<HTML>
<HEAD>
<TITLE>S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
September&nbsp;12, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 6pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington, DC&nbsp;20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Form&nbsp;S-1</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Innovene Inc.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact Name of Registrant as Specified in Its Charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 2pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>2860</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>20-3181950</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or Other Jurisdiction of<BR>
    Incorporation or Organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(IRS Employer<BR>
    Identification No.)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Innovene Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>200&nbsp;E. Randolph Street</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Chicago, IL 60601</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(312)&nbsp;873-8700</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, Including Zip Code, and Telephone Number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>Including Area Code, of Registrant&#146;s Principal Executive
Offices)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Corporation Trust&nbsp;Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Corporation Trust&nbsp;Center</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>1209&nbsp;Orange Street</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Wilmington, Delaware 19801</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, Address Including Zip Code, and Telephone Number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>Including Area Code, of Agent For Service)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Copies to:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Henry Kleeman<BR>
    Senior Vice President and General Counsel<BR>
    Innovene Inc.<BR>
    200 E. Randolph Street<BR>
    Chicago, IL 60601<BR>
    (312)&nbsp;873-8789</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Kathryn A. Campbell<BR>
    Sullivan &#38; Cromwell LLP<BR>
    1 New Fetter Lane<BR>
    London EC4A 1AN<BR>
    England<BR>
    +44 (0) 207 959-8900</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>John W. Banes<BR>
    Davis Polk &#38; Wardwell<BR>
    450 Lexington Avenue<BR>
    New York, NY 10017<BR>
    (212)&nbsp;450-4000</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate
date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes
effective.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>If
any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this
form is filed to register additional securities for an offering
pursuant to Rule&nbsp;462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this
form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this
form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 2pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of each Class of Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum Offering Price<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, par value $0.01 per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $1,000,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $117,700</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the amount of
    the registration fee in accordance with Rule&nbsp;457(o) under
    the Securities Act of 1933. Includes shares which the
    underwriters have the option to purchase from BP solely to cover
    over-allotments.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The
Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to such Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT color="#E8112D">The information in this prospectus is
incomplete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
</FONT> <BR>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#E8112D">SUBJECT TO COMPLETION.
DATED &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005</FONT></B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="u49013u4901302.gif" alt="(INNOVENE LOGO)">
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Innovene Inc.</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMON STOCK</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is an initial public offering of shares of common stock of
Innovene Inc. (Innovene). All of the shares of common stock are
being sold by BP p.l.c. (BP), and we will not receive any of the
net proceeds from the sale of these shares. Following the
offering, BP will own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock, assuming no exercise of the over-allotment
option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is our initial public offering and no public market has
existed for our shares prior to the offering. We anticipate that
the initial public offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to list our common stock on the New York Stock
Exchange, Inc., or the NYSE, under the trading symbol
&#147;INV.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investing in our common stock involves risks. See &#147;Risk
Factors&#148; starting on page 9.</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Initial public offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discounts and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds to BP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP has granted the underwriters the right to purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock to cover over-allotments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Securities and Exchange Commission (SEC)&nbsp;and state
securities regulators have not approved or disapproved of the
shares of our common stock or determined that this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters expect to deliver the shares to purchasers
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Goldman, Sachs &#38; Co.</B></TD>
    <TD align="right"><B>Morgan Stanley</B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Lehman Brothers</B></TD>
    <TD align="right"><B>UBS Investment Bank</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prospectus
dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 27pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
[This page intentionally has been left blank.]
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Table of Contents</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="93%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Special Note&nbsp;Regarding Forward-Looking
    Statements and Market Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Selected Combined Financial Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Unaudited Pro Forma Combined Financial
    Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Industry Overview</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Principal Shareholder</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Certain Relationships and Related
    Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Description of Capital Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Certain U.S.&nbsp;Federal Tax
    Considerations for Non-U.S.&nbsp;Holders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Validity of the Shares</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Glossary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>Index to Combined Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="u49013exv2w1.htm">EX-2.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="u49013exv23w1.htm">EX-23.1: CONSENT OF ERNST & YOUNG LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>You should rely only on the information contained in this
prospectus. Neither we nor our subsidiaries have authorized
anyone to provide you with information different from that
contained in this prospectus. The prospectus may only be used
for the purposes for which it has been published and no person
has been authorized to give any information not contained in
this prospectus. If you receive any other information, you
should not rely on it. No offer of the shares of our common
stock is made in any state where such an offer is not
permitted.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (25&nbsp;days after the date of this prospectus), all
dealers that buy, sell or trade our stock, whether or not
participating in the offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus. The information set forth below does not
contain all the information you should consider before deciding
to invest in our shares. We urge you to read the entire
prospectus carefully, including the section &#147;Risk
Factors&#148; and our combined financial statements, including
the notes thereto.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>In this prospectus, &#147;Innovene Inc.,&#148; the
&#147;company,&#148; &#147;we,&#148; &#147;us&#148; and
&#147;our&#148; each refer to Innovene Inc. and its
subsidiaries, including its predecessor businesses, which
comprise certain assets, liabilities and associated
infrastructure that were formerly part of BP&#146;s
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments, as described under &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations &#151; Basis of Presentation,&#148; except where the
context makes clear that the reference is only to Innovene Inc.
itself and not to its subsidiaries or predecessor businesses.
The assets and liabilities comprising the operations of our
predecessor businesses will be transferred to us prior to the
completion of the offering. A glossary of petrochemical and
refining abbreviations used in this prospectus is set forth on
page&nbsp;133.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are among the world&#146;s largest petrochemical companies,
with revenues of $17.9&nbsp;billion in 2004. We conduct our
business through petrochemical manufacturing sites in eight
countries as well as two refineries which are fully integrated
with our petrochemical facilities. At June&nbsp;30, 2005, our
total petrochemical production capacity was approximately
40&nbsp;billion pounds per year and our refineries had a
combined crude oil distillation capacity of approximately 400
thousand barrels per day (mbd). Our business is structured
around five major sites, which account for approximately 70% of
our petrochemical production volumes and approximately 85% of
our overall production volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a global reach and leading market positions with respect
to our key petrochemical products, which enable us to manage our
business on a worldwide basis. We benefit from the cost
advantages of operating large-scale petrochemical facilities and
the high degree of integration at our major sites. We have an
expanding position in the fast-growing Asian markets, which we
serve through our operations in North America and Europe. We
have an established regional office in Shanghai, China to manage
our operations in Asia. Our competitive position in the
petrochemical industry is supported by a portfolio of
proprietary process technologies. Our two European refineries
have the scale, location, product slate, feedstock flexibility
and clean fuels capabilities necessary to be competitive in
their respective markets and provide an earnings stream that is
not driven by the same cyclical patterns as our petrochemical
businesses. Our safety performance track record is among the
best in the industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business comprises certain assets, liabilities and
associated infrastructure that were formerly part of BP&#146;s
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments. We believe our separation from BP has
created new opportunities for us. Historically, our business was
a small part of a much larger organization and our performance
lagged behind that of other companies in the petrochemicals
sector. As a separate entity with our own management structure,
we will be able to focus on the factors that are critical to the
success of our petrochemical and refining businesses and
benchmark ourselves directly against the performance of our
competitors. Our benchmarking work has identified significant
opportunities to improve the performance and optimize the use of
our existing assets and to increase our margins. We intend to
pursue growth opportunities by investing in new assets and
forming joint ventures in regions that have access to low-cost
feedstocks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We report our business on the basis of five segments, Olefins
and Polymers (O&#38;P) North America, O&#38;P Europe, Global
Derivatives, Refining, and Corporate and Other. The following
chart provides an overview of our
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
two principal businesses, the segments which each business
comprises and the products we make in each of these segments:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="u49013u4901301.gif" alt="(FLOW CHART)">
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Intersegmental sales amounted to $1,909&nbsp;million for the
    year ended December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
In our petrochemical business, we make olefins and related
products, a broad range of polymers and various other
petrochemical products directly or indirectly derived from
olefins. We are among the largest volume manufacturers of
olefins, polymers, and derivatives in the world. The focus of
our olefins business is on ethylene and propylene, which are the
two largest volume olefins and are key building blocks for
polymers and derivatives. The olefins we make are primarily used
as feedstock for our polymers and derivatives businesses. In
addition, we sell olefins to third party customers for a variety
of industrial and consumer applications, including plastics,
rubber and fiber. In our polymers business, we focus on
polyethylene and polypropylene. The largest volume product of
our global derivatives business is acrylonitrile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of our capacity, global
market position and certain regional market positions with
respect to our key petrochemical products:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full-year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capacity<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Global</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as of June</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>market</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Selected regional</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Key products</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>position<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>market positions<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(mmlbs)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#4 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polypropylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#2 in North America</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    HDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#2 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#4 in North America</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#4 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#1 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#1 in North America</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Capacity is defined as nameplate capacity. See
    &#147;Business&nbsp;&#151; Manufacturing&nbsp;&#151;
    Overview&#148; for more information on how we calculate capacity.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    According to Chemical Markets Associates, Inc. (CMAI)&nbsp;data
    as of July 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
In our refining business, we operate two large refineries in
Europe. Our principal refining products are transport fuels,
particularly diesel fuel and gasoline, naphtha, and heating and
fuel oils. Our refineries are physically integrated with
petrochemical plants located at the same sites. We have recently
implemented a single management structure at these sites to
further leverage the benefits of integration. The majority of
the naphtha output of our refineries is used as inputs by the
petrochemical plants located at the relevant sites. We have
entered into agreements with BP, pursuant to which BP has agreed
to buy the balance of our refinery products and to either market
these products to its local customers or trade them on the
commodity markets on our behalf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have approximately 8,000 employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Strengths</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Global Reach and Leading Market Positions.</I></B> We are
    among the world&#146;s largest petrochemical companies with 24
    manufacturing sites in eight countries in North America and
    Europe, and a total petrochemical production capacity of
    approximately 40&nbsp;billion pounds per year. From these sites,
    we serve approximately 2,700 customers who are located in the
    principal industrial regions of the world and use our products
    across a broad range of end-use applications, which we believe
    has allowed us to achieve and hold leading market positions with
    respect to each of our key products. According to CMAI, as
    measured by expected average annual capacity for 2005, we are
    among the top three companies globally for each of HDPE,
    polypropylene and acrylonitrile.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Vertically Integrated, Large Scale Producer. </I></B>We
    have five large-scale sites, accounting for 85% of our total
    production volumes. All of these large-scale sites are
    integrated with major crackers and polymers and derivatives
    units, giving us the ability to capture margins across the value
    chain. Two of them are also integrated with onsite refineries,
    which differentiates us from many of our competitors. We believe
    that the scale of our global operations provides benefits by
    reducing our selling, administrative, and research and
    development costs on a per unit basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Strong Refining Platform. </I></B>We own and operate two
    refineries focused on serving their respective markets with the
    product slate, feedstock flexibility and clean fuels
    capabilities necessary to be competitive. Each of our
    Grangemouth, United Kingdom and Lav&#233;ra, France refineries
    has a crude oil distillation capacity exceeding 200&nbsp;mbd,
    which is larger than the average refinery size of each of our
    top five European refining competitors. Each of our refineries
    is equipped with a hydrocracker (HC)&nbsp;and a fluid catalytic
    cracker (FCC), which provides them with significant flexibility
    in processing heavy, sour crude oils into light, sweet middle
    distillates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Extensive Portfolio of Leading Proprietary Technologies.
    </I></B>Our technologies are positioned around our key products,
    including our gas phase polyethylene, gas phase polypropylene,
    slurry HDPE and acrylonitrile technologies. We believe that our
    technology is recognized as being among the lowest-cost in the
    petrochemical industry. As a result of their low cost, our
    technologies are widely used in the industry.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Experienced Management Team. </I></B>We have a talented
    and experienced management team recruited from both within BP
    and externally. Our management team is led by Ralph Alexander,
    our Chief Executive Officer, who has worked in a variety of
    roles within BP, including as Chief Executive Officer of
    BP&#146;s Gas, Power, and Renewables segment and as Chief
    Executive Officer of BP&#146;s Petrochemicals segment.
    Mr.&nbsp;Alexander is supported by a team of business and
    functional leaders, including Mark Tomkins, our Chief Financial
    Officer, who have extensive experience in petrochemicals,
    refining, supply and trading and who we believe have the
    requisite skill set to successfully execute our strategy.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we have an opportunity to significantly improve our
competitive position and future financial performance by
implementing the key components of our strategy, which are to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Achieve Performance Improvements Through Our Accelerator
    Program and By Implementing a Simplified Organizational
    Structure. </I></B>To reduce our operating costs and maximize
    our operating efficiency, we have embarked on a comprehensive
    performance improvement program, which we refer to as our
    Accelerator program. Projects include eliminating unprofitable
    product lines, redesigning and enhancing our sales and marketing
    activities through optimized channels of trade, reducing our
    overhead and functional costs commensurate with our status as a
    standalone petrochemical company and making targeted investments
    to maximize our asset utilization and productivity. Throughout
    our organization, we have also reduced management and other
    organizational layers, focusing the business around three
    operating companies which are responsible for driving the
    performance of our overall business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Maximize Cash Flow. </I></B>We have revamped our incentive
    compensation programs for 2005 to focus every employee on a
    single financial goal, improving our adjusted EBITDA. In 2006,
    our incentive compensation programs will focus on three
    measures, adjusted EBITDA, capital expenditures and working
    capital, to further enhance the focus in our organization on
    delivering sustainable cash flow. We intend to use our free cash
    flow to reduce indebtedness and selectively expand our
    businesses, particularly to access low-cost feedstocks and serve
    growth markets.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Enhance the Value of Our Portfolio. </I></B>We intend to
    focus on businesses that we believe have the potential to
    maintain or achieve cost and market leadership positions. We
    plan to manage our assets and businesses to achieve strong unit
    cost and gross margin performance relative to competitive
    benchmarks and make a meaningful financial contribution to our
    company. We expect that as a result of our Accelerator Program,
    the substantial majority of our assets and businesses will meet
    these benchmarks by 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Expand Position in Locations with Low Cost Feedstocks.
    </I></B>We intend to improve our long-term competitiveness by
    accessing low-cost feedstocks in the Middle East and north
    Africa through strategic collaborations with local partners and
    governments to build petrochemical complexes in these regions.
    In June 2005, we entered into a non-binding memorandum of
    understanding to construct a world-scale cracker and associated
    derivative complex in Saudi Arabia. Our goal is to sign a
    binding agreement and secure a guaranteed feedstock supply for
    the facility by year-end 2005 and commission the facility by
    2009.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Maximize Profitability by Optimizing Supply and Trading
    Flows. </I></B>We intend to continue to strengthen our supply
    and trading capabilities to ensure we derive maximum benefit
    from optimizing our operations, channels to market and market
    positions. The capabilities we have developed closely mirror the
    commercial model which BP has established and successfully
    operated in the oil and gas markets for many years. We believe
    this model distinguishes us from our peers in the petrochemical
    industry.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Relationship with BP</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our formation as a separate legal entity
within the BP group, BP has transferred to us certain assets,
liabilities and associated infrastructure relating to the former
olefins and derivatives business of its Petrochemicals segment
(not including joint ventures operating petrochemical facilities
in China, Malaysia and Germany), refineries in Grangemouth,
United Kingdom and Lav&#233;ra, France, which formed part of its
Refining and Marketing segment, and a gas fractionator near
Hobbs, New Mexico, which formed part of its Gas, Power and
Renewables segment, in each case together with associated
infrastructure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our separation from BP, BP has agreed to
provide various administrative and operational support services
to us. In addition, we have entered into a range of commercial
arrangements with BP for the supply of refining and
petrochemical feedstocks, the purchase and sale of refined
products, the sharing of common infrastructure and the provision
of utilities at various sites which we share with BP.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">4
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Company Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were incorporated in Delaware as a corporation on
July&nbsp;14, 2005 as a wholly-owned subsidiary of BP. Our
principal executive offices are located at
200&nbsp;E.&nbsp;Randolph Street, Chicago, IL 60601, and our
telephone number is (312)&nbsp;873-8700. Our website is at
http://www.innovene.com. The information and other content
contained on our website are not part of this prospectus.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Issuer</TD>
    <TD></TD>
    <TD valign="top">
    Innovene Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding immediately after the offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock to be held by BP immediately after the offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="top">
    Upon completion of the offering, our Board of Directors intends
    to adopt a policy of declaring, subject to legally available
    funds, a quarterly cash dividend on each share of common stock
    at an annual rate initially equal to
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the initial
    public offering price, commencing with the first quarter of
    2006. However, there can be no assurance that sufficient cash
    will be available to pay any such dividends. In addition, our
    dividend policy remains within the sole discretion of our Board
    of Directors and is subject to change. See &#147;Dividend
    Policy&#148; for a discussion of factors that will affect the
    determination by our Board of Directors to declare dividends, as
    well as other matters concerning our dividend policy.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We will not receive any of the net proceeds from the sale of any
    of
    the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock sold by BP in the offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="top">
    See &#147;Risk Factors&#148; and other information included in
    this prospectus for a discussion of factors you should carefully
    consider before deciding to invest in our shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed NYSE symbol</TD>
    <TD></TD>
    <TD valign="top">
    &#147;INV&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless otherwise indicated, all information in this prospectus:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    assumes the over-allotment option has not been exercised; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    excludes restricted shares, restricted stock units and shares of
    common stock issuable upon the exercise of stock options granted
    to our executive officers and certain key employees in
    connection with the Innovene &#147;BP LTPP&#148; Conversion Plan
    (the Conversion Plan), the Innovene Incentive Plan 2005 (the
    Incentive Plan) and the Innovene Executive Share Matching Plan
    (the Executive Share Matching Plan).</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Historical and Pro Forma Combined Financial Data</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents our summary combined financial
data. The summary combined statements of operations data for the
years ended December&nbsp;31, 2002, 2003 and 2004, the summary
combined statements of cash flows data for the years ended
December&nbsp;31, 2002, 2003 and 2004 and the summary combined
balance sheet data as of December&nbsp;31, 2003 and 2004 have
been derived from our audited combined financial statements
included elsewhere in this prospectus. The unaudited summary
combined statements of operations data for the six months ended
June&nbsp;30, 2004 and 2005, the unaudited summary combined
statements of cash flows data for the six months ended
June&nbsp;30, 2004 and 2005 and the unaudited summary combined
balance sheet data as of June&nbsp;30, 2005 have been derived
from our unaudited accounting records for those periods and as
of those dates. The unaudited summary combined financial data
have been prepared on a basis consistent with the basis on which
our audited combined financial statements have been prepared
and, in the opinion of our management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of such data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have derived the unaudited summary pro forma combined
financial data from our audited combined financial statements
for the year ended December&nbsp;31, 2004 and our unaudited
combined financial statements for the six months ended
June&nbsp;30, 2005 included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary historical and pro forma combined financial data
should be read in conjunction with &#147;Selected Combined
Financial Data,&#148; &#147;Unaudited Pro Forma Combined
Financial Data,&#148; &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and the combined financial statements and the accompanying notes
included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited summary pro forma combined statement of operations
data reflect the combined operations of our company and our
subsidiaries as if our separation from BP and the related
transactions described below had occurred as of January&nbsp;1,
2004. The unaudited summary pro forma combined balance sheet
data reflects the combined operations of our company and our
subsidiaries as if our separation from BP and the related
transactions described below had occurred as of June&nbsp;30,
2005. However, the unaudited summary pro forma combined
financial data do not necessarily reflect what our financial
position and results of operations actually would have been had
our separation from BP and the related transactions described
below occurred on the dates indicated nor do they purport to
project our future financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited summary pro forma combined financial data give pro
forma effect to:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the recapitalization of our company prior to the offering, as
    part of which our share capital will be increased
    to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock, par value $0.01 per share;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our repayment on March&nbsp;22, 2005 of loans in the amount of
    $1,755&nbsp;million which were secured by the petrochemical
    assets of our site in Grangemouth, United Kingdom, and the
    replacement of this debt by a loan from BP to us in the amount
    of $1,700&nbsp;million, which was granted to us effective
    April&nbsp;1, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer from BP to us of the road and rail terminals of our
    Grangemouth site, which are not included in our historical
    combined financial statements; the relevant assets will be
    transferred to us prior to the offering, effective April&nbsp;1,
    2005;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer from us to BP of our proportionate share of the
    shared power station of the Grangemouth site and certain
    infrastructure shared between us and BP at our site in Geel,
    Belgium; our historical combined financial statements show our
    proportionate share of these assets; the relevant assets were
    transferred from us to BP prior to the offering, effective
    April&nbsp;1, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer from us to BP of our obligations under certain
    pension and other post-employment benefit plans relating to
    former employees to reflect the fact that BP has agreed to
    retain these obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the commercial arrangements entered into between us and BP
    effective January&nbsp;1, 2005; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    insurance costs we expect to incur as a result of operating as a
    standalone company.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of and for the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>As of and for the year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>pro&nbsp;forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>pro&nbsp;forma</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Statements of Operations Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,775</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,586</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,765</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,768</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,253</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,876</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(734</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(616</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(630</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(680</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(115</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring and asset impairment charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>844</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity (loss) income from investments in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from continuing operations before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>777</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(232</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from discontinued operations, net of income tax expense
    (benefit) of $0, $0, $(52)&nbsp;million, $0 and $0</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income per
    share<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares used in computing net (loss) income per
    share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center" style="font-size: 10pt;">7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of and for the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>As of and for the year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>pro&nbsp;forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>pro&nbsp;forma</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Statements of Cash Flows Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities of continuing
    operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities of continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(579</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities of
    continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(559</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Balance Sheet Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,465</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Information</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA from continuing operations
    <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The computation of net (loss) income per share is based on the
    anticipated number of shares of our common stock outstanding
    upon completion of the offering. Prior to completion of the
    offering, there will be no outstanding options to purchase
    shares of our common stock or other potentially dilutive
    securities. In connection with the offering, our executive
    officers and certain key employees will be granted restricted
    shares, restricted stock units and stock options.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    See &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures&#148; for a definition of adjusted
    EBITDA and the reasons why management believes that the
    presentation of adjusted EBITDA provides useful information to
    investors. Set forth below is a reconciliation of net (loss)
    income to adjusted EBITDA for each period indicated:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six&nbsp;months</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from discontinued operations, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset impairments from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</DIV>

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<A name='102'></A>
</DIV>

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<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should carefully consider the risks described below and
all other information contained in this prospectus before
deciding to purchase shares of our common stock. If any of these
risks occur, our business, results of operations and financial
condition could be adversely affected, and you could lose part
or all of your investment.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our results are driven by industry margins, which are
volatile and in the petrochemical industry historically have
been highly cyclical. If industry margins decline from their
current levels, our results and, potentially, our liquidity
could be materially adversely affected.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our results are largely dependent on industry margins, which are
a function of the relationship between supply and demand in the
petrochemical and refining industries. Industry margins
typically increase when demand approaches or exceeds available
supply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The relationship between supply and demand in the petrochemical
industry historically has been highly cyclical. This is
primarily because product supply is driven by alternating
periods of substantial capacity additions and periods in which
no or limited capacity is added. As a general matter, companies
are more likely to add capacity in periods when current or
expected future demand is strong and margins are, or are
expected to be, high. Investments in new capacity can result,
and in the past frequently have resulted, in overcapacity, which
typically leads to a reduction of margins. In response,
companies typically reduce capacity or limit further capacity
additions, eventually causing the market to be relatively
undersupplied. The bottom of the last cycle was reached in 2001
and continued through 2003 due to weak demand and substantial
simultaneous capacity additions. Since the beginning of 2004,
profit margins have improved. However, the duration of the
current upturn is difficult to predict and depends on a number
of factors, including the extent of growth in key regions and
the amount of capacity that will be built over the coming years.
In the current environment, China is the principal driver of
demand growth for petrochemical products. Any slowdown in
Chinese growth for whatever reason could have a
disproportionately negative effect on industry margins.
</DIV>

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Historically, industry margins in the petrochemical and refining
industries have also been volatile due to a number of factors,
most of which are beyond our control. These factors include:
</DIV>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    short-term utilization rate fluctuations due to planned and
    unplanned plant outages;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    political and economic conditions, which drive rapid changes in
    prices for our key feedstocks, namely the price of crude oil,
    gas and naphtha;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    customers&#146; inventory management policies; and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    exchange rate fluctuations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If industry margins decline, our results would be materially
adversely affected and we could incur losses, particularly if
industry margins in the petrochemical industry were to return to
their 2001 levels or decline more significantly than they have
in the past. Furthermore, increased volatility in industry
margins could have a significant impact on our short-term
results. In both cases, we would have to absorb any losses
through our balance sheet or by borrowing additional funds. If
we experience significant margin volatility or if we generate
losses over a prolonged period and are unable to obtain
additional funds, our liquidity could be materially adversely
affected.
</DIV>

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<B><I>In recent years, our performance has lagged behind that of
our competitors. There can be no assurance that we will be able
to fully implement our ongoing performance improvement program
or that it will yield the benefits we expect.</I></B>
</DIV>

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In recent years, our performance has lagged behind that of other
companies in the petrochemical industry, and we have recorded
losses in each of the last three years. To improve our operating
results, we have started a program aimed at enhancing our
performance, which we call our Accelerator program. However,
there can be no
</DIV>

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<DIV align="left" style="font-size: 10pt;">
assurance that we will be able to successfully implement this
program or that it will yield the benefits we expect or any
benefits at all. If we are unable to improve our performance,
our results may continue to lag behind those of our competitors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our feedstock costs are closely linked to oil and gas
prices. If we are unable to pass on increases in our feedstock
costs to our customers in the form of higher prices for our
products, our margins would be materially adversely
affected.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our margins are largely a function of the relationship between
the prices that we are able to charge for our products and the
costs of the feedstocks we require to make these products, which
are principally driven by the price of oil and natural gas. Oil
and gas prices have increased significantly in recent years. As
a result of the recent tightening in the balance between the
supply and demand for our products, we have been able to pass on
these increases to our customers, although we typically
experience some lag time due to the repricing intervals of our
contracts with suppliers and customers and our customers&#146;
inventory management policies, particularly in our petrochemical
business. For example, our olefins contracts in Europe reprice
quarterly, whereas the corresponding feedstock contracts
typically reprice daily. However, there can be no assurance that
we will always be able to pass on increases in oil and gas
prices to our customers. If we are unable to pass through
feedstock cost increases to our customers in the form of higher
prices for our products, our margins, results of operations and
financial condition would be materially adversely affected.
</DIV>

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<B><I>If the U.S.&nbsp;dollar weakens relative to other major
currencies, our results could be materially adversely
affected.</I></B>
</DIV>

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A large proportion of our manufacturing costs and our selling,
general and administrative expenses are incurred in currencies
other than the U.S.&nbsp;dollar, principally the euro and the
British pound, reflecting the location of our sites and
corporate and business support centers. At the same time,
although many of our sales are invoiced in local currencies, a
substantial proportion of our revenues are denominated in or
linked to the U.S.&nbsp;dollar. Therefore, our results in any
given period are materially affected by fluctuations in the
value of the U.S.&nbsp;dollar relative to the euro and the
British pound. Despite its recent recovery, the decline in the
value of the U.S.&nbsp;dollar relative to the euro and the
British pound that started in 2002 has adversely affected our
results. If the value of the U.S.&nbsp;dollar declines, our
results of operations and financial condition could be
materially adversely affected.
</DIV>

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<B><I>In Europe, and to a lesser extent North America, we face
increasing pressures due to intense competition from companies
with facilities in the Middle East. In addition, our customers
could experience a loss of business to low-cost Asian
competitors.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The petrochemical industry in Europe, where the majority of our
assets are concentrated, and, to a lesser extent, in North
America, faces competitive pressures from companies with
facilities in the Middle East, which enjoy substantial cost
advantages due to access to low-cost gas feedstock available in
this region. These cost advantages are particularly significant
when oil prices are high, as has been the case in recent years.
The competitive pressure we experience could be exacerbated if
the Chinese economy fails to grow as expected, in which case
more of the product manufactured in the Middle East to meet the
growth expected for China could be redirected to Europe and
North America, potentially resulting in greater supply to these
markets.
</DIV>

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In addition, we and other petrochemical companies with a large
asset base in Europe face pressures due to the fact that many of
our key customers in Europe are subject to competition from
low-cost producers in Asia. If our European customers are unable
to successfully compete with Asian manufacturers, they could
reduce their purchases from us or cease making such purchases
altogether. To a lesser extent, this danger also exists in North
America. Each of these risks could materially adversely affect
our business, results of operations and financial condition.
</DIV>

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<B><I>While our strategy is to build one or more petrochemical
complexes through joint ventures in regions with access to
low-cost feedstocks, including the Middle East and north Africa,
we may not be successful in doing so.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To gain access to low-cost feedstocks, we are actively looking
at various options for constructing one or more petrochemical
complexes in the Middle East or north Africa through joint
ventures. On June&nbsp;8, 2005, we signed a nonbinding
memorandum of understanding to construct a cracker and
associated derivative complex in Saudi Arabia. However, we
cannot assure you that we ultimately will reach a final
agreement with our Saudi partner and the Saudi Arabian
government on commercially reasonable terms, that we will secure
feedstock on commercially advantageous terms or that we will
succeed in constructing and operating the planned complex or any
similar facility on the envisaged time schedule or at all. In
addition, any of these projects could require us to expend
substantial amounts of cash and incur debt and could divert
management&#146;s attention from our operations. If any of these
risks materializes, our business, results of operations and
financial condition could be materially adversely affected.
</DIV>

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<B><I>In aggregate, we consume more ethylene and propylene than
we produce at our own crackers. If the overall margin in the
petrochemical value chain becomes more concentrated in the
olefins business, we will be at a competitive disadvantage
compared with more fully integrated competitors, and our results
could be materially adversely affected.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In Europe, we consume more ethylene than we produce, and in
North America and Europe our consumption of propylene exceeds
our production. To redress our olefins shortage, we purchase
ethylene and propylene on the merchant market through supply
contracts and swaps with other petrochemical and refining
companies, including BP. To the extent olefins suppliers are
able to increase their portion of the overall margin in the
petrochemical value chain, there will be a corresponding
decrease in the portion of the overall margin that their
customers earn on processing olefins into polymers and
derivatives. Because we are a net purchaser of olefins, if the
overall margin becomes more concentrated in the olefins
business, we will become less profitable than our more fully
integrated and balanced competitors, and our business, results
of operations and financial condition could be materially
adversely affected.
</DIV>

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<B><I>We may experience reliability problems despite the fact
that we have made significant investments in recent years to
improve the reliability of some of our facilities in North
America and Europe.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We faced major reliability problems in 2000 and 2001,
principally at our sites in Chocolate Bayou, Texas, and
Grangemouth, United Kingdom, and, to a lesser extent, at our
site in Lav&#233;ra, France. In the case of Grangemouth, the
incidents culminated in a government inspection and the
imposition of fines. We have invested in our facilities to
address these issues. While we believe that these investments
have resulted in better reliability, we have continued to
experience reliability issues, and there can be no assurance
that we will not experience similar problems in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we may be required to shut down facilities as a
result of reliability problems and incidents at other
companies&#146; facilities, including facilities owned and
operated by BP, if these facilities are located at or near the
same site as our facilities or if we otherwise depend on them.
Any of these reliability issues could materially adversely
affect our business, results of operations and financial
condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Several of our petrochemical facilities are owned and
operated in joint ventures with third parties. We do not control
these joint ventures, and actions taken by any of the joint
ventures could materially adversely affect our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Several of our petrochemical facilities are owned and operated
by joint ventures between us and one or more third parties.
These facilities include the facility in Lav&#233;ra, France,
various units of which are operated by joint ventures between us
and Total, S.A. (Total), and the facility in Cedar Bayou, Texas,
which is operated by Chevron Phillips Chemical Company&nbsp;LLC
(Chevron Phillips) in a 50/50 joint venture between us and
Chevron Phillips. In addition, we have recently agreed to
contribute our European polystyrene and expandable polystyrene
(EPS) businesses to a 50/50 joint venture with NOVA Chemicals
Corporation (NOVA). While we have a certain amount
</DIV>

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of influence over each of these joint ventures, we do not
control them and are therefore dependent on our respective joint
venture partners to cooperate with us in making decisions
regarding the relevant joint venture. Moreover, the day-to-day
operation of the relevant facilities is the responsibility of
the respective joint venture or our respective joint venture
partner. Therefore, our ability to influence these operations on
a day-to-day basis is limited and we may be unable to prevent
actions that we believe are not in the best interests of the
relevant joint venture or our company as a whole. Any such
actions could materially adversely affect our business, results
of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Some of our competitors are larger and more integrated and
have greater financial resources.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Competition in the petrochemical industry is based primarily on
price and to a lesser extent on product performance, product
quality, product deliverability and customer service. Some of
our competitors are larger and more vertically integrated than
we are and therefore may be able to manufacture products more
economically than we can. In addition, some of our competitors
have greater financial resources than we do, which may enable
them to invest more capital in their business, including in
their facilities and their research and technology (R&#38;T)
activities. Larger, more integrated companies with greater
financial resources may be able to compete more effectively than
we can, which could have a material adverse effect on our
business, results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We are subject to a variety of operational hazards and
potential product liability claims, and we may not be able to
maintain sufficient insurance against these risks or insurance
may be unavailable to us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations are subject to operational hazards inherent in
the manufacturing and distribution of our products. These
hazards include explosions, fires, severe weather and natural
disasters, mechanical failures, unscheduled downtimes, pipeline
leaks and ruptures, transportation interruptions, human error,
spills, discharges or releases of toxic or hazardous substances
or gases, storage tank leaks, and safety and security risks
relating to the transport of a variety of hazardous and
non-hazardous raw materials, intermediates and finished products.
</DIV>

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In addition to the operational hazards described above, we may
become subject to product liability claims arising out of the
use of, or exposure to, our products. While most of our products
have some hazardous properties, some of them, such as
acrylonitrile, require specialized handling procedures due to
their acute and chronic toxicity. Furthermore, our polymer
products have widespread end-uses in a variety of consumer
industries, including in food packaging and medical applications.
</DIV>

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If any of these risks were to materialize and cause bodily
injury or loss of life, severe damage to, or destruction of,
property and equipment or environmental damage, our operations
could be suspended and we could become subject to civil and
criminal penalties and liabilities, which could have a material
adverse effect on our business, results of operations and
financial condition.
</DIV>

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As part of the BP&nbsp;group, we did not purchase third-party
insurance coverage for the risks described above. In connection
with our separation from BP, we have purchased limited insurance
coverage for the above types of risks. In addition, we may,
prior to the offering, seek to obtain insurance coverage at
levels which we believe are appropriate for the size of our
company and the nature of the risks we face. However, we will
not seek full insurance against all potential risks incident to
our business and may not obtain full coverage for all types of
damage we may cause. Moreover, as a result of market conditions,
premiums and deductibles for certain insurance policies may
increase substantially and, in some instances, insurance may be
available only for reduced amounts of coverage or at high
premiums. If we were to incur a significant liability for which
we are not adequately insured, our business, results of
operations and financial condition could be materially adversely
affected.
</DIV>

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<B><I>Because our operations are subject to numerous
environmental, health, safety and other laws and regulations, we
could become exposed to liability and be required to spend
substantial amounts on environmental, health and safety
compliance and remediation.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations and the products we make are subject to numerous
environmental, health and safety laws and regulations in
countries in which we operate and sell our products, including
laws and regulations governing
</DIV>

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emissions and discharges to air and water, the handling and
disposal of hazardous wastes and the remediation of
contamination. In addition, some of these laws and regulations
require us to hold permits in connection with our operations.
</DIV>

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From time to time, our facilities may experience operational
problems or malfunctions, fires, storms, earthquakes or floods
or other unplanned events, each of which could result in
emissions or discharges in excess of applicable laws and
regulations or permit limits. Any failure by us to comply with
such laws and regulations or permit limits or to obtain permits
could lead to, among other things, the imposition on us of civil
and criminal penalties and in certain circumstances, the
temporary or permanent curtailment or shutdown of a part of our
operations. Moreover, if, as a result of any such failure,
hazardous substances are released into the environment, the
consequences could include bodily injury or loss of life, severe
damage to, or destruction of, property and equipment or
environmental damage.
</DIV>

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In addition, certain environmental laws and regulations impose
liability without regard to fault for cleanup costs at
contaminated sites. Given the nature of our business, we
presently have environmental remediation and closure obligations
at certain sites and will likely incur such obligations at
additional sites, including offsite waste disposal sites, in the
future. We cannot assure you that the costs associated with
these obligations will not be material or exceed the accruals we
have established.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Laws and regulations affecting particular petrochemical or
refined products could also have an effect on the availability
or permitted use of our products, our unit costs and the prices
we may charge for these products, which in turn could have an
adverse effect on the profitability of these products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently incur substantial operating and capital costs for
compliance with environmental, health, safety and other laws and
regulations. We expect that, given the nature of our
petrochemical and refining businesses, we will continue to be
subject to increasingly stringent environmental, health, safety
and other laws and regulations that may increase the cost of
operating these businesses above currently expected levels and
require substantial future capital and other expenditures. We
cannot assure you that the effect of future laws and regulations
on our business, results of operations and financial condition
will not be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of the events described above occurs or any of these
risks materializes, our business, results of operations and
financial condition could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We depend on our senior executives and other key members
of our management to implement our business strategy. If we lose
and are unable to replace any of these key persons or if we are
unable to attract and retain other qualified personnel, our
business, results of operations and financial condition could be
materially adversely affected.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We depend on the continued employment and performance of our
senior executives and other key members of our management. If
any of these individuals resigns or becomes unable to continue
in his or her present role and is not adequately replaced, our
business operations and our ability to successfully implement
our business strategies could be materially disrupted. Our
performance is also dependent on our ability to identify, hire
and retain key technical, support, sales and other qualified
personnel. If we are unsuccessful in attracting and retaining
such personnel, our business, results of operations and
financial condition could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We depend on good relations with our workforce, and any
significant disruption could adversely affect us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We employ approximately 8,000 people, approximately 40% of whom
are unionized. We enjoy good relations with our workforce, which
we believe is a result of, among other things, the employment
terms and conditions offered by BP. In connection with our
formation as a separate legal entity, we have committed to
maintaining equivalent terms and conditions for at least one
year following the date of this offering. While this decision
has allowed us to continue our good relations with our
employees, if we were to materially change our terms and
conditions of employment after the one-year period expires and
our employees were to react adversely to any such changes, we
could experience significant labor disputes and work stoppages
at one or more of our sites. A labor disturbance or work
stoppage at any of our facilities as a result of any changes to
our employment
</DIV>

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<DIV align="left" style="font-size: 10pt;">
terms and conditions or for any other reason could have a
material adverse effect on that facility&#146;s operations and,
potentially, on our business, results of operations and
financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>If our patents are declared invalid or our trade secrets
become known to our competitors, our ability to compete may be
impaired.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Proprietary protection of our technologies, including our
polyethylene, polypropylene and acrylonitrile technologies, is
important to our business, and we may have to rely on judicial
enforcement of our patents and other forms of intellectual
property protection of these technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There can be no assurance that our patents will not be
challenged, invalidated, circumvented or rendered unenforceable.
Furthermore, if any pending patent application filed by us does
not result in an issued patent or if any patent owned by us does
not provide meaningful protection, our ability to compete
effectively may be adversely affected. In addition, our
competitors and any other third parties may obtain patents that
restrict or preclude our ability to lawfully manufacture and
market our products in a competitive manner, which could
materially adversely affect our business, results of operations
and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also rely on trade secrets to develop and maintain our
competitive position. While it is our policy to enter into
confidentiality agreements to protect our intellectual property,
these confidentiality agreements may be breached and may not
provide meaningful protection for our trade secrets in the event
of an unauthorized use or disclosure. In addition, others could
obtain knowledge of our trade secrets through independent
development or other access by legal means. If our trade secrets
become known, our business, results of operations and financial
condition could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Relationship with BP</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our historical financial results as a part of BP may not
be representative of our future results as a separate,
standalone company.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our combined financial statements and the other financial
information we have included in this prospectus have been
derived from BP&#146;s consolidated financial statements and
accounting records and do not necessarily reflect what our
results of operations, financial condition and cash flows would
have been had we operated as a separate, standalone company
during the periods presented in this prospectus. BP did not
account for us, and we were not operated, as a separate,
standalone company for the periods presented. The historical
costs and expenses reflected in our combined financial
statements include an allocation for certain corporate functions
historically provided to us by BP, including legal, finance,
human resources and other administrative functions. These
allocations were based on what we and BP considered to be
reasonable reflections of the historical utilization levels of
these functions required in support of our business. Moreover,
our combined financial statements and the other historical
financial information included in this prospectus do not
necessarily indicate what our results of operations, financial
condition, cash flows or costs and expenses will be in the
future. The adjustments made to arrive at our unaudited pro
forma combined financial statements reflect, among other things,
changes in our funding and operations as a result of our
separation from BP. However, there can be no assurance that
these adjustments will reflect our funding and operating costs
as a separate, standalone company. For more information on our
results of operations, financial condition and cash flows, see
&#147;Selected Combined Financial Data,&#148; &#147;Unaudited
Pro Forma Combined Financial Data,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and the combined financial statements and the
accompanying notes included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>BP provides us with a substantial proportion of our
feedstock requirements and several of our sites depend entirely
on BP for their supply of raw materials.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP accounts for a substantial proportion of our refining and
petrochemical feedstock requirements. While the substantial
majority of these feedstocks are secured by long-term contracts,
BP may terminate each of these agreements for cause. If we lose
BP as a supplier or if, as a result of operational problems at
any of its facilities, BP is unable or unwilling to supply us
with raw materials in the required quantities or at all, we
could experience temporary disruptions which could force us to
shut down facilities. In addition, we could experience
substantial
</DIV>

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<DIV align="left" style="font-size: 10pt;">
delays in finding suitable replacement feedstocks on
commercially viable terms. At sites which are deeply integrated
with BP&#146;s facilities and therefore depend entirely on BP
for the supply of raw materials, we may be unable to find a
suitable alternative supplier. For example, our facilities in
Carson, California and Texas City, Texas depend on raw materials
from the respective BP refineries located on the same sites and
have no convenient access to alternative supply channels. If BP
fails to supply us with raw materials at any of these sites, we
may be forced to shut the affected facilities, either
temporarily or permanently. If any of these risks materializes,
our business, results of operations and financial condition
could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We currently rely on BP for a variety of specialized
support services, including with respect to commercial
optimization, commodity trading, hedging and operational
support. We cannot assure you that the transitional support BP
has agreed to provide to us in these areas will be sufficient
for our needs or that we will be able to develop equivalent
in-house expertise or replace these services by contracting with
third parties.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have historically relied on BP for assistance with the
optimization of purchases and sales of refinery and
petrochemical feedstocks on the international commodity markets,
the off-take of refinery products and related commodity trading
and hedging activities. In addition, BP has provided us with
operational assistance, including in the areas of technical
support, shipping and transportation. BP has agreed to continue
to provide us with these services for a limited period of time
through a series of arrangements with BP&#146;s supply and
trading operations. While the term and termination provisions of
the relevant agreements vary based on the service being
provided, several of these agreements may be terminated at the
end of 2006. In addition, BP has agreed to provide certain
transitional support services to us, including services related
to information technology systems, marketing, treasury
functions, human resources management and financial, tax and
accounting services. Most of these services are provided under
agreements which terminate no later than December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to develop capabilities to provide many of the
services for which we currently rely on BP during the term of
the relevant agreements. However, although we have attempted to
structure these agreements to meet our needs, there can be no
assurance that in the case of a conflict of interest BP will not
prioritize its own business interests. Moreover, we may fail to
effectively develop the capabilities for which we currently rely
on BP. In addition, the level of expertise we may ultimately
acquire could be lower than that which BP possesses. Moreover,
because of our smaller scale and, consequently, relatively
weaker financial position than BP, we may be less competitive
when operating independently in the commodity markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we fail to adequately replace the functions for which we
currently rely on BP, or are unable to enter into alternative
arrangements with third parties on commercially viable terms,
our business, results of operations and financial condition
could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>As a standalone company, we may have less purchasing power
and therefore could experience higher costs.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a part of BP, we were able to take advantage of BP&#146;s
large size and purchasing power in procuring feedstocks, other
raw materials and supplies, and technology and support services,
including employee benefit support and audit services. Following
the separation, we will be a smaller and less diversified
company and will not have access to financial and other
resources comparable to those of BP. Accordingly, we may be
unable to buy feedstocks, other raw materials and supplies,
technology and support services or sell products at prices and
on terms as favorable as those which were available to us prior
to the separation, which could increase our operating costs and
have a material adverse effect on our business, results of
operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We may from time to time experience conflicts of interest
in our relationship with BP, and, because BP owns a controlling
stake in us, the resolution of these conflicts may not be on the
most favorable terms for us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may from time to time have conflicts of interest with BP with
respect to our relationship and the resolution of these
conflicts may not be on the most favorable terms for us.
Conflicts of interest may arise between us and BP in a number of
areas including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    direct or indirect competition between us and BP, for example,
    due to the fact that we both operate refineries in Europe, and
    the fact that BP holds interests in joint ventures which operate
    petrochemical facilities in China, Malaysia and Germany;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    tax, labor, employee benefit, environmental, indemnification and
    other matters arising from our separation from BP;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    intellectual property matters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    employee recruiting and retention;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer by BP of all or a portion of its ownership interest
    in us to a third party;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the nature, quantity, quality, time of delivery and pricing of
    products we supply to each other under our supply agreements
    with BP;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    business combinations involving our company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    business opportunities that may be attractive to both BP and us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the completion of the offering, BP will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our shares. Although we
and BP have attempted to structure our ongoing commercial
relationships on an arm&#146;s length basis, if a conflict of
interest were to arise in the future, we may not be able to
successfully resolve that conflict, and even if we manage to do
so, there can be no assurance that the resolution would be as
favorable as if we were dealing with an unaffiliated third
party. In each such case, our business, results of operations
and financial condition could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Several of our directors are currently employees of BP. In
addition, most of our directors and executive officers own BP
common stock or options to acquire shares of BP common stock.
These directors and executive officers potentially have
conflicts of interest, which they may not resolve in our
favor.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Several of our directors are currently employees of BP and will
continue their employment relationship with BP after the
offering. In addition, several of our directors and executive
officers own BP common stock, options to acquire BP common stock
and other equity securities of BP and will continue to do so
after the offering. Each of these relationships could create, or
appear to create, potential conflicts of interest when those
directors and officers are faced with decisions that potentially
have different implications for BP than they do for us. While
our directors, executive officers and members of our senior
management are legally required to act in our best interests, we
cannot assure you that no conflicts of interest between their
duties and interests as our employees and their affiliation with
BP will arise or that they will resolve any such conflicts in
our favor. See &#147;Management&#148; for a description of the
extent of the relationship between our directors, officers and
senior management on the one hand and BP on the other hand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The reorganization agreements we have entered into with BP
in connection with our establishment as a separate, standalone
company require us to assume certain past, present and future
liabilities related to our business and may be less favorable to
us than if we had acquired a separate business from an
unaffiliated third party.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the agreements we have entered into with BP in
connection with our formation as a separate legal entity within
the BP group, we have agreed to indemnify BP for certain past,
present and future liabilities related to our business,
including liabilities arising from facts and events that
currently may be unknown to us. BP has transferred to us certain
assets and liabilities formerly included in BP&#146;s
Petrochemicals, Refining and Marketing and Gas, Power and
Renewables segments. In connection with these transfers, we have
generally assumed all historic liabilities (other than tax
liabilities) relating to the assets we acquired, and we will
retain substantial environmental remedial or closure obligations
relating to conditions at our facilities, irrespective of
whether they occurred before or after the transfers. We provided
BP with an indemnity in relation to our business and the
liabilities we have assumed in connection with these transfers.
Although we and BP have attempted to structure these agreements
on an arm&#146;s length basis, there can be no assurance that
the allocation of assets and liabilities between us and BP set
forth in these agreements is as favorable to us as the
allocation we would have been able to agree upon if we had
acquired a separate business from an unaffiliated third party.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>BP has agreed to indemnify us for certain liabilities.
However, there can be no assurance that we will be able to
enforce any claims under this indemnity against BP.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our separation from BP, BP has agreed to
indemnify us, subject to certain limitations, for certain
liabilities, including any claims and losses we may incur with
respect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any liabilities related to off-site waste disposal prior to
    April&nbsp;1, 2005 (excluding liabilities related to certain
    waste disposal sites located near our facilities in Cologne,
    Germany and Sarralbe, France);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any liabilities related to former facilities which, as of
    April&nbsp;1, 2005, had been sold, closed or decommissioned;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any claims for exposure to hazardous materials at our facilities
    to the extent that such claims were either made prior to
    April&nbsp;1, 2005 or threatened in writing prior to
    April&nbsp;1, 2005 and made prior to April&nbsp;1, 2006 or, in
    certain cases, to the extent that such exposure related to
    events that occurred prior to April&nbsp;1, 2005; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    certain product liability claims related to products
    manufactured prior to April&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Nonetheless, third parties could seek to hold us responsible for
any of the liabilities BP has agreed to retain, and there can be
no assurance that we will be able to enforce our claims under
the indemnity against BP. Moreover, even if we ultimately
succeed in recovering any amounts for which we are held liable
from BP, we may be required to temporarily bear these losses
ourselves. Each of these risks could materially adversely affect
our business, results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to the Ownership of Shares of Our Common
Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>There has been no prior market for our shares, and our
share price could fluctuate significantly.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, there has been no trading market for our
shares. We intend to apply to list our shares on the NYSE.
However, our share price may fluctuate significantly, depending
on many factors, including the perceived prospects of our
business and the petrochemical and refining industries in
general, differences between our actual financial position and
results of operations and those expected by investors and
analysts, changes in analysts&#146; recommendations or
projections, changes in general economic or market conditions
and broad market fluctuations. In recent years, the securities
markets have experienced substantial volatility in prevailing
price levels that is unrelated or disproportionate to the
operating performance of individual companies. Accordingly, our
shares may trade at a price significantly below the initial
public offering price of our shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The future sale of a substantial number of our shares by
BP or the perception that such sales may occur could adversely
affect our share price.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following completion of the offering, BP will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our shares, assuming the
over-allotment option is not exercised. In connection with the
offering, BP has agreed to certain restrictions on the sale or
other disposition of its shares under a lock-up agreement. See
&#147;Underwriting&#148; for more information on BP and on the
restrictions BP has agreed to with respect to the sale or other
disposition by BP of its shares in our company. After the
expiration of this period, BP could sell or otherwise dispose of
these shares in a public offering, spin-off or other
transaction. BP has announced that it will consider sales of its
remaining shares in our company following the completion of the
offering. Any sale or other disposition by BP of a substantial
number of our shares in the public market or to its shareholders
or the possibility that such a sale or distribution may occur
could have a material adverse effect on our share price.
Pressure on our share price could also result if BP decided to
sell some or all of its shares in our company to a financial or
strategic buyer and the financial markets perceived that
transaction as not being in the best interests of our
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>After completion of the offering, BP will continue to own
a controlling stake in our company and as a result will be able
to exercise significant control over our company, which may
adversely affect your interests.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following completion of the offering, BP will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our shares, and new
investors who purchase shares in the offering will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our shares. As a result,
BP will be in a position to control the outcome of
</DIV>

<P align="center" style="font-size: 10pt;">17

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<DIV align="left" style="font-size: 10pt;">
corporate actions with respect to our company in a manner that
could conflict with our interests. Examples of such corporate
actions include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    amending our corporate documents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    determining the amount and timing of dividends paid to itself
    and other shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changing the size and composition of our Board of Directors and
    committees of our Board of Directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    otherwise controlling management and operations and the outcome
    of matters submitted for a shareholder vote;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    preventing a business combination or other change in control in
    the future that might affect our share price.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Certain provisions of our charter and bylaws, the laws of
Delaware and our agreements with BP could make a takeover more
difficult and could adversely affect our share price.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of our agreements with BP and our charter and
bylaws as well as the laws of Delaware could make a takeover of
our company more difficult, which could adversely affect our
share price. Under our agreements with BP, for so long as the BP
group beneficially owns at least 50% of the voting power of the
outstanding shares of our capital stock entitled to vote, we are
required to obtain BP&#146;s consent prior to issuing shares of
common stock or securities convertible or exchangeable into or
exercisable for our common stock if, after giving effect to such
issuances, the BP group would own less than 50% of the voting
power of the outstanding shares of our capital stock. In
addition, for so long as the BP group beneficially owns at least
10% of the outstanding shares of our capital stock entitled to
vote, in any future issuances of shares of our common stock or
other securities described above, BP will be entitled to a
preemptive right to purchase such number of shares as is
necessary to allow it to maintain the percentage of its voting
power, with certain exceptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of our charter and bylaws could make it
difficult for someone to acquire control of our company in a
transaction not approved by our Board of Directors. These
provisions include the authorization of the issuance of
&#147;blank check&#148; preferred stock without the need for
action by our shareholders, restrictions on the ability of our
shareholders to remove directors, restrictions on the ability of
our shareholders to call special meetings of our shareholders,
supermajority voting requirements for shareholders to amend
certain provisions of our organizational documents, the
authorization to establish a classified Board of Directors,
advance notice requirements for nominations of directors or for
proposals by directors to be acted upon at shareholders&#146;
meetings, special quorum requirements for meetings of our Board
of Directors and limitations on the ability of our shareholders
to act by written consent. Some of these provisions, such as
supermajority voting requirements for shareholders to amend
certain provisions of our organizational documents, are
effective for so long as the BP group&#146;s or its designated
direct transferee&#146;s beneficial ownership of our company
meets certain thresholds, and some of these provisions, such as
the limitation on shareholder action by written consent, become
effective once BP group&#146;s or its designated direct
transferee&#146;s beneficial ownership of our company falls
below 50%. See &#147;Description of Capital Stock&nbsp;&#151;
Anti-Takeover Effects of Provisions of Our Amended and Restated
Certificate of Incorporation and Bylaws.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation also provides that
Section&nbsp;203 of the Delaware General Corporation Law will
not apply to us for so long as the BP group or any designated
direct transferee of the BP&nbsp;group beneficially owns at
least 20% of the outstanding shares of our common stock. If the
ownership interest of the BP&nbsp;group or any of its designated
direct transferees falls below 20%, we will be subject to
Section&nbsp;203 of the Delaware General Corporation Law, which
will prohibit us, in certain situations, from entering into a
business combination with a shareholder owning 15% or more of
our shares for a period of three years after the shareholder
attains that status. These provisions could also discourage
proxy contests and make it more difficult for you and other
shareholders to elect directors other than the candidates
nominated by our Board of Directors. The existence of these
provisions could adversely affect our share price. Although such
provisions do not have a substantial practical significance to
investors while BP controls us, they could have the effect of
depriving our shareholders of an opportunity to sell their
shares at a premium over prevailing market prices should
BP&#146;s combined voting power fall below the relevant
thresholds.
</DIV>

<P align="center" style="font-size: 10pt;">18

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<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SPECIAL NOTE&nbsp;REGARDING FORWARD-LOOKING STATEMENTS AND
MARKET DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus includes forward-looking statements. When used
in this document, the words &#147;anticipate,&#148;
&#147;believe,&#148; &#147;estimate,&#148; &#147;forecast,&#148;
&#147;expect,&#148; &#147;intend,&#148; &#147;plan&#148; and
&#147;project,&#148; and similar expressions, as they relate to
us, our management or third parties, identify forward-looking
statements. Forward-looking statements include statements
regarding our business strategy, financial condition, results of
operations, and market data, as well as any other statements
which are not historical facts. These statements reflect beliefs
of our management as well as assumptions made by our management
and information currently available to us. Although we believe
that these beliefs and assumptions are reasonable, the
statements are subject to numerous factors, risks and
uncertainties that could cause actual outcomes and results to be
materially different from those projected. These factors, risks
and uncertainties include those listed under &#147;Risk
Factors&#148; and elsewhere in this prospectus and expressly
qualify all subsequent oral and written forward-looking
statements attributable to us or persons acting on our behalf.
Except for any ongoing obligation to disclose material
information as required by the federal securities laws, we do
not have any intention or obligation to update forward-looking
statements after we distribute this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, this prospectus contains information concerning the
petrochemical and refining industries, our market segments and
product areas generally which is forward-looking in nature and
is based on a variety of assumptions regarding the ways in which
the petrochemical and refining industries, our market segments
and product areas will develop. We have based these assumptions
on information currently available to us, including through the
market research and industry reports referred to in this
prospectus. Although we believe that this information is
reliable, we have not independently verified and cannot
guarantee its accuracy or completeness. If any one or more of
these assumptions turn out to be incorrect, actual market
results may differ from those predicted. While we do not know
what impact any such differences may have on our business, if
there are such differences, our future results of operations and
financial condition and the market price of our shares of common
stock could be materially adversely affected.
</DIV>

<P align="center" style="font-size: 10pt;">19

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<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of the offering, our Board of Directors intends
to adopt a policy of declaring, subject to legally available
funds, a quarterly cash dividend on each share of common stock
at an annual rate initially equal to
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the initial public offering price, commencing with the first
quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Board of Directors may at any time modify or revoke our
dividend policy with respect to the common stock. Any future
payment of dividends will be at the discretion of our Board of
Directors and will be dependent on our net income, results of
operations, financial condition, capital requirements, any
contractual restrictions and other factors that our Board of
Directors may consider relevant.
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our cash and cash equivalents,
short-term debt and capitalization as of June&nbsp;30, 2005
(1)&nbsp;on an actual basis and (2)&nbsp;as adjusted to reflect
the recapitalization of our company prior to the offering, as
part of which our share capital will be increased to shares of
common stock, par value $0.01&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the information in the following table together
with &#147;Selected Combined Financial Data,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the combined
financial statements, the interim unaudited combined condensed
financial statements and the accompanying notes included
elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash and cash equivalents</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Short-term debt (including current portion of long-term
    debt)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Long-term debt</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares of common stock, par value $0.01 per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    shares of common stock authorized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    shares of common stock issued and outstanding pro forma as
    adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">21
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<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "SELECTED COMBINED FINANCIAL DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELECTED COMBINED FINANCIAL DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents our selected combined financial
data. The selected combined statements of operations data for
the years ended December&nbsp;31, 2002, 2003 and 2004, the
selected combined statements of cash flows data for the years
ended December&nbsp;31, 2002, 2003 and 2004 and the selected
combined balance sheet data as of December&nbsp;31, 2003 and
2004 have been derived from our audited combined financial
statements included elsewhere in this prospectus. The unaudited
selected combined statements of operations data for the years
ended December&nbsp;31, 2000 and 2001 and the six months ended
June&nbsp;30, 2004 and 2005, the unaudited selected combined
statements of cash flows data for the years ended
December&nbsp;31, 2000 and 2001 and the six months ended
June&nbsp;30, 2004 and 2005 and the unaudited combined balance
sheet data as of December&nbsp;31, 2000 and 2001 and
June&nbsp;30, 2005 have been derived from our unaudited
accounting records for those periods. The unaudited selected
combined financial data have been prepared on a basis consistent
with our audited combined financial statements and, in the
opinion of management, include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair
presentation of such data. The selected combined financial data
should be read in conjunction with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and the combined financial statements and the
accompanying notes included elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of and for the</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of and for the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Statements of Operations Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,775</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,586</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,765</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,253</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,876</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(734</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(616</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(630</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(115</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring and asset impairment charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity (loss) income from investments in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from continuing operations before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(758</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from discontinued operations, net of income tax expense
    (benefit) of $0, $0, $(52)&nbsp;million, $0 and $0</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of and for the</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of and for the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Statements of Cash Flows Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities of continuing
    operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities of continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(579</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities of
    continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(559</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Balance Sheet Data</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,174</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Information</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA from continuing operations
    <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,088</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Selected financial data disclosed as of and for the years ended
    December&nbsp;31, 2000 and 2001 is limited to revenues, net
    income (loss) from continuing operations, total assets and
    long-term debt, as this is the only financial information
    required to be disclosed as of these dates and the years then
    ended.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    See &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures&#148; for a definition of adjusted
    EBITDA and the reasons why management believes that the
    presentation of adjusted EBITDA provides useful information to
    investors. Set forth below is a reconciliation of net (loss)
    income to adjusted EBITDA for each period indicated:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset impairments from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted EBITDA from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">23

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of Non-GAAP Financial Measures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA is a non-GAAP measure and is defined as net
income (loss) from continuing operations before interest
expense, provision for income taxes for continuing operations,
depreciation and amortization from continuing operations and
asset impairments from continuing operations. We believe that
the presentation of adjusted EBITDA enhances an investor&#146;s
understanding of our financial performance. However, adjusted
EBITDA should not be considered in isolation or viewed as a
substitute for net income, cash flow from operations or other
measures of performance as defined by U.S.&nbsp;GAAP. Adjusted
EBITDA, as used herein, is not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. Our management
uses adjusted EBITDA to assess our company&#146;s operating
performance and to make decisions about allocating resources
among our various segments. In assessing our overall performance
and the performance of each of our segments, management reviews
adjusted EBITDA as a general indicator of performance compared
to prior periods. Adjusted EBITDA excludes losses related to
discontinued operations, interest expense, provisions for income
taxes for continuing operations, depreciation and amortization
from continuing operations and asset impairments from continuing
operations, which are items that management does not utilize in
assessing operating performance. Our management believes it is
useful to eliminate these items because it allows management to
focus on what it considers to be a more meaningful indicator of
our operating performance and ability to generate cash flow from
operations. As a result, internal management reports used during
monthly operating reviews feature adjusted EBITDA. Nevertheless,
management recognizes that there are limitations associated with
the use of adjusted EBITDA as compared to net income, which
reflects overall financial performance, including the effects of
interest, taxes, depreciation and amortization and asset
impairments, and therefore uses adjusted EBITDA in conjunction
with traditional GAAP operating performance measures as part of
its overall assessment of our performance.
</DIV>

<P align="center" style="font-size: 10pt;">24

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<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA COMBINED FINANCIAL DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA COMBINED FINANCIAL DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have derived the unaudited pro forma combined financial
statements set forth below from our audited combined financial
statements for the year ended December&nbsp;31, 2004 and our
unaudited combined financial statements for the six months ended
June&nbsp;30, 2005, each of which is included elsewhere in this
prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma combined statements of operations
reflect the combined operations of our company and our
subsidiaries as if our separation from BP and the related
transactions described below had occurred as of January&nbsp;1,
2004. The unaudited pro forma combined balance sheet reflects
the combined operations of our company and our subsidiaries as
if our separation from BP and the related transactions described
below had occurred as of June&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the unaudited pro forma financial statements
reported below in conjunction with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and the combined financial statements and the
notes thereto included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma combined financial statements do not
necessarily reflect what our financial position and results of
operations actually would have been had our separation from BP
and the related transactions described below occurred on the
dates indicated nor do they purport to project our future
financial performance. BP did not account for us, and we were
not operated, as a separate legal entity for any period prior to
April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma combined financial statements give pro
forma effect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the recapitalization of our company prior to the offering, as
    part of which our share capital will be increased
    to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock, par value $0.01&nbsp;per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our repayment on March&nbsp;22, 2005 of loans in the amount of
    $1,755&nbsp;million which were secured by the petrochemical
    assets of our site in Grangemouth, United Kingdom, and the
    replacement of this debt by a loan from BP to us in the amount
    of $1,700&nbsp;million, which was granted to us effective
    April&nbsp;1, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer from BP to us of the road and rail terminals of our
    Grangemouth site, which are not included in our historical
    combined financial statements; the relevant assets will be
    transferred to us prior to the offering, effective April&nbsp;1,
    2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer from us to BP of our proportionate share of the
    shared power station of the Grangemouth site and certain
    infrastructure shared between us and BP at our site in Geel,
    Belgium; our historical combined financial statements show our
    proportionate share of these assets; the relevant assets were
    transferred from us to BP prior to the offering, effective
    April&nbsp;1, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the transfer from us to BP of our obligations under certain
    pension and other post-employment benefit plans relating to
    former employees to reflect the fact that BP has agreed to
    retain these obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the commercial arrangements entered into between us and BP
    effective January&nbsp;1, 2005; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    insurance costs we expect to incur as a result of operating as a
    standalone company.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the year ended December&nbsp;31, 2004 and the six months
ended June&nbsp;30, 2005, BP allocated to us general and
administrative (including head office) expenses in the amount of
$259&nbsp;million and $8&nbsp;million, respectively. General and
administrative expenses include costs related to human
resources, legal, treasury, insurance, finance, internal audit,
strategy, public affairs and other services but do not include
selling-related expenses. Effective January&nbsp;1, 2005, we
assumed responsibility for substantially all of these services
and related costs and therefore the charges allocated to us by
BP are expected to be substantially lower in 2005. We expect our
general and administrative expenses, in aggregate, to be
approximately $320&nbsp;million in 2005. No pro forma
adjustments have been made to our combined financial statements
to reflect the costs and expenses described in this paragraph,
except for additional costs related to our standalone insurance
policies described in note&nbsp;(d) below.
</DIV>

<P align="center" style="font-size: 10pt;">25
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows our unaudited pro forma combined
statements of operations for 2004 and the six months ended
June&nbsp;30, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the six months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>combined</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>combined</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>($ in millions, except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pro forma combined statement of operations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,765</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(b)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,768</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,876</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(b)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(c)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(630</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(d)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(680</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring and asset impairment charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>844</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity income (loss) from investments in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(e)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(e)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(f)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(f)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(c)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(g)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(g)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from continuing operations before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>777</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(h)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(h)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(232</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (loss) income per
    share<SUP style="font-size: 85%; vertical-align: text-top">(i)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of shares used in computing net (loss) income per
    share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Represents (1)&nbsp;a decline in revenues, reflecting the fact
    that in some cases our agreements with BP effective
    January&nbsp;1, 2005 relating to the purchase and sale of
    refinery products have a different economic effect than the
    intra-group arrangements which governed our relationship with BP
    historically; and (2)&nbsp;other income in the form of fees
    received by us from BP to compensate us for inventories held by
    us to support BP&#146;s inventory maintenance obligations in
    certain countries.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Represents the net effect of (1)&nbsp;reversing costs associated
    with retired employees participating in our German pension and
    post-employment benefit plans to reflect the fact that BP has
    agreed to retain all obligations to retirees under these plans,
    (2)&nbsp;eliminating the financing and amortization component
    from expenses associated with the participation of our employees
    in BP&#146;s group-wide pension and post-employment benefit
    plans to reflect our agreement with BP that in the future we
    will only be responsible for the service cost</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">component of these plans (for
    U.K.&nbsp;plans, this agreement results in an increase in our
    costs due to the fact that our historical pension costs were
    reduced by a surplus generated by BP&#146;s pension plan in the
    United Kingdom; in all other relevant jurisdictions the
    agreement has the opposite effect) and (3)&nbsp;certain related
    adjustments.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the six</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>months ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retired employees under plans in Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Group-wide plans (United Kingdom)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Group-wide plans (other jurisdictions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    Represents (1)&nbsp;the impact on our depreciation charge of
    including in our asset base the road and rail terminals of our
    site in Grangemouth, United Kingdom, which are not reflected in
    our historical combined financial statements but will be
    transferred from BP to us prior to the offering, effective
    April&nbsp;1, 2005, and (2) the impact on our depreciation
    charge of excluding from our asset base our proportionate share
    of the shared power station of the Grangemouth site and certain
    shared infrastructure at our Geel, Belgium, site, which will be
    transferred from us to BP prior to the offering, effective
    April&nbsp;1, 2005 (we have agreed to pay to BP
    (A)&nbsp;depreciation charges for our proportionate use of these
    assets, which we record under cost of sales, and (B)&nbsp;a
    charge on capital on their net book value, which we record under
    other income (expense), net).</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the six months</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase) decrease in depreciation charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grangemouth road and rail terminal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grangemouth power station</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Geel infrastructure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation charge-back</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grangemouth power station</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Geel infrastructure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of capital charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grangemouth power station</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Geel infrastructure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(d)&nbsp;</TD>
    <TD align="left">
    On January&nbsp;1, 2005, we established our own standalone
    insurance policies for certain risks with BP&#146;s captive
    insurance subsidiary. The cost of these policies for 2005 is
    expected to be approximately $38&nbsp;million. Following
    completion of the offering, we expect to put in place a
    comprehensive insurance program, which is expected to cost
    approximately $50&nbsp;million per year.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(e)&nbsp;</TD>
    <TD align="left">
    Represents the elimination of interest expense related to debt
    secured by our Grangemouth petrochemical assets, which is
    reflected in our historical combined financial statements and
    was repaid on March&nbsp;22, 2005.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(f)&nbsp;</TD>
    <TD align="left">
    Represents interest expense for the year ended December&nbsp;31,
    2004 related to a loan in the amount of $1,700&nbsp;million
    extended to us by BP effective April&nbsp;1, 2005. The interest
    rate on the loan is LIBOR plus five basis points, with interest
    payable every three months. LIBOR has been calculated based on
    the three-month LIBOR rate as of April&nbsp;1, 2005, which was
    3.12%. This loan replaced the debt secured by our Grangemouth
    petrochemical assets, which was repaid on March&nbsp;22, 2005.
    The loan we have been granted by BP matures on March&nbsp;30,
    2006, unless repaid earlier. The annual impact of an increase or
    decrease of 10&nbsp;basis points in interest rates on the loan
    would reduce or increase our pre-tax income by
    $1.7&nbsp;million. We are currently in discussions with banks
    for term loans and other short-term facilities with which we
    intend to replace this loan. Accordingly, our future interest
    expense may be higher or lower, depending on the maturity and
    interest rate of the bank financing we plan to obtain, the
    timing of repayment of this loan and the then-applicable LIBOR
    rate.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(g)&nbsp;</TD>
    <TD align="left">
    Represents the elimination of the net impact of foreign exchange
    translation gains and losses in connection with the loans
    secured by the Grangemouth petrochemical assets and gains and
    losses on derivatives used to hedge these losses at year-end
    exchange rates.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the six</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>months ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Translation gains and losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gains and losses on derivatives trading</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(h)&nbsp;</TD>
    <TD align="left">
    Represents the tax effect of the pro forma adjustments on our
    net (loss) income before income taxes using the estimated
    effective tax rate of 38%.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(i)&nbsp;</TD>
    <TD align="left">
    The computation of pro forma net (loss) income per share is
    based on the anticipated number of shares of our common stock
    outstanding upon completion of the offering. Prior to the
    completion of the offering, there will be no outstanding options
    to purchase shares of our common stock or other potentially
    dilutive securities. In connection with the offering, our
    executive officers and certain key employees will be granted
    restricted shares, restricted stock units and stock options.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows our unaudited pro forma combined
balance sheet as of June&nbsp;30, 2005 along with a
reconciliation to our audited combined balance sheets as of that
date:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro forma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>combined</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pro forma combined balance sheet</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>576</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayments and other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in and advances to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill and intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayments and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="15" align="left" valign="top">
    Liabilities and owner&#146;s equity</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payables to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>649</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due to parent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,465</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Owner&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(b)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(b)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income (loss), net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total owner&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and owner&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Represents the reversal of an accrual for the estimated closure
    costs of the Pasadena, North America site. BP operates this
    facility for us under a toll manufacturing agreement and will
    incur the closure costs.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Reflects the recapitalization of our company prior to the
    offering, as part of which our share capital will be increased
    to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock, par value $0.01 per&nbsp;share.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">29
<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following information should be read together with our
selected combined financial and operating data, our unaudited
pro forma financial data and the combined financial statements
and notes included elsewhere in this prospectus. The following
discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed
below and elsewhere in this prospectus particularly in
&#147;Risk Factors&#148; and &#147;Special Note&nbsp;Regarding
Forward-Looking Statements and Market Data.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>&#147;Innovene Inc.,&#148; the &#147;company,&#148;
&#147;we,&#148; &#147;us,&#148; and &#147;our&#148; each refer
to Innovene Inc. and its subsidiaries, including its predecessor
businesses, which comprise certain operations that were formerly
part of BP&#146;s Petrochemicals, Refining and Marketing, and
Gas, Power and Renewables segments, as described under
&#147;&nbsp;&#151; Basis of Presentation,&#148; except where the
context makes clear that the reference is only to Innovene Inc.
itself and not to its subsidiaries or predecessor businesses.
The assets and liabilities comprising the operations of our
predecessor businesses will be transferred to us prior to the
completion of the offering. A glossary of petrochemical and
refining abbreviations used in this prospectus is set forth on
page&nbsp;133.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are among the world&#146;s largest petrochemical companies,
with revenues of $17.9&nbsp;billion in 2004. We conduct our
business through petrochemical manufacturing sites in eight
countries as well as two refineries which are fully integrated
with our petrochemical facilities. At June&nbsp;30, 2005, our
total petrochemical production capacity was approximately
40&nbsp;billion pounds per year and our refineries had a
combined crude oil distillation capacity of approximately
400&nbsp;mbd. Our business is structured around five major
sites, which account for approximately 70% of our petrochemical
production volumes and approximately 85% of our overall
production volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a global reach and leading market positions with respect
to our key petrochemical products, which enable us to manage our
business on a worldwide basis. We benefit from the cost
advantages of operating large-scale petrochemical facilities and
the high degree of integration at our major sites. We have an
expanding position in the fast-growing Asian markets, which we
serve through our operations in North America and Europe. We
have an established regional office in Shanghai, China to manage
our operations in Asia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business comprises certain assets, liabilities and
associated infrastructure that were formerly part of BP&#146;s
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments. We believe our separation from BP has
created new opportunities for us. Historically, our business was
a small part of a much larger organization and, our performance
lagged behind that of other companies in the petrochemicals
sector. As a separate entity with our own management structure,
we will be able to focus on the factors that are critical to the
success of our petrochemical and refining businesses and
benchmark ourselves directly against the performance of our
competitors. Our benchmarking work has identified significant
opportunities to improve the performance and optimize the use of
our existing assets and to increase our margins. We intend to
pursue growth opportunities by investing in new assets and
forming joint ventures in regions that have access to low-cost
feedstocks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our formation as a separate legal entity, BP
has agreed to provide various administrative and operational
support services to us. In addition, we have entered into a
range of commercial arrangements with BP for the supply of
refining and petrochemical feedstocks, the purchase and sale of
refined products, the sharing of common infrastructure and the
provision of utilities at various sites which we share with BP.
See &#147;Certain Relationships and Related
Transactions&nbsp;&#151; Commercial Interface Agreements&#148;
for more information on these arrangements.
</DIV>

<P align="center" style="font-size: 10pt;">30

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Key Factors Driving Our Results</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our results of operations are driven by a combination of factors
affecting the petrochemical and refining industries as a whole
and various structural and operational factors specific to our
company. To improve our results, we depend on our ability to
maximize our sales volumes, to realize attractive contribution
margins (that is, the difference between revenues and variable
costs of goods sold on a per-unit basis) and to firmly manage
our fixed costs. While we have some ability to manage our
revenues and feedstock costs, given the commodity nature of the
petrochemical and refining industries, our contribution margins
are largely driven by industry dynamics. Set forth below is an
overview of the key drivers affecting our results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Supply and demand in the petrochemical industry.</I></B>
Margins in the petrochemical industry are strongly influenced by
industry utilization. As demand for petrochemical products
approaches available supply, utilization rates rise, and, prices
and margins typically increase. Historically, this relationship
has been highly cyclical due to fluctuations in supply resulting
from the timing of new investments in capacity and general
economic conditions affecting the relative strength or weakness
of demand. Generally, capacity is more likely to be added in
periods when current or expected future demand is strong and
margins are, or are expected to be, high. Investments in new
capacity can result, and in the past frequently have resulted,
in overcapacity, which typically leads to a reduction of
margins. In response, companies typically reduce capacity or
limit further capacity additions, eventually causing the market
to be relatively undersupplied. The bottom of the last cycle was
reached in 2001 and continued through 2003 due to weak demand
and substantial simultaneous capacity additions. Starting in
2004, stronger demand and limited capacity investments have led
to greater contribution margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the global petrochemical cycle, our results are
driven by short-term fluctuations in the regional balance
between the supply of products and the amount of available
capacity on the one hand and the demand for products on the
other hand due to planned and unplanned facility outages, which
are a feature of our industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Refining industry cash margins and oil price
differentials.</I></B> Refining industry cash margins have
increased significantly since 2002, reaching near record levels
in 2004 and remaining strong in the six months ended
June&nbsp;30, 2005. According to Purvin&nbsp;&#38;
Gertz,&nbsp;Inc. (PGI), the average cash margin for a
hydrocracking refinery in Europe was $6.04&nbsp;per barrel in
2004 and $6.15&nbsp;per barrel in the six months ended
June&nbsp;30, 2005, compared with $2.73 per barrel in 2003. This
increase is explained by several factors. Global demand for
transportation fuels rose significantly from 2003 levels,
substantially outstripping additions of refinery capacity. In
addition, tightening product specifications to satisfy higher
environmental standards restricted the production of certain
refinery products. From a macroeconomic perspective, OPEC
continued to limit supplies, keeping global inventories of both
crude oil and refined products at low levels, leading to further
price and margin increases. At the same time, demand for
heavy/residual refinery products continued to decline, whereas
incremental crude oil supplies became dominated by heavy, sour
crudes. As a result, the price differential between light, sweet
crude oil and heavy, sour crude oil widened substantially.
According to PGI, this price differential (as measured by the
Urals/ Brent differential) averaged $4.14&nbsp;per barrel in
2004 and $4.33&nbsp;per barrel in the six months ended
June&nbsp;30, 2005, compared with $1.76 per barrel in 2003. We
benefited from these developments because both of our refineries
have the ability to process a broad range of crude oil blends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Asset utilization, reliability and turnarounds.
</I></B>Our results of operations are materially influenced by
the degree to which we utilize our assets, as measured by our
production volumes relative to the capacity of our assets. The
principal factors that influence our asset utilization are plant
reliability, turnarounds and the balance between supply and
demand for our products in the industries and regions in which
we operate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of our asset
utilization:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>For the year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(%)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Utilization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Petrochemicals<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">31

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    In our petrochemical business, capacity is defined as nameplate
    capacity. See &#147;Business&nbsp;&#151;
    Manufacturing&nbsp;&#151; Overview&#148; for more information on
    how we calculate nameplate capacity in our petrochemical
    business. One of the consequences of the way we calculate
    capacity is that reliability problems and turnarounds affect our
    utilization rates only to the extent that the impact of these
    events exceeds the estimates factored into our capacity
    calculations.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    In our refining business, utilization is measured by reference
    to crude oil distillation capacity, which is calculated as the
    maximum crude oil volume that can be fed into a refinery using
    the type of crude oil that the relevant refinery was designed to
    process. The volume of crude oil expands during its conversion
    into finished refinery products. Therefore, it is not possible
    to directly compare the utilization rates and capacity figures
    of our refining business with the refining production volumes
    shown elsewhere in this prospectus.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
In 2000 and 2001, the utilization of our facilities was
influenced by the fact that we faced reliability issues at
several of our sites. See &#147;Business&nbsp;&#151;
Manufacturing&nbsp;&#151; Europe&#148; for more information on
these issues. We began to address these issues through targeted
investments in our plants and infrastructure, workforce
assessment and development programs and process automation.
Since 2001, these initiatives have led to significant
improvements in the reliability of our assets, particularly our
olefins crackers and refineries. However, issues remain with
respect to the reliability of some of our assets, in particular
with respect to some of our polymers and derivatives units and,
during the six months ended June&nbsp;30, 2005, with respect to
our refineries. We intend to build on the initial improvements
we achieved in 2002 and focus our efforts on those assets with
respect to which we continue to have reliability issues.
Moreover, we plan to improve the reliability of our assets with
remediation measures as part of the performance improvement
program described below under &#147;&#151;&nbsp;Our Accelerator
Program.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of the reliability of
our facilities:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six&nbsp;months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>For the year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(%)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Reliability<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins crackers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polymers and derivatives units</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refineries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The reliability of a facility is defined as the maximum
    sustainable daily rate (MSDR)&nbsp;of the facility, multiplied
    by the actual number of days in the period for which the
    calculation is made, minus volume losses during the period due
    to equipment or operational failures resulting in downtime or an
    inability to run a unit at maximum possible capacity, and the
    resulting net figure is divided by MSDR.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The utilization of our facilities is also influenced by the
number and length of turnarounds carried out in any given
period. Turnarounds are outages of a unit scheduled to carry out
necessary inspections and testing to comply with industry
regulations. These outages also permit us to perform any
additional maintenance activities that may be necessary. Where
possible, we seek to schedule the timing of turnarounds to
coincide with periods of relatively low demand for the products
of the relevant units. Turnarounds of our refineries and olefins
crackers typically take longer, but are less frequent, than
turnarounds of our polymers and derivatives assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Oil and gas price movements.</I></B> Feedstock costs are
the most significant component of our operating costs. The costs
of the feedstocks we require to make our petrochemical products
(naphtha, ethane, butane and propane) are principally driven by
the price of oil and natural gas. According to the
U.S.&nbsp;Energy Information Administration, the market price
for West Texas Intermediate (WTI) crude oil increased from
approximately $20 per barrel in January 2002 to approximately
$57 per barrel in June 2005, while the market price for natural
gas increased from $2.43&nbsp;per mmbtu in January 2002 to
$5.99&nbsp;per&nbsp;mmbtu in June 2005. Our revenues increased
from $11,776&nbsp;million in 2002 to $13,422&nbsp;million in
2003 to $17,937&nbsp;million in 2004 and were
$11,131&nbsp;million in the six months ended June&nbsp;30, 2005.
The increase in revenues reflects the fact that in the recent
past we have been able to pass on increases in feedstock prices
to our customers in the form of higher product prices. However,
our ability to do so is limited due to the impact of time lags
resulting from the repricing intervals of our contracts with
suppliers and customers, particularly in our petrochemical
business. While most of our feedstock contracts reprice daily,
our contracts with customers generally reprice on a monthly
basis or, in the case of olefins contracts in Europe, quarterly.
A further limitation is that many of our customers take
advantage of fluctuating prices by building inventories when
they expect product prices to increase and reducing inventories
when they expect prices
</DIV>

<P align="center" style="font-size: 10pt;">32

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<DIV align="left" style="font-size: 10pt;">
to decrease. The effect of these time lags and our
customers&#146; inventory management policies on our ability to
pass through feedstock price increases is magnified in periods
of high volatility. In addition, changes in oil and gas prices
have a direct impact on our working capital levels. In general,
increases in feedstock prices lead to an increase in our working
capital and decreases in feedstock prices decrease our working
capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Foreign exchange rate fluctuations.</I></B> Although many
of our sales are invoiced in local currencies, a substantial
proportion of our revenues is denominated in, or linked to, the
U.S.&nbsp;dollar. This linkage results from the fact that many
of our products are subject to significant interregional trade
between North America, Europe and Asia and, as a result, prices
for these products tend to settle at a consistent level in
U.S.&nbsp;dollar terms, irrespective of the currencies in which
local sales and purchases are made. In markets which are smaller
and more regional with limited import penetration, the linkage
to the U.S.&nbsp;dollar tends to be weaker and, consequently,
fluctuations in exchange rates have a greater impact on our
reported revenues. At the same time, the majority of our
non-feedstock costs are incurred in currencies other than the
U.S.&nbsp;dollar, mostly the euro and the British pound,
reflecting the fact that most of our assets are located in
Europe. From January&nbsp;1, 2002 to December&nbsp;31, 2004, the
U.S.&nbsp;dollar weakened against the euro and the British pound
by approximately 53% and 32%, respectively. From January&nbsp;1,
2005 to June&nbsp;30, 2005, the U.S.&nbsp;dollar strengthened
against the euro and the British pound by approximately 13% and
6%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Portfolio restructuring.</I></B> Our cost structure
relative to other companies in the petrochemical industry is a
function of the quality and performance of our assets. We have
embarked on a program to restructure and simplify our asset
portfolio to reduce our costs. For example, we sold the
butanediol (BDO) unit of our Lima, Ohio facility in March 2005
because it did not fit in with our overall strategy and
generated operating losses since the plant opened in 2000. We
report this business as a discontinued operation. Furthermore,
we decided to close down the linear alpha olefins
(LAO)&nbsp;facility in Pasadena, Texas, currently operated for
us by BP under a toll manufacturing agreement, in late 2005.
This decision was prompted by overcapacity in the LAO industry,
the facility&#146;s age, its outdated technology and expensive
processes. The impairment charges were recorded in 2004 at the
time when management made the decision to exit the butanediol
business and close down the Pasadena plant. We incurred
restructuring and asset impairment charges of $93&nbsp;million
in 2002, $72&nbsp;million in 2003, $345&nbsp;million in 2004,
and $21&nbsp;million in the six months ended June&nbsp;30, 2005.
On June&nbsp;8, 2005, we signed a non-binding memorandum of
understanding to construct a cracker and associated derivative
complex in Saudi Arabia. If we enter into a definitive agreement
with our partner and the Saudi Arabian government and construct
a facility in this region, we would gain access to low-cost
natural gas feedstock, which would improve our cost of sales
position, particularly in periods when oil prices are high
compared with the price for gas, as has been the case in recent
years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;10, 2005, we experienced a fire at one of the
crackers of our Chocolate Bayou, Texas facility. The affected
unit primarily produces ethylene and represents approximately
50% of our Chocolate Bayou facility&#146;s total ethylene
capacity. We are continuing to assess the operational and
financial impact the incident may have on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hurricane Katrina brought unusually severe weather conditions
and caused extensive property damage to the U.S.&nbsp;Gulf Coast
in Louisiana, Mississippi and Alabama. Although none of our
plants suffered physical damage as a result of the storm, raw
material suppliers and logistics providers have been affected,
potentially disrupting our ability to produce and ship certain
products to customers. We, and other companies in the industry,
are continuing to assess the impact of Hurricane Katrina.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Accelerator Program</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To improve our operating results, we have embarked on a focused
performance improvement program, which we refer to as our
Accelerator program. The actions which we have identified under
this program, and which we intend to implement over the period
from 2005 to 2007, are based on a detailed analysis of our
operational performance relative to our peers in the
petrochemical and refining industries, and encompass all of our
operations from procurement to manufacturing, sales, marketing
and logistics as well as overhead costs. The
</DIV>

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<DIV align="left" style="font-size: 10pt;">
initiatives are intended to increase our revenues, decrease our
cost of sales, and reduce our selling, general, and
administrative expenses, as described below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Increase Revenues</I></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Improve the availability, reliability and utilization of
    our facilities.</I></B> We intend to improve the availability,
    reliability and utilization of our facilities by streamlining
    our management structure and establishing clear
    accountabilities, training our employees, improving our
    maintenance practices and making appropriate investments in our
    infrastructure. We expect to focus our maintenance efforts on
    facilities whose reliability was below average in 2004. We
    believe that this program will enable us to maximize the
    availability of our refineries and to operate our petrochemical
    facilities as close as possible to their full capacity, thereby
    increasing our revenues.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Improve our sales effectiveness.</I></B> Our business
    optimization organization, which consists of a global network of
    teams drawn from our various operating units, constantly seeks
    to identify the best possible channel for bringing our products
    to market. To succeed in this effort, we depend on a strong
    sales force that can identify the most attractive opportunities
    in the market and develop offers to capture these opportunities.
    We recently introduced a compensation program designed to reward
    our sales personnel based on their success in the marketplace.
    In addition, starting in 2004, we took steps to renegotiate
    those of our polymers and derivatives contracts with customers
    which contained pricing provisions that either were fixed or
    lacked adequate flexibility to respond to changing market
    conditions. We believe that the inclusion of more responsive
    pricing provisions in our contracts will help us reduce the
    pressure on our contribution margins which we have historically
    experienced as a result of time lags due to the repricing
    intervals of our customer contracts, our customers&#146;
    inventory management policies and other inefficiencies in our
    pricing mechanisms.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Decrease Cost of Sales</I></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Reduce operating and maintenance costs at our
    manufacturing facilities.</I></B> We have recently completed an
    assessment of our maintenance practices and the energy
    utilization of our facilities. Based on these findings, we are
    making improvements to our maintenance practices which we expect
    will increase the efficiency and productivity of our plants
    through improved resource planning and management, while
    maintaining applicable Health, Safety, Security and
    Environmental (HSSE) standards. In addition, we have identified
    a number of areas in which we believe we can improve the energy
    utilization of our facilities, and we intend to take advantage
    of these opportunities to reduce our energy costs.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Actively manage our portfolio of assets and businesses
    where sufficient productivity improvements cannot be
    achieved.</I></B> We have analyzed the competitive position and
    financial contribution of each of our major assets and
    businesses. In those cases where an asset or business is unable
    to perform to expectations or to contribute materially to the
    financial performance of our company or where it would be
    uneconomical to implement the necessary improvements, we will
    consider selling or closing the relevant asset or business. This
    approach has already led to the divestment of businesses and the
    closure of some assets in 2004 and the first six months of 2005.
    For example, we closed an old HDPE unit at our Grangemouth,
    United Kingdom site, which was expensive to operate, in March
    2005, having replaced its production with a more efficient unit
    at our Lillo, Belgium facility. Furthermore, we signed an
    agreement with NOVA in May 2005 to merge our respective European
    polystyrene and EPS businesses into a 50/50 joint venture. We
    expect that these actions will reduce manufacturing costs and
    improve our results.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Simplify our product portfolio to improve utilization and
    increase margin contribution.</I></B> To minimize the amount of
    production volumes lost due to transitions of our units between
    product grades and to maximize the utilization of our
    manufacturing facilities and their contribution margins, we have
    taken steps to simplify our product portfolio, and we intend to
    continue to take further steps in this direction. For example,
    in North America, we have reduced the number of commercial
    grades of our polypropylene products by approximately 40% since
    mid-2004. Similarly, at our Cologne, Germany site we have</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">34

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    significantly reduced the number of low-density polyethylene
    (LDPE) grades, consistent with the commodity nature of our
    business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Use trading markets to better optimize our feedstock and
    product portfolio.</I></B> Although we typically derive
    significant value from the integration of feedstocks and product
    flows across our major sites, at times the commodity markets may
    offer more favorable commercial opportunities. Such
    opportunities may include reselling primary feedstocks when
    doing so is more valuable than processing them internally or
    selling olefins rather than processing them into polymers and
    derivatives in situations where we are able to source finished
    products from third parties at lower prices than the
    manufacturing costs we would have to incur in producing them
    ourselves. We intend to improve our ability to leverage these
    opportunities to enhance our results.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reduce Selling, General and Administrative Expenses</I></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Reduce overhead and functional costs commensurate with a
    standalone commodity petrochemical company.</I></B> We have
    conducted benchmarking studies and identified savings
    opportunities in a number of functional areas. Each function is
    currently implementing improvement plans which we developed
    based on these studies, and we have already achieved a reduction
    in the number of employees engaged in our operations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were incorporated in Delaware on July&nbsp;14, 2005 as a
wholly-owned subsidiary of BP. Our combined statements of
operations, changes in owner&#146;s equity and cash flows for
the years ended December&nbsp;31, 2002, 2003 and 2004 and the
six months ended June&nbsp;30, 2004 and 2005 and our combined
balance sheets as of December&nbsp;31, 2003 and 2004 and
March&nbsp;31, 2005 have been derived from the consolidated
financial statements and accounting records of BP, representing
certain assets, liabilities and associated infrastructure of
certain operations that were formerly part of BP&#146;s
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments, and associated revenues and expenses.
Specifically, BP transferred to us certain assets, liabilities
and associated infrastructure relating to the former olefins and
derivatives business of its Petrochemicals segment (not
including joint ventures operating petrochemical facilities in
China, Malaysia and Germany), refineries in Grangemouth, United
Kingdom and Lav&#233;ra, France, which formed part of its
Refining and Marketing segment, and a gas fractionator near
Hobbs, New Mexico, which formed part of its Gas, Power and
Renewables segment, in each case together with associated
infrastructure. The assets and liabilities comprising the
operations of our predecessor businesses will be transferred to
us prior to the completion of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our combined statements of operations for the years ended
December&nbsp;31, 2002, 2003 and 2004 and the six months ended
June&nbsp;30, 2004 and 2005 reflect expense allocations for
certain central corporate functions historically provided to us
by BP, including information systems, human resources,
accounting and treasury activities and legal services. These
allocations reflect expenses specifically identifiable as
relating to our business as well as our share of expenses
allocated to us based on capital employed, capital expenditures,
headcount, revenues, production volumes, fixed costs,
environmental accruals or other methods our management considers
to be reasonable. We and BP consider these allocations to be a
reasonable reflection of our utilization of the services
provided to us by BP. However, our expenses as a separate,
standalone company may be higher or lower than the amounts
reflected in our combined statements of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Segments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We report our results on the basis of five segments, O&#38;P
North America, O&#38;P Europe, Global Derivatives, Refining and
Corporate and Other. While our operating company for Europe is
responsible for both our European olefins and polymers business
and our refineries, management reviews the performance of these
businesses separately and, accordingly, each of them is reported
as a separate segment. In our O&#38;P segments, we make olefins
and related products, a broad range of polymers and various
other petrochemical products directly or indirectly derived from
olefins. The focus of our olefins business is on ethylene and
propylene, which are the two largest volume olefins and key
building blocks for polymers and derivatives. In our polymers
business, we focus
</DIV>

<P align="center" style="font-size: 10pt;">35

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<DIV align="left" style="font-size: 10pt;">
on polyethylene and polypropylene. The largest volume product of
our Global Derivatives segment is acrylonitrile. Our Refining
segment operates two large refineries in Grangemouth, United
Kingdom and Lav&#233;ra, France. Our principal refining products
are transport fuels, naphtha, and heating and fuel oils. Income
and expenses associated with the operation of our regional
office in Shanghai, China, the licensing of our technologies,
the sales of catalysts to third parties and certain other
corporate functions are reported in our Corporate and Other
segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The revenues of our O&#38;P segments and our Refining segment in
any given period include substantial amounts of sales between
segments. All intersegmental revenues and related expenses are
eliminated during consolidation. Revenues are recorded based on
the source of the product sold. Accordingly, exports to Asia are
recorded in the segment from which the underlying products are
sourced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We review the performance of our segments based on adjusted
EBITDA, which is the measure used by our management to assess
our company&#146;s operating performance and to make decisions
about allocating resources among our various segments. See
&#147;Selected Combined Financial Data&nbsp;&#151; Use of
Non-GAAP Financial Measures&#148; for a definition of adjusted
EBITDA and the reasons why management believes that the
presentation of adjusted EBITDA provides useful information to
investors.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Description of Key Line Items of our Combined Statements of
Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a brief description of the composition of the
key line items of our combined statements of operations:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Revenues.</I></B> Consolidated revenues comprise sales of
petrochemical and refinery products to customers and are shown
net of intersegmental transactions, discounts and rebates. Each
segment includes the external revenues generated by the assets
included in that segment. Segmental revenues also include
intersegmental sales, primarily sales of naphtha by our Refining
segment to our O&#38;P Europe segment and sales of ethylene and
propylene by our O&#38;P segments to our Global Derivatives
segment. All intersegmental revenues and related expenses are
eliminated during consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Gross margin.</I></B> Gross margin is calculated by
subtracting cost of sales from revenues. Cost of sales comprises:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    feedstock costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    variable manufacturing and transportation costs, including the
    costs of catalysts, other chemicals and energy;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    fixed manufacturing costs, including operating and maintenance
    costs, principally staff costs, and depreciation and
    amortization of property, plant and equipment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Selling, general and administrative expenses.</I></B>
Selling, general and administrative expenses comprise selling
and various general administrative expenses, including
accounting, IT and corporate overhead costs, as well as related
depreciation and amortization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Research and development expenses. </I></B>Research and
development expenses include costs related to activities focused
on short-term performance improvements as well as expenses
incurred to support the long-term growth of our business. All
research and development costs are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Restructuring and asset impairment charges.</I></B>
Restructuring costs relate to charges incurred in connection
with restructuring our business to improve our performance.
Asset impairment charges relate to charges incurred to reduce
the carrying value of an asset to its fair value where we have
determined that the asset&#146;s carrying value is greater than
the future cash flows expected to be derived from the asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest expense.</I></B> Interest expense primarily
comprises interest charges on long-term debt related to the
petrochemical facilities at our Grangemouth, United Kingdom
site. The debt was repaid on March&nbsp;22, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">36

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Other income (expense), net.</I></B> Other income
(expense), net primarily consists of non-trading income, foreign
exchange gains and losses, gains and losses on the sale of
assets and other miscellaneous items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Provision for income taxes for continuing
operations.</I></B> We record deferred tax assets to account for
deductible temporary differences between the carrying amount of
our assets and liabilities and our tax base for these assets and
liabilities, unused tax losses and unused tax credits. In
addition, we establish valuation allowances when we determine
that there is significant uncertainty that we will be able to
realize all or a portion of a deferred tax asset. In determining
the need for establishing a valuation allowance, we consider
many factors, including our expectations regarding our future
taxable income in the period during which we expect the
temporary differences to reverse and the loss carry-forward
periods under the applicable tax laws, as well as our income tax
strategies in the relevant jurisdictions. For periods prior to
2000, we have not identified the amount of deferred tax assets
in respect of operating loss carry-forwards and tax credits due
to the fact that this is a carve out situation and the number of
assumptions that would be required to quantify such assets.
Effectively, we have completely reserved these deferred tax
assets. This accounting results in limiting the recognition of
current period tax benefits after 2000 to the amount of any
deferred tax expense incurred in such periods and the amount of
net assets, if any, that is expected to be realizable in the
future. Effective April&nbsp;1, 2005, as a result of our
separation from BP, our tax basis with respect to our assets
changed. For periods after April&nbsp;1, 2005, as a result of
our formation as a separate legal entity within the BP group, we
will fully account for deferred taxes, including the recognition
of deferred tax assets in respect of operating loss
carry-forwards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For periods ended prior to April&nbsp;1, 2005, we recorded
income tax expense as if we filed separate tax returns from BP,
notwithstanding the fact that our operations were often included
in consolidated tax returns filed by BP and most of the related
taxes were paid by BP. Income taxes deemed to have been paid on
our behalf by BP are shown in the parent net investment line of
our combined balance sheets. Losses generated by our business
prior to April&nbsp;1, 2005 were available to, and were utilized
by other members of the BP group in line with BP&#146;s tax
strategies. However, in accordance with recording income tax
expense as if we filed separate returns, we evaluated our own
tax loss position on a separate return basis. Accordingly, we
recorded our tax losses as deferred tax assets in the period in
which they arose and assessed our ability to realize the
resulting deferred tax assets based on all facts and
circumstances. As described above, due to our inability to
quantify the amount of the deferred tax assets in respect of
pre-2000 operating loss carry-forwards and tax credits, we have
not recorded those deferred tax assets. This, and our inability
to utilize losses across jurisdictions, contributed to effective
tax rates considerably higher than statutory tax rates for
periods prior to 2005. Our effective tax rate for the six months
ended June&nbsp;30, 2005, 31.5%, is more in line with our normal
expectations. This rate reflects increased income from
operations and the lack of certain permanent differences
associated with foreign currency transactions and the fair value
adjustments of the Solvay put liability that affected prior
period effective tax rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective April&nbsp;1, 2005, we and BP entered into tax sharing
agreements, which govern our respective rights and obligations
with respect to taxes for any tax period ending on or before
April&nbsp;1, 2005, as well as for any tax period beginning
after April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should note that BP manages its tax position for the benefit
of its entire portfolio of businesses, and its tax strategies
are not necessarily identical with the tax strategies that we
would have followed or will follow as a standalone entity.
Accordingly, our future provision for income taxes for
continuing operations is likely to be materially different from
the amounts shown in our combined statements of operations. In
particular, you should note that for nearly all jurisdictions in
which we have material operations, we received our assets from
BP in transactions providing us with a depreciable asset base
equal to fair value. Therefore, during profitable periods, we
expect our cash tax rate (current tax expense) to be less than
the applicable statutory rate; the difference between the
statutory rate and the cash tax rate will approximate our
deferred tax charge.
</DIV>

<P align="center" style="font-size: 10pt;">37

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Six Months Ended June&nbsp;30, 2005 Compared with Six Months
Ended June&nbsp;30, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Consolidated</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues increased by 43%, from $7,791&nbsp;million in the six
months ended June&nbsp;30, 2004 to $11,131 in the six months
ended June&nbsp;30, 2005. This increase primarily reflects
higher sales prices as a result of higher raw material costs in
a market environment characterized by a tighter relationship
between supply and demand in both our petrochemical and refining
businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gross margin</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gross margin increased from $538&nbsp;million in the six months
ended June&nbsp;30, 2004 to $1,255&nbsp;million in the six
months ended June&nbsp;30, 2005. As a percentage of revenues,
gross margin rose from 7% to 11%. This strong improvement
primarily reflects a more favorable market environment in the
six months ended June&nbsp;30, 2005, which allowed us to
increase the prices for our products at a greater rate than the
increase in our feedstock costs. To a lesser extent, the
improvement of our gross margin reflects benefits derived from
our Accelerator program, as explained in greater detail in the
discussion of our segment results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, general and administrative expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling, general and administrative expenses totaled
$341&nbsp;million in both the six months ended June&nbsp;30,
2004 and the six months ended June&nbsp;30, 2005. Although the
total level of selling, general and administrative expenses was
similar in both periods, there are significant differences in
their composition as we now operate as a standalone company. In
2004, prior to our separation from BP, selling, general and
administrative expenses included the costs of our own business
as well as significant costs allocated to us by BP because there
were certain services provided by BP as well as certain
corporate costs allocated to us. In 2005, we have been operating
on a standalone basis and, accordingly, most of our selling,
general and administrative expenses are incurred directly by us.
Also, there were certain cost increases as a result of this
standalone operation, including insurance and additional
employee incentive compensation as a result of improved
financial performance, each of which amounted to
$18&nbsp;million in 2004. These cost increases were offset by
decreases resulting from the streamlining of business processes
in connection with our separation from BP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Research and development expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenses decreased by 20%, from
$64&nbsp;million in the first six months of 2004 to
$51&nbsp;million in 2005. In addition to the timing of research
and development costs for certain projects, this decrease
reflects the fact that our formation as a separate legal entity
within the BP group and the integration of Solvay&#146;s
HDPE-related research projects in our own R&#38;T program
allowed us to rationalize our R&#38;T activities with respect to
polymers in North America and to integrate R&#38;T teams in
Europe that had previously worked separately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Restructuring and asset impairment charges</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restructuring and asset impairment charges increased from
$5&nbsp;million in the six months ended June&nbsp;30, 2004 to
$21&nbsp;million in the six months ended June&nbsp;30, 2005.
Restructuring charges in the six months ended June&nbsp;30, 2004
reflect carryover charges from earlier years related to various
workforce reduction programs, whereas restructuring charges in
the six months ended June&nbsp;30, 2005 reflect charges
associated with workforce reductions which were initiated in
late 2004 in connection with the establishment of our company
and continued into 2005. We incurred no asset impairment charges
in either period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest expense remained flat at $25&nbsp;million in the six
months ended June&nbsp;30, 2005 when compared with the same
period in 2004, reflecting the fact that total debt levels
remained at a similar level.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other income (expense), net</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other income (expense), net decreased from income of
$27&nbsp;million in the six months ended June&nbsp;30, 2004 to
an expense of $42&nbsp;million in the six months ended
June&nbsp;30, 2005. This decrease primarily reflects losses
associated with the early repayment of the long-term debt
secured by the petrochemical assets of our site in Grangemouth,
United Kingdom, in the six months ended June&nbsp;30, 2005.
Another contributing factor was that in the six months ended
June&nbsp;30, 2004, the derivative contracts associated with
this debt had generated gains of $13&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Provision for income taxes for continuing operations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provision for income taxes for continuing operations increased
from $86&nbsp;million in the six months ended June&nbsp;30, 2004
to $233&nbsp;million in the six months ended June&nbsp;30, 2005,
primarily reflecting an increase in income from continuing
operations. Our effective tax rate for the six months ended
June&nbsp;30, 2005 was 31.5%. Our effective tax rate was
impacted by increased earnings in jurisdictions with statutory
tax rates lower than the U.S.&nbsp;federal tax rate and our
inability to utilize some loss carry-forwards in non-U.S.
jurisdictions. The effective tax rate for the six months ended
June&nbsp;30, 2004 is higher than the statutory tax rates due
principally to our being unable to recognize losses from foreign
currency transactions in certain jurisdictions and the
non-deductibility of the change in fair value of the Solvay put
liabilities and losses. In addition, our inability to recognize
our deferred tax asset balances in respect of losses brought
forward limited our recognition of tax benefits to the amount of
deferred tax expense in loss-making jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Loss from discontinued operations, net of income tax expense
(benefit)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loss from discontinued operations was $11&nbsp;million in the
six months ended June&nbsp;30, 2004 and $3&nbsp;million in the
six months ended June&nbsp;30, 2005. This improvement was due to
lower depreciation because of the write-down of the book value
of our BDO business at the end of 2004 and the sale of this
business at the end of March 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net income increased from $38&nbsp;million in the six months
ended June&nbsp;30, 2004 to $543&nbsp;million in the six months
ended June&nbsp;30, 2005, reflecting the factors discussed above.
</DIV>

<P align="center" style="font-size: 10pt;">39
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<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of the historical
revenues and adjusted EBITDA of each of our segments for the
periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,331</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegmental eliminations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(890</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>492</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(254</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Revenues exclude revenues from discontinued operations. Revenues
    from discontinued operations for the six months ended
    June&nbsp;30, 2004 and 2005 were $30&nbsp;million and
    $11&nbsp;million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P North America</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our O&#38;P North America segment increased by 32%,
from $1,615&nbsp;million in the six months ended June&nbsp;30,
2004 to $2,150&nbsp;million in the six months ended
June&nbsp;30, 2005. Revenues included intersegmental sales
(primarily sales of ethylene and propylene to our Global
Derivatives segment) of $241&nbsp;million in the six months
ended June&nbsp;30, 2004 and $319&nbsp;million in the six months
ended June&nbsp;30, 2005. The increased revenues are due
primarily to higher sales prices, reflecting higher feedstock
costs and tightening market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our O&#38;P North America segment increased
substantially, from $77&nbsp;million in the six months ended
June&nbsp;30, 2004 to $250&nbsp;million in the six months ended
June&nbsp;30, 2005. The majority of this increase reflects
increased margins for ethylene, polyethylene and polypropylene
due to tightening supply and demand conditions and an
unscheduled outage at a facility of one of our major ethylene
competitors in the first three months of 2005. In addition, we
started to benefit from our ongoing Accelerator program,
including the renegotiation of our polyethylene and
polypropylene customer contracts to include more responsive
pricing provisions and lower fixed manufacturing and selling,
general and administrative costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P Europe</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our O&#38;P Europe segment increased by 33%, from
$3,328&nbsp;million in the six months ended June&nbsp;30, 2004
to $4,399&nbsp;million in the six months ended June&nbsp;30,
2005. Revenues included intersegmental sales
</DIV>

<P align="center" style="font-size: 10pt;">40
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<DIV align="left" style="font-size: 10pt;">
(primarily sales of ethylene and propylene to our Global
Derivatives segment) of $275&nbsp;million in the six months
ended June&nbsp;30, 2004 and $350&nbsp;million in the six months
ended June&nbsp;30, 2005. The increase in revenues reflects the
effect of higher sales prices as a result of higher feedstock
costs and tightening market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our O&#38;P Europe segment increased from
$195&nbsp;million in the six months ended June&nbsp;30, 2004 to
$492&nbsp;million in the six months ended June&nbsp;30, 2005.
The majority of this increase was caused by higher margins due
to improved market conditions, which led to a more than
proportionate increase in our sales prices compared with our
feedstock costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in adjusted EBITDA was also driven by performance
improvements as part of our Accelerator program. For example, we
put in place new arrangements to import propane feedstock for
the gas cracker at our site in Grangemouth, United Kingdom, to
supplement the locally available feedstock and to improve
utilization. Furthermore, we changed the catalyst of our
ethylene oxide (EO) unit at our Lav&#233;ra, France, and
Cologne, Germany sites, which resulted in better reliability and
significant capacity improvements. In addition, we rationalized
our LDPE product range at our Cologne, Germany, site, which
reduced complexity and led to efficiency gains.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Global Derivatives</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Global Derivatives segment increased by 25%,
from $1,015&nbsp;million in the six months ended June&nbsp;30,
2004 to $1,272&nbsp;million in the six months ended
June&nbsp;30, 2005. Increased sales prices resulted in a 21%
increase in revenues, while higher sales volumes increased
revenues by 4%. The increase in price was principally caused by
improved market prices. The overall increase in volumes was
mainly a result of strong demand for alpha olefins in
polyethylene co-monomer and oilfield applications, the effect of
which was partially offset by a decrease in acrylonitrile
volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Global Derivatives segment increased
significantly from $41&nbsp;million in the six months ended
June&nbsp;30, 2004 to $164&nbsp;million in the six months ended
June&nbsp;30, 2005. The substantial rise in adjusted EBITDA was
due for the most part to higher margins achieved in a stronger
market environment. To a lesser extent, results also benefited
from our Accelerator program efforts, including the
renegotiation of customer contracts for both acrylonitrile and
alpha olefins and more spot sales. The segment&#146;s results
also benefited from higher utilization rates due to the absence
of turnarounds and lower fixed costs as a result of efficiency
gains following the combination of two business units which were
previously managed separately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Refining</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Refining segment increased by 61%, from
$2,699&nbsp;million in the six months ended June&nbsp;30, 2004
to $4,331&nbsp;million in the six months ended June&nbsp;30,
2005. Revenues included intersegmental sales (primarily sales of
naphtha to our O&#38;P&nbsp;Europe segment) of $367&nbsp;million
in 2004 and $399&nbsp;million in 2005. Increased selling prices
resulted in a 55% increase in revenues. Sales volumes increased
by 15,000 barrels per day in the first six months of 2005
relative to the first six months of 2004, resulting in a 5%
increase in revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Refining segment increased from
$164&nbsp;million in the six months ended June&nbsp;30, 2004 to
$436&nbsp;million in the six months ended June&nbsp;30, 2005.
This increase reflects the fact that both refineries achieved
higher cash margins on a per-unit basis. Cash margins in our
refineries are calculated as gross margin without depreciation,
per barrel of crude oil. The weighted average cash margin of our
refineries increased by approximately $3.80&nbsp;per barrel in
the six months ended June&nbsp;30, 2005 relative to the six
months ended June&nbsp;30,
</DIV>

<P align="center" style="font-size: 10pt;">41

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<DIV align="left" style="font-size: 10pt;">
2004. A significant factor contributing to this development were
increases in inventory values. Inventory gains were
$130&nbsp;million in the six months ended June&nbsp;30, 2005,
compared to $45&nbsp;million in the six months ended
June&nbsp;30, 2004. Our Lav&#233;ra refinery&#146;s performance
showed a particularly strong improvement because of its
feedstock flexibility, which was particularly beneficial early
in 2005. These higher margins were driven by a general
improvement in the market environment and a widening light to
heavy oil price differential. In the case of Grangemouth,
margins benefited from a tightening supply and demand balance in
the market for distillates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Corporate and Other</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Corporate and Other segment increased from
$24&nbsp;million in the six months ended June&nbsp;30, 2004 to
$46&nbsp;million in the six months ended June&nbsp;30, 2005,
reflecting increased sales of acrylonitrile and polypropylene
catalysts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Corporate and Other segment decreased
from a loss of $73&nbsp;million in the six months ended
June&nbsp;30, 2004 to a loss of $254&nbsp;million in the six
months ended June&nbsp;30, 2005. This increased loss reflects a
number of factors, principally a loss of $45&nbsp;million which
we incurred as a result of the early repayment of the loans
secured by the petrochemical assets of our site in Grangemouth,
United Kingdom, which was partially offset by a gain of
$3&nbsp;million on derivative contracts associated with this
debt. This compares with a derivative contract gain of
$13&nbsp;million in 2004. The increased loss also reflects
approximately $80&nbsp;million of additional costs for employee
incentive compensation, reflecting the improved results of the
business, costs of $20&nbsp;million in the first six months of
2005 related to foreign currency options contracts put in place
to manage some of our currency exposure and $18&nbsp;million of
costs related to our stand-alone insurance programs, which were
put in place at the beginning of 2005 with BP&#146;s captive
insurance company. Previously we were part of BP&#146;s
self-insurance program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Year Ended December&nbsp;31, 2004 Compared with Year Ended
December&nbsp;31, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Consolidated</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues increased by 34%, from $13,422&nbsp;million in 2003 to
$17,937&nbsp;million in 2004, reflecting higher market prices
for our products in both our petrochemical and our refining
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gross margin</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gross margin increased by 40%, from $836&nbsp;million in 2003 to
$1,172&nbsp;million in 2004. As a percentage of revenues, gross
margin improved slightly from 6% to 7%. The improvement in gross
margin was driven by increasingly favorable market conditions
for refining and olefins products due to tight supply relative
to strong demand, which increased our product prices in excess
of the increase in feedstock costs. The effects of this
improvement were partially offset by revenues lost to
turnarounds at our sites in Grangemouth, United Kingdom,
Cologne, Germany, and Lav&#233;ra, France, and the impact of the
weakening of the U.S.&nbsp;dollar relative to the euro and the
British pound, which resulted in higher fixed and variable
manufacturing costs in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, general and administrative expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling, general and administrative expenses increased by 2%,
from $616&nbsp;million in 2003 to $630&nbsp;million in 2004. The
impact of the decline in the value of the U.S.&nbsp;dollar
relative to the euro and the British pound resulted in higher
costs. Costs also increased because of expenses in connection
with our formation as a separate legal entity within the BP
group and the establishment of our own corporate functions.
These cost increases were partially offset by early benefits
from the streamlining of business processes in connection with
our separation from BP.
</DIV>

<P align="center" style="font-size: 10pt;">42

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Research and development expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenses increased by 19%, from
$115&nbsp;million in 2003 to $137&nbsp;million in 2004. Activity
levels across the two years were similar, with the main
contributing factor being the weakening of the U.S. dollar
relative to the euro and the British pound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Restructuring and asset impairment charges</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, we incurred restructuring and impairment charges in the
amount of $345&nbsp;million relating to various events,
including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $228&nbsp;million charge related to the anticipated closure of
    the LAO facility in Pasadena, Texas, currently operated for us
    by BP under a toll manufacturing agreement, in late 2005,
    consisting of an impairment charge of $185&nbsp;million and
    costs to close and decommission the facility in the amount of
    $42&nbsp;million;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $69&nbsp;million charge related to the closure of an HDPE line
    at our Grangemouth site; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $19&nbsp;million write-down of assets related to our maleic
    catalyst business.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2003, restructuring and asset impairment charges in the
amount of $72&nbsp;million included:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $36&nbsp;million charge related to write-off of alkylations
    and sulfur units located at our Grangemouth site, and of a part
    of the facility damaged by a fire;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $20&nbsp;million charge related to employee severance and
    transition costs at our Grangemouth site;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an $11&nbsp;million charge related to restructuring activities
    at our facilities in Geel, Belgium and Grangemouth and a
    reorganization of our alpha olefins businesses.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest expense increased by 11%, from $44&nbsp;million in 2003
to $49&nbsp;million in 2004. This increase primarily reflects
the weakness of the U.S.&nbsp;dollar relative to the British
pound, leading to higher interest payments on the loans secured
by the petrochemical assets of our site in Grangemouth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other income (expense), net</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other income (expense), net improved from a loss of
$123&nbsp;million in 2003 to a loss of $24&nbsp;million in 2004.
This decrease in the loss was the result of $63&nbsp;million of
lower losses associated with the put liability under our former
joint ventures with Solvay and approximately $29&nbsp;million of
gains associated with foreign exchange derivative contracts.
These contracts were put in place to help manage certain foreign
exchange exposures. As described in note&nbsp;9 of our combined
financial statements, this put liability arose due to a put
instrument held by Solvay giving Solvay the right to require us
to purchase its interests in the joint ventures at certain dates
and prices. Solvay exercised this right on November&nbsp;2, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Provision for income taxes for continuing operations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provision for income taxes for continuing operations increased,
from $90&nbsp;million in 2003 to $128&nbsp;million in 2004. Our
effective tax rates for 2003 and 2004 were higher than the
statutory tax rates due principally to our inability to
recognize losses from foreign currency transactions in certain
jurisdictions and the non-deductibility of the change in fair
value of the Solvay put liabilities and losses. In addition, our
inability to recognize deferred tax asset balances in respect of
losses brought forward limited the amount of tax benefits we
were able to recognize to the amount of deferred tax expense in
loss-making jurisdictions. The provision for income taxes for
continuing operations in 2004 increased from 2003 in line with a
lower loss from continuing operations before income taxes.
</DIV>

<P align="center" style="font-size: 10pt;">43

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Loss from discontinued operations, net of income tax expense
(benefit)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loss from discontinued operations, net of income tax expense
(benefit), increased from $25&nbsp;million in 2003 to
$128&nbsp;million in 2004. This increase was caused primarily by
an asset impairment charge of $148&nbsp;million (before tax) in
2004, which related to the write-down of assets associated with
our BDO business prior to its disposal in March 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net loss</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net loss increased from $240&nbsp;million in 2003 to
$261&nbsp;million in 2004, reflecting the factors described
above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of the historical
revenues and adjusted EBITDA of each of our segments for the
periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,424</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegmental eliminations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,502</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Revenues exclude revenues from discontinued operations. Revenues
    from discontinued operations for the year ended
    December&nbsp;31, 2003 and 2004 were $52&nbsp;million and
    $59&nbsp;million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P North America</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our O&#38;P North America segment increased by 36%,
from $2,698&nbsp;million in 2003 to $3,680&nbsp;million in 2004.
Revenues included intersegmental sales of $389&nbsp;million in
2003 and $500&nbsp;million in 2004. The increase in
intersegmental sales was due to increased prices, the effect of
which was partially offset by decreased volumes. The increase in
total revenues primarily reflected higher market prices across
all products as a result of higher feedstock prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our O&#38;P North America segment increased
by $86&nbsp;million, or 50%, from $171&nbsp;million in 2003 to
$257&nbsp;million in 2004. Higher margins for our olefins
products due to favorable market conditions were partially
offset by lower margins for polymer products. The segment&#146;s
adjusted EBITDA also benefited from lower fixed manufacturing
costs, primarily as a result of the fact that there were no
turnarounds at
</DIV>

<P align="center" style="font-size: 10pt;">44
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<DIV align="left" style="font-size: 10pt;">
our site in Chocolate Bayou, Texas in 2004. Another factor
contributing to the improved adjusted EBITDA figure was the
first full year of operations of our HDPE joint venture with
Chevron Phillips.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P Europe</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our O&#38;P Europe segment increased by 32%, from
$5,609&nbsp;million in 2003 to $7,424&nbsp;million in 2004.
Revenues included intersegmental sales of $500&nbsp;million in
2003 and $550&nbsp;million in 2004. The overall increase in
revenues primarily reflects higher sales prices as a result of
higher raw material costs, which increased revenues by
$1,385&nbsp;million. The remainder of the increase reflects the
impact of higher sales volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our O&#38;P Europe segment increased from
$54&nbsp;million in 2003 to $334&nbsp;million in 2004. The
increase in adjusted EBITDA primarily reflects the fact that we
were able to achieve higher unit margins due to favorable market
conditions. In the first half of 2004, we were not always able
to pass on increases in our feedstock costs to our customers,
who were under pressure due to lower economic growth rates in
Europe and mounting competitive pressures from imports as the
euro and the British pound continued to strengthen against the
U.S.&nbsp;dollar. In the second half, feedstock costs peaked and
product markets tightened allowing us to raise our product
prices and achieve higher margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reliability issues at the derivatives units at our site in
Grangemouth, United Kingdom in the first half of 2004 resulted
in reduced utilization of these units. In the second half of the
year, reliability improved as we took steps to address these
issues. The improvement in reliability enabled us to take
advantage of market opportunities, following a series of
unplanned shutdowns of our competitors&#146; crackers. In
addition, we started to benefit from more responsive pricing
provisions in our customer contracts. Further benefits resulted
from the elimination of certain product grades in our LDPE
business and efficiency gains realized in our polypropylene
business. The effect of these factors was partially offset by
higher levels of fixed manufacturing costs and selling, general
and administrative expenses due to increased turnaround activity
and the continued weakening of the U.S.&nbsp;dollar relative to
the euro and the British pound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Another factor contributing to the higher adjusted EBITDA figure
was the fact that we incurred lower losses associated with the
joint venture put liability under our former joint ventures with
Solvay. Losses associated with the European joint venture were
$99&nbsp;million in 2004 compared to $120&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Global Derivatives</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Global Derivatives segment increased by 18%,
from $1,769&nbsp;million in 2003 to $2,090&nbsp;million in 2004.
This increase reflects a 23% increase due to higher prices and a
5% decrease in volumes. The price increases were driven by
acrylonitrile and, to a lesser extent, LAOs and PAOs.
Acrylonitrile prices received a boost from record propylene
prices. Acrylonitrile volumes declined as a result of price
increases and scheduled turnarounds at our Lima, Ohio facility
and from the larger acrylonitrile unit at our site in Cologne,
Germany. LAO and PAO revenues were driven by increased prices
and volumes, reflecting improved market conditions. This
improvement was partially offset by weaker volumes of the
heavier LAOs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Global Derivatives segment decreased from
$74&nbsp;million in 2003 to $5&nbsp;million in 2004. This
decrease was due primarily to restructuring costs incurred in
connection with our decision to cease production at the
Pasadena, Texas, facility which is operated for us by BP under a
toll manufacturing agreement, due to overcapacity in the LAO
industry, the age of the facility, its product mix/quality and
its relatively high fixed costs. Adjusted EBITDA was also
negatively impacted by operational problems at the ammonia unit
of our site in Cologne, Germany, which led to higher
manufacturing costs and lower efficiency at that facility. We
addressed these issues in connection with a scheduled turnaround
at that facility in the second half of the year.
</DIV>

<P align="center" style="font-size: 10pt;">45

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<DIV align="left" style="font-size: 10pt;">
Further reductions of adjusted EBITDA resulted from the
continued weakening of the U.S.&nbsp;dollar relative to the
euro. These factors more than offset margin improvements for our
acrylonitrile, LAO and PAO product lines, due to increasingly
favorable market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Refining</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Refining segment increased by 37%, from
$4,779&nbsp;million in 2003 to $6,555&nbsp;million in 2004.
Revenues included intersegmental sales of $613&nbsp;million in
2003 and $859&nbsp;million in 2004. The overall increase in
revenues was driven by higher sales prices, especially for
diesel and gasoline. Volumes were slightly lower in 2004 as a
result of a major turnaround at Lav&#233;ra, and these lower
overall volumes reduced revenues by $35 million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Refining segment increased from
$199&nbsp;million in 2003 to $410&nbsp;million in 2004. Both
refineries contributed to this increase, reflecting
significantly higher cash margins per barrel, as improved sales
prices outpaced rising feedstock costs due to favorable market
conditions as a result of strong global demand for refined
products, low industry inventory levels and high refinery
utilization. The weighted average cash margin of our refineries
increased by approximately $1.65&nbsp;per barrel in 2004
relative to 2003. The effect of these factors was partially
offset by higher fixed manufacturing costs resulting from a
turnaround at the Lav&#233;ra refinery, higher maintenance
charges, pension costs and expenses incurred at the Grangemouth
refinery in preparation for recommissioning the refinery&#146;s
FCC. Another offsetting factor was the continued weakening of
the U.S.&nbsp;dollar against the euro and the British pound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Corporate and Other</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Corporate and Other segment increased from
$69&nbsp;million in 2003 to $97&nbsp;million in 2004, primarily
reflecting increased polymer catalyst sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Corporate and Other segment decreased
from a loss of $26&nbsp;million in 2003 to a loss of
$137&nbsp;million in 2004. This increased loss reflects several
factors, including an increase in the provision for intercompany
profit in inventory of $37&nbsp;million and a net charge of
$15&nbsp;million due to the effect of the weaker U.S. dollar
relative to the British pound on the loans secured by the
petrochemical assets of our site in Grangemouth, United Kingdom,
and derivative contracts associated with this debt. Property
management and separation costs contributed a further
$14&nbsp;million and $8&nbsp;million, respectively, to the
increase in the loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Year Ended December&nbsp;31, 2003 Compared with Year Ended
December&nbsp;31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Consolidated</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues increased by 14%, from $11,776&nbsp;million in 2002 to
$13,422&nbsp;million in 2003. This increase was driven by higher
sales prices in both our petrochemical and our refining
businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gross margin</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Gross margin decreased by 17%, from $1,001&nbsp;million in 2002
to $836&nbsp;million in 2003. As a percentage of revenues, gross
margin declined from 9% to 6%. The decrease in gross margin in
both absolute and relative terms reflects an increase in fixed
manufacturing costs and higher levels of depreciation. The rise
in fixed manufacturing costs was caused by turnarounds at our
Chocolate Bayou, Texas, Grangemouth, United Kingdom and Cologne,
Germany facilities. In addition, both fixed manufacturing costs
and depreciation went up as a result
</DIV>

<P align="center" style="font-size: 10pt;">46
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<DIV align="left" style="font-size: 10pt;">
of the weakening of the U.S.&nbsp;dollar against the euro and
the British pound. The effect of these factors was partially
offset by more favorable market conditions for olefins and
refining products, which allowed us to increase our product
prices in excess of the increase in our feedstock costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Selling, general and administrative expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling, general and administrative expenses decreased by 16%,
from $734&nbsp;million in 2002 to $616&nbsp;million in 2003. The
decrease in selling, general and administrative expenses was due
primarily to cost reduction programs, particularly in the
administrative functions of our businesses and in our corporate
area.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Research and development expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenses decreased by 4%, from
$120&nbsp;million in 2002 to $115&nbsp;million in 2003,
reflecting consolidation of our research facilities in Europe.
The effect of this decrease was partially offset by weakening of
the U.S. dollar relative to the euro and the British pound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Restructuring and asset impairment charges</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2003, we incurred restructuring and impairment charges in the
amount of $72&nbsp;million relating to various events, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $36&nbsp;million charge related to the write-off of the
    alkylation and sulfur units located at our Grangemouth, United
    Kingdom, site, as well as a part of the facility damaged by a
    fire;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $20&nbsp;million charge related to employee severance and
    transition costs at our Grangemouth site;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an $11&nbsp;million charge related to restructuring activities
    at our facilities in Geel, Belgium and Grangemouth, and a
    reorganization of our alpha olefins businesses.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, restructuring and asset impairment charges in the
amount of $93&nbsp;million included:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $32&nbsp;million charge primarily related to employee
    severance and asset impairments in connection with the
    polypropylene business we acquired from Solvay in 2001 and our
    former joint ventures with Solvay;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $21&nbsp;million charge related to the restructuring of our
    technology function, consisting of employee severance and
    relocation costs as well as asset impairments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $20&nbsp;million charge related to the closure of a
    polypropylene line at our site in Chocolate Bayou;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a $12&nbsp;million charge related to asset impairments recorded
    in connection with a redundant pipeline at our Grangemouth,
    site; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an $8&nbsp;million charge related to various other activities,
    including restructuring activities at our site in Lav&#233;ra,
    France.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Interest expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest expense increased by 26%, from $35&nbsp;million in 2002
to $44&nbsp;million in 2003. This increase reflects the
strengthening of the British pound relative to the
U.S.&nbsp;dollar and the resulting impact on the interest
payments on the loans secured by the petrochemical assets of our
Grangemouth, United Kingdom, site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other income (expense), net</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other income (expense), net increased from an expense of
$65&nbsp;million in 2002 to an expense of $123&nbsp;million in
2003. This change primarily reflects:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a gain of $25&nbsp;million related to the disposal of a partial
    interest in the Aethylen Rohrleitungs Gesellschaft mbH &#38; Co.
    KG (ARG) pipeline in 2002, compared with a loss of
    $7&nbsp;million related to an adjustment in the level of the
    gain on this disposal in 2003;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the expense related to the change in value of put liabilities
    related to our former joint ventures with Solvay increased from
    $128&nbsp;million in 2002 to $168&nbsp;million in 2003; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the remaining change is due to gains associated with foreign
    exchange derivatives in 2003.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Provision for income taxes for continuing operations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provision for income taxes for continuing operations decreased
from $118&nbsp;million in 2002 to $90&nbsp;million in 2003. This
decrease was due to an increase in our loss from continuing
operations before income taxes. In each of 2002 and 2003, our
effective tax rate exceeded the statutory tax rate due
principally to our inability to recognize losses from foreign
currency transactions in certain jurisdictions and the
non-deductibility of the change in fair value of put liabilities
and losses related to our former joint ventures with Solvay. In
addition, our inability to recognize deferred tax asset balances
in respect of losses brought forward limited the amount of tax
benefits we were able to recognize to the amount of deferred tax
expense in loss-making jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Loss from discontinued operations, net of income tax expense
(benefit)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loss from discontinued operations decreased by 14%, from
$29&nbsp;million in 2002 to $25&nbsp;million in 2003, but the
continued losses reflect the difficult business environment of
the BDO unit of our Lima, Ohio facility, which we sold in
March&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Net loss</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net loss increased from $195&nbsp;million in 2002 to
$240&nbsp;million in 2003, reflecting the effect of the factors
described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of the historical
revenues and adjusted EBITDA of each of our segments for the
periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,609</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,769</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegmental eliminations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,165</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,502</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Revenues exclude revenues from discontinued operations. Revenues
    from discontinued operations for the year ended
    December&nbsp;31, 2002 and 2003 were $39&nbsp;million and
    $52&nbsp;million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">48
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P North America</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our O&#38;P North America segment increased by 15%,
from $2,341&nbsp;million in 2002 to $2,698&nbsp;million in 2003.
Revenues included intersegmental sales of $301&nbsp;million in
2002 and $389&nbsp;million in 2003. The increase in revenues was
due mainly to an increase in average sales prices. In addition,
the consolidation of our facility in Carson, California,
following the acquisition of our joint venture partner&#146;s
share in 2003, contributed $86&nbsp;million to revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our O&#38;P North America segment increased
from $91&nbsp;million in 2002 to $171&nbsp;million in 2003. This
increase was mainly driven by polypropylene, resulting from a
beneficial time lag in our contracts with customers that allowed
us to achieve higher polypropylene prices in the second half of
2003 at a time when the price for propylene was declining.
Higher ethylene margins were offset by lower volumes and a rise
in fixed costs due to a turnaround of the crackers at our
Chocolate Bayou, Texas site. In addition, the growth of adjusted
EBITDA reflects the fact that we purchased ethylene from another
manufacturer at a time when gas prices temporarily spiked
relative to feedstocks whose prices are linked to crude oil
prices, enabling us to purchase ethylene at a lower cost than we
would have had to incur had we produced it internally based on
gas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P Europe</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our O&#38;P Europe segment increased by 15%, from
$4,863&nbsp;million in 2002 to $5,609&nbsp;million in 2003.
Revenues included intersegmental sales of $400&nbsp;million in
2002 and $500&nbsp;million in 2003. The overall increase in
revenues was due to higher selling prices, which increased
revenues by $357&nbsp;million with the remainder due to higher
sales volumes. For the most part, the increase in sales volumes
was driven by olefins and polyethylene. The main contributing
factors were higher cracker utilization rates and the
commencement of operations of the expanded cracker at our
Cologne, Germany site, which increased our ethylene capacity at
that site by around 10%. Volumes also benefited from the first
full-year contribution of our new HDPE production unit at our
Lillo, Belgium, facility which had been commissioned in the
second half of 2002. However, the effect of this addition was
partially offset by competitive pressures in the polyethylene
markets due to increased competition from commodity producers
with manufacturing operations in the Middle East, which limited
our volume growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our O&#38;P Europe segment decreased by 64%,
from $148&nbsp;million in 2002 to $54&nbsp;million in 2003. This
decrease was driven by continued pressure on our margins, which
were squeezed by increasing feedstock prices and our inability
to pass on these increases to our customers due to a lack of
market growth. The pressure was particularly strong in the
polyethylene markets, which were characterized by intense
competition from Middle East commodity imports. In addition,
manufacturing, distribution and overhead costs increased in
U.S.&nbsp;dollar terms due to the weakening of the U.S. dollar
relative to the euro and the British pound. Also contributing to
the decrease in adjusted EBITDA were higher expenses of
$42&nbsp;million related to the change in the value of the put
liability in relation to our former joint ventures with Solvay.
Expense related to the change in value of this obligation was
$120&nbsp;million in 2002 compared to $162&nbsp;million in 2003.
In addition, 2002 included a $25&nbsp;million gain on the
disposal of a partial interest in the ARG pipeline whereas 2003
reflected a loss of $7&nbsp;million because of an adjustment of
the gain on this disposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Global Derivatives</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Global Derivatives segment increased by 1%, from
$1,749&nbsp;million in 2002 to $1,769&nbsp;million in 2003. The
slight increase in revenues was driven by a 4%&nbsp;increase in
prices, which was offset by a
</DIV>

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<DIV align="left" style="font-size: 10pt;">
4%&nbsp;decrease in volumes. In both cases, the development was
primarily driven by acrylonitrile and, to a lesser extent, LAOs
and PAOs. In the case of acrylonitrile, the decline in volumes
was caused by scheduled turnarounds, whereas in the case of LAOs
and PAOs the decline reflects our attempt to preserve prices by
cutting volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Global Derivatives segment decreased by
65%, from $211&nbsp;million in 2002 to $74&nbsp;million in 2003,
driven by acrylonitrile, LAOs and PAOs. The decrease in adjusted
EBITDA for acrylonitrile and LAOs and PAOs was due primarily to
higher feedstock and energy costs, which rose faster than we
were able to raise our sales prices. LAO margins also suffered
from industry overcapacity, which put additional pressure on our
margins. Adjusted EBITDA also suffered from turnarounds at our
Green Lake, Texas, and Cologne, Germany, facilities and
reliability issues at the ammonia unit of our Cologne facility,
which forced us to purchase ammonia on the market, leading to an
increase in feedstock costs and higher maintenance expenses. The
weakening of the U.S.&nbsp;dollar relative to the euro and the
British pound further contributed to the decline in adjusted
EBITDA. The effect of these factors was partially offset by
headcount reductions in our alpha olefins business in connection
with a restructuring of that business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Refining</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Refining segment increased by 23%, from
$3,876&nbsp;million in 2002 to $4,779&nbsp;million in 2003.
Revenues included intersegmental sales of $465&nbsp;million in
2002 and $613&nbsp;million in 2003. The overall increase in
revenues was driven by higher prices, while volumes were 4%
lower than in 2002 as a result of a turnaround at our
Grangemouth, United Kingdom facility. Revenues increased for
both refineries across all products, with diesel, gasoline and
naphtha experiencing the strongest increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA of our Refining segment increased from
$44&nbsp;million in 2002 to $199&nbsp;million for 2003,
reflecting improved cash margins at both our refineries. The
weighted average cash margin of our refineries increased by
approximately $1.20 per barrel in 2003 relative to 2002. This
development was driven by more favorable market conditions, the
effects of which were partially offset by the continued
weakening of the U.S.&nbsp;dollar against the euro and the
British pound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Corporate and Other</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues of our Corporate and Other segment decreased by 38%,
from $112&nbsp;million in 2002 to $69&nbsp;million in 2003. This
decrease reflects a decline in licensing revenues, as 2002
included revenues from certain major projects which were not
repeated in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Adjusted EBITDA</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
EBITDA of our Corporate and Other segment increased from a loss
of $52&nbsp;million in 2002 to a loss of $26&nbsp;million in
2003. This reduction reflects lower administration expenses and
gains associated with foreign exchange derivatives contracts.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary source of liquidity for our business is cash
generated from operations. In periods during which we
experienced shortfalls in cash generated from operations, BP has
historically provided us with additional funds. In the past, we
primarily used cash for capital expenditures, working capital
and pension contributions. Over the next several years, we
expect to use a portion of our cash reserves to service debt.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we will have sufficient cash to meet both our
short-term and long-term liquidity requirements, including our
debt service requirements. If our cash flow from operations is
insufficient to fund our debt service and other obligations, we
may need to raise funds using other means available to us, such
as increasing our borrowings, decreasing or delaying capital
expenditures, accelerating improvements in working capital
management, making divestitures, raising additional capital or
restructuring or refinancing our indebtedness. However, there
can be no assurance that such funds would be available on
commercially reasonable terms or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash Flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Net Cash Provided by Operating Activities of Continuing
Operations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash flow from operating activities of continuing operations
increased by $251&nbsp;million, from $513&nbsp;million in the
six months ended June&nbsp;30, 2004 to $764&nbsp;million for the
six months ended June&nbsp;30, 2005. This increase primarily
reflects improved operating results, mainly as a result of a
better margin environment for all of our businesses in the six
months ended June&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by operating activities from continuing
operations was $177&nbsp;million, $695&nbsp;million, and
$383&nbsp;million for each of 2002, 2003 and 2004, respectively.
The primary reason for the significant changes in net cash
provided by operating activities was changes in our working
capital and other operating assets and liabilities. Our working
capital balances typically develop in line with feedstock
prices, although timing factors can affect flows of capital in
any individual year. Over the three years, operating working
capital and other operating assets and liabilities increased by
$934&nbsp;million, reflecting the impact of higher oil and gas
prices on inventories and higher product prices, which increased
our net accounts receivable. In 2002, we experienced a cash
outflow in the amount of $411&nbsp;million associated with
working capital and other operating assets and liabilities. In
2004, this outflow amounted to $545&nbsp;million. In both cases,
the outflow was caused by increasing feedstock prices. The cash
impact in 2003 was not as significant because of lower inventory
levels, offsetting some of the effect of higher prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Net Cash Used in Investing Activities of Continuing
Operations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities of continuing operations
increased from $218&nbsp;million in the six months ended
June&nbsp;30, 2004 to $250&nbsp;million in the six months ended
June&nbsp;30, 2005, reflecting higher levels of capital
expenditure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities of continuing operations
was $579&nbsp;million, $561&nbsp;million and $565&nbsp;million
for each of 2002, 2003 and 2004, respectively. The consistent
level of cash requirements for investing activities reflects the
steady level of capital investment over the three-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Net Cash Provided by (Used in) Financing Activities of
Continuing Operations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in financing activities of continuing operations
increased from $260&nbsp;million in the six months ended
June&nbsp;30, 2004 to $559&nbsp;million in the six months ended
June&nbsp;30, 2005. In both periods, our net cash provided by
operating activities was transferred to BP, thereby reducing
owner&#146;s equity. The increase in cash available to BP
reflects the improvement in net cash provided by operating
activities. We repaid the debt that was secured by our
Grangemouth, United Kingdom petrochemical assets on
March&nbsp;22, 2005. The repayment was financed through a loan
granted by BP, which matures on March&nbsp;30, 2006, unless
repaid earlier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by (used in) financing activities of
continuing operations was $422&nbsp;million, $(140)&nbsp;million
and $203&nbsp;million in 2002, 2003 and 2004, respectively.
During 2004, we acquired the outstanding minority interests in
our former joint ventures with Solvay in Europe and North
America, which required an expenditure of $1,538&nbsp;million.
This expenditure was funded by BP through an increase in
owner&#146;s equity. Our 2003 cash flow from financing
activities reflects the excess of operating cash over cash
required for our investing activities. In 2002, we issued
$290&nbsp;million of additional debt and made cash calls of
$100&nbsp;million in the Solvay joint ventures in order to fund
the joint ventures.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Working Capital</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, BP has used a worldwide, centralized approach to
cash management. Cash accounts were reduced to zero on a daily
basis and the financing of our operations and all related
activity between our company and BP was reflected as business
equity transactions in the parent net investment line of our
combined balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Similarly, following the completion of the offering, we will
adopt a centralized approach to cash management. Short-term
fluctuations in our cash requirements will be funded by
short-term investments, through issuances of commercial paper or
through drawdowns on our revolving credit agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Debt Due to BP</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;1, 2005, we had $1,700&nbsp;million of
intercompany debt outstanding to BP under an intra-group loan
facility. The interest rate on the loan is LIBOR plus five basis
points, with interest payable every three months. LIBOR has been
calculated based on the April&nbsp;1, 2005 three-month LIBOR
rate, which was 3.12%. This loan replaced the debt secured by
the petrochemical assets of our site in Grangemouth, United
Kingdom, described below under &#147;&#151;&nbsp;Other Long-term
Debt&#148;, which was repaid on March&nbsp;22, 2005. The loan we
have been granted by BP matures on March&nbsp;30, 2006, unless
repaid earlier. The annual impact of an increase or decrease of
ten basis points in the interest rate on the loan would decrease
or increase our pre-tax income by $1.7&nbsp;million. We are
currently in discussions with banks for term loans and other
short-term facilities with which we intend to replace this loan.
Accordingly, our interest expense may be higher or lower,
depending on the maturity and interest rate of the bank
financing we plan to obtain, the timing of repayment of the loan
and the then-applicable LIBOR rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Other Long-Term Debt</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our combined balance sheets included long-term debt of
$1,585&nbsp;million and $1,729&nbsp;million at December&nbsp;31,
2003, and 2004, respectively, related to loans secured by the
petrochemical assets of our Grangemouth, United Kingdom site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loans had terms of between 20 and 30&nbsp;years and would
have matured between 2018 to 2022. The average interest rate was
3.14%, 3.16% and 3.58% for the years ended December&nbsp;31,
2002, 2003 and 2004, respectively, and we incurred interest
charges of $37&nbsp;million, $45&nbsp;million and
$58&nbsp;million in 2002, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our separation from BP, the loans were repaid
on March&nbsp;22, 2005. The termination payment was
$1,755&nbsp;million, which exceeded the book value of the loans
and resulted in a loss of $45&nbsp;million, which is included in
other income (expense), net.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Post-Employment Benefit Obligations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of our employees participate in benefit plans sponsored
by us. These &#147;standalone&#148; plans, most of which are
unfunded, were generally transferred from BP to us on
April&nbsp;1, 2005. At March&nbsp;31, 2005, our
actuarially-determined projected benefit obligations under these
plans was $367&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our employees also participate in benefit plans sponsored by BP.
Our employees will continue to participate in these plans until
BP&#146;s investment in our company falls below certain
thresholds, generally 80% for U.S.&nbsp;group-wide plans and 50%
for all other plans. During the participation period, we are
generally required to reimburse BP for service costs incurred by
it in administering these plans to the extent these costs relate
to our employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
When BP&#146;s investment in our company falls below certain
thresholds, the net assets and benefit obligations of the
relevant group-wide plans, to the extent they relate to our
employees, will be assumed by separate standalone plans
established by us. At December&nbsp;31, 2004, it was estimated
that the aggregate amount of benefit obligations that would
transfer to us was $250&nbsp;million if BP&#146;s investment in
our company fell below 80%, and $615&nbsp;million if BP&#146;s
investment in our company fell below 50%. If the net assets
transferred to us differ from the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
actuarially-determined benefit obligations, we or BP, as the
case may be, will make a balancing payment to compensate the
other party for the difference. We intend to contribute any
balancing payments we may receive from BP to the relevant plans,
subject to local laws and other considerations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on actuarial valuations, at December&nbsp;31, 2004, our
annualized pension and other post-retirement benefit expenses
for group-wide and standalone plans was estimated to be between
$100&nbsp;million and $120&nbsp;million. Based on the projected
level of funding, our initial annual funding requirements for
these plans were estimated to be $20&nbsp;million to
$30&nbsp;million lower than this pension and post-retirement
benefit expense. We will fund our plans in accordance with
applicable local regulations and practice, and will provide
additional funding as management deems appropriate from time to
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Capital Expenditures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total capital expenditures for the six months ended
June&nbsp;30, 2005 were $250&nbsp;million, primarily reflecting
capital expenditures of $43&nbsp;million related to the
Distinctive Compliance Project (DCP) at our site in Chocolate
Bayou, Texas, which was initiated in 2002 to meet new
environmental laws and regulations, expand the facility&#146;s
ethylene capacity and improve process efficiency. With the
exception of the DCP, there were no individually significant
projects in the period. The remainder of the expenditure was
primarily for HSSE projects and normal sustaining capital
expenditures at our sites in addition to certain expenditures
relating to our establishment as a standalone operation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total capital expenditures for 2005 are expected to be slightly
less than in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our capital expenditures were $567&nbsp;million for the year
ended December&nbsp;31, 2004, reflecting capital expenditures of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $129&nbsp;million related to the DCP at the Chocolate Bayou site;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $83&nbsp;million related to the replacement of the reformer
    tubes in the ammonia plant and the first phase of an expansion
    to de-bottleneck the acrylonitrile plant of our Cologne, Germany
    site;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $48&nbsp;million related to the FCC rebuild at our refinery in
    Grangemouth, United Kingdom.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our capital expenditures were $556&nbsp;million for the year
ended December&nbsp;31, 2003, reflecting capital expenditures of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $97&nbsp;million related to the DCP at the Chocolate Bayou site;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $48&nbsp;million related to various projects at the Cologne
    site;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $32&nbsp;million related to the FCC rebuild at the Grangemouth
    refinery.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our capital expenditures were $614&nbsp;million for the year
ended December&nbsp;31, 2002, primarily reflecting capital
expenditures of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $57&nbsp;million related to the DCP at the Chocolate Bayou site;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $49&nbsp;million related to the closure of the alcohols
    production line and reconfiguration of the LAO unit of the
    Pasadena, Texas, facility, which is operated for us by BP under
    a toll manufacturing agreement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $49&nbsp;million related to the construction of an HDPE plant in
    Lillo, Belgium;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $36&nbsp;million related to the construction of the Cedar Bayou,
    Texas, facility, which is operated by Chevron Phillips in a
    50/50 joint venture between us and Chevron Phillips; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    $26&nbsp;million related to an expansion of the cracker of the
    Cologne site to enable it to recycle ethane by-products.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">53

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides a breakdown of our capital
expenditures by segments for the periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six&nbsp;months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred $96&nbsp;million, $151&nbsp;million,
$172&nbsp;million and $54&nbsp;million in HSSE-related capital
expenditures for 2002, 2003, and 2004 and for the six months
ended June&nbsp;30, 2005, respectively. We expect to incur an
estimated $140&nbsp;million of such expenditures for the
remainder of 2005. Although we cannot predict with certainty
future capital expenditures, from 2005 to 2010 we expect to
incur an estimated total of $830&nbsp;million in HSSE-related
capital expenditures, which includes $660&nbsp;million in
capital expenditures to comply with various regulations related
to health, safety, security and the environment and an
additional $170&nbsp;million to meet industry good practice and
internal safety standards. An estimated $490&nbsp;million of
this estimated total is expected to be made specifically to
comply with various environmental regulations, which include an
estimated $350&nbsp;million related to compliance with the EU
directive on integrated pollution prevention and control (IPPC).
We anticipate that HSSE regulations will continue to require us
and the industry in general to make capital expenditures. Since
capital expenditures vary with applicable HSSE legal
requirements, we cannot assure you that our recent capital
expenditures are indicative of the amounts we may be required to
spend to comply with future HSSE legal requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contractual Obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we own most of our major facilities, we lease certain
office, factory and warehouse space and land, as well as data
processing and other equipment, principally under non-cancelable
operating leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides a maturity analysis of our material
contractual obligations as of December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payments due by period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Less than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>More than</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1-3&nbsp;years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>3-5&nbsp;years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5&nbsp;years</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Contractual obligations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,729</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unconditional purchase obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other long-term liabilities reflected on Innovene&#146;s balance
    sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>363</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unconditional purchase obligations shown in the table
primarily include arrangements to secure long-term access to
supplies of feedstock which are used in our facilities in the
ordinary course of business.
</DIV>

<P align="center" style="font-size: 10pt;">54
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other long-term liabilities are liabilities for pensions and
other post-employment benefits. BP has agreed to retain
approximately $262&nbsp;million of obligations associated with
retired employees participating in our German pension and
post-employment benefit plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Off-Balance Sheet Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We use various customary off-balance sheet arrangements, such as
operating leases, to finance our business. None of these
arrangements has or is likely to have a material effect on our
results of operations, financial condition or liquidity.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and Qualitative Disclosures about Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are exposed to various types of market risk, including
changes in interest rates, currency exchange rates and the
prices of certain commodities. In the case of commodities, this
exposure arises from movements in the prices of the feedstocks
we require to make our products. To manage this exposure, we
generally acquire raw materials and sell finished products at
posted or market-related prices, which are typically set on a
quarterly, monthly or more frequent basis in line with industry
practice. We seek to minimize reductions in our margins by
passing through feedstock cost increases to our customers
through higher prices for our products. In the three years ended
December&nbsp;31, 2004, we were not engaged in commodity or
financial transactions that would have created additional or
different exposures than those described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our cash flows and earnings are subject to exchange rate
fluctuations. In our Refining segment, the prices of finished
products and of the underlying raw materials are primarily
denominated in U.S.&nbsp;dollars, whereas our other costs are
largely denominated in euros and British pounds. In our European
petrochemical business, product prices, certain feedstock costs
and most other costs are denominated in euros and British
pounds. From time to time, we may enter into foreign currency
exchange instruments to minimize the short-term impact of
movements in foreign exchange rates. On February&nbsp;24, 2005,
we entered into a transaction with BP to purchase options at a
cost of $20&nbsp;million. The exercise dates of these options
are spread equally over eleven months from February 2005 to
December 2005 and each gives the company the right to purchase
an amount of $83&nbsp;million at an exchange rate of $1.35/euro
and an amount of $42&nbsp;million at an exchange rate of
$1.90/British pound. The options are reflected in our unaudited
summary combined financial data on a mark-to-market basis. We
recorded realized and unrealized losses in connection with these
options of approximately $20&nbsp;million through June&nbsp;30,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;1, 2005, we had $1,700&nbsp;million of
intercompany debt outstanding to BP under an intra-group loan
facility. The loans under this facility accrue interest at a
rate of LIBOR plus five basis points, with interest payable
every three months and will mature on March&nbsp;30, 2006,
unless repaid earlier. This facility replaced debt secured by
the petrochemical assets of our site in Grangemouth, United
Kingdom, which was repaid on March&nbsp;22, 2005. A quarter
percentage point increase or decrease in the interest rates on
the total borrowings is estimated to change pre-tax income by
approximately $4&nbsp;million. In connection with the offering,
our capital structure is expected to change. This change will
change our exposure to interest rate risk. See
&#147;Capitalization&#148; for more information on our capital
structure.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements and related disclosures
in accordance with accounting principles generally accepted in
the United States requires our management to make judgments,
assumptions and estimates that affect the amounts reported in
our combined financial statements and the accompanying notes.
Our management bases its estimates and judgments on historical
experience, current economic and industry conditions and on
various other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. If actual
results differ significantly from management&#146;s estimates,
there could be a material adverse effect on our results of
operations, financial condition and liquidity.
</DIV>

<P align="center" style="font-size: 10pt;">55

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our significant accounting policies are summarized in
note&nbsp;3 to our combined financial statements. Summarized
below are those of our accounting policies where the nature of
the estimates or assumptions involved is material due to the
levels of subjectivity and judgment necessary to account for
highly uncertain matters or the susceptibility of such matters
to change and the impact of the estimates and assumptions on
financial condition or results of operations is material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue Recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We generate substantially all of our revenues through sales of
products in the open market. We recognize revenue when it has
been earned. Revenue for product sales is recognized when risk
and title to the product transfer to the customer,
collectibility is reasonably assured and pricing is fixed or
determinable. Generally, revenue is recognized at the time of
shipment or delivery of a product, depending on contractual
terms. Revenue is recognized net of discounts and other price
adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventory Valuation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our inventories are valued at the lower of cost or market value.
Elements of cost in inventories include raw materials, direct
labor, and manufacturing overhead. The majority of our
inventories in the United States are valued at cost using the
&#147;last-in, first-out&#148; method (LIFO). The balance of our
inventories are valued using the &#147;first-in, first-out&#148;
method (FIFO). Management adjusts the carrying value of U.S.
inventories using a LIFO reserve account, requiring estimates of
the impact of inflation on existing LIFO inventory pools as of
each reporting date. LIFO inventories comprise approximately 10%
and 7% of total inventories at December&nbsp;31, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We establish reserves for excess or obsolete inventory based on
experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property, Plant and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business is capital-intensive and has required, and will
continue to require, significant investments in property, plant
and equipment. At June&nbsp;30, 2005, December&nbsp;31, 2004 and
December&nbsp;31, 2003, the carrying value of our property,
plant and equipment was $6,737&nbsp;million,
$7,136&nbsp;million, and $7,050&nbsp;million, respectively. The
average of the estimated useful lives of our refineries and
petrochemical plants is 20&nbsp;years. Depreciation for
property, plant and equipment is recorded on the straight-line
method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate the useful lives of our property, plant and
equipment based on our historical experience, engineering
estimates and industry information. Such lives are reviewed when
economic events indicate that we may not be able to recover the
carrying value of the assets. Management&#146;s estimates of our
assets&#146; useful lives assume periodic maintenance and an
appropriate level of annual capital expenditures. Without
ongoing capital improvements and maintenance, the productivity
and cost efficiency of our machinery and equipment would decline
and the useful lives of our assets would be shorter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the useful life of our property, plant and equipment as of
June&nbsp;30, 2005 were to have been estimated to be one year
longer or shorter, our depreciation charge for the six months
ended June&nbsp;30, 2005 would have been $18&nbsp;million less
or $20&nbsp;million greater, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounting for Business Combinations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We allocate the purchase price paid for assets acquired and
liabilities assumed based on their relative fair value at the
date of acquisition pursuant to SFAS&nbsp;No.&nbsp;141,
&#147;<I>Business Combinations</I>.&#148; In estimating the fair
value of tangible and intangible assets acquired and liabilities
assumed, we consider information obtained during the underlying
due diligence process and utilize various valuation methods and
measures, including market prices, where available, appraisals,
comparisons to transactions for similar assets and liabilities
and the net present value of estimated future cash flows.
</DIV>

<P align="center" style="font-size: 10pt;">56

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recoverability of Long-Lived Assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We review the carrying value of our long-lived assets, including
property, plant and equipment and definite-lived intangible
assets whenever events or changes in circumstances indicate that
the carrying value of the assets may not be fully recoverable.
An impairment loss may be recognized when the undiscounted
future cash flows expected to result from the use of the asset,
including disposition proceeds, are less than the carrying value
of the asset. The amount of the impairment loss to be recognized
is based on the difference between the estimated fair value and
the carrying amounts of the assets. Fair value is generally
determined based on a discounted cash flow analysis. In order to
determine whether an asset has been impaired, assets are grouped
and tested at the bottom of the range of available estimates for
identifiable future cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The determination of both undiscounted and discounted cash flows
requires us to make significant estimates and considers expected
future development as of the balance sheet date. Subsequent
changes in estimated undiscounted and discounted cash flows
arising from changes in anticipated developments could impact
the determination of whether an impairment exists, the amount of
the impairment charge recorded and whether the effects could
materially impact our net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Goodwill</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill represents the excess of the purchase price paid for an
asset and related costs over the value assigned to the net
tangible and identifiable intangible assets of businesses
acquired. At June&nbsp;30, 2005 and December&nbsp;31, 2004, we
had $258&nbsp;million and $261&nbsp;million of goodwill and
other intangible assets, respectively. We assess the
recoverability of the carrying value of goodwill at least
annually or whenever events or changes in circumstances indicate
that the carrying value may not be fully recoverable.
Recoverability of goodwill is measured at the reporting unit
level based on a two-step approach. First, the carrying amount
of the reporting unit is compared to its fair value as estimated
using a discounted cash flow analysis and terminal value model
for expected future cash flows. To the extent that the carrying
value of the reporting unit exceeds the fair value of the
reporting unit, a second step is performed, whereby the
reporting unit&#146;s assets and liabilities are fair valued.
The implied fair value of goodwill is calculated as the fair
value of the reporting unit in excess of the fair value of all
non-goodwill assets and liabilities allocated to the reporting
unit. To the extent that the reporting unit&#146;s carrying
value of goodwill exceeds its implied fair value, impairment
exists and must be recognized. The annual goodwill impairment
test requires us to make a number of assumptions and estimates
concerning future levels of earnings and cash flow, which are
based upon our strategic plans. While we use available
information to prepare estimates and to perform the impairment
evaluation, actual results could differ significantly resulting
in future impairment and losses related to recorded goodwill
balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restructuring and Plant Closing Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restructuring and plant closing costs represent charges related
to the closing of plant locations, work force reductions and
other cost savings programs. These charges are recorded when
management has committed to a plan to implement the relevant
measures and incurred a liability related to the plan. Estimates
for plant closing costs include write-offs of the carrying value
of the relevant plant, any costs incurred for necessary
environmental and/or regulatory measures, contract termination
costs and demolition costs. Amounts provided for work force
reductions and other cost savings programs are based upon
estimates of the number of positions to be terminated,
termination benefits to be paid and other relevant information.
While management evaluates the relevant estimates as of the end
of each reporting period and adjusts the reserve when
information indicates that the estimate is above or below the
initial estimate, management&#146;s estimates on a
project-by-project basis historically have not varied to a
material degree. See note&nbsp;15 to our combined financial
statements for a further discussion of our restructuring
activities in the three years ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Environmental Liabilities and Expenditures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because we refine oil products and manufacture and sell a range
of petrochemical products, our operations are subject to various
hazards incidental to the refining of oil and the production of
industrial chemicals, including the use, handling, processing,
storage and transportation of hazardous materials. Environmental
</DIV>

<P align="center" style="font-size: 10pt;">57

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<DIV align="left" style="font-size: 10pt;">
restoration and remediation costs are recorded as liabilities
and expensed when site restoration and environmental remediation
and cleanup obligations are either known or considered probable
and the amount can be reasonably estimated. Environmental
accruals are measured based on an evaluation of currently
available information with respect to each site, considering
factors such as existing technology, currently applicable laws
and regulations and our prior experience in the remediation of
contaminated sites. The measurement of environmental liabilities
is based on a range of estimates of costs required to carry out
the remediation efforts. We use our best estimate within this
range to establish our environmental accruals. For environmental
accruals, actual costs can differ from estimates because of
changes in laws and regulations, public expectations, discovery
and analysis of site conditions and changes in clean-up
technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recognize deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and
the tax bases and operating losses of our assets and
liabilities. We regularly review our deferred tax assets for
recoverability and establish a valuation allowance based on
historical taxable income, projected future taxable income, the
expected timing of the reversals of existing temporary
differences and the implementation of tax-planning strategies
when we determine that it is more likely than not that we will
not be able to realize all or a portion of a deferred tax asset.
If we continue to operate at a loss or are unable to generate
sufficient future taxable income in the relevant tax
jurisdictions or if there is a material change in the applicable
effective tax rates or time period within which the underlying
temporary differences become taxable or deductible, we could be
required to increase our valuation allowance against our
deferred tax assets, resulting in an increase in our effective
tax rate and a reduction of our net income. We have implemented
a centralized procurement and sales organization within Europe
along with dedicated manufacturing companies. During periods of
low margins, our tax rate will likely increase as our
manufacturing companies may earn a profit for their
manufacturing services while our central procurement and sales
organization may incur losses which will not immediately reduce
income taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operating results have been included as a part of BP&#146;s
consolidated group for tax purposes. Our provisions for income
taxes have been determined on a separate return basis. Pursuant
to SFAS&nbsp;No.&nbsp;109, <I>&#147;Accounting for Income
Taxes&#148;</I>, we are required to assess our deferred tax
assets and the need for a valuation allowance on a separate
return basis and exclude from that assessment the utilization of
all or a portion of those losses incurred by BP under the
separate return method. This assessment requires considerable
judgment on the part of management with respect to benefits that
could be realized from future taxable income as well as other
positive and negative factors. Because we were unable to
accurately determine the amount of pre-2000 deferred tax assets
in respect of operating loss carry-forwards and tax credits, we
have only recognized current tax benefits in the periods
presented equal to, but not exceeding, any deferred tax expense
with any excess amounts evaluated. Evaluation allowances were
provided for any deferred tax assets to the extent it was not
likely that these tax assets would be realized in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employee Benefit Programs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We sponsor pension and other post-retirement benefit plans for
some of our employees in France and Germany. These plans cover
most of our employees in these countries and provide for pension
payments to eligible employees upon retirement. Pension benefits
for employees generally are based on years of service. Some of
our pension plans are unfunded while others are partially
funded, consistent with local practice in the relevant
jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amounts shown in our combined financial statements as net
periodic pension costs are determined on an actuarial basis. We
use various assumptions in calculating the actuarial valuation
of pensions, including weighted average discount rates, rates of
increases in compensation levels, and plan withdrawal, turnover
and mortality rates. Our net periodic pension costs for all
pension plans sponsored by us were $24&nbsp;million and
$24&nbsp;million for the six months ended June&nbsp;30, 2005 and
2004, respectively, and $51&nbsp;million, $71&nbsp;million and
$19&nbsp;million for the years ended December&nbsp;31, 2004,
2003 and 2002, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">58

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The discount rate we have selected for our pension plans
represents our best estimate of the interest rate that should be
used to determine the present value of future cash flows
currently expected to be required to settle our future pension
obligations. Historically, we have determined the discount rate
based upon current market indicators, primarily the yield on
high-quality corporate fixed-income securities. At
December&nbsp;31, 2004, 2003 and 2002, the weighted-average
annual discount rate of our sponsored plans was 5%, 6% and 6%,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The rate of compensation increase we have selected represents
our best estimate of the annual rate at which the average
compensation for our employees included in the plan will
increase. Historically, we have determined the rate of
compensation increase based on an analysis of historical and
projected compensation trends within our industry and specific
regions for employees covered by our plans. For the years ended
December&nbsp;31, 2004, 2003 and 2002, the annual rate of
compensation increase for our sponsored plans was 4%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A change in the two key assumptions of discount rate and rate of
compensation increase of 100&nbsp;basis points would have the
following effects on our net periodic pension cost for the year
ended December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>100 basis point</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Assumption</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Decrease</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, we have other post-retirement benefit plans that
provide for lump sum benefits depending on an employee&#146;s
length of service and earnings at, or near, retirement, and
post-retirement healthcare benefits in the form of healthcare
cost reimbursements for retirees and dependents. These
post-retirement benefit plans are also unfunded, in line with
local practice in the relevant jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amounts recognized in our combined financial statements as
other post-retirement benefit costs are determined on an
actuarial basis. We use various assumptions in calculating the
actuarial valuation of other post-retirement benefit costs,
including the weighted average discount rate, health care cost
trend rates, and plan withdrawal, turnover and mortality rates.
Our other post-retirement benefit cost for all sponsored plans
were less than $1&nbsp;million in each of the six month periods
ended June&nbsp;30, 2005 and 2004, respectively, and
$2&nbsp;million for each of the years ended December&nbsp;31,
2004, 2003 and 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The other post-retirement benefit costs described in the
paragraph above are calculated using the same discount rate
selected for the pension plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A change in the two key assumptions of discount rate and assumed
health care cost trend of 100&nbsp;basis points would have the
following effects on our other post-retirement benefit cost for
the year ended December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>100 basis point</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Assumption</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Decrease</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed health care cost trend</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we incur costs related to pension plans and other
post-retirement benefit plans sponsored by the BP group that
also cover certain of our employees. These costs are generally
allocated to us based on BP&#146;s calculation of net periodic
pension cost and an assessment of our share of such costs given
our employee and retiree base. Aggregate allocated costs for
BP-sponsored pension and post-retirement benefit plans incurred
by us were $29&nbsp;million and $26&nbsp;million for the six
months ended June&nbsp;30, 2005 and 2004, respectively, and
$55&nbsp;million, $(1)&nbsp;million, and $(8)&nbsp;million for
the years ended December&nbsp;31, 2004, 2003, and 2002,
respectively.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For information on recent accounting pronouncements, please see
&#147;Notes to Combined Financial Statements&nbsp;&#151;
Adoption of New Accounting Standards&#148; and &#147;Notes to
Combined Financial Statements&nbsp;&#151; Recently Issued
Accounting Standards.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">59

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<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "INDUSTRY OVERVIEW" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDUSTRY OVERVIEW</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Petrochemicals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Market Environment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The petrochemical industry produces olefins and polymers and
manufactures various petrochemical products directly or
indirectly derived from olefins. The olefins industry is
primarily regional, with market dynamics and prices varying
between regions, while the polymers and derivatives industries
and the plastics, rubbers and fibers industries served by them
are becoming increasingly global. The petrochemical industry is
highly commoditized. Some petrochemical products, mainly
polymers and derivatives, have characteristics which permit
petrochemical companies to engage in price differentiation, but
these products account for a small portion of the overall market
and most of them may become commodities at some point in their
lifecycle.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cyclicality and Volatility</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The relationship between supply and demand in the petrochemical
industry historically has been highly cyclical, with margins
typically increasing when demand approaches or exceeds available
supply. This is primarily because product supply is driven by
periods of substantial capacity additions and followed by
periods in which no or limited capacity is added. In addition,
product demand fluctuates with overall economic conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a general matter, companies are more likely to add capacity
in periods when current or expected future demand is strong and
margins are, or are expected to be, high. Investments in new
capacity can result, and in the past frequently have resulted,
in overcapacity, which typically leads to a reduction of
margins. In response, companies typically reduce capacity or
limit further capacity additions, eventually causing the market
to be relatively undersupplied. The alternation between periods
of substantial capacity addition and periods of limited capacity
addition, or even capacity reduction, produces recognizable
swings in petrochemical capacity utilization, which typically
result in swings in industry margins. This long-term pattern is
often referred to as the petrochemical cycle.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Margins are also susceptible to potentially significant swings
in the short term. This volatility, which may be global or
isolated in individual regions, can be caused by a number of
factors, including fluctuations in utilization rates due to
planned or unplanned plant outages, political and economic
conditions driving rapid changes in prices for key feedstocks,
exchange rate fluctuations and changes in inventory management
policies by customers of the petrochemical industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because the petrochemical industry&#146;s profitability
historically has been highly correlated with swings in
utilization of the industry&#146;s ethylene capacity, the
petrochemical cycle is often described by reference to the
ethylene cycle. The bottom of the last cycle was reached in 2001
and continued through 2003 due to weak demand and substantial
capacity additions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since 2004, stronger demand and limited capacity additions have
led to improved utilization rates and rising profit margins.
While a number of industry observers, including CMAI, a
chemicals consulting company, have forecast that the current
recovery of the ethylene cycle may last longer than previous
upturns, the duration of the present upturn is difficult to
predict and depends on a number of factors, including the extent
of the global economic expansion and the amount of capacity that
will be built over the coming years. Those observers who predict
an extended upturn believe that, among other things, the
prevailing high level of energy prices and low growth in the
consumption of petrochemical products in North America and
Europe may cause petrochemical companies to focus their
investments in these regions on de-bottlenecking existing
facilities, rather than adding new capacity. Given that there
are several recently completed world-scale petrochemical
complexes which will be able to meet growth requirements over
the coming years and the absence of recent announcements of
large-scale construction projects, CMAI forecasts that there
will likely not be a substantial increase in industry capacity
in these two regions before 2010. However, CMAI expects that the
majority of new ethylene capacity will be built in the Middle
East to take advantage of the low-cost gas feedstock available
in this region. Although some of this new capacity could be used
to supply product to Europe, the majority of production is
expected to be exported to Asia. According to CMAI, the demand
growth projected for China should absorb a significant
proportion of the
</DIV>

<P align="center" style="font-size: 10pt;">60

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<DIV align="left" style="font-size: 10pt;">
capacity expected to be added in the Middle East over the next
several years. However, if demand in China fails to reach
current projections, a greater proportion of the product
manufactured in the Middle East would likely be delivered to
Europe, potentially resulting in an oversupply of the European
market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Petrochemical Feedstock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal feedstocks of our petrochemical business are
naphtha and gas. Naphtha is mainly obtained in the process of
refining crude oil. Gas is recovered either from oil in the form
of associated gas obtained together with oil and natural gas
liquids (NGL), or directly from gas fields. Gas includes ethane,
butane and propane. Butane and propane are transported and
stored as liquids, referred to as liquified petroleum gas (LPG).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For most petrochemical processes, feedstock costs are the most
significant cost item. The costs of the feedstocks we require to
make our petrochemical products (naphtha, ethane, butane and
propane) are principally driven by the price of oil and natural
gas. Oil and gas prices are influenced by numerous factors,
including the balance between supply and demand and geopolitical
factors, making accurate price forecasts virtually impossible.
Because gas is not as readily transportable between regions as
oil and the amount of interregional trade in gas is thus
limited, gas prices tend to vary by geographic region. In the
current environment of high oil prices, petrochemical facilities
located in the Middle East enjoy the advantage of direct access
to gas feedstocks which are priced at a significant advantage to
naphtha. To the extent petrochemical companies are integrated
with their feedstock sources, are geographically diversified or
have the ability to change their feedstock mix quickly and
easily, they are better able to manage the volatility in oil and
gas prices than other petrochemical manufacturers. Also,
petrochemical producers with a more diversified product
portfolio are less exposed to price movements in any single
product category.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Petrochemical Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, worldwide demand for petrochemical products
has grown steadily over the past 15&nbsp;years at a greater rate
than the growth rate of gross domestic product (GDP), reflecting
the ongoing substitution of thermoplastics for other industrial
materials, including glass, metal, wood and paper. CMAI projects
demand growth for petrochemical products to moderate slightly
from historical levels but still to grow slightly faster than
GDP, despite petrochemical growth rates below GDP growth rates
in North America and western Europe. For 2006, CMAI projects GDP
to grow at an annual rate of 3.6% in North America, 2.3% in
western Europe and 5.1% in north east Asia, excluding Japan.
Within north east Asia, China is expected to experience the
strongest growth, with a projected growth of 8.0% for 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GDP and demand growth rates vary not only by region but also
among different types of petrochemical products, as detailed in
the table below:
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Average annual GDP and demand growth
rates<SUP style="font-size: 85%; vertical-align: text-top">(1)(2)</SUP></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>1999-2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>2004-2009</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>North</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Western</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>North</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>North</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Western</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>North</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>America</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Europe</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>east Asia</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Global</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>America</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Europe</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>east Asia</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Global</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="30" align="center" nowrap><B>(%)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GDP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Butadiene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polyethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    HDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LLDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polypropylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polystyrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alpha olefins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene oxide</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.0)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene oxide</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Source: CMAI, July 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The growth rates shown for each region reflect the growth of
    domestic demand in that region.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is an overview of the principal petrochemical
products and their applications.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Ethylene.</I> Ethylene is a flammable gas obtained in a
    process called cracking, in which hydrocarbons are briefly
    heated to 750-950 &#176;C, causing chemical reactions that split
    the carbon-hydrogen or carbon-carbon bonds of the feedstock. The
    chemical mixture resulting from cracking contains ethylene,
    propylene, butadiene and other compounds in varying amounts
    depending on the feedstock. The majority of this mixture is in
    the form of ethylene. Because ethylene is a gas, it must be
    transported either by pipeline or in the form of highly
    pressurized or refrigerated liquids, which is expensive. While
    ethylene itself has no consumer applications, it is a key
    building block for polyethylene, polystyrene, EO and other
    derivatives.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 According to CMAI, ethylene is the most widely consumed
petrochemical product in the world. Global ethylene demand is
primarily driven by the use of ethylene as a feedstock for the
production of polyethylene. Other important demand drivers
include the use of ethylene in the manufacture of EO, ethylene
dichloride and ethylbenzene.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Propylene.</I> Propylene is a flammable gas which is derived
    either as a co-product of the refinery FCC process used to make
    gasoline or as a co-product of the steam cracking process used
    to make ethylene. While propylene has virtually no independent
    end use, it is an important input for a significant number of
    industrial products and the main feedstock for polypropylene and
    acrylonitrile. Propylene is marginally easier to transport than
    ethylene and may be shipped by pipeline, road, rail or ship.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Global propylene demand is primarily driven by the use of
propylene as a feedstock for the production of polypropylene.
Other important demand drivers include the use of propylene in
the manufacture of acrylonitrile, propylene oxide (PO),
oxo-alcohols, cumene and acrylic acid.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Styrene.</I> Styrene, a hydrocarbon which under normal
    conditions is a flammable liquid, is derived from ethylene and
    benzene, which are brought together in a reaction with a
    catalyst to form ethylbenzene. Virtually all worldwide
    ethylbenzene production is consumed in the manufacture of
    styrene. The largest use of styrene is in the production of
    polystyrene. It is also used, in combination with acrylonitrile,
    in the manufacture of styrene-acrylonitrile (SAN). SAN has a
    variety of applications, including housewares and appliances. In
    combination with butadiene, styrene is also used in the
    manufacture of styrene-butadiene rubber (SBR)&nbsp;and
    styrene-butadiene latex (SBL), two common types of synthetic
    rubbers, and to make</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">62

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    <TD></TD>
    <TD align="left">
    acrylonitrile-butadiene styrene (ABS), a plastic with a high
    degree of tensile strength and a variety of end uses.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Styrene demand is mainly driven by various types of
polystyrene, with general purpose polystyrene and EPS accounting
for approximately two thirds of global demand. According to
CMAI, China will be the principal driver of demand growth for
styrene in the future as industrial users of polystyrene, EPS
and ABS are moving their operations to this region.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Butadiene.</I> Butadiene is a gas which condenses to a liquid
    at minus 4.5&#176;C. It is one of the co-products of the steam
    cracking process used to manufacture ethylene and propylene, and
    can also be made from NGL through chemical transformations or
    the separation of natural components. Butadiene is used
    primarily in the production of polymers, principally synthetic
    rubbers such as SBR, which is used to make tires and other
    rubber products. Other polymers made from butadiene include ABS
    and SBL.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Butadiene demand is driven primarily by growth in consumption
of synthetic rubber.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Polyethylene.</I> Polyethylene is the world&#146;s most
    widely used thermoplastic. A thermoplastic is a plastic which
    softens when heated and hardens again when cooled. Polyethylene
    is made by aggregating many ethylene molecules in a process
    called polymerization. Polyethylene has a wide variety of
    applications, including soft plastics, such as those used in
    plastic films, hard plastics such as those used in plastic
    bottles and extremely hard plastics found, for example, in
    bulletproof vests.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Polyethylene is often classified by its density, because the
denser the polyethylene used in a material, the greater the
material&#146;s rigidity. The world&#146;s largest volume
polyethylene is HDPE, which has a relatively high degree of
tensile strength. Its most common household use is plastic
containers. At the opposite end of the spectrum is LDPE, which
was the first type of polyethylene to be developed. Its most
common household use is plastic bags. Both HDPE and LDPE are
also commonly used for molding applications. LLDPE, which was
developed in the 1970s and can usually be manufactured at a
lower cost than LDPE, has basic properties similar to LDPE.
While LDPE and LLDPE are to a certain extent substitutable for
each other, for certain applications one of them is usually more
suitable than the other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Film is the largest use of global polyethylene production and
the primary driver of demand, representing approximately one
half of worldwide polyethylene consumption. Film includes a
myriad of end use applications, from food packaging to trash
bags, stretch films and shrink films. Blow-molding and
injection-molding are the next largest uses and are also
important demand drivers. In the blow-molded category,
blow-molded bottles are the single largest end use.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Polypropylene.</I> Polypropylene is the world&#146;s second
    most widely-used thermoplastic after polyethylene. It is a
    thermoplastic characterized by its rigidity and resistance to
    high temperatures, chemicals and fatigue. Polypropylene has a
    heat distortion temperature of 150 to 200 &#176;C, which makes
    it particularly suitable for &#147;hot-fill&#148; applications,
    which are manufactured using injection molding production
    methods. As a result, polypropylene is the most significant
    material used in molded containers and automotive applications.
    In addition, polypropylene can be configured to a high degree of
    purity, making it useful for the semiconductor industry.
    Polypropylene fibers are also used in fabrics and carpets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Polypropylene represents the largest category of
thermoplastics, and it is among the fastest growing categories
of thermoplastics. The fast growth of polypropylene-based
products reflects the superior cost and performance
characteristics of this material. As one of the industry&#146;s
most versatile and historically least expensive polymers,
polypropylene is achieving a portion of its growth by displacing
other polymers, such as polyethylene and polystyrene. The
largest end use segment of the polypropylene industry is
injection-molding, followed by film and sheet. Injection-molded
polypropylene includes a wide variety of end uses, such as
packaging, automotive and appliances. End use segments for film
and sheet include food bags, tape and wrappings for consumer
goods. According to CMAI, North America, western Europe and
north-east Asia will account for approximately 75% of global
demand in 2005. CMAI expects that Asia will continue to grow at
higher rates than North America and Europe, primarily as a
result of growth in the Chinese market.
</DIV>

<P align="center" style="font-size: 10pt;">63

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Polystyrene.</I> General purpose, or &#147;crystal,&#148;
    polystyrene and high impact polystyrene are hard and brittle
    materials which are used for packaging, appliance and electrical
    housings and insulation. Both forms are also used for plastic
    molding applications. Styrene is the main feedstock used to make
    polystyrene. EPS is used to manufacture lightweight foam for
    packaging and insulation purposes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 The largest demand driver for polystyrene is rigid durable
products, such as television and computer cabinets.
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Solvents and industrial chemicals.</I> Solvents are used to
    dissolve solids and keep them in liquid form. They serve a
    variety of industrial and consumer markets, including in the
    pharmaceuticals, cosmetics, inks, adhesives, detergents and
    coatings industries. One important solvent is ethanol. Important
    industrial chemicals include EO, ethylene glycols (EG), PO and
    propylene glycols (PG). EO is used mainly to make EG and
    industrial detergents, and EG is, in turn, primarily used in the
    manufacture of polyesters and antifreeze/coolants. PO is used to
    make PG, which, in turn, is primarily used to produce polyester,
    paints and coatings, airplane de-icers, antifreeze and
    industrial coolants.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 EO demand is driven by demand for EO derivatives, principally
EG. In recent years, EG has become the most important derivative
of EO. As a result of increased consumption of polyester, EG has
become the second largest application of ethylene after
polyethylene. The lack of sufficient supplies of EG to satisfy
demand for polyester has recently fueled a strong market
environment. Similarly, PO demand is driven by demand for PO
derivatives, principally PG.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Acrylonitrile.</I> Acrylonitrile is a well-established
    commodity that has been in commercial use for more than
    70&nbsp;years. It is used in the production of acrylic fiber,
    ABS and SAN. Acrylic fiber is used in a wide variety of consumer
    products, including clothing and carpets. Acrylonitrile is
    manufactured from propylene, ammonia and air with the use of a
    special catalyst. Acrylonitrile is toxic and flammable and,
    unless chemical stabilizers are added for storage and shipment,
    can undergo an explosive chemical reaction.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Historically, acrylonitrile demand has been driven by acrylic
fiber. More recently, ABS and SAN polymers have taken over as
the main drivers of demand for acrylonitrile, with annual growth
rates of approximately 4% over the past four years. As with
other petrochemicals, the growth in demand for ABS and SAN
polymers has been fueled by Asia while demand in North America
and Europe has declined. Currently, Asia is a net importer of
acrylonitrile. Much of the Asian imports come from North America.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Alpha olefins.</I> Alpha olefins include LAOs and PAOs. LAOs
    are hydrocarbons in a chain formation with physical
    characteristics and commercial uses that vary according to the
    length of the hydrocarbon chain. Ethylene is the primary
    feedstock for the production of LAOs, and LAOs, in turn, are
    important feedstocks for the manufacture of certain types of
    polyethylene. In addition, they have many applications in the
    petrochemical industry, including as surfactant intermediates,
    base oil for synthetic lubricants and drilling fluids. Demand
    for LAOs has increased substantially since they first became
    commercially available. PAOs, which are made by merging several
    LAOs together, are primarily used as synthetic lubricants. PAOs
    are value-added products compared with LAOs, and, accordingly,
    command higher margins. However, PAOs account for only
    approximately 10% of the overall market for alpha olefins.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Producers of LAOs may be divided into two groups:
&#147;full-range&#148; producers, which manufacture a whole
range of LAOs and &#147;on purpose&#148; or &#147;single
product&#148; producers, which specialize in those LAOs which
historically have experienced the fastest growth. Demand for
LAOs has experienced an increasing divergence between demand for
LAOs with shorter carbon chains, which have grown more quickly,
and demand for LAOs with higher carbon numbers, which on average
have experienced slower growth. As a result, the industry has
focused on developing single product technologies to target the
fastest growing LAOs. Demand for PAOs is driven by the European
automotive industry and lubricant substitutes. Following a
period of flat demand for PAOs in North America, North American
PAO demand has recently shown signs of improvement.
</DIV>

<P align="center" style="font-size: 10pt;">64

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
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    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>PIB.</I> PIB is a synthetic hydrocarbon polymer available in
    a wide variety of viscosities for use in a broad range of
    industrial applications, such as lubricants and fuel additives,
    and consumer applications, such as adhesives and sealants.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consolidation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Several of the major oil companies have recently restructured
their petrochemical businesses. At the same time, there has been
a trend in the North American and European petrochemical
industry since the early 1980s towards consolidation, a
development which has gained pace during the 1990s. At the
global level, the industry is still relatively fragmented due to
the continuous emergence of new manufacturers, primarily in the
Middle East but also in Asia. The world&#146;s top ten ethylene
and propylene producers, for example, account for less than 50%
of global capacity for the relevant products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Regional Outlook</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is expected that few new olefins crackers will be built in
North America and Europe, with the exception of Russia, which,
although not currently a focus of foreign investment,
potentially has low-cost gas feedstock reserves and thus may
attract new projects in the future. Instead, petrochemical
companies operating in North America and Europe are expected to
focus on upgrading and expanding existing facilities. Slower
demand growth in these regions relative to China and the rest of
Asia and fewer sources of low-cost feedstocks compared with the
Middle East are the primary drivers behind this outlook. Another
contributing factor is the fact that the North American and
European petrochemical industries are becoming subject to ever
more stringent environmental laws and regulations. Although
significant merger and acquisition activity in Europe in recent
years has led to consolidation, much of the infrastructure is
still local. Several projects to address this problem are
underway, including connecting the principal ethylene pipeline
networks in Europe and building a European propylene pipeline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While only very few facilities are thus expected to be built in
North America and Europe, significant projects are underway in
Asia and the Middle East. Petrochemical investments in Asia are
primarily targeted at China and surrounding countries to take
advantage of the strong growth of the Chinese manufacturing
industry. The growth in Chinese exports, along with increased
local demand as China grows, are driving demand growth for
petrochemical products, much of which is met through imports.
While new capacity is expected to come on-stream in China over
the next several years, it is expected that, for the foreseeable
future, China&#146;s strong demand growth will exceed supply
growth and China will remain a major importing country of
petrochemical products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Middle East is attracting investment in petrochemical
capacity because of its significant reserves of low-cost gas
feedstock obtained as a co-product of the oil production
process. There is political support in many Middle Eastern
countries for building an export-oriented industry around these
gas reserves, and joint ventures with foreign companies
providing technology expertise and market access are supported
as a means of exploiting these reserves. As discussed above,
much of the capacity in the Middle East is being built for
export to China. However, as the capacity buildup continues,
some product may be exported to Europe and the Americas.
Furthermore, if China fails to grow as expected, substantially
greater volumes may be directed from the Middle East to North
America and Europe.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Refining in Europe</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The refining industry in Europe historically has been
characterized by steady growth in demand for refinery products,
cyclical margins due to periodic overcapacity and supply
shortages in various regional markets, and seasonal fluctuations
in the consumption of particular types of refinery products,
such as gasoline and diesel during the summer driving season in
the northern hemisphere and home heating oil during the winter
months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In aggregate, refining industry margins have experienced a sharp
upturn since 2002 to reach record levels in late 2004. With
growth in product demand exceeding capacity additions, and crude
oil supply shifting towards heavier and higher sulfur crudes,
refineries with more sophisticated technical configurations have
been able to capture greater margins. According to PGI, the
average cash margin for a hydrocracking refinery in north west
</DIV>

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Europe was $6.04&nbsp;per barrel in 2004 and $6.15 in the six
months ended June&nbsp;30, 2005, compared with $2.73 per barrel
in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The current supply and demand fundamentals should continue to
underpin refining cash margins in the immediate future, and
therefore margins are expected to stay above the European
historical average during the period from 1992 to 2002 of
approximately $1.50 per barrel. Furthermore, with global
inventories remaining relatively low, and tightening product
specifications limiting the flexibility of the global supply
system, the risk of supply disruptions remains high, with
associated volatility in product prices and cash margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Crude oil distillation capacity in Europe has declined slightly
over the past five years, from 15.3&nbsp;million barrels per day
in 1999 to 15.2&nbsp;million barrels per day in 2004. The
industry still has some spare capacity left but the amount of
this extra capacity is declining. According to PGI, industry
utilization rates in Europe have increased since 2002 and
averaged 91.6% in the six months ended June&nbsp;30, 2005. No
new crude oil distillation capacity is expected to be built in
the foreseeable future, due principally to the high cost of
entry into the European refining markets and the capital to
comply with increasingly stricter environmental standards.
Furthermore, the process of planning, obtaining permission to
build and constructing a new refinery typically takes between
three and four years, and therefore capacity forecasts may be
made with a high degree of certainty for up to three years.
Instead of building new refining capacity, refinery operators
are expected to focus their investments on de-bottlenecking and
upgrading existing production facilities to enable them to
process higher volumes of crude oil and to manufacture higher
volumes of more valuable products. These investments are
expected to be driven by changes in consumption patterns and the
introduction of stricter environmental laws and regulations,
such as clean fuels legislation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The quality of crude oil dictates the level of processing and
conversion necessary to achieve the optimal mix of finished
refinery products. For these purposes, crude oil may be
classified by its density (ranging from light to heavy) and
sulfur content (ranging from sweet to sour). Light, sweet crude
oils are more expensive than heavy, sour crude oils because they
require less treatment and produce a slate of products with a
greater percentage of high-value refinery products, such as
gasoline, naphtha and kerosene. The heavy, sour crude oils
typically sell at a discount to the lighter, sweet crude oils
because they produce a greater percentage of lower-value
products with simple distillation and require additional
processing to produce the higher-value light products. We
believe that increasing worldwide supplies of heavy, sour crude
oil will result in continuing cost advantages for refineries
with complex configurations which are able to process these
crude oils. The upgrading capability, or complexity, of a
refinery is a measure of its ability to process less expensive
feedstock, such as heavier and higher-sulfur content crude oils,
into lighter value-added products, such as gasoline, diesel and
jet fuel. The greater a refinery&#146;s complexity and the more
flexible its feedstock slate, the better positioned it is to
take advantage of the more cost-effective crude oils, resulting
in incremental cash margins. From 2002 to 2004, the price
differential between light, sweet crude oil and heavy, sour
crude oil widened substantially. According to PGI, this price
differential (as measured by the Urals/ Brent differential)
averaged $4.14&nbsp;per barrel in 2004 and $4.33&nbsp;per barrel
in the six months ended June&nbsp;30, 2005, compared with $1.76
per barrel in 2003. In Europe, the average crude oil quality is
expected to decline, as significant volumes of sour crude oils
are expected to be imported from the countries of the former
Soviet Union.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The main refinery products, apart from naphtha, which is used as
a petrochemical feedstock, are gasoline, middle distillates, jet
fuel and kerosene, and fuel oil. Middle distillates, or gas
oils, include road diesel, light gas oils, which are used as
industrial and commercial fuels, and heavy gas oils, which are
used as refinery feedstock. Fuel oil is used by marine vessels,
power plants, commercial buildings and industrial facilities for
heating and processing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The most important transport fuels are gasoline and diesel.
Refineries blend together various gasoline components to achieve
specifications for regular and premium grades in both summer and
winter formulations. Additives are often used to enhance the
performance of gasoline and provide protection against oxidation
and rust formation. According to PGI, in European countries that
are members of the Organization for Economic Cooperation and
Development (OECD Europe) there is an overall net gasoline
surplus of approximately 210&nbsp;million barrels per year. Most
of this surplus is exported to the United States but tight
quality specifications
</DIV>

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<DIV align="left" style="font-size: 10pt;">
make it difficult for some refineries to comply with U.S.
requirements. Other gasoline destinations are eastern Europe,
the countries of the former Soviet Union and Africa.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Specifications for fuel products are becoming more and more
stringent. By 2009, transport fuels such as gasoline and diesel
are expected to have to comply with a 10 parts per million
(ppm)&nbsp;maximum sulfur specification in the European Union.
This constitutes a significant reduction from the 50&nbsp;ppm of
sulfur currently permitted by European Union diesel and gasoline
specifications, as well as the 500&nbsp;ppm of sulfur (which
will be reduced to 15&nbsp;ppm beginning June&nbsp;1, 2006) and
the 30&nbsp;ppm of sulfur currently permitted by the more
restrictive specifications for diesel and gasoline,
respectively, in the United States. To comply with these
stringent specifications, refineries must make expensive
technology upgrades.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to middle distillates, western Europe has a net
deficit of approximately 148&nbsp;million barrels per year. Most
of this shortfall is imported from the countries of the former
Soviet Union. These imports typically require further processing
to reduce the oil&#146;s sulfur content before they can be
marketed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fuel oil is balanced in northern Europe, with a small excess in
high sulfur grades. Southern Europe has a deficit of fuel oil
resulting in net imports of approximately 33&nbsp;million
barrels per year, which come predominantly from northern Europe
and Africa. However, imports have significantly declined over
the last ten years in line with declines in consumption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Further details on the growth outlook for each major type of
refinery product are provided below:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Naphtha.</I> According to PGI, demand for naphtha increased
    by 0.8% in 2004 in OECD Europe. Naphtha demand is primarily
    driven by the petrochemical industry. North west Europe has a
    growing deficit position in naphtha, which is met by imports
    from the Middle East and the Mediterranean.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Gasoline.</I> Although gasoline demand is seasonal and peaks
    during the summer months, the long-term trend is clearly toward
    a sustained decline, reflecting the continued replacement of
    gasoline-powered vehicles with vehicles powered by diesel and
    benefiting from greater engine efficiency. PGI reports a decline
    of 1.7% in gasoline demand in OECD Europe for 2004 and forecasts
    further declines of 2.5% and 2.0% for 2005 and 2006,
    respectively. The excess supply in Europe is expected to
    increase steadily as demand continues to decrease, while
    production remains broadly flat. By contrast, in North America,
    demand for gasoline is expected to continue to increase at
    faster rates than the increase in North American supply, which
    in turn should enable European manufacturers to export their
    surplus to North America.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Diesel and heating gas oil.</I> According to PGI, in 2004,
    road diesel demand in Europe continued to grow strongly at 4.6%,
    led by the United Kingdom, which experienced growth at a rate of
    7.9%. Road diesel is expected to show a consistent and
    significant uptrend for the foreseeable future. PGI forecasts
    gas oil/diesel growth rates of 1.8% and 1.6% for 2005 and 2006,
    respectively. In contrast to road diesel, which has its seasonal
    peak in the summer and is set for positive growth, demand for
    heating gas oil peaks in the winter and is expected to continue
    to decline. The diesel and heating gas oil shortfall in Europe
    is covered by imports from the countries of the former Soviet
    Union.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Jet fuel and kerosene.</I> According to PGI, demand for jet
    fuel and kerosene in OECD Europe grew by 4.4% in 2004. Going
    forward, jet fuel demand in Europe is expected to grow faster
    than any other transportation fuel, driven by increasing air
    traffic. According to PGI, kerosene consumption in OECD Europe
    will grow at a rate of 2.9% for each of 2005 and 2006. Given
    north west Europe&#146;s deficit position and flat capacity,
    this region is expected to increasingly rely on imports from the
    Middle East and the Mediterranean.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Fuel oil.</I> According to PGI, demand in OECD Europe for
    fuel oil, both high sulfur and low sulfur, declined by 0.9% in
    2004. Fuel oil demand is expected to continue to decline as a
    result of emissions restrictions, including sulfurous and
    nitrous emissions, and a continuing shift to natural gas as a
    source of fuel. PGI forecasts a further decline of 2% for each
    of 2005 and 2006 in OECD Europe. However, the marine bunker fuel
    market is expected to remain strong, particularly in the
    Mediterranean markets.</TD>
</TR>

</TABLE>

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<A name='111'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BUSINESS</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Introduction</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are among the world&#146;s largest petrochemical companies
with revenues of $17.9&nbsp;billion in 2004. We conduct our
business through petrochemical manufacturing sites in eight
countries, as well as two refineries which are fully integrated
with our petrochemical facilities. At June&nbsp;30, 2005, our
total petrochemical production capacity was approximately
40&nbsp;billion pounds per year and our refineries had a
combined crude oil distillation capacity of approximately 400
mbd. Our business is structured around five major sites, which
account for approximately 70% of our petrochemical production
volumes and approximately 85% of our overall production volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a global reach and leading market positions with respect
to our key petrochemical products, which enable us to manage our
business on a worldwide basis. We benefit from the cost
advantages of operating large-scale petrochemical facilities and
the high degree of integration at our major sites. We have an
expanding position in the fast-growing Asian markets, which we
serve through our operations in North America and Europe. We
have an established regional office in Shanghai, China to manage
our operations in Asia. Our competitive position in the
petrochemical industry is supported by a portfolio of
proprietary process technologies. Our two European refineries
have the scale, location, product slate, feedstock flexibility
and clean fuels capabilities necessary to be competitive in
their respective markets and provide an earnings stream that is
not driven by the same cyclical patterns as our petrochemical
businesses. Our safety performance track record is among the
best in the industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business comprises certain assets, liabilities and
associated infrastructure that were formerly part of BP&#146;s
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments. We believe our separation from BP has
created new opportunities for us. Historically, our business was
a small part of a much larger organization and our performance
lagged behind that of other companies in the petrochemicals
sector. As a separate entity with our own management structure,
we will be able to focus on the factors that are critical to the
success of our petrochemical and refining businesses and
benchmark ourselves directly against the performance of our
competitors. Our benchmarking work has identified significant
opportunities to improve the performance and optimize the use of
our existing assets and to increase our margins. We intend to
pursue growth opportunities by investing in new assets and
forming joint ventures in regions that have access to low-cost
feedstocks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our formation as a separate legal entity, BP
has agreed to provide various administrative and operational
support services to us. In addition, we have entered into a
range of commercial arrangements with BP for the supply of
refining and petrochemical feedstocks, the purchase and sale of
our refined products, the sharing of common infrastructure and
the provision of utilities at various sites which we share with
BP. See &#147;Certain Relationships and Related Transactions
&#151; Commercial Interface Agreements&#148; for more
information on these arrangements.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following chart provides an overview of our two principal
businesses, the segments which each business comprises and the
products we make in each of these segments:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="u49013u4901301.gif" alt="(CHART)">
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Intersegmental sales amounted to $1,909&nbsp;million for the
    year ended December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
In our petrochemical business, we make olefins and related
products, a broad range of polymers and various other
petrochemical products directly or indirectly derived from
olefins. The focus of our olefins business is on ethylene and
propylene, which are the two largest volume olefins and key
building blocks for polymers and derivatives. The olefins we
make are primarily used as feedstock for our polymers and
derivatives businesses. In addition, we sell olefins to third
party customers for a variety of industrial and consumer
applications involving plastics, rubber and fiber. In our
polymers business, we focus on polyethylene and polypropylene.
The largest volume product of our global derivatives business is
acrylonitrile. See &#147;&#151;&nbsp;Products&#148; for more
information on the markets in which we sell our products. We are
among the largest volume manufacturers of olefins and polymers
in the world. In addition, we have developed several proprietary
process technologies for the production of polymers, including
our gas phase polyethylene and polypropylene processes, which we
use both internally and license to customers, and our HDPE
process, which we use internally. In addition, we have developed
the market-leading acrylonitrile manufacturing technology and
related catalysts, which are used in more than 90% of
acrylonitrile production processes in the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of our capacity, global
market position and certain regional market positions with
respect to our key petrochemical products:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full-year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capacity<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Global</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as of June</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>market</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Selected regional</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Key products</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>position<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>market positions<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(mmlbs)</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#4 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polypropylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#2 in North America</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    HDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#2 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#4 in North America</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#4 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#1 in Europe</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>#1 in North America</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Capacity is defined as nameplate capacity. See
    &#147;Business&nbsp;&#151; Manufacturing&nbsp;&#151;
    Overview&#148; for more information on how we calculate capacity.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    According to Chemical Markets Associates, Inc. (CMAI)&nbsp;data
    as of July 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">69
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our petrochemical business has developed significantly over the
past five years. We obtained full ownership of our Cologne,
Germany, site in 2001 when we acquired Bayer AG&#146;s
(Bayer&#146;s) 50% stake in Erd&#246;lchemie GmbH, a joint
venture between us and Bayer that had been existence since 1957.
In 2001, we acquired Solvay&#146;s U.S. and European
polypropylene businesses. At the same time, we combined our HDPE
businesses to form BP Solvay Polyethylene North America, in
which we owned a 49% stake, and BP Solvay Polyethylene Europe,
in which we owned a 50% stake. We contributed the HDPE units of
our Grangemouth, United Kingdom, and Lav&#233;ra, France, sites
to these joint ventures. In November 2004, Solvay exercised its
put option with respect to these joint ventures. As a result, we
obtained full ownership of the HDPE operations at our
Grangemouth and Lav&#233;ra sites, as well as our Battleground,
Texas, Lillo, Belgium, Rosignano, Italy, and Sarralbe, France,
sites. In the three years ended December&nbsp;31, 2004, we
started a program of restructuring our polymers and derivatives
assets in North America and Europe with a view to rationalizing
and modernizing our asset base. In May 2005, we signed an
agreement with NOVA to establish a 50/50 joint venture. Under
the agreement, we and NOVA will contribute our respective
European polystyrene and EPS businesses to the joint venture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our refining business, we operate two large refineries in
Grangemouth and Lav&#233;ra. Our principal refining products are
transport fuels, particularly diesel fuel and gasoline, naphtha,
and heating and fuel oils. Our refineries are physically
integrated with petrochemical plants located at the same sites.
We have recently implemented a single management structure at
these sites to further leverage the benefits of integration. The
majority of the naphtha output of our refineries is used as
inputs by the petrochemical plants located at the relevant
sites. We have entered into agreements with BP pursuant to which
BP has agreed to buy the balance of our refinery products and to
either market these products to its local customers or trade
them on the commodity markets on our behalf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both of our refineries have made substantial investments to
bring their units into compliance with European Union clean
fuels specifications. Clean fuels are low-polluting transport
fuels which are capable of replacing ordinary gasoline and
diesel, including unleaded, low benzene, low sulfur gasoline and
low sulfur diesel. Both refineries are able to produce clean
fuels meeting current European Union specifications. Grangemouth
is also able to manufacture clean fuels in accordance with the
stricter rules currently applicable in certain parts of the
United States and the even more stringent specifications that
are expected to become applicable in the European Union in 2009.
Lav&#233;ra is compliant with current European Union
specifications, and we are in the process of making further
investments in the refinery to achieve compliance with the
expected 2009 European Union specifications by the end of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following reliability issues at several of our key petrochemical
and refinery facilities, including Chocolate Bayou, Texas,
Grangemouth and Lav&#233;ra in 2000 and 2001, we made
substantial investments. We believe that these programs have
resulted in better reliability and expect to achieve further
improvements in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have approximately 8,000&nbsp;employees.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our key competitive strengths are the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Global Reach and Leading Market positions.</I></B> We are
    among the world&#146;s largest petrochemical companies with
    24&nbsp;manufacturing sites in eight countries in North America
    and Europe and a total petrochemical production capacity of
    approximately 40&nbsp;billion pounds per year. From these sites,
    we serve approximately 2,700 customers who are located in the
    principal industrial regions of the world and use our products
    across a broad range of end-use applications, which we believe
    has allowed us to achieve and hold leading market positions with
    respect to each of our key products. According to CMAI, as
    measured by expected average annual capacity for 2005, we are
    among the top three companies globally for each of HDPE,
    polypropylene and acrylonitrile. We believe that our access to
    the world&#146;s principal markets and our leading positions
    with respect to key products enable us to identify and capture
    demand opportunities in all major market centers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Vertically Integrated, Large Scale Producer.</I></B> We
    have five large-scale sites, accounting for approximately 85% of
    our total production volumes. All of these large-scale sites are
    integrated with major</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">70

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    crackers and polymers and derivatives units, giving us the
    ability to capture margins across the value chain. Two of them
    are also integrated with onsite refineries, which differentiates
    us from many of our competitors. In addition, we own and operate
    several large global derivatives sites, including the largest
    acrylonitrile site in the world. We believe the scale and
    integration of our key sites enable us to realize economies of
    scale, improve energy management and minimize logistics costs.
    In addition, this gives us flexibility to adjust our product
    slate to capture greater value, which is particularly important
    in volatile markets. We believe that the scale of our global
    operations provides benefits by reducing our selling,
    administrative, and research and development costs on a per unit
    basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Strong Refining Platform.</I></B> We own and operate two
    refineries focused on serving their respective markets with the
    product slate, feedstock flexibility and clean fuels
    capabilities necessary to be competitive. Each of our
    Grangemouth and Lav&#233;ra refineries has a crude oil
    distillation capacity exceeding 200&nbsp;mbd, which is larger
    than the average refinery size of each of our top five European
    refining competitors. Each of our refineries is equipped with an
    HC and an FCC, which provides them with significant flexibility
    in processing heavy, sour crude oils into light, sweet middle
    distillates. The product slates of our refineries are geared to
    their respective markets, with Lav&#233;ra focusing on middle
    distillates and Grangemouth focusing on gasoline and gasoline
    blending components. Both refineries are able to produce clean
    fuels meeting current European requirements. Furthermore,
    Grangemouth already complies with the more stringent standards
    for clean fuels expected to become applicable in 2009, and we
    expect to achieve the same capability in Lav&#233;ra by the end
    of 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Extensive Portfolio of Leading Proprietary
    Technologies.</I></B> Our technologies are positioned around our
    key products, including our gas phase polyethylene, gas phase
    polypropylene, slurry HDPE and acrylonitrile technologies. We
    believe that our technologies are recognized as being among the
    lowest-cost in the petrochemical industry. As a result of their
    low cost, our technologies are widely used in the industry. For
    example, according to Nexant, Inc. (Nexant), our acrylonitrile
    technology is used in more than 90% of the world&#146;s
    acrylonitrile production, while our gas phase polyethylene
    technology is used in 15% of worldwide LLDPE/ HDPE capacity. The
    successful recent completion of a large petrochemical complex in
    Shanghai, China, which is operated by Shanghai SECCO
    Petrochemical Company Limited (SECCO) and which was designed and
    constructed by our and BP&#146;s employees in collaboration with
    local partners and continues to form part of BP&#146;s
    petrochemical business, demonstrates our ability to utilize our
    technologies as a competitive advantage when seeking
    opportunities to expand our position in foreign markets. We
    intend to continue to use our technological expertise to seek
    similar projects in regions with low-cost feedstock access or
    high growth, such as the Middle East and north Africa. In
    addition, we view technology licensing as an effective way of
    establishing our products in the market, as well as providing a
    stable contribution to our adjusted EBITDA of approximately
    $50&nbsp;million to $75&nbsp;million per year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Experienced Management Team. </I></B>We have a talented
    and experienced management team recruited from both within BP
    and externally. Our management team is led by Ralph Alexander,
    our Chief Executive Officer, who has worked in a variety of
    roles within BP, including as Chief Executive Officer of
    BP&#146;s Gas, Power, and Renewables segment, as Group Vice
    President in BP&#146;s Exploration and Production segment and
    its Refining and Marketing segment and, most recently, as Chief
    Executive Officer of BP&#146;s Petrochemicals segment.
    Mr.&nbsp;Alexander is supported by a team of business and
    functional leaders, including Mark Tomkins, our Chief Financial
    Officer, who have extensive experience in petrochemicals,
    refining, supply and trading and who we believe have the
    requisite skill set to successfully execute our strategy.
    Mr.&nbsp;Tomkins has 15&nbsp;years of experience with public
    chemical companies.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we have an opportunity to significantly improve our
competitive position and future financial performance by
implementing the key components of our strategy, which are to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Achieve Performance Improvement Through Our Accelerator
    Program and By Implementing a Simplified Organizational
    Structure. </I></B>To reduce our operating costs and maximize
    our operating efficiency, we have embarked on a comprehensive
    performance improvement program, which we refer to</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">71

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    as our Accelerator program. The actions we have identified under
    this program and intend to implement over the period from 2005
    to 2007 are based on a detailed analysis of our operational
    performance relative to our peers in the petrochemical and
    refining industries, and encompass all of our global operations
    from procurement to manufacturing, sales, marketing and
    logistics, as well as overhead costs. Projects include
    eliminating unprofitable product lines, redesigning and
    enhancing our sales and marketing activities by optimizing
    channels of trade, reducing our overhead and functional costs
    commensurate with our status as a standalone petrochemical
    company and making targeted investments to maximize our asset
    utilization and productivity.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    We are also taking a number of steps to ensure that the
    performance improvements we intend to achieve through our
    Accelerator program become a basis for continued action.
    Throughout our organization, we have reduced management and
    other organizational layers, focusing the business around three
    operating companies which are responsible for driving the
    performance of our overall business.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Maximize Cash Flow. </I></B>We have revamped our incentive
    compensation programs for 2005 to focus every employee on a
    single financial goal, improving our adjusted EBITDA. In 2006,
    our incentive compensation programs will focus on three
    measures, adjusted EBITDA, capital expenditures and working
    capital, to further enhance the focus in our organization on
    delivering sustainable cash flow. Performance management systems
    are being put in place to allow employees to monitor the impact
    of their actions on our performance. We believe in a focused
    capital expenditure plan dedicated to attractive investment
    projects, as well as projects that maintain and improve our cost
    and technology positions. We intend to use our free cash flow to
    reduce indebtedness and selectively expand our businesses,
    particularly to access low-cost feedstocks and serve growth
    markets.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Enhance the Value of Our Portfolio. </I></B>We intend to
    focus on businesses that we believe have the potential to
    maintain or achieve cost and market leadership positions. We
    plan to manage our assets and businesses to achieve strong unit
    cost and gross margin performance relative to competitive
    benchmarks and make a meaningful financial contribution to our
    company. We expect that as a result of our Accelerator program,
    the substantial majority of our assets and businesses will meet
    these benchmarks by 2007. In those cases where an asset or
    business is unable to meet these benchmarks, or where it would
    be uneconomical for us to implement the necessary improvements,
    we will consider selling or closing the relevant asset or
    business. This strategy has already led to the divestment of
    businesses and the closure or planned closure of certain assets
    in 2004 and 2005, including, for example, the sale of the BDO
    unit of our Lima, Ohio facility, the planned closure of the LAO
    facility in Pasadena, Texas in late 2005, and the planned merger
    of our European polystyrene and EPS business into a 50/50 joint
    venture with Nova Chemicals Corporation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Expand Position in Locations with Low Cost Feedstocks.
    </I></B>We intend to improve our long-term competitiveness by
    accessing low-cost feedstocks in the Middle East and north
    Africa through strategic collaborations with local partners and
    governments to build petrochemical complexes in these regions.
    In June 2005, we entered into a non-binding memorandum of
    understanding to construct a world-scale cracker and associated
    derivative complex in Saudi Arabia. Our goal is to sign a
    binding agreement and secure a guaranteed feedstock supply for
    the facility by year-end 2005 and commission the facility by
    2009. We believe we are well-positioned to provide all of the
    technology, project management skills, operational experience
    and market positions needed to build, operate and market the
    products of world-scale petrochemical complexes. The successful
    completion of the SECCO facility in Shanghai, China, in which
    our employees played a significant part, is a recent example of
    this partnering approach. Investments in the Middle East or
    north Africa can further enhance our ability to serve the
    fast-growing Asian market from a low-cost base and serve as a
    platform for future long-term growth opportunities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Maximize Profitability by Optimizing Supply and Trading
    Flows. </I></B>We intend to continue to strengthen our supply
    and trading capabilities to ensure we derive maximum benefit
    from optimizing our operations, channels to market and market
    positions. The capabilities we have developed closely mirror the
    commercial model which BP has established and successfully
    operated in the oil and gas markets for many years. We believe
    this model distinguishes us from our peers in the petrochemical
    industry.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">72
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Petrochemicals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Introduction</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our petrochemical business, we produce olefins and a broad
range of polymers and derivatives. The following table provides
a breakdown of the revenues, adjusted EBITDA and total assets of
each of the three segments included in our petrochemical
business for the periods and as of the dates indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of and for</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of and for the year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,821</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>492</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>909</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    O&#38;P Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,796</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,639</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,913</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Revenues exclude revenues from discontinued operations. See
    &#147;Managements Discussion and Analysis of Financial Condition
    and Results of Operations&nbsp;&#151; Results of
    Operations&#148; for more information on revenues from
    discontinued operations.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides an overview of our key
petrochemical products along with their principal applications:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>Key products</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Principal applications</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>O&#38;P</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Olefins and related products</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polyethylene, polyvinyl chloride, ethylene oxide and styrene</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polypropylene, acrylonitrile and propylene oxide</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Butadiene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Synthetic rubbers and acrylonitrile butadiene styrene</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benzene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Styrene, cumene and nylon</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polystyrene and acrylonitrile butadiene styrene, synthetic
    rubbers and certain polyesters</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">73
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>Key products</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Principal applications</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Polymers</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polyethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Films for packaging, agricultural applications, molded products,
    pipes and coatings</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polypropylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Molded products, filaments, fibers and films</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polystyrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Food packaging and appliance/electrical housings</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expandable polystyrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Insulation and consumer packaging</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Solvents and industrial chemicals</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Synthetic ethanol</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Solvent used in personal care products, inks, household
    chemicals and industrial applications</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene oxide and derivatives, including ethylene glycols</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polyester, antifreeze/coolants and industrial detergents</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene oxide and derivatives, including propylene glycols</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polyurethane foam and polyester resins</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Global Derivatives</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Acrylic fibers and acrylonitrile butadiene styrene and styrene
    acrylonitrile polymers</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Linear alpha olefins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Comonomers for polyethylene, synthetic lubricants, detergents
    and oil drilling chemicals</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Poly alpha olefins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Synthetic lubricants</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polyisobutylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Additives, lubricants, sealants, shrink wrap, cables and
    adhesives</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table breaks down the total capacity of the
facilities comprising our petrochemical business by each
petrochemical product, including our pro rata shares of the
capacity of facilities operated by joint ventures and the
capacity of third-party facilities that provide us with products
under various commercial agreements:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full-year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capacity<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP>as of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Pounds&nbsp;in&nbsp;millions</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(mmlbs))</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>O&#38;P</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Olefins and related products</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,860</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Butadiene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benzene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,540</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,820</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Polymers</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polyethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    HDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,780</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LDPE/ LLDPE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,850</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polypropylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polystyrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polystyrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>910</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EPS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>360</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">74

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full-year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capacity<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP>as of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Pounds&nbsp;in&nbsp;millions</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(mmlbs))</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Solvents and industrial chemicals</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Synthetic ethanol</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EO and derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,470</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PO and derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>620</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Other</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Global Derivatives</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Nitriles</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,010</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other nitriles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Alpha olefins</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LAOs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,180</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PAOs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>310</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>PIB</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Capacity is defined as nameplate capacity. See
    &#147;&#151;&nbsp;Manufacturing &#151;&nbsp;Overview&#148; for
    more information on how we calculate capacity.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Our most important olefins in terms of production volumes are
ethylene and propylene. Most of our production of these olefins
is consumed internally in the manufacture of polymers. Our most
important polymers in terms of production volumes are
polyethylene and polypropylene. The products that made the
largest contributions to our consolidated revenues in the three
years ended December&nbsp;31, 2004 were polyethylene and
polypropylene.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>O&#38;P</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Olefins and related products</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the seventh largest manufacturer of ethylene
globally. In Europe, we consume more ethylene than we produce.
By contrast, our olefins crackers at our Chocolate Bayou
facility manufacture substantially more ethylene than is needed
by our polymers and derivatives units in the Gulf coast region.
As a result, we sell substantial amounts of the ethylene we
produce to customers in the Gulf coast region.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the ninth largest propylene manufacturer in the
world. In both North America and Europe, we consume more
propylene than we produce, primarily to produce polypropylene
and acrylonitrile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the seventh largest manufacturer of butadiene
in the world. Since we have no internal use for the butadiene we
manufacture in North America and Europe, our entire production
is sold externally.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, all of our benzene production volumes were manufactured
in Europe and were primarily used to produce styrene, with the
remainder sold externally.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the eighth largest manufacturer of styrene in
the world. A portion of our styrene production in Europe is
sourced from third parties based on long-term supply agreements.
Because we have no polystyrene operations in North America, all
of our North American styrene volumes are sold to external
customers. In Europe, our entire styrene production is used in
the manufacture of polystyrene, as discussed in greater detail
below.
</DIV>

<P align="center" style="font-size: 10pt;">75

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Polymers</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the fifth largest manufacturer of polyethylene,
the third largest manufacturer of HDPE and the sixth largest
manufacturer of LLDPE. In North America, the only type of
polyethylene we make is HDPE. Our HDPE products in this region
are targeted at three main markets: (1)&nbsp;durables, which
comprise industrial applications, such as pipes, consumer
applications, automotive applications, including car fuel
systems, and building and construction applications,
(2)&nbsp;packaging applications, such as organoleptic caps and
closures (that is, caps and closures which do not affect flavor
or odor), organoleptic blow-molded long-life milk bottles and
other blow molded or injection-molded applications and
(3)&nbsp;commodities, which are products where there is little
scope for differentiation, such as novelty toys, disposable
shopping bags and pails. In Europe, we manufacture LDPE, LLDPE
and HDPE. Our European LLDPE production is primarily sold to
customers in the film sector, while our LDPE products are
primarily marketed to customers in the coatings sector. With
respect to HDPE, we are a leader in a number of European markets
that permit a significant scope for product differentiation. The
applications targeted by us include markets for premium products
such as pressure pipes, organoleptic caps and closures,
organoleptic blow-molded long-life milk bottles and car fuel
systems. We are also present in other commodity blow-molded and
injection-molded applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our competitive position in the worldwide polyethylene markets
is supported by our proprietary swing technology for the
production of HDPE and LLDPE. See &#147;&#151;&nbsp;Research and
Technology&nbsp;&#151; Our Key Technologies&#148; for more
information on our various polyethylene manufacturing
technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the third largest polypropylene manufacturer in
the world. In North America, we target our polypropylene
products at similar markets as our HDPE products, including
consumer and industrial durables, rigid and flexible packaging
applications, and fiber and film applications. We believe this
approach allows us to efficiently market our polymers through a
common sales and marketing team. In Europe, our focus is on the
fiber, film and rigid packaging sectors. In addition, we are a
leading European supplier in the heat seal films market, which
we believe offers significant scope for product differentiation.
Our competitive position in the polypropylene markets is
supported by our proprietary technology for the production of
polypropylene. See &#147;&#151;&nbsp;Research and
Technology&nbsp;&#151; Our Key Technologies&#148; for more
information on our polypropylene manufacturing technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the sixth largest producer of polystyrene in
the world. In May 2005, we signed an agreement with NOVA to
combine our and NOVA&#146;s European polystyrene and EPS
businesses in a 50/50 joint venture, to be called NOVA Innovene,
which we believe will substantially strengthen our competitive
position in the polystyrene and EPS markets in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Solvents and industrial chemicals</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We make several solvents and industrial chemicals, including EO,
EG, PO and PG. We primarily sell our EO products to third party
manufacturers and use the balance to produce EG, glycol ethers
and esters and ethanolamines. Our most important solvent is
synthetic ethanol. According to CMAI, measured by expected
average annual capacity for 2005, we are the second largest
provider of synthetic ethanol in the world. Given the high level
of purity of our synthetic ethanol compared with fermentation
ethanol, we market this product to the cosmetics and
pharmaceuticals sectors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Global Derivatives</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Nitriles</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our main product in the nitriles sector is acrylonitrile. We
also make acetonitrile and hydrogen cyanide, which are specialty
nitriles that are derived as co-products of acrylonitrile.
According to CMAI, measured by expected average annual capacity
for 2005, we are the largest manufacturer of acrylonitrile in
the world. The primary applications for acrylonitrile are
acrylic fiber and ABS plastics. We have the capability to purify
our own acetonitrile and can also purchase and purify crude
acetonitrile from other companies which do not have the
necessary purification equipment. The resulting purified
acetonitrile is primarily marketed as a solvent for
</DIV>

<P align="center" style="font-size: 10pt;">76

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<DIV align="left" style="font-size: 10pt;">
pharmaceutical applications. Hydrogen cyanide, the other
co-product derived in the acrylonitrile production process, is
an extremely hazardous gas used mainly to manufacture polymers
(coatings and nylon) and for chemicals used in gold extraction.
We have developed significant safeguards to ensure the safe
handling of our nitriles, including the use of specially
designed railcars and pipelines for transportation to nearby
customers. We believe that our leading market position is a
result of the fact that our acrylonitrile production process and
the catalysts we use in that process are the leading
acrylonitrile production technology in the world. See
&#147;&#151;&nbsp;Research and Technology&nbsp;&#151; Our Key
Technologies&#148; for more information on our acrylonitrile
manufacturing technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Alpha olefins</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Measured by expected average annual capacity for 2005, we are
among the largest suppliers of LAOs and PAOs worldwide. As a
&#147;full-range&#148; LAO producer, we manufacture a whole
range of LAOs and, accordingly, must sell our LAO production in
the proportions yielded by our facilities. This exposure often
creates commercial challenges, as different segments of the LAO
market tend to grow at different rates. We benefit from the fact
that our technology provides us with a certain amount of
flexibility in adjusting our yield slate, thereby emphasizing
certain products and deemphasizing others. However, our
technology is not an &#147;on-purpose&#148; or &#147;single
product&#148; technology that would permit us to manufacture
only specific types of LAOs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In Europe, we operate units that make nitrogen products such as
ammonia and nitric acid. We also make PIB. According to CMAI,
measured by expected average annual capacity for 2005, we are
the largest supplier of PIB in the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Manufacturing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the manufacturing operations of our
petrochemical business benefit from the large scale of our key
sites, a high degree of integration and proprietary process
technologies. Our petrochemical facilities are located in North
America and Europe. Our key assets include the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our Chocolate Bayou, Texas facility, which comprises one of the
    largest cracker installations in North America, and our
    Battleground, Texas, facility, which is one of the largest North
    American HDPE facilities and is integrated with our Chocolate
    Bayou site through a pipeline system owned by us; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our three large petrochemical facilities in Cologne, Germany,
    Grangemouth, United Kingdom, and Lav&#233;ra, France, of which
    the latter two are fully integrated with onsite refineries, plus
    a number of market-facing facilities which are located in close
    proximity to our customers.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of our olefins crackers are either co-located with, or
connected by pipeline to, polymers and derivatives units,
enabling us to realize economies of scale, improve our
facilities&#146; energy management and minimize logistics costs.
In addition, two of our European crackers are integrated with
onsite refineries, allowing further hydrocarbon optimization. We
believe that the global reach of our operations enables us to
optimize our production across different regions. Our focus has
been on increasing the size and efficiency of our crackers and
preparing them for compliance with new environmental laws and
regulations and expanding and improving our polyethylene and
polypropylene assets by replacing less efficient units with new
installations. We believe these investments have positioned us
well to participate in the current upswing of the petrochemical
cycle. In addition, on June&nbsp;8, 2005, we entered into a
nonbinding memorandum of understanding to construct a
world-scale cracker and associated derivative complex in Saudi
Arabia. Our goal is to sign a binding agreement by year-end
2005, secure a guaranteed feedstock supply for the facility by
year-end 2005 and commission the facility towards the end of
2008 or early in 2009. We believe that this constitutes an
attractive investment opportunity due to the significant
reserves of low-cost gas reserves available in the Middle East.
See &#147;&#151;&nbsp;Facilities&#148; for more information on
our facilities, &#147;&#151;&nbsp;Research and Technology&#148;
for more information on our proprietary process technologies and
&#147;&#151;&nbsp;Joint Ventures&#148; for more information on
our joint ventures.
</DIV>

<P align="center" style="font-size: 10pt;">77

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The size of our manufacturing operations has grown in recent
years, both through organic growth and as a result of
acquisitions. Our most significant acquisitions were our
purchase in 2001 of Bayer&#146;s 50% stake in Erd&#246;lchemie
GmbH, a joint venture which operated our Cologne site, our
acquisition of Solvay&#146;s polypropylene businesses and the
formation of two HDPE joint ventures between us and Solvay in
2001 and our acquisitions of Solvay&#146;s interests in these
joint ventures in January 2005. We believe that the growth of
our business has opened up significant opportunities for
efficiency gains and for streamlining our operations as we
integrate the acquired assets into our existing organization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the total capacity of the
production facilities of our petrochemical business, including
our pro rata shares of the capacity of facilities operated by
joint ventures and the capacity of third-party facilities that
provide us with products under various commercial agreements:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average capacity<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full-year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capacity<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP>as of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(mmlbs)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(mmlbs)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,430</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,930</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">78

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<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Capacity is defined as nameplate capacity, which is calculated
    as the result of (1)&nbsp;the aggregate MSDR for all of our
    facilities multiplied by the actual number of days in the period
    for which the calculation is made, minus (2)&nbsp;on an average
    annual basis, the expected amount of volumes expected to be lost
    due to reliability constraints inherent in the operation of a
    facility, scheduled turnarounds and transition products.
    Transition products result when a production unit is adjusted to
    change product grades, typically in response to customer
    requirements. Because such adjustments are made while the unit
    is up and running, it may temporarily yield products which do
    not fit within a specific grade level. For each facility, the
    MSDR is calculated by dividing the highest monthly production
    volumes ever achieved by that facility by the number of days in
    the month in which those volumes were achieved, subject to
    adjustment in the event that the facility was unable to operate
    at its full potential in the relevant month. Capacity figures
    are reviewed annually for each facility and typically adjusted
    upwards each year due to upgrades or expansions. We believe it
    is appropriate to exclude from capacity figures production
    volumes expected to be lost due to anticipated manufacturing
    constraints in order to give a more realistic picture of the
    volumes we are able to achieve. However, you should be aware
    that there is no uniform definition of capacity in the
    petrochemical industry, and other companies may define capacity
    differently than we do.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, our petrochemical facilities operated on average at 88%
of their capacity. The main reason why our facilities&#146;
utilization is less than their capacity is that we periodically
adjust our production volumes in response to changes in the
consumption of our petrochemical products and variations in
feedstock and product prices. Our facilities&#146; utilization
is also affected by unexpected outages due to unforeseen
reliability problems and unscheduled turnarounds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As described in greater detail in the regional discussion below,
we faced major reliability problems at several sites in 2000 and
2001, mainly affecting our crackers. We began to address these
issues through targeted investments in our plants and
infrastructure, workforce assessment and development programs
and process automation. Since 2001, these initiatives have led
to significant improvements in the reliability of our assets,
particularly our olefins crackers and refineries. However,
issues remain with respect to some of our assets, in particular
some of our polymers and derivatives units. We intend to build
on the initial improvements we achieved in 2002 and focus our
efforts on those assets with respect to which we continue to
have reliability issues. Moreover, we plan to improve the
reliability of our assets with remediation measures as part of
our ongoing performance improvement program. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Key Factors
Driving Our Results&nbsp;&#151; Asset utilization, reliability
and turnarounds&#148; for more information on the reliability of
our assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Turnarounds are outages of a unit scheduled to carry out
necessary inspections and testing to comply with industry
regulations. These outages also permit us to perform any
additional maintenance activities that may be necessary. Where
possible, we seek to schedule the timing of turnarounds to
coincide with periods of relatively low demand for the products
of the relevant unit. Olefins crackers typically undergo major
turnarounds every four to five years, with each turnaround
lasting four to six weeks. Polymers and derivatives units are
subject to more frequent maintenance shutdowns, typically one
turnaround every one or two years, but each of them lasts only
seven to ten days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have recently implemented a new managerial structure which we
believe will assist us in improving the utilization of our
facilities. Historically, we have managed our petrochemical
business by product line. As a result, it was not uncommon for
different units at the same site to be under different
management. In some cases, this has resulted in conflicting
maintenance strategies and a lack of focus on shared
infrastructure. We have recently installed a single point of
accountability at each of our sites. We believe that this change
has resulted in a simplified, integrated management structure
that will enable us to identify synergies and manage our sites
accordingly. In addition, we expect that our ongoing efforts to
simplify our product portfolio will enable us to minimize losses
from transition products. By focusing on those products which
generate the highest profits, we believe we will be able to
increase utilization rates and create incremental margin
opportunities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>North America</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In North America, our petrochemical business comprises eleven
sites including our major facilities in Chocolate Bayou, Texas,
and Battleground, Texas. In 2004, these facilities had total
production volumes of 12,170&nbsp;mmlbs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Chocolate Bayou is our largest site in North America. In 2001,
several furnaces of one of the facility&#146;s crackers were
destroyed due to an offsite power surge combined with the
failure of certain control technologies.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Following this incident, we rebuilt the destroyed furnaces and
initiated a program to modernize the facility to improve the
cracker&#146;s availability and reliability. As a result, the
facility&#146;s reliability increased from 83% in 2001 to
98%&nbsp;in 2002 and remained relatively constant in 2003 and
2004. However, on August&nbsp;10, 2005, we experienced a fire at
one of the facility&#146;s crackers, which will result in a loss
of some of our olefins production volumes for 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we completed the DCP, a program involving
investments of $337&nbsp;million over a period of several years,
to increase the Chocolate Bayou facility&#146;s ethylene
capacity by approximately 650&nbsp;mmlbs and improve its
efficiency and to meet new environmental laws and regulations.
As a result, Chocolate Bayou now has one of the largest cracker
installations in the region. Its central location in the Gulf
coast area and access to pipeline and storage facilities permit
the site to place its surplus ethylene either directly in the
local merchant market or in storage to bridge time lags between
production and consumption. We expect that the scale of the
crackers will also enable us to better leverage the
facility&#146;s infrastructure and work force. Another key
strength of the facility is the crackers&#146; flexible design.
While their main feedstock is gas, which is obtained from
various sources, including our gas fractionator near Hobbs, New
Mexico, the commodity markets and BP&#146;s refinery in Texas
City, Texas, the facility also has the ability to process
naphtha. This flexibility enables us to manage our feedstock mix
in response to changes in economic and market conditions. All of
our polymers and derivatives facilities in North America are
either connected with the Chocolate Bayou crackers or are
adjacent to facilities operated by BP or third parties with whom
we have feedstock arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Among our North American polymers and derivatives sites, our key
facility is our Battleground, Texas, site, which is one of the
largest HDPE complexes in North America. Battleground is
integrated with Chocolate Bayou by way of a pipeline system
owned by us. Our manufacturing assets in this region also
include several major global derivatives facilities, principally
Green Lake, Texas, Joffre, Canada, and Lima, Ohio. Measured by
capacity, Green Lake is the largest facility for acrylonitrile
and related products in the world. Joffre is one of the newest
LAO units in the world and has access to low-cost third party
ethylene feedstock derived from Canadian gas. Lima is an
integrated nitriles complex, producing acrylonitrile and related
products, with access to feedstock from an adjacent refinery.
Lima also manufactures acrylonitrile catalysts for other
facilities on a global basis. Our facilities in Carson,
California, Texas City, Texas, and Whiting, Indiana, are
operated by our onsite management teams in cooperation with
employees from the respective adjacent BP refineries. The
facility in Cedar Bayou, Texas, is operated by Chevron Phillips
in a 50/50 joint venture between us and Chevron Phillips.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, we have also operated many sites that were
significantly smaller and less efficient. Our strategy is to
gradually replace or modernize these facilities. For example, in
March 2005, we sold the BDO unit at our Lima, Ohio, facility.
Furthermore, we intend to close down the LAO facility in
Pasadena, Texas, which BP currently operates for us under a toll
manufacturing agreement, in late 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Europe</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In Europe, we own and operate three major cracker complexes, one
in Cologne, Germany, one in Grangemouth, United Kingdom, and one
in Lav&#233;ra, France. Each of these sites includes polymers
and derivatives units, and the Grangemouth and Lav&#233;ra
facilities are also integrated with refineries. The Lav&#233;ra
facility consists of a combination of units fully owned by us
and various 50/50 joint ventures between us and Total. These
joint ventures operate their respective units within the
Lav&#233;ra facility. We also own and operate several standalone
polyethylene and polypropylene plants at our sites in Lillo,
Belgium, Geel, Belgium, Sarralbe, France, and Rosignano, Italy.
In addition, we own and operate a standalone styrene,
polystyrene and EPS plant at our Marl, Germany, facility and a
polysterene and EPS plant at our Trelleborg, Sweden, facility.
In 2004, our European facilities had production volumes of
21,720 mmlbs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we signed an agreement with NOVA to combine our and
NOVA&#146;s European polystyrene and EPS businesses in a 50/50
joint venture, to be called NOVA Innovene, which we believe will
substantially strengthen our competitive position in the
polystyrene and EPS markets. We expect to commence operations
under the joint venture, pending regulatory and other approvals,
in the third quarter of 2005. The joint venture will be
headquartered in Fribourg, Switzerland, and will include six
manufacturing facilities in France, Germany, The Netherlands,
Sweden and the United Kingdom. We will contribute our
polystyrene and EPS production
</DIV>

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<DIV align="left" style="font-size: 10pt;">
facilities in Marl, Germany and our polystyrene production
facilities in Trelleborg, Sweden. BP&#146;s polystyrene and EPS
facility in Wingles, France, may be transferred to the joint
venture in 2007 if put or call options provided for in the
agreements relating to the formation of the joint venture are
exercised. The joint venture will enter into a commercial
agreement with BP under which the joint venture will supply
feedstock to, and purchase and distribute all of the production
of, the Wingles facility. We have retained full ownership of our
styrene operations. NOVA will contribute four polystyrene and
EPS production facilities in The Netherlands, France, and the
United Kingdom to the joint venture. We expect to account for
the joint venture under the equity method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The key strength of our operations in Europe is the high degree
of upstream infrastructure integration between our crackers and
their feedstock sources. In the case of Grangemouth and
Lav&#233;ra, our crackers are physically integrated with
refineries located on the same site. This integration allows us
to leverage the sites&#146; infrastructure, energy management
and work force and realize feedstock synergies in both
directions. For example, each of the refineries provides the
associated petrochemical plant with naphtha, LPG, butanes and
propylene and in return receives pygas, which is a gasoline
blending component, and hydrogen. Moreover, because each of
these crackers and the respective refineries share a single
site, we incur virtually no transportation costs in connection
with moving petrochemical feedstock from the refinery into the
cracker complex. Grangemouth is connected with the Forties
Pipeline System (FPS), which carries oil from a variety of North
Sea fields, and BP&#146;s oil and gas processing complex at
Kinneil, Scotland, which separates the associated gas from the
oil carried through the FPS and delivers it directly into the
petrochemical facility. Although our cracker complex in Cologne,
Germany is not co-located with a refinery, it is located in the
center of one of the key industrial regions of Germany and has
access by pipeline and ship to the Rotterdam area in The
Netherlands, one of the world&#146;s most competitive naphtha
supply regions. It also benefits from a balanced polymers and
derivatives portfolio behind a large and reliable olefins
cracker. Cologne also has the ability to sell its excess
ethylene to buyers in the merchant market through the ethylene
pipeline owned by ARG. ARG is a company owned by BP and five
other European petrochemical companies. BP is in the process of
transferring its stake in the ARG ethylene pipeline to us. In
the future, the Cologne facility will also have access to the
propylene pipeline owned by the European Pipeline Development
Company, in which we own a stake.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Grangemouth and Lav&#233;ra sites have historically suffered
from reliability issues. In 2000 and 2001, both sites
experienced mechanical breakdowns, utility failures and fires at
both sites, although these issues primarily affected
Grangemouth. In the case of Grangemouth, these incidents
culminated in a government inspection and the imposition of
fines. We have made significant investments in both sites, and
we believe that these investments have resulted in better
reliability. We expect further improvements in the future as we
continue to make appropriate investments. The reliability of the
petrochemical units at Grangemouth was 81% in 2001, 91%&nbsp;in
2002, 90% in 2003 and 90% in 2004, while the reliability of the
petrochemical units at our Lav&#233;ra site was 90% in 2001,
94%&nbsp;in 2002, 93% in 2003 and 94% in 2004. Our Cologne site
has consistently achieved significantly higher reliability rates
during this period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have four large standalone polyethylene and
polypropylene sites in Lillo, Geel, Sarralbe and Rosignano.
While these sites are not integrated with crackers, Lillo, Geel
and Sarralbe are connected to olefins pipelines and Rosignano
imports ethylene by ship, providing each of these facilities
with flexibility in sourcing their feedstock. Moreover, all of
these sites are located in close proximity to their customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also made significant investments in our facilities,
particularly at our Grangemouth site. In 2000, we commissioned a
new polypropylene unit and a new LLDPE unit and converted one of
the existing LLDPE units into an HDPE unit. In 2001, we expanded
the capacity of the gas cracker. In 2002, we commissioned a new
synthetic ethanol plant. In addition, we commissioned a new HDPE
unit at our facility in Lillo in 2002. At our Lav&#233;ra site,
we focused mainly on de-bottlenecking our existing units. Since
these investments were made, we have continued to upgrade our
facilities. In 2004, we improved the reliability of the LLDPE
unit we commissioned at Grangemouth in 2000 by upgrading its
catalyst. We have also taken a series of steps to rationalize
our European polymers and derivatives units, including by
closing two inefficient HDPE lines at Grangemouth in 2003 and
2005.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Raw Materials and Energy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary raw materials of our petrochemical business are the
basic feedstocks of our olefins crackers, naphtha and gas.
Consistent with the industry, our principal cracker feedstock in
North America is gas, whereas our European crackers primarily
process naphtha. In aggregate, our most important feedstock is
naphtha, reflecting the weighting of our asset base towards
Europe. A portion of our European crackers&#146; naphtha
requirements is sourced from our refineries in Grangemouth,
United Kingdom, and Lav&#233;ra, France.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The vast majority of our crackers&#146; production is consumed
as feedstock by our polymers and derivatives units. However, the
olefins supplied by our crackers are not sufficient to match the
overall requirements of our polymers and derivatives units.
While we have an ethylene surplus in North America, in Europe
the situation is reversed and we consume more ethylene than we
produce. In addition, we have a propylene deficit in both
regions. In Europe, these shortages are due to the fact that
many of our European sites comprise polymers and derivatives
units that are not integrated with onsite olefins crackers. In
North America, our propylene shortage is in part a result of the
fact that the principal feedstock of most North American
crackers, including our crackers at Chocolate Bayou, is gas, and
that gas-fed crackers yield substantially less propylene than
crackers processing naphtha. It is also a legacy of the fact
that when we were a part of BP our crackers were integrated with
BP&#146;s refineries and processed BP&#146;s surplus refinery
propylene. To redress our olefins shortage, we purchase ethylene
and propylene on the merchant market through supply contracts
and swaps with other petrochemical and refining companies,
including BP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Overall, BP is our single most important external supplier of
naphtha and gas. Although most of our external feedstock
supplies are available from a variety of third parties, some of
our sites are substantially reliant on BP refineries. For
example, our facilities in Carson, California and Texas City,
Texas depend on raw materials from the respective BP refineries
located on the same sites and have no convenient access to
alternative supply channels. We plan to make investments at
Texas City to allow us to access the commodity markets if we
choose to do so and import benzene from the U.S.&nbsp;Gulf coast
merchant market. The substantial majority of the petrochemical
feedstocks we obtain from BP are provided to us under various
Hydrocarbon Sale and Purchase Agreements with varying durations.
See &#147;Certain Relationships and Related
Transactions&nbsp;&#151; Commercial Interface
Agreements&nbsp;&#151; Hydrocarbons Sale and Purchase
Agreements&#148; for a description of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also obtain a substantial proportion of our feedstock
requirements on the commodity markets. BP assists us and will
continue to assist us in making and optimizing feedstock
purchases of naphtha and gas on the commodity markets under
various Master Services Agreements, which may be terminated by
either party with notice periods ranging from three to twelve
months, provided that no notice may be given prior to
December&nbsp;31, 2005. We expect to eventually carry out some
or all of this commodity trading and related hedging ourselves
and have entered into transitional arrangements with BP which
provide for the training of our staff and the transfer of
knowledge with a view to enabling us to develop these functions
within our organization. See &#147;Certain Relationships and
Related Transactions&nbsp;&#151; Commercial Interface
Agreements&nbsp;&#151; Supply and Trading Agreements&nbsp;&#151;
Master Services Agreements&#148; for a description of these
agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The costs of the feedstocks we require to make our petrochemical
products (naphtha, ethane, butane and propane) are principally
driven by the price of oil and natural gas. In the current
environment of relatively high oil prices, crackers located in
the Middle East enjoy the advantage of access to low-cost gas
feedstock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although energy is generated at several of our sites, including
as part of petrochemical manufacturing processes, we are a
significant net purchaser of both electricity and gas. Typically
we procure our requirements from local producers or utilities at
local market prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transportation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have access to a comprehensive transportation network and
associated logistics infrastructure through a combination of
ownership and long-term contracts. This network allows us to
move feedstocks and products at competitive rates and provides
us with access to the merchant market, enabling us to manage
demand and supply imbalances across the petrochemical value
chain in response to market conditions.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our transportation modes include pipelines, ship, rail and road.
The choice of transportation mode depends on the local
infrastructure and geography and the physical properties of the
product or feedstock being transported.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because pipelines are the most efficient and least expensive
mode of transportation, we consider them to be of strategic
importance. Some of the pipelines we use are owned by us, while
others are consortium-owned pipelines in which we hold a stake
or are provided to us by dedicated operators under long-term
contracts. Rules and conventions governing pipeline ownership
vary substantially between North America and Europe, as does the
regulatory framework governing the setting of transportation
tariffs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Where we are reliant on access to shipping channels, we either
own or hold stakes in the relevant terminals and storage
facilities or have secured access to them through long-term
contracts. However, we do not own any of the ships we use and
instead rely on an extensive network of third party shipping
companies which make capacity available to us on a spot or term
contract basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP will for a limited period provide us with shipping and global
assurance services under various agreements. We expect that,
when these agreements expire, we will have built sufficient
in-house capability to carry out the relevant services ourselves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sales and Marketing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have structured our sales and marketing organization to match
the sector and regional requirements of our customers. Each
sales team is led by a sales manager focusing on a particular
product or market sector. In addition, each team includes sector
and regional key account managers who are responsible for our
largest customers in the relevant region, account managers
focusing on smaller customers in specific countries and sales
executives working at customer service centers located at our
sales offices. In light of the specialized nature of our
petrochemical products, we ensure that our sales force possesses
appropriate technical knowledge of our products and their
applications. In Europe, we use a separate sales organization to
market those products in our HDPE and polypropylene portfolio
which are more differentiated. Those of our customers who are
not serviced through one of our sales offices are supplied
through a network of third party distributors. We also maintain
a network of agents, particularly in countries for which we do
not have direct sales teams. We remunerate these agents on a
commission basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A critical element of our sales and marketing approach is to
assist our customers in optimizing the use of our products in
their internal processes. Our dedicated technical service teams
work closely with our sales force and are available to our
customers for advice and support. They also provide a critical
link between our sales and marketing personnel and our product
development and manufacturing staff. We believe that the
extensive market knowledge and industry experience of our sales
and marketing teams, our focus on technical support and our
strong emphasis on customer satisfaction have helped us
establish and maintain long-term customer relationships.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to ensure that we are in a position to meet our
customers&#146; rapid delivery requirements, we carry
inventories of finished products at our facilities and
distribution centers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have approximately 2,700 customers worldwide. Our industrial
customers include a large number of companies in a variety of
downstream industries involving rigid packaging, fibers,
flexible packaging and chemical intermediates. For more
information on the product markets served by us, see
&#147;&#151;&nbsp;Products.&#148; No single customer accounts
for more than 5% of our revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our sales are to customers in the merchant market and
are made on contract or spot terms. These terms allow us to
reset prices at regular intervals, typically monthly or
quarterly, to reflect changes in market prices. Some contracts
are based on negotiated prices, while others are based on
pricing formulas or refer to spot market rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although our production facilities are located in Europe and
North America, we also ship significant quantities of our
products to Asia for sale in that region. We have an established
regional office in Shanghai, China to manage our operations in
Asia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In China, our current business license does not permit us to
make local sales of product directly to customers in local
currency. Instead, we work with our customers and distributors
who take title to our products offshore
</DIV>

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<DIV align="left" style="font-size: 10pt;">
and clear customs on their own. As part of the conditions under
which China gained entry to the World Trade Organization, new
regulations came into effect in December 2004 that permit
foreign companies to import and export products and engage in
wholesale activities and distribution within China. These new
regulations are in the process of being implemented. We intend
to apply to the Chinese authorities later in 2005 for a license
that would include import, export, wholesale and distribution
rights. However, there can be no assurance as to whether and
when we will be able to obtain such a license.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Research and Technology</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We consider R&#38;T to be a key element of both the short-term
performance and the long-term growth of our petrochemical
business. By investing in R&#38;T, we seek to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    decrease our production costs with a view to increasing the
    margins we achieve in the manufacture and sale of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make better products in order to increase our market
    share;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reduce our capital expenditures to minimize the investments
    necessary to meet demand.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, 2003 and 2004, we had research and development expenses
of approximately $120&nbsp;million, $115&nbsp;million and
$137&nbsp;million, respectively. Our formation as a separate
legal entity within the BP group and the integration of
Solvay&#146;s HDPE-related research projects in our own R&#38;T
program will allow us to rationalize our R&#38;T activities with
respect to polymers in North America and to integrate R&#38;T
teams in Europe which have worked separately. These steps have
enabled us to improve the focus of our R&#38;T activities and to
reduce the overall level of our research and development
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate three principal R&#38;T centers, one in
Neder-over-Heembeek, Belgium, one in Naperville, Illinois, and
one at our Battleground, Texas, facility. We also maintain pilot
plant facilities at a number of sites, including Lav&#233;ra,
France, Grangemouth, United Kingdom, and Rosignano, Italy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A substantial portion of our R&#38;T expenditures in any given
period is dedicated to the continuous improvement of our
existing processes, products, assets and operations and is
intended to yield returns in less than two years. This R&#38;T
work is carried out by a combination of integrated teams based
at our facilities and centrally located specialists and research
teams in one of our R&#38;T centers. In addition, we allocate a
portion of our R&#38;T budget to longer-term projects targeted
at more fundamental improvements, which we typically intend to
yield returns within two to five years. We seek to protect our
process technologies and products by seeking patents or
retaining them as trade secrets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The market position of our petrochemical business is supported
by a range of technologies. Among them are the following four
highly competitive proprietary process technologies:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our gas phase polyethylene technology;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our gas phase polypropylene technology;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our slurry HDPE technology;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our acrylonitrile technology.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The four technologies listed above are the primary focus of our
R&#38;T efforts. Together, they form one of the most
comprehensive technology packages available in the petrochemical
industry. We use these technologies in our own production
processes and also license them to external customers. We view
technology licensing as an effective way of establishing our
products in the market and of generating additional income. In
addition, we believe that the ability to offer a comprehensive
technology package is a substantial advantage in attracting
joint venture partners for investments in regions characterized
by low feedstock costs or high growth, such as the Middle East,
north Africa, Russia and China.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the quality of our scientific staff is important
to our success. The employees working in our R&#38;T centers
have comprehensive expertise in a variety of areas, including
catalysis, process development, product and material science,
modeling and project management. When we form teams for R&#38;T
projects, we seek to ensure that each team has both technical
and commercial expertise. We consistently aim to improve the
effectiveness of our R&#38;T efforts by targeting our projects
at the most valuable applications and using project management
tools to monitor progress. At April&nbsp;1, 2005, 659 of our
employees&nbsp;&#151; about 8% of our petrochemical
workforce&nbsp;&#151; worked in R&#38;T functions. To attract
and retain the best-qualified scientists and develop a high
level of capability and competence in the key areas of
processes, products and operations, we offer our employees
challenging development opportunities and a competitive
compensation package.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we draw on external resources to enhance the scope,
depth and effectiveness of our internal R&#38;T efforts. We
proactively seek mutually beneficial partnerships with third
parties, including other petrochemical companies and leading
universities. For example, we have a partnership with NOVA,
which has led to the development of substantially improved
catalysts for our gas phase polyethylene technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our key technologies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gas phase polyethylene technology</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our proprietary gas phase polyethylene technology is designed to
serve the LLDPE and HDPE markets, which are the fastest growing
segments of the commodity polyethylene markets. The technology
is characterized by low capital investments, low operating
costs, low emissions and waste, and the fact that it does not
require the use of additional solvents. It is known as a swing
technology because it allows both LLDPE and HDPE to be produced
from a single reactor, thereby permitting the manufacture of a
broad range of products. We have licensed our technology to 25
petrochemical companies in more than 15 countries. According to
Nexant, in 2004 the technology was used in 15% of the worldwide
LLDPE/ HDPE capacity, second only to the polyethylene technology
offered by Univation Technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our technology uses our proprietary Ziegler-Natta catalysts. We
use these catalysts internally and also sell them to external
customers. We constantly improve our existing catalysts and seek
to develop new ones, both alone and in collaboration with third
parties. For example, we are currently in the process of
expanding the reach of our gas phase polyethylene technology by
commercializing products from our proprietary metallocene
catalysts. These catalysts allow the cost-effective manufacture
of LLDPE products with better strength and clarity
characteristics compared with traditional Ziegler-Natta and
chromium-based catalysts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Gas phase polypropylene technology</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our gas phase polypropylene technology is recognized in the
industry as offering low capital investments and low operating
cost. The design of our technology enables the cost-effective
production of high-performance polypropylene plastics. In
addition, the simplicity of the equipment used with this
technology combined with our proprietary catalysts allows us to
achieve very high reliability. We have licensed the technology
to eight companies. According to Nexant, our technology
accounted for 13% of the 24 mmlbs in capacity added by the
industry between 2000 and 2005. Overall, it accounted for 7% of
the worldwide polypropylene capacity in&nbsp;2004. We intend to
continue to improve this technology through a combination of
process improvements, the development of new catalysts and
engineering design work.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>HDPE technology</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to our gas phase technologies, we own a specialized
technology for the manufacture of HDPE, which we acquired from
Solvay. This technology is based on a slurry production process
and is characterized by low capital investments and low
operating costs. The technology may be used in combination with
either a Ziegler-Natta catalyst or a chromium-based catalyst to
make a range of superior products. It is particularly
well-adapted to the manufacture of high-performance materials
such as high pressure pipe, one of the fastest growing segments
of the HDPE market, and one in which we hold a leading position.
From both a cost and product perspective, we believe that our
production technology is the leading HDPE technology available
on the market, and we plan to license it selectively.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Acrylonitrile technology</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our main technology assets in the derivatives area are our
proprietary fluid bed acrylonitrile process and related
catalysts. Our technology is based on a chemical process for the
transformation of propylene into acrylonitrile called
ammoxidation. We have provided five generations of acrylonitrile
catalysts, and there is continuing industry demand for these
catalysts. Our technology is the leading nitriles manufacturing
technology and, according to Nexant, it is used in more than 90%
of the world&#146;s acrylonitrile production. We continue to
invest in acrylonitrile R&#38;T to further improve the catalysts
and maintain our competitive position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Intellectual property</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our policy is to protect all of our significant technologies by
seeking patents, retaining it in the form of trade secrets, and
defending and enforcing our intellectual property rights, where
appropriate. We expect that this strategy allows us to preserve
the advantages of the products we sell and the technologies we
use and license, and helps us to maximize the return on our
investment in research and development. We own, or have rights
to, approximately 6,200 patents, divided into 650 patent
families, in the United States, Europe and various other
regions. In 2004, we filed 61 applications for new patent
families. To protect confidential technical information which is
not subject to patent protection, we rely on trade secret law
and frequently enter into confidentiality agreements with our
employees, customers and partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While our patents and trade secrets constitute valuable assets,
we do not view any one of them as being material to our
operations as a whole. Instead, we believe it is the combination
of our patents and trade secrets that creates advantages for our
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to our own patents and trade secrets, we are party
to licensing and other agreements authorizing us to use patents,
trade secrets, confidential technical information and related
technology owned by third parties and/or operate within the
scope of patents owned by third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we own a number of registered trademarks, including
our Innovene&#174; brand. We continuously develop new names for
new products, secure trademark protection for them, police our
existing trademarks and enforce our legal entitlements in
situations where third parties infringe upon any of these rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our separation from BP, BP has transferred to
us certain intellectual property rights and assets we require to
operate our petrochemical business and our gas fractionator near
Hobbs, New Mexico, pursuant to an Intellectual Property and
Information Technology Separation Agreement. There are also
certain technologies and associated intellectual property in
which both we and BP have a common interest. In these cases, we
or BP, as the case may be, have granted the other party licenses
in a series of Common Interest Intellectual Property Agreements
to ensure that both parties have specified access to such
intellectual property and technology. See &#147;Certain
Relationships and Related Transactions&nbsp;&#151;
Reorganization Agreements &nbsp;&#151; Intellectual Property and
Information Technology Separation Agreement&#148; for more
information regarding these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We face intense competition in all petrochemical markets in
which we compete. The main competitive criterion is price. In
certain segments of the HDPE and polypropylene markets, where
products must satisfy specified technical performance criteria,
competition is also based on performance, quality and customer
service. Given that most of our products are commodities, a key
component of our competitive position is our ability to manage
our costs successfully, requiring continuous management focus on
reducing unit costs and improving efficiency. The main drivers
in this respect are technology, scale, feedstock access, asset
utilization, logistics and the ability to execute capital
projects efficiently. We believe we are well-positioned with
respect to each of these criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our competitors vary in terms of the degree to which they are
integrated with their feedstock sources. Companies like Dow
Chemical Company (Dow Chemical), Borealis A/ S (Borealis) and
NOVA have no refineries of their own. Companies like Chevron
Phillips, Basell, N.V. (Basell) and Lyondell Chemical Company,
including its Equistar operations (Lyondell/ Equistar), benefit
from some degree of refinery integration resulting from
</DIV>

<P align="center" style="font-size: 10pt;">86

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<DIV align="left" style="font-size: 10pt;">
relationships with their current or former parent companies or
joint venture partners. Companies such as ExxonMobil Corporation
(ExxonMobil), Royal Dutch/ Shell Group (Shell) and Total are
fully integrated energy companies with deep integration between
refining and olefins crackers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal competitors of our petrochemical business are
Basell, Borealis, Chevron Phillips, China Petroleum and Chemical
Corporation (Sinopec), Dow Chemical, ExxonMobil,
Lyondell/Equistar, NOVA, Saudi Basic Industries Corporation
(Sabic), Shell and Total. Several of our competitors, including
Iran&#146;s National Petrochemical Company, Saudi Arabia&#146;s
Sabic and China&#146;s Sinopec, are fully or partially
state-owned and could have broader goals than maximizing their
profits, such as investing in the economies of their respective
countries and providing local employment. In China, we also
compete with Sino-foreign joint ventures, some of which are
partnered by the competitors discussed above, and a variety of
Asian importers. Most of our competitors market their products
in North America, Europe and Asia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to CMAI, measured by expected average annual capacity
for 2005, we are the seventh largest manufacturer of ethylene,
the ninth largest manufacturer of propylene, the fifth largest
manufacturer of polyethylene and the third largest manufacturer
of polypropylene in the world. The following table provides an
overview of the market position of the principal competitors of
our petrochemical business, measured by expected average annual
capacity for these products in 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Competitor</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Market position<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Polyethylene (8th), polypropylene (1st)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borealis</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Polyethylene (10th), polypropylene (7th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chevron Phillips</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (8th), polyethylene (6th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dow Chemical</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (1st), propylene (4th), polyethylene (1st)
    polypropylene (10th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ExxonMobil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (2nd), propylene (1st), polyethylene (2nd),
    polypropylene (5th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lyondell/ Equistar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (5th), propylene (6th), polyethylene (7th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NOVA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (11th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sabic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (3rd), polyethylene (3rd), polypropylene (6th)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (4th), propylene (2nd)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sinopec</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (6th), propylene (5th), polyethylene (4th),
    polypropylene (2nd)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ethylene (9th), propylene (3rd), polyethylene (9th)
    polypropylene (4th)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    According to CMAI data as of July 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Our global derivatives business operates in a relatively mature
market environment. Royal Dutch, Chevron Phillips and Sasol
Limited are our main competitors with respect to LAOs. Although
there are numerous manufacturers of acrylonitrile, we are the
largest producer in the world. In addition, more than 90% of the
world&#146;s acrylonitrile volumes are based on our process
technology. Our most significant competitor is Asahi Kasei
Corporation, which is the market leader in Asia. Other
competitors include E.I. du Pont de Nemours and Company and
Solutia, Inc. in North America and Koninklijke DSM&nbsp;N.V. in
Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Facilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our facilities are located on sites wholly-owned by us,
while others are located at sites which we share with other
parties, including BP. As part of our separation from BP, we
have entered into agreements to establish rules and procedures
to facilitate operations at shared sites. See &#147;Certain
Relationships and Related Transactions&nbsp;&#151; Commercial
Interface Agreements&nbsp;&#151; Site Cooperation
Agreements&#148; for a description of these agreements.
</DIV>

<P align="center" style="font-size: 10pt;">87

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the location, primary products
and capacity of the major facilities in our petrochemical
business, including our pro rata shares of the capacity of
facilities operated by joint ventures:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full-year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capacity<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP>as of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Primary products</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(mmlbs)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Battleground, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    HDPE, polypropylene</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,560</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chocolate Bayou,
    Texas<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene, propylene, butadiene, polypropylene</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,280</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cologne, Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene, propylene, butadiene, benzene, LDPE, LLDPE, ammonia,
    acrylonitrile and related products, EO and derivatives, PO and
    derivatives, other solvents and industrial chemicals</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Geel, Belgium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polypropylene</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,080</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grangemouth, United Kingdom</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene, propylene, butadiene, benzene, ethanol, HDPE, LLDPE,
    polypropylene</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Green Lake, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Acrylonitrile and related products</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lav&#233;ra,
    France<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene, propylene, butadiene, benzene, PIB, HDPE,
    polypropylene, EO and derivatives, other solvents and industrial
    chemicals</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lillo, Belgium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polypropylene, HDPE</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marl,
    Germany<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Styrene, polystyrene, EPS</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,290</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sarralbe, France</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polypropylene, HDPE</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Texas City,
    Texas<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Styrene</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,070</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other
    facilities<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,230</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Capacity is defined as nameplate capacity. See
    &#147;&#151;&nbsp;Manufacturing&nbsp;&#151; Overview&#148; for
    more information on how we calculate capacity. For facilities
    that we operate in a joint venture, the table shows only the
    portion of the facilities&#146; capacity attributable to our
    share in the joint venture.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    On August&nbsp;10, 2005, we experienced a fire at one of the
    crackers at our Chocolate Bayou facility, which will result in a
    loss of some of our olefins production volumes for 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    This facility consists of a combination of units fully owned by
    us and various 50/50&nbsp;joint ventures between us and Total.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Capacity figures include 100% of the capacity of the facilities
    we agreed in May 2005 to contribute to our polystyrene and EPS
    joint venture with NOVA in May 2005. Excludes the
    facility&#146;s cumene capacity, as the plant that we own and
    operate is used exclusively for supplying a third party under a
    toll manufacturing agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Capacity figures do not include the propylene capacity of the
    facility&#146;s propylene concentration unit which we plan to
    close by the end of 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Capacity figures include the capacity of third-party facilities
    that provide us with products under various commercial
    agreements.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Refining</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Introduction</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We own and operate two refineries, one in Grangemouth, United
Kingdom, and one in Lav&#233;ra, France. Both refineries are
fully integrated with our petrochemical plants located at the
same sites. Grangemouth has direct access to crude oil from the
North Sea, and Lav&#233;ra benefits from its ability to process
a broad range of crude oil blends. Our principal refining
products are transport fuels, naphtha, and heating and fuel
oils. Most of the naphtha we manufacture is used as feedstock by
the olefins crackers of our O&#38;P&nbsp;Europe segment. We have
entered into
</DIV>

<P align="center" style="font-size: 10pt;">88

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<DIV align="left" style="font-size: 10pt;">
contracts with BP for the purchase of crude oil and the
marketing of all of our refinery production except for the
naphtha we use in our petrochemical business, until
December&nbsp;31, 2006 and beyond, with contract terms varying
by product and customer segment. In addition, we have entered
into agreements with BP under which they assist us with the
disposal of bulk refinery products to ensure our continued
access to the commodity markets. See &#147;Certain Relationships
and Related Transactions&nbsp;&#151; Commercial Interface
Agreements&nbsp;&#151; Supply and Trading Agreements&nbsp;&#151;
Sale and Purchase Agreements&#148; and &#147;&#151;&nbsp;Inland
Refined Products Sale and Purchase Agreements&#148; for a
description of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides a breakdown of the revenues,
adjusted EBITDA and total assets of our refining business for
the periods and as of dates indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of and for</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of and for the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,331</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,604</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Revenues exclude revenues from discontinued operations. See
    &#147;Managements Discussion and Analysis of Financial Condition
    and Results of Operations&nbsp;&#151; Results of
    Operations&#148; for more information on revenues from
    discontinued operations.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For more information on how we calculate adjusted EBITDA, see
    &#147;Selected Combined Financial Data&nbsp;&#151; Use of
    Non-GAAP Financial Measures.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The increase in the revenues of our Refining segment in 2003 and
2004 reflects the fact that oil prices increased significantly
over the past several years. The rise in our adjusted EBITDA is
consistent with higher refining cash margins across the
industry, which were driven by continued strong demand for
refinery products, modest capacity growth in the industry and
growth in supply of cheaper, heavier and more sour crude oil
relative to more expensive, lighter and sweeter crude oil.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Refineries</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both of our refineries are strategically important to us as they
benefit from extensive integration with the petrochemical plants
located on the respective sites. This integration is beneficial
because it allows us to maximize the value from hydrocarbon
flows between refining and petrochemicals, as well as to
leverage the sites&#146; infrastructure, energy management and
work force and realize feedstock synergies in both directions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both of our refineries are larger than the European average, as
each has a distillation capacity of over 200&nbsp;mbd. They are
also unusual refineries by European standards in that both
combine an HC with an FCC. The combination of these two units
permits us to manufacture light, low sulfur middle distillates,
principally diesel. Moreover, with the hydrocracking technology
employed by them, both refineries are able to produce high
quality diesel. This constitutes a competitive advantage as
Europe is short of high quality diesel, a position that is not
likely to change as the demand for middle distillates continues
to grow. Middle distillates currently account for approximately
45% of the volumes manufactured by Grangemouth and approximately
50% of the volumes produced by Lav&#233;ra.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both of our refineries are able to produce clean fuels meeting
current European Union specifications, which limit the sulfur
content of these fuels to 50&nbsp;ppm. Our clean fuels
investments in the Grangemouth refinery have enabled it to
manufacture clean fuels containing no more than 10&nbsp;ppm of
sulfur, which is expected to become the maximum allowable level
in the European Union in 2009. This specification requires a
lower sulfur content than the 500 ppm of sulfur (which will be
reduced to 15 ppm beginning June&nbsp;1, 2006) and the
30&nbsp;ppm of sulfur currently permitted by the more
restrictive diesel and gasoline specifications, respectively, in
the United States. Lav&#233;ra is compliant with the current
European Union specifications, and we are in the process of
making further investments to achieve compliance with the
10&nbsp;ppm sulfur specifications by the end of 2007.
</DIV>

<P align="center" style="font-size: 10pt;">89
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As with our petrochemical facilities, we undertake turnarounds
of our refineries to carry out necessary inspections and testing
to comply with industry regulations. These outages also permit
us to perform additional maintenance activities, as necessary.
Where possible, we seek to schedule the timing of turnarounds to
coincide with periods of relatively low demand for the products
of the relevant refinery. Refineries typically undergo major
turnarounds every four to five years, with each turnaround
lasting several weeks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One of the challenges faced by our refining business is that
both of our refineries have an ageing infrastructure which
requires significant investments. We believe our investments in
the infrastructure, utilities and logistics of our refineries
historically have been below industry average. In recent years,
we have increased our investments at Grangemouth, and we intend
to continue to make appropriate investments in the future to
improve our refineries&#146; reliability and to meet tightening
regulatory requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As is the case with other refineries that are integrated with
petrochemical facilities, both of our refineries are slightly
below industry average in terms of their upgrading complexity.
This is primarily because the naphtha produced by integrated
refineries such as ours is used as feedstock for the adjacent
petrochemical plants, whereas the naphtha manufactured by
non-integrated refineries is typically upgraded into gasoline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Another consequence of their lower than average upgrading
complexity is that our refineries have a higher than average
fuel oil yield.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Grangemouth</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Grangemouth refinery has a maximum crude oil distillation
capacity of 205&nbsp;mbd. On the supply side, the refinery
benefits from the fact that it is vertically integrated with its
feedstock sources through a direct connection with the FPS, a
pipeline that carries crude oil from a variety of oil fields in
the North Sea. Known as the Forties blend, this light, sweet
crude oil accounts for the majority of the refinery&#146;s
feedstock mix. We have entered into a two-year agreement with BP
for the supply of Forties blend at market-related prices, after
which we intend to have completed an $8&nbsp;million investment
in our infrastructure, which will allow us to purchase Forties
blend from any of the oil companies using the FPS. The balance
of the refinery&#146;s feedstock consists of heavier, more sour
crude oils from the North Sea, Russia and Africa. The
composition of the refinery&#146;s crude slate will change and
become heavier and more sour with the entry of the Buzzard oil
field into the Forties blend, which is currently expected to
occur in 2006. Due to its technology and configuration,
Grangemouth will be able to process this crude oil and will also
have the ability to process other low-cost, high-acid crude
oils, such as crude oils from Russia, and other crude oils
available from non-traditional sources. The rising proportion of
low-cost, high-acid crude oil in Grangemouth&#146;s crude oil
slate over in the past several years has improved the
refinery&#146;s cash margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the product side, Grangemouth is well-positioned due to the
fact that it is the only refinery in Scotland and has convenient
access to the markets in Scotland, Ireland and northern England.
The refinery produces more gasoline than its local markets can
consume. Accordingly, it exports gasoline components to other
markets. The refinery can access the U.S.&nbsp;markets for
gasoline and gasoline blending components by shipping from the
west coast of Scotland via a pipeline which starts at the
refinery, runs across Scotland and terminates at the deep-water
Finnart terminal at Loch Long.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Grangemouth has a cogeneration unit operated by a third party,
which provides steam and electricity at a lower cost than
traditional generation facilities. Cogeneration is a highly
efficient process that enables us to have flexibility in the use
of various by-product fuels from our refining and petrochemical
units in the generation of steam and electricity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed above under
&#147;&#151;&nbsp;Petrochemicals&nbsp;&#151;
Manufacturing,&#148; we experienced significant reliability
problems at Grangemouth in 2000 and 2001. These problems, among
other things, damaged the refinery&#146;s FCC and culminated in
a government inspection and the imposition of fines. We have
made significant investments in our Grangemouth site to address
these issues. In 2004, we brought the FCC back online. The
reliability of our Grangemouth refinery improved from
88%&nbsp;in 2001 to 94% in 2002, 94% in 2003 and 96% in 2004.
However, we experienced reliability issues at our Grangemouth
refinery in the first six months of 2005, and as a result our
reliability rate at Grangemouth during this period was 88%.
</DIV>

<P align="center" style="font-size: 10pt;">90
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Lav&#233;ra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Lav&#233;ra refinery has a maximum crude oil distillation
capacity of 207&nbsp;mbd. On the supply side, the refinery
benefits from its location and its high level of flexibility in
processing a broad range of qualities of crude oil. Its ability
to upgrade heavy, sour crude oil into light, low sulfur
products, enables it to take advantage of the wide variety of
crude oils available primarily through the Mediterranean
markets. This is especially beneficial in light of the
increasing availability of new crude oils from Russia and other
countries of the former Soviet Union. According to Wood
Mackenzie Limited&nbsp;(WM), in 2004, Lav&#233;ra ranked first
for distillation capability in France.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reliability of the refinery at our Lav&#233;ra site improved
from 91%&nbsp;in 2001 to 91% in 2002, 94% in 2003 and 96% in
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the product side, Lav&#233;ra benefits from its ability to
export both to continental Europe and other Mediterranean
markets, including the Middle East and north Africa. In
addition, Lav&#233;ra has a product slate rich in middle
distillates, for which there is a shortage in the European
market. The refinery also has the capability to manufacture
asphalt, a liquid used in road surfacing and roofing, which can
be sold to customers in profitable specialty markets in France,
the Middle East, Africa and other regions. This capability gives
us increased flexibility in our selection of crude oil and in
the optimization of our operations at Lav&#233;ra. Furthermore,
the bunker fuel market served by Lav&#233;ra is currently
strong, and, unlike the market for domestic fuel oil, we do not
expect it to become subject to further sulfur restrictions for
the foreseeable future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the sales volumes of our refined
products for the period indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Barrels in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LPG</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Naphtha</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,620</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gasoline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jet fuel/kerosene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diesel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gas oil/heating oil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fuel oil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asphalt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,190</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, high-value transport fuels (gasoline, jet fuel and
diesel) accounted for approximately 60% of our total volumes. We
are well-positioned to serve the transport fuel market in the
future, given that Grangemouth is able to manufacture clean
fuels in accordance with the stringent clean fuels requirements
currently applicable in certain parts of the United States and
the even stricter requirements which are expected to become
applicable in Europe in 2009 and that we are in the process of
making investments in Lav&#233;ra to achieve compliance with the
expected 2009 European requirements by the end of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The naphtha output of our refineries is primarily used as inputs
by the co-located petrochemical facilities. The balance of our
refinery products is transferred to BP, which either markets
them to its customers or trades them on the commodity markets on
our behalf. All transfers from us to BP are made at prices which
are based on market prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Raw Materials and Energy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary feedstocks of our refineries are crude oil,
condensates, atmospheric residues, hydrogen and a range of blend
components such as pygas. Both of our refineries are able to
process different qualities of crude oil. The main variables in
the selection of a particular type of crude oil are price and
quality. Heavy, high-sulfur, sour slates are cheaper than
lighter, sweeter slates. However, because high-sulfur crude oils
require more
</DIV>

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<DIV align="left" style="font-size: 10pt;">
processing, refineries that purchase primarily lower cost crude
oils incur higher fixed costs. Processing high-sulfur crude oil
also requires greater energy expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Grangemouth, United Kingdom, refinery has a light, sweet
crude oil slate, reflecting the dominance of the Forties blend
in its crude slate, which accounts for more than three quarters
of its total feedstock requirements. The balance comprises
heavier crude oils from the North Sea, Russia and Africa. The
composition of the refinery&#146;s crude slate will change and
become heavier and more sour with the entry of the Buzzard oil
field into the Forties blend, which is currently expected to
occur in 2006. Our refinery in Lav&#233;ra, France has a
heavier, more sour crude slate than Grangemouth, comprising
various blends, principally from Russia and the countries of the
former Soviet Union, the Middle East and North and West Africa.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In Grangemouth, we obtain the crude oil sourced through the FPS
from BP through a Master Feedstock Sale and Purchase Agreement
for Crude Oil, with rates based on market prices. The agreement
has a minimum duration of two years, and when it expires, we
expect to either enter into another contract with BP or purchase
Forties blend oil from other suppliers, as we currently do with
the respect to the balance of our requirements. We believe we do
not depend on BP as a supplier of crude oil or other feedstocks
and would be able to replace the feedstocks obtained through the
FPS by purchases on the spot market. See &#147;Certain
Relationships and Related Transactions&nbsp;&#151; Commercial
Interface Agreements&nbsp;&#151; Supply and Trading
Agreements&nbsp;&#151; Sale and Purchase Agreements&#148; for a
description of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Energy cost is the single largest operating expense of a
refinery. The main sources of energy for our refineries are gas
and fuel derived from the crude oil feedstock, supplemented by
methane, electricity and steam. Our refineries and associated
petrochemical units are fully integrated and use a single steam
and power generation infrastructure at each refinery, consisting
of power stations, long-term contracts with local utility
companies and, at Grangemouth, a cogeneration unit operated by a
third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transportation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Grangemouth receives all of its crude oil requirements by ship
and pipeline, while Lav&#233;ra receives all of its oil
requirements by tanker ships. With the exception of the Finnart
pipelines, which deliver crude oil to our Grangemouth refinery
and refinery product to the deep-water Finnart terminal at Loch
Long on the west coast of Scotland, we do not own any pipelines
for crude oil or refinery products. All arrangements with third
party pipeline operators are entered into by BP. Where we use
third party shipping companies, BP negotiates the terms of
contracts with the relevant third parties on our behalf, subject
to our final approval before the execution of any contract. In
addition, BP maintains the relationships with these third
parties and provides shipping services, global assurance
services and price information to us. The Grangemouth refinery
serves its customers, the majority of which are located in the
United Kingdom, by road, rail and ship and through a pipeline
link to a nearby shipping terminal. The Lav&#233;ra
refinery&#146;s customers are located in a broader geographic
region, and therefore most of the refinery&#146;s off-take is
shipped through pipelines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sales and Marketing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have made the strategic choice of focusing our refining
business on bulk sales out of the refinery and not to set up a
retail sales and marketing organization of our own. We have
chosen to sell our refinery products to BP, which allows us to
use BP&#146;s extensive distribution capabilities for the onward
transportation and sales of our refinery products to our
customers. Accordingly, we do not currently need a sales and
marketing organization of our own.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Substantially all of the naphtha output of our refineries is
used as inputs by the petrochemical plants located at the
relevant sites. In addition, we have entered into an Inland
Refined Products Sale and Purchase Agreement with BP for each of
our Grangemouth and Lav&#233;ra refineries, pursuant to which BP
has agreed to take off the balance of our refinery products and
to either market these products to its local customers or trade
them on the commodity markets on our behalf. All transfers under
these agreements are made at market-related prices. Most of the
term sheets under the agreements entered into with respect to
our Grangemouth refinery have fixed terms ranging from three to
seven years from January&nbsp;1, 2005. Under the Grangemouth
agreements, we are required to sell our refinery products
exclusively to BP for so long as BP continues to hold more than
50% of the voting
</DIV>

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<DIV align="left" style="font-size: 10pt;">
power of our capital stock. The term sheets under the agreements
entered into with respect to our Lav&#233;ra refinery expire
between 2008 and 2011 and generally may be terminated upon
written notice with periods ranging from one to three years,
depending upon the refinery product. All transfers under the
agreements are made at market-related prices. Under the
Lav&#233;ra agreements, we are required to sell all of our
products to BP. However, there are exceptions for the supply of
products to specified third parties for those third
parties&#146; own use. See &#147;Certain Relationships and
Related Transactions&nbsp;&#151; Commercial Interface
Agreements&nbsp;&#151; Inland Refined Products Sale and Purchase
Agreements&#148; for a description of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP has agreed to grant us long-term access to any intellectual
property owned by it that is required for our refining
operations, such as refining process models used to optimize the
performance of our units. We have also signed agreements with BP
providing for the continuation of process support through the
end of 2006. Process support includes assistance with the
day-to-day operation of our refineries and also with projects
and developments aimed at increasing our profitability through
improvements in the various refining technologies. In addition,
all existing licenses that have been granted to BP in order to
operate specific process units have been or will be transferred
to us. We are utilizing the transition period to review our
support needs and are developing options for operational support.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The refining industry is highly competitive. The main
competitive factors are feedstock prices, refinery configuration
and operating costs. According to WM, measured by capacity at
December&nbsp;31, 2004, we were the ninth largest refining
company in Europe. Grangemouth is the only refinery in Scotland
and one of eleven refineries in the United Kingdom. As
Scotland&#146;s infrastructure for distributing imported oil is
limited, the refinery has a competitive advantage since
competitors must either exchange product with us or import from
abroad in order to access the Scottish market. Some competition
results from the fact that several large refineries in north
west Europe are able to supply the market via third party
storage facilities. Lav&#233;ra is the largest refinery in its
region, which comprises south-eastern France, Switzerland and
south-western Germany. In its local market, it competes with
four other refineries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into an Inland Refined Products Sale and
Purchase Agreement for each of our refineries, pursuant to which
BP has agreed to purchase all of our refining products, except
for the petrochemical feedstock which we use internally. If
either we or BP terminate one or both these agreements, we will
need to establish a sales and trading function in order to sell
our products through wholesale and retail outlets. In Scotland,
the market is dominated by integrated companies with refining
and retail marketing operations, which supply the Scottish
market from the refineries in other countries or through
exchange arrangements with BP, while in France independent
marketers account for a larger portion of the retail market.
While our location in Scotland would provide us with a strong
basis for selling refinery products into the retail market once
our agreements with BP expire, in France there is open access to
the transportation infrastructure, which results in a very
competitive market for suppliers. See &#147;Certain
Relationships and Related Transactions&nbsp;&#151; Commercial
Interface Agreements&nbsp;&#151; Inland Refined Products Sale
and Purchase Agreements&#148; for more information on these
arrangements.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Health, Safety, Security and the Environment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations involve the transportation, manufacturing,
storage, handling and processing of large volumes of hazardous
materials, including toxic and flammable compounds. As a result,
HSSE risks are inherent in our business. In the ordinary course
of our business, we are subject to environmental inspections,
monitoring and occasional investigations by governmental
authorities, which in some cases have resulted in, and may in
the future result in, fines or penalties or other expenditures.
In addition, our production facilities require us to hold
multiple operating permits that are subject to renewal,
modification and, in certain circumstances, revocation. Any
actual or alleged violations of HSSE laws, regulations or permit
requirements or failure to obtain any
</DIV>

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<DIV align="left" style="font-size: 10pt;">
required permits could result in restrictions or prohibitions on
our operations, civil or criminal sanctions, as well as, under
some HSSE laws, strict liability and/or joint and several
liability. Changes in HSSE regulations have the potential to
inhibit or interrupt our operations, or require us to modify our
facilities or operations. HSSE regulatory matters may cause us
to incur significant unanticipated losses, costs or liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>HSSE Management Systems</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The health, personal safety and security of our employees,
customers and the communities in which we operate are vital to
our success, as are the security and integrity of the places in
which our employees work and the equipment and other assets they
use. We have a set of HSSE policies and procedures in place at
all of our facilities that build upon those BP HSSE systems that
were already in place at many of our facilities. As a separate
company, our HSSE management systems will assist us in achieving
our HSSE compliance goals while also improving our operational
efficiency and minimizing our overall risks of doing business.
An important aspect of our HSSE management strategy will be to
manage HSSE compliance requirements on a site-specific basis,
taking into account the various operational and HSSE-related
risks associated with a particular site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>HSSE Related Liabilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental Remediation and Closure Liabilities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Environmental laws and regulations may require us to remediate
or otherwise redress the effects on the environment of prior
disposal or the release of hazardous substances by us or, in
some cases, other parties. We presently have remediation and
closure obligations at certain sites, including refineries,
petrochemical plants and waste disposal sites and will likely
incur obligations at other sites in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP has agreed to indemnify us, subject to certain limitations,
for certain liabilities, including any claims and losses we may
incur with respect to:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any liabilities related to off-site waste disposal prior to
    April&nbsp;1, 2005 (excluding liabilities related to certain
    waste disposal sites located near our facilities in Cologne,
    Germany, and Sarralbe, France,); and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any liabilities related to former facilities which, as of
    April&nbsp;1, 2005, had been sold, closed or decommissioned.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will retain all other environmental remediation or closure
obligations, whether known or unknown, relating to the
businesses and assets being transferred from BP to us, including
any interests in pipelines or jetties, irrespective of whether
they occurred before April&nbsp;1, 2005 or thereafter. We will
also retain liability for off-site waste disposal from our
facilities that occur on or after April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>HSSE Accruals</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, we had recorded approximately
$17&nbsp;million in financial accruals relating to anticipated
environmental related obligations, including offsite waste
liabilities and contaminated land liabilities at certain sites.
In addition, we had established approximately $19&nbsp;million
in financial accruals for decommissioning and demolition
obligations at certain sites. Under GAAP, accruals are
established when potential liabilities are either known or
considered probable and have been reasonably estimated. These
estimates do not include accruals established relating to
liabilities retained by BP. In addition, there exist other
potential remediation risks at some of our sites where financial
accruals have not been provided, because these potential
liabilities are either not probable or are considered probable
but are not currently estimable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Furthermore, we may in the future be required to establish
additional financial accruals for environmental liabilities
associated with onsite waste disposal activities, off-site waste
disposal activities from our sites occurring after April&nbsp;1,
2005, obligations relating to any future site closures, process
equipment at our facilities that is already idle or for which
demolition or decommissioning estimates have been made, and
potential liabilities associated with contaminated land and
groundwater at our sites.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Health and Safety Liabilities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also may incur costs for health and safety liabilities
associated with our products. Potential liabilities could also
exist from employee or contractor exposure to hazardous
materials. We currently are not aware of any facts that would
require us to make provisions for any such potential
liabilities, although we may need to establish financial
accruals for them in the future as more information becomes
available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of our separation from BP, BP has agreed to
indemnify us, subject to certain limitations, for:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any claims for exposure to hazardous materials at our facilities
    to the extent that such claims were either made prior to
    April&nbsp;1, 2005 or threatened in writing prior to
    April&nbsp;1, 2005 and made prior to April&nbsp;1, 2006 or, in
    certain cases, to the extent that such exposure related to
    events that occurred prior to April&nbsp;1, 2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    certain product liability claims related to products
    manufactured prior to April&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have agreed to assume all other health and safety related
liabilities related to the assets transferred to us in
connection with the separation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>HSSE Related Capital Expenditures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred $96&nbsp;million, $151&nbsp;million,
$172&nbsp;million and $54&nbsp;million in HSSE-related capital
expenditures for 2002, 2003, and 2004 and for the six months
ended June&nbsp;30, 2005, respectively. We expect to incur an
estimated $140&nbsp;million of such expenditures for the
remainder of 2005. Although we cannot predict with certainty
future capital expenditures, from 2005 to 2010 we expect to
incur an estimated total of $830&nbsp;million in HSSE-related
capital expenditures, which includes $660&nbsp;million in
capital expenditures to comply with various regulations related
to health, safety, security and the environment and an
additional $170&nbsp;million to meet industry good practice and
internal safety standards. An estimated $490&nbsp;million of
this estimated total is expected to be made specifically to
comply with various environmental regulations, which include an
estimated $350&nbsp;million related to compliance with the EU
directive on IPPC. We anticipate that HSSE regulations will
continue to require us and the industry in general to make
capital expenditures. Since capital expenditures vary with
applicable HSSE legal requirements, we cannot assure you that
our recent capital expenditures are indicative of the amounts we
may be required to spend to comply with future HSSE legal
requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Environmental Regulatory Matters and Developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>North America</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>United States Clean Air Act</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the United States, the Clean Air Act requires, among other
things, sulfur reductions; enhanced monitoring of major sources
of specified pollutants; stringent air emission limits and new
operating permits for chemical plants. This law affects our
facilities in the United States producing, manufacturing and
distributing petrochemical products. Federal and state controls
on ozone, carbon monoxide, benzene, sulfur, and nitrogen dioxide
impact our activities and products in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Title&nbsp;V of the Clean Air Act imposes federal requirements
which dictate that all of our facilities in the United States
obtain operating permits. Our facilities either currently have
operating permits or have submitted Title&nbsp;V permit
applications and are awaiting approval from the appropriate
regulatory agencies. Affected facilities with Title&nbsp;V
permits are required to make regular reports, certify compliance
with operating permit conditions and report all deviations from
any operating permit conditions. Some of our facilities which
have submitted these reports have reported a number of
deviations to the conditions of their Title&nbsp;V permits,
though we believe these deviations to not be material at this
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By 2007, our facilities in south Houston, Texas, and Lima, Ohio
must comply with new nitrogen oxide emission standards under the
Clean Air Act. These new standards are being phased in through
2007. While we may purchase emissions allowances to partially
meet these new nitrogen oxide emission standards, modifications
to existing equipment and the installation of additional control
equipment are required. Clean Air Act regulations
</DIV>

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<DIV align="left" style="font-size: 10pt;">
have also been issued concerning emissions of highly-reactive
volatile organic compounds (such as ethylene and propylene). We
expect that additional estimated capital expenditures of
$40&nbsp;million will be required to comply with the Clean Air
Act standards and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, the United States Environmental Protection Agency
(EPA)&nbsp;inspected our Lima, Ohio facility as part of a
broader investigation by the EPA of the chemical industry&#146;s
compliance with certain emission standards relating to hazardous
organic pollutants. We have not yet received the results of the
inspection or received any notices of violations, but if an
enforcement action is brought by the EPA, it is reasonable to
believe that we may be subject to fines or penalties in excess
of $100,000 or be required to undertake other actions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>European Union</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Directive for Integrated Pollution Prevention and Control</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The IPPC is the most significant environmental regulation
affecting our operations in Europe over the next three years.
The IPPC attempts to minimize pollution from various point
sources throughout the European Union through a single
permitting process and requires facilities covered by the
Directive to obtain an IPPC operating permit from the
authorities in the relevant EU member states. The permits must
be based on the concept of Best Available Technology (BAT),
which in some cases involve environmental control improvements
to prevent, minimize and control pollution from a facility. If
the use of BAT is likely to result in the breach of an
environmental quality standard under IPPC, plant emissions must
be reduced accordingly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All plants in Europe affected by IPPC must obtain an IPPC
operating permit by November 2007 or have an agreed improvement
program in place. The Directive encompasses most activities and
processes undertaken by the oil and petrochemical industry
within the EU. All of our affected facilities in the EU have
applied for their IPPC permits as required by local EU member
state legislation, but as the implementation deadline
approaches, there may be amendments to our permits and, in some
cases, a requirement to apply for new permits. We expect to
incur increased costs in maintaining compliance with IPPC and we
expect to incur estimated capital expenditures of
$350&nbsp;million to comply with these standards at our
facilities in Europe through 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Large Combustion Plant Directive</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our European operations are also subject to the EU Large
Combustion Plant Directive, which aims to reduce acidification,
ground level ozone and particles throughout Europe by
controlling emission limit values for sulfur dioxide, nitrogen
oxides and particulates from combustion plants with a thermal
output of greater than 50 megawatts. The initial Directive
required phased-in reductions in emissions from existing large
combustion plants on or before April&nbsp;1, 2001. A revised
Large Combustion Plant Directive has been agreed and
implementation plans by the EU member states for the revised
Directive were required to be submitted to the EU by
November&nbsp;27, 2003 and large combustion plants must be in
full compliance with the Directive by January&nbsp;1, 2008. Our
expected capital expenditures for complying with IPPC will also
assist in us in complying with the Large Combustion Plant
Directive, but we will still need to incur additional estimated
capital expenditures of $40&nbsp;million through 2010 to comply
with such regulations at several of our facilities in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>European Union Emissions Trading Scheme</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our operations in Europe are also subject to the
European Union Emissions Trading Scheme (EU ETS). By setting an
overall cap on carbon dioxide emissions, the EU ETS authorizes
emissions allowances to be issued to specified EU large
stationary installations and allows for the trading of such
allowances across the EU. Each installation achieves compliance
by surrendering enough allowances to cover its emissions in each
annual period. Emissions are treated as a liability and emission
allowances are treated as an intangible asset. Allocations of
carbon dioxide emissions allowances to each of our affected
facilities have been made under each EU member state&#146;s
National Allocation Plan. The National Allocation Plans have
been approved by the European Commission and allowances have now
been issued for each of our installations. However, since our
emissions can vary, we may be required to purchase additional
allowances at the prevailing market price which may increase our
operating costs.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Health and Safety Regulatory Matters and Developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Product Stewardship</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While most of our products have some hazardous properties, some
of them, such as acrylonitrile, require specialized handling
procedures due to their acute and chronic toxicity. Furthermore,
our polymer products have widespread end-uses in a variety of
tightly regulated consumer industries, including in food
packaging and medical applications. To manage these risks, our
product stewardship team works closely with industry
associations, government regulators and other stakeholders to
strive for positive solutions in setting regulations which are
based in science and are commensurate with the magnitude of the
risk. The various aspects of our business are also careful to
ensure that transporters and customers have the appropriate
information and processes to properly manage our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Registration, Evaluation, and Authorization of Chemicals
(REACH)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The European Union is currently proposing to introduce new
legislation requiring much greater control of the use of
chemical products within the European Union by giving the
affected industries the responsibility for ensuring and
demonstrating the safe manufacture, use and disposal of
chemicals. In 2003, the European Commission adopted an official
proposal for a future regulation on European chemical policy
referred to as Registration, Evaluation and Authorization of
Chemicals (REACH). This proposal is being discussed by the
European Parliament and the Council of the European Union.
Depending on the outcome of these discussions, the regulation
could enter into force by 2007 and could require additional
testing, documentation and risk assessments for products
manufactured by the chemical industry. We are currently part of
a collaborative industry approach to comply with these
regulations, which will affect both our petrochemicals and
refinery products. The ultimate cost of REACH may vary depending
on the final requirements of the regulation and at this time it
is uncertain what the estimated costs of complying with the
final regulations may be, although such costs could be
substantial. The costs of registering and authorizing certain
products and the restrictions placed upon them may affect the
demand for those products from our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Major Accident Risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The safety of our sites is a top priority because system
failures or accidents can present a health and safety risk to
our employees and people who live or work near our facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Within the European Union, the EU directive on the control of
major-accident hazards (Seveso&nbsp;II Directive) regulates
facilities that present a risk of accidents involving hazardous
materials and impose specific plans and procedures, particularly
for the storage of such materials. The directive contains
general and specific obligations on both operators and the
member states&#146; authorities. The provisions provide for
control measures aimed at the prevention of major accidents and
the limitation of consequences of major accidents. All operators
of establishments coming under the scope of the Directive must
provide a safety plan to the competent authority and establish a
major-accident prevention policy. In addition, facilities
holding even larger quantities of dangerous substances above the
upper threshold contained in the Directive (upper tier
establishments) must establish a safety reporting system, a
safety management system and an emergency plan. We have ten
facilities in Europe which are considered upper tier
establishments under the Directive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Within the United States, our facilities are subject to the
Occupational Safety and Health Administration Process Safety
Management (PSM)&nbsp;standard, implemented in 1992, which
requires management of major accident risk with fourteen
elements of management controls. Included in the mandatory
management controls are requirements for operator training,
mechanical integrity, incident investigation, and process hazard
analysis. All facilities subject to the PSM standard undergo PSM
compliance audits every three years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Security and Crisis Management</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Department of Homeland Security Act, Marine Transportation
Security Act (MTSA) and Department of Transportation Hazardous
Material security compliance regulations require many of our
sites and facilities in the United States to conduct security
vulnerability assessments, which include the preparation of
security mitigation
</DIV>

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<DIV align="left" style="font-size: 10pt;">
plans, implementation of upgrades to security measures,
appointment and training of a designated security person and
submission of plans for approval and inspection. Additionally,
proposed EU legislation would require similar standards at our
petrochemical facilities in Europe. Our United States
facilities, in partnership with American Chemical Council, meet
the requirements of the Responsible Care Security Code, a
facility security plan to protect our chemical facilities, our
communities and our products. All of our facilities worldwide
have a multi-tiered response system for emergency response and
crisis management. Facilities in other regions are periodically
assessed to ensure that they meet appropriate security standards
and safeguards.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a diverse and highly skilled workforce with a high
degree of commitment to our business and our strategic and
operational goals. A significant percentage of our employees are
covered by collective bargaining agreements that determine such
matters as compensation, working hours and other conditions of
employment, and are represented by works councils. During the
last three years, we have not experienced any material labor
disputes resulting in work stoppages. We believe that our
relationship with our employees is good, and we have taken steps
to ensure the continued support of our employees while we
transition to a separate, standalone company. To that end, we
have committed to our employees that we would maintain
equivalent employment terms and conditions to those offered by
BP for a period of at least one year after completion of the
offering. While this decision has allowed us to continue our
good relations with our employees, we cannot assure you how our
employees would respond if we were to make any changes after the
one-year period has expired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have approximately 8,000&nbsp;employees. This figure includes
employees who became employed by our company as a result of our
acquisitions of Solvay&#146;s interests in our former HDPE joint
ventures with that company. The figure excludes the
approximately 180 employees who will move to our joint venture
with NOVA, as well as the employees at BP&#146;s facility in
Wingles, France, which may be transferred to the joint venture
in 2007 if put or call options provided for in the agreements
relating to the formation of the joint venture are then
exercised. The figure also excludes employees of the various
joint ventures at our site in Lav&#233;ra, France. In addition,
the figure excludes the approximately 270 individuals seconded
to us by BP, some of whom will be retained by us and become
employees of our company, and some of whom will be redeployed to
BP or be made redundant. Finally, the figure excludes BP
employees who work at our Carson, California, Texas City, Texas,
and Whiting, Indiana, facilities, which for labor law reasons
have not been transferred to us as part of our separation from
BP, as well as employees at the LAO facility in Pasadena, Texas,
which is owned by BP and operated for us on a toll manufacturing
basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we employ a significant number of contractors at
our sites. Our contractors are mostly engaged in turnarounds,
maintenance and construction work.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As is the case with many companies in the petrochemical
industry, we are and may from time to time become a party to
claims and lawsuits incidental to the ordinary course of our
business. We are not currently involved in any legal or
arbitration proceedings that we expect to have a material
adverse effect on our financial position, and, to our knowledge,
no such legal or arbitration proceedings are currently
threatened.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

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<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directors and Executive Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below are the names, ages, as of July&nbsp;1, 2005,
and current positions of our present directors and executive
officers:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ross Pillari</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Elbert</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Riney</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Winters</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Tomkins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Henry Kleeman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, General Counsel and Secretary</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier Baudrand</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, European Operations</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, North American Operations</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    K&#146;Lynne Johnson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Global Derivatives</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Peter Cella</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Business Support and External Affairs</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paul Adams</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Business Optimization and Procurement</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jay Kouba</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Strategy</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Davies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Human Resources, HSSE&nbsp;&#38; Internal
    Communications</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jim White</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Portfolio</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tom Muething</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Controller</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a brief description of the business
experience of the persons who serve as our directors and
executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Ralph Alexander&nbsp;&#151; President, Chief Executive
Officer and Director.</I> Mr.&nbsp;Alexander has been our Chief
Executive Officer since our formation as a separate legal entity
within the BP Group in 2005. Prior to this appointment,
Mr.&nbsp;Alexander held a variety of roles within BP. From
January 2005 to June 2005, Mr.&nbsp;Alexander was the Chief
Executive Officer of BP&#146;s olefins and derivatives business.
From July 2004 to December 2004, Mr.&nbsp;Alexander was the
Chief Executive Officer of BP&#146;s Petrochemicals business,
and from April 2002 to June 2004, he was the Executive Vice
President and Chief Executive Officer of BP&#146;s Gas, Power
and Renewables segment. From September 2001 to March 2002,
Mr.&nbsp;Alexander served as a Group Vice President in BP&#146;s
Exploration and Production segment. In this position, he held
responsibilities for various regions of the world, including
Russia, the Caspian, Africa and Middle East. Additionally, he
was responsible for the segment&#146;s recruitment, diversity
and marketing activities. From September 1999 to August 2001,
Mr.&nbsp;Alexander was Group Vice President with responsibility
for global onshore oil activities as well as emerging gas
activities in the Asia-Pacific region. Mr.&nbsp;Alexander has
also held senior roles in BP&#146;s&nbsp;Refining and Marketing
segment. In addition, Mr.&nbsp;Alexander held senior roles in
strategy development, mergers and acquisitions and performance
management for the BP&nbsp;Group. Mr.&nbsp;Alexander holds a
bachelor&#146;s degree and master&#146;s degree in nuclear
engineering from New York Polytechnic University and a
master&#146;s degree in management science from Stanford
University Business School. He is currently vice chairman of the
Board of Trustees of New&nbsp;York Polytechnic University, a
member of Stanford University&#146;s Sloan Advisory Board, the
Liquid Engine Advisory Board and the Society of Petroleum
Engineers. In addition he serves as a nonexecutive director on
the Board of Directors of Anglo American&nbsp;plc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Ross Pillari&nbsp;&#151; Chairman of the Board of Directors.
</I>Mr.&nbsp;Pillari is a Group Vice President for BP and, since
2001, has been President and Chief Executive Officer of BP
America Inc. Prior to this appointment, Mr.&nbsp;Pillari
</DIV>

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<DIV align="left" style="font-size: 10pt;">
was BP&#146;s Group Vice President for Downstream Marketing and
was responsible for BP&#146;s global marketing operations.
Mr.&nbsp;Pillari is a member of the Board of Directors of The
American Petroleum Institute, The Chicago Symphony Orchestra,
The Foreign Policy Association, The Baker Institute Energy
Forum, and The Alliance to Save Energy. Mr.&nbsp;Pillari is a
graduate of Case Western Reserve University and the Stanford
Executive Program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stephen Elbert&nbsp;&#151; Director. </I>Mr.&nbsp;Elbert is
Senior Vice President for remediation management of BP America
Inc. and is responsible for managing BP&#146;s environmental
liabilities worldwide. Mr.&nbsp;Elbert also serves as Chairman
and CEO of Atlantic Richfield Company, an affiliate of BP.
Before his current position, Mr.&nbsp;Elbert was Vice President
of Health, Safety and Environment (HSE) for BP&#146;s
Petrochemicals segment, with responsibility for HSE policies and
performance. Mr.&nbsp;Elbert holds a Ph.D., master&#146;s and
bachelor&#146;s degrees in biological science from the
University of Louisville, DePauw University and The Ohio State
University, respectively. He is a graduate of the Northwestern
University&#146;s Executive Management Program and the Advanced
Management Program of the Harvard Graduate School of Business
Administration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stephen Riney&nbsp;&#151; Director. </I>Mr.&nbsp;Riney was
appointed Vice President of Finance in the Americas for BP in
March 2005. From January 2004 to March 2005, Mr.&nbsp;Riney
served as the performance unit leader for BP&#146;s Marlin and
Horn Mountain production facilities in the Deepwater Gulf of
Mexico. From February 2001 to January 2004, Mr.&nbsp;Riney was
Vice President of Planning for BP&#146;s global exploration and
production business. Mr.&nbsp;Riney holds a bachelor&#146;s
degree in accounting from the University of Notre Dame and a
master&#146;s degree in business administration from the
University of Chicago.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stephen Winters&nbsp;&#151; Director. </I>Mr.&nbsp;Winters is
Associate General Counsel for BP&#146;s Refining and Marketing
segment and is responsible for BP&#146;s corporate and specialty
legal practice groups in the United States. Mr.&nbsp;Winters is
a member of the Kansas, Illinois and U.S.&nbsp;Supreme Court
bars, the American Bar Association and the American Corporate
Counsel Association. He obtained his bachelor&#146;s degree in
English and psychology and a law degree from Kansas University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mark Tomkins&nbsp;&#151; Chief Financial Officer.</I>
Mr.&nbsp;Tomkins joined our company in May 2005 as Chief
Financial Officer. Previously he was Senior Vice President,
Chief Financial Officer and Treasurer of Vulcan Materials
Company, a provider of construction materials and chemicals, a
position he held since January 2001. Prior to that,
Mr.&nbsp;Tomkins held the same position at Great Lakes Chemicals
Chemical Corporation, which is now a part of Chemtura
Corporation, and worked as Vice President, Finance and Business
Development, for two chemical divisions of Allied Signal, Inc.
Mr.&nbsp;Tomkins is a certified public accountant and holds a
bachelor&#146;s degree in business and a master&#146;s degree in
business administration from Eastern Illinois University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>R.&nbsp;Henry Kleeman&nbsp;&#151; Senior Vice President,
General Counsel and Secretary.</I> Mr.&nbsp;Kleeman joined our
company as Senior Vice President and General Counsel in June
2005. Previously he was Vice President, Deputy General Counsel
and Business Practices Officer at Sara Lee Corporation (Sara
Lee) from 1999 to 2005. He was also the assistant secretary for
Sara Lee and secretary to the audit committee of its Board of
Directors. Mr.&nbsp;Kleeman holds a bachelor&#146;s degree in
English and economics from Colgate University and a law degree
from the University of Chicago Law School. From June 2000 until
June 2005, Mr.&nbsp;Kleeman was a director of Delta Galil
Industries, Inc., a publicly traded apparel manufacturer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Didier Baudrand&nbsp;&#151; Senior Vice President, European
operations.</I> Mr. Baudrand is the head of our O&#38;P Europe
segment. Mr.&nbsp;Baudrand held a variety of roles within BP
over the past 26&nbsp;years, including in the areas of
lubricants, sales, marketing, logistics and chemicals. From July
2004 to June 2005, Mr.&nbsp;Baudrand served as Senior Vice
President, European operations, for BP&#146;s olefins and
derivatives business. From January 2004 to July 2004,
Mr.&nbsp;Baudrand was the Chief Executive Officer of our former
joint venture with Solvay in Europe. From January 2002 to
December 2003, Mr.&nbsp;Baudrand was the business unit leader of
BP&#146;s global polymers business and from January 2001 to
December 2001 he was the business unit leader of BP&#146;s
European polypropylene business. Prior to this period, he served
as Chief Executive Officer for BP&#146;s European polypropylene
business. Mr.&nbsp;Baudrand holds a master&#146;s degree in
physical chemistry from Paris University and a chemical
engineering degree from the Ecole Nationale Superieure de Chimie
de Paris. Mr.&nbsp;Didier Baudrand is a board member of the
CEFIC organization and Vice President of Plastic Europe.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dennis Seith&nbsp;&#151; Senior Vice President, North
American operations.</I> Mr. Seith is the head of our O&#38;P
North America segment. Mr.&nbsp;Seith has 26&nbsp;years of
experience within BP&#146;s Petrochemicals and Refining and
Marketing segments, including in the areas of manufacturing,
business management, project development, and management sales
and planning. From July 2004 to June 2005, Mr.&nbsp;Seith was
Senior Vice President, North American operations, for BP&#146;s
olefins and derivatives business. From January 2004 to June
2004, Mr.&nbsp;Seith was the business unit leader of BP&#146;s
refinery in Whiting, Indiana. From January 1999 to December
2003, he was the business unit leader of BP&#146;s olefins
business in North America with additional duties for the North
American styrene business added in 2002. Mr.&nbsp;Seith holds a
bachelor&#146;s degree in chemical engineering from Texas
A&#38;M University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>K&#146;Lynne Johnson&nbsp;&#151; Senior Vice President,
Global Derivatives.</I> Ms. Johnson is the head of our Global
Derivatives segment. From May 2005, to June 2005, Ms. Johnson
was Senior Vice President, Global Derivatives, for BP&#146;s
olefins and derivatives business. From January 2004 to April
2005, Ms.&nbsp;Johnson led BP&#146;s global nitriles business as
performance unit leader and Vice President, Business
Optimization. From September 2002 to December 2003, Ms. Johnson
was responsible for the global development of BP&#146;s
petrochemical e-commerce business, back office and demand supply
planning automation. From February 2001 to September 2002, Ms.
Johnson served as a director for demand supply planning. From
January 1999 to February 2001, Ms. Johnson worked as a human
resources manager for BP&#146;s global specialty intermediates
chemical business and the petrochemical technology function.
Ms.&nbsp;Johnson holds a bachelor&#146;s degree in psychology
from Brigham Young University and a master&#146;s degree in
organizational behavior from the Marriot School of Management at
Brigham Young University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Peter Cella&nbsp;&#151; Senior Vice President, Business
Support and External Affairs.</I> Mr.&nbsp;Cella is responsible
for planning and performance management, information technology,
property management and services, and external affairs. From
July 2004 to June 2005, Mr.&nbsp;Cella served as Senior Vice
President, Business Support and External Affairs, for BP&#146;s
olefins and derivatives business. From May 2002 to June 2004,
Mr.&nbsp;Cella served as the business unit leader of BP&#146;s
global olefins specialties and derivatives business. Between
June 1999 and May 2002, Mr.&nbsp;Cella was the business unit
leader of BP&#146;s global fabrics and fibers business.
Mr.&nbsp;Cella holds a bachelor&#146;s degree in finance from
the University of Illinois and a master&#146;s degree in
business administration from Northwestern University&#146;s
Kellogg Graduate School of Management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Paul Adams&nbsp;&#151; Senior Vice President, Business
Optimization and Procurement.</I> Mr.&nbsp;Adams is responsible
for trading, procurement and business optimization.
Mr.&nbsp;Adams has 24&nbsp;years of experience within BP. From
July 2004 to June 2005, Mr.&nbsp;Adams served as Senior Vice
President, Business Optimization and Procurement, for BP&#146;s
olefins and derivatives business. In 2003 and 2004,
Mr.&nbsp;Adams served as special advisor to BP&#146;s Group Vice
President, Supply and Trading. Between 1998 and 2003, he was the
head of BP&#146;s U.S. oil trading and supply operations.
Mr.&nbsp;Adams holds a bachelor&#146;s of science degree from
the London School of Economics and Political Science.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Jay Kouba&nbsp;&#151; Senior Vice President, Strategy.
</I>Mr.&nbsp;Kouba is responsible for developing our long-term
business strategy, marketing, technology and licensing.
Mr.&nbsp;Kouba has 24&nbsp;years of experience with BP&#146;s
Petrochemicals segment. From July 2004 to June 2005,
Mr.&nbsp;Kouba served as Senior Vice President, Strategy, for
BP&#146;s olefins and derivatives business and, earlier in 2004,
as Vice President of Marketing, Sales and Logistics for
BP&#146;s Petrochemicals segment. Between 1999 and 2003,
Mr.&nbsp;Kouba was Vice President, Technology, for BP&#146;s
Petrochemicals segment. Mr.&nbsp;Kouba holds a bachelor&#146;s
degree in chemistry from Stanford University, a master&#146;s
degree and doctorate in chemistry from Harvard University and a
master&#146;s degree in business administration from the
University of Chicago.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stephen Davies&nbsp;&#151; Senior Vice President, Human
Resources, HSSE&nbsp;&#38; Internal Communications.</I>
Mr.&nbsp;Davies is responsible for human resources, HSSE and
internal communications. From July 2004 to June 2005,
Mr.&nbsp;Davies served as Senior Vice President, Human
Resources, HSSE and Communications, for BP&#146;s olefins and
derivatives business. From January 2003 to June 2004,
Mr.&nbsp;Davies was Vice President of Global People
(HR)&nbsp;Operations of BP&#146;s human resources global
operations department. From January 1999 to December 2002,
Mr.&nbsp;Davies was Vice President, Downstream Human Resources,
of BP&#146;s downstream human resources department.
Mr.&nbsp;Davies holds a bachelor&#146;s degree from the
University of Manchester. As a result of the design of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
certain BP pension arrangements, Mr.&nbsp;Davies is employed by
BP and has been seconded to us. The secondment arrangement will
expire in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Jim White&nbsp;&#151; Senior Vice President, Portfolio.</I>
Mr. White is responsible for developing and managing our
portfolio options, transactions and opportunities.
Mr.&nbsp;White&#146;s 25-year career with BP spanned research,
refining&nbsp;&#38; marketing, marine fuels and lubricants,
corporate head of BP&#146;s Indonesian operations and, since
1996, petrochemicals. From July 2004 to March 2005,
Mr.&nbsp;White served as Senior Vice President, Portfolio for
BP&#146;s olefins and derivatives business. From January 2004 to
June 2004, he was Director, Portfolio Management, for BP&#146;s
petrochemical business. From January 2000 to December 2003, he
was the business unit leader for BP&#146;s global olefins and
polymers development, where he led mergers and acquisitions
activity, joint venture relationships, licensing and polymers
technology. Mr.&nbsp;White holds a Ph.D and a bachelor&#146;s of
science degree in chemistry from City University, London. As a
result of the design of certain BP pension arrangements,
Mr.&nbsp;White is employed by BP and has been seconded to us.
The secondment arrangement will expire in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Tom Muething&nbsp;&#151; Controller.</I> Mr. Muething is our
financial controller. Prior to his current role,
Mr.&nbsp;Muething served as the Controller for BP&#146;s olefins
and derivatives business within BP&#146;s Petrochemical&#146;s
segment from July 2004 to June 2005. From June 2003 to June
2004, Mr.&nbsp;Muething served as Segment Controller for
BP&#146;s Gas, Power and Renewables segment. From September 2000
to June 2003, Mr.&nbsp;Muething was a business unit leader
within BP&#146;s Gas, Power and Renewables segment accountable
for marketing and business development activities in North
America. Prior to September 2000, Mr.&nbsp;Muething was
responsible for BP&#146;s North American accounting services
organization. Mr.&nbsp;Muething holds a bachelor&#146;s degree
in accounting from Xavier University and is a certified public
accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board Practices</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Board Structure</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately upon completion of the offering, our Board of
Directors will consist of up to nine&nbsp;directors,
including&nbsp;&nbsp;&nbsp;, who are independent directors. Our
Board of Directors will be divided into three classes serving
staggered three-year terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At each annual meeting of our stockholders, directors will be
elected to succeed the class of directors whose terms have
expired. Class&nbsp;I directors&#146; terms will expire at the
first annual meeting of our stockholders following the
completion of the offering. Class&nbsp;II directors&#146; terms
will expire at the second annual meeting of our stockholders
following the completion of the offering. Class&nbsp;III
directors&#146; terms will expire at the third annual meeting of
our stockholders following the completion of the offering. Our
classified board structure could have the effect of increasing
the length of time necessary to change the composition of a
majority of our Board of Directors. In general, at least two
annual general meetings of stockholders will be necessary for
stockholders to effect a change in a majority of the members of
our Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For so long as BP owns at least 50% of the voting power of the
outstanding shares of our capital stock entitled to vote, we
intend to avail ourselves of the &#147;controlled company&#148;
exemption under the NYSE rules from the requirements that a
listed company has a majority of independent directors on its
Board of Directors and that its compensation and nominating and
governance committees be composed entirely of independent
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Board Committees</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Board of Directors has an audit committee, a compensation
committee, and a nominating and governance committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Audit committee</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately upon completion of the offering, our audit committee
will consist of no fewer than three members, each of whom our
Board of Directors will have determined has no material
relationship with us and is otherwise independent under the
rules and regulations of the NYSE and the SEC. Our Board of
Directors will also have determined that each member of the
audit committee is financially literate and that the chairman of
the audit committee, is an &#147;audit committee financial
expert&#148; as defined under the rules of the SEC.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our audit committee has general responsibility for the oversight
of our accounting, reporting and financial control practices.
Among other functions, the committee is responsible for
(1)&nbsp;the appointment, compensation, retention and oversight
of the work of our independent auditor; (2)&nbsp;assisting our
Board of Directors in monitoring the integrity of our financial
statements, our independent auditor&#146;s qualifications and
independence, the performance of our independent auditor and our
internal audit function, and our compliance with legal and
regulatory requirements; (3)&nbsp;reviewing with the chief
executive officer and chief financial officer the design and
operation of internal controls over financial reporting;
(4)&nbsp;annually reviewing our independent auditor&#146;s
report describing the audit firm&#146;s internal quality-control
procedures and any material issues raised by the most recent
internal quality-control review, or peer review, of the audit
firm; (5)&nbsp;discussing the annual audited financial and
quarterly financial statements with management and our
independent auditor; (6)&nbsp;discussing earnings press
releases, as well as financial information and earnings guidance
provided to analysts and rating agencies; (7)&nbsp;discussing
policies with respect to risk assessment and risk management;
(8)&nbsp;meeting separately and periodically, with management,
internal auditors and our independent auditor;
(9)&nbsp;reviewing with our independent auditor any audit
problems or difficulties and managements&#146; response;
(10)&nbsp;setting hiring policies for employees or former
employees of our independent auditor; (11)&nbsp;annually
reviewing the adequacy of the audit committee&#146;s written
charter and evaluating the performance of the audit committee;
(12)&nbsp;handling such other matters that are specifically
delegated to the audit committee by our Board of Directors from
time to time; (13)&nbsp;establishing procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters;
(14)&nbsp;reporting regularly to the full Board of Directors and
(15)&nbsp;preparing an audit committee report for inclusion in
the company&#146;s annual proxy statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, for so long as BP remains our affiliate, the
committee has the authority to review and approve any material
contract, amendment to a material contract or other intercompany
transaction between us and BP or any subsidiary or affiliate of
BP (other than us and our subsidiaries) and to decide on the
initiation and escalation of disputes between us and BP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Compensation committee</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately upon completion of the offering, our compensation
committee will consist of up to three members, one of whom will
be designated by BP and up to two of whom the Board of Directors
will have determined have no material relationship with us and
will otherwise be independent under the rules and regulations of
the NYSE and the SEC. None of our executive officers serves on
the compensation committee or Board of Directors of any other
company of which any of the members of the compensation
committee or the Board of Directors is an executive officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our compensation committee is responsible for (1)&nbsp;reviewing
key employee compensation policies, plans and programs;
(2)&nbsp;reviewing and approving the compensation of our chief
executive officer and other executive officers;
(3)&nbsp;reviewing and approving employment contracts and other
similar arrangements between us and our executive officers;
(4)&nbsp;overseeing compliance with any applicable compensation
reporting requirements of the SEC; (5)&nbsp;retaining
consultants to advise the committee on executive compensation
practices and policies and (6)&nbsp;handling such other matters
that are specifically delegated to the compensation committee by
the Board of Directors from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Nominating and governance committee</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately upon completion of the offering, our nominating and
governance committee will consist of five members, one of whom
will be an executive officer of our company, three of whom will
be designated by BP and one of whom the Board of Directors will
have determined has no material relationship with us and is
otherwise independent under the rules and regulations of the
NYSE and the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our nominating and governance committee is responsible for
making recommendations to our Board of Directors regarding
candidates for directorships and the size and composition of the
board, overseeing our corporate governance guidelines and
reporting and making recommendations to the board of directors
concerning corporate governance matters.
</DIV>

<P align="center" style="font-size: 10pt;">103

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BP Common Stock Ownership of Directors and Executive
Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of our common stock is currently owned by BP. Accordingly,
none of our directors and executive officers currently owns any
shares of our common stock. However, upon consummation of the
offering, those of our executive officers who currently hold
unvested performance units under BP&#146;s Long-Term Performance
Plan (LTPP) will receive restricted stock units with respect to
our common stock under the Conversion Plan. In addition, upon
consummation of the offering, our executive officers will
receive stock options and restricted shares under the Incentive
Plan and will be entitled to purchase shares and receive stock
options under the Executive Share Matching Plan. See
&#147;&#151;&nbsp;Innovene &#147;BP&nbsp;LTPP&#148; Conversion
Plan&#148;, &#147;&#151;&nbsp;Innovene Incentive Plan 2005&#148;
and &#147;&#151;&nbsp;Innovene Executive Share Matching
Plan&#148; for more information on each of these plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, as of August&nbsp;1, 2005 the
number of shares of BP common stock and options to purchase BP
common stock held by our directors, those of our executive
officers named in the Summary Compensation Table below under
&#147;&#151;&nbsp;Executive Compensation&#148; and all of our
directors and executive officers as a group. Except as otherwise
noted, each of the directors and executive officers named in the
table below (including their respective family members) had sole
voting and investment power with respect to the BP common stock.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>BP common stock and</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>securities underlying</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options beneficially</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>owned<SUP style="font-size: 85%; vertical-align: text-top">(1)(2)(3)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>580,612</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ross Pillari</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>515,152</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Elbert</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Riney</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,730</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stephen Winters</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>405,303</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier Baudrand</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,597</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All directors and executive officers as a group (17&nbsp;persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*<SUP style="font-size: 85%; vertical-align: text-top">(4</SUP></TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">)</SUP></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Beneficial ownership is determined in accordance with the rules
    of the SEC and generally includes voting or investment power
    with respect to securities. Shares of BP common stock subject to
    options that are exercisable or will become exercisable within
    60&nbsp;days of June&nbsp;30, 2005 are deemed to be outstanding
    and to be beneficially owned by the person holding the options.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    ADSs held by the relevant director or executive officer have
    been converted into shares at a ratio of one ADS for every six
    shares of BP common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes (a)&nbsp;awards of restricted shares of BP common
    stock, ADSs and stock units under the BP LTPP which have not
    been deferred by the relevant executive officer or director,
    (b)&nbsp;shares of BP common stock and ADSs currently held in a
    BP retirement plan and (c)&nbsp;shares of BP common stock and
    ADSs underlying options that are currently exercisable or will
    become exercisable within sixty days of June&nbsp;30, 2005 for
    each of the following executive officers or directors: Ralph
    Alexander&nbsp;(528,444); Stephen Elbert (157,224); Stephen
    Riney&nbsp;(79,800); Stephen Winters&nbsp;(385,974); Didier
    Baudrand&nbsp;(53,200); and Dennis Seith&nbsp;(68,940). ADSs
    underlying options have been converted into shares at a ratio of
    one ADS for every six shares of BP common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The shares of BP common stock and securities underlying options
    beneficially owned by all directors and executive officers as a
    group does not exceed 1% of the outstanding shares of BP&#146;s
    common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board of Directors&#146; Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Directors who are employed by us or are employees of BP do not
receive a retainer or fees for service on our Board of Directors
or any of its committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our independent directors receive an annual retainer of $120,000
and an annual committee retainer of $5,000 with respect to each
committee on which they serve. An independent chairperson of our
Board of Directors would receive an annual retainer of $200,000.
An independent chairperson of our audit committee would receive
an annual retainer of $25,000, and independent chairpersons of
our compensation committee and our nominating and governance
committee would each receive an annual retainer of $20,000 and
$15,000,
</DIV>

<P align="center" style="font-size: 10pt;">104

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
respectively, in each case in lieu of the $5,000 annual
committee retainer to which ordinary committee members are
entitled. All retainers are paid on a quarterly basis, with 50%
in cash and 50% in stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of our directors is entitled to be reimbursed for
reasonable out-of-pocket expenses incurred in attending board or
committee meetings and for other reasonable expenses related to
the performance of his or her duties as a director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table discloses compensation information for 2004
for our chief executive officer and those of our other executive
officers who were employed by BP in 2004 and are expected to be
among our four most highly compensated employees in 2005, as
determined by reference to their total salary and bonus for
2005. The compensation figures shown in the table reflect
salaries paid by BP. Because Mr.&nbsp;Tomkins and
Mr.&nbsp;Kleeman joined our company in May and June 2005,
respectively, no summary compensation information has been
provided for these individuals with respect to 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Annual compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Long-term compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Awards</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Payouts</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long-term</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restricted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>incentive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All other</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock awards<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>plans<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>482,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>864,574</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,711</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier
    Baudrand<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>337,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>384,720</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,085</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,126</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>119,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,894</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,240</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    All awards of restricted stock made to the named executive
    officers in 2004 were payouts under BP&#146;s 2001 LTPP and,
    accordingly, have been reflected in the column captioned
    &#147;Payouts &#151;&nbsp;long-term incentive plans&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    ADSs have been converted into shares at a ratio of one ADS for
    every six shares of BP common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Payouts under long-term incentive plans represent awards of
    restricted shares of BP&#146;s common stock or restricted stock
    units under BP&#146;s 2001 LTPP. Under this plan, performance
    units were granted in 2001 and converted into an award of
    restricted shares of BP common stock or restricted stock units
    in 2004. See &#147;&#151;&nbsp;Awards of Performance Units Under
    the BP&nbsp;LTPP&#148; for additional information with respect
    to these awards. Performance units are notional units that give
    participants the right to be considered for an award of
    restricted shares of BP common stock or restricted stock units
    (without payment by the participant) at the end of a three-year
    performance period if demanding performance conditions are met.
    Any restricted shares of BP common stock or restricted stock
    units awarded are held in trust for three years before they are
    released to the individual. In addition, shares are released at
    the end of the retention period only if BP&#146;s minimum
    shareholding guidelines are met.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    &#147;All other compensation&#148; includes amounts contributed
    or credited by BP to Mr.&nbsp;Alexander&#146;s and Mr.
    Seith&#146;s respective BP savings plan accounts and life, death
    and disability insurance premiums paid by BP for
    Mr.&nbsp;Baudrand in 2004. The insurance premium payments have
    been converted from euros to U.S.&nbsp;dollars at the noon
    buying rate published by the U.S.&nbsp;Federal Reserve Bank in
    New York for December 31, 2004, which was $1.3538 per
    <FONT face="times new roman,times">&#128;</FONT>1.00.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Represents $455,896 in perquisites and other expatriate-related
    or personal benefits provided to Mr.&nbsp;Alexander and a
    restricted share award under BP&#146;s 2001 LTTP on
    February&nbsp;11, 2004, which was deferred at the election of
    Mr.&nbsp;Alexander. The restricted share award was made in the
    form of BP ADSs and for purposes of this table has been valued
    based on the price of one BP ADS on the award date, which was
    $47.92.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Baudrand&#146;s salary and bonus have been converted
    from euros to U.S.&nbsp;dollars at the noon buying exchange rate
    published by the U.S.&nbsp;Federal Reserve Bank in New&nbsp;York
    for December&nbsp;31, 2004, which was $1.3538&nbsp;per
    <FONT face="times new roman,times">&#128;</FONT>1.00.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Represents perquisites and other expatriate-related or personal
    benefits provided to Mr. Baudrand in 2004. The payments were
    made in a combination of U.S. dollars, euros and British pounds
    and have been converted from euros and British pounds to U.S.
    dollars at the noon buying rates published by the U.S. Federal
    Reserve Bank in New York for December&nbsp;31, 2004, which were
    $1.3538 per <FONT face="times new roman,times">&#128;</FONT>1.00
    and $1.9160 per &#163;1.00, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Represents the fair market value of a restricted share award
    under BP&#146;s 2001 LTPP on February&nbsp;11, 2004. The
    restricted share award was made in the form of shares of BP
    common stock and for purposes of this table has been valued
    based on the price of one share of BP common stock on the award
    date, which was &#163;4.14. The value has been converted from
    British pounds to U.S.&nbsp;dollars at the noon buying rate
    published by the U.S.&nbsp;Federal Reserve in New York on the
    grant date, which was $1.885 per British pound.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">105
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Represents the fair market value of a restricted share award to
    Mr. Seith under BP&#146;s 2001 LTPP on February&nbsp;11, 2004,
    which was deferred at the election of Mr.&nbsp;Seith. The
    restricted share award was made in the form of BP ADSs and for
    purposes of this table has been valued based on the price of one
    BP ADS on the award date, which was $47.92.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The following table discloses compensation information for 2005
for our chief executive officer and our four executive officers
(other than our chief executive officer) who are expected to be
our most highly compensated employees in 2005, as determined by
reference to their expected total salary and target bonus, for
that of July&nbsp;1, 2005.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Future Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Grant date value of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>shares of common</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock restricted</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock units and</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>shares underlying</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Target bonus<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Tomkins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>675,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier
    Baudrand<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>365,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>402,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>902,625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Henry Kleeman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>525,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,225,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,500</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The target figures shown in this column represent the amounts on
    which the calculation of the respective executive officer&#146;s
    bonus will be based if certain performance targets are reached.
    These amounts are subject to upward or downward adjustment based
    on various criteria, including the achievement of goals
    established under our Accelerator program.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Upon consummation of the offering, each of the persons shown in
    the table will receive a combination of restricted shares of our
    common stock (or restricted stock units) and stock options under
    the Executive Share Matching Plan and the Incentive Plan. Dollar
    amounts shown in this column represent the estimated fair value
    of these awards on the grant date. See
    &#147;&#151;&nbsp;Innovene Incentive Plan 2005&#148; and
    &#147;&#151;&nbsp;Innovene Executive Share Matching Plan&#148;
    for more information on restricted cash grants made, and
    restricted shares (or restricted stock units) and stock options
    issued, under these plans.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Baudrand&#146;s salary and target bonus amounts have
    been converted from euros to U.S.&nbsp;dollars at the noon
    buying rate published by U.S.&nbsp;Federal Reserve Bank in New
    York for August&nbsp;1, 2005, which was $1.2195&nbsp;per
    <FONT face="times new roman,times">&#128;</FONT>1.00.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Grants of Options to Acquire Shares of BP Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table discloses information regarding options with
respect to shares of BP common stock granted to the executive
officers named in the Summary Compensation Table in 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Potentially realizable value at</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of BP common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>assumed annual rates of</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>stock price appreciation over</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options/ stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>options/ SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>option term<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>appreciation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>granted to BP</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>rights (SARs)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>employees</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>price<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration date</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>10%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(%)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($/&#163;)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($/&#163;)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($/&#163;)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>February&nbsp;24, 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,845,552.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,745,384.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier Baudrand</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#163;4.22</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>February&nbsp;25, 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#163;111,465.28</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#163;282,474.91</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>February&nbsp;24, 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>392,901.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>995,690.60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>December&nbsp;6, 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>640,925.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,624,230.80</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    ADSs have been converted into shares at a ratio of one ADS to
    six shares of BP common stock, and exercise prices have been
    adjusted accordingly.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Potentially realizable values have been determined assuming the
    stock options will be exercised at the end of their ten-year
    life.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    This amount would correspond to $8.09, assuming conversion at
    the noon buying rate published by the U.S. Federal Reserve Bank
    in New&nbsp;York for December&nbsp;31, 2004, which was $1.9160
    per &#163;1.00.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The potentially realizable values shown for Mr.&nbsp;Baudrand
    would correspond to $213,567.48 and $541,221.93, respectively,
    assuming conversion at the noon buying rate published by the
    U.S. Federal Reserve Bank in New&nbsp;York for December&nbsp;31,
    2004, which was $1.9160 per &#163;1.00.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">106
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exercises of Options to Acquire Shares of BP Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table discloses information regarding options with
respect to shares of BP common stock exercised by the executive
officers named in the Summary Compensation Table in 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Number of BP shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Value of unexercised in-the-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>underlying unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>money options at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>BP shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>options at year-end</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2004<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>acquired on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>exercise<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>realized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($/&#163;)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>395,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,335,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>748,671</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier Baudrand</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#163;99,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>124,880</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    ADSs have been converted into shares at a ratio of one ADS to
    six shares of BP common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Options have been treated as &#147;in the money&#148; if their
    exercise price at December&nbsp;31, 2004 was less than the
    market price of a share of BP common stock at that date. Option
    values have been calculated based on the closing price of a
    share of BP common stock or ADS, as reported on the NYSE or the
    London stock exchange on December&nbsp;31, 2004, which were
    &#163;5.08 and $58.40, respectively.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Awards of Performance Units Under BP&#146;s LTPP</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table discloses information regarding grants of
performance units under BP&#146;s LTPP to the executive officers
named in the Summary Compensation Table in 2004. Under the
Conversion Plan, each of these executive officers has agreed to
convert unvested performance units granted to him under
BP&#146;s LTPP in 2004 into Innovene restricted stock units. See
&#147;Innovene &#147;BP LTPP&#148; Conversion Plan&#148; for
more information regarding this plan.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Estimated future payouts under</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>non-stock price-based plans</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>performance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date of maturation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>units</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>or payout</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Threshold</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Target</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Maximum</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ralph Alexander</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Didier Baudrand</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>March&nbsp;1, 2007<SUP style="font-size: 85%; vertical-align: text-top">(2</SUP></TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dennis Seith</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>March&nbsp;1, 2007<SUP style="font-size: 85%; vertical-align: text-top">(2</SUP></TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,300</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Performance units awarded to Mr. Alexander under BP&#146;s 2004
    LTPP are scheduled to be paid out in the form of BP ADSs
    ten&nbsp;years after the completion of his employment at BP.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Represents the date on which the performance units granted under
    BP&#146;s 2004 LTPP are expected to result in an award of
    restricted stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Innovene Equity-Based Compensation Plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the offering, we have adopted the Conversion
Plan, the Incentive Plan and the Executive Share Matching Plan
to attract, retain and motivate our executive officers, certain
key employees and others and align their financial interests
with those of our shareholders. These plans are unfunded, are
not qualified under Section&nbsp;401(a) of the United States
Internal Revenue Code and are not subject to the provisions of
U.S.&nbsp;Employee Retirement Income Security Act. The following
plan summaries are not complete and are qualified in their
entirety by reference to the actual plans, copies of which are
filed as exhibits to the registration statement of which this
prospectus is a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plans will be administered by our compensation committee or
any other committee designated by our Board of Directors. Our
compensation committee has the exclusive power to administer the
plans and to take all actions that are specifically contemplated
in the plans or are necessary or appropriate in connection with
their administration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we subdivide or consolidate the outstanding shares of our
common stock, declare a stock dividend or undertake a stock
split, our compensation committee is authorized to make
appropriate adjustments to (1)&nbsp;the number of shares of our
common stock reserved under the plans, (2)&nbsp;the number of
shares of our common stock covered by outstanding awards,
(3)&nbsp;the exercise or other price in respect of such awards,
(4)&nbsp;the appropriate fair
</DIV>

<P align="center" style="font-size: 10pt;">107

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<DIV align="left" style="font-size: 10pt;">
market value and other price determinations for such awards and
(5)&nbsp;the award limitations applicable to the Executive Share
Matching Plan, as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Innovene &#147;BP LTPP&#148; Conversion Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Conversion Plan, if the offering is completed on or
before December&nbsp;29, 2006, those of our executive officers
and key employees who were awarded performance units under
BP&#146;s LTPP in 2003 or 2004 will have any unvested
performance units exchanged for restricted stock units with
respect to shares of our common stock. Each participant&#146;s
unvested performance units will be valued on the date of the
offering as the equivalent of two shares of BP common stock,
using the highest single closing price for these shares as
reported on the London stock exchange during the five trading
days prior to the offering and converted from British pounds
into U.S. dollars value using the exchange rate on the close of
business on the date of the offering. Each participant&#146;s
performance units will then be converted into restricted stock
units at a ratio calculated by dividing the deemed value of one
performance unit by the initial public offering price of our
shares. The restricted stock units will vest on the third
anniversary of the completion of the offering and entitle their
holders to receive one share of our common stock of our for each
restricted stock unit held by them, subject to certain transfer
restrictions imposed by our compensation committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have
reserved &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock for issuance under the Conversion Plan. The
number of shares authorized to be issued under the plan is
subject to adjustment in certain circumstances, as described
under &#147;&#151;&nbsp;Innovene Equity-Based Compensation
Plans.&#148; Shares subject to awards that are forfeited,
terminated or settled in cash instead of shares of our common
stock, will no longer be reserved and will not again be
available for awards under the Conversion Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a participant ceases to be employed by us, any unvested
restricted stock units held by him or her will lapse. However,
if a participant ceases to be employed by us because of death,
disability, retirement, termination by us without cause,
termination by the participant for good reason, such as a
significant change in his or her duties that could lead to an
adverse change in the participant&#146;s responsibilities or a
reduction in his or her salary, or a participant&#146;s employer
ceasing to be our affiliate, the participant&#146;s restricted
stock units will vest immediately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the vesting period, participants are entitled to cash
dividend equivalents in respect of the number of shares
represented by the restricted stock units held by them. A cash
dividend equivalent represents an entitlement to receive upon
vesting of a restricted stock unit any cash dividends paid on
the underlying share of common stock during the vesting period.
Restricted stock units do not entitle participants to exercise
voting rights or receive any other types of dividend equivalents
with respect to the underlying shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At our compensation committee&#146;s discretion, restricted
stock units generally may be settled by a cash payment in an
amount equal to the fair market value of the number of shares of
our common stock underlying those units on the date of vesting
or date of payment, as determined by the compensation committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Innovene Incentive Plan 2005</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To incentivize our executive officers and key employees, we
launched the Incentive Plan in 2005. Because there was no public
trading market for our common stock prior to the offering, no
shares have been granted under the Incentive Plan. Instead, each
participant received a restricted cash grant equal to a multiple
of the participant&#146;s basic annual salary. If the offering
is completed on or before December&nbsp;29, 2006, the restricted
cash grant will lapse and be replaced by an award of restricted
shares of our common stock and stock options. Restricted shares
are shares that are subject to transfer restrictions and
forfeiture during a vesting period. In some jurisdictions, we
may grant participants restricted stock units instead of
restricted shares. The number of restricted shares or restricted
stock units issuable to a participant under the Incentive Plan
will be equal to 30% of the participant&#146;s restricted cash
grant divided by the initial public offering price of our
shares. The restricted shares or restricted stock units will
vest on January&nbsp;1, 2008. The number of stock options
issuable to participants will be equal to five multiplied by the
quotient of 70% of the restricted cash grant and the initial
public offering price of our shares. The stock options will vest
on January&nbsp;1, 2008 and entitle their holders to purchase
one share of our common stock for each stock option held by them
at a price equal to the initial public offering price of our
shares. In
</DIV>

<P align="center" style="font-size: 10pt;">108
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<DIV align="left" style="font-size: 10pt;">
addition, the Incentive Plan provides for the grant of SARs to
participants either in connection with the grant of stock
options or separately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have
reserved &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock for issuance under the Incentive Plan. The
number of shares authorized to be issued under the plan is
subject to adjustment in certain circumstances, as described
above under &#147;&#151;&nbsp;Innovene Equity-Based Compensation
Plans.&#148; Shares subject to awards that are forfeited or
terminated, or settled in cash instead of shares of our common
stock, will no longer be reserved and will not again be
available for awards under the Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a participant ceases to be employed by us, any unvested
restricted shares, restricted stock units and stock options held
by him or her will lapse. However, if a participant ceases to be
employed by us because of death, disability, retirement,
termination by us without cause, termination by the participant
for good reason, such as a significant change in duties that
could lead to an adverse change in the participant&#146;s
responsibilities or a reduction in salary, or a
participant&#146;s employing entity ceasing to be our affiliate,
then his or her restricted shares, restricted stock units and
stock options will vest immediately. A vested stock option
generally will remain exercisable until it expires. However,
stock options generally will expire and cease to be exercisable
60&nbsp;days following termination of employment, except that if
a participant dies, becomes disabled or is terminated without
cause or terminates for good reason, or if the
participant&#146;s employing entity ceases to be a member of the
group, his or her stock options will expire on the third
anniversary after the relevant event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the vesting period, participants are entitled to cash
dividends with respect to restricted shares and cash dividend
equivalents in respect of the number of shares represented by
the restricted stock units held by them. Restricted shares also
entitle participants to exercise voting rights with respect the
underlying shares. No cash dividend or voting rights are
associated with stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At our compensation committee&#146;s discretion, restricted
shares and restricted stock units generally may be settled by a
cash payment in an amount equal to the fair market value of the
relevant number of shares as of the date of vesting or the date
of delivery, as determined by the committee. Likewise, at the
compensation committee&#146;s discretion, stock options
generally may be settled by a cash payment in an amount equal to
the difference between the fair market value of the number of
shares of our common stock underlying the options on the date of
exercise and the exercise price of the award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Innovene Executive Share Matching Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have adopted a compensatory benefit plan under which we
intend to offer our executive officers and key employees an
opportunity, at the time of the offering to purchase shares of
newly issued common stock at the initial public offering price
and in addition receive stock options under the Executive Share
Matching Plan. The maximum number of shares that each
participant will be permitted to purchase will be equal to
one-half of his or her basic annual salary at the time of
purchase. Shares purchased under the plan will be subject to
transfer restrictions for a period of up to 180&nbsp;days from
the date of purchase and certain additional transfer
restrictions for up to one year from the date of purchase or, if
earlier, the date the participant ceases to be our employee. The
number of shares underlying each stock option granted will equal
five times the number of shares purchased by the executive in
connection with the offering. The stock options will have an
exercise price equal to the initial offering price, a term of
ten years and a vesting period of three years from the date of
purchase and otherwise will have the same terms and conditions
as stock options granted under the Incentive Plan, as described
above under &#147;&#151;&nbsp;Innovene Incentive Plan 2005.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have
reserved &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock for issuance under the Executive Share
Matching Plan. The number of shares authorized to be issued
under the plan is subject to adjustment in certain circumstances
as described under &#147;&#151;&nbsp;Innovene Equity-Based
Compensation Plans.&#148; Shares subject to awards that are
forfeited or terminated, or settled in cash instead of common
stock, will no longer be reserved and will not again be
available for awards under the Executive Share Matching Plan.
</DIV>

<P align="center" style="font-size: 10pt;">109

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Retirement Plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The executive officers named in the Summary Compensation Table
participate in various pension and other post-employment benefit
plans sponsored by BP or us. In those cases where a plan is
currently sponsored by BP, we intend to set up and sponsor
corresponding plans once BP&#146;s ownership of our common stock
drops below certain levels, at which point our employees will no
longer be entitled to participate in these plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Alexander, Mr.&nbsp;Kleeman, Mr.&nbsp;Seith and
Mr.&nbsp;Tomkins are covered by various U.S. retirement plans.
Mr.&nbsp;Baudrand is covered by a French retirement plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>U.S. Retirement Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Alexander and Mr.&nbsp;Seith participate in the BP
Retirement Accumulation Plan (RAP). Under this plan&#146;s
&#147;cash balance&#148; formula, participants earn monthly pay
credits based on their eligible compensation (salary plus
bonus), age and years of service, subject to a maximum of 11% of
eligible compensation. Accumulated pay credits accrue interest
at U.S.&nbsp;Treasury interest rates, with a minimum of 5% per
year. As a former Amoco employee, Mr.&nbsp;Seith also accrues
benefits pursuant to the grandfathered Amoco plan formula under
the RAP. Mr.&nbsp;Seith&#146;s total pension benefit will be the
greater of the benefit to which he is entitled pursuant to the
&#147;cash balance&#148; formula and the benefit to which he is
entitled under the Amoco plan formula. The Amoco plan formula
provides for an annual annuity to be paid from the time a
participant reaches the age of 65. The annuity amounts to 1.67%
of the participant&#146;s final average earnings times years of
service, offset by a portion of his or her social security
benefits. A participant&#146;s final average earnings are
determined by calculating the sum of the participant&#146;s
average basic earnings during his or her three highest
consecutive years of basic earnings and his or her average bonus
awards during his or her three highest consecutive years of
bonus awards. Mr.&nbsp;Tomkins and Mr.&nbsp;Kleeman participate
in the BP Polyethylene Pension Plan, which mirrors the structure
of the RAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, Mr.&nbsp;Alexander, Mr.&nbsp;Kleeman,
Mr.&nbsp;Seith and Mr.&nbsp;Tomkins participate in the BP
Supplemental Executive Retirement Benefit plan (SERB), which is
an unfunded &#147;top-up&#148; arrangement for certain members
of senior management. The benefits payable upon retirement under
the SERB equal 1.3% of a participant&#146;s final average
earnings times years of service, with an offset for benefits
payable under any other qualified and non-qualified pension plan
of BP, including the RAP and the BP Polyethylene Pension Plan. A
participant&#146;s final average earnings are determined in the
same manner as described above under the RAP. Benefits are
payable in the form of a lump sum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Alexander, Mr.&nbsp;Kleeman, Mr.&nbsp;Seith and
Mr.&nbsp;Tomkins are also eligible to participate in the BP
Employee Savings Plan, a qualified savings plan which matches
100% of an employee&#146;s contributions for the first 7% of his
or her eligible compensation, including bonuses. Unfunded
non-qualified plans have been established to enable matching
contributions that could not be made under the qualified savings
plan due to applicable IRS limits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At June&nbsp;30, 2005, Mr.&nbsp;Alexander and Mr.&nbsp;Seith had
accrued 22.75 and 27.08&nbsp;years of service and estimated lump
sum benefits upon retirement of $2,193,251 and $1,034,591,
respectively, assuming no future growth in their final average
earnings, which, as of June&nbsp;30, 2005, were expected to be
$893,709 and $405,375, respectively. Savings plan balances for
Mr.&nbsp;Alexander and Mr.&nbsp;Seith, both qualified and
non-qualified as of June&nbsp;30, 2005, were $1,751,208 and
$1,022,133, respectively. Mr.&nbsp;Tomkins and Mr.&nbsp;Kleeman
joined our company in May and June 2005, respectively and do not
currently have any accrued pension benefit entitlements under
any company plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>French Retirement Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Baudrand participates in BP&#146;s Caisse de Retraite
plan, a partially funded non-contributory pension plan which
&#147;tops up&#148; (but is not dependent on the future
development of) state and mandatory benefit arrangements to
provide annual retirement benefits depending on final earnings
and years of service. Under the plan&#146;s formula, benefits
cannot exceed 65% of final base salary, inclusive of state and
mandatory benefits. The normal retirement age under this plan is
60.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At June&nbsp;30, 2005, Mr.&nbsp;Baudrand had accrued
25.5&nbsp;years of service and estimated benefits upon
retirement, payable in the form of an annual annuity, of $7,500
per month, assuming no future growth in his final earnings.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Change in Control Severance Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to enter into change in control severance agreements
with Mr.&nbsp;Alexander, Mr.&nbsp;Baudrand, Mr.&nbsp;Seith and
certain other executive officers to provide severance pay and
benefits in the event that their employment with us were to
terminate under certain change in control scenarios defined in
the agreement. The change in control severance agreements have
similar terms and terminate on the earliest of (1)&nbsp;the
relevant executive officer&#146;s termination of employment,
unless such termination is a qualifying termination as defined
below or (2)&nbsp;December&nbsp;31, 2007; provided that if a
change in control occurs during this period, the term of the
agreement will continue for an additional two years after such
change in control. Mr.&nbsp;Alexander&#146;s change in control
agreement will be entered into by BP and it is expected that BP
will assign this agreement to us following the consummation of
the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A qualifying termination means (1)&nbsp;a termination of
employment by us or our successors other than for cause or
(2)&nbsp;a termination by the relevant executive officer for
good reason, as defined in the applicable change in control
agreement. Termination because of death, disability or
retirement does not constitute a qualifying termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A termination of employment by us other than for cause within
the 90-day period preceding a change in control is deemed to be
a qualifying termination and entitles the relevant executive
officer to the benefits payable as if a change in control had
occurred provided that such benefits will be offset by any
severance payments or benefits payable to that executive officer
as a result of his or her termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the change in control severance agreements, if an
executive officer becomes subject to a qualifying termination
during the time period commencing with a change in control and
ending two years after such change in control, we will generally
provide him or her the following severance benefits:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="95%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    a lump sum cash payment equal to (1)&nbsp;twice the sum of the
    executive officer&#146;s current annual base salary, plus the
    greater of (a)&nbsp;the executive officer&#146;s current-year
    target bonus and (b)&nbsp;his or her most recent actual annual
    bonus and (2)&nbsp;an amount equal to the daily pro rata portion
    of the executive officer&#146;s annual target bonus for the year
    of termination (subject to certain performance-based parameters
    if the termination occurs in 2005); if the executive officer
    terminates his or her employment because of a reduction in base
    salary or target bonus opportunity, then the base salary or
    target bonus amount prior to such reduction will be used in
    calculating the lump sum cash payments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    twelve&nbsp;months of medical benefits (if the executive elects
    extended medical coverage) and group term life insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    job placement services with a provider selected and paid by us
    for a period no less than one year; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;</TD>
    <TD align="left">
    certain gross-up payments in the event the executive officer is
    subject to the golden parachute excise tax under
    Section&nbsp;4999 of the Internal Revenue Code.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Alexander experiences a qualifying termination under
his change in control agreement prior to January&nbsp;1, 2008,
he will in addition be entitled to a lump sum benefit equal to
no less than $3,210,000 for his participation in our and
BP&#146;s defined benefit pension plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the one year-period following a qualifying termination,
each relevant executive officer will be subject to certain
restrictions on competition with us (and in, certain limited
circumstances, BP) and solicitation of our employees, customers
and suppliers. In addition, the executive officer must maintain
the confidentiality of BP&#146;s and our non-public information.
</DIV>

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<A name='113'></A>
</DIV>

<!-- link1 "PRINCIPAL SHAREHOLDER" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRINCIPAL SHAREHOLDER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, all of the outstanding shares of our
common stock were owned by BP. After the offering, BP will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the outstanding shares of our common stock, assuming the
underwriters do not exercise their option to purchase additional
shares. Except for BP, we are not aware of any person or group
that will beneficially own more than 5% of our outstanding
shares of common stock following the offering. None of our
executive officers, directors or director nominees currently
owns any shares of our common stock, but those who own shares of
BP common stock will be treated on the same terms as other
holders of BP stock in any distribution by BP.
</DIV>

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<A name='114'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview of Arrangements Between Us and BP</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with our separation from BP, we and BP have
entered into numerous agreements. These agreements comprise:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reorganization agreements under which BP has transferred
    substantially all of the assets and liabilities comprising our
    current business activities to us, subject to the retention by
    BP of certain historic liabilities;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    commercial interface agreements which (1)&nbsp;have established
    arm&#146;s length commercial arrangements between us and BP and
    (2)&nbsp;require BP to provide us with support services for a
    limited period of time.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reorganization agreements assume that our separation from BP
and the transfer of all relevant assets and liabilities occurred
on April&nbsp;1, 2005, whereas the commercial interface
agreements regulate our commercial relationships with BP with
effect from January&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reorganization Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Local Transfer Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective April&nbsp;1, 2005, BP transferred to us substantially
all of the assets and liabilities relating to the former olefins
and derivatives business of BP&#146;s Petrochemicals segment,
our refineries at Grangemouth, United Kingdom, and Lav&#233;ra,
France, which formed part of BP&#146;s Refining and Marketing
segment, and the gas fractionator located near Hobbs, New
Mexico, which formed part of BP&#146;s Gas, Power and Renewables
segment, in each case, together with associated infrastructure.
The transfers were made on the basis of a series of Local
Transfer Agreements. As a result of these transfers, we acquired
BP&#146;s title or other interest in the relevant assets and,
with limited exceptions, the unencumbered ability to operate and
transfer these assets to third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
However, given the scale and complexity of our business, some
transfers were structured differently to facilitate the relevant
transaction and to protect the interests of one or both parties.
The most important examples of such transfers are:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Pasadena, Texas.</I> Instead of transferring BP&#146;s
    facility in Pasadena, Texas to us, BP has agreed to operate the
    facility for us on a toll manufacturing basis and to close it in
    late 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Wingles, France.</I> Due to restrictions on the
    transferability of BP&#146;s facility in Wingles, France, BP has
    retained ownership of that facility. However, we have entered
    into agreements with BP under which BP has agreed to purchase
    all of the facility&#146;s styrene requirements from us, and to
    sell all of the polystyrene and EPS made by the facility to us.
    Following the commencement of operations of our polystyrene and
    EPS joint venture with NOVA, we expect to supply approximately
    half of the styrene requirements of that joint venture, which in
    turn will supply all of the Wingles facility&#146;s styrene
    requirements. The joint venture will also purchase all of the
    polystyrene and EPS made by the Wingles facility. In addition,
    we have entered into a put and call option agreement with BP,
    under which we have the option to purchase and transfer to the
    joint venture, and BP has the option to sell to the joint
    venture, the Wingles facility and associated assets and
    liabilities, in each case at the fair market value of the
    facility and related assets and liabilities at the time of
    transfer. Our call option is exercisable in January 2007. If we
    do not exercise the option at that time, BP may exercise its put
    option in February 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Grangemouth, United Kingdom.</I> BP has retained ownership of
    certain assets of our Grangemouth, United Kingdom, site,
    including the power station, two of the high voltage electricity
    substations and certain tankage and pipelines associated with
    the transportation of condensate from Grangemouth to other
    destinations, to ensure that the FPS remains in operation
    throughout the term of certain supply agreements between us and
    BP at that site. BP has agreed to lease these assets to us on a
    long-term basis. Under the terms of the leasing arrangement, BP
    has reserved the right to temporarily step in as operator of the
    leased assets in the event this is necessary to protect itself
    against our failure to take off hydrocarbons from, or to provide
    utilities to, BP or otherwise fail to transport condensate
    through the relevant pipelines. BP is</TD>
</TR>

</TABLE>

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    <TD width="3%"></TD>
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    <TD width="96%"></TD>
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    <TD></TD>
    <TD align="left">
    entitled to terminate the leasing arrangement if we become
    insolvent or materially breach our various Framework Interface
    Agreements (FIAs) with BP with respect to that site.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Pipelines in North America.</I> We have entered into a 50/50
    joint venture with BP in relation to certain pipelines in Texas.
    This joint venture lasts until December&nbsp;31, 2025, unless it
    is terminated earlier. In addition, certain other pipelines are
    wholly-owned by us and operated by BP on our behalf under
    arrangements which expire on December 31, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>RMR Pipeline Access.</I> A significant portion of the annual
    naphtha supply required by the petrochemical cracker at our
    Cologne, Germany, site is transported through the RMR pipeline.
    BP is entitled to a certain amount of RMR pipeline capacity
    every year, consistent with its overall 35% interest in the
    pipeline. We have agreed with BP to use some of this capacity,
    along with associated infrastructure at Nerefco, The
    Netherlands, to enable us to meet approximately 50% of the
    current naphtha requirements of our Cologne site.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In instances where a third party consent would have been
necessary to transfer an asset from BP to us but was not
obtained, we and BP have agreed to alternative arrangements so
that, to the maximum extent possible, we will receive the same
benefits as if the consent had been obtained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Amended and Restated Master Reorganization
Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Amended and Restated Master Reorganization Agreement sets
out a framework for dealing with assets or liabilities not
specifically covered by the Local Transfer Agreements described
above, such as liabilities arising from our or BP&#146;s past
and future conduct.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the exceptions described below, we generally have
assumed all liabilities relating to the businesses and assets BP
has transferred to us, and BP has agreed to retain all
liabilities relating to the businesses and assets it has
retained. In each case, these indemnities cover all losses
arising from such liabilities, regardless of whether they arise
from events occurring before or on or after April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding this overall allocation of liabilities, BP has
specifically agreed to indemnify us, subject to certain
limitations, for claims and losses relating to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any liabilities related to off-site waste disposal prior to
    April&nbsp;1, 2005 (excluding liabilities related to certain
    waste disposal sites located near our facilities in Cologne,
    Germany, and Sarralbe, France);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any liabilities related to former facilities which, as of
    April&nbsp;1, 2005, had been sold, closed or decommissioned;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any claims for exposure to hazardous materials at our facilities
    to the extent that such claims were either made prior to
    April&nbsp;1, 2005 or threatened in writing prior to
    April&nbsp;1, 2005 and made prior to April&nbsp;1, 2006 or, in
    certain cases, to the extent that such exposure related to
    events that occurred prior to April&nbsp;1, 2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    certain product liability claims related to products
    manufactured prior to April&nbsp;1, 2005;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Amended and Restated Master Reorganization Agreement
provides that we will maintain employee benefits at the same or
comparable levels for a period of at least twelve&nbsp;months
from the date of the consummation of the offering. With respect
to retirement benefit arrangements, in particular, we plan to
meet this commitment by either continuing to participate in
BP&#146;s arrangements after the date of consummation of the
offering for a prescribed period or by establishing replacement
pension, saving and post-employment medical plans. With respect
to funded retirement benefit arrangements being retained by BP,
BP has agreed to transfer to us the relevant plan assets
relating to our employees together with associated liabilities
that accrued prior to the date of the offering and to make any
necessary equalization payments to ensure that the sum of the
value of these plan assets and the amount of these payments
equals the amount of the liabilities transferred to us. Our
employees may continue to participate in BP&#146;s retirement
plans until BP&#146;s stake in our company falls below certain
thresholds. The relevant threshold is 80% with respect to our
U.S.&nbsp;employees and 50% with respect to all our other
employees. Our U.K. and Belgian employees may continue to
participate in BP&#146;s retirement plans until the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
later of the date on which BP&#146;s stake in our company falls
below 50% or the expiration of twelve months from the
consummation of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Intellectual Property and Information Technology
Separation Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into an Intellectual Property and Information
Technology Separation Agreement (IPITSA) with BP, which governs
the transfer of intellectual property and intellectual property
related agreements from BP to us and addresses certain related
third-party issues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The IPITSA provides for the transfer from BP to us of certain
registered patents, trademarks and domain names along with any
other intellectual property relating exclusively to our
petrochemical business, our refineries in Grangemouth, United
Kingdom, and Lav&#233;ra, France, and our gas fractionator near
Hobbs, New Mexico. In addition, BP has agreed to assign to us
all intellectual property-related contracts, such as licenses,
research and development agreements, technology sharing
agreements, software licenses and support agreements relating
exclusively to our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP has also granted us licenses in respect of certain
intellectual property in which we and BP have a common interest.
The terms and conditions of these licenses are set forth in
separate common interest license agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the IPITSA, we have assumed all liabilities relating to
the intellectual property and related contracts transferred from
BP to us, whether existing at April&nbsp;1, 2005 or arising
thereafter. In this connection, we have agreed to indemnify BP
for any losses it may incur in the event a third party raises a
claim in respect of our use of any of this transferred
intellectual property on or after April&nbsp;1, 2005. In return,
BP has agreed to indemnify us in the event and to the extent
that we notify it before the end of September 2005 of any
failure or inability to transfer a material intellectual
property-related third-party contract to us or to extend a
material common interest intellectual property agreement to
cover our activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP has also transferred to us in separate agreements various
U.S. and foreign trademarks, including our Innovene&#174; brand.
Pursuant to a separate endorsement agreement, BP has allowed us
to describe ourselves as &#147;forming part of the BP
group&#148; and to use certain BP trademarks in connection with
this description, so long as BP holds 50% or more of our share
capital. We have not been granted any other rights to use the
&#147;BP&#148; trademark and are required to phase out all uses
of this trademark on or before April&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Master Tax Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into two Master Tax Agreements with BP, one with
respect to taxation in the United States (the U.S. Tax
Agreement), and one with respect to taxation in the rest of the
world (the ROW Tax Agreement).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>U.S.&nbsp;Master Tax Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S. Tax Agreement regulates the ongoing arrangements
between us and BP in relation to U.S. tax matters, including the
preparation and submission of tax returns and the conduct of tax
audits and litigation. Under the U.S. Tax Agreement, BP has
generally agreed to assume, and to indemnify us for, U.S.
federal, state or local tax liabilities of our businesses
arising on or before April&nbsp;1, 2005, and U.S. federal, state
or local tax liabilities of any BP entity not associated with
our businesses arising after April&nbsp;1, 2005. We have agreed
to assume, and to indemnify BP for, any U.S. federal, state or
local tax liabilities of our businesses arising after
April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP has also agreed to assume, and to indemnify us for, any U.S.
federal, state and local tax liabilities arising as a result of
our deconsolidation from BP. As a general matter, U.S. state or
local transfer tax liabilities arising as a result of our legal
separation from BP will be borne by the entity that is legally
responsible for such taxes under applicable law. In addition,
the U.S. Tax Agreement requires us to indemnify BP in the event
that our actions cause a recapture of any dual consolidated loss
incurred prior to the offering that is related to any business
owned by us at the time of the offering. Moreover, each party to
the U.S. Tax Agreement will be required under certain
circumstances to pay compensation if one party uses a tax credit
or loss generated by the other party.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Rest of the World Tax Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the ROW Tax Agreement, BP has generally agreed to assume,
and indemnify us for, non-U.S. tax liabilities arising prior to
April&nbsp;1, 2005, and we have generally agreed to assume, and
indemnify BP for, non-U.S. tax liabilities arising on or after
April&nbsp;1, 2005. Any other separation-related non-U.S. tax
liabilities generally will be paid by the party on which it has
been assessed provided that taxes payable on the transfer of
shares and assets will be borne by us. We will also be liable
for any separation-related non-U.S. tax liabilities where the
relevant tax is jointly payable by us and BP. The ROW Tax
Agreement also regulates the ongoing relationship between us and
BP in relation to other non-U.S. tax matters, for example, in
relation to tax compliance, and includes provisions which allow
both parties to share tax assets, subject to appropriate
compensation payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commercial Interface Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into a series of commercial interface agreements
with BP to maintain and enhance our existing relationships by
establishing medium- to long-term arrangements for services,
utilities and infrastructure access rights in situations where
we or BP depend on each other or where reasonable alternatives
do exist but it is nevertheless economical for us and BP to
continue preexisting arrangements. We have also established
agreements for the sale and purchase of refining and
petrochemical feedstocks and refined products in situations
where we or BP have an interest in establishing a secure source
of feedstock supply or ensure the off-take of products, with the
term of these agreements in part depending on the availability
of third-party alternatives. In addition, we have entered into
various agreements for the provision by BP to us of short-term
transitional services, such as information technology
infrastructure, which we cannot readily replicate as a new
company but which we expect to have the ability to provide
in-house or outsource to a third party at the end of the initial
term of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The commercial interface agreements include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Hydrocarbons Sale and Purchase Agreements (SPAs);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Supply and Trading Agreements, which include the Master Services
    Agreements, the Sale and Purchase Agreements and the Foreign
    Exchange and Precious Metals Agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Shipping Services Agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Inland Refined Product Sale and Purchase Agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    FIAs, including the Utilities FIAs, Complex Infrastructure FIAs,
    Shared Services FIA and Functional Services FIAs; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Site Cooperation Agreements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a summary of the key principles on which
these commercial interface agreements are based. We believe that
these principles will allow us to operate successfully as a
standalone entity and maintain secure commercial relationships
with BP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>No stranding of key infrastructure.</I> We have agreed with
BP that when a term sheet under a Hydrocarbons SPA or site-based
FIA expires neither party should be left stranded, land-locked
or cut off from alternative sources of supply of the feedstock
or service covered by the term sheet. Accordingly, upon
expiration of a term sheet, the stranded party generally will be
entitled to request the other party to allow it to access and
use for a period of not more than five years any infrastructure
owned by that party which it considers in good faith to be
necessary for the continued supply or purchase, as applicable,
of the relevant feedstock or service from the relevant third
party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pricing arrangements.</I> Prices for the sale and purchase of
petrochemical and refining feedstocks as between us and BP are
generally based on formulas designed to reflect market prices.
Services, utilities and complex infrastructure access rights
provided to us by BP are generally priced at cost, which
includes BP&#146;s fixed and variable costs and, where fixed
assets are involved in providing the service, a fixed return on
capital investment.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term and termination.</I> The initial term of the commercial
interface agreements and related term sheets generally runs from
January&nbsp;1, 2005. The medium- to long-term nature of many of
these agreements allows us to secure the supply of products and
services for which we may not have ready third-party
alternatives and also reflects BP&#146;s desire to have a
guaranteed purchaser for certain of its products and services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Hydrocarbons Sale and Purchase Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Hydrocarbons SPAs govern the sale and purchase of
petrochemical feedstocks at or between sites where we and BP
have a continuing relationship with each other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the agreements is in substantially the same form, with
only minor jurisdiction- and site-specific differences. Each
agreement is a master agreement describing the general terms and
conditions on which the relevant feedstocks are sold and
purchased as between us and BP. The commercial terms for each
relevant petrochemical feedstock are set out in a separate term
sheet appended to the relevant agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the agreements themselves nor the relevant term sheets
executed on the basis of these agreements may be terminated
prior to the expiry of an initial term set forth in the relevant
term sheet, unless a termination event or extended force majeure
event occurs or the parties mutually agree to terminate the
relevant term sheet. Termination events include breach of a
material obligation, insolvency and failure to make any payment
of an amount (other than an amount subject to a bona fide
dispute) in excess of, in most cases, $500,000 when due and such
amount is not paid for 60&nbsp;days following notification by
the other party. Unless terminated, most of the term sheets
automatically renew at the end of their initial term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The most significant term sheets we have entered into with BP
are discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>NGLs in South Houston, Texas.</I> To address our and
BP&#146;s mutual requirements for the sale and purchase of NGLs
at our Chocolate Bayou, Texas, site, we have entered into a term
sheet for the purchase by us of NGLs provided by BP for
processing at our gas fractionator near Hobbs, New Mexico,
further processing at BP&#146;s gas fractionator in Mont
Belvieu, Texas, and the supply of the resulting gas to the
olefins crackers of our Chocolate Bayou site. The NGL processing
arrangements have an initial term of ten years, while the gas
supply arrangements to our Chocolate Bayou site have
a&nbsp;five-year initial term. All of the relevant term sheets
are thereafter terminable on one year&#146;s notice. If, prior
to the end of the initial term, we become subject to a change in
control (other than a change in control caused by BP), BP has
the right to terminate these arrangements by providing notice in
accordance with the notice period set forth in the term sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Propylene in Toledo, Ohio, Texas City, Texas, Whiting,
Indiana, and Carson, California.</I> We have entered into four
term sheets for the purchase by us of propylene from BP&#146;s
refineries in Toledo, Ohio, Texas City, Texas, Whiting, Indiana,
and Carson, California. The term sheet for the Carson facility
has a five-year initial term and is thereafter terminable on two
years&#146; notice, and the term sheet for the Toledo facility
has a three-year initial term and is thereafter terminable on
two years&#146; notice. The term sheets for the Texas City and
Whiting facilities each have an initial term of three years with
a notice period thereafter of one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>NGLs in Grangemouth, United Kingdom.</I> Our Grangemouth,
United Kingdom, site is connected with the FPS, which transports
oil and gas from the North Sea to Scotland. BP stabilizes the
oil and separates the associated gas at its Kinneil, Scotland,
site, which is adjacent to our Grangemouth site and provides dry
gas, propane, butane and condensate to Grangemouth. BP requires
a constant off-take of these products and a constant supply of
utilities to enable the FPS to continue in operation, and we
depend on constantly purchasing feedstocks for our operations at
the site. Accordingly, we have entered into a term sheet for the
off-take of feedstocks from the FPS with an initial term of
13&nbsp;years, which is thereafter terminable on three
years&#146; notice. If, prior to the end of the initial term, we
become subject to a change in control (other than a change in
control caused by BP), BP has the right to terminate these
arrangements by providing notice in accordance with the notice
period set forth in the term sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Naphtha in Cologne, Germany.</I> Our Cologne, Germany, site
primarily uses naphtha as the feedstock for its cracker.
Approximately one-third of the facility&#146;s naphtha
requirements is provided under a term sheet pursuant to which BP
has agreed to supply naphtha from a facility in Nerefco, The
Netherlands, via the RMR pipeline. The
</DIV>

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<DIV align="left" style="font-size: 10pt;">
term sheet has an initial term of three years from
January&nbsp;1, 2005 and is thereafter terminable on two
years&#146; notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Supply and Trading Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into various Supply and Trading Agreements with
BP under which BP will, for a limited period of time, provide us
with certain supply, trading and optimization services in areas
in which we currently have no or only limited in-house
capability. The agreements have been structured so as to enable
us to develop the necessary capabilities in-house by the end of
the initial term of these agreements. The main agreements may be
divided into Master Services Agreements and Sale and Purchase
Agreements. We have also entered into a series of Foreign
Exchange and Precious Metals Agreements with BP for the
provision of foreign exchange and interest rate services and
services relating to the sale and/or lease of certain precious
metals used as catalysts but because these agreements are less
material, they are not described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Master Services Agreements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into a series of Master Services Agreements with
BP under which BP has agreed to provide us with certain
commercial services where we currently have no or only limited
in-house capability. We have entered into Master Services
Agreements for:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    commercial optimization services, including asset trading, cargo
    balancing and inventory and working capital management with
    respect to (1)&nbsp;naphtha, gas and benzene at our facilities
    in North America, (2)&nbsp;crude oil, feedstocks and refined
    products in Europe and (3)&nbsp;the trading of certain
    petrochemical products in Asia;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    sale and purchase execution services for (1)&nbsp;naphtha and
    gas at our facilities in North America and (2)&nbsp;crude oil,
    feedstocks and refined products in Europe;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    various other services, such as inventory and excise tax
    accounting and invoicing services at our facilities in the
    United Kingdom and France.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each service provided under a Master Service Agreement may be
terminated by either party. Notice periods range from three to
twelve months, depending on the agreement, provided that in most
cases no notice may be given prior to December&nbsp;31, 2005.
The termination of a particular type of service does not affect
any contracts or agreements that have already been entered into
between us and BP under one of the Master Services Agreements or
any schedules entered into under the Sale and Purchase
Agreements described below. The prices payable by us for the
various types of services are set out in schedules to the
relevant agreements and generally consist of a combination of a
fixed fee and a value sharing element.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each agreement provides that, following a change in control, we
and BP will enter into negotiations in good faith for a period
of two months following the event to make any amendments
necessary to enable us to comply with law. If no amendment is
agreed, either party may terminate the agreement without
liability to the party, except for certain mark-to-market
termination payments that may be due in respect of certain
terminated transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The various agreements remain in effect until a termination
event, a change in control (as described above) or an extended
force majeure event occurs. Termination events include breach of
a material obligation, insolvency of either party and failure to
make any payment in an amount (other than an amount subject to a
bona fide dispute) greater than that set forth in the agreement
when due for 60&nbsp;days following notification by the other
party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Sale and Purchase Agreements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also entered into a series of Sale and Purchase
Agreements with BP under which BP has agreed to sell to, or
purchase from, us crude oil, naphtha, gas and refined products
purchased from, or to be sold to, a third party in situations
where BP has the commercial relationship with the third party.
Each agreement governs a different type of product. The
agreements include an Amended and Restated Master Feedstock
Sales and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Purchase Agreement in respect of Crude Oil, an Amended and
Restated Master Refined Products Sale and Purchase Agreement and
two Amended and Restated Master Feedstock Sales and Purchase
Agreement for Naphtha, NGL and Other Feedstock Volumes,
including one for our facilities in Europe and one for those in
the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of the agreements has a fixed term. Instead, the agreements
remain in effect until a termination event or a change in
control occurs (as described above) or one of the parties
terminates the agreement on twelve months&#146; notice at the
end of a calendar year quarter. Termination events include
breach of a material obligation, insolvency of either party or
failure to make any payment in an amount greater than
$10&nbsp;million when due for 60&nbsp;days following
notification by the other party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For each trade or series of trades under an agreement, a
separate schedule to the relevant agreement will be executed.
Each schedule contains the specific terms associated with the
relevant trade and incorporates by reference the relevant
provisions of the underlying initiating contract, which is the
contract under which BP has purchased the product to be sold to
us or the contract under which BP will on-sell the product
purchased from us. Termination of an agreement will not in
itself affect schedules already executed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Shipping Services Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into two Shipping Services Agreements with BP
under which BP will, for a short transitional period, provide us
with certain services where we currently have no or only limited
in-house capability. The shipping services we receive from BP
under these agreements include chemical movement services in
Europe and container movement services in Asia. The services
generally involve the negotiation of shipping contracts and
charters, assistance with maintaining shipping supplier
relationships, the provision of shipping market and price
information and assistance with identifying and recruiting
resources for building our own chartering capabilities. Each of
the agreements is in substantially the same form, subject to
service-specific and jurisdictional differences. The agreements
were intended to be transitional in nature, and we have already
terminated services under some of the agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also entered into a Global Assurance Services Agreement
with BP under which BP will provide us with global assurance
services for certain marine activities. These services include
ship and shore interface audits, vessel owner audits, physical
inspections of ships and barges and support services in case of
marine emergencies. The agreement may be terminated, at our
option, by providing not less than one month&#146;s notice
provided that such notice may not be given prior to
June&nbsp;30, 2005. BP may terminate the agreement in the event
of a termination event, such an extended force majeure, or six
months after BP ceases to have the power to remove or appoint a
majority of our Board of Directors or otherwise control our
affairs and policies. We are currently developing the necessary
plans to obtain these services from non-BP sources before the
possible occurrence of any termination event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Inland Refined Products Sale and Purchase
Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into Inland Refined Products Sale and Purchase
Agreements with BP for the domestic sale of certain refined
products. We have entered into separate agreements for our
Grangemouth, United Kingdom, and Lav&#233;ra, France,
refineries. Under each agreement, BP has agreed to purchase all
of the refined products we sell into the relevant domestic
market at market-based prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement with respect to our Grangemouth refinery leverages
the refinery&#146;s position in its domestic market by providing
it with guaranteed access to BP&#146;s distribution network in
Scotland and northern England. Similarly, under the agreement
with respect to our Lav&#233;ra refinery, the vast majority of
the refinery&#146;s products are sold domestically and the
refinery&#146;s guaranteed access to BP as a customer for its
refined products in France under the relevant agreement should
help to mitigate competitive pressures from other refineries in
the region.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreements remain in effect until a termination event or an
event of extended force majeure occurs. Termination events
include breach of a material obligation, insolvency of either
party (but only in the case of the Grangemouth agreement) or
failure to make any payment in an amount greater than
$10&nbsp;million when due for 60&nbsp;days following
notification by the other party.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of the term sheets under the Grangemouth agreement have
fixed terms ranging from three to seven years. Most of the term
sheets under the Lav&#233;ra agreement terminate between 2008
and 2011 and may generally be terminated upon written notice
with notice periods ranging from one to three years, depending
on the refined product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Grangemouth agreement, we are required to sell our
refinery products exclusively to BP, but only for so long as BP
holds a majority of the voting rights in our company. If BP
ceases to hold at least 50% of our voting rights, the
exclusivity arrangements may be terminated by either party on
twelve months&#146; notice from the earlier of the date that
BP&#146;s voting rights in us falls below 50% or January&nbsp;1,
2007 (except in the case of jet fuel). Under the Lav&#233;ra
agreement, we are required to sell our refinery products
exclusively to BP, with certain limited exceptions. In return,
BP has agreed to compensate us for the restraints that this
exclusivity imposes on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Framework Interface Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>General</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into various FIAs for the provision by us to and
vice-versa BP of services and utilities at certain shared sites
and in some cases between our respective sites. These agreements
range from short-term, transitional arrangements for services
which we will eventually establish on an in-house basis or will
outsource to an alternative supplier to long-term arrangements
in areas where we and BP depend on each other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreements may be categorized as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Utilities FIAs, which govern arrangements for utility supply,
    including electricity, water and gas;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Complex Infrastructure FIAs, which govern access rights to
    infrastructure, such as jetties, pipelines and storage
    facilities at our facilities in Texas City, Texas, and
    Grangemouth, United Kingdom;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Shared Services FIAs, which govern shared services, such as
    laboratory services, medical services and facilities management
    services;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Functional Services FIAs, which govern the provision of
    functions, such as information technology, accounting, human
    resources, tax, legal and health and safety services.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each agreement describes the general terms and conditions on
which services are to be provided. The specific terms applicable
to particular services are set forth in separate term sheets
appended to the relevant agreement. Most of the term sheets
continue on an evergreen basis and automatically renew, unless a
termination event or extended force majeure event occurs prior
to the expiration of the term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The services provided under the various agreements generally may
be categorized as strategic, normal, transitional or
pass-through.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Strategic services are characterized by a high degree of mutual
dependence between us and BP and the lack of viable
alternatives. Strategic services include certain
infrastructure-related services, such as marine, road or rail
services, access to storage facilities and, generally, pipelines
and key utilities. Strategic services are terminable by either
party on 48&nbsp;months&#146; notice, provided that no notice
may be given prior to January&nbsp;1, 2015.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Transitional services are services provided on a temporary
basis. Most of the services terminate no later than
December&nbsp;31, 2006, although certain term sheets are
renewable until December&nbsp;31, 2007. Examples of transitional
services include the services provided under the Functional
Services FIAs, such as employee training and ancillary
facilities services. Transitional services are terminable at our
option on six months&#146; notice or four months&#146; notice in
the case of term sheets executed under the Functional Services
FIAs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pass-through services are services provided to either us or BP
by a third party where the benefit of the service is
&#147;passed through&#148; to the other party as the third
party&#146;s customer. Examples of such services include payroll
services, corporate relationship services, security services and
certain utility supplies. Pass-through services are terminable
in accordance with the terms of the underlying third party
pass-through contract.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Services that do not fall within any of these categories are
categorized as &#147;normal&#148; services and include services
where reasonable alternatives exist but where it is nevertheless
economical for both parties to continue preexisting
arrangements. Examples of this type of service include
facilities management, medical services, security services,
storehousing services, canteen services and fire brigade
services. Most normal services are terminable by either party on
12&nbsp;months&#146; notice provided that no notice may be given
prior to January&nbsp;1, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Utilities FIAs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into Utilities FIAs with BP at our sites in
Carson, California, Whiting, Indiana, and Texas City, Texas, in
North America and Geel, Belgium and Grangemouth, United Kingdom,
in Europe for the provision of certain utilities at cost-based
prices. Depending on the type of utility, the initial term under
the relevant term sheets ranges from one month to several years.
The most significant term sheets include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a five-year term sheet for the provision of gas fuel from BP to
    us in Texas City. The term-sheet can be terminated by BP on 30
    days notice at any time and by us after December&nbsp;31, 2009
    on two years notice;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    ten-year term sheets with a four-year notice period for the
    provision of steam and power services from us to BP in
    Grangemouth.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Complex Infrastructure FIAs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into Complex Infrastructure FIAs with BP at our
sites in Texas City, Texas, and Grangemouth, United Kingdom, for
the provision of certain access rights. Generally these rights
are provided at cost. The term of the complex infrastructure
term sheets ranges from two to 13&nbsp;years. The most
significant term sheets include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a 13-year term sheet with a two-year notice period granting us
    long-term access to the LPG export/import terminals at our
    Grangemouth site;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a 13-year term sheet granting BP long-term access to the
    condensate systems which we lease from BP near the Grangemouth
    site.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Shared Services FIAs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into Shared Services FIAs with BP with respect
to our sites in Grangemouth, United Kingdom, Hull, United
Kingdom, and Geel, Belgium, in Europe and Carson, California,
La&nbsp;Porte, Texas, Pasadena, Texas, Texas City, Texas, and
Whiting, Indiana, in North America for the provision of certain
shared services at cost-based prices. Most of the services
provided under the Shared Services FIAs are normal, transitional
or pass-through services and thus have initial terms ranging
from two to five years with notice periods ranging from six to
twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Functional Services FIAs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into eight Functional Services FIAs under which
BP has agreed to provide us with head office services at
cost-based prices in areas such as information technology,
accounting, human resources, tax, legal and health and safety,
pending our development of internal capabilities in these areas.
In some instances, we have agreed to provide functional services
to BP where BP no longer has the relevant capabilities as a
result of the separation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Agreements have been established for our sites in Belgium,
Canada, France, Germany, the United Kingdom and the United
States and for our operations in Asia. In addition, we have
entered into separate agreements for certain administrative
services provided from BP to our operations in the United States
and Asia. The agreements are all in substantially the same form,
subject to jurisdictional variations. The key commercial terms
for each service to be provided are set forth in separate term
sheets appended to the relevant agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of the functional services are either transitional or
pass-through in nature and terminate on or before
December&nbsp;31, 2006. We are entitled to terminate most
transitional services at any time on four months&#146; notice.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Following termination of a service, BP is generally required to
use reasonable efforts to assist us in migrating the relevant
service to a new service provider or an in-house function.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Site Cooperation Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into various Site Cooperation Agreements with BP
to establish rules and procedures to facilitate our operations
at certain key sites that we share with BP. We have agreements
in place for our sites in Carson, California, Naperville,
Illinois, Texas City, Texas, Whiting, Indiana, Geel, Belgium,
and Grangemouth, United Kingdom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At each shared site, a site board has been established, which is
comprised of one representative from us and one representative
from BP. Each site board is responsible for governance and
policy coordination (including the implementation and oversight
of joint site rules), strategy and new developments, reputation
and conflict resolution. Each site board is authorized to
establish joint site committees responsible for matters relating
to the relevant sites, such as HSSE matters.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF CAPITAL STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following descriptions are summaries of material terms of
our certificate of incorporation and bylaws as each will be in
effect upon the completion of the offering. These descriptions
may not contain all of the information that is important to you.
To understand the material terms of our certificate of
incorporation and bylaws fully, you should read our certificate
of incorporation and bylaws, copies of which are filed with the
SEC as exhibits to the registration statement of which this
prospectus is a part. The following descriptions are qualified
in their entirety by reference to the certificate of
incorporation and bylaws and applicable law.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the completion of the offering, our authorized capital
stock will consist
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $0.01&nbsp;per share
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, par value $0.01&nbsp;per share. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, there
were &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding, all of which were held by the BP
group. Upon completion of this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding. In addition, as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, shares of our common stock were reserved for issuance
under our stock option plans, and options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock were outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Description of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are authorized to issue one class of common stock. Our
shareholders will be entitled to one vote for each share of our
common stock held of record on all matters on which shareholders
are entitled or permitted to vote. Our common stock will not
have cumulative voting rights with respect to the election of
directors. As a result, holders of a majority of the shares of
our common stock voting for the election of directors can elect
all the directors standing for election. Upon completion of this
offering, BP will own a majority of the shares of our
outstanding common stock. See &#147;Principal Shareholder&#148;
and &#147;Risk Factors&nbsp;&#151; Risks Related to Our
Relationship with BP.&#148; Holders of our common stock will be
entitled to receive dividends, if any, out of legally available
funds when and if declared from time to time by our Board of
Directors. See &#147;Dividend Policy.&#148; In the event of our
liquidation, dissolution or winding up, the holders of our
common stock will be entitled to share ratably in all assets
remaining after payment of liabilities, subject to the rights of
any then-outstanding preferred stock. Our common stock will have
no preemptive, subscription or conversion rights, and there are
no redemption or sinking fund provisions applicable to our
common stock. The rights, preferences and privileges of holders
of our common stock will be subject to, and may be adversely
affected by, the rights of holders of shares of any series of
preferred stock that we may designate and issue in the future.
All outstanding shares of our common stock are fully paid and
nonassessable and the shares of common stock offered hereby will
be fully paid and nonassessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Anti-Takeover Effects of Provisions of Our Amended and
Restated Certificate of Incorporation and Bylaws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of our certificate of incorporation and
bylaws that may have the effect of delaying, discouraging, or
preventing a merger or acquisition that our shareholders may
consider favorable, including transactions in which shareholders
might receive a premium for their shares. These provisions
include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    authorizing our Board of Directors to issue shares of preferred
    stock in one or more series and to fix the rights and
    preferences of the shares of any such series without stockholder
    approval;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    providing that no more than one-third of the members of our
    Board of Directors stand for re-election by the stockholders at
    each annual meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    permitting the removal of a director from office only for cause
    and only by the affirmative vote of the holders of at least a
    majority of the shares of our capital stock entitled to vote;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    vesting the Board of Directors with sole power to set the number
    of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    providing that any vacancy on the Board of Directors, however
    occurring, including a vacancy resulting from an enlargement of
    the board, may only be filled by vote of the directors then in
    office;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    allowing a special meeting of the stockholders to be called only
    by a majority of the Board of Directors, the chairman of our
    Board of Directors, the president, the chief executive officer
    or BP (for so long as the BP group or any designated direct
    transferee beneficially owns at least 10% of the outstanding
    shares of our common stock);</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">123

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prohibiting stockholder action by written consent on or after
    the first date on which the BP group or any designated direct
    transferee of the BP group ceases to beneficially own at least
    50% of the shares of our capital stock entitled to vote;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    requiring the affirmative vote of the holders of at least 80% of
    the outstanding shares of our common stock to effect certain
    amendments to our charter or bylaws, for so long as the BP group
    or its designated direct transferee owns at least 10% of the
    outstanding shares of our common stock;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    requiring formal advance notice by shareholders for nominations
    for election to our Board of Directors or for proposing matters
    that can be acted upon at shareholders&#146; meetings, other
    than BP or any designated direct transferee of the BP group (so
    long as such person owns at least 10% of the outstanding shares
    of our common stock).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Limitation of Liability and Indemnification Matters</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As permitted by the Delaware General Corporation Law, our
certificate of incorporation and bylaws contain provisions that
limit or eliminate the personal liability of our directors for a
breach of their fiduciary duty of care as a director. The duty
of care generally requires that, when acting on behalf of a
corporation, directors exercise an informed business judgment
based on all material information reasonably available to them.
Consequently, a director will not be personally liable to us or
our shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability for:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    shareholders,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any act or omission not in good faith or that involve
    intentional misconduct or a knowing violation of law,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The duty of loyalty generally requires that, when acting on
behalf of a corporation, officers and directors act in the best
interests of the corporation and its shareholders. In
circumstances where an officer or director owes fiduciary duties
to more than one entity it can be difficult for such person to
satisfy duties of loyalty to both entities. Our bylaws provide
that transactions that we enter into in which a director or
officer has a conflict of interest are generally permissible so
long as (1)&nbsp;the material facts relating to the
director&#146;s or officer&#146;s relationship or interest as to
the transaction are disclosed to our Board of Directors and a
majority of our disinterested directors approves the
transaction, (2)&nbsp;the material facts relating to the
director&#146;s or officer&#146;s relationship or interest as to
the transaction are disclosed to our shareholders and a majority
of our disinterested shareholders approves the transaction, or
(3)&nbsp;the transaction is otherwise fair to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, as permitted by the Delaware General Corporation
Law, our certificate of incorporation and bylaws provide that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we shall indemnify our directors and officers to the fullest
    extent permitted by the Delaware General Corporation Law,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we shall advance expenses to our directors and officers in
    connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the rights provided in our certificate of incorporation and
    bylaws are not exclusive.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transfer Agent and Registrar</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transfer agent and registrar for our common stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have our common stock approved for quotation on the NYSE
under the trading symbol &#147;INV.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">124
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<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, there has been no public market for the
shares of our common stock. The sale of a substantial number of
shares of our common stock in the public market after the
offering, or the perception that such sales may occur, could
adversely affect our share price. Furthermore, because some of
our shares will not be available for sale shortly after the
offering due to the contractual and legal restrictions on resale
described below, the sale of a substantial number of shares of
our common stock in the public market after these restrictions
lapse could adversely affect our share price and our ability to
raise equity capital in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of the offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Of those shares, all of the shares of our common stock sold in
the offering will be freely tradable without restriction or
further registration under the Securities Act, unless the shares
are purchased by &#147;affiliates&#148; as that term is defined
in Rule&nbsp;144 under the Securities Act. Any shares purchased
by an affiliate may not be resold except in compliance with
Rule&nbsp;144 volume limitations, manner of sale and notice
requirements, pursuant to another applicable exemption from
registration or pursuant to an effective registration statement.
The shares of our common stock held by BP are &#147;restricted
securities&#148; as that term is defined in Rule&nbsp;144 under
the Securities Act. These restricted securities may be sold in
the public market by BP only if they are registered or if they
qualify for an exemption from registration under Rule&nbsp;144
or Rule&nbsp;144(k) under the Securities Act. These rules are
summarized below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144 as currently in effect, starting
90&nbsp;days after the date of this prospectus, a person or
persons whose shares are aggregated, who have beneficially owned
restricted shares for at least one year, including persons who
may be deemed to be our &#147;affiliates,&#148; would be
entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    1.0% of the number of shares of common stock then outstanding,
    which will equal
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    shares immediately after this offering;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the average weekly trading volume of our common stock on the
    NYSE during the four calendar weeks before a notice of the sale
    on Form&nbsp;144 is filed with the SEC.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to certain manner of
sale provisions and notice requirements and to the availability
of certain public information about us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144(k)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Rule&nbsp;144(k), a person who is not deemed to have been
one of our &#147;affiliates&#148; at any time during the
90&nbsp;days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including
the holding period of any prior owner other than an
&#147;affiliate,&#148; is entitled to sell these shares without
complying with the manner of sale, public information, volume
limitation or notice provisions of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Issued Under Employee Plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to file registration statements on Form&nbsp;S-8 under
the Securities Act to register
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock issuable, with respect to options to be
granted, or otherwise, under the Conversion Plan, the Incentive
Plan and the Innovene Executive Share Matching Plan. Currently,
there are no outstanding options to purchase shares of our
common stock. These registration statements are expected to be
filed following the closing of the offering. Shares issued upon
the exercise of stock options after the effective date of the
Form&nbsp;S-8 registration statements will be eligible for
resale in the public market without restriction, subject to
Rule&nbsp;144 limitations applicable to affiliates.
</DIV>

<P align="center" style="font-size: 10pt;">125

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<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN U.S.&nbsp;FEDERAL TAX CONSIDERATIONS FOR
NON-U.S.&nbsp;HOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This section summarizes certain United States federal income and
estate tax consequences of the ownership and disposition of
common stock by a non-U.S.&nbsp;holder. You are a
non-U.S.&nbsp;holder if you are, for United States federal
income tax purposes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a nonresident alien individual,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a foreign corporation,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an estate or trust that in either case is not subject to United
    States federal income tax on a net income basis on income or
    gain from common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This section does not consider the specific facts and
circumstances that may be relevant to a particular
non-U.S.&nbsp;holder and does not address the treatment of a
non-U.S.&nbsp;holder under the laws of any state, local or
foreign taxing jurisdiction. This section is based on the tax
laws of the United States, including the Internal Revenue Code
of 1986, as amended, existing and proposed regulations, and
administrative and judicial interpretations, all as of the date
hereof. These laws are subject to change, possibly on a
retroactive basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a partnership holds common stock, the United States federal
income tax treatment of a partner will generally depend on the
status of the partner and the tax treatment of the partnership.
A partner in a partnership holding common stock should consult
its tax advisor with regard to the United States federal income
tax treatment of an investment in common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should consult a tax advisor regarding the United States
federal tax consequences of acquiring, holding and disposing of
common stock in your particular circumstances, as well as any
tax consequences that may arise under the laws of any state,
local or foreign taxing jurisdiction.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dividends</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a non-U.S.&nbsp;holder of common stock, dividends
paid to you are subject to withholding of United States federal
income tax at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a
lower rate. Even if you are eligible for a lower treaty rate, we
and other payors will generally be required to withhold at a 30%
rate (rather than the lower treaty rate) on dividend payments to
you, unless you have furnished to us or another payor:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a valid Internal Revenue Service Form&nbsp;W-8BEN or an
    acceptable substitute form upon which you certify, under
    penalties of perjury, your status as (or, in the case of a
    non-U.S.&nbsp;holder that is a partnership or an estate or
    trust, such forms certifying the status of each partner in the
    partnership or beneficiary of the estate or trust as) a
    non-United States person and your entitlement to the lower
    treaty rate with respect to such payments,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    in the case of payments made outside the United States to an
    offshore account (generally, an account maintained by you at an
    office or branch of a bank or other financial institution at any
    location outside the United States), other documentary evidence
    establishing your entitlement to the lower treaty rate in
    accordance with U.S.&nbsp;Treasury regulations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are eligible for a reduced rate of United States
withholding tax under a tax treaty, you may obtain a refund of
any amounts withheld in excess of that rate by filing a refund
claim with the Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If dividends paid to you are &#147;effectively connected&#148;
with your conduct of a trade or business within the United
States, and, if required by a tax treaty, the dividends are
attributable to a permanent establishment that you maintain in
the United States, we and other payors generally are not
required to withhold tax from the dividends, provided that you
have furnished to us or another payor a valid Internal Revenue
Service Form&nbsp;W-8ECI or an acceptable substitute form upon
which you represent, under penalties of perjury, that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    you are a non-United States person,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the dividends are effectively connected with your conduct of a
    trade or business within the United States and are includible in
    your gross income.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">126

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&#147;Effectively connected&#148; dividends are taxed at rates
applicable to United States citizens, resident aliens and
domestic United States corporations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a corporate non-U.S.&nbsp;holder, &#147;effectively
connected&#148; dividends that you receive may, under certain
circumstances, be subject to an additional &#147;branch profits
tax&#148; at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a
lower rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Gains on Disposition of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a non-U.S.&nbsp;holder, you generally will not be
subject to United States federal income tax on any gain that you
recognize on a disposition of common stock unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the gain is &#147;effectively connected&#148; with your conduct
    of a trade or business in the United States, and the gain is
    attributable to a permanent establishment that you maintain in
    the United States, if that is required by an applicable income
    tax treaty as a condition for subjecting you to United States
    taxation on a net income basis,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    you are an individual, you hold the common stock as a capital
    asset, you are present in the United States for 183 or more days
    in the taxable year of the sale and certain other conditions
    exist,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we are or have been a United States real property holding
    corporation for United States federal income tax purposes and
    you held, directly or indirectly, at any time during the
    five-year period ending on the date of disposition, more than 5%
    of the common stock and you are not eligible for any treaty
    exemption.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a corporate non-U.S.&nbsp;holder, &#147;effectively
connected&#148; gains that you recognize may also, under certain
circumstances, be subject to an additional &#147;branch profits
tax&#148; at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a
lower rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not been, are not and do not anticipate becoming a
United States real property holding corporation for United
States federal income tax purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Federal Estate Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Common stock held by a non-U.S.&nbsp;holder at the time of death
will be included in the holder&#146;s gross estate for United
States federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Backup Withholding and Information Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a non-U.S.&nbsp;holder, you are generally exempt from
backup withholding and information reporting requirements with
respect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    dividend payments&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the payment of the proceeds from the sale of common stock
    effected at a United States office of a broker, as long as the
    income associated with such payments is otherwise exempt from
    United States federal income tax, provided, in each case:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the payor or broker does not have actual knowledge or reason to
    know that you are a United States person and:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    you have furnished to the payor or broker a valid Internal
    Revenue Service Form&nbsp;W-8BEN or an acceptable substitute
    form upon which you certify, under penalties of perjury, that
    you are (or, in the case of a non-U.S.&nbsp;holder that is a
    partnership or an estate or trust, such forms certifying that
    each partner in the partnership or beneficiary of the estate or
    trust is) a non-United States person,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    you have furnished to the payor or broker other documentation
    upon which it may rely to treat the payments as made to a
    non-United States person in accordance with U.S.&nbsp;Treasury
    regulations,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    you otherwise establish an exemption.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">127

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
However, we, or a paying agent, are required to report payments
of dividends on common stock on Internal Revenue Service
Form&nbsp;1042-S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Payment of the proceeds from the sale of common stock effected
at a foreign office of a broker generally will not be subject to
information reporting or backup withholding. However, a sale of
common stock that is effected at a foreign office of a broker
will be subject to information reporting and backup withholding
if:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the proceeds are transferred to an account maintained by you in
    the United States,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the payment of proceeds or the confirmation of the sale is
    mailed to you at a United States address,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the sale has some other specified connection with the United
    States as provided in U.S.&nbsp;Treasury regulations,</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
unless the broker does not have actual knowledge or reason to
know that you are a United States person and the documentation
requirements described above are met or you otherwise establish
an exemption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, a sale of common stock will be subject to
information reporting if it is effected at a foreign office of a
broker that is:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a United States person,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a controlled foreign corporation for United States tax purposes,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a foreign person 50% or more of whose gross income is
    effectively connected with the conduct of a United States trade
    or business for a specified three-year period,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a foreign partnership, if at any time during its tax year:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    one or more of its partners are &#147;U.S.&nbsp;persons,&#148;
    as defined in U.S.&nbsp;Treasury regulations, who in the
    aggregate own more than 50% of the income or capital interest in
    the partnership,&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    such foreign partnership is engaged in the conduct of a United
    States trade or business,</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
unless the broker does not have actual knowledge or reason to
know that you are a United States person and the documentation
requirements described above are met or you otherwise establish
an exemption. Backup withholding will apply if the sale is
subject to information reporting and the broker has actual
knowledge that you are a United States person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You generally may obtain a refund of any amounts withheld under
the backup withholding rules that exceed your United&nbsp;States
federal income tax liability by filing a refund claim with the
Internal Revenue Service.
</DIV>

<P align="center" style="font-size: 10pt;">128

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<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "UNDERWRITING" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the underwriters named below have entered into an
underwriting agreement with respect to the shares of our common
stock being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs &#38;
Co. and Morgan Stanley &#38; Co. Incorporated are the
representatives of the underwriters.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goldman, Sachs &#38; Co.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Morgan Stanley &#38; Co. Incorporated</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lehman Brothers Inc</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UBS Securities LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters are committed to take and pay for all of the
shares being offered, if any are taken, other than the shares
covered by the option described below unless and until this
option is exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the underwriters sell more shares than the total number set
forth in the table above, the underwriters have an option to buy
up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from us to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option,
the underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the per share and total underwriting
discounts and commissions to be paid to the underwriters by BP.
Such amounts are shown assuming both no exercise and full
exercise of the underwriters&#146; option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full exercise</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount
of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, there has been no public market for the
shares. The initial public offering price has been negotiated
among us and the representatives. Among the factors to be
considered in determining the initial public offering price of
the shares, in addition to prevailing market conditions, will be
our historical performance, estimates of the business potential
and earnings prospects of us, an assessment of our management
and the consideration of the above factors in relation to market
valuation of companies in related businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An application has been made to list the common stock on the New
York Stock Exchange under the symbol &#147;INV.&#148; In order
to meet one of the requirements for listing the common stock on
the NYSE, the underwriters have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the offering, the underwriters may purchase
and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Shorts
sales involve the sale by the underwriters of a greater number
of shares than they are required to purchase in the offering.
&#147;Covered&#148; short sales are sales made in an amount not
greater than the underwriters&#146; option to purchase
additional shares from us in the offering. The underwriters may
close out any covered short position by either exercising their
option to purchase additional shares or purchasing shares in the
open market. In determining the source of shares to close out
the covered short position, the underwriters will consider,
among other things, the price of shares available for purchase
in the open market as compared to the
</DIV>

<P align="center" style="font-size: 10pt;">129
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<DIV align="left" style="font-size: 10pt;">
price at which they may purchase additional shares pursuant to
the option granted to them. &#147;Naked&#148; short sales are
any sales in excess of such option. The underwriters must close
out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of various
bids for or purchases of common stock made by the underwriters
in the open market prior to the completion of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of such underwriter in stabilizing or short covering
transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or retarding a decline in the
market price of our common stock, and together with the
imposition of the penalty bid, may stabilize, maintain or
otherwise affect the market price of the common stock. As a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued at any time.
These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the underwriters has represented and agreed that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;it has not made or will not make an offer of shares to
the public in the United Kingdom within the meaning of section
102B of the Financial Services and Markets Act 2000 (as amended)
(FSMA)&nbsp;except to legal entities which are authorised or
regulated to operate in the financial markets or, if not so
authorised or regulated, whose corporate purpose is solely to
invest in securities or otherwise in circumstances which do not
require the publication by us of a prospectus pursuant to the
Prospectus Rules of the Financial Services Authority (FSA);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section&nbsp;21 of FSMA) to persons who
have professional experience in matters relating to investments
falling within Article&nbsp;19(5) of the Financial Services and
Markets Act&nbsp;2000 (Financial Promotion) Order&nbsp;2005 or
in circumstances in which section&nbsp;21 of FSMA does not apply
to us; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;it has complied with, and will comply with all
applicable provisions of FSMA with respect to anything done by
it in relation to the shares in, from or otherwise involving the
United Kingdom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
&#147;Relevant Member State&#148;), each underwriter has
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the &#147;Relevant Implementation
Date&#148;) it has not made and will not make an offer of shares
to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the shares which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive,
except that it may, with effect from and including the Relevant
Implementation Date, make an offer of shares to the public in
that Relevant Member State at any time:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;to any legal entity which has two or more of
(1)&nbsp;an average of at least 250 employees during the last
financial year; (2)&nbsp;a total balance sheet of more than
<FONT face="times new roman,times">&#128;</FONT>43,000,000 and
(3)&nbsp;an annual net turnover of more than
<FONT face="times new roman,times">&#128;</FONT>50,000,000, as
shown in its last annual or consolidated accounts; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;in any other circumstances which do not require the
publication by us of a prospectus pursuant to Article&nbsp;3 of
the Prospectus Directive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the purposes of this provision, the expression an
&#147;offer of shares to the public&#148; in relation to any
shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the shares to be offered so as to enable an
investor to decide to purchase or subscribe
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the shares, as the same may be varied in that Member State by
any measure implementing the Prospectus Directive in that Member
State and the expression Prospectus Directive means Directive
2003/71/ EC and includes any relevant implementing measure in
each Relevant Member State.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shares may not be offered or sold by means of any document
other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public
within the meaning of the Companies Ordinance (Cap.&nbsp;32) of
Hong&nbsp;Kong, and no advertisement, invitation or document
relating to the shares may be issued, whether in Hong&nbsp;Kong
or elsewhere, which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong&nbsp;Kong
(except if permitted to do so under the securities laws of
Hong&nbsp;Kong) other than with respect to shares which are or
are intended to be disposed of only to persons outside
Hong&nbsp;Kong or only to &#147;professional investors&#148;
within the meaning of the Securities and Futures Ordinance
(Cap.&nbsp;571) of Hong&nbsp;Kong and any rules made thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation or subscription or purchase, of the
securities may not be circulated or distributed, nor may the
securities be offered or sold, or be made the subject of an
invitation for subscription or purchase, whether directly or
indirectly, to persons in Singapore other than under
circumstances in which such offer, sale or invitation does not
constitute an offer or sale, or invitation for subscription or
purchase, of the securities to the public in Singapore.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The securities have not been and will not be registered under
the Securities and Exchange Law of Japan (the Securities and
Exchange Law) and each underwriter has agreed that it will not
offer or sell any securities, directly or indirectly, in Japan
or to, or for the benefit of, any resident of Japan (which term
as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any
other applicable laws, regulations and ministerial guidelines of
Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters do not expect sales to discretionary accounts
to exceed five percent of the total number of shares offered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and BP estimate that their share of the total expenses of the
offering, excluding underwriting discounts and commissions, will
be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and BP have agreed to indemnify the several underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for us and BP, for which they received or will receive
customary fees and expenses.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "VALIDITY OF THE SHARES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>VALIDITY OF THE SHARES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of our common stock offered by this prospectus will
be passed upon for us by Sullivan&nbsp;&#38; Cromwell LLP, New
York, New York, and for the underwriters by Davis
Polk&nbsp;&#38; Wardwell.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements of Innovene Inc. at December
31, 2003 and 2004 and for each of the three years in the period
ended December 31, 2004, appearing in this prospectus and
registration statement have been audited by Ernst&nbsp;&#38;
Young LLP, independent registered public accounting firm, as set
forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority
of such firm as experts in accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the SEC a registration statement on
Form&nbsp;S-1 under the Securities Act that registers the shares
of our common stock to be sold in this offering. The
registration statement, including the attached exhibits and
schedules, contains additional relevant information about us and
our capital stock. The rules and regulations of the SEC allow us
to omit various information included in the registration
statement from this document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, upon completion of the offering, we will become
subject to the reporting and information requirements of the
Exchange Act and, as a result, will file periodic reports, proxy
statements and other information with the SEC. You may read and
copy this information at the public reference room of the SEC at
100 F Street, N.E., Washington, DC 20549. You may also obtain
copies of this information by mail from the public reference
room of the SEC, 100 F Street, N.E., Washington, DC 20549, at
prescribed rates. You may obtain information on the operation of
the public reference room by calling the SEC at
1&nbsp;(800)&nbsp;SEC-0330.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The SEC also maintains an Internet website at http://www.sec.gov
that contains reports, proxy statements and other information
about issuers like us who file electronically with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to furnish our shareholders with annual reports
containing audited financial statements and make available to
our shareholders quarterly reports containing unaudited interim
financial information for the first three quarters of each
fiscal year.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "GLOSSARY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>GLOSSARY</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Term</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Definition</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile-butadiene styrene (ABS)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    ABS is a tough thermoplastic that has a variety of consumer
    appliance and automotive component uses. It is made from
    acrylonitrile, butadiene and styrene.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acetonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Acetonitrile is co-produced in the manufacture of acrylonitrile
    and is largely used in solvents.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylic acid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Acrylic acid is produced from propylene and used in
    manufacturing absorbent polymers, coatings and
    adhesives/sealants.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acrylonitrile</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Acrylonitrile is a commodity used in a wide variety of consumer
    applications. It is used in the production of acrylic fiber, ABS
    and SAN. Acrylonitrile is manufactured from propylene, ammonia
    and air with the use of a catalyst.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alkylation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Alkylation is a process for refining light products from the FCC
    to make high-octane gasoline.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alpha olefins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    See &#147;Linear alpha olefins&#148; and &#147;Poly alpha
    olefins.&#148;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ammonia</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ammonia is used in the manufacture of acrylonitrile, although
    its largest end use is in the manufacture of fertilisers. It is
    made from nitrogen and hydrogen with the use of a catalyst.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asphalt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Asphalt, a refinery product, is a liquid used for road surfacing
    and roofing.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benzene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Benzene is a building block for styrene and is also used to make
    cumene and nylon. It is mainly produced from refinery processes
    or as a co-product of steam cracker operations.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Butadiene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Butadiene, a gas, is one of the co-products of the steam
    cracking process and is used primarily in the production of
    polymers, principally synthetic rubbers such as SBR, which is
    used to manufacture tires and other rubber products.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Co-monomer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Co-monomers are mainly used in combination with ethylene to make
    some types of polyethylene.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cracker</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    See &#147;Olefins cracker.&#148;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Cumene is produced from benzene and propylene and is used as a
    feedstock for producing phenol/acetone, which have large uses in
    the manufacture of plastics and resins.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene glycol (EG)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    EG is an industrial chemical, primarily used in the manufacture
    of polyesters and antifreeze/coolants. It is produced from
    ethylene oxide.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene oxide (EO)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    EO is mainly used to produce EG and industrial detergents. It is
    manufactured from ethylene and oxygen.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethanolamines</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethanolamines are derivatives of EO used largely in industrial
    detergents and herbicides.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylbenzene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylbenzene is an intermediate made from benzene and ethylene
    and used to make styrene. Virtually all worldwide ethylbenzene
    production is consumed in the manufacture of styrene.</TD>
</TR>

</TABLE>
</CENTER>

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Term</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Definition</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene is a flammable gas obtained in a process called steam
    cracking. Ethylene itself has no consumer applications, but is
    the basic feedstock for a large number of industrial uses,
    including the manufacture of polyethylene. Ethylene is a key
    building block for polyethylene, polystyrene, EO and other
    derivatives.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ethylene dichloride</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene dichloride is a liquid used as an intermediate to make
    polyvinyl chloride, which is used for water piping
    (outside/underground), sidings, as well as for sewers, drains,
    wastes and venting pipes and fittings. It is made from ethylene
    and chlorine.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expandable polystyrene (EPS)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    EPS is polystyrene that, when heated, forms a lightweight foam
    used for packaging and insulation purposes. Styrene is the main
    feedstock to manufacture EPS.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fluidized catalytic cracker (FCC)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    An FCC is a type of oil refining cracker that makes gasoline
    components with high octane levels and some co-produced lighter
    products.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fractionator</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    A fractionator splits gas into its components ethane, propane,
    butane and other NGLs.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Gas includes methane, ethane, butane and propane.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Glycol ethers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Glycol ethers are used as solvents in paints, inks and cleaning
    fluids, and are derivatives of EO.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hydrocracker (HC)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    An HC is a type of oil refining cracker which makes refined
    products such as diesel and jet fuel, as well as some co-product
    quantities of LPGs.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    High-density polyethylene (HDPE)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    HDPE is a type of polyethylene and is a relatively tough
    thermoplastic. Its most common household use is container
    plastics. HDPE is also commonly used for molding, pipe and thin
    film applications.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Heating gas oil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Heating gas oil is a refinery product.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hydrocarbons</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Hydrocarbons is used to describe all compounds that consist of
    hydrogen and carbon. These include crude oil, natural gas, gas,
    olefins and their derivatives.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hydrogen cyanide</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Hydrogen cyanide is manufactured as a co-product of
    acrylonitrile. Hydrogen cyanide is an extremely hazardous gas
    used mainly to produce polymers, coatings and nylon, and for
    chemicals used in gold extraction.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Linear alpha olefins (LAOs)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    LAOs are hydrocarbons in a straight chain formation which have
    physical characteristics and commercial uses that vary according
    to the length of the hydrocarbon chain. LAOs are co-monomers for
    certain types of polyethylene. They also have applications as
    surfactant intermediates, base oil for synthetic lubricants and
    drilling fluids. They are made from ethylene.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Low-density polyethylene (LDPE)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    LDPE was the first type of polyethylene to be invented. Its most
    common household use is in plastic bags.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Linear low-density polyethylene (LLDPE)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    LLDPE is a type of polyethylene and has basic properties similar
    to LDPE. LDPE and LLDPE are to a certain extent substitutable
    for each other. The most significant end use for LLDPE is film.</TD>
</TR>

</TABLE>
</CENTER>

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Term</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Definition</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liquified petroleum gas (LPG)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    LPG is a mixture of gases, usually propane and butane, used as
    fuel in heating appliances and vehicles and also as a
    petrochemical feedstock.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Naphtha</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Naphtha is a refinery product that is used as a gasoline
    component, but also serves as feedstock for petrochemical plants.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Natural gas liquids (NGL)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    NGLs generally comprise a mixture of ethane, propane, butanes
    and smaller amounts of other lighter hydrocarbons.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nitriles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Nitriles is used to describe acrylonitrile, its co-products and
    other products produced from ammonia feedstock.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Olefins, including ethylene and propylene, are the key building
    blocks of the petrochemical industry and produce a large range
    of derivative products.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins cracker</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    An olefins cracker breaks down naphtha or gas feedstocks into
    olefins, principally ethylene and propylene.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Organoleptic products</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Organoleptic products, including caps and closures made from
    polyethylene, impart no taste or odor to the contents of the
    container.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oxo-alcohols</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Oxo-alcohols are a feedstock for intermediates which are used in
    many soft plastic products and solvent applications. They are
    largely produced from propylene feedstock.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Poly alpha olefins (PAOs)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    PAOs are made by polymerising, or merging, several LAOs together
    and are mainly used as synthetic lubricants.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene glycols (PGs)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    PGs are an industrial chemical, mainly used to produce
    polyester, paints and coatings, airplane de-icers, antifreeze
    and industrial coolants. PG is made from propylene oxide.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polyisobutylene (PIB)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    PIB is a synthetic polymer available in a wide variety of
    viscosities for use in a broad range of industrial applications
    including lubricants, sealants, cling film, cables and adhesives.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene oxide (PO)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    PO is used in manufacture of polyurethane foams and to make
    propylene glycols (PG). PO is primarily made from propylene
    feedstock.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polyethylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polyethylene (including HDPE, LDPE, and LLDPE) is the
    world&#146;s most widely used thermoplastic, manufactured by
    aggregating many ethylene and co-monomer molecules in a process
    called polymerization. Polyethylene is used primarily to produce
    films for packaging, agricultural applications, molded products,
    pipes and coatings.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polymer</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    A polymer is a chemical compound usually made up of a large
    number of identical components linked together into long
    molecular chains.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polypropylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polypropylene is the world&#146;s second most widely used
    thermoplastic after polyethylene. It is manufactured by the
    polymerization of propylene. It is used mainly for molding,
    filaments, fibers and films. Polypropylene is the most
    significant thermoplastic material used in molded containers and
    automotive applications.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Polystyrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    General purpose, or &#147;crystal,&#148; polystyrene and high
    impact polystyrene are hard and brittle materials which are used
    mainly for packaging, appliance and electrical housings and
    insulation. Both forms are also used for plastic molding
    applications. Styrene is the main feedstock used to manufacture
    polystyrene.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">135

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Term</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Definition</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Propylene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Propylene is a flammable gas which is largely derived either as
    a co-product of the refinery FCC process used to make gasoline
    or as a co-product of the steam cracking process used to make
    ethylene. Propylene has virtually no independent end use, but is
    an important input for a significant number of industrial
    products, and is the main feedstock used to make polypropylene
    and acrylonitrile.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pygas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Pygas is a by-product of olefins production from steam crackers
    and is used by refineries as a liquid gasoline blending
    component.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene-acrylonitrile (SAN)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    SAN is made from styrene and acrylonitrile, used in variety of
    applications, including housewares and appliances.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene-butadiene latex (SBL)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    SBL is a polymer derivative made from styrene and butadiene,
    used mainly in paper coatings and carpet backing applications.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene-butadiene rubber (SBR)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    SBR is a polymer derivative made from styrene and butadiene,
    used mainly in manufacture of tires and other rubber products.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Solvents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Solvents are used to dissolve solids and keep them in liquid
    form.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Styrene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Styrene, a hydrocarbon which under normal conditions is a
    flammable liquid, is produced from ethylene and benzene, via
    ethylbenzene. The largest use of styrene is in the production of
    polystyrene, although it is also used in many other derivatives
    such as ABS, SBR, SBL and SAN.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Synthetic ethanol</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Synthetic ethanol is a solvent used in personal care products,
    inks, household chemicals and industrial applications as well as
    in the manufacture of other chemical products.</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thermoplastic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    A thermoplastic is a plastic which softens when heated and
    hardens again when cooled. Thermoplastics include polyethylene,
    polypropylene and polystyrene.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">136
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='123'></A>
</DIV>

<!-- link1 "Index to Combined Financial Statements" -->

<DIV align="center" style="font-size: 10pt;">
<B>Index to Combined Financial Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Financial Statements as of and for the years ended
    December&nbsp;31, 2002, 2003 and 2004 and the six months ended
    June&nbsp;30, 2004 and 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Independent Registered Public Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Balance Sheets as of December&nbsp;31, 2003 and 2004,
    and June&nbsp;30, 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Operations for the years ended
    December&nbsp;31, 2002, 2003 and 2004 and the six months ended
    June&nbsp;30, 2004 and 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Owner&#146;s Equity and Comprehensive
    Income for the years ended December&nbsp;31, 2002, 2003 and 2004
    and the six months ended June&nbsp;30, 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Cash Flows for the years ended
    December&nbsp;31, 2002, 2003 and 2004 and the six months ended
    June&nbsp;30, 2004 and 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Combined Financial Statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-8</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-1
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Owner
</DIV>

<DIV align="left" style="font-size: 10pt;">
Innovene Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined balance sheets of
Innovene Inc. as of December&nbsp;31, 2004 and 2003, and the
related combined statements of operations, owner&#146;s equity
and comprehensive income, and cash flows for each of the three
years in the period ended December&nbsp;31, 2004. Our audits
also included the financial statement schedule listed at
Item&nbsp;16(b). These financial statements and schedule are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company&#146;s internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company&#146;s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of Innovene Inc. at December&nbsp;31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December&nbsp;31, 2004, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Ernst &#38; Young LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
London, United Kingdom
</DIV>

<DIV align="left" style="font-size: 10pt;">
September 9, 2005
</DIV>

<DIV align="left" style="font-size: 10pt;">
(except for Note&nbsp;(1) as to which the date
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005)
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="84%"></TD>
    <TD width="16%"></TD>
</TR>

<TR valign="top">
    <TD align="left">
    The foregoing report is in the form that will be signed upon the
    completion of certain transactions as described in Note&nbsp;(1)
    to the combined financial statements.</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ Ernst &#38; Young LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
London, United Kingdom
</DIV>

<DIV align="left" style="font-size: 10pt;">
September&nbsp;9, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Combined Balance Sheets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="15" align="center" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts receivable, net of allowance for doubtful
    accounts of $18&nbsp;million, $23&nbsp;million, and
    $23&nbsp;million, at December&nbsp;31, 2003 and 2004 and
    June&nbsp;30, 2005, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>576</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories (Note&nbsp;6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets (Note&nbsp;7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant, and equipment, net (Note&nbsp;8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in and advances to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill and other intangible assets (Note&nbsp;11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets (Note&nbsp;18)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayments and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assets of discontinued operations (Note&nbsp;10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="15" align="center" valign="top">
    <B>LIABILITIES, MINORITY INTEREST AND OWNER&#146;S EQUITY</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payables to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>692</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current liabilities (Note&nbsp;12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due to parent (Note&nbsp;13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes (Note&nbsp;18)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long term debt (Note&nbsp;13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities (Note&nbsp;14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes (Note&nbsp;18)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities of discontinued operations (Note&nbsp;10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Owner&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,174</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total owner&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities, minority interests and owner&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Combined Statements of Operations</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,775</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,586</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,765</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,253</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,876</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross margin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(734</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(616</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(630</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(341</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(115</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring and asset impairment charges (Note&nbsp;15)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity income (loss) from investments in affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net (Note&nbsp;5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from continuing operations before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations
    (Note&nbsp;18)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from discontinued operations, net of income tax expense
    (benefit) of $0, $0, $(52) million, $0, and $0 (Notes&nbsp;10
    and 18)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Combined Statements of Owner&#146;s Equity and Comprehensive
Income</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Parent net</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owner&#146;s equity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>investment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>610</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax $9&nbsp;million</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax effect of transaction with affiliate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfers from parent, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax $8&nbsp;million</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfers to parent, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>352</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax $14&nbsp;million</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfers from parent, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(371</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(371</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(371</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability, net of tax $10&nbsp;million</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net transfers upon legal separation (Note&nbsp;4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfers to parent, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(506</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(506</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at June&nbsp;30, 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Note:
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(1)&nbsp;Balance solely relates to minimum pension liabilities,
net of tax of $3&nbsp;million.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Combined Statements of Cash Flows</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net profit/(loss) to net cash provided
    from (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset impairments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring charges, net of cash paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain) loss from foreign exchange revaluation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on extinguishment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain) loss on disposal of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (Increase) in the fair value of the BP Solvay Ventures
    liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities, net of acquisitions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(411</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities of continuing
    operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities of discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>746</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(614</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(556</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(567</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the sale of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisitions of businesses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends received</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in and advances to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities of continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(579</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities of discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(582</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(568</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(230</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of minority interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,538</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from subsidiary capital calls</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayments of long term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,755</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of long term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of short term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfers (to) from parent, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(154</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(297</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(504</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities of
    continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(559</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities of
    discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(121</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(254</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental disclosure:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>239</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Combined Statements of Cash Flows&nbsp;&#151; (Continued)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities, net of acquisitions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(298</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(364</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(324</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(576</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(197</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(157</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(346</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(291</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayments and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(450</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payables to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(141</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(132</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities, net of acquisitions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(411</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Background</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Innovene Inc. (&#147;Innovene&#148; or the &#147;Company&#148;)
is currently an indirect wholly-owned subsidiary of BP p.l.c.
(&#147;BP&#148;). The Company anticipates completing an initial
public offering before December&nbsp;31, 2005. Prior to the
offering, BP will transfer to Innovene certain assets,
liabilities and the associated operations that were formerly
part of BP&#146;s Petrochemicals, Refining and Marketing, and
Gas, Power and Renewables segments. Specifically, the Company
combines (a)&nbsp;all of BP&#146;s petrochemical operating units
for olefins, polymers and other derivatives (collectively
&#147;O&#38;D&#148;), (b)&nbsp;two integrated refinery plants in
Grangemouth, Scotland, and Lav&#233;ra, France, (c)&nbsp;a gas
fractionator located in Hobbs, New Mexico and certain related
pipelines, and (d)&nbsp;existing O&#38;D strategic joint venture
investments (collectively, the Company&#146;s
&#147;Manufacturing Interests&#148;). The most important
products manufactured from the Company&#146;s Manufacturing
Interests are ethylene, propylene, polyethylene (including
high-density polyethylene), polypropylene, styrene, polystyrene,
acrylonitrile, alpha olefins, solvents, transport fuels,
particularly diesel fuel and gasoline, naphtha, and heating and
fuel oils. Innovene will be a worldwide manufacturer and
marketer of these products, with major manufacturing sites at
Grangemouth in Scotland, Cologne in Germany, Lav&#233;ra in
France and Chocolate Bayou and Battleground in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the Amended and Restated Master
Reorganization Agreement, BP transferred to separate legal
entities effective April&nbsp;1, 2005, substantially all of the
assets and liabilities, including fixed assets, inventory, and
non-monetary working capital related to the Company&#146;s
Manufacturing Interests (the &#147;Separation&#148;). Innovene
will conduct the ongoing operations relating to the
Manufacturing Interests transferred to it as part of the
Separation. Prior to the offering, the separate legal entities
will be transferred to Innovene Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until the transfers occur, Innovene has no material assets,
liabilities or operations. These combined financial statements
describe Innovene and its financial condition and operations as
if it held the operations and separate entities that will be
transferred to it for all historical periods presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Innovene and BP have entered into a series of agreements which
provide for the transfer of substantially all of the assets and
liabilities within the scope of our current and future business
activities from BP to the Company, subject to the retention by
BP of certain historic liabilities. These agreements include a
series of Local Transfer Agreements, the Intellectual Property
and Information Technology Separation Agreement, the Master
Reorganization Agreement and the tax sharing agreements
(together, the &#147;Reorganization Agreements&#148;). The
agreements also establish arm&#146;s length commercial
arrangements between the Company and BP and require BP to
provide the Company with transitional support for a limited
period of one to three years, (the &#147;Commercial Interface
Agreements&#148;). For purposes of these agreements, the legal
separation is deemed to have occurred on April&nbsp;1, 2005,
whereas, except for the tax sharing agreements, the commercial
arrangements are effective from January&nbsp;1, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements have been prepared using the
historical cost basis in the assets and liabilities and
historical results of operations related to the Company&#146;s
Manufacturing Interests, and may not be indicative of the actual
results of operations and financial position of the Company had
it operated as a separate entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because direct ownership relationships did not exist among the
various Manufacturing Interests, BP&#146;s net investment in the
Company is presented as &#147;Parent net investment&#148;. The
accompanying combined balance sheets do not include certain BP
assets and liabilities that are not specifically identifiable to
the Company&#146;s Manufacturing Interests.
</DIV>

<P align="center" style="font-size: 10pt;">F-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP manages its cash, accounts payable and certain related
matters on a centralized basis for the entire BP group, which in
the three years and six months ended June&nbsp;30, 2005 included
the Company. BP&#146;s financial systems are not designed to
track intercompany working capital balances, accounts payable,
cash receipts, and payments separately for each production unit.
Accordingly, in preparing the combined financial statements, it
was not practicable to determine certain assets and liabilities
associated with the Company. Assets and liabilities not
specifically identifiable to the Company include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Cash and cash equivalent balances that are recorded in the
    Parent net investment account. The cash that is presented on the
    balance sheet is cash belonging to certain consolidated joint
    ventures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Accounts payable related to trade purchases that are made
    centrally by BP, but nonetheless related to the Company that are
    reflected in the Parent net investment account.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Accrued liabilities related to corporate allocations that are
    reflected in the Parent net investment account.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Intercompany working capital balances between BP and its
    affiliates (unless directly traceable to a third-party
    relationship), which are not settled on a current basis and are
    not tracked separately for each production unit. To the extent
    that such balances relate to the Company, they are reflected in
    the Parent net investment account.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Hedging positions through which derivative and other financial
    contracts are used to offset exposures to interest rates,
    commodity prices or foreign exchange rates, unless individual
    instruments are specifically attributable to an underlying
    Innovene asset, liability or anticipated series of cash flows
    (see Note&nbsp;21).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Third party financing and related balances, such as debt and
    capital leases that are managed centrally by BP and which are
    not secured by Company assets.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Until BP&#146;s shareholding in the Company falls below the
    limits set out in the Master Reorganization Agreement of 80% in
    the U.S.&nbsp;and 50% elsewhere, the Company&#146;s employees
    generally will continue to participate in BP&#146;s group-wide
    pension and other post employment plans. As long as this is the
    case, assets and obligations related to these plans will be
    owned directly by BP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Assets and obligations related to the Company&#146;s
    participation in BP&#146;s stock option schemes, and, in
    particular, the BP ESOP trusts are not separately allocable to
    employees or employee costs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined statements of operations include all revenues and
costs attributable to the Manufacturing Interests including an
allocation of the cost of shared utilities, overhead and
administrative expenses related to general management,
information technology, human resources and other services
provided to the Company by BP. As further described in
Note&nbsp;4, these allocations were made based on such criteria
as personnel or business volume. All of the allocations and
estimates in the combined statements of operations are based on
assumptions that management believes are reasonable under the
circumstances. However, these allocations and estimates are not
necessarily indicative of the costs that the Company would have
incurred if it had operated on a standalone basis or as an
entity independent of BP.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Basis of Combination</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying combined financial statements are presented on
the basis of accounting principles generally accepted in the
United States of America. Within the Company&#146;s group, all
intercompany accounts and transactions have been eliminated.
Companies and joint ventures in which Innovene has or had a
significant influence, but not a controlling interest, are
carried on the equity basis and are included in &#147;Investment
in and advances to affiliates&#148;. The Company&#146;s share of
earnings or losses in these investments is included in
&#147;Equity
</DIV>

<P align="center" style="font-size: 10pt;">F-9

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<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
income/ (loss) from investments in affiliates&#148;. As a result
of Innovene&#146;s adoption of FASB Interpretation No.&nbsp;46,
<I>Consolidation of Variable Interest Entities,</I> all variable
interest entities in which the Company is determined to be the
primary beneficiary are consolidated in the combined financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Use of Estimates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of the combined financial statements in
conformity with generally accepted accounting principles in the
United States requires management to make estimates and
assumptions affecting the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the dates presented and the reported amounts of revenues and
expenses during the periods presented. Significant estimates
include: the recognition of an impairment, if any, relating to
property, plant, and equipment, intangibles, and goodwill;
litigation-related obligations; valuation allowances for
receivables, inventories, and deferred income tax assets;
environmental liabilities; allocation of the purchase price for
businesses acquired; recoverability of long-lived assets;
restructuring and plant closing costs; revaluation of derivative
instruments; and assets and obligations related to employee
benefits, such as amounts reported for pensions, plan assets,
and post-employment benefits. Actual results could differ from
those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Inventories</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories are valued at the lower of cost or market value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Elements of cost in inventories include raw materials, direct
labor and manufacturing overhead. Inventory consists of the
balance on hand of raw materials, work in progress, and finished
goods held for sale. Stores inventory include catalysts and
consumable materials used in the production process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The majority of the Company&#146;s inventories in the United
States are valued at cost using the &#147;last in, first
out&#148; (&#147;LIFO&#148;) method. Inventories valued using
the LIFO method comprised approximately 10% and 7% of total
inventories at December&nbsp;31, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The balance of the Company&#146;s inventories are valued using
the &#147;first in, first out&#148; method. The Company&#146;s
stores inventories are mainly valued using the average cost
method or, if lower, at their market value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company uses the dollar value method for computing its LIFO
inventory valuation in the United States. This method, by its
nature, involves an annual calculation. In preparing quarterly
balance sheets, the Company spreads forecast movements in the
LIFO layers across the year based on movements in inventory
during the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property, Plant and Equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment are stated at cost and depreciated
over their estimated useful lives using the straight line
method. The average of the estimated useful lives of the
Company&#146;s refineries and petrochemical manufacturing plants
is 20&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenditures incurred in connection with major maintenance
operations, refits or repairs are capitalized only where they
enhance the performance of the asset being maintained, refitted
or repaired above its originally assessed standard of
performance or replaces an asset (or part of an asset) which was
separately depreciated and then written off or restore the
economic benefits of an asset that has been fully depreciated.
Such expenditures are amortized over their respective estimated
useful lives. All other maintenance costs are expensed as
incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest costs incurred as part of major construction projects
are capitalized. Net annual interest expense capitalized as part
of property, plant and equipment was $2&nbsp;million,
$9&nbsp;million, and $10&nbsp;million during the years ended
December&nbsp;31, 2002, 2003 and 2004, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-10

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<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The cost and accumulated depreciation are removed from the
respective accounts upon retirement or sale of property, plant
and equipment. Upon retirement, any resulting loss is included
in costs of goods sold in the combined statement of operations
and upon sale, the resulting gain or loss is included in other
income (expense) in the combined statement of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-Lived Assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company reviews the carrying value of its long-lived assets,
including property, plant and equipment and definite-lived
intangible assets whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the
total of the undiscounted future cash flows is less than the
carrying amount of the asset or asset group, an impairment loss
is recognized for the difference between the estimated fair
value and the carrying value of the asset or asset group. The
Company recorded impairments on long-lived assets of
$32&nbsp;million, $36&nbsp;million and $280&nbsp;million for the
years ended December&nbsp;31, 2002, 2003 and 2004, respectively.
In addition, an impairment of $148&nbsp;million was reflected as
discontinued operations in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company complies with FASB Statement No.&nbsp;144,
<I>Accounting for the Impairment or Disposal of Long-Lived
Assets</I>. An impairment loss on a long-lived asset is
recognized if the asset&#146;s carrying amount is not
recoverable and exceeds its fair value. Long-lived assets to be
sold are separately classified as held for sale when the Company
commits to a plan for sale or disposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Goodwill and Other Intangible Assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill represents the excess of the cost of an acquired entity
or business over the fair value of the net assets acquired.
Goodwill impairment is considered at least annually or when
events or circumstances indicate the fair value of a reporting
unit may be less than its carrying value. The Company recorded
no goodwill impairment charges for the years ended
December&nbsp;31, 2002, 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon adoption of FASB Statement No.&nbsp;142, <I>Goodwill and
Other Intangible Assets,</I> on January&nbsp;1, 2002, the
Company ceased to amortize goodwill. Intangible assets with
definite useful lives (other than goodwill) are amortized over
their estimated useful lives up to a maximum period of
20&nbsp;years. The Company has no intangible assets with
indefinite useful lives other than goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Capitalized costs associated with computer software developed
for internal use are amortized on a straight-line basis over 4
to 7&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Investments in Affiliates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investments in non-consolidated companies over which the Company
has significant influence are accounted for under the equity
method. The Company assesses any decline in the value of
individual investments to determine whether such decline is
other than temporary and thus whether the relevant investment is
impaired. This assessment is made by considering available
evidence, including changes in general market conditions,
specific industry and individual Company data, the length of
time and the extent to which the market value has been less than
cost, the financial condition and near term prospects of the
individual entity, and the Company&#146;s intent and ability to
hold the investment. Investments in Affiliates is primarily
comprised of Innovene&#146;s investments in five manufacturing
joint ventures in Lav&#233;ra, France.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Financial Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated fair value of financial instruments has been
determined by using available market information and appropriate
valuation methodologies. The carrying values of all current
assets and current liabilities approximate their fair value
because of their short-term nature. The carrying value of
long-term debt
</DIV>

<P align="center" style="font-size: 10pt;">F-11

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<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
approximates its fair value based on management&#146;s estimates
for similar debt, giving consideration to rating, interest
rates, maturity and other significant characteristics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Derivative Instruments and Hedging Activities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for derivatives and hedging activities in
accordance with FASB Statement No.&nbsp;133, <I>Accounting for
Derivative Instruments and Certain Hedging Activities</I>, as
amended, which requires that all derivative instruments be
recorded on the balance sheet at their respective fair values.
If the derivative is designated as a fair-value hedge, the
changes in the fair value of the derivative and the hedged items
are recognized in earnings. If the derivative is designated as a
cash flow hedge, changes in the fair value of the derivative are
recorded in other comprehensive income and will be recognized in
the income statement when the hedged item affects earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The purpose for which a derivative contract is used is
identified at inception. To qualify as a derivative for hedging,
the contract must be in accordance with established guidelines
that ensure that it is effective in achieving its objective. All
contracts not identified at inception as being for the purpose
of hedging are designated as being held for trading purposes and
accounted for using fair value method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Employee Benefit Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For pension and other post-employment benefit plans in which
Innovene employees participate, costs are determined in
accordance with FASB Statement No.&nbsp;87, <I>Employers&#146;
Accounting for Pensions,</I> FASB Statement No.&nbsp;88,
<I>Employers&#146; Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination
Benefits</I>, and FASB Statement No.&nbsp;106,
<I>Employers&#146; Accounting for Postretirement Benefits Other
Than Pensions</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Post-retirement benefit costs consist of service cost, interest
cost on accrued obligations and the expected return on assets
(calculated using a smoothed market value of assets). Any
difference between actual and expected returns on assets during
a year and actuarial gains and losses on liabilities together
with any prior service costs are charged (or credited) to income
over the average remaining service lives of employees which is
estimated to be 10&nbsp;years. No amortization has been applied
for plans outside of the U.S.&nbsp;in the historic results
presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For BP plans in which BP employees (including those of the
predecessor businesses of Innovene) participate (Group plans),
BP determined pensions and other post-employment benefit costs
on a consolidated basis. Separate Company information is not
readily available. The benefit cost components shown in the
combined statements of operations reflect an allocation of the
costs (including the costs for retirees and former employees of
the predecessor businesses) for these BP Group Plans. The
allocation was based on the predecessor businesses of
Innovene&#146;s active population for each period presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For pension and other post-employment plans in which only
Innovene employees participate, disclosures are provided in
accordance with FASB Statement No.&nbsp;132 (revised 2003),
<I>Employers&#146; Disclosures about Pensions and Other
Postretirement Benefits</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Commitments and Contingencies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Liabilities for loss contingencies, including environmental
remediation costs not within the scope of FASB Statement
No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations</I>, arising from claims, assessments, litigation,
fines, and penalties and other sources are recorded when it is
probable that a liability has been incurred and the amount of
the assessment and/or remediation can be reasonably estimated.
</DIV>

<P align="center" style="font-size: 10pt;">F-12

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<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental Expenditures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Environmental expenditures that relate to current or future
revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations and that do not impact future earnings are expensed.
Liabilities for environmental costs are recognized when
environmental assessments or clean-ups are probable and the
associated costs can be reasonably estimated. Generally, the
timing of these provisions coincides with the commitment to a
formal plan of action or, if earlier, the divestment or closure
of the relevant sites. The amount recognized reflects
management&#146;s best estimate of the expenditures expected to
be required. Where a liability is not to be settled for a number
of years, the amount recognized is the estimated future
expenditure on an undiscounted basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Revenue Recognition</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenue is recognized when risk and title to the product
transfers to the customer, collectibility is reasonably assured
and the price is fixed or determinable. Revenue is typically
recognized at the time of shipment or delivery of a product,
depending on the contractual terms. Revenue is recognized net of
discounts and other price adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, the Company&#146;s Refining operating segment was
integrated within BP&#146;s Refining &#38; Marketing
(&#147;R&#38;M&#148;) reporting entities. No revenue was
recognized for refining in the R&#38;M business, since there
were no direct sales to third parties. For the purposes of the
combined financial statements, revenue presented was determined
based on production throughput, valued at an average sales price
per product grade in the applicable periods. With effect from
January&nbsp;1, 2005, revenues of the Company&#146;s Refining
segment have been recognized in a manner consistent with the
Company&#146;s revenue recognition policy described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cost of Sales</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company classifies the costs of manufacturing and
distributing its products as cost of sales. Manufacturing costs
include raw materials and variable and fixed manufacturing costs
associated with production. Fixed manufacturing costs include,
among other things, plant site operating costs and overhead,
production planning, depreciation and amortization, repairs and
maintenance, plant site purchasing costs, and engineering and
technical support costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Research and Development Costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company conducts a broad range of research and development
activities aimed at improving existing products and
manufacturing processes and developing new products and
processes. Research and development costs are expensed as
incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Trade Accounts Receivable</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Trade accounts receivable are recorded at the invoiced amount.
The allowance for doubtful accounts reflect management&#146;s
best estimate of the amount of probable losses with respect to
the Company&#146;s accounts receivable. The Company determines
the allowance based on a monthly review of the collectibility of
each overdue balance. Account balances are charged against the
allowance after all means of collection have been exhausted and
the potential for recovery is considered remote. The Company
does not have any off-balance sheet credit exposure to its
customers.
</DIV>

<P align="center" style="font-size: 10pt;">F-13

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<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Lease Transactions</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases certain machinery, equipment and facilities
under long-term lease agreements with third parties. The Company
reviews the terms of each lease at inception of the lease in
order to determine whether it should be treated as an operating
or a capital lease under FASB Statement No.&nbsp;13,
<I>Accounting for Leases,</I> and its interpretations. Operating
leases are expensed on a straight line basis over the term of
the lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Stock Based Compensation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the Company&#146;s employees participate in BP&#146;s
long term incentive plans. Under the plans, employees received
various stock-based compensation awards, including stock
options, restricted stock, stock opportunity grants and
performance units, some of which have yet to be exercised. The
Company currently accounts for stock-based compensation related
to participants in BP&#146;s plans using the intrinsic value
method prescribed by Accounting Principles Board (APB) Opinion
No.&nbsp;25, <I>Accounting for Stock Issued to Employees,</I>
whereby the options are granted at market price, and therefore
no compensation costs are recognized. Compensation cost for
stock options, if any, would be measured as the excess of the
quoted market price at the grant date of the Company&#146;s
stock over the amount an employee must pay to acquire the stock.
FASB Statement No.&nbsp;123, <I>Accounting for Stock-Based
Compensation,</I> and FASB Statement No.&nbsp;148, <I>Accounting
for Stock-Based Compensation&nbsp;&#151; Transition and
Disclosure,</I> an amendment of FASB Statement No.&nbsp;123,
established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic value method of accounting described above, and has
adopted only the disclosure requirements of FASB Statement
No.&nbsp;123, as amended. Had compensation costs attributable to
awards granted to employees of the Company been determined using
the fair value accounting method, pro forma net loss would have
been as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(195</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(240</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct: Additional stock-based employee compensation expense
    under the fair value based method for all awards, net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss, pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(247</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(268</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of BP&#146;s stock-based awards attributed to
employees of the Company was estimated using the following
weighted average assumptions for each of the years ended
December&nbsp;31, 2002, 2003 and 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk-free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected life (in years)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1 to 5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1 to 5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1 to 5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Using the Black-Scholes pricing model, the weighted-average fair
value of an option granted in 2002, 2003, and 2004, was $1.64,
$1.44, and $1.40 respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Foreign Currency Translation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accounts of the Company&#146;s subsidiaries outside of the
United States generally consider local currency to be their
functional currency. Foreign currency transactions are recorded
in the functional currency at the relevant exchange rates on the
date of the transaction. Foreign currency assets and liabilities
are translated into the functional currency at relevant exchange
rates at the balance sheet date. Exchange differences are
included in operating profit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Assets and liabilities are translated from the respective
functional currency into U.S.&nbsp;dollars using exchange rates
at the relevant balance sheet date. Revenues, expenses and cash
flows are translated from the functional currency into
U.S.&nbsp;dollars using average exchange rates for the reporting
period. Exchange adjustments arising from the translation of the
accounts from the respective functional currency into
U.S.&nbsp;dollars are recorded as a component of owner&#146;s
equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Taxes</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The results of the Company have been included in the
consolidated income tax assessments of BP for the periods
presented. In the periods presented prior to &nbsp;April&nbsp;1,
2005, there was no formal tax sharing agreement between the
Company and BP. Tax losses and credits generated by one member
of the BP group that were utilized by another BP group member
generally were compensated by the utilizing member. In preparing
the combined financial statements the provision for income taxes
has been calculated as if Innovene had been a standalone entity
and filed separate returns during the periods presented. In
light of the complexities and numerous assumptions inherent in
preparing tax returns involving interactions between the
U.S.&nbsp;tax system and the relevant non-U.S.&nbsp;tax systems
including foreign tax credit computations, allocation and
apportionment (including complying with national transfer
pricing rules) of various expenses, such as consolidated
interest expense, stewardship, research and development, etc.,
the provision for income taxes has been determined based on the
assumption that such expenses would give rise to tax relief
where incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for income taxes in accordance with the
asset and liability method prescribed by FASB Statement
No.&nbsp;109, <I>Accounting for Income Taxes</I>. Deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period in which the rates have
changed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP manages its tax position for the benefit of its entire
portfolio of businesses, and its tax strategies are not
necessarily reflective of the tax strategies that Innovene would
have followed or will follow as a standalone entity. Losses
generated by the Company&#146;s businesses historically were
available to, and were often utilized by BP in its tax
strategies with respect to entities or operations not forming
part of the Company&#146;s businesses. Due to difficulties
inherent in separating the Company&#146;s results from BP&#146;s
consolidated results during periods pre-dating the periods
presented, any deferred tax assets in respect of operating loss
carryforwards and tax credits have been fully offset by
valuation allowances. This treatment also reflects the
Company&#146;s inability to quantify the amounts of these
deferred tax assets, although the existence of these assets is
acknowledged but the assets are not susceptible to accurate
estimation. In the periods presented, current tax benefits are
recognized to the extent of any deferred tax expense and
increase in deferred tax liabilities recognized in the same
period. Existing deferred tax liability balances are not
considered in the evaluation of the ability to recognize current
tax benefits and the associated deferred tax assets due to the
inability to estimate the amount of deferred tax assets existing
at the beginning of the periods presented which could partially
or fully offset the existing deferred tax liabilities. Where
loss carryforwards generated by one of the Company&#146;s
businesses were available to offset income from the same
</DIV>

<P align="center" style="font-size: 10pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
business or another of the Company&#146;s businesses within a
given jurisdiction during the periods presented, the Company has
reflected such loss carryforwards in the period they arose and
has assessed its ability to realize these deferred tax assets
based on the available evidence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are deemed to have been paid on behalf of the
Company by BP and are included in the parent net investment line
of the combined balance sheets. The Company will be required to
file separate United States federal income tax returns only
after the sale of greater than 20% of the securities held by BP.
The Company may be included in consolidated/ combined returns
with BP for other tax jurisdictions, such as states, where
consolidated/ combined ownership thresholds are different than
the U.S.&nbsp;federal consolidated ownership threshold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and BP have entered into tax sharing agreements
effective April&nbsp;1, 2005, that will generally govern
BP&#146;s and the Company&#146;s respective rights,
responsibilities and obligations for taxes after the
registration of Innovene&#146;s shares. With respect to all
taxes for any tax period ending on or before April&nbsp;1, 2005,
BP generally will retain responsibility for any federal,
foreign, and certain state taxes due and will benefit from tax
refunds available. For any tax years subsequent to that date,
the Company will be responsible for federal, foreign, and state
taxes due and will benefit from tax refunds available. Following
April&nbsp;1, 2005, the Company will file tax returns, pay taxes
due and receive the benefits from losses generated in foreign
jurisdictions in which it operates. For the U.S., dependent on
BP&#146;s ownership share of the Company, the Company will
either file its own U.S.&nbsp;tax return or the Company will pay
to BP its allocable share as if the Company were a standalone
taxpayer pursuant to the terms of the tax sharing agreements,
for tax on income generated and BP will retain the benefits of
tax losses, and will pay the Company for the benefits BP obtains
from such tax losses, as long as the Company is part of any BP
consolidated tax computations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective April&nbsp;1, 2005, the Company received its assets
from BP in a taxable asset transaction; accordingly, the Company
will obtain a depreciable basis equal to the fair market value
of the assets received from BP. The majority of
non-U.S.&nbsp;asset transfers were taxable such that the
depreciable assets are recorded at fair market value for tax
purposes. Accordingly, the existing deferred tax asset and
liability balances were reversed through Parent Net Investment
and a deferred tax asset recorded, with an offsetting entry to
equity, to the extent that the tax depreciable basis exceeded
the depreciable net book value. The net effect of these
transactions was to increase Parent Net Investment by
$483&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While BP&#146;s US&nbsp;affiliates continue to own at least
80&nbsp;percent of the Company, BP will include the Company in
its consolidated US&nbsp;Federal tax return and, pursuant to the
terms of the US&nbsp;Master Tax Agreement, the Company will not
be entitled to claim the benefits of the tax depreciation in
excess of the historical BP&nbsp;US&nbsp;group tax basis in the
depreciable assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Earnings per share</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historical earnings per share are not presented since Innovene
common stock was not part of the capital structure of BP for the
periods presented. Innovene will present basic and diluted
earnings per share in the first report it issues after the
effective date of the initial public offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Adoption of New Accounting Standards</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, the FASB issued FASB Statement No.&nbsp;146,
<I>Accounting for Costs Associated with Exit or Disposal
Activities</I>. This standard requires companies to recognize
costs associated with exit or disposal activities when they are
incurred, rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by the standard include
lease termination costs and certain employee severance costs
that are associated with a restructuring, plant closing, or
other exit or disposal activity. Statement&nbsp;146 is required
to be applied
</DIV>

<P align="center" style="font-size: 10pt;">F-16

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
prospectively to exit or disposal activities initiated after
December&nbsp;31, 2002, with earlier application encouraged. The
Company adopted Statement 146 as of January&nbsp;1, 2003. The
adoption of Statement&nbsp;146 did not have a significant impact
on the Company&#146;s financial position or results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2002, the FASB issued FASB Interpretation
No.&nbsp;45 <I>Guarantor&#146;s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others</I> (FIN&nbsp;45). FIN&nbsp;45 modifies
existing disclosure requirements for most guarantees and
requires at the time the Company issues a guarantee, the Company
must recognize an initial liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial
recognition and measurement provisions of FIN&nbsp;45 apply on a
prospective basis to guarantees issued or modified after
December&nbsp;31, 2002. The adoption of FIN&nbsp;45 did not have
a significant effect on the Company&#146;s financial position or
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2001, the FASB issued FASB Statement No.&nbsp;143,
<I>Accounting for Asset Retirement Obligations,</I> which
applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition,
construction, development, or the normal operation of the asset.
Statement&nbsp;143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period
in which it is incurred if a reasonable estimate of fair value
can be made. Such estimates are generally determined based upon
estimated future cash flows discounted using a credit-adjusted
risk-free interest rate. The fair value of the liability is
added to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period
through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, the
Company will recognize a gain or loss on settlement. The
adoption of Statement 143 did not have a significant impact on
the Company&#146;s financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, the FASB issued FASB Statement No.&nbsp;149,
<I>Amendment of Statement 133 on Derivative Instruments and
Hedging Activities,</I> which amends and clarifies the financial
accounting and reporting of derivative instruments and hedging
activities under Statement 133. Statement 149 applies to
contracts entered into or modified after June&nbsp;30, 2003, and
hedging relationships designated after June&nbsp;30, 2003. The
adoption of Statement 149 did not have a significant effect on
the Company&#146;s financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2003, the FASB issued FASB Statement No.&nbsp;150,
<I>Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.</I> Statement
150 establishes standards for classifying and measuring certain
financial instruments that have characteristics of both
liabilities and equity. The adoption of Statement 150 did not
have a significant impact on the Company&#146;s financial
position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2003, the FASB issued FASB Interpretation
No.&nbsp;46, <I>Consolidation of Variable Interest Entities</I>
(FIN&nbsp;46). FIN&nbsp;46 clarifies the application of existing
consolidation requirements to entities where a controlling
financial interest is achieved through arrangements that do not
involve voting interests. Under FIN&nbsp;46, a variable interest
entity (&#147;VIE&#148;) is consolidated if a company is subject
to a majority of the risk of loss from the VIE&#146;s activities
or entitled to receive a majority of the entity&#146;s residual
returns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on management&#146;s analysis of arrangements created
prior to February&nbsp;1, 2003, Innovene identified
BP&nbsp;Solvay Polyethylene North America (&#147;BP Solvay North
America&#148;) and BP Solvay Polyethylene Europe
(&#147;BP&nbsp;Solvay Europe&#148;) (collectively, the &#147;BP
Solvay Ventures&#148;) as VIEs, based on the lack of equity at
risk for Innovene&#146;s venture partner and its obligation to
absorb losses if the venture partner elected to sell its
interest to Innovene. The Company further determined that it was
the primary beneficiary of the BP Solvay Ventures. No other
VIE&#146;s were identified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Innovene retroactively applied the provisions of FIN&nbsp;46
upon its adoption of the Interpretation from inception of the
BP&nbsp;Solvay Ventures. As a result the consolidated assets,
liabilities, and noncontrolling interests of the BP Solvay
Ventures are reflected in Innovene&#146;s combined financial
statements using values at which these
</DIV>

<P align="center" style="font-size: 10pt;">F-17

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
amounts would have been carried in the consolidated financial
statements if FIN&nbsp;46 had been effective at the inception of
the BP Solvay Ventures in November 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the Staff of the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin (SAB)
No.&nbsp;104, <I>Revenue Recognition,</I> which supersedes
SAB&nbsp;No.&nbsp;101. The primary purpose of
SAB&nbsp;No.&nbsp;104 is to rescind accounting guidance
contained in SAB&nbsp;No.&nbsp;101 and the SEC&#146;s <I>Revenue
Recognition in Financial Statements Frequently Asked Questions
and Answers</I> (the FAQ) related to multiple element revenue
arrangements. Adoption of SAB&nbsp;No.&nbsp;104 did not have a
significant effect on the Company&#146;s financial position or
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, FASB Statement No.&nbsp;132 (revised),
<I>Employers&#146; Disclosures about Pensions and Other
Postretirement Benefits,</I> was issued. Statement&nbsp;132
(revised) prescribes employers&#146; disclosures about pension
plans and other postretirement benefit plans; it does not change
the measurement or recognition of those plans. The Statement
retains and revises the disclosure requirements contained in the
original Statement 132. It also requires additional disclosures
about the assets, obligations, cash flows, and net periodic
benefit cost of defined benefit pension plans and other
postretirement benefit plans. The new annual disclosure
requirements became effective for the Company as of the year
ended December&nbsp;31, 2004. The Company&#146;s disclosures in
Note&nbsp;17 incorporate the requirements of Statement 132
(revised).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with FASB Staff Position Nos. 106-1 and 106-2,
<I>Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003</I>, BP adopted the standard for the fiscal year beginning
January&nbsp;1, 2004. The provisions of the Medicare Act provide
for a federal subsidy for post-retirement medical plans that
provide prescription drug benefits and meet certain
qualifications, and alternately would allow prescription drug
plan sponsors to co-ordinate with the Medicare benefit.
BP&nbsp;reflected the impact of the legislation by reducing its
actuarially determined obligation for post-retirement medical
benefits at December&nbsp;31, 2004 and will reduce the net cost
for post-retirement benefits in subsequent periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the EITF reached a consensus on Issue
No.&nbsp;03-13, <I>Applying the Conditions in Paragraph&nbsp;42
of FASB Statement No.&nbsp;144, Accounting for the Impairment or
Disposal of Long-Lived Assets, in Determining Whether to Report
Discontinued Operations</I> (EITF&nbsp;03-13). Under
EITF&nbsp;03-13, a disposed component of an enterprise is
classified as a discontinued operation only where the ongoing
entity has no continuing direct cash flows and does not retain
an interest, contract or other arrangement sufficient to enable
the entity to exert significant influence over the disposed
component&#146;s operating and financial policies after
disposal. EITF&nbsp;03-13 is effective for a component of an
enterprise that is either disposed of or classified as held for
sale in accounting periods beginning after December&nbsp;15,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Recently Issued Accounting Standards</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued FASB Statement No.&nbsp;153,
<I>Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No.&nbsp;29</I>. Statement&nbsp;153 eliminates the Accounting
Principles Board Opinion No.&nbsp;29 exception for nonmonetary
exchanges of similar productive assets and replaces it with an
exception for exchanges of nonmonetary assets that do not have
commercial substance. Statement&nbsp;153 is effective for
nonmonetary asset exchanges occurring in accounting periods
beginning after June&nbsp;15, 2005. The Company does not expect
the application of Statement 153 to have a material impact on
its financial position or the results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued FASB Statement No.&nbsp;151,
<I>Inventory Costs an amendment of ARB No.&nbsp;43,
Chapter&nbsp;4</I>. Statement&nbsp;151 requires that items, such
as idle facility expense, excessive spoilage, double freight and
re-handling costs, be recognized as current-period charges.
Statement&nbsp;151 also requires that the allocation of fixed
production overheads to the costs of conversion be based on the
normal capacity of the
</DIV>

<P align="center" style="font-size: 10pt;">F-18

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
production facilities. Statement&nbsp;151 is effective for
accounting periods beginning after June&nbsp;15, 2005. The
Company does not expect this Statement to have a material impact
on its financial position or the results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued FASB Statement No.&nbsp;123
(revised 2004), <I>Share-Based Payment</I> (SFAS&nbsp;123R).
Statement&nbsp;123R, which is a revision of FASB Statement
No.&nbsp;123, <I>Accounting for Stock-Based Compensation,
supersedes APB Opinion No.&nbsp;25, Accounting for Stock Issued
to Employees</I>. Under Statement 123R, share-based payments to
employees and others are required to be recognized in the income
statement based on their fair value. Pro forma disclosure of the
anticipated impact of Statement&nbsp;123R (as disclosed above)
is no longer a permitted alternative. Statement&nbsp;123R has
been adopted for the first interim period beginning
January&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued Staff Position No.&nbsp;109-1,
<I>Application of FASB Statement No.&nbsp;109, Accounting for
Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of
2004</I> (FSP&nbsp;109-1). FSP&nbsp;109-1, effective upon
issuance, requires that the manufacturers&#146; deduction
provided for under the American Jobs Creation Act of 2004 (the
Jobs Creation Act) be accounted for as special deduction in
accordance with FASB Statement No.&nbsp;109, <I>Accounting for
Income Taxes,</I> rather than a tax rate reduction. The Company
will recognize the manufacturers&#146; deduction in the year the
benefit is earned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, the FASB issued FASB Interpretation No.&nbsp;47
<I>Accounting for Conditional Asset Retirement Obligations an
interpretation of FASB Statement No.&nbsp;143</I> (FIN&nbsp;47).
Under FIN&nbsp;47, a conditional asset retirement obligation
(&#147;ARO&#148;) represents an unconditional obligation to
perform an asset retirement activity where the timing or method
of settlement are conditional on a future event that may or may
not be within the control of the entity. FIN&nbsp;47 clarifies
that an entity is required to recognize a liability, when
incurred, for the fair value of a conditional ARO if the fair
value of the liability can be reasonably estimated. Uncertainty
about the timing or method of settlement of a conditional ARO is
factored into the measurement of the liability when sufficient
information exists. Statement&nbsp;143 acknowledges that in some
cases, sufficient information may not be available to reasonably
estimate the fair value of an ARO. FIN&nbsp;47 also clarifies
when an entity would have sufficient information to reasonably
estimate the fair value of an asset ARO. FIN&nbsp;47 is
effective for fiscal years ending after December&nbsp;15, 2005.
The Company has not yet completed its evaluation of the impact
of adopting FIN&nbsp;47.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Interim Financial Information (unaudited)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements as of June&nbsp;30, 2005 and for the
six-month periods ended June&nbsp;30, 2005 and 2004 are
unaudited; however, in the opinion of management, all
adjustments, consisting solely of normal recurring adjustments
necessary for a fair presentation of the financial statements
for the interim periods, have been included. The results of
operations for the six-months ended June&nbsp;30, 2005 are not
necessarily indicative of the results to be achieved for the
full fiscal year.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Relationship with BP</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company engages in transactions with BP and BP&#146;s
subsidiaries in the normal course of business. These
transactions include the purchase of feedstock used as raw
material by the Company as well as the sharing of certain
infrastructure sites. Additionally, the Company utilizes
centralized functions of BP to support its operations and in
return, BP allocates certain of its expenses to the Company.
Such intercompany transactions are included in Transfers from
Parent net investment in the combined financial statements
unless directly traceable to a third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Funding is derived from inter-company transactions with BP, from
operations, or other sources. Cash requirements met through
transfers from BP include funds used to purchase investments, to
fund operating losses
</DIV>

<P align="center" style="font-size: 10pt;">F-19

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
and for other liquidity needs. All transaction activity between
Innovene and BP is netted and recorded as Transfers to/from
parent within Parent net investment. Except for interest accrued
on a short-term note extended upon legal separation on
April&nbsp;1, 2005, no intercompany interest charges have been
recognized between BP and the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Transactions with BP Group are summarized in the table below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales to BP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases from BP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,670</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,869</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,703</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general, and
    administrative<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Note:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Selling, general and administrative comprises corporate cost
    allocations and recharges from functions hosted elsewhere within
    BP.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The BP Group was both the Company&#146;s most significant
customer and supplier, accounting for over 10% of the
Company&#146;s total revenues and purchases. The majority of
sales were generated from the Company&#146;s refining segment,
all of which historically were sold on by BP to third parties.
Purchases were made across all segments of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Corporate Cost Allocations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain expenses reflected in the combined statement of
operations include allocations of costs from BP. Such expenses
represent costs related to treasury, legal, insurance, payroll
administration, human resources, and other services. These
costs, together with an allocation of central BP overhead costs,
are included within selling, general, and administrative
expenses, as described above. Where it is possible to
specifically attribute such expenses to activities of the
Company, these amounts have been charged or credited directly to
the Company without allocation or apportionment. Allocation of
all other such expenses is based on factors depending on the
relevant respective activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Where employees of the Company participate in pension and other
post-employment benefit arrangements sponsored by BP, the
Company has reflected the cost BP incurs on its behalf of
providing the pensions as a charge (or credit) to income based
on the number of the Company&#146;s active employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP also sponsors other benefit plans, including profit sharing
plans, incentive plans and stock purchase plans in which Company
employees participate. Costs related to these plans are
allocated to the Company according to an analysis of the number
of current and historic employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In management&#146;s opinion, the methods used in allocating
expenses are reasonable. However, resulting expenses may not
represent the amounts that would have been incurred had such
transactions been entered into with third parties at
&#147;arm&#146;s length&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of governing certain of the ongoing relationships
between Innovene and BP at and after the Separation and to
provide for an orderly transition, Innovene and BP have entered
into various agreements. A brief description of each of the
material agreements follows.
</DIV>

<P align="center" style="font-size: 10pt;">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reorganization Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following are some key reorganization agreements in
connection with interfaces with&nbsp;BP.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Local Transfer Agreements</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective April&nbsp;1, 2005, BP transferred to separate legal
entities substantially all of the assets and liabilities
relating to the former olefins and derivatives business of
BP&#146;s Petrochemicals segment, the Company&#146;s refineries
at Grangemouth, United Kingdom, and Lav&#233;ra, France, which
formed part of BP&#146;s Refining and Marketing segment, and the
gas fractionator located near Hobbs, New Mexico, which formed
part of BP&#146;s Gas, Power and Renewables segment, in each
case, together with associated infrastructure. The transfers
were made on the basis of a series of Local Transfer Agreements
for each country in which the Company has operations. As a
result of these transfers, the separate legal entities acquired
BP&#146;s title or other interest in the relevant assets and,
with limited exceptions, the unencumbered ability to operate and
transfer their assets to third parties.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Master Reorganization Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amended and restated Master Reorganization Agreement sets
out a framework for dealing with assets or liabilities not
specifically covered by the Local Transfer Agreements described
above, such as liabilities arising from the Company&#146;s or
BP&#146;s past and future conduct. Subject to the exceptions
described in the agreement, the Company generally has agreed to
assume, and indemnify BP for, all liabilities relating to the
assets BP has transferred to the Company, and BP has agreed to
retain, and indemnify the Company for, all liabilities relating
to assets BP has retained. In each case, these indemnities cover
all losses arising from such liabilities, regardless of whether
they arise from events occurring before or on or after
April&nbsp;1, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>New Common Terms Memorandum</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also entered into a New Common Terms Memorandum with
BP where it and BP have agreed to transfer restrictions on the
Company&#146;s assets in connection with certain of the
commercial interface agreements as described below. Under these
restrictions, neither the Company nor BP can transfer an asset
reasonably related to any relevant commercial interface
agreement to a non-affiliated third party without assigning that
commercial interface agreement to the same third party. Such
assignment of the relevant commercial interface agreement by the
Company or BP will require prior consent of the other party, but
the other party may refuse prior consent only if it is
reasonable to believe that the unaffiliated transferee will not
act as a reasonable and prudent operator under the agreement or
does not have sufficient financial standing to perform the
obligations under the agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Intellectual Property and Information Technology Separation
    Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into an Intellectual Property and
Information Technology Separation Agreement (IPITSA) with BP,
which governs the transfer of intellectual property and
intellectual property related agreements from BP to the Company
and addresses certain related third-party issues. The IPITSA
provides for the transfer from BP to the Company of certain
registered patents, trademarks and domain names along with any
other intellectual property relating exclusively to the
Company&#146;s petrochemical business, the Company&#146;s
refineries in Grangemouth, United Kingdom, and Lav&#233;ra,
France, and the Company&#146;s gas fractionator near Hobbs, New
Mexico. In addition, BP has agreed to assign to the Company all
intellectual property-related contracts, such as licenses,
research and development agreements, technology sharing
agreements, software licenses and support agreements relating
exclusively to the Company&#146;s business. BP has also granted
the Company licenses in respect of certain intellectual property
in which the Company and BP have a common interest under
separate common interest intellectual property agreements.
</DIV>

<P align="center" style="font-size: 10pt;">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>U.S.&nbsp;Master Tax Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP and the Company have entered into a U.S. Master Tax Agreement
pursuant to which BP has agreed to retain, and indemnify the
Company for, among other things, the U.S. tax liabilities
arising prior to April&nbsp;1, 2005, including any income and
franchise and other taxes measured by income incurred as a
result of transferring assets to the Company, and the Company
has agreed to assume, and indemnify BP for, among other things,
the U.S. tax liabilities arising on or after April&nbsp;1, 2005.
Any other separation-related U.S. tax liabilities generally will
be paid by the party legally responsible and BP and the Company
have agreed to cooperate in the resolution of such taxes. The
Company additionally will be liable should it take any actions
that trigger recapture of taxes in respect of any foreign
affiliate to the extent that prior losses claimed in relation to
such affiliate by the BP U.S. Federal consolidated group were
certified to only be deductible by the BP U.S. Federal
consolidated group (i.e., dual consolidated losses). The U.S.
Master Tax Agreement also deals with the ongoing relationship
between the Company and BP in relation to other U.S. tax
matters, for example, in relation to tax compliance, and
includes provisions which allow both parties to share tax
assets, subject to appropriate compensation payments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Rest of the World Tax Agreement</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Rest of the World tax Agreement, BP has generally
agreed to retain, and indemnify the Company for, among other
things, non-U.S.&nbsp;tax liabilities arising prior to
April&nbsp;1, 2005 including any income and other taxes measured
by income which are incurred as a result of transferring assets
to the Company, and the Company has generally agreed to assume,
and indemnify BP for, among other things, non-U.S.&nbsp;tax
liabilities arising on or after April&nbsp;1, 2005. Any other
separation-related non-U.S.&nbsp;tax liabilities generally will
be paid by the party on which it has been assessed provided that
all transfer taxes will be borne by the Company. The Rest of the
World Tax Agreement also deals with the ongoing relationship
between the Company and BP in relation to other
non-U.S.&nbsp;tax matters, for example, in relation to tax
compliance, and includes provisions which allow both parties to
share tax assets, subject to appropriate compensation payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Net Transfers Upon Legal Separation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective April&nbsp;1, 2005, certain transactions occurred in
accordance with the agreements between BP and the Company. The
results of these transactions have been recorded as adjustments
to the parent company investment in the Company. The result of
these transactions was to increase the Parent Net Investment in
the Company by $589&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the basis of the Local Transfer Agreements between the
Company and BP for each country in which the Company has
operations, the separate legal entities of the Company acquired
title to assets and operations from other entities of BP.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Income Taxes</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;1, 2005, the Company received its assets from BP
in a taxable asset transaction; accordingly, the Company will
obtain a depreciable basis equal to the fair market value of the
assets received from BP. The majority of non-U.S.&nbsp;asset
transfers were taxable such that the depreciable assets are
recorded at fair market value for tax purposes. Accordingly, the
existing deferred tax asset and liability balances were reversed
through Parent Net Investment and a deferred tax asset recorded,
with an offsetting entry to equity, to the extent that the tax
depreciable basis exceeded the depreciable net book value. The
net effect of these transactions was to increase Parent Net
Investment by $483&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the U.S., pursuant to the terms of the U.S. Master Tax
Agreement, the Company will not be entitled to the benefits of
the depreciation associated with this additional tax basis until
the Company is no longer included in
</DIV>

<P align="center" style="font-size: 10pt;">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the BP U.S. consolidated tax return. This will occur when
BP&#146;s ownership in the Company is less than 80%. As the
Company currently is wholly-owned by BP no adjustment to the
existing tax position was made as of April&nbsp;1, 2005.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Grangemouth assets and Geel Infrastructure</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the asset transfers made in accordance with the Local
Transfer Agreements resulted in BP transferring to the Company
certain assets and the Company transferring to BP certain
assets. Among those assets transferred to the Company were
certain logistic assets at the Grangemouth, UK site. Among the
assets transferred by the Company to BP were certain previously
shared assets at the Grangemouth, UK site and the Geel, Belgium
site. The net effect of these transfers was to decrease Parent
Net Investment in the Company by $25&nbsp;million.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Pensions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the Master Reorganization Agreement, BP
agreed to retain the obligations for retirees related to the
Company&#146;s pension plans in Germany. The effect of this is
to increase the Parent Net Investment by $262&nbsp;million. The
Company has agreed to certain reimbursement arrangements with BP
related to its U.S. post-retirement health care obligations and
other unfunded arrangements related to the U.S. and France. The
effect of this was to decrease Parent Net Investment by
$52&nbsp;million.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Other</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other Reorganization Agreements between BP and the Company have
resulted in an increase in Parent Net Investment of
$14&nbsp;million. These primarily relate to BP agreeing to
assume certain obligations previously recorded by the
Company&#146;s predecessor operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tax effects of transactions other than tax related to the
legal separation reduced Parent Net Investment by
$93&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Commercial Interface Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into a series of commercial interface
agreements with BP to maintain and enhance its existing
relationships by establishing medium- to long-term arrangements
for services, utilities and infrastructure access rights in
situations where the Company or BP depend on each other or where
reasonable alternatives do exist but it is nevertheless
economical for the Company and BP to continue pre-existing
arrangements. The Company has also established agreements for
the sale and purchase of refining and petrochemical feedstocks
and refined products in situations where the Company or BP have
an interest in establishing a secure source of feedstock supply
or ensure the off-take of products, with the term of these
agreements in part depending on the availability of third-party
alternatives. In addition, the Company has entered into various
agreements for the provision by BP to the Company of short-term
transitional services, such as information technology
infrastructure, which the Company cannot readily replicate as a
new company but which it expects to have the ability to provide
in-house or outsource to a third party at the end of the initial
term of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the major commercial interface agreements are briefly
summarized below.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Hydrocarbons Sale and Purchase Agreements</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Hydrocarbons Sale and Purchase Agreements govern the sale
and purchase of petrochemical and refining feedstocks at or
between sites where the Company and BP have a continuing
relationship with each other. Each of the agreements is in
substantially the same form, with only minor jurisdiction and
site-specific differences. Each agreement is a master agreement
describing the general terms and conditions on which the
relevant feedstocks are sold and purchased as between the
Company and BP. The commercial terms for each
</DIV>

<P align="center" style="font-size: 10pt;">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
relevant petrochemical or refining feedstock are set out in a
separate term sheet appended to the relevant agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Supply and Trading Agreements</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into various Supply and Trading
Agreements with BP under which BP will, for a limited period of
time, provide the Company with certain supply, trading and
optimization services in areas in which the Company currently
has no, or limited, in-house capability. The agreements have
been structured so as to enable the Company to develop the
necessary capabilities in-house by the end of the initial term
of these agreements. The main agreements may be divided into
Master Services Agreements and Sale and Purchase Agreements. The
Company has also entered into a series of Foreign Exchange and
Precious Metals Agreements with BP for the provision of foreign
exchange and interest rate services and services relating to the
sale and/or lease of certain precious metals used as catalysts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Inland Refined Products Sale and Purchase Agreements</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into Inland Refined Products Sale and
Purchase Agreements with BP for the domestic sale of certain
refined products. The Company has entered into separate
agreements for its Grangemouth, United Kingdom, and Lav&#233;ra,
France, refineries. Under each agreement, BP has agreed to
purchase all of the refined products the Company sells into the
relevant domestic market at market-based prices for the term of
the respective agreements and related term sheets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Framework Interface Agreements</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into various Framework Interface
Agreements for the provision by the Company to and vice-versa BP
of services and utilities at certain shared sites and in some
cases between our respective sites. These agreements range from
short-term, transitional arrangements for services which the
Company will eventually establish on an in-house basis or will
outsource to an alternative supplier to long-term arrangements
in areas where the Company and BP depend on each other.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Site Cooperation Agreements</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into various Site Cooperation Agreements
with BP to establish rules and procedures to facilitate its
operations at certain key sites that the Company shares with BP.
The Company has agreements in place for its sites in Carson,
California, Naperville, Illinois, Texas City, Texas, Whiting,
Indiana, Geel, Belgium, and Grangemouth, United Kingdom.
</DIV>

<P align="center" style="font-size: 10pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Other Income (Expense)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other income (expense) consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six&nbsp;months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) from disposals of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) from foreign exchange revaluation net of gains
    (losses) from derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in the fair value of the BP Solvay Ventures
    put liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(105</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accelerated interest on loan termination</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Inventories</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Crude oil</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Oil products</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Petrochemicals products</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,072</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,856</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stores</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As disclosed in Note&nbsp;3, the Company values the majority of
inventories in the United States using the LIFO method. At
December&nbsp;31, 2003 and 2004 and June&nbsp;30, 2005, the
excess of current cost over the stated LIFO value was
$102&nbsp;million, $228&nbsp;million, and $194&nbsp;million,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Other Current Assets</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prepayments and other current assets are summarized as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepayments and other accrued income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxes and duties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Derivative instruments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>260</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Property, Plant, and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant, and equipment are summarized as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,939</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Construction in progress</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,013</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,218</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,877</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,136</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation expense from continuing operations for the years
ended December&nbsp;31, 2002, 2003, and 2004 was
$406&nbsp;million, $492&nbsp;million, and $527&nbsp;million,
respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Consolidation of Variable Interest Entities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Innovene adopted FASB Interpretation No.&nbsp;46,
<I>Consolidation of Variable Interest Entities,</I> which
addresses the consolidation of variable interest entities
(&#147;VIEs&#148;). Under FIN&nbsp;46, arrangements that are not
controlled through voting or similar rights are accounted for as
VIEs. An enterprise is required to consolidate a VIE if it is
the primary beneficiary of the VIE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under FIN&nbsp;46, a VIE is created when (i)&nbsp;the equity
investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial
support from other parties or (ii)&nbsp;equity holders either
(a)&nbsp;lack direct or indirect ability to make decisions about
the entity through voting or similar rights, (b)&nbsp;are not
obligated to absorb expected losses of the entity or (c)&nbsp;do
not have the right to receive expected residual returns of the
entity if they occur. If an entity is deemed to be a VIE,
pursuant to FIN&nbsp;46, an enterprise that absorbs a majority
of the expected losses or residual returns of the VIE is
considered the primary beneficiary and must consolidate the VIE.
</DIV>

<P align="center" style="font-size: 10pt;">F-26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Innovene&#146;s analysis of its arrangements identified
BP&nbsp;Solvay North America and BP&nbsp;Solvay Europe as VIEs.
This determination primarily was based on a put instrument held
by Innovene&#146;s venture partner allowing the partner to put
its interest in the BP&nbsp;Solvay Ventures to Innovene at
specified dates and at specified prices. The pricing of the put
arrangement effectively resulted in the obligation by Innovene
to absorb losses of the BP Solvay Ventures. Innovene further
determined that it was the primary beneficiary as a result of
its obligations under the put instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The BP&nbsp;Solvay Ventures were formed for the purpose of
manufacturing and selling high density polyethylene in Europe
and North America. Innovene held a 50% voting interest in BP
Solvay Europe entities and a 49% interest in the BP&nbsp;Solvay
North America entity. Innovene retroactively applied the
provisions of FIN&nbsp;46 upon its adoption of the
Interpretation from inception of the BP&nbsp;Solvay Ventures. As
a result the assets, liabilities and noncontrolling interests
have been consolidated in Innovene&#146;s combined financial
statements from November, 2001. The noncontrolling interests
have been included as Minority Interest in the Combined Balance
Sheets. Changes in the fair value of the BP Solvay Ventures put
liabilities from the date of initial consolidation to exercise
of the put have been recognized as Other income (expense) in the
Combined Statement of Operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;2, 2004, the Company&#146;s former venture
partner in the BP&nbsp;Solvay Ventures exercised its option to
sell its interests in the two joint ventures to Innovene at the
previously determined and established prices based on the terms
of the put instrument. On completion, the two ventures, which
manufacture and market high-density polyethylene, became
wholly-owned subsidiaries of BP.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(10)</B></TD>
    <TD>
    <B>Discontinued Operations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, Innovene&#146;s management committed to a plan to
sell its butanediol (&#147;BDO&#148;) operations based in Lima,
Ohio. As a result of this commitment, the Company recorded a
charge of $148&nbsp;million to record the BDO asset group at
fair value less cost to sell. For reporting purposes, the
results of operations related to BDO, including the 2004
impairment charge, are classified as discontinued operations for
all periods presented. In the first quarter of 2005, the Company
signed a definitive sales agreement and closed the sale. There
was no gain or loss on disposal following the impairment charge
recorded in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The major classes of assets and liabilities of discontinued
operations included in the Combined Balance Sheets are
summarized as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets of discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities of discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(11)</B></TD>
    <TD>
    <B>Goodwill and Other Intangible Assets</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Goodwill</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon adoption of FASB Statement No.&nbsp;142 on January&nbsp;1,
2002, the Company ceased to amortize goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s goodwill balance relates solely to the
Olefins and Polymers Europe segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes the changes in the Company&#146;s
goodwill balance during 2003 and 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate on translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5<DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate on translation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3<DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34<HR size="4" noshade color="#000000"></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Other Intangible Assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company does not have any indefinite-lived Other Intangible
Assets. The gross carrying amounts and accumulated amortization
in total and by major class of other intangible assets are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of December&nbsp;31, 2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets subject to amortization (definite-lived):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension&nbsp;&#151; unamortized prior service costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capitalized software development costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Favorable contracts (customer lists, distribution logistics)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Technology</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets subject to amortization (definite-lived):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension&nbsp;&#151; unamortized prior service costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capitalized software development costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Favorable contracts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Technology</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>227</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Amortization expense from continuing operations for the years
ended December&nbsp;31, 2002, 2003, and 2004 was
$17&nbsp;million, $25&nbsp;million, and $18&nbsp;million,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Estimated future amortization expense for intangible assets
through December&nbsp;31, 2009 is $16&nbsp;million annually.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(12)</B></TD>
    <TD>
    <B>Other Current Liabilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other current liabilities consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>30&nbsp;June</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxes and duties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short term debt held in affiliate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Short term debt was held from December&nbsp;27, 2004 and repaid
on January&nbsp;3, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(13)</B></TD>
    <TD>
    <B>Debt</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Long term debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined balance sheets include long-term loans of
$1,585&nbsp;million and $1,729&nbsp;million at December&nbsp;31,
2003 and 2004, respectively, for borrowings secured by certain
of the Olefins &#38; Polymers Europe assets located at the
Grangemouth site in the United Kingdom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The borrowings have terms of between 20 and 30&nbsp;years and
would have matured between 2018 to 2022. The average rate of
interest for these loans was 3.14%, 3.16% and 3.58% for the
years ended December&nbsp;31, 2002, 2003 and 2004, respectively.
The related interest charges total $37&nbsp;million,
$45&nbsp;million and $58&nbsp;million for the years ended
December&nbsp;31, 2002, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
According to the terms of the long term loans, Innovene was
required to pledge assets to secure a portion of the outstanding
loan balance. In accordance with the loan terms, the net book
value of the assets securing these loans was $643&nbsp;million
and $652&nbsp;million at December&nbsp;31, 2003 and 2004,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Short term debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In anticipation of the separation of the Company from BP, the
long-term debt was repaid in full by the Company on
March&nbsp;22, 2005 for $1,755&nbsp;million. This funding was
replaced with a $1,700&nbsp;million short-term interest-bearing
loan from the Parent, with an interest rate of LIBOR plus five
basis points. The termination payment on the debt exceeded the
book value resulting in a loss being recognised on
extinguishment of the debt of $45&nbsp;million which is included
in Other income (expense) in the Combined Statements of
Operations.
</DIV>

<P align="center" style="font-size: 10pt;">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(14)</B></TD>
    <TD>
    <B>Other Non-current Liabilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other non-current liabilities consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension and other post-employment benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>528</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(15)</B></TD>
    <TD>
    <B>Impairments and Restructuring Charges</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restructuring activities represent the integration of
acquisitions into the business, divestment activities, as well
as ongoing cost rationalization programs at manufacturing sites
and other locations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2003, the Company had reserves for
severance related cost and site exit and other costs of
$51&nbsp;million and $33&nbsp;million, respectively. During the
year ended December&nbsp;31, 2004, the Company recorded
additional charges of $345&nbsp;million, including
$280&nbsp;million of charges for asset impairment and write
downs, and $65&nbsp;million of costs for workforce reductions,
demolition and decommissioning and other restructuring costs.
For the purposes of measuring impairment charges, the fair value
of the assets was largely determined by using the
</DIV>

<P align="center" style="font-size: 10pt;">F-30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
present value of expected cash flows or expected sales proceeds,
depending on the circumstances. During the 2004 period, the
Company made cash payments against reserves of $56&nbsp;million.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Write-down</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Severance-related</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Site exit and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of assets</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>other costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(71</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset write offs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange rate movements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset write offs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange rate movements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>345</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset write offs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(280</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(280</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange rate movements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer to parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of June&nbsp;30, 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-31

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restructuring accruals by reportable segments are summarized as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Olefins and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Polymers</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>North</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Global</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Corporate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Europe</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>America</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Derivatives</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Refining</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(71</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset write offs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange rate movements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset write offs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange rate movements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>345</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset write offs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(76</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(280</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange rate movements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charges during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer to parent net investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities as of June&nbsp;30, 2005 (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>First Half 2005 Segmental Restructuring Activity and
Impairments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Olefins and Polymers Europe
segment reserve consisted of $35&nbsp;million related to the
restructuring activities at the Grangemouth, UK site (as
announced in 2003), the restructuring activities at the
Lav&#233;ra, France site (as announced in 2000 and 2002), the
restructuring activities at the Geel, Belgium site (as announced
in 2000 and 2003) and the integration of the BP Solvay entities.
During the six months ended June&nbsp;30, 2005, the segment made
cash payments of $6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Corporate and Other segment
reserve consisted of $9&nbsp;million related to the
restructuring of the global Research &#38; Technology support
function and facilities and liabilities in respect of workforce
reduction across the global operations. During the six months
ended June&nbsp;30, 2005, the segment recorded additional
restructuring charges of $21&nbsp;million in respect of further
global workforce reductions. Cash payments were $16&nbsp;million
in the six months ended June&nbsp;30, 2005. The reserve balance
as of April&nbsp;1, 2005 was retained by BP and the
$14&nbsp;million was reclassified to Parent net investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Global Derivatives segment
reserve consisted of $53&nbsp;million, related to the closure of
the Pasadena, North America site (as announced in 2004) and the
restructuring activities at the Feluy, Belgium site (as
announced in 2001). Cash payments were $1&nbsp;million in the
six months ended June&nbsp;30, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">F-32

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>2004 Segmental Restructuring Activity and
Impairments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2003, the Olefins and Polymers Europe
segment reserve consisted of $64&nbsp;million related to the
restructuring activities at the Grangemouth, UK site (as
announced in 2003), the restructuring activities at the
Lav&#233;ra, France site (as announced in 2000 and 2002), the
restructuring activities at the Geel, Belgium site (as announced
in 2000 and 2003) and the integration of the BP Solvay entities.
During the year ended December&nbsp;31, 2004, the segment
recorded additional charges of $83&nbsp;million consisting of
asset impairments at the Grangemouth site ($69&nbsp;million) and
within the Solvay&nbsp;JV, Belgium ($7&nbsp;million) and
$7&nbsp;million of other charges and made cash payments of
$39&nbsp;million. As of December&nbsp;31, 2004 the balance of
the Olefins and Polymers Europe segment reserve totaled
$35&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2003, the Global Derivatives segment
reserve consisted of $14&nbsp;million related to the
restructuring activities at the sites in Feluy, Belgium (as
announced in 2001), Texas City, North America (as announced in
2001), and Whiting, North America (as announced in 2001). During
the year ended December&nbsp;31, 2004, the segment recorded
additional charges of $228&nbsp;million consisting of
$185&nbsp;million of asset impairment and $43&nbsp;million of
other charges and made cash payments of $5&nbsp;million. The
charges followed the Company&#146;s decision to exit the
Pasadena, North America site (as announced in December 2004). As
of December&nbsp;31, 2004 the balance of the Global Derivatives
segment reserve totaled $53&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2004, the Refining
segment recorded restructuring charges and made cash payments of
$7&nbsp;million relating to the Grangemouth, UK site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2003, the Corporate and Other segment
reserve consisted of $4&nbsp;million related to the
restructuring of the global Research &#38; Technology support
function and facilities. During the year ended December&nbsp;31,
2004, the segment recorded additional charges of
$27&nbsp;million consisting of $19&nbsp;million of asset
impairment and $8&nbsp;million of other charges and made cash
payments of $3&nbsp;million. The asset impairment in the
Licencing business relates to the decision to exit the
butanediol (&#147;BDO&#148;) business (see Note&nbsp;10). The
charges are in respect of workforce reductions across the global
operation. Further workforce reductions resulted in additional
restructuring charges of approximately $21&nbsp;million in 2005.
As of December&nbsp;31, 2004 the balance of the Corporate and
Other segment reserve totaled $9&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>2003 Segmental Restructuring Activities and
Impairments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2003, the Olefins and
Polymers Europe and Refining segments announced a joint
transformation program at the Grangemouth, UK site.
Restructuring charges of $20&nbsp;million were recorded for
estimated workforce reductions of 190 employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2003, the Refining
segment recorded $36&nbsp;million of asset impairment in respect
of units at the Grangemouth, UK site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2003, the Olefins and
Polymers Europe segment recorded $11&nbsp;million of charges in
respect of the restructuring of the Solvay, UK and Geel, Belgium
sites.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>2002 Segmental Restructuring Activities and
Impairments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2002, the Olefins and
Polymers Europe segment recorded $38&nbsp;million charges in
respect of the integration of the BP Solvay entities
($28&nbsp;million, announced 2001), the cessation of Ethylene
Oxide-based Glycol Ether manufacturing at the Lav&#233;ra site
($8&nbsp;million, fourth quarter of 2002) and the anticipated
final costs associated with the closure of a sales and
administrative office in Geneva, Switzerland ($2&nbsp;million,
announced 2000). The net charge included the reversal of a
$6&nbsp;million historical provision relating to the
Grangemouth, UK site (announced in 2000).
</DIV>

<P align="center" style="font-size: 10pt;">F-33

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2002, the Olefins and
Polymers North America segment recorded a $20&nbsp;million asset
impairment following the decision to close a polypropylene
production line at the Chocolate Bayou, North America site in
the first quarter of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2002, the Refining
segment recorded a $12&nbsp;million asset impairment in respect
of a redundant pipeline at the Grangemouth, UK site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2002, the Corporate and
Other segment recorded $28&nbsp;million of charges in respect of
the restructuring of the global Research&nbsp;&#38; Technology
support function and facilities ($21&nbsp;million, announced
second quarter of 2002), the refit of an administrative office
at Naperville, North America ($3&nbsp;million) and sundry
functional transformation projects.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(16)</B></TD>
    <TD>
    <B>Employee Benefit Plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>BP Pension and Other Post-Employment Benefit Plans (Group
Plans)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A number of the Company&#146;s employees in the United States,
United Kingdom, Canada and Belgium participate in BP pension and
other post-employment benefit plans (the Group Plans). BP
pension plans typically provide pension payments that depend on
an employee&#146;s length of service and earnings at, or near,
retirement or have a &#147;cash balance&#148; design. Such plans
are funded by the employer, and in certain countries employee
contributions to external funds, with contributions and costs
being determined after receiving advice from independent
actuaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP also provides post-retirement healthcare benefits and
post-retirement life insurance that reimburse healthcare costs
for retirees and dependants, or pay a lump sum to a
beneficiary&#146;s spouse upon death. Entitlement to these
benefits is generally based on an employee&#146;s service at
retirement. The cost of providing post-retirement healthcare
benefits and post-retirement life insurance is assessed annually
by independent actuaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP determines pension and post-employment benefit cost for its
Group Plans on a consolidated basis and therefore accurate
information relating to the Company&#146;s assets and
obligations cannot be determined with any certainty prior to
April&nbsp;1, 2005. For the years ended December&nbsp;31, 2002,
2003 and 2004 and the three months ended March&nbsp;31, 2005 the
Statements of Operations include an allocation to the Company of
the benefit costs of the Group Plans. The costs for retirees and
former employees of the BP Group Plans were allocated based on
the Company&#146;s active employee population from each of the
periods presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to the Company&#146;s participation in the Group
Plans, the Company recorded pension and other post-employment
benefit amounts for the three years ended December&nbsp;31, 2004
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension expense/(credit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other post employment benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expense/(credit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to January&nbsp;1, 2004, a net pension credit is reported
due to the combined effect of the unrecognized actuarial gain
and unrecognized transitional gain being amortized through the
pension expense. The transitional obligation was fully amortized
by December&nbsp;31, 2003 and the actuarial gain recorded in
prior years has reversed to become an actuarial loss for the
year ended December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">F-34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The pension and other post-employment benefit amounts recognized
in future periods could be materially different from these
amounts, principally because pension and other post-employment
obligations relating to retired and terminated vested Group Plan
employees prior to April&nbsp;1, 2005 remained the
responsibility of BP, and the Company has generally continued to
participate in the Group Plans from April&nbsp;1, 2005 under the
terms of the Master Reorganization Agreement. From April&nbsp;1,
2005 and until BP&#146;s shareholding in Innovene falls below
50% (80% in the US) Innovene will pay to BP the International
Financial Reporting Standards (&#147;IFRS&#148;) Service Cost
for Innovene employees who continue to participate in the BP
Group funded plans and reimburse BP for benefits paid to
Innovene employees who continue to participate in the BP Group
unfunded arrangements and who reach eligibility after
March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP&#146;s U.S.&nbsp;tax-qualified pension plan has a design that
is based in part upon a &#147;cash balance&#148; formula. It
should be noted that in 2003, a Federal district court in
Illinois ruled that the benefit formula used in International
Business Machines Corporation&#146;s (IBM) cash balance pension
plan violated the age discrimination provisions of ERISA and
that IBM must make back payments to workers covered under the
plan. The IBM decision conflicts with decisions of at least
three other district courts, including most recently a June 2004
decision of the Federal district court in Maryland. Proposed
regulations validating the cash balance design have been
withdrawn by the Treasury Department while Congress considers
legislative action to clarify the legal status of cash balance
plans under age discrimination rules. At this time, it is
unclear what effect, if any, these decisions or Congressional or
regulatory action may have on BP&#146;s tax-qualified pension
plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Company Pension and Other Post-employment Benefit
Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sponsors pension and other post-employment benefit
plans for certain of its employees in the U.S., France and
Germany. The pension plans provide payments to eligible
employees upon retirement. Pension benefits for employees are
generally based on an employee&#146;s length of service, and in
the case of France, earnings at or near retirement. Other
post-employment benefits are in the form of lump sum benefits
that depend on an employee&#146;s length of service and earnings
at, or near retirement, and post-employment healthcare benefits
that reimburse healthcare costs for retirees and dependants. The
BP Solvay North America Pension Plan is funded by the Company.
Contributions to external funds are determined after receiving
advice from independent actuaries. The other pension and other
post-employment benefit plans are unfunded in line with local
practice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The cost of providing pension and other post-employment benefits
is assessed annually by independent actuaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pension plan assets for funded arrangements are generally held
in trusts. The primary objective of the trusts is to accumulate
pools of assets sufficient to meet the obligations of the
various plans. The assets of the trusts are invested in a manner
consistent with fiduciary obligations and principles that
reflect current practices in portfolio management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A significant proportion of the assets are held in equities
owing to a higher expected level of return over the long term
with an acceptable level of risk. In order to provide a
reasonable assurance that no single security or type of security
has an unwarranted impact on the total portfolio, the investment
portfolios are diversified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The asset allocation for the major funded Company pension plan
(BP Solvay North America) at December&nbsp;31, 2002, 2003 and
2004 was as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Asset category</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bonds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Return on asset assumptions reflect the Company&#146;s
expectations built up by asset class. The Company&#146;s
expectation is derived from a combination of historical returns
over the long term and forecasts of market professionals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I> Plan Obligations, Assets and Funded Status at
December&nbsp;31:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Post-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>employment Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Change in benefit</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan amendments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss (gain)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency exchange rate changes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Post-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>employment Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Change in plan assets</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employer contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan participants&#146; contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded status at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(439</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(536</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized net actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(244</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(342</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(392</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Amounts recognized in the Combined Financial Statements at
December&nbsp;31:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Post-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>employment Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Accrued) benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(305</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(507</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(244</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(342</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(392</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-36

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Accumulated Benefit Obligation for defined benefit pension
plans was $297&nbsp;million, $414&nbsp;million and
$505&nbsp;million respectively as of December&nbsp;31, 2002,
2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Components of net periodic benefit cost:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pension benefits:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of net loss (gain)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost for pension benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other Post-employment benefits:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of net loss (gain)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost for other post-employment benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total net periodic benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pension plan contributions paid during the six months ended
June&nbsp;30, 2004 and June&nbsp;30, 2005 were $15&nbsp;million
and $11&nbsp;million respectively. Expected contributions for
the year ended December&nbsp;31, 2005 are $15&nbsp;million.
Expected other post-employment benefit contributions for the
year ended December&nbsp;31, 2005 are $0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Additional information:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in minimum liability included in other comprehensive
    income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-37

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Weighted average assumptions used to determine benefit
obligations at December&nbsp;31:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Post-employment Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.79</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.53</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.04</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.32%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.98%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.50%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.01</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.14%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Healthcare cost trend rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.02%- 4.15%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.89%- 3.98%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.02%- 4.01%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Note:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Reduction in average assumed healthcare trend rate occurs in
    period until 2009</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Weighted average assumptions used to determine net periodic
benefit cost for years ended December&nbsp;31:</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Post-employment</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Pension Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>%</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.12</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.79</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.53</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.68%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.32%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.98%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected long-term return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.11</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.98</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>n/a</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>n/a</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>n/a</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.21</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.01</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.78%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.14%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Healthcare cost trend rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.60%- 3.72%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.02%- 4.15%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.89%- 3.98%</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Note:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Reduction in average assumed healthcare trend rate occurs in
    period until 2009</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
A one percentage point change in the assumed healthcare cost
trend rate would have the following effect:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>One percentage</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>One percentage</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>point increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>point decrease</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on service and interest cost in 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on postretirement benefit obligation at December&nbsp;31,
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Actuarial gains and losses are amortized on a straight-line
basis over current employees&#146; average remaining service
lives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following benefit payments, which reflect expected future
service, as appropriate, are anticipated to be paid:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Post-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>employment</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010 - 2014</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-38

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The pension and other post-employment benefit amounts recognized
in future periods could be materially different from these
amounts, principally because pension obligations relating to
retired and terminated vested German employees prior to
April&nbsp;1, 2005, remained the responsibility of BP under the
terms of the Master Reorganization Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Defined Contribution Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company contributed to defined contribution pension plans
for the three years ended December&nbsp;31, 2004 as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Defined contribution pension expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(17)</B></TD>
    <TD>
    <B>Stock Based Compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the years ended December&nbsp;31, 2002, 2003, and 2004, a
number of Innovene employees participated in BP sponsored long
term incentive plans. Under the plans, employees received
various stock-based compensation awards, including stock
options, restricted stock, stock opportunity grants and
performance units.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under these plans, BP offered most of its employees the
opportunity to acquire a shareholding in BP through
savings-related and/or matching share plan arrangements. BP also
used long-term performance plans and the granting of share
options as elements of remuneration for executive directors and
senior employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>BP Share Option and Share Save Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Share options were granted under the BP Share Option Plan to
certain categories of employees. Subject to certain vesting
requirements, the options are exercisable between the third and
10th&nbsp;anniversaries of the date of grant. There are no
performance conditions attaching to the options granted during
the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the BP ShareSave Plan (a savings-related share option
plan), employees save on a monthly basis over a three- or
five-year period towards the purchase of shares at a price fixed
when the option is granted. The option must be exercised within
six months of maturity of the savings contract; otherwise it
lapses. The plan is run in the UK and a small number of other
countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No compensation expense is recognized by the Company for the BP
ShareSave Plan or in respect of share options granted to
employees under the BP Share Option Plan. The Company has made
pro forma disclosure in Note&nbsp;3 of the impact on the results
of operations had compensation costs attributable to awards
granted to employees of the Company been determined using the
fair value-based accounting method in accordance with FASB
Statement No.&nbsp;123, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>BP ShareMatch Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the BP ShareMatch Plan, BP matches employees&#146; own
contributions of shares, up to a predetermined limit. The shares
are then held in trust for a defined minimum period. The plan is
run in the UK and in over 70&nbsp;other countries.
</DIV>

<P align="center" style="font-size: 10pt;">F-39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-term Performance Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, BP operated two long-term performance plans: the
Executive Directors&#146; Incentive Plan (EDIP) for executive
directors and the Long Term Performance Plan (LTPP) for senior
employees. Executive directors participated in the LTPP prior to
2002 or to their appointment as an executive director, whichever
was the later. Both plans are incentive schemes under which the
Company may award shares to participants or fund the purchase of
shares for participants if long-term targets are met. Awards
were made in 2004 in respect of the 2001-2003 LTPP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The costs of potential future awards for both the EDIP and LTPP
are accrued over the three-year performance periods of each plan
and have been allocated to the Innovene statement of operations
based on Innovene senior executive headcount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Employee Share Ownership Plans (ESOPs) have been established to
acquire BP shares to satisfy any awards made to participants
under the EDIP and LTPP and then to hold them for the
participants during the retention period of the plan. BP
provides funding to the ESOPs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP&#146;s own shares held by the ESOP have not been included in
the Innovene balance sheet.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(18)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Current and deferred income tax expense (benefit) consisted of
the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income tax expense</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal and state</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(87</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income before income taxes consists of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Continuing Operations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Domestic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(312</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Discontinued Operations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Domestic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(180</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(77</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes reflected in owner&#146;s equity are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AOCI&nbsp;&#151; minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes result from temporary differences between
the financial and tax bases of the Company&#146;s assets and
liabilities.
</DIV>

<P align="center" style="font-size: 10pt;">F-41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tax effect of temporary differences giving rise to the
significant components of deferred tax assets and liabilities is
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Deferred tax assets:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Domestic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefit plans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>496</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(134</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>362</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Deferred tax liabilities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial instruments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(866</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(908</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(986</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,002</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(674</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(640</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Reported as:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets&nbsp;&#151; non-current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities&nbsp;&#151; current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities&nbsp;&#151; non-current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(746</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(699</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Discontinued operations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities&nbsp;&#151; non-current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(674</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(640</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As more fully described in Note&nbsp;3, Summary of Significant
Accounting Policies, Income Taxes, the Company assesses the
realizability of deferred tax assets by consideration of the
potential for future taxable income in the jurisdiction to which
the deferred tax asset relates. Deferred tax assets in respect
of operating loss carryforwards and tax credits arising in
periods before those covered by these financial statements have
been reduced by valuation allowances. To the extent that
deferred tax expense is recognized in respect of current period
increases in deferred tax liabilities during the same period in
which losses are incurred, a current tax benefit is recognized
to the extent of the increase in deferred tax liabilities. Any
excess amounts were assessed against the ability to realize
these tax benefits in the future. As a result, the Company has
provided valuation allowances to the extent that it was not
likely to be realized in the future.
</DIV>

<P align="center" style="font-size: 10pt;">F-42

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s actual tax charge from continuing activity
differs as follows from the expected tax charge calculated at a
statutory federal income tax rate of 35% for the following
periods:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected tax charge/(benefit) at statutory tax rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in valuation allowances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign tax rate differential</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in fair value of Solvay put liabilities and losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charitable contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency transactions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax rate changes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual income tax charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Differences between the effective and statutory tax rates arise
due principally to the effects of management&#146;s assessment
of the realizability of tax loss carryforwards, the
Company&#146;s inability to determine its deferred tax asset
balances in respect of operating and tax loss carryforwards for
periods before those covered by these financial statements, the
inability to offset carryforwards from one jurisdiction against
income arising in other jurisdictions on a separate return
basis, the non-deductibility of losses associated with the
accounting for the Solvay put liabilities, foreign exchange rate
losses on long term debt, and higher rates and currency-related
items in foreign jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the periods 2002, 2003 and 2004 the Company has followed its
parent&#146;s policy to permanently reinvest the earnings of its
non-U.S. operations. The Company intends to partially reinvest
the earnings of its non-U.S.&nbsp;subsidiaries after deduction
of non-U.S.&nbsp;income taxes, to maintain and enhance its
international operations. New non-U.S. investments will
generally be held from the U.S. Because non-U.S.&nbsp;income
taxes are, on average, equal to or higher than the comparable
U.S.&nbsp;rates, and in accordance with the U.S.&nbsp;foreign
tax credit assumptions described in Note&nbsp;3, no provision
has been made for U.S.&nbsp;income taxes that might be payable
upon repatriation of such earnings.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(19)</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Operating Leases</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is obligated under operating leases with remaining
non-cancelable terms of one year or more for property, office
equipment, rail cars, storage facilities and automobiles. Rental
expense for these operating leases for the years ended
December&nbsp;31, 2002, 2003, and 2004 was $37&nbsp;million,
$68&nbsp;million, and $89&nbsp;million, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-43

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, future payments under non-cancelable
operating leases with a remaining term greater than one-year are
as follows over each of the next five years and thereafter:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating Leases</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less executory costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less sub-lease receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental Matters</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As at December&nbsp;31, 2004, the Company had accrued
$17&nbsp;million which relates to environmental liability
provisions for various sites.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is subject to numerous national and local
environmental laws and regulations concerning its products,
operations and other activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These laws and regulations may require the Company to take
future action to remediate the effects on the environment of
prior disposal or release of chemicals or other substances by
the Company or other parties. The ultimate requirement for
remediation and its cost are inherently difficult to estimate.
However, the estimated cost of known environmental obligations
has been accrued in accordance with the Company&#146;s
accounting policies. While the amounts of future costs could be
significant to the Company&#146;s results of operations in the
period in which they are recognized, Innovene does not expect
these costs to have a material effect on the Company&#146;s
financial position or liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Tax Matters</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of the separation from BP, the Company will incur
liability for stamp duty in various countries related to the
transfer of assets from BP to Innovene. In the United Kingdom,
liability for stamp duty land tax will be chargeable to Innovene
if and when BP&#146;s interest in the assets transferred falls
below 75%. This potential future liability for stamp duty land
tax in the United Kingdom and other stamp duties is estimated to
be approximately $100&nbsp;million to $150&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Committed Capital Expenditures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Externally committed and internally authorized future capital
expenditure by the Company as at December&nbsp;31, 2004 amounted
to $149&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt;">F-44

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(20)</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, the Company signed the previously announced
transaction with NOVA Chemicals Corporation to combine their
European polystyrene and expandable polystyrene
(&#147;EPS&#148;) businesses into a joint venture named NOVA
Innovene. Under the terms of the agreement, upon closing, which
is expected to occur in late 2005, Innovene will contribute its
polystyrene and EPS assets at Marl, Germany and Trelleborg,
Sweden while NOVA will contribute four polystyrene and EPS
plants located in France, the Netherlands and the United
Kingdom. Each party will receive a 50% equity interest in NOVA
Innovene as consideration in the exchange. In addition, Innovene
has entered into an agreement which provides for put and call
options for the purchase by the Company, and transfer to NOVA
Innovene, of BP&#146;s polystyrene and EPS assets and
liabilities at Wingles in the first quarter of 2007. On the
exercise of either a put or call option, the consideration for
the transfer is the fair market value of such assets and
liabilities at the time of any transfer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;10, 2005, the Company experienced a fire at one
of the crackers at the Company&#146;s Chocolate Bayou, Texas
facility. The affected unit primarily produces ethylene and
represents approximately 50% of the facility&#146;s total
ethylene capacity. We are continuing to assess the operational
and financial impact the incident may have on our business.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(21)</B></TD>
    <TD>
    <B>Financial Instruments and Derivative Contracts</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Innovene is exposed to a number of different market risks
arising from the Company&#146;s normal business activities.
Market risk is the possibility that changes in currency exchange
rates, interest rates, or commodity prices will adversely affect
the value of the Company&#146;s financial assets, liabilities or
expected future cash flows. The Company has developed policies
aimed at managing the volatility inherent in certain of these
natural business exposures and, in accordance with these
policies, the Company enters into various transactions using
derivative financial and commodity instruments (derivatives),
including conventional exchange-traded derivative instruments
such as futures and option contracts, as well as
non-exchange-traded instruments such as swaps,
&#147;over-the-counter&#148; options, and forward contracts.
Derivatives are contracts whose value is derived from one or
more underlying financial instruments, indices, or prices that
are defined in the contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for derivatives and hedging activities in
accordance with FASB Statement No.&nbsp;133, <I>Accounting for
Derivative Instruments and Certain Hedging Activities,</I> as
amended, which requires that all derivative instruments be
recorded on the balance sheet at their respective fair values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The purpose for which a derivative contract is used is
identified at inception. To qualify as a hedge for accounting
purposes, the contract must comply with established guidelines
that ensure that it is effective in achieving its objective. In
such circumstances where the Company designates a derivative as
a hedge against changes in the value of a recognized asset or
liability, the Company&#146;s exposure to market risk created by
the derivative is offset by the opposite exposure arising from
the asset or liability being hedged. In other circumstances
where the Company designates a derivative as a cash flow hedge
of an anticipated transaction, the changes in value of the
derivative are included in Other Comprehensive Income until the
occurrence of the future transaction, and then are offset by the
effects of the transaction being hedged in the period it occurs.
In all other cases where derivatives are not designated as a
hedge for accounting purposes, changes in market value give rise
to realized and unrealized gains and losses, which are
recognized in current period operating results. For the periods
presented herein, none of the Company&#146;s derivative
instruments were designated as hedges for accounting purposes.
</DIV>

<P align="center" style="font-size: 10pt;">F-45
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All derivative activity, whether designated as a hedge for
accounting purposes or not, is carried out by specialist teams
that have the appropriate skills, experience and supervision.
These teams are subject to close financial and management
control, meeting generally accepted industry practice and
reflecting the principles of the Group of Thirty Global
Derivatives Study recommendations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated fair value of financial instruments has been
determined by using available market information and appropriate
valuation methodologies. The following table provides the fair
values of all material derivatives instruments outstanding as at
each period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Derivative instruments fair value and notional
amounts</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign exchange contracts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchased options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign exchange swaps</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contractual notional amounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Foreign Currency Exchange Rate Risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP and Innovene&#146;s foreign exchange management policy is to
minimize economic and material transactional exposures arising
from currency movements against the U.S.&nbsp;dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until December&nbsp;31, 2004, Innovene did not separately manage
these risks, with the exception of specific risks around the
sterling-denominated debt, as all exposures were managed
centrally by BP on a net BP Group basis. The BP Group
co-ordinated the handling of foreign exchange risks centrally,
by netting off naturally occurring opposite exposures wherever
possible, to reduce the risks, and then dealing with any
material residual foreign exchange risks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into foreign exchange derivative contracts
to manage the exposure related to the sterling-denominated debt
as this was a specific identifiable risk. These contracts, which
all have a maturity of less than one year, are not designated as
hedges for financial reporting purposes and are recorded at fair
value. As of December&nbsp;31, 2002, 2003, and 2004, the fair
value of outstanding foreign exchange derivative contracts was
$116&nbsp;million, $204&nbsp;million, and $155&nbsp;million,
respectively. Settlement of the foreign exchange swaps resulted
in net pre-tax gains of $16&nbsp;million, $2&nbsp;million, and
$4&nbsp;million in 2002, 2003, and 2004 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In early 2005, the Company began separately managing its
significant non-U.S.&nbsp;dollar economic exposures using
derivative contracts that have not been designated as hedges for
accounting purposes. The most significant of such exposures are
the net cash flows of the Euro and Sterling related to the
Company&#146;s activities within Continental Europe and the UK.
The following table provides information about the
Company&#146;s foreign currency purchased options that were
negotiated at the beginning of 2005 for a premium cost of
$20&nbsp;million. These financial instruments are sensitive to
changes in the Sterling/U.S.&nbsp;dollar, Euro/U.S.&nbsp;dollar
exchange rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair values for the foreign exchange options in the table
below are based on pricing models that take into account
relevant market data.
</DIV>

<P align="center" style="font-size: 10pt;">F-46

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Purchased options</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Notional amount by</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>expected maturity&nbsp;date</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Fair value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>As of June&nbsp;30, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Asset</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Liability</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receive sterling/pay U.S.&nbsp;dollars</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract amount ($ in millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average strike price&nbsp;($)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receive Euro/pay U.S.&nbsp;dollars</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract amount ($ in millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average strike price&nbsp;($)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currency options which matured during the first half of 2005
resulted in a realized loss of $4&nbsp;million from inception to
June&nbsp;30, 2005. Changes in fair values of outstanding
options account for $15&nbsp;million unrealized loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Commodity Prices</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Within the Company&#146;s normal business activities, Innovene
is exposed to commodity prices that could adversely affect the
value of the Company&#146;s financial assets, liabilities or
expected future cash flows. Commodity price trading and hedging
activities have been carried out by BP&#146;s supply and trading
function. Service agreements have been negotiated in order to
ensure the continuity of such activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BP risk management policy with respect to commodity price risk
is to manage certain short-term exposures in respect of its
business activities. To this end, BP&#146;s supply and trading
function uses the full range of conventional financial and
commodity derivatives available in the relevant markets. The
derivative instruments used for hedging purposes do not expose
the Company to market risk because the change in their market
value is offset by an equal and opposite change in the market
value of the asset, liability or transaction being hedged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Trading Risk Management Committee has oversight of the quality
of internal control in BP&#146;s supply and trading function.
Independent control functions monitor compliance with BP&#146;s
policies. The control framework includes prescribed trading
limits that are reviewed regularly by senior management, daily
monitoring of risk exposure using value-at-risk principles,
marking trading exposures to market and stress testing to assess
the exposure to potentially extreme market situations. BP&#146;s
supply and trading activities in oil, natural gas, power and
financial markets are managed within a single integrated
function. This function has the responsibility for ensuring high
and consistent standards of control, making investments in the
necessary systems, and supporting infrastructure and providing
professional management oversight.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company measures its market risk exposure,&nbsp;i.e.
potential gain or loss in fair values, on its trading activity
using value-at-risk techniques. These techniques are based on a
variance/ covariance model or a Monte Carlo simulation and make
a statistical assessment of the market risk arising from
possible future changes in market values over a 24-hour period.
The calculation of the range of potential changes in fair value
takes into account a snapshot of the end-of-day exposures, and
the history of one-day price movements over the previous twelve
months, together with the correlation of these price movements.
The potential movement in fair values is expressed to three
standard deviations, equivalent to a 99.7% confidence level.
This means that, in broad terms, one would expect to see an
increase or a decrease in fair values greater than the
value-at-risk on only one occasion per year if the portfolio
were left unchanged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company calculates value-at-risk on all instruments that are
held for trading purposes and that therefore give an exposure to
market risk. The value-at-risk models take account of derivative
financial instruments such as interest rate forward and futures
contracts and swap agreements; foreign exchange forward and
futures contracts
</DIV>

<P align="center" style="font-size: 10pt;">F-47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
and swap agreements; and oil, natural gas and power price
futures and swap agreements. Financial assets and liabilities
and physical crude oil and refined products that are treated as
trading positions are also included in these calculations. For
options a linear approximation is included in the value-at-risk
models. The value-at-risk calculation for oil, natural gas and
power price exposure also includes derivative commodity
instruments (commodity contracts that permit settlement either
by delivery of the underlying commodity or in cash), such as
forward contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Commodity</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides the gain and losses, excluding any
costs relating to such activities, that have been recognized in
the Company&#146;s income statement due to hedging and trading
activities performed by BP&#146;s supply and trading function.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hedging</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Petrochemicals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trading</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Petrochemicals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(22)</B></TD>
    <TD>
    <B>Geographic and Segment Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company derives its revenues, earnings and cash flows from
the manufacture and sale of a wide variety of specialty and
commodity chemical products and refined oil products. The
Company has five reportable operating segments: Olefins and
Polymers North America, Olefins and Polymers Europe, Global
Derivatives, Refining, and Corporate. The major products of each
reportable operating segment are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Segment</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Primary Products</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    Olefins and Polymers North America</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene, Propylene, Butadiene, Polypropylene, High Density
    Polyethylene, Styrene Monomer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Olefins and Polymers Europe</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Ethylene, Propylene, Butadiene, Benzene, Polypropylene, Low-,
    Linear Low- and High-Density Polyethylene, Styrene Monomer,
    Polystyrene, Expandable Polystyrene, Solvents and Industrial
    Chemicals</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    Global Derivatives</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Acrylonitrile, and Linear and Poly Alpha Olefins</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Refining</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Gasoline, Diesel, Jet Fuel, Naphtha, LPG, Gas Oil</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    Corporate and other</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Polymers and Acrylonitrile licensing</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The BDO business has historically been included in the Global
Derivatives operating segment and is included in this segment in
this note.
</DIV>

<P align="center" style="font-size: 10pt;">F-48

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial information for each of the Company&#146;s geographic
regions is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six&nbsp;months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United Kingdom</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,287</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    France</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,396</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Belgium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rest of world</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,433</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Long-lived
    Assets<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United Kingdom</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,279</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Germany</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>967</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    France</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Belgium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rest of world</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>427</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-lived assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(144</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Note:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Represents property, plant and equipment, net of accumulated
    depreciation</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Revenue by geographic region was determined based on the
location of the manufacturing facility generating the revenues.
Long-lived assets by geographic region were determined based on
where these assets were physically located.
</DIV>

<P align="center" style="font-size: 10pt;">F-49

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins and Polymers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,331</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eliminations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,165</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,502</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(890</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Adjusted
    EBITDA<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP>:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins and Polymers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>492</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(254</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total adjusted EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add back (deduct) adjusted EBITDA from discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total adjusted EBITDA from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reconciliation of adjusted EBITDA from continuing operations to
    net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes for continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset impairments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(280</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(423</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(517</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(545</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(244</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(284</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) from continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Notes:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Revenues on products sold between operating segments are
    recorded at market prices.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Adjusted EBITDA represents income (loss) before income tax
    benefit (expense), adjusted for interest expense, depreciation
    and amortization, and asset impairments.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-50

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>For the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>six&nbsp;months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the year ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Depreciation and Amortization:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins and Polymers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Capital Expenditures:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins and Polymers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-51

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>INNOVENE Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Information as of June&nbsp;30, 2005 and for the six months
ended</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>June&nbsp;30, 2004 and 2005 is unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 24pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Olefins and Polymers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North America</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Europe</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,796</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Global Derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,639</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate and Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eliminations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(384</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less discontinued operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(178</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total continuing operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-52

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="u49013u4901303.gif" alt="(INNOVENE LOGO)">
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Goldman, Sachs &#38; Co.</B></TD>
    <TD align="right"><B>Morgan Stanley</B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Lehman Brothers</B></TD>
    <TD align="right"><B>UBS Investment Bank</B></TD>
</TR>

</TABLE>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the estimated costs and expenses,
other than underwriting discounts and commissions, payable in
connection with the sale of common stock being registered, all
of which will be paid by the Registrant:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    SEC registration fee</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>117,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NYSE listing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Blue sky fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment</TD>
</TR>

</TABLE>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the General Corporation Law of the State of
Delaware provides as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&#147;A corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys&#146; fees) actually and reasonably
incurred by him in connection with the defense or settlement of
such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or
matter. as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such
</DIV>

<P align="center" style="font-size: 10pt;">II-1

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<DIV align="left" style="font-size: 10pt;">
person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall
deem proper.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As permitted by the Delaware General Corporation Law, the
Registrant has included in its certificate of incorporation and
bylaws provisions to eliminate the personal liability of its
directors for monetary damages for breach of their fiduciary
duties as directors, subject to certain exceptions. In addition,
the Registrant&#146;s certificate of incorporation and bylaws
provide that the Registrant is required to indemnify its
officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be
discretionary, and the Registrant is required to advance
expenses to its officers and directors as incurred in connection
with proceedings against them for which they may be indemnified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement provides that the underwriters are
obligated, under certain circumstances, to indemnify directors,
officers and controlling persons of the Registrant against
certain liabilities, including liabilities under the Securities
Act of 1933. Reference is made to the form of underwriting
agreement filed as Exhibit&nbsp;1.1 hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant intends to maintain directors and officers
liability insurance for the benefit of its directors and
officers.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant has not sold any securities, registered or
otherwise, within the past three years, except for the shares
issued upon formation to Registrant&#146;s sole shareholder, BP.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Exhibits</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Exhibit number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit title</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Underwriting Agreement*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Reorganisation Agreement, dated
    June&nbsp;30, 2005, between BP p.l.c., Innovene LLC, Innovene
    Europe Holdings Limited and BP Chemicals East China Investments
    Limited</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Innovene Inc.&#146;s Amended and Restated Certificate of
    Incorporation*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Innovene Inc.&#146;s Amended and Restated Bylaws*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Specimen Certificate for Innovene Inc.&#146;s Common
    Stock*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Sullivan&nbsp;&#38; Cromwell&nbsp;LLP*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Intellectual Property and Information Technology Separation
    Agreement, dated April&nbsp;1, 2005, between certain members of
    the Innovene Group and BP&nbsp;p.l.c.*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    U.S. Master Tax Agreement, dated as of April&nbsp;1, 2005,
    between Innovene&nbsp;LLC., BP&nbsp;America&nbsp;Inc and
    BP&nbsp;p.l.c.*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Rest of World Master Tax Agreement, dated as of August&nbsp;3,
    2005 between Innovene LLC, Innovene European Holdings Limited
    and BP&nbsp;p.l.c., each signing on behalf of various BP and
    Innovene entities*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Crude Oil, dated June&nbsp;16, 2005, between
    BP&nbsp;Trade and Supply (Germany) GmbH and Innovene Europe
    Limited (formerly O&#38;D&nbsp;Trading Limited)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Naphtha, NGL and other Feedstock volumes, dated
    June&nbsp;16, 2005, between BP&nbsp;Oil International Limited
    and Innovene Europe Limited (formerly O&#38;D&nbsp;Trading
    Limited)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Refined Product Sale and Purchase
    Agreement, dated June&nbsp;16, 2005, between BP&nbsp;Oil
    International Limited and Innovene Europe Limited (formerly
    O&#38;D&nbsp;Trading Limited)*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-2
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Exhibit number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit title</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Services Agreement in relation to Refining Commercial
    Optimisation Services, Naphtha Commercial Optimisation Services
    and NGL&nbsp;Commercial Services and LME Plastics Hedging, dated
    March&nbsp;31, 2005, as amended by an amendment deed, dated
    June&nbsp;10, 2005, and an amendment deed, dated August&nbsp;18,
    2005, between BP&nbsp;Oil International Limited and Innovene
    Europe Limited (formerly O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Services Agreement in relation to
    NGL&nbsp;Commercial Optimisation Services, Naphtha Commercial
    Optimisation Services and Benzene Commercial Optimisation
    Services, dated June&nbsp;16, 2005, between BP&nbsp;North
    Products America&nbsp;Inc and Innovene USA&nbsp;LLC (formerly
    O&#38;D&nbsp;USA&nbsp;LLC)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Feedstock Sale and Purchase Agreement for
    Naphtha and NGL, dated June&nbsp;16, 2005, between
    BP&nbsp;Products North America&nbsp;Inc and Innovene
    USA&nbsp;LLC (formerly O&#38;D&nbsp;USA&nbsp;LLC)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbons Streams produced at Carson, dated April&nbsp;1,
    2005, between BP&nbsp;West Coast Products&nbsp;LLC and ARCO
    Polypropylene&nbsp;LLC*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, Mont
    Belvieu, Conway and the Hobbs Fractionator, dated June&nbsp;30,
    2005, between BP&nbsp;North Products America&nbsp;Inc and
    Innovene USA&nbsp;LLC (formerly O&#38;D&nbsp;USA&nbsp;LLC)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, dated
    June&nbsp;16, 2005, between BP&nbsp;Amoco Chemical Company and
    Innovene USA&nbsp;LLC (formerly O&#38;D&nbsp;USA&nbsp;LLC)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Whiting, dated June&nbsp;16,
    2005, between BP&nbsp;Products North America&nbsp;Inc and
    Innovene USA&nbsp;LLC (formerly O&#38;D&nbsp;USA&nbsp;LLC)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Refined Products Sale and Purchase Agreement in respect
    of the domestic sale of Refined Products at Lav&#233;ra, dated
    March&nbsp;31, 2005 between O&#38;D&nbsp;Trading Limited and
    BP&nbsp;France&nbsp;SA*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Cologne, dated March&nbsp;31,
    2005 between Deutsche BP&nbsp;AG and O&#38;D&nbsp;Trading
    Limited*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Nerefco, dated March&nbsp;31,
    2005 between BP&nbsp;Oil International Limited and
    O&#38;D&nbsp;Trading Limited*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Agreement regarding the Use of
    Infrastructure at the Nerefco Facilities in Rotterdam (Nerefco
    Infrastructure Agreement), dated June&nbsp;16, 2005, between
    BP&nbsp;Oil International Limited and Innovene Europe Limited
    (formerly O&#38;D&nbsp;Trading Limited)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Agreement regarding Transportation of
    Naphtha through the RMR&nbsp;Pipeline, dated June&nbsp;16, 2005,
    between Deutsche BP&nbsp;AG and Innovene Europe Limited
    (formerly O&#38;D&nbsp;Trading Limited)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams supplied to Grangemouth, dated
    March&nbsp;31, 2005, between BP&nbsp;Exploration Operating
    Company Limited and O&#38;D&nbsp;Trading Limited*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Refined Products Sale and Purchase
    Agreement in respect of the domestic sale of Refined Products
    produced at Grangemouth, dated June&nbsp;16, 2005, between
    Innovene Europe Limited (formerly O&#38;D&nbsp;Trading Limited)
    and BP&nbsp;Oil UK&nbsp;Limited*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Innovene &#147;BP LTPP&#148; Conversion Plan, dated
    June&nbsp;23, 2005.*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Innovene Incentive Plan 2005, dated June&nbsp;23, 2005.*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Innovene Executive Share Matching Plan, dated June&nbsp;23,
    2005.*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Change in Control Severance Agreement for Ralph Alexander*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Change in Control Severance Agreement for Didier Baudrand*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Change in Control Severance Agreement for Dennis Seith*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Change in Control Severance Agreement for
    U.S.&nbsp;executive officers*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Exhibit number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit title</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of Innovene&nbsp;Inc.*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Ernst&nbsp;&#38; Young LLP, Independent Registered
    Public Accounting Firm</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Sullivan&nbsp;&#38; Cromwell&nbsp;LLP (included in
    Exhibit&nbsp;5.1)*</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney**</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>**</TD>
    <TD align="left">
    Included on signature page.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;Financial Statement Schedules
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying
Accounts</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Deduction from asset accounts, allowance for doubtful
debt:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charged to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charged to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>$m</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>accounts</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions<SUP style="font-size: 85%; vertical-align: text-top">(a),(b)</SUP></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>end of year</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>($ in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December 31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December 31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December 31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
 Notes:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Includes foreign currency translation effects</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Uncollected accounts written off, net of recoveries</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item 17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Undertakings</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(1)&nbsp;That for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this Registration Statement
in reliance upon Rule&nbsp;430A and contained in a form of
prospectus filed by the Registrant pursuant to
Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(2)&nbsp;That for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(3)&nbsp;To provide to the underwriters at the closing specified
in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(4)&nbsp;Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
</DIV>

<P align="center" style="font-size: 10pt;">II-4
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, Innovene Inc. has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in&nbsp;Chicago, Illinois, on
September&nbsp;12, 2005.
</DIV>

<DIV style="margin-top: 20pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Innovene Inc.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 44pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="2%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ Ralph C. Alexander</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Ralph C. Alexander</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    President, Chief Executive Officer and Director</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints each of
Ralph C.&nbsp;Alexander, Mark Tomkins and Henry Kleeman, and
each of them acting individually, as his or her true and lawful
attorneys-in-fact and agents, each with full power of
substitution, for the undersigned in any and all capacities, to
sign any and all amendments to this Registration Statement
(including post-effective amendments or any abbreviated
registration statement and any amendments thereto filed pursuant
to Rule&nbsp;462(b) increasing the number of securities for
which registration is sought), and to file the same, with all
exhibits thereto and other documents in connection therewith,
with the SEC, granting unto said attorneys-in-fact and agents,
with full power of each to act alone, full power and authority
to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully for all
intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Ralph C. Alexander<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Ralph
    C. Alexander</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    President, Chief Executive Officer, and&nbsp;Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Mark Tomkins<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Mark
    Tomkins</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Thomas C. Muething<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Thomas
    C. Muething</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Controller</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Ross J. Pillari<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Ross
    J. Pillari</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chairman of the Board and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Stephen A. Elbert<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Stephen
    A. Elbert</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Stephen Riney<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Stephen
    Riney</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Stephen R. Winters<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Stephen
    R. Winters</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;12, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXHIBIT INDEX</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit title</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Underwriting Agreement*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Reorganisation Agreement, dated
    June&nbsp;30, 2005, between BP p.l.c., Innovene LLC, Innovene
    Europe Holdings Limited and BP Chemicals East China Investments
    Limited</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Innovene Inc.&#146;s Amended and Restated Certificate of
    Incorporation*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Innovene Inc.&#146;s Amended and Restated Bylaws*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Specimen Certificate for Innovene Inc.&#146;s Common
    Stock*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Sullivan &#38; Cromwell LLP*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Intellectual Property and Information Technology Separation
    Agreement, dated April&nbsp;1, 2005, between certain members of
    the Innovene Group and BP p.l.c.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    U.S. Master Tax Agreement, dated, as of April&nbsp;1, 2005,
    between Innovene LLC, BP America Inc and BP p.l.c.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Rest of World Tax Master Agreement, dated as of August&nbsp;3,
    2005 between Innovene LLC, Innovene European Holdings Limited
    and BP p.l.c., each signing on behalf of various BP and Innovene
    entities*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Crude Oil, dated June&nbsp;16, 2005, between BP
    Trade and Supply (Germany) GmbH and Innovene Europe Limited
    (formerly O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Naphtha, NGL and other Feedstock volumes, dated
    June&nbsp;16, 2005, between BP Oil International Limited and
    Innovene Europe Limited (formerly O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Refined Product Sale and Purchase
    Agreement, dated June&nbsp;16, 2005, between BP Oil
    International Limited and Innovene Europe Limited (formerly
    O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Services Agreement in relation to Refining Commercial
    Optimisation Services, Naphtha Commercial Optimisation Services
    and NGL Commercial Services and LME Plastics Hedging, dated
    March&nbsp;31, 2005, as amended by an amendment deed, dated
    June&nbsp;10, 2005 and an amendment deed, dated August&nbsp;18,
    2005, between BP Oil International Limited and Innovene Europe
    Limited (formerly O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Services Agreement in relation to
    NGL Commercial Optimisation Services, Naphtha Commercial
    Optimisation Services and Benzene Commercial Optimisation
    Services, dated June&nbsp;16, 2005, between BP North Products
    America Inc and Innovene USA LLC (formerly O&#38;D USA LLC)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Feedstock Sale and Purchase Agreement for
    Naphtha and NGL (and other feedstock volumes), dated
    June&nbsp;16, 2005, between BP Products North America Inc and
    Innovene USA LLC (formerly O&#38;D USA LLC)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbons Streams produced at Carson, dated April&nbsp;1,
    2005, between BP West Coast Products LLC and ARCO Polypropylene
    LLC*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, Mont
    Belvieu, Conway and the Hobbs Fractionator, dated June&nbsp;30,
    2005, between BP North Products America Inc and Innovene USA LLC
    (formerly O&#38;D USA LLC)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, dated
    June&nbsp;16, 2005, between BP Amoco Chemical Company and
    Innovene USA LLC (formerly O&#38;D USA LLC)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Whiting, dated June&nbsp;16,
    2005, between BP Products North America Inc and Innovene USA LLC
    (formerly O&#38;D USA LLC)*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-6
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Exhibit title</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Refined Products Sale and Purchase Agreement in respect
    of the domestic sale of Refined Products at Lav&#233;ra, dated
    March&nbsp;31, 2005 between O&#38;D Trading Limited and BP
    France SA*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Cologne, dated March&nbsp;31,
    2005 between Deutsche BP AG and O&#38;D Trading Limited*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Nerefco, dated March&nbsp;31,
    2005 between BP Oil International Limited and O&#38;D Trading
    Limited*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Agreement regarding the Use of
    Infrastructure at the Nerefco Facilities in Rotterdam (Nerefco
    Infrastructure Agreement), dated June&nbsp;16, 2005, between BP
    Oil International Limited and Innovene Europe Limited (formerly
    O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Agreement regarding Transportation of
    Naphtha through the RMR Pipeline, dated June&nbsp;16, 2005,
    between Deutsche BP AG and Innovene Europe Limited (formerly
    O&#38;D Trading Limited)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams supplied to Grangemouth, dated
    March&nbsp;31, 2005, between BP Exploration Operating Company
    Limited and O&#38;D Trading Limited*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Master Refined Products Sale and Purchase
    Agreement in respect of the domestic sale of Refined Products
    produced at Grangemouth, dated June&nbsp;16, 2005, between
    Innovene Europe Limited (formerly O&#38;D Trading Limited) and
    BP Oil UK Limited*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Innovene &#147;BP LTPP&#148; Conversion Plan, dated
    June&nbsp;23, 2005.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Innovene Incentive Plan 2005, dated June&nbsp;23, 2005.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The Innovene Executive Share Matching Plan, dated June&nbsp;23,
    2005.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Change in Control Severance Agreement for Ralph Alexander*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Change in Control Severance Agreement for Didier Baudrand*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Change in Control Severance Agreement for Dennis Seith*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Change in Control Severance Agreement for U.S. executive
    officers*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of Innovene Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Ernst &#38; Young LLP, Independent Registered Public
    Accounting Firm</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Sullivan &#38; Cromwell LLP (included in
    Exhibit&nbsp;5.1)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney**</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>**</TD>
    <TD align="left">
    Included on signature page.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-7
</BODY>
</HTML>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on
September 12, 2005
Registration
No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Innovene Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
2860
20-3181950
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification No.)
Innovene Inc.
200 E. Randolph Street
Chicago, IL 60601
(312) 873-8700
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive
Offices)
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
(Name, Address Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
Henry Kleeman
Senior Vice President and General Counsel
Innovene Inc.
200 E. Randolph Street
Chicago, IL 60601
(312) 873-8789
Kathryn A. Campbell
Sullivan & Cromwell LLP
1 New Fetter Lane
London EC4A 1AN
England
+44 (0) 207 959-8900
John W. Banes
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
Approximate
date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes
effective.
If
any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this
form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If this
form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this
form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of each Class of Securities to be Registered
Proposed Maximum Offering Price
(1)
Amount of Registration Fee
Common Stock, par value $0.01 per share
$1,000,000,000
$117,700
(1)
Estimated solely for the purpose of calculating the amount of
    the registration fee in accordance with Rule 457(o) under
    the Securities Act of 1933. Includes shares which the
    underwriters have the option to purchase from BP solely to cover
    over-allotments.
The
Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
Table of Contents
The information in this prospectus is
incomplete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION.
DATED                     ,
2005
Shares
Innovene Inc.
COMMON STOCK
This is an initial public offering of shares of common stock of
Innovene Inc. (Innovene). All of the shares of common stock are
being sold by BP p.l.c. (BP), and we will not receive any of the
net proceeds from the sale of these shares. Following the
offering, BP will own
approximately           %
of our common stock, assuming no exercise of the over-allotment
option.
This is our initial public offering and no public market has
existed for our shares prior to the offering. We anticipate that
the initial public offering price will be between
$          and
$           per
share.
We intend to list our common stock on the New York Stock
Exchange, Inc., or the NYSE, under the trading symbol
"INV."
Investing in our common stock involves risks. See "Risk
Factors" starting on page 9.
Per share
Total
Initial public offering price
Underwriting discounts and commissions
Proceeds to BP
BP has granted the underwriters the right to purchase up to an
additional                      shares
of common stock to cover over-allotments.
The Securities and Exchange Commission (SEC) and state
securities regulators have not approved or disapproved of the
shares of our common stock or determined that this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
The underwriters expect to deliver the shares to purchasers
on                     ,
2005.
Goldman, Sachs & Co.
Morgan Stanley
Lehman Brothers
UBS Investment Bank
Prospectus
dated                    ,
2005
Table of Contents
[This page intentionally has been left blank.]
Table of Contents
Prospectus Summary
1
Risk Factors
9
Special Note Regarding Forward-Looking
    Statements and Market Data
19
Dividend Policy
20
Capitalization
21
Selected Combined Financial Data
22
Unaudited Pro Forma Combined Financial
    Data
25
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
30
Industry Overview
60
Business
68
Management
99
Principal Shareholder
112
Certain Relationships and Related
    Transactions
113
Description of Capital Stock
123
Shares Eligible for Future Sale
125
Certain U.S. Federal Tax
    Considerations for Non-U.S. Holders
126
Underwriting
129
Validity of the Shares
132
Experts
132
Where You Can Find More Information
132
Glossary
133
Index to Combined Financial Statements
F-1
EX-2.1
EX-23.1: CONSENT OF ERNST & YOUNG LLP
You should rely only on the information contained in this
prospectus. Neither we nor our subsidiaries have authorized
anyone to provide you with information different from that
contained in this prospectus. The prospectus may only be used
for the purposes for which it has been published and no person
has been authorized to give any information not contained in
this prospectus. If you receive any other information, you
should not rely on it. No offer of the shares of our common
stock is made in any state where such an offer is not
permitted.
Until                     ,
2005 (25 days after the date of this prospectus), all
dealers that buy, sell or trade our stock, whether or not
participating in the offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. The information set forth below does not
contain all the information you should consider before deciding
to invest in our shares. We urge you to read the entire
prospectus carefully, including the section "Risk
Factors" and our combined financial statements, including
the notes thereto.
In this prospectus, "Innovene Inc.," the
"company," "we," "us" and
"our" each refer to Innovene Inc. and its
subsidiaries, including its predecessor businesses, which
comprise certain assets, liabilities and associated
infrastructure that were formerly part of BP's
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments, as described under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations — Basis of Presentation," except where the
context makes clear that the reference is only to Innovene Inc.
itself and not to its subsidiaries or predecessor businesses.
The assets and liabilities comprising the operations of our
predecessor businesses will be transferred to us prior to the
completion of the offering. A glossary of petrochemical and
refining abbreviations used in this prospectus is set forth on
page 133.
Our Company
We are among the world's largest petrochemical companies,
with revenues of $17.9 billion in 2004. We conduct our
business through petrochemical manufacturing sites in eight
countries as well as two refineries which are fully integrated
with our petrochemical facilities. At June 30, 2005, our
total petrochemical production capacity was approximately
40 billion pounds per year and our refineries had a
combined crude oil distillation capacity of approximately 400
thousand barrels per day (mbd). Our business is structured
around five major sites, which account for approximately 70% of
our petrochemical production volumes and approximately 85% of
our overall production volumes.
We have a global reach and leading market positions with respect
to our key petrochemical products, which enable us to manage our
business on a worldwide basis. We benefit from the cost
advantages of operating large-scale petrochemical facilities and
the high degree of integration at our major sites. We have an
expanding position in the fast-growing Asian markets, which we
serve through our operations in North America and Europe. We
have an established regional office in Shanghai, China to manage
our operations in Asia. Our competitive position in the
petrochemical industry is supported by a portfolio of
proprietary process technologies. Our two European refineries
have the scale, location, product slate, feedstock flexibility
and clean fuels capabilities necessary to be competitive in
their respective markets and provide an earnings stream that is
not driven by the same cyclical patterns as our petrochemical
businesses. Our safety performance track record is among the
best in the industry.
Our business comprises certain assets, liabilities and
associated infrastructure that were formerly part of BP's
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments. We believe our separation from BP has
created new opportunities for us. Historically, our business was
a small part of a much larger organization and our performance
lagged behind that of other companies in the petrochemicals
sector. As a separate entity with our own management structure,
we will be able to focus on the factors that are critical to the
success of our petrochemical and refining businesses and
benchmark ourselves directly against the performance of our
competitors. Our benchmarking work has identified significant
opportunities to improve the performance and optimize the use of
our existing assets and to increase our margins. We intend to
pursue growth opportunities by investing in new assets and
forming joint ventures in regions that have access to low-cost
feedstocks.
We report our business on the basis of five segments, Olefins
and Polymers (O&P) North America, O&P Europe, Global
Derivatives, Refining, and Corporate and Other. The following
chart provides an overview of our
1
Table of Contents
two principal businesses, the segments which each business
comprises and the products we make in each of these segments:
(1)
Intersegmental sales amounted to $1,909 million for the
    year ended December 31, 2004.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
In our petrochemical business, we make olefins and related
products, a broad range of polymers and various other
petrochemical products directly or indirectly derived from
olefins. We are among the largest volume manufacturers of
olefins, polymers, and derivatives in the world. The focus of
our olefins business is on ethylene and propylene, which are the
two largest volume olefins and are key building blocks for
polymers and derivatives. The olefins we make are primarily used
as feedstock for our polymers and derivatives businesses. In
addition, we sell olefins to third party customers for a variety
of industrial and consumer applications, including plastics,
rubber and fiber. In our polymers business, we focus on
polyethylene and polypropylene. The largest volume product of
our global derivatives business is acrylonitrile.
The following table provides an overview of our capacity, global
market position and certain regional market positions with
respect to our key petrochemical products:
Full-year
capacity
(1)
Global
as of June
market
Selected regional
Key products
30, 2005
position
(2)
market positions
(2)
(mmlbs)
Ethylene
8,860
#7
#4 in Europe
Polypropylene
5,680
#3
#2 in North America
HDPE
4,780
#3
#2 in Europe
#4 in North America
Propylene
3,830
#9
#4 in Europe
Acrylonitrile
2,010
#1
#1 in Europe
#1 in North America
Other
15,200
Total
40,360
2
Table of Contents
(1)
Capacity is defined as nameplate capacity. See
    "Business — Manufacturing —
    Overview" for more information on how we calculate capacity.
(2)
According to Chemical Markets Associates, Inc. (CMAI) data
    as of July 2005.
In our refining business, we operate two large refineries in
Europe. Our principal refining products are transport fuels,
particularly diesel fuel and gasoline, naphtha, and heating and
fuel oils. Our refineries are physically integrated with
petrochemical plants located at the same sites. We have recently
implemented a single management structure at these sites to
further leverage the benefits of integration. The majority of
the naphtha output of our refineries is used as inputs by the
petrochemical plants located at the relevant sites. We have
entered into agreements with BP, pursuant to which BP has agreed
to buy the balance of our refinery products and to either market
these products to its local customers or trade them on the
commodity markets on our behalf.
We have approximately 8,000 employees.
Competitive Strengths
•
Global Reach and Leading Market Positions.
We are
    among the world's largest petrochemical companies with 24
    manufacturing sites in eight countries in North America and
    Europe, and a total petrochemical production capacity of
    approximately 40 billion pounds per year. From these sites,
    we serve approximately 2,700 customers who are located in the
    principal industrial regions of the world and use our products
    across a broad range of end-use applications, which we believe
    has allowed us to achieve and hold leading market positions with
    respect to each of our key products. According to CMAI, as
    measured by expected average annual capacity for 2005, we are
    among the top three companies globally for each of HDPE,
    polypropylene and acrylonitrile.
•
Vertically Integrated, Large Scale Producer.
We
    have five large-scale sites, accounting for 85% of our total
    production volumes. All of these large-scale sites are
    integrated with major crackers and polymers and derivatives
    units, giving us the ability to capture margins across the value
    chain. Two of them are also integrated with onsite refineries,
    which differentiates us from many of our competitors. We believe
    that the scale of our global operations provides benefits by
    reducing our selling, administrative, and research and
    development costs on a per unit basis.
•
Strong Refining Platform.
We own and operate two
    refineries focused on serving their respective markets with the
    product slate, feedstock flexibility and clean fuels
    capabilities necessary to be competitive. Each of our
    Grangemouth, United Kingdom and Lavéra, France refineries
    has a crude oil distillation capacity exceeding 200 mbd,
    which is larger than the average refinery size of each of our
    top five European refining competitors. Each of our refineries
    is equipped with a hydrocracker (HC) and a fluid catalytic
    cracker (FCC), which provides them with significant flexibility
    in processing heavy, sour crude oils into light, sweet middle
    distillates.
•
Extensive Portfolio of Leading Proprietary Technologies.
Our technologies are positioned around our key products,
    including our gas phase polyethylene, gas phase polypropylene,
    slurry HDPE and acrylonitrile technologies. We believe that our
    technology is recognized as being among the lowest-cost in the
    petrochemical industry. As a result of their low cost, our
    technologies are widely used in the industry.
•
Experienced Management Team.
We have a talented
    and experienced management team recruited from both within BP
    and externally. Our management team is led by Ralph Alexander,
    our Chief Executive Officer, who has worked in a variety of
    roles within BP, including as Chief Executive Officer of
    BP's Gas, Power, and Renewables segment and as Chief
    Executive Officer of BP's Petrochemicals segment.
    Mr. Alexander is supported by a team of business and
    functional leaders, including Mark Tomkins, our Chief Financial
    Officer, who have extensive experience in petrochemicals,
    refining, supply and trading and who we believe have the
    requisite skill set to successfully execute our strategy.
3
Table of Contents
Strategy
We believe we have an opportunity to significantly improve our
competitive position and future financial performance by
implementing the key components of our strategy, which are to:
•
Achieve Performance Improvements Through Our Accelerator
    Program and By Implementing a Simplified Organizational
    Structure.
To reduce our operating costs and maximize
    our operating efficiency, we have embarked on a comprehensive
    performance improvement program, which we refer to as our
    Accelerator program. Projects include eliminating unprofitable
    product lines, redesigning and enhancing our sales and marketing
    activities through optimized channels of trade, reducing our
    overhead and functional costs commensurate with our status as a
    standalone petrochemical company and making targeted investments
    to maximize our asset utilization and productivity. Throughout
    our organization, we have also reduced management and other
    organizational layers, focusing the business around three
    operating companies which are responsible for driving the
    performance of our overall business.
•
Maximize Cash Flow.
We have revamped our incentive
    compensation programs for 2005 to focus every employee on a
    single financial goal, improving our adjusted EBITDA. In 2006,
    our incentive compensation programs will focus on three
    measures, adjusted EBITDA, capital expenditures and working
    capital, to further enhance the focus in our organization on
    delivering sustainable cash flow. We intend to use our free cash
    flow to reduce indebtedness and selectively expand our
    businesses, particularly to access low-cost feedstocks and serve
    growth markets.
•
Enhance the Value of Our Portfolio.
We intend to
    focus on businesses that we believe have the potential to
    maintain or achieve cost and market leadership positions. We
    plan to manage our assets and businesses to achieve strong unit
    cost and gross margin performance relative to competitive
    benchmarks and make a meaningful financial contribution to our
    company. We expect that as a result of our Accelerator Program,
    the substantial majority of our assets and businesses will meet
    these benchmarks by 2007.
•
Expand Position in Locations with Low Cost Feedstocks.
We intend to improve our long-term competitiveness by
    accessing low-cost feedstocks in the Middle East and north
    Africa through strategic collaborations with local partners and
    governments to build petrochemical complexes in these regions.
    In June 2005, we entered into a non-binding memorandum of
    understanding to construct a world-scale cracker and associated
    derivative complex in Saudi Arabia. Our goal is to sign a
    binding agreement and secure a guaranteed feedstock supply for
    the facility by year-end 2005 and commission the facility by
    2009.
•
Maximize Profitability by Optimizing Supply and Trading
    Flows.
We intend to continue to strengthen our supply
    and trading capabilities to ensure we derive maximum benefit
    from optimizing our operations, channels to market and market
    positions. The capabilities we have developed closely mirror the
    commercial model which BP has established and successfully
    operated in the oil and gas markets for many years. We believe
    this model distinguishes us from our peers in the petrochemical
    industry.
Our Relationship with BP
In connection with our formation as a separate legal entity
within the BP group, BP has transferred to us certain assets,
liabilities and associated infrastructure relating to the former
olefins and derivatives business of its Petrochemicals segment
(not including joint ventures operating petrochemical facilities
in China, Malaysia and Germany), refineries in Grangemouth,
United Kingdom and Lavéra, France, which formed part of its
Refining and Marketing segment, and a gas fractionator near
Hobbs, New Mexico, which formed part of its Gas, Power and
Renewables segment, in each case together with associated
infrastructure.
In connection with our separation from BP, BP has agreed to
provide various administrative and operational support services
to us. In addition, we have entered into a range of commercial
arrangements with BP for the supply of refining and
petrochemical feedstocks, the purchase and sale of refined
products, the sharing of common infrastructure and the provision
of utilities at various sites which we share with BP.
4
Table of Contents
Company Information
We were incorporated in Delaware as a corporation on
July 14, 2005 as a wholly-owned subsidiary of BP. Our
principal executive offices are located at
200 E. Randolph Street, Chicago, IL 60601, and our
telephone number is (312) 873-8700. Our website is at
http://www.innovene.com. The information and other content
contained on our website are not part of this prospectus.
The Offering
Issuer
Innovene Inc.
Common stock offered
shares
Common stock to be outstanding immediately after the offering
shares
Common stock to be held by BP immediately after the offering
shares
Over-allotment option
shares
    of common stock
Dividend policy
Upon completion of the offering, our Board of Directors intends
    to adopt a policy of declaring, subject to legally available
    funds, a quarterly cash dividend on each share of common stock
    at an annual rate initially equal to
    approximately      % of the initial
    public offering price, commencing with the first quarter of
    2006. However, there can be no assurance that sufficient cash
    will be available to pay any such dividends. In addition, our
    dividend policy remains within the sole discretion of our Board
    of Directors and is subject to change. See "Dividend
    Policy" for a discussion of factors that will affect the
    determination by our Board of Directors to declare dividends, as
    well as other matters concerning our dividend policy.
Use of proceeds
We will not receive any of the net proceeds from the sale of any
    of
    the                     shares
    of common stock sold by BP in the offering.
Risk factors
See "Risk Factors" and other information included in
    this prospectus for a discussion of factors you should carefully
    consider before deciding to invest in our shares.
Proposed NYSE symbol
"INV"
Unless otherwise indicated, all information in this prospectus:
•
assumes the over-allotment option has not been exercised; and
•
excludes restricted shares, restricted stock units and shares of
    common stock issuable upon the exercise of stock options granted
    to our executive officers and certain key employees in
    connection with the Innovene "BP LTPP" Conversion Plan
    (the Conversion Plan), the Innovene Incentive Plan 2005 (the
    Incentive Plan) and the Innovene Executive Share Matching Plan
    (the Executive Share Matching Plan).
5
Table of Contents
Summary Historical and Pro Forma Combined Financial Data
The following table presents our summary combined financial
data. The summary combined statements of operations data for the
years ended December 31, 2002, 2003 and 2004, the summary
combined statements of cash flows data for the years ended
December 31, 2002, 2003 and 2004 and the summary combined
balance sheet data as of December 31, 2003 and 2004 have
been derived from our audited combined financial statements
included elsewhere in this prospectus. The unaudited summary
combined statements of operations data for the six months ended
June 30, 2004 and 2005, the unaudited summary combined
statements of cash flows data for the six months ended
June 30, 2004 and 2005 and the unaudited summary combined
balance sheet data as of June 30, 2005 have been derived
from our unaudited accounting records for those periods and as
of those dates. The unaudited summary combined financial data
have been prepared on a basis consistent with the basis on which
our audited combined financial statements have been prepared
and, in the opinion of our management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of such data.
We have derived the unaudited summary pro forma combined
financial data from our audited combined financial statements
for the year ended December 31, 2004 and our unaudited
combined financial statements for the six months ended
June 30, 2005 included elsewhere in this prospectus.
The summary historical and pro forma combined financial data
should be read in conjunction with "Selected Combined
Financial Data," "Unaudited Pro Forma Combined
Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and the combined financial statements and the accompanying notes
included elsewhere in this prospectus.
The unaudited summary pro forma combined statement of operations
data reflect the combined operations of our company and our
subsidiaries as if our separation from BP and the related
transactions described below had occurred as of January 1,
2004. The unaudited summary pro forma combined balance sheet
data reflects the combined operations of our company and our
subsidiaries as if our separation from BP and the related
transactions described below had occurred as of June 30,
2005. However, the unaudited summary pro forma combined
financial data do not necessarily reflect what our financial
position and results of operations actually would have been had
our separation from BP and the related transactions described
below occurred on the dates indicated nor do they purport to
project our future financial performance.
The unaudited summary pro forma combined financial data give pro
forma effect to:
•
the recapitalization of our company prior to the offering, as
    part of which our share capital will be increased
    to           shares
    of common stock, par value $0.01 per share;
•
our repayment on March 22, 2005 of loans in the amount of
    $1,755 million which were secured by the petrochemical
    assets of our site in Grangemouth, United Kingdom, and the
    replacement of this debt by a loan from BP to us in the amount
    of $1,700 million, which was granted to us effective
    April 1, 2005;
•
the transfer from BP to us of the road and rail terminals of our
    Grangemouth site, which are not included in our historical
    combined financial statements; the relevant assets will be
    transferred to us prior to the offering, effective April 1,
    2005;
•
the transfer from us to BP of our proportionate share of the
    shared power station of the Grangemouth site and certain
    infrastructure shared between us and BP at our site in Geel,
    Belgium; our historical combined financial statements show our
    proportionate share of these assets; the relevant assets were
    transferred from us to BP prior to the offering, effective
    April 1, 2005;
•
the transfer from us to BP of our obligations under certain
    pension and other post-employment benefit plans relating to
    former employees to reflect the fact that BP has agreed to
    retain these obligations;
•
the commercial arrangements entered into between us and BP
    effective January 1, 2005; and
•
insurance costs we expect to incur as a result of operating as a
    standalone company.
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Table of Contents
As of and for the six months
As of and for the year ended December 31,
ended June 30,
2004
2005
2002
2003
2004
pro forma
2004
2005
pro forma
($ in millions)
Combined Statements of Operations Data
Revenues
11,776
13,422
17,937
17,935
7,791
11,131
11,131
Cost of sales
(10,775
)
(12,586
)
(16,765
)
(16,768
)
(7,253
)
(9,876
)
(9,874
)
Gross margin
1,001
836
1,172
1,167
538
1,255
1,257
Selling, general and administrative expenses
(734
)
(616
)
(630
)
(680
)
(341
)
(341
)
(341
)
Research and development expenses
(120
)
(115
)
(137
)
(137
)
(64
)
(51
)
(51
)
Restructuring and asset impairment charges
(93
)
(72
)
(345
)
(345
)
(5
)
(21
)
(21
)
Operating profit
54
33
60
5
128
842
844
Equity (loss) income from investments in affiliates
(2
)
9
8
8
5
4
4
Interest expense
(35
)
(44
)
(49
)
(46
)
(25
)
(25
)
(26
)
Other income (expense), net
(65
)
(123
)
(24
)
(49
)
27
(42
)
(45
)
Income (loss) from continuing operations before income taxes
(48
)
(125
)
(5
)
(82
)
135
779
777
Provision for income taxes for continuing operations
(118
)
(90
)
(128
)
(99
)
(86
)
(233
)
(232
)
Net income (loss) from continuing operations
(166
)
(215
)
(133
)
(181
)
49
546
545
Loss from discontinued operations, net of income tax expense
    (benefit) of $0, $0, $(52) million, $0 and $0
(29
)
(25
)
(128
)
(11
)
(3
)
Net (loss) income
(195
)
(240
)
(261
)
(181
)
38
543
545
Net (loss) income per
    share
(1)
Basic
Diluted
Average number of shares used in computing net (loss) income per
    share
Basic
Diluted
7
Table of Contents
As of and for the six months
As of and for the year ended December 31,
ended June 30,
2004
2005
2002
2003
2004
pro forma
2004
2005
pro forma
($ in millions)
Combined Statements of Cash Flows Data
Net cash provided by operating activities of continuing
    operations
177
695
383
513
764
Net cash used in investing activities of continuing operations
(579
)
(561
)
(565
)
(218
)
(250
)
Net cash provided by (used in) financing activities of
    continuing operations
422
(140
)
203
(260
)
(559
)
Combined Balance Sheet Data
Current assets
3,520
4,398
5,129
5,129
Property, plant and equipment, net
7,050
7,136
6,737
6,737
Total assets
10,107
11,456
12,214
12,463
12,463
Current liabilities
2,085
2,210
4,508
4,465
Long-term debt
1,423
1,585
1,729
—
—
Total liabilities
4,937
5,201
5,172
5,129
Minority interest
1,242
—
—
—
Parent net investment
4,095
5,548
6,174
6,217
Accumulated other comprehensive income, net of tax
1,182
1,465
1,117
1,117
Supplemental Information
Adjusted EBITDA from continuing operations
(2)
442
472
869
404
1,088
(1)
The computation of net (loss) income per share is based on the
    anticipated number of shares of our common stock outstanding
    upon completion of the offering. Prior to completion of the
    offering, there will be no outstanding options to purchase
    shares of our common stock or other potentially dilutive
    securities. In connection with the offering, our executive
    officers and certain key employees will be granted restricted
    shares, restricted stock units and stock options.
(2)
See "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures" for a definition of adjusted
    EBITDA and the reasons why management believes that the
    presentation of adjusted EBITDA provides useful information to
    investors. Set forth below is a reconciliation of net (loss)
    income to adjusted EBITDA for each period indicated:
For the
six months
For the year ended
ended
December 31
June 30,
2002
2003
2004
2004
2005
($ in millions)
Net (loss) income
(195
)
(240
)
(261
)
38
543
Loss from discontinued operations, net of tax
29
25
128
11
3
Interest expense
35
44
49
25
25
Provision for income taxes for continuing operations
118
90
128
86
233
Depreciation and amortization from continuing operations
423
517
545
244
284
Asset impairments from continuing operations
32
36
280
—
—
Adjusted EBITDA from continuing operations
442
472
869
404
1,088
8
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RISK FACTORS
You should carefully consider the risks described below and
all other information contained in this prospectus before
deciding to purchase shares of our common stock. If any of these
risks occur, our business, results of operations and financial
condition could be adversely affected, and you could lose part
or all of your investment.
Risks Related to Our Business
Our results are driven by industry margins, which are
volatile and in the petrochemical industry historically have
been highly cyclical. If industry margins decline from their
current levels, our results and, potentially, our liquidity
could be materially adversely affected.
Our results are largely dependent on industry margins, which are
a function of the relationship between supply and demand in the
petrochemical and refining industries. Industry margins
typically increase when demand approaches or exceeds available
supply.
The relationship between supply and demand in the petrochemical
industry historically has been highly cyclical. This is
primarily because product supply is driven by alternating
periods of substantial capacity additions and periods in which
no or limited capacity is added. As a general matter, companies
are more likely to add capacity in periods when current or
expected future demand is strong and margins are, or are
expected to be, high. Investments in new capacity can result,
and in the past frequently have resulted, in overcapacity, which
typically leads to a reduction of margins. In response,
companies typically reduce capacity or limit further capacity
additions, eventually causing the market to be relatively
undersupplied. The bottom of the last cycle was reached in 2001
and continued through 2003 due to weak demand and substantial
simultaneous capacity additions. Since the beginning of 2004,
profit margins have improved. However, the duration of the
current upturn is difficult to predict and depends on a number
of factors, including the extent of growth in key regions and
the amount of capacity that will be built over the coming years.
In the current environment, China is the principal driver of
demand growth for petrochemical products. Any slowdown in
Chinese growth for whatever reason could have a
disproportionately negative effect on industry margins.
Historically, industry margins in the petrochemical and refining
industries have also been volatile due to a number of factors,
most of which are beyond our control. These factors include:
•
short-term utilization rate fluctuations due to planned and
    unplanned plant outages;
•
political and economic conditions, which drive rapid changes in
    prices for our key feedstocks, namely the price of crude oil,
    gas and naphtha;
•
customers' inventory management policies; and
•
exchange rate fluctuations.
If industry margins decline, our results would be materially
adversely affected and we could incur losses, particularly if
industry margins in the petrochemical industry were to return to
their 2001 levels or decline more significantly than they have
in the past. Furthermore, increased volatility in industry
margins could have a significant impact on our short-term
results. In both cases, we would have to absorb any losses
through our balance sheet or by borrowing additional funds. If
we experience significant margin volatility or if we generate
losses over a prolonged period and are unable to obtain
additional funds, our liquidity could be materially adversely
affected.
In recent years, our performance has lagged behind that of
our competitors. There can be no assurance that we will be able
to fully implement our ongoing performance improvement program
or that it will yield the benefits we expect.
In recent years, our performance has lagged behind that of other
companies in the petrochemical industry, and we have recorded
losses in each of the last three years. To improve our operating
results, we have started a program aimed at enhancing our
performance, which we call our Accelerator program. However,
there can be no
9
Table of Contents
assurance that we will be able to successfully implement this
program or that it will yield the benefits we expect or any
benefits at all. If we are unable to improve our performance,
our results may continue to lag behind those of our competitors.
Our feedstock costs are closely linked to oil and gas
prices. If we are unable to pass on increases in our feedstock
costs to our customers in the form of higher prices for our
products, our margins would be materially adversely
affected.
Our margins are largely a function of the relationship between
the prices that we are able to charge for our products and the
costs of the feedstocks we require to make these products, which
are principally driven by the price of oil and natural gas. Oil
and gas prices have increased significantly in recent years. As
a result of the recent tightening in the balance between the
supply and demand for our products, we have been able to pass on
these increases to our customers, although we typically
experience some lag time due to the repricing intervals of our
contracts with suppliers and customers and our customers'
inventory management policies, particularly in our petrochemical
business. For example, our olefins contracts in Europe reprice
quarterly, whereas the corresponding feedstock contracts
typically reprice daily. However, there can be no assurance that
we will always be able to pass on increases in oil and gas
prices to our customers. If we are unable to pass through
feedstock cost increases to our customers in the form of higher
prices for our products, our margins, results of operations and
financial condition would be materially adversely affected.
If the U.S. dollar weakens relative to other major
currencies, our results could be materially adversely
affected.
A large proportion of our manufacturing costs and our selling,
general and administrative expenses are incurred in currencies
other than the U.S. dollar, principally the euro and the
British pound, reflecting the location of our sites and
corporate and business support centers. At the same time,
although many of our sales are invoiced in local currencies, a
substantial proportion of our revenues are denominated in or
linked to the U.S. dollar. Therefore, our results in any
given period are materially affected by fluctuations in the
value of the U.S. dollar relative to the euro and the
British pound. Despite its recent recovery, the decline in the
value of the U.S. dollar relative to the euro and the
British pound that started in 2002 has adversely affected our
results. If the value of the U.S. dollar declines, our
results of operations and financial condition could be
materially adversely affected.
In Europe, and to a lesser extent North America, we face
increasing pressures due to intense competition from companies
with facilities in the Middle East. In addition, our customers
could experience a loss of business to low-cost Asian
competitors.
The petrochemical industry in Europe, where the majority of our
assets are concentrated, and, to a lesser extent, in North
America, faces competitive pressures from companies with
facilities in the Middle East, which enjoy substantial cost
advantages due to access to low-cost gas feedstock available in
this region. These cost advantages are particularly significant
when oil prices are high, as has been the case in recent years.
The competitive pressure we experience could be exacerbated if
the Chinese economy fails to grow as expected, in which case
more of the product manufactured in the Middle East to meet the
growth expected for China could be redirected to Europe and
North America, potentially resulting in greater supply to these
markets.
In addition, we and other petrochemical companies with a large
asset base in Europe face pressures due to the fact that many of
our key customers in Europe are subject to competition from
low-cost producers in Asia. If our European customers are unable
to successfully compete with Asian manufacturers, they could
reduce their purchases from us or cease making such purchases
altogether. To a lesser extent, this danger also exists in North
America. Each of these risks could materially adversely affect
our business, results of operations and financial condition.
10
Table of Contents
While our strategy is to build one or more petrochemical
complexes through joint ventures in regions with access to
low-cost feedstocks, including the Middle East and north Africa,
we may not be successful in doing so.
To gain access to low-cost feedstocks, we are actively looking
at various options for constructing one or more petrochemical
complexes in the Middle East or north Africa through joint
ventures. On June 8, 2005, we signed a nonbinding
memorandum of understanding to construct a cracker and
associated derivative complex in Saudi Arabia. However, we
cannot assure you that we ultimately will reach a final
agreement with our Saudi partner and the Saudi Arabian
government on commercially reasonable terms, that we will secure
feedstock on commercially advantageous terms or that we will
succeed in constructing and operating the planned complex or any
similar facility on the envisaged time schedule or at all. In
addition, any of these projects could require us to expend
substantial amounts of cash and incur debt and could divert
management's attention from our operations. If any of these
risks materializes, our business, results of operations and
financial condition could be materially adversely affected.
In aggregate, we consume more ethylene and propylene than
we produce at our own crackers. If the overall margin in the
petrochemical value chain becomes more concentrated in the
olefins business, we will be at a competitive disadvantage
compared with more fully integrated competitors, and our results
could be materially adversely affected.
In Europe, we consume more ethylene than we produce, and in
North America and Europe our consumption of propylene exceeds
our production. To redress our olefins shortage, we purchase
ethylene and propylene on the merchant market through supply
contracts and swaps with other petrochemical and refining
companies, including BP. To the extent olefins suppliers are
able to increase their portion of the overall margin in the
petrochemical value chain, there will be a corresponding
decrease in the portion of the overall margin that their
customers earn on processing olefins into polymers and
derivatives. Because we are a net purchaser of olefins, if the
overall margin becomes more concentrated in the olefins
business, we will become less profitable than our more fully
integrated and balanced competitors, and our business, results
of operations and financial condition could be materially
adversely affected.
We may experience reliability problems despite the fact
that we have made significant investments in recent years to
improve the reliability of some of our facilities in North
America and Europe.
We faced major reliability problems in 2000 and 2001,
principally at our sites in Chocolate Bayou, Texas, and
Grangemouth, United Kingdom, and, to a lesser extent, at our
site in Lavéra, France. In the case of Grangemouth, the
incidents culminated in a government inspection and the
imposition of fines. We have invested in our facilities to
address these issues. While we believe that these investments
have resulted in better reliability, we have continued to
experience reliability issues, and there can be no assurance
that we will not experience similar problems in the future.
In addition, we may be required to shut down facilities as a
result of reliability problems and incidents at other
companies' facilities, including facilities owned and
operated by BP, if these facilities are located at or near the
same site as our facilities or if we otherwise depend on them.
Any of these reliability issues could materially adversely
affect our business, results of operations and financial
condition.
Several of our petrochemical facilities are owned and
operated in joint ventures with third parties. We do not control
these joint ventures, and actions taken by any of the joint
ventures could materially adversely affect our business.
Several of our petrochemical facilities are owned and operated
by joint ventures between us and one or more third parties.
These facilities include the facility in Lavéra, France,
various units of which are operated by joint ventures between us
and Total, S.A. (Total), and the facility in Cedar Bayou, Texas,
which is operated by Chevron Phillips Chemical Company LLC
(Chevron Phillips) in a 50/50 joint venture between us and
Chevron Phillips. In addition, we have recently agreed to
contribute our European polystyrene and expandable polystyrene
(EPS) businesses to a 50/50 joint venture with NOVA Chemicals
Corporation (NOVA). While we have a certain amount
11
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of influence over each of these joint ventures, we do not
control them and are therefore dependent on our respective joint
venture partners to cooperate with us in making decisions
regarding the relevant joint venture. Moreover, the day-to-day
operation of the relevant facilities is the responsibility of
the respective joint venture or our respective joint venture
partner. Therefore, our ability to influence these operations on
a day-to-day basis is limited and we may be unable to prevent
actions that we believe are not in the best interests of the
relevant joint venture or our company as a whole. Any such
actions could materially adversely affect our business, results
of operations and financial condition.
Some of our competitors are larger and more integrated and
have greater financial resources.
Competition in the petrochemical industry is based primarily on
price and to a lesser extent on product performance, product
quality, product deliverability and customer service. Some of
our competitors are larger and more vertically integrated than
we are and therefore may be able to manufacture products more
economically than we can. In addition, some of our competitors
have greater financial resources than we do, which may enable
them to invest more capital in their business, including in
their facilities and their research and technology (R&T)
activities. Larger, more integrated companies with greater
financial resources may be able to compete more effectively than
we can, which could have a material adverse effect on our
business, results of operations and financial condition.
We are subject to a variety of operational hazards and
potential product liability claims, and we may not be able to
maintain sufficient insurance against these risks or insurance
may be unavailable to us.
Our operations are subject to operational hazards inherent in
the manufacturing and distribution of our products. These
hazards include explosions, fires, severe weather and natural
disasters, mechanical failures, unscheduled downtimes, pipeline
leaks and ruptures, transportation interruptions, human error,
spills, discharges or releases of toxic or hazardous substances
or gases, storage tank leaks, and safety and security risks
relating to the transport of a variety of hazardous and
non-hazardous raw materials, intermediates and finished products.
In addition to the operational hazards described above, we may
become subject to product liability claims arising out of the
use of, or exposure to, our products. While most of our products
have some hazardous properties, some of them, such as
acrylonitrile, require specialized handling procedures due to
their acute and chronic toxicity. Furthermore, our polymer
products have widespread end-uses in a variety of consumer
industries, including in food packaging and medical applications.
If any of these risks were to materialize and cause bodily
injury or loss of life, severe damage to, or destruction of,
property and equipment or environmental damage, our operations
could be suspended and we could become subject to civil and
criminal penalties and liabilities, which could have a material
adverse effect on our business, results of operations and
financial condition.
As part of the BP group, we did not purchase third-party
insurance coverage for the risks described above. In connection
with our separation from BP, we have purchased limited insurance
coverage for the above types of risks. In addition, we may,
prior to the offering, seek to obtain insurance coverage at
levels which we believe are appropriate for the size of our
company and the nature of the risks we face. However, we will
not seek full insurance against all potential risks incident to
our business and may not obtain full coverage for all types of
damage we may cause. Moreover, as a result of market conditions,
premiums and deductibles for certain insurance policies may
increase substantially and, in some instances, insurance may be
available only for reduced amounts of coverage or at high
premiums. If we were to incur a significant liability for which
we are not adequately insured, our business, results of
operations and financial condition could be materially adversely
affected.
Because our operations are subject to numerous
environmental, health, safety and other laws and regulations, we
could become exposed to liability and be required to spend
substantial amounts on environmental, health and safety
compliance and remediation.
Our operations and the products we make are subject to numerous
environmental, health and safety laws and regulations in
countries in which we operate and sell our products, including
laws and regulations governing
12
Table of Contents
emissions and discharges to air and water, the handling and
disposal of hazardous wastes and the remediation of
contamination. In addition, some of these laws and regulations
require us to hold permits in connection with our operations.
From time to time, our facilities may experience operational
problems or malfunctions, fires, storms, earthquakes or floods
or other unplanned events, each of which could result in
emissions or discharges in excess of applicable laws and
regulations or permit limits. Any failure by us to comply with
such laws and regulations or permit limits or to obtain permits
could lead to, among other things, the imposition on us of civil
and criminal penalties and in certain circumstances, the
temporary or permanent curtailment or shutdown of a part of our
operations. Moreover, if, as a result of any such failure,
hazardous substances are released into the environment, the
consequences could include bodily injury or loss of life, severe
damage to, or destruction of, property and equipment or
environmental damage.
In addition, certain environmental laws and regulations impose
liability without regard to fault for cleanup costs at
contaminated sites. Given the nature of our business, we
presently have environmental remediation and closure obligations
at certain sites and will likely incur such obligations at
additional sites, including offsite waste disposal sites, in the
future. We cannot assure you that the costs associated with
these obligations will not be material or exceed the accruals we
have established.
Laws and regulations affecting particular petrochemical or
refined products could also have an effect on the availability
or permitted use of our products, our unit costs and the prices
we may charge for these products, which in turn could have an
adverse effect on the profitability of these products.
We currently incur substantial operating and capital costs for
compliance with environmental, health, safety and other laws and
regulations. We expect that, given the nature of our
petrochemical and refining businesses, we will continue to be
subject to increasingly stringent environmental, health, safety
and other laws and regulations that may increase the cost of
operating these businesses above currently expected levels and
require substantial future capital and other expenditures. We
cannot assure you that the effect of future laws and regulations
on our business, results of operations and financial condition
will not be material.
If any of the events described above occurs or any of these
risks materializes, our business, results of operations and
financial condition could be materially adversely affected.
We depend on our senior executives and other key members
of our management to implement our business strategy. If we lose
and are unable to replace any of these key persons or if we are
unable to attract and retain other qualified personnel, our
business, results of operations and financial condition could be
materially adversely affected.
We depend on the continued employment and performance of our
senior executives and other key members of our management. If
any of these individuals resigns or becomes unable to continue
in his or her present role and is not adequately replaced, our
business operations and our ability to successfully implement
our business strategies could be materially disrupted. Our
performance is also dependent on our ability to identify, hire
and retain key technical, support, sales and other qualified
personnel. If we are unsuccessful in attracting and retaining
such personnel, our business, results of operations and
financial condition could be materially adversely affected.
We depend on good relations with our workforce, and any
significant disruption could adversely affect us.
We employ approximately 8,000 people, approximately 40% of whom
are unionized. We enjoy good relations with our workforce, which
we believe is a result of, among other things, the employment
terms and conditions offered by BP. In connection with our
formation as a separate legal entity, we have committed to
maintaining equivalent terms and conditions for at least one
year following the date of this offering. While this decision
has allowed us to continue our good relations with our
employees, if we were to materially change our terms and
conditions of employment after the one-year period expires and
our employees were to react adversely to any such changes, we
could experience significant labor disputes and work stoppages
at one or more of our sites. A labor disturbance or work
stoppage at any of our facilities as a result of any changes to
our employment
13
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terms and conditions or for any other reason could have a
material adverse effect on that facility's operations and,
potentially, on our business, results of operations and
financial condition.
If our patents are declared invalid or our trade secrets
become known to our competitors, our ability to compete may be
impaired.
Proprietary protection of our technologies, including our
polyethylene, polypropylene and acrylonitrile technologies, is
important to our business, and we may have to rely on judicial
enforcement of our patents and other forms of intellectual
property protection of these technologies.
There can be no assurance that our patents will not be
challenged, invalidated, circumvented or rendered unenforceable.
Furthermore, if any pending patent application filed by us does
not result in an issued patent or if any patent owned by us does
not provide meaningful protection, our ability to compete
effectively may be adversely affected. In addition, our
competitors and any other third parties may obtain patents that
restrict or preclude our ability to lawfully manufacture and
market our products in a competitive manner, which could
materially adversely affect our business, results of operations
and financial condition.
We also rely on trade secrets to develop and maintain our
competitive position. While it is our policy to enter into
confidentiality agreements to protect our intellectual property,
these confidentiality agreements may be breached and may not
provide meaningful protection for our trade secrets in the event
of an unauthorized use or disclosure. In addition, others could
obtain knowledge of our trade secrets through independent
development or other access by legal means. If our trade secrets
become known, our business, results of operations and financial
condition could be materially adversely affected.
Risks Related to Our Relationship with BP
Our historical financial results as a part of BP may not
be representative of our future results as a separate,
standalone company.
Our combined financial statements and the other financial
information we have included in this prospectus have been
derived from BP's consolidated financial statements and
accounting records and do not necessarily reflect what our
results of operations, financial condition and cash flows would
have been had we operated as a separate, standalone company
during the periods presented in this prospectus. BP did not
account for us, and we were not operated, as a separate,
standalone company for the periods presented. The historical
costs and expenses reflected in our combined financial
statements include an allocation for certain corporate functions
historically provided to us by BP, including legal, finance,
human resources and other administrative functions. These
allocations were based on what we and BP considered to be
reasonable reflections of the historical utilization levels of
these functions required in support of our business. Moreover,
our combined financial statements and the other historical
financial information included in this prospectus do not
necessarily indicate what our results of operations, financial
condition, cash flows or costs and expenses will be in the
future. The adjustments made to arrive at our unaudited pro
forma combined financial statements reflect, among other things,
changes in our funding and operations as a result of our
separation from BP. However, there can be no assurance that
these adjustments will reflect our funding and operating costs
as a separate, standalone company. For more information on our
results of operations, financial condition and cash flows, see
"Selected Combined Financial Data," "Unaudited
Pro Forma Combined Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the combined financial statements and the
accompanying notes included elsewhere in this prospectus.
BP provides us with a substantial proportion of our
feedstock requirements and several of our sites depend entirely
on BP for their supply of raw materials.
BP accounts for a substantial proportion of our refining and
petrochemical feedstock requirements. While the substantial
majority of these feedstocks are secured by long-term contracts,
BP may terminate each of these agreements for cause. If we lose
BP as a supplier or if, as a result of operational problems at
any of its facilities, BP is unable or unwilling to supply us
with raw materials in the required quantities or at all, we
could experience temporary disruptions which could force us to
shut down facilities. In addition, we could experience
substantial
14
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delays in finding suitable replacement feedstocks on
commercially viable terms. At sites which are deeply integrated
with BP's facilities and therefore depend entirely on BP
for the supply of raw materials, we may be unable to find a
suitable alternative supplier. For example, our facilities in
Carson, California and Texas City, Texas depend on raw materials
from the respective BP refineries located on the same sites and
have no convenient access to alternative supply channels. If BP
fails to supply us with raw materials at any of these sites, we
may be forced to shut the affected facilities, either
temporarily or permanently. If any of these risks materializes,
our business, results of operations and financial condition
could be materially adversely affected.
We currently rely on BP for a variety of specialized
support services, including with respect to commercial
optimization, commodity trading, hedging and operational
support. We cannot assure you that the transitional support BP
has agreed to provide to us in these areas will be sufficient
for our needs or that we will be able to develop equivalent
in-house expertise or replace these services by contracting with
third parties.
We have historically relied on BP for assistance with the
optimization of purchases and sales of refinery and
petrochemical feedstocks on the international commodity markets,
the off-take of refinery products and related commodity trading
and hedging activities. In addition, BP has provided us with
operational assistance, including in the areas of technical
support, shipping and transportation. BP has agreed to continue
to provide us with these services for a limited period of time
through a series of arrangements with BP's supply and
trading operations. While the term and termination provisions of
the relevant agreements vary based on the service being
provided, several of these agreements may be terminated at the
end of 2006. In addition, BP has agreed to provide certain
transitional support services to us, including services related
to information technology systems, marketing, treasury
functions, human resources management and financial, tax and
accounting services. Most of these services are provided under
agreements which terminate no later than December 31, 2006.
We intend to develop capabilities to provide many of the
services for which we currently rely on BP during the term of
the relevant agreements. However, although we have attempted to
structure these agreements to meet our needs, there can be no
assurance that in the case of a conflict of interest BP will not
prioritize its own business interests. Moreover, we may fail to
effectively develop the capabilities for which we currently rely
on BP. In addition, the level of expertise we may ultimately
acquire could be lower than that which BP possesses. Moreover,
because of our smaller scale and, consequently, relatively
weaker financial position than BP, we may be less competitive
when operating independently in the commodity markets.
If we fail to adequately replace the functions for which we
currently rely on BP, or are unable to enter into alternative
arrangements with third parties on commercially viable terms,
our business, results of operations and financial condition
could be materially adversely affected.
As a standalone company, we may have less purchasing power
and therefore could experience higher costs.
As a part of BP, we were able to take advantage of BP's
large size and purchasing power in procuring feedstocks, other
raw materials and supplies, and technology and support services,
including employee benefit support and audit services. Following
the separation, we will be a smaller and less diversified
company and will not have access to financial and other
resources comparable to those of BP. Accordingly, we may be
unable to buy feedstocks, other raw materials and supplies,
technology and support services or sell products at prices and
on terms as favorable as those which were available to us prior
to the separation, which could increase our operating costs and
have a material adverse effect on our business, results of
operations and financial condition.
We may from time to time experience conflicts of interest
in our relationship with BP, and, because BP owns a controlling
stake in us, the resolution of these conflicts may not be on the
most favorable terms for us.
We may from time to time have conflicts of interest with BP with
respect to our relationship and the resolution of these
conflicts may not be on the most favorable terms for us.
Conflicts of interest may arise between us and BP in a number of
areas including:
•
direct or indirect competition between us and BP, for example,
    due to the fact that we both operate refineries in Europe, and
    the fact that BP holds interests in joint ventures which operate
    petrochemical facilities in China, Malaysia and Germany;
15
Table of Contents
•
tax, labor, employee benefit, environmental, indemnification and
    other matters arising from our separation from BP;
•
intellectual property matters;
•
employee recruiting and retention;
•
the transfer by BP of all or a portion of its ownership interest
    in us to a third party;
•
the nature, quantity, quality, time of delivery and pricing of
    products we supply to each other under our supply agreements
    with BP;
•
business combinations involving our company; and
•
business opportunities that may be attractive to both BP and us.
Following the completion of the offering, BP will
own      % of our shares. Although we
and BP have attempted to structure our ongoing commercial
relationships on an arm's length basis, if a conflict of
interest were to arise in the future, we may not be able to
successfully resolve that conflict, and even if we manage to do
so, there can be no assurance that the resolution would be as
favorable as if we were dealing with an unaffiliated third
party. In each such case, our business, results of operations
and financial condition could be materially adversely affected.
Several of our directors are currently employees of BP. In
addition, most of our directors and executive officers own BP
common stock or options to acquire shares of BP common stock.
These directors and executive officers potentially have
conflicts of interest, which they may not resolve in our
favor.
Several of our directors are currently employees of BP and will
continue their employment relationship with BP after the
offering. In addition, several of our directors and executive
officers own BP common stock, options to acquire BP common stock
and other equity securities of BP and will continue to do so
after the offering. Each of these relationships could create, or
appear to create, potential conflicts of interest when those
directors and officers are faced with decisions that potentially
have different implications for BP than they do for us. While
our directors, executive officers and members of our senior
management are legally required to act in our best interests, we
cannot assure you that no conflicts of interest between their
duties and interests as our employees and their affiliation with
BP will arise or that they will resolve any such conflicts in
our favor. See "Management" for a description of the
extent of the relationship between our directors, officers and
senior management on the one hand and BP on the other hand.
The reorganization agreements we have entered into with BP
in connection with our establishment as a separate, standalone
company require us to assume certain past, present and future
liabilities related to our business and may be less favorable to
us than if we had acquired a separate business from an
unaffiliated third party.
Pursuant to the agreements we have entered into with BP in
connection with our formation as a separate legal entity within
the BP group, we have agreed to indemnify BP for certain past,
present and future liabilities related to our business,
including liabilities arising from facts and events that
currently may be unknown to us. BP has transferred to us certain
assets and liabilities formerly included in BP's
Petrochemicals, Refining and Marketing and Gas, Power and
Renewables segments. In connection with these transfers, we have
generally assumed all historic liabilities (other than tax
liabilities) relating to the assets we acquired, and we will
retain substantial environmental remedial or closure obligations
relating to conditions at our facilities, irrespective of
whether they occurred before or after the transfers. We provided
BP with an indemnity in relation to our business and the
liabilities we have assumed in connection with these transfers.
Although we and BP have attempted to structure these agreements
on an arm's length basis, there can be no assurance that
the allocation of assets and liabilities between us and BP set
forth in these agreements is as favorable to us as the
allocation we would have been able to agree upon if we had
acquired a separate business from an unaffiliated third party.
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BP has agreed to indemnify us for certain liabilities.
However, there can be no assurance that we will be able to
enforce any claims under this indemnity against BP.
In connection with our separation from BP, BP has agreed to
indemnify us, subject to certain limitations, for certain
liabilities, including any claims and losses we may incur with
respect to:
•
any liabilities related to off-site waste disposal prior to
    April 1, 2005 (excluding liabilities related to certain
    waste disposal sites located near our facilities in Cologne,
    Germany and Sarralbe, France);
•
any liabilities related to former facilities which, as of
    April 1, 2005, had been sold, closed or decommissioned;
•
any claims for exposure to hazardous materials at our facilities
    to the extent that such claims were either made prior to
    April 1, 2005 or threatened in writing prior to
    April 1, 2005 and made prior to April 1, 2006 or, in
    certain cases, to the extent that such exposure related to
    events that occurred prior to April 1, 2005; and
•
certain product liability claims related to products
    manufactured prior to April 1, 2005.
Nonetheless, third parties could seek to hold us responsible for
any of the liabilities BP has agreed to retain, and there can be
no assurance that we will be able to enforce our claims under
the indemnity against BP. Moreover, even if we ultimately
succeed in recovering any amounts for which we are held liable
from BP, we may be required to temporarily bear these losses
ourselves. Each of these risks could materially adversely affect
our business, results of operations and financial condition.
Risks Related to the Ownership of Shares of Our Common
Stock
There has been no prior market for our shares, and our
share price could fluctuate significantly.
Prior to the offering, there has been no trading market for our
shares. We intend to apply to list our shares on the NYSE.
However, our share price may fluctuate significantly, depending
on many factors, including the perceived prospects of our
business and the petrochemical and refining industries in
general, differences between our actual financial position and
results of operations and those expected by investors and
analysts, changes in analysts' recommendations or
projections, changes in general economic or market conditions
and broad market fluctuations. In recent years, the securities
markets have experienced substantial volatility in prevailing
price levels that is unrelated or disproportionate to the
operating performance of individual companies. Accordingly, our
shares may trade at a price significantly below the initial
public offering price of our shares.
The future sale of a substantial number of our shares by
BP or the perception that such sales may occur could adversely
affect our share price.
Following completion of the offering, BP will
own      % of our shares, assuming the
over-allotment option is not exercised. In connection with the
offering, BP has agreed to certain restrictions on the sale or
other disposition of its shares under a lock-up agreement. See
"Underwriting" for more information on BP and on the
restrictions BP has agreed to with respect to the sale or other
disposition by BP of its shares in our company. After the
expiration of this period, BP could sell or otherwise dispose of
these shares in a public offering, spin-off or other
transaction. BP has announced that it will consider sales of its
remaining shares in our company following the completion of the
offering. Any sale or other disposition by BP of a substantial
number of our shares in the public market or to its shareholders
or the possibility that such a sale or distribution may occur
could have a material adverse effect on our share price.
Pressure on our share price could also result if BP decided to
sell some or all of its shares in our company to a financial or
strategic buyer and the financial markets perceived that
transaction as not being in the best interests of our
shareholders.
After completion of the offering, BP will continue to own
a controlling stake in our company and as a result will be able
to exercise significant control over our company, which may
adversely affect your interests.
Following completion of the offering, BP will
own      % of our shares, and new
investors who purchase shares in the offering will
own      % of our shares. As a result,
BP will be in a position to control the outcome of
17
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corporate actions with respect to our company in a manner that
could conflict with our interests. Examples of such corporate
actions include:
•
amending our corporate documents;
•
determining the amount and timing of dividends paid to itself
    and other shareholders;
•
changing the size and composition of our Board of Directors and
    committees of our Board of Directors;
•
otherwise controlling management and operations and the outcome
    of matters submitted for a shareholder vote; and
•
preventing a business combination or other change in control in
    the future that might affect our share price.
Certain provisions of our charter and bylaws, the laws of
Delaware and our agreements with BP could make a takeover more
difficult and could adversely affect our share price.
Certain provisions of our agreements with BP and our charter and
bylaws as well as the laws of Delaware could make a takeover of
our company more difficult, which could adversely affect our
share price. Under our agreements with BP, for so long as the BP
group beneficially owns at least 50% of the voting power of the
outstanding shares of our capital stock entitled to vote, we are
required to obtain BP's consent prior to issuing shares of
common stock or securities convertible or exchangeable into or
exercisable for our common stock if, after giving effect to such
issuances, the BP group would own less than 50% of the voting
power of the outstanding shares of our capital stock. In
addition, for so long as the BP group beneficially owns at least
10% of the outstanding shares of our capital stock entitled to
vote, in any future issuances of shares of our common stock or
other securities described above, BP will be entitled to a
preemptive right to purchase such number of shares as is
necessary to allow it to maintain the percentage of its voting
power, with certain exceptions.
Certain provisions of our charter and bylaws could make it
difficult for someone to acquire control of our company in a
transaction not approved by our Board of Directors. These
provisions include the authorization of the issuance of
"blank check" preferred stock without the need for
action by our shareholders, restrictions on the ability of our
shareholders to remove directors, restrictions on the ability of
our shareholders to call special meetings of our shareholders,
supermajority voting requirements for shareholders to amend
certain provisions of our organizational documents, the
authorization to establish a classified Board of Directors,
advance notice requirements for nominations of directors or for
proposals by directors to be acted upon at shareholders'
meetings, special quorum requirements for meetings of our Board
of Directors and limitations on the ability of our shareholders
to act by written consent. Some of these provisions, such as
supermajority voting requirements for shareholders to amend
certain provisions of our organizational documents, are
effective for so long as the BP group's or its designated
direct transferee's beneficial ownership of our company
meets certain thresholds, and some of these provisions, such as
the limitation on shareholder action by written consent, become
effective once BP group's or its designated direct
transferee's beneficial ownership of our company falls
below 50%. See "Description of Capital Stock —
Anti-Takeover Effects of Provisions of Our Amended and Restated
Certificate of Incorporation and Bylaws."
Our certificate of incorporation also provides that
Section 203 of the Delaware General Corporation Law will
not apply to us for so long as the BP group or any designated
direct transferee of the BP group beneficially owns at
least 20% of the outstanding shares of our common stock. If the
ownership interest of the BP group or any of its designated
direct transferees falls below 20%, we will be subject to
Section 203 of the Delaware General Corporation Law, which
will prohibit us, in certain situations, from entering into a
business combination with a shareholder owning 15% or more of
our shares for a period of three years after the shareholder
attains that status. These provisions could also discourage
proxy contests and make it more difficult for you and other
shareholders to elect directors other than the candidates
nominated by our Board of Directors. The existence of these
provisions could adversely affect our share price. Although such
provisions do not have a substantial practical significance to
investors while BP controls us, they could have the effect of
depriving our shareholders of an opportunity to sell their
shares at a premium over prevailing market prices should
BP's combined voting power fall below the relevant
thresholds.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
MARKET DATA
This prospectus includes forward-looking statements. When used
in this document, the words "anticipate,"
"believe," "estimate," "forecast,"
"expect," "intend," "plan" and
"project," and similar expressions, as they relate to
us, our management or third parties, identify forward-looking
statements. Forward-looking statements include statements
regarding our business strategy, financial condition, results of
operations, and market data, as well as any other statements
which are not historical facts. These statements reflect beliefs
of our management as well as assumptions made by our management
and information currently available to us. Although we believe
that these beliefs and assumptions are reasonable, the
statements are subject to numerous factors, risks and
uncertainties that could cause actual outcomes and results to be
materially different from those projected. These factors, risks
and uncertainties include those listed under "Risk
Factors" and elsewhere in this prospectus and expressly
qualify all subsequent oral and written forward-looking
statements attributable to us or persons acting on our behalf.
Except for any ongoing obligation to disclose material
information as required by the federal securities laws, we do
not have any intention or obligation to update forward-looking
statements after we distribute this prospectus.
In addition, this prospectus contains information concerning the
petrochemical and refining industries, our market segments and
product areas generally which is forward-looking in nature and
is based on a variety of assumptions regarding the ways in which
the petrochemical and refining industries, our market segments
and product areas will develop. We have based these assumptions
on information currently available to us, including through the
market research and industry reports referred to in this
prospectus. Although we believe that this information is
reliable, we have not independently verified and cannot
guarantee its accuracy or completeness. If any one or more of
these assumptions turn out to be incorrect, actual market
results may differ from those predicted. While we do not know
what impact any such differences may have on our business, if
there are such differences, our future results of operations and
financial condition and the market price of our shares of common
stock could be materially adversely affected.
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DIVIDEND POLICY
Upon completion of the offering, our Board of Directors intends
to adopt a policy of declaring, subject to legally available
funds, a quarterly cash dividend on each share of common stock
at an annual rate initially equal to
approximately           of
the initial public offering price, commencing with the first
quarter of 2006.
Our Board of Directors may at any time modify or revoke our
dividend policy with respect to the common stock. Any future
payment of dividends will be at the discretion of our Board of
Directors and will be dependent on our net income, results of
operations, financial condition, capital requirements, any
contractual restrictions and other factors that our Board of
Directors may consider relevant.
20
Table of Contents
CAPITALIZATION
The following table sets forth our cash and cash equivalents,
short-term debt and capitalization as of June 30, 2005
(1) on an actual basis and (2) as adjusted to reflect
the recapitalization of our company prior to the offering, as
part of which our share capital will be increased to shares of
common stock, par value $0.01 per share.
You should read the information in the following table together
with "Selected Combined Financial Data,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined
financial statements, the interim unaudited combined condensed
financial statements and the accompanying notes included
elsewhere in this prospectus.
As of June 30, 2005
Actual
As adjusted
($ in millions)
Cash and cash equivalents
—
Short-term debt (including current portion of long-term
    debt)
1,700
Long-term debt
—
Shareholders' equity
Shares of common stock, par value $0.01 per share
shares of common stock authorized
shares of common stock issued and outstanding pro forma as
    adjusted
Additional paid-in capital
Parent net investment
6,174
Accumulated other comprehensive income, net of tax
1,117
Total shareholders' equity
7,291
Total capitalization
7,291
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SELECTED COMBINED FINANCIAL DATA
The following table presents our selected combined financial
data. The selected combined statements of operations data for
the years ended December 31, 2002, 2003 and 2004, the
selected combined statements of cash flows data for the years
ended December 31, 2002, 2003 and 2004 and the selected
combined balance sheet data as of December 31, 2003 and
2004 have been derived from our audited combined financial
statements included elsewhere in this prospectus. The unaudited
selected combined statements of operations data for the years
ended December 31, 2000 and 2001 and the six months ended
June 30, 2004 and 2005, the unaudited selected combined
statements of cash flows data for the years ended
December 31, 2000 and 2001 and the six months ended
June 30, 2004 and 2005 and the unaudited combined balance
sheet data as of December 31, 2000 and 2001 and
June 30, 2005 have been derived from our unaudited
accounting records for those periods. The unaudited selected
combined financial data have been prepared on a basis consistent
with our audited combined financial statements and, in the
opinion of management, include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair
presentation of such data. The selected combined financial data
should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the combined financial statements and the
accompanying notes included elsewhere in this prospectus.
As of and for the
As of and for the
six months ended
year ended December 31,
June 30,
2000
(1)
2001
(1)
2002
2003
2004
2004
2005
($ in millions)
Combined Statements of Operations Data
Revenues
10,599
9,898
11,776
13,422
17,937
7,791
11,131
Cost of sales
(10,775
)
(12,586
)
(16,765
)
(7,253
)
(9,876
)
Gross margin
1,001
836
1,172
538
1,255
Selling, general and administrative expenses
(734
)
(616
)
(630
)
(341
)
(341
)
Research and development expenses
(120
)
(115
)
(137
)
(64
)
(51
)
Restructuring and asset impairment charges
(93
)
(72
)
(345
)
(5
)
(21
)
Operating profit
54
33
60
128
842
Equity (loss) income from investments in affiliates
(2
)
9
8
5
4
Interest expense
(35
)
(44
)
(49
)
(25
)
(25
)
Other income (expense), net
(65
)
(123
)
(24
)
27
(42
)
Income (loss) from continuing operations before income taxes
(48
)
(125
)
(5
)
135
779
Provision for income taxes for continuing operations
(118
)
(90
)
(128
)
(86
)
(233
)
Net income (loss) from continuing operations
456
(758
)
(166
)
(215
)
(133
)
49
546
Loss from discontinued operations, net of income tax expense
    (benefit) of $0, $0, $(52) million, $0 and $0
(29
)
(25
)
(128
)
(11
)
(3
)
Net (loss) income
(195
)
(240
)
(261
)
38
543
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As of and for the
As of and for the
six months ended
year ended December 31,
June 30,
2000
(1)
2001
(1)
2002
2003
2004
2004
2005
($ in millions)
Combined Statements of Cash Flows Data
Net cash provided by operating activities of continuing
    operations
177
695
383
513
764
Net cash used in investing activities of continuing operations
(579
)
(561
)
(565
)
(218
)
(250
)
Net cash provided by (used in) financing activities of
    continuing operations
422
(140
)
203
(260
)
(559
)
Combined Balance Sheet Data
Current assets
3,520
4,398
5,129
Property, plant and equipment, net
7,050
7,136
6,737
Total assets
7,483
9,347
10,107
11,456
12,214
12,463
Current liabilities
2,085
2,210
4,508
Long-term debt
1,023
1,011
1,423
1,585
1,729
—
Total liabilities
4,937
5,201
5,172
Minority interest
1,242
—
—
Parent net investment
4,095
5,548
6,174
Accumulated other comprehensive income, net of tax
1,182
1,465
1,117
Supplemental Information
Adjusted EBITDA from continuing operations
(2)
442
472
869
404
1,088
(1)
Selected financial data disclosed as of and for the years ended
    December 31, 2000 and 2001 is limited to revenues, net
    income (loss) from continuing operations, total assets and
    long-term debt, as this is the only financial information
    required to be disclosed as of these dates and the years then
    ended.
(2)
See "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures" for a definition of adjusted
    EBITDA and the reasons why management believes that the
    presentation of adjusted EBITDA provides useful information to
    investors. Set forth below is a reconciliation of net (loss)
    income to adjusted EBITDA for each period indicated:
For the six
For the year ended
months ended
December 31,
June 30,
2002
2003
2004
2004
2005
($ in millions)
Net (loss) income
(195
)
(240
)
(261
)
38
543
Loss from discontinued operations
29
25
128
11
3
Interest expense
35
44
49
25
25
Provision for income taxes for continuing operations
118
90
128
86
233
Depreciation and amortization from continuing operations
423
517
545
244
284
Asset impairments from continuing operations
32
36
280
—
—
Adjusted EBITDA from continuing operations
442
472
869
404
1,088
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Use of Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP measure and is defined as net
income (loss) from continuing operations before interest
expense, provision for income taxes for continuing operations,
depreciation and amortization from continuing operations and
asset impairments from continuing operations. We believe that
the presentation of adjusted EBITDA enhances an investor's
understanding of our financial performance. However, adjusted
EBITDA should not be considered in isolation or viewed as a
substitute for net income, cash flow from operations or other
measures of performance as defined by U.S. GAAP. Adjusted
EBITDA, as used herein, is not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. Our management
uses adjusted EBITDA to assess our company's operating
performance and to make decisions about allocating resources
among our various segments. In assessing our overall performance
and the performance of each of our segments, management reviews
adjusted EBITDA as a general indicator of performance compared
to prior periods. Adjusted EBITDA excludes losses related to
discontinued operations, interest expense, provisions for income
taxes for continuing operations, depreciation and amortization
from continuing operations and asset impairments from continuing
operations, which are items that management does not utilize in
assessing operating performance. Our management believes it is
useful to eliminate these items because it allows management to
focus on what it considers to be a more meaningful indicator of
our operating performance and ability to generate cash flow from
operations. As a result, internal management reports used during
monthly operating reviews feature adjusted EBITDA. Nevertheless,
management recognizes that there are limitations associated with
the use of adjusted EBITDA as compared to net income, which
reflects overall financial performance, including the effects of
interest, taxes, depreciation and amortization and asset
impairments, and therefore uses adjusted EBITDA in conjunction
with traditional GAAP operating performance measures as part of
its overall assessment of our performance.
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UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
We have derived the unaudited pro forma combined financial
statements set forth below from our audited combined financial
statements for the year ended December 31, 2004 and our
unaudited combined financial statements for the six months ended
June 30, 2005, each of which is included elsewhere in this
prospectus.
The unaudited pro forma combined statements of operations
reflect the combined operations of our company and our
subsidiaries as if our separation from BP and the related
transactions described below had occurred as of January 1,
2004. The unaudited pro forma combined balance sheet reflects
the combined operations of our company and our subsidiaries as
if our separation from BP and the related transactions described
below had occurred as of June 30, 2005.
You should read the unaudited pro forma financial statements
reported below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the combined financial statements and the
notes thereto included elsewhere in this prospectus.
The unaudited pro forma combined financial statements do not
necessarily reflect what our financial position and results of
operations actually would have been had our separation from BP
and the related transactions described below occurred on the
dates indicated nor do they purport to project our future
financial performance. BP did not account for us, and we were
not operated, as a separate legal entity for any period prior to
April 1, 2005.
The unaudited pro forma combined financial statements give pro
forma effect to:
•
the recapitalization of our company prior to the offering, as
    part of which our share capital will be increased
    to                shares
    of common stock, par value $0.01 per share;
•
our repayment on March 22, 2005 of loans in the amount of
    $1,755 million which were secured by the petrochemical
    assets of our site in Grangemouth, United Kingdom, and the
    replacement of this debt by a loan from BP to us in the amount
    of $1,700 million, which was granted to us effective
    April 1, 2005;
•
the transfer from BP to us of the road and rail terminals of our
    Grangemouth site, which are not included in our historical
    combined financial statements; the relevant assets will be
    transferred to us prior to the offering, effective April 1,
    2005;
•
the transfer from us to BP of our proportionate share of the
    shared power station of the Grangemouth site and certain
    infrastructure shared between us and BP at our site in Geel,
    Belgium; our historical combined financial statements show our
    proportionate share of these assets; the relevant assets were
    transferred from us to BP prior to the offering, effective
    April 1, 2005;
•
the transfer from us to BP of our obligations under certain
    pension and other post-employment benefit plans relating to
    former employees to reflect the fact that BP has agreed to
    retain these obligations;
•
the commercial arrangements entered into between us and BP
    effective January 1, 2005; and
•
insurance costs we expect to incur as a result of operating as a
    standalone company.
In the year ended December 31, 2004 and the six months
ended June 30, 2005, BP allocated to us general and
administrative (including head office) expenses in the amount of
$259 million and $8 million, respectively. General and
administrative expenses include costs related to human
resources, legal, treasury, insurance, finance, internal audit,
strategy, public affairs and other services but do not include
selling-related expenses. Effective January 1, 2005, we
assumed responsibility for substantially all of these services
and related costs and therefore the charges allocated to us by
BP are expected to be substantially lower in 2005. We expect our
general and administrative expenses, in aggregate, to be
approximately $320 million in 2005. No pro forma
adjustments have been made to our combined financial statements
to reflect the costs and expenses described in this paragraph,
except for additional costs related to our standalone insurance
policies described in note (d) below.
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The following table shows our unaudited pro forma combined
statements of operations for 2004 and the six months ended
June 30, 2005:
For the year ended
For the six months ended
December 31, 2004
June 30, 2005
Pro forma
Pro forma
Pro forma
Pro forma
Historical
adjustments
combined
Historical
adjustments
combined
($ in millions, except per share amounts)
Pro forma combined statement of operations
Revenues
17,937
(2
)
(a)
17,935
11,131
11,131
Cost of sales
(16,765
)
(2
)
(b)
(16,768
)
(9,876
)
2
(b)
(9,874
)
(1
)
(c)
Gross margin
1,172
(5
)
1,167
1,255
2
1,257
Selling, general and administrative expenses
(630
)
(50
)
(d)
(680
)
(341
)
(341
)
Research and development expenses
(137
)
(137
)
(51
)
(51
)
Restructuring and asset impairment charges
(345
)
(345
)
(21
)
(21
)
Operating profit
60
(55
)
5
842
2
844
Equity income (loss) from investments in affiliates
8
8
4
4
Interest expense
(49
)
58
(e)
(46
)
(25
)
14
(e)
(26
)
(55
)
(f)
(15
)
(f)
Other income (expense), net
(24
)
9
(a)
(49
)
(42
)
(45
)
1
(c)
(3
)
(g)
(35
)
(g)
Income (loss) from continuing operations before income taxes
(5
)
(77
)
(82
)
779
(2
)
777
Provision for income taxes for continuing operations
(128
)
29
(h)
(99
)
(233
)
1
(h)
(232
)
Net (loss) income from continuing operations
(133
)
(48
)
(181
)
546
(1
)
545
Net (loss) income per
    share
(i)
Basic
Diluted
Average number of shares used in computing net (loss) income per
    share
Basic
Diluted
(a)
Represents (1) a decline in revenues, reflecting the fact
    that in some cases our agreements with BP effective
    January 1, 2005 relating to the purchase and sale of
    refinery products have a different economic effect than the
    intra-group arrangements which governed our relationship with BP
    historically; and (2) other income in the form of fees
    received by us from BP to compensate us for inventories held by
    us to support BP's inventory maintenance obligations in
    certain countries.
For the year ended
December 31, 2004
($ in millions)
Revenues
(2
)
Other income
9
Net adjustment
7
(b)
Represents the net effect of (1) reversing costs associated
    with retired employees participating in our German pension and
    post-employment benefit plans to reflect the fact that BP has
    agreed to retain all obligations to retirees under these plans,
    (2) eliminating the financing and amortization component
    from expenses associated with the participation of our employees
    in BP's group-wide pension and post-employment benefit
    plans to reflect our agreement with BP that in the future we
    will only be responsible for the service cost
26
Table of Contents
component of these plans (for
    U.K. plans, this agreement results in an increase in our
    costs due to the fact that our historical pension costs were
    reduced by a surplus generated by BP's pension plan in the
    United Kingdom; in all other relevant jurisdictions the
    agreement has the opposite effect) and (3) certain related
    adjustments.
For the year
ended
For the six
December 31,
months ended
2004
June 30, 2005
($ in millions)
Retired employees under plans in Germany
13
4
Group-wide plans (United Kingdom)
(45
)
(8
)
Group-wide plans (other jurisdictions)
35
6
Other
(5
)
0
Net adjustment
(2
)
2
(c)
Represents (1) the impact on our depreciation charge of
    including in our asset base the road and rail terminals of our
    site in Grangemouth, United Kingdom, which are not reflected in
    our historical combined financial statements but will be
    transferred from BP to us prior to the offering, effective
    April 1, 2005, and (2) the impact on our depreciation
    charge of excluding from our asset base our proportionate share
    of the shared power station of the Grangemouth site and certain
    shared infrastructure at our Geel, Belgium, site, which will be
    transferred from us to BP prior to the offering, effective
    April 1, 2005 (we have agreed to pay to BP
    (A) depreciation charges for our proportionate use of these
    assets, which we record under cost of sales, and (B) a
    charge on capital on their net book value, which we record under
    other income (expense), net).
For the year ended
For the six months
December 31,
ended June 30,
2004
2005
($ in millions)
(Increase) decrease in depreciation charge
Grangemouth road and rail terminal
(2
)
(1
)
Grangemouth power station
1
0
Geel infrastructure
1
1
Depreciation charge-back
Grangemouth power station
0
0
Geel infrastructure
(1
)
0
Cost of capital charge
Grangemouth power station
1
0
Geel infrastructure
0
0
Net adjustment
0
0
(d)
On January 1, 2005, we established our own standalone
    insurance policies for certain risks with BP's captive
    insurance subsidiary. The cost of these policies for 2005 is
    expected to be approximately $38 million. Following
    completion of the offering, we expect to put in place a
    comprehensive insurance program, which is expected to cost
    approximately $50 million per year.
(e)
Represents the elimination of interest expense related to debt
    secured by our Grangemouth petrochemical assets, which is
    reflected in our historical combined financial statements and
    was repaid on March 22, 2005.
(f)
Represents interest expense for the year ended December 31,
    2004 related to a loan in the amount of $1,700 million
    extended to us by BP effective April 1, 2005. The interest
    rate on the loan is LIBOR plus five basis points, with interest
    payable every three months. LIBOR has been calculated based on
    the three-month LIBOR rate as of April 1, 2005, which was
    3.12%. This loan replaced the debt secured by our Grangemouth
    petrochemical assets, which was repaid on March 22, 2005.
    The loan we have been granted by BP matures on March 30,
    2006, unless repaid earlier. The annual impact of an increase or
    decrease of 10 basis points in interest rates on the loan
    would reduce or increase our pre-tax income by
    $1.7 million. We are currently in discussions with banks
    for term loans and other short-term facilities with which we
    intend to replace this loan. Accordingly, our future interest
    expense may be higher or lower, depending on the maturity and
    interest rate of the bank financing we plan to obtain, the
    timing of repayment of this loan and the then-applicable LIBOR
    rate.
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(g)
Represents the elimination of the net impact of foreign exchange
    translation gains and losses in connection with the loans
    secured by the Grangemouth petrochemical assets and gains and
    losses on derivatives used to hedge these losses at year-end
    exchange rates.
For the year
ended
For the six
December 31,
months ended
2004
June 30, 2005
($ in millions)
Translation gains and losses
124
(19
)
Gains and losses on derivatives trading
(159
)
16
Net adjustment
(35
)
(3
)
(h)
Represents the tax effect of the pro forma adjustments on our
    net (loss) income before income taxes using the estimated
    effective tax rate of 38%.
(i)
The computation of pro forma net (loss) income per share is
    based on the anticipated number of shares of our common stock
    outstanding upon completion of the offering. Prior to the
    completion of the offering, there will be no outstanding options
    to purchase shares of our common stock or other potentially
    dilutive securities. In connection with the offering, our
    executive officers and certain key employees will be granted
    restricted shares, restricted stock units and stock options.
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Table of Contents
The following table shows our unaudited pro forma combined
balance sheet as of June 30, 2005 along with a
reconciliation to our audited combined balance sheets as of that
date:
As of June 30, 2005
Pro forma
Pro forma
Historical
adjustments
combined
($ in millions)
Pro forma combined balance sheet
Assets
Current assets
Trade accounts receivable, net
1,923
1,923
Receivables from affiliates
576
576
Inventories
2,030
2,030
Prepayments and other current assets
600
600
Total current assets
5,129
5,129
Property, plant and equipment, net
6,737
6,737
Investment in and advances to affiliates
145
145
Goodwill and intangible assets
258
258
Deferred tax assets
61
61
Prepayments and other assets
133
133
Total assets
12,463
12,463
Liabilities and owner's equity
Current liabilities
Trade accounts payable
718
718
Payables to affiliates
1,075
1,075
Accrued liabilities
692
(43
)
(a)
649
Other current liabilities
323
323
Due to parent
1,700
1,700
Total current liabilities
4,508
(43
)
4,465
Long-term debt
—
—
Other liabilities
347
347
Deferred income taxes
317
317
Total liabilities
5,172
(43
)
5,129
Owner's equity
Common stock
(b)
Parent net investment
6,174
43
(a)
6,217
Additional paid-in capital
(b)
Accumulated other comprehensive income (loss), net of tax
1,117
1,117
Total owner's equity
7,291
43
7,334
Total liabilities and owner's equity
12,463
12,463
(a)
Represents the reversal of an accrual for the estimated closure
    costs of the Pasadena, North America site. BP operates this
    facility for us under a toll manufacturing agreement and will
    incur the closure costs.
(b)
Reflects the recapitalization of our company prior to the
    offering, as part of which our share capital will be increased
    to              shares
    of common stock, par value $0.01 per share.
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read together with our
selected combined financial and operating data, our unaudited
pro forma financial data and the combined financial statements
and notes included elsewhere in this prospectus. The following
discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed
below and elsewhere in this prospectus particularly in
"Risk Factors" and "Special Note Regarding
Forward-Looking Statements and Market Data."
"Innovene Inc.," the "company,"
"we," "us," and "our" each refer
to Innovene Inc. and its subsidiaries, including its predecessor
businesses, which comprise certain operations that were formerly
part of BP's Petrochemicals, Refining and Marketing, and
Gas, Power and Renewables segments, as described under
" — Basis of Presentation," except where the
context makes clear that the reference is only to Innovene Inc.
itself and not to its subsidiaries or predecessor businesses.
The assets and liabilities comprising the operations of our
predecessor businesses will be transferred to us prior to the
completion of the offering. A glossary of petrochemical and
refining abbreviations used in this prospectus is set forth on
page 133.
Overview
Our Business
We are among the world's largest petrochemical companies,
with revenues of $17.9 billion in 2004. We conduct our
business through petrochemical manufacturing sites in eight
countries as well as two refineries which are fully integrated
with our petrochemical facilities. At June 30, 2005, our
total petrochemical production capacity was approximately
40 billion pounds per year and our refineries had a
combined crude oil distillation capacity of approximately
400 mbd. Our business is structured around five major
sites, which account for approximately 70% of our petrochemical
production volumes and approximately 85% of our overall
production volumes.
We have a global reach and leading market positions with respect
to our key petrochemical products, which enable us to manage our
business on a worldwide basis. We benefit from the cost
advantages of operating large-scale petrochemical facilities and
the high degree of integration at our major sites. We have an
expanding position in the fast-growing Asian markets, which we
serve through our operations in North America and Europe. We
have an established regional office in Shanghai, China to manage
our operations in Asia.
Our business comprises certain assets, liabilities and
associated infrastructure that were formerly part of BP's
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments. We believe our separation from BP has
created new opportunities for us. Historically, our business was
a small part of a much larger organization and, our performance
lagged behind that of other companies in the petrochemicals
sector. As a separate entity with our own management structure,
we will be able to focus on the factors that are critical to the
success of our petrochemical and refining businesses and
benchmark ourselves directly against the performance of our
competitors. Our benchmarking work has identified significant
opportunities to improve the performance and optimize the use of
our existing assets and to increase our margins. We intend to
pursue growth opportunities by investing in new assets and
forming joint ventures in regions that have access to low-cost
feedstocks.
In connection with our formation as a separate legal entity, BP
has agreed to provide various administrative and operational
support services to us. In addition, we have entered into a
range of commercial arrangements with BP for the supply of
refining and petrochemical feedstocks, the purchase and sale of
refined products, the sharing of common infrastructure and the
provision of utilities at various sites which we share with BP.
See "Certain Relationships and Related
Transactions — Commercial Interface Agreements"
for more information on these arrangements.
30
Table of Contents
Key Factors Driving Our Results
Our results of operations are driven by a combination of factors
affecting the petrochemical and refining industries as a whole
and various structural and operational factors specific to our
company. To improve our results, we depend on our ability to
maximize our sales volumes, to realize attractive contribution
margins (that is, the difference between revenues and variable
costs of goods sold on a per-unit basis) and to firmly manage
our fixed costs. While we have some ability to manage our
revenues and feedstock costs, given the commodity nature of the
petrochemical and refining industries, our contribution margins
are largely driven by industry dynamics. Set forth below is an
overview of the key drivers affecting our results.
Supply and demand in the petrochemical industry.
Margins in the petrochemical industry are strongly influenced by
industry utilization. As demand for petrochemical products
approaches available supply, utilization rates rise, and, prices
and margins typically increase. Historically, this relationship
has been highly cyclical due to fluctuations in supply resulting
from the timing of new investments in capacity and general
economic conditions affecting the relative strength or weakness
of demand. Generally, capacity is more likely to be added in
periods when current or expected future demand is strong and
margins are, or are expected to be, high. Investments in new
capacity can result, and in the past frequently have resulted,
in overcapacity, which typically leads to a reduction of
margins. In response, companies typically reduce capacity or
limit further capacity additions, eventually causing the market
to be relatively undersupplied. The bottom of the last cycle was
reached in 2001 and continued through 2003 due to weak demand
and substantial simultaneous capacity additions. Starting in
2004, stronger demand and limited capacity investments have led
to greater contribution margins.
In addition to the global petrochemical cycle, our results are
driven by short-term fluctuations in the regional balance
between the supply of products and the amount of available
capacity on the one hand and the demand for products on the
other hand due to planned and unplanned facility outages, which
are a feature of our industry.
Refining industry cash margins and oil price
differentials.
Refining industry cash margins have
increased significantly since 2002, reaching near record levels
in 2004 and remaining strong in the six months ended
June 30, 2005. According to Purvin &
Gertz, Inc. (PGI), the average cash margin for a
hydrocracking refinery in Europe was $6.04 per barrel in
2004 and $6.15 per barrel in the six months ended
June 30, 2005, compared with $2.73 per barrel in 2003. This
increase is explained by several factors. Global demand for
transportation fuels rose significantly from 2003 levels,
substantially outstripping additions of refinery capacity. In
addition, tightening product specifications to satisfy higher
environmental standards restricted the production of certain
refinery products. From a macroeconomic perspective, OPEC
continued to limit supplies, keeping global inventories of both
crude oil and refined products at low levels, leading to further
price and margin increases. At the same time, demand for
heavy/residual refinery products continued to decline, whereas
incremental crude oil supplies became dominated by heavy, sour
crudes. As a result, the price differential between light, sweet
crude oil and heavy, sour crude oil widened substantially.
According to PGI, this price differential (as measured by the
Urals/ Brent differential) averaged $4.14 per barrel in
2004 and $4.33 per barrel in the six months ended
June 30, 2005, compared with $1.76 per barrel in 2003. We
benefited from these developments because both of our refineries
have the ability to process a broad range of crude oil blends.
Asset utilization, reliability and turnarounds.
Our results of operations are materially influenced by
the degree to which we utilize our assets, as measured by our
production volumes relative to the capacity of our assets. The
principal factors that influence our asset utilization are plant
reliability, turnarounds and the balance between supply and
demand for our products in the industries and regions in which
we operate.
The following table provides an overview of our asset
utilization:
For the six months
For the year ended December 31,
ended June 30,
2001
2002
2003
2004
2004
2005
(%)
Utilization
Petrochemicals
(1)
85
87
87
88
88
88
Refining
(2)
81
89
90
89
85
86
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Table of Contents
(1)
In our petrochemical business, capacity is defined as nameplate
    capacity. See "Business —
    Manufacturing — Overview" for more information on
    how we calculate nameplate capacity in our petrochemical
    business. One of the consequences of the way we calculate
    capacity is that reliability problems and turnarounds affect our
    utilization rates only to the extent that the impact of these
    events exceeds the estimates factored into our capacity
    calculations.
(2)
In our refining business, utilization is measured by reference
    to crude oil distillation capacity, which is calculated as the
    maximum crude oil volume that can be fed into a refinery using
    the type of crude oil that the relevant refinery was designed to
    process. The volume of crude oil expands during its conversion
    into finished refinery products. Therefore, it is not possible
    to directly compare the utilization rates and capacity figures
    of our refining business with the refining production volumes
    shown elsewhere in this prospectus.
In 2000 and 2001, the utilization of our facilities was
influenced by the fact that we faced reliability issues at
several of our sites. See "Business —
Manufacturing — Europe" for more information on
these issues. We began to address these issues through targeted
investments in our plants and infrastructure, workforce
assessment and development programs and process automation.
Since 2001, these initiatives have led to significant
improvements in the reliability of our assets, particularly our
olefins crackers and refineries. However, issues remain with
respect to the reliability of some of our assets, in particular
with respect to some of our polymers and derivatives units and,
during the six months ended June 30, 2005, with respect to
our refineries. We intend to build on the initial improvements
we achieved in 2002 and focus our efforts on those assets with
respect to which we continue to have reliability issues.
Moreover, we plan to improve the reliability of our assets with
remediation measures as part of the performance improvement
program described below under "— Our Accelerator
Program."
The following table provides an overview of the reliability of
our facilities:
For the six months
For the year ended December 31,
ended June 30,
2001
2002
2003
2004
2004
2005
(%)
Reliability
(1)
Olefins crackers
87
97
96
96
96
95
Polymers and derivatives units
93
95
94
94
93
94
Refineries
90
93
94
96
95
93
(1)
The reliability of a facility is defined as the maximum
    sustainable daily rate (MSDR) of the facility, multiplied
    by the actual number of days in the period for which the
    calculation is made, minus volume losses during the period due
    to equipment or operational failures resulting in downtime or an
    inability to run a unit at maximum possible capacity, and the
    resulting net figure is divided by MSDR.
The utilization of our facilities is also influenced by the
number and length of turnarounds carried out in any given
period. Turnarounds are outages of a unit scheduled to carry out
necessary inspections and testing to comply with industry
regulations. These outages also permit us to perform any
additional maintenance activities that may be necessary. Where
possible, we seek to schedule the timing of turnarounds to
coincide with periods of relatively low demand for the products
of the relevant units. Turnarounds of our refineries and olefins
crackers typically take longer, but are less frequent, than
turnarounds of our polymers and derivatives assets.
Oil and gas price movements.
Feedstock costs are
the most significant component of our operating costs. The costs
of the feedstocks we require to make our petrochemical products
(naphtha, ethane, butane and propane) are principally driven by
the price of oil and natural gas. According to the
U.S. Energy Information Administration, the market price
for West Texas Intermediate (WTI) crude oil increased from
approximately $20 per barrel in January 2002 to approximately
$57 per barrel in June 2005, while the market price for natural
gas increased from $2.43 per mmbtu in January 2002 to
$5.99 per mmbtu in June 2005. Our revenues increased
from $11,776 million in 2002 to $13,422 million in
2003 to $17,937 million in 2004 and were
$11,131 million in the six months ended June 30, 2005.
The increase in revenues reflects the fact that in the recent
past we have been able to pass on increases in feedstock prices
to our customers in the form of higher product prices. However,
our ability to do so is limited due to the impact of time lags
resulting from the repricing intervals of our contracts with
suppliers and customers, particularly in our petrochemical
business. While most of our feedstock contracts reprice daily,
our contracts with customers generally reprice on a monthly
basis or, in the case of olefins contracts in Europe, quarterly.
A further limitation is that many of our customers take
advantage of fluctuating prices by building inventories when
they expect product prices to increase and reducing inventories
when they expect prices
32
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to decrease. The effect of these time lags and our
customers' inventory management policies on our ability to
pass through feedstock price increases is magnified in periods
of high volatility. In addition, changes in oil and gas prices
have a direct impact on our working capital levels. In general,
increases in feedstock prices lead to an increase in our working
capital and decreases in feedstock prices decrease our working
capital.
Foreign exchange rate fluctuations.
Although many
of our sales are invoiced in local currencies, a substantial
proportion of our revenues is denominated in, or linked to, the
U.S. dollar. This linkage results from the fact that many
of our products are subject to significant interregional trade
between North America, Europe and Asia and, as a result, prices
for these products tend to settle at a consistent level in
U.S. dollar terms, irrespective of the currencies in which
local sales and purchases are made. In markets which are smaller
and more regional with limited import penetration, the linkage
to the U.S. dollar tends to be weaker and, consequently,
fluctuations in exchange rates have a greater impact on our
reported revenues. At the same time, the majority of our
non-feedstock costs are incurred in currencies other than the
U.S. dollar, mostly the euro and the British pound,
reflecting the fact that most of our assets are located in
Europe. From January 1, 2002 to December 31, 2004, the
U.S. dollar weakened against the euro and the British pound
by approximately 53% and 32%, respectively. From January 1,
2005 to June 30, 2005, the U.S. dollar strengthened
against the euro and the British pound by approximately 13% and
6%, respectively.
Portfolio restructuring.
Our cost structure
relative to other companies in the petrochemical industry is a
function of the quality and performance of our assets. We have
embarked on a program to restructure and simplify our asset
portfolio to reduce our costs. For example, we sold the
butanediol (BDO) unit of our Lima, Ohio facility in March 2005
because it did not fit in with our overall strategy and
generated operating losses since the plant opened in 2000. We
report this business as a discontinued operation. Furthermore,
we decided to close down the linear alpha olefins
(LAO) facility in Pasadena, Texas, currently operated for
us by BP under a toll manufacturing agreement, in late 2005.
This decision was prompted by overcapacity in the LAO industry,
the facility's age, its outdated technology and expensive
processes. The impairment charges were recorded in 2004 at the
time when management made the decision to exit the butanediol
business and close down the Pasadena plant. We incurred
restructuring and asset impairment charges of $93 million
in 2002, $72 million in 2003, $345 million in 2004,
and $21 million in the six months ended June 30, 2005.
On June 8, 2005, we signed a non-binding memorandum of
understanding to construct a cracker and associated derivative
complex in Saudi Arabia. If we enter into a definitive agreement
with our partner and the Saudi Arabian government and construct
a facility in this region, we would gain access to low-cost
natural gas feedstock, which would improve our cost of sales
position, particularly in periods when oil prices are high
compared with the price for gas, as has been the case in recent
years.
Recent Developments
On August 10, 2005, we experienced a fire at one of the
crackers of our Chocolate Bayou, Texas facility. The affected
unit primarily produces ethylene and represents approximately
50% of our Chocolate Bayou facility's total ethylene
capacity. We are continuing to assess the operational and
financial impact the incident may have on our business.
Hurricane Katrina brought unusually severe weather conditions
and caused extensive property damage to the U.S. Gulf Coast
in Louisiana, Mississippi and Alabama. Although none of our
plants suffered physical damage as a result of the storm, raw
material suppliers and logistics providers have been affected,
potentially disrupting our ability to produce and ship certain
products to customers. We, and other companies in the industry,
are continuing to assess the impact of Hurricane Katrina.
Our Accelerator Program
To improve our operating results, we have embarked on a focused
performance improvement program, which we refer to as our
Accelerator program. The actions which we have identified under
this program, and which we intend to implement over the period
from 2005 to 2007, are based on a detailed analysis of our
operational performance relative to our peers in the
petrochemical and refining industries, and encompass all of our
operations from procurement to manufacturing, sales, marketing
and logistics as well as overhead costs. The
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Table of Contents
initiatives are intended to increase our revenues, decrease our
cost of sales, and reduce our selling, general, and
administrative expenses, as described below:
Increase Revenues
•
Improve the availability, reliability and utilization of
    our facilities.
We intend to improve the availability,
    reliability and utilization of our facilities by streamlining
    our management structure and establishing clear
    accountabilities, training our employees, improving our
    maintenance practices and making appropriate investments in our
    infrastructure. We expect to focus our maintenance efforts on
    facilities whose reliability was below average in 2004. We
    believe that this program will enable us to maximize the
    availability of our refineries and to operate our petrochemical
    facilities as close as possible to their full capacity, thereby
    increasing our revenues.
•
Improve our sales effectiveness.
Our business
    optimization organization, which consists of a global network of
    teams drawn from our various operating units, constantly seeks
    to identify the best possible channel for bringing our products
    to market. To succeed in this effort, we depend on a strong
    sales force that can identify the most attractive opportunities
    in the market and develop offers to capture these opportunities.
    We recently introduced a compensation program designed to reward
    our sales personnel based on their success in the marketplace.
    In addition, starting in 2004, we took steps to renegotiate
    those of our polymers and derivatives contracts with customers
    which contained pricing provisions that either were fixed or
    lacked adequate flexibility to respond to changing market
    conditions. We believe that the inclusion of more responsive
    pricing provisions in our contracts will help us reduce the
    pressure on our contribution margins which we have historically
    experienced as a result of time lags due to the repricing
    intervals of our customer contracts, our customers'
    inventory management policies and other inefficiencies in our
    pricing mechanisms.
Decrease Cost of Sales
•
Reduce operating and maintenance costs at our
    manufacturing facilities.
We have recently completed an
    assessment of our maintenance practices and the energy
    utilization of our facilities. Based on these findings, we are
    making improvements to our maintenance practices which we expect
    will increase the efficiency and productivity of our plants
    through improved resource planning and management, while
    maintaining applicable Health, Safety, Security and
    Environmental (HSSE) standards. In addition, we have identified
    a number of areas in which we believe we can improve the energy
    utilization of our facilities, and we intend to take advantage
    of these opportunities to reduce our energy costs.
•
Actively manage our portfolio of assets and businesses
    where sufficient productivity improvements cannot be
    achieved.
We have analyzed the competitive position and
    financial contribution of each of our major assets and
    businesses. In those cases where an asset or business is unable
    to perform to expectations or to contribute materially to the
    financial performance of our company or where it would be
    uneconomical to implement the necessary improvements, we will
    consider selling or closing the relevant asset or business. This
    approach has already led to the divestment of businesses and the
    closure of some assets in 2004 and the first six months of 2005.
    For example, we closed an old HDPE unit at our Grangemouth,
    United Kingdom site, which was expensive to operate, in March
    2005, having replaced its production with a more efficient unit
    at our Lillo, Belgium facility. Furthermore, we signed an
    agreement with NOVA in May 2005 to merge our respective European
    polystyrene and EPS businesses into a 50/50 joint venture. We
    expect that these actions will reduce manufacturing costs and
    improve our results.
•
Simplify our product portfolio to improve utilization and
    increase margin contribution.
To minimize the amount of
    production volumes lost due to transitions of our units between
    product grades and to maximize the utilization of our
    manufacturing facilities and their contribution margins, we have
    taken steps to simplify our product portfolio, and we intend to
    continue to take further steps in this direction. For example,
    in North America, we have reduced the number of commercial
    grades of our polypropylene products by approximately 40% since
    mid-2004. Similarly, at our Cologne, Germany site we have
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significantly reduced the number of low-density polyethylene
    (LDPE) grades, consistent with the commodity nature of our
    business.
•
Use trading markets to better optimize our feedstock and
    product portfolio.
Although we typically derive
    significant value from the integration of feedstocks and product
    flows across our major sites, at times the commodity markets may
    offer more favorable commercial opportunities. Such
    opportunities may include reselling primary feedstocks when
    doing so is more valuable than processing them internally or
    selling olefins rather than processing them into polymers and
    derivatives in situations where we are able to source finished
    products from third parties at lower prices than the
    manufacturing costs we would have to incur in producing them
    ourselves. We intend to improve our ability to leverage these
    opportunities to enhance our results.
Reduce Selling, General and Administrative Expenses
•
Reduce overhead and functional costs commensurate with a
    standalone commodity petrochemical company.
We have
    conducted benchmarking studies and identified savings
    opportunities in a number of functional areas. Each function is
    currently implementing improvement plans which we developed
    based on these studies, and we have already achieved a reduction
    in the number of employees engaged in our operations.
Basis of Presentation
We were incorporated in Delaware on July 14, 2005 as a
wholly-owned subsidiary of BP. Our combined statements of
operations, changes in owner's equity and cash flows for
the years ended December 31, 2002, 2003 and 2004 and the
six months ended June 30, 2004 and 2005 and our combined
balance sheets as of December 31, 2003 and 2004 and
March 31, 2005 have been derived from the consolidated
financial statements and accounting records of BP, representing
certain assets, liabilities and associated infrastructure of
certain operations that were formerly part of BP's
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments, and associated revenues and expenses.
Specifically, BP transferred to us certain assets, liabilities
and associated infrastructure relating to the former olefins and
derivatives business of its Petrochemicals segment (not
including joint ventures operating petrochemical facilities in
China, Malaysia and Germany), refineries in Grangemouth, United
Kingdom and Lavéra, France, which formed part of its
Refining and Marketing segment, and a gas fractionator near
Hobbs, New Mexico, which formed part of its Gas, Power and
Renewables segment, in each case together with associated
infrastructure. The assets and liabilities comprising the
operations of our predecessor businesses will be transferred to
us prior to the completion of this offering.
Our combined statements of operations for the years ended
December 31, 2002, 2003 and 2004 and the six months ended
June 30, 2004 and 2005 reflect expense allocations for
certain central corporate functions historically provided to us
by BP, including information systems, human resources,
accounting and treasury activities and legal services. These
allocations reflect expenses specifically identifiable as
relating to our business as well as our share of expenses
allocated to us based on capital employed, capital expenditures,
headcount, revenues, production volumes, fixed costs,
environmental accruals or other methods our management considers
to be reasonable. We and BP consider these allocations to be a
reasonable reflection of our utilization of the services
provided to us by BP. However, our expenses as a separate,
standalone company may be higher or lower than the amounts
reflected in our combined statements of operations.
Our Segments
We report our results on the basis of five segments, O&P
North America, O&P Europe, Global Derivatives, Refining and
Corporate and Other. While our operating company for Europe is
responsible for both our European olefins and polymers business
and our refineries, management reviews the performance of these
businesses separately and, accordingly, each of them is reported
as a separate segment. In our O&P segments, we make olefins
and related products, a broad range of polymers and various
other petrochemical products directly or indirectly derived from
olefins. The focus of our olefins business is on ethylene and
propylene, which are the two largest volume olefins and key
building blocks for polymers and derivatives. In our polymers
business, we focus
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on polyethylene and polypropylene. The largest volume product of
our Global Derivatives segment is acrylonitrile. Our Refining
segment operates two large refineries in Grangemouth, United
Kingdom and Lavéra, France. Our principal refining products
are transport fuels, naphtha, and heating and fuel oils. Income
and expenses associated with the operation of our regional
office in Shanghai, China, the licensing of our technologies,
the sales of catalysts to third parties and certain other
corporate functions are reported in our Corporate and Other
segment.
The revenues of our O&P segments and our Refining segment in
any given period include substantial amounts of sales between
segments. All intersegmental revenues and related expenses are
eliminated during consolidation. Revenues are recorded based on
the source of the product sold. Accordingly, exports to Asia are
recorded in the segment from which the underlying products are
sourced.
We review the performance of our segments based on adjusted
EBITDA, which is the measure used by our management to assess
our company's operating performance and to make decisions
about allocating resources among our various segments. See
"Selected Combined Financial Data — Use of
Non-GAAP Financial Measures" for a definition of adjusted
EBITDA and the reasons why management believes that the
presentation of adjusted EBITDA provides useful information to
investors.
Results of Operations
Description of Key Line Items of our Combined Statements of
Operations
Set forth below is a brief description of the composition of the
key line items of our combined statements of operations:
Revenues.
Consolidated revenues comprise sales of
petrochemical and refinery products to customers and are shown
net of intersegmental transactions, discounts and rebates. Each
segment includes the external revenues generated by the assets
included in that segment. Segmental revenues also include
intersegmental sales, primarily sales of naphtha by our Refining
segment to our O&P Europe segment and sales of ethylene and
propylene by our O&P segments to our Global Derivatives
segment. All intersegmental revenues and related expenses are
eliminated during consolidation.
Gross margin.
Gross margin is calculated by
subtracting cost of sales from revenues. Cost of sales comprises:
•
feedstock costs;
•
variable manufacturing and transportation costs, including the
    costs of catalysts, other chemicals and energy; and
•
fixed manufacturing costs, including operating and maintenance
    costs, principally staff costs, and depreciation and
    amortization of property, plant and equipment.
Selling, general and administrative expenses.
Selling, general and administrative expenses comprise selling
and various general administrative expenses, including
accounting, IT and corporate overhead costs, as well as related
depreciation and amortization.
Research and development expenses.
Research and
development expenses include costs related to activities focused
on short-term performance improvements as well as expenses
incurred to support the long-term growth of our business. All
research and development costs are expensed as incurred.
Restructuring and asset impairment charges.
Restructuring costs relate to charges incurred in connection
with restructuring our business to improve our performance.
Asset impairment charges relate to charges incurred to reduce
the carrying value of an asset to its fair value where we have
determined that the asset's carrying value is greater than
the future cash flows expected to be derived from the asset.
Interest expense.
Interest expense primarily
comprises interest charges on long-term debt related to the
petrochemical facilities at our Grangemouth, United Kingdom
site. The debt was repaid on March 22, 2005.
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Other income (expense), net.
Other income
(expense), net primarily consists of non-trading income, foreign
exchange gains and losses, gains and losses on the sale of
assets and other miscellaneous items.
Provision for income taxes for continuing
operations.
We record deferred tax assets to account for
deductible temporary differences between the carrying amount of
our assets and liabilities and our tax base for these assets and
liabilities, unused tax losses and unused tax credits. In
addition, we establish valuation allowances when we determine
that there is significant uncertainty that we will be able to
realize all or a portion of a deferred tax asset. In determining
the need for establishing a valuation allowance, we consider
many factors, including our expectations regarding our future
taxable income in the period during which we expect the
temporary differences to reverse and the loss carry-forward
periods under the applicable tax laws, as well as our income tax
strategies in the relevant jurisdictions. For periods prior to
2000, we have not identified the amount of deferred tax assets
in respect of operating loss carry-forwards and tax credits due
to the fact that this is a carve out situation and the number of
assumptions that would be required to quantify such assets.
Effectively, we have completely reserved these deferred tax
assets. This accounting results in limiting the recognition of
current period tax benefits after 2000 to the amount of any
deferred tax expense incurred in such periods and the amount of
net assets, if any, that is expected to be realizable in the
future. Effective April 1, 2005, as a result of our
separation from BP, our tax basis with respect to our assets
changed. For periods after April 1, 2005, as a result of
our formation as a separate legal entity within the BP group, we
will fully account for deferred taxes, including the recognition
of deferred tax assets in respect of operating loss
carry-forwards.
For periods ended prior to April 1, 2005, we recorded
income tax expense as if we filed separate tax returns from BP,
notwithstanding the fact that our operations were often included
in consolidated tax returns filed by BP and most of the related
taxes were paid by BP. Income taxes deemed to have been paid on
our behalf by BP are shown in the parent net investment line of
our combined balance sheets. Losses generated by our business
prior to April 1, 2005 were available to, and were utilized
by other members of the BP group in line with BP's tax
strategies. However, in accordance with recording income tax
expense as if we filed separate returns, we evaluated our own
tax loss position on a separate return basis. Accordingly, we
recorded our tax losses as deferred tax assets in the period in
which they arose and assessed our ability to realize the
resulting deferred tax assets based on all facts and
circumstances. As described above, due to our inability to
quantify the amount of the deferred tax assets in respect of
pre-2000 operating loss carry-forwards and tax credits, we have
not recorded those deferred tax assets. This, and our inability
to utilize losses across jurisdictions, contributed to effective
tax rates considerably higher than statutory tax rates for
periods prior to 2005. Our effective tax rate for the six months
ended June 30, 2005, 31.5%, is more in line with our normal
expectations. This rate reflects increased income from
operations and the lack of certain permanent differences
associated with foreign currency transactions and the fair value
adjustments of the Solvay put liability that affected prior
period effective tax rates.
Effective April 1, 2005, we and BP entered into tax sharing
agreements, which govern our respective rights and obligations
with respect to taxes for any tax period ending on or before
April 1, 2005, as well as for any tax period beginning
after April 1, 2005.
You should note that BP manages its tax position for the benefit
of its entire portfolio of businesses, and its tax strategies
are not necessarily identical with the tax strategies that we
would have followed or will follow as a standalone entity.
Accordingly, our future provision for income taxes for
continuing operations is likely to be materially different from
the amounts shown in our combined statements of operations. In
particular, you should note that for nearly all jurisdictions in
which we have material operations, we received our assets from
BP in transactions providing us with a depreciable asset base
equal to fair value. Therefore, during profitable periods, we
expect our cash tax rate (current tax expense) to be less than
the applicable statutory rate; the difference between the
statutory rate and the cash tax rate will approximate our
deferred tax charge.
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Six Months Ended June 30, 2005 Compared with Six Months
Ended June 30, 2004
Consolidated
Revenues
Revenues increased by 43%, from $7,791 million in the six
months ended June 30, 2004 to $11,131 in the six months
ended June 30, 2005. This increase primarily reflects
higher sales prices as a result of higher raw material costs in
a market environment characterized by a tighter relationship
between supply and demand in both our petrochemical and refining
businesses.
Gross margin
Gross margin increased from $538 million in the six months
ended June 30, 2004 to $1,255 million in the six
months ended June 30, 2005. As a percentage of revenues,
gross margin rose from 7% to 11%. This strong improvement
primarily reflects a more favorable market environment in the
six months ended June 30, 2005, which allowed us to
increase the prices for our products at a greater rate than the
increase in our feedstock costs. To a lesser extent, the
improvement of our gross margin reflects benefits derived from
our Accelerator program, as explained in greater detail in the
discussion of our segment results.
Selling, general and administrative expenses
Selling, general and administrative expenses totaled
$341 million in both the six months ended June 30,
2004 and the six months ended June 30, 2005. Although the
total level of selling, general and administrative expenses was
similar in both periods, there are significant differences in
their composition as we now operate as a standalone company. In
2004, prior to our separation from BP, selling, general and
administrative expenses included the costs of our own business
as well as significant costs allocated to us by BP because there
were certain services provided by BP as well as certain
corporate costs allocated to us. In 2005, we have been operating
on a standalone basis and, accordingly, most of our selling,
general and administrative expenses are incurred directly by us.
Also, there were certain cost increases as a result of this
standalone operation, including insurance and additional
employee incentive compensation as a result of improved
financial performance, each of which amounted to
$18 million in 2004. These cost increases were offset by
decreases resulting from the streamlining of business processes
in connection with our separation from BP.
Research and development expenses
Research and development expenses decreased by 20%, from
$64 million in the first six months of 2004 to
$51 million in 2005. In addition to the timing of research
and development costs for certain projects, this decrease
reflects the fact that our formation as a separate legal entity
within the BP group and the integration of Solvay's
HDPE-related research projects in our own R&T program
allowed us to rationalize our R&T activities with respect to
polymers in North America and to integrate R&T teams in
Europe that had previously worked separately.
Restructuring and asset impairment charges
Restructuring and asset impairment charges increased from
$5 million in the six months ended June 30, 2004 to
$21 million in the six months ended June 30, 2005.
Restructuring charges in the six months ended June 30, 2004
reflect carryover charges from earlier years related to various
workforce reduction programs, whereas restructuring charges in
the six months ended June 30, 2005 reflect charges
associated with workforce reductions which were initiated in
late 2004 in connection with the establishment of our company
and continued into 2005. We incurred no asset impairment charges
in either period.
Interest expense
Interest expense remained flat at $25 million in the six
months ended June 30, 2005 when compared with the same
period in 2004, reflecting the fact that total debt levels
remained at a similar level.
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Other income (expense), net
Other income (expense), net decreased from income of
$27 million in the six months ended June 30, 2004 to
an expense of $42 million in the six months ended
June 30, 2005. This decrease primarily reflects losses
associated with the early repayment of the long-term debt
secured by the petrochemical assets of our site in Grangemouth,
United Kingdom, in the six months ended June 30, 2005.
Another contributing factor was that in the six months ended
June 30, 2004, the derivative contracts associated with
this debt had generated gains of $13 million.
Provision for income taxes for continuing operations
Provision for income taxes for continuing operations increased
from $86 million in the six months ended June 30, 2004
to $233 million in the six months ended June 30, 2005,
primarily reflecting an increase in income from continuing
operations. Our effective tax rate for the six months ended
June 30, 2005 was 31.5%. Our effective tax rate was
impacted by increased earnings in jurisdictions with statutory
tax rates lower than the U.S. federal tax rate and our
inability to utilize some loss carry-forwards in non-U.S.
jurisdictions. The effective tax rate for the six months ended
June 30, 2004 is higher than the statutory tax rates due
principally to our being unable to recognize losses from foreign
currency transactions in certain jurisdictions and the
non-deductibility of the change in fair value of the Solvay put
liabilities and losses. In addition, our inability to recognize
our deferred tax asset balances in respect of losses brought
forward limited our recognition of tax benefits to the amount of
deferred tax expense in loss-making jurisdictions.
Loss from discontinued operations, net of income tax expense
(benefit)
Loss from discontinued operations was $11 million in the
six months ended June 30, 2004 and $3 million in the
six months ended June 30, 2005. This improvement was due to
lower depreciation because of the write-down of the book value
of our BDO business at the end of 2004 and the sale of this
business at the end of March 2005.
Net income
Net income increased from $38 million in the six months
ended June 30, 2004 to $543 million in the six months
ended June 30, 2005, reflecting the factors discussed above.
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The following table provides an overview of the historical
revenues and adjusted EBITDA of each of our segments for the
periods indicated:
For the six months
ended June 30,
2004
2005
(unaudited)
($ in millions)
Revenues
(1)
O&P North America
1,615
2,150
O&P Europe
3,328
4,399
Global Derivatives
1,015
1,272
Refining
2,699
4,331
Corporate and Other
24
46
Intersegmental eliminations
(890
)
(1,067
)
Total
7,791
11,131
Adjusted
    EBITDA
(2)
O&P North America
77
250
O&P Europe
195
492
Global Derivatives
41
164
Refining
164
436
Corporate and Other
(73
)
(254
)
Total
404
1,088
(1)
Revenues exclude revenues from discontinued operations. Revenues
    from discontinued operations for the six months ended
    June 30, 2004 and 2005 were $30 million and
    $11 million, respectively.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
O&P North America
Revenues
Revenues of our O&P North America segment increased by 32%,
from $1,615 million in the six months ended June 30,
2004 to $2,150 million in the six months ended
June 30, 2005. Revenues included intersegmental sales
(primarily sales of ethylene and propylene to our Global
Derivatives segment) of $241 million in the six months
ended June 30, 2004 and $319 million in the six months
ended June 30, 2005. The increased revenues are due
primarily to higher sales prices, reflecting higher feedstock
costs and tightening market conditions.
Adjusted EBITDA
Adjusted EBITDA of our O&P North America segment increased
substantially, from $77 million in the six months ended
June 30, 2004 to $250 million in the six months ended
June 30, 2005. The majority of this increase reflects
increased margins for ethylene, polyethylene and polypropylene
due to tightening supply and demand conditions and an
unscheduled outage at a facility of one of our major ethylene
competitors in the first three months of 2005. In addition, we
started to benefit from our ongoing Accelerator program,
including the renegotiation of our polyethylene and
polypropylene customer contracts to include more responsive
pricing provisions and lower fixed manufacturing and selling,
general and administrative costs.
O&P Europe
Revenues
Revenues of our O&P Europe segment increased by 33%, from
$3,328 million in the six months ended June 30, 2004
to $4,399 million in the six months ended June 30,
2005. Revenues included intersegmental sales
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(primarily sales of ethylene and propylene to our Global
Derivatives segment) of $275 million in the six months
ended June 30, 2004 and $350 million in the six months
ended June 30, 2005. The increase in revenues reflects the
effect of higher sales prices as a result of higher feedstock
costs and tightening market conditions.
Adjusted EBITDA
Adjusted EBITDA of our O&P Europe segment increased from
$195 million in the six months ended June 30, 2004 to
$492 million in the six months ended June 30, 2005.
The majority of this increase was caused by higher margins due
to improved market conditions, which led to a more than
proportionate increase in our sales prices compared with our
feedstock costs.
The increase in adjusted EBITDA was also driven by performance
improvements as part of our Accelerator program. For example, we
put in place new arrangements to import propane feedstock for
the gas cracker at our site in Grangemouth, United Kingdom, to
supplement the locally available feedstock and to improve
utilization. Furthermore, we changed the catalyst of our
ethylene oxide (EO) unit at our Lavéra, France, and
Cologne, Germany sites, which resulted in better reliability and
significant capacity improvements. In addition, we rationalized
our LDPE product range at our Cologne, Germany, site, which
reduced complexity and led to efficiency gains.
Global Derivatives
Revenues
Revenues of our Global Derivatives segment increased by 25%,
from $1,015 million in the six months ended June 30,
2004 to $1,272 million in the six months ended
June 30, 2005. Increased sales prices resulted in a 21%
increase in revenues, while higher sales volumes increased
revenues by 4%. The increase in price was principally caused by
improved market prices. The overall increase in volumes was
mainly a result of strong demand for alpha olefins in
polyethylene co-monomer and oilfield applications, the effect of
which was partially offset by a decrease in acrylonitrile
volumes.
Adjusted EBITDA
Adjusted EBITDA of our Global Derivatives segment increased
significantly from $41 million in the six months ended
June 30, 2004 to $164 million in the six months ended
June 30, 2005. The substantial rise in adjusted EBITDA was
due for the most part to higher margins achieved in a stronger
market environment. To a lesser extent, results also benefited
from our Accelerator program efforts, including the
renegotiation of customer contracts for both acrylonitrile and
alpha olefins and more spot sales. The segment's results
also benefited from higher utilization rates due to the absence
of turnarounds and lower fixed costs as a result of efficiency
gains following the combination of two business units which were
previously managed separately.
Refining
Revenues
Revenues of our Refining segment increased by 61%, from
$2,699 million in the six months ended June 30, 2004
to $4,331 million in the six months ended June 30,
2005. Revenues included intersegmental sales (primarily sales of
naphtha to our O&P Europe segment) of $367 million
in 2004 and $399 million in 2005. Increased selling prices
resulted in a 55% increase in revenues. Sales volumes increased
by 15,000 barrels per day in the first six months of 2005
relative to the first six months of 2004, resulting in a 5%
increase in revenues.
Adjusted EBITDA
Adjusted EBITDA of our Refining segment increased from
$164 million in the six months ended June 30, 2004 to
$436 million in the six months ended June 30, 2005.
This increase reflects the fact that both refineries achieved
higher cash margins on a per-unit basis. Cash margins in our
refineries are calculated as gross margin without depreciation,
per barrel of crude oil. The weighted average cash margin of our
refineries increased by approximately $3.80 per barrel in
the six months ended June 30, 2005 relative to the six
months ended June 30,
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2004. A significant factor contributing to this development were
increases in inventory values. Inventory gains were
$130 million in the six months ended June 30, 2005,
compared to $45 million in the six months ended
June 30, 2004. Our Lavéra refinery's performance
showed a particularly strong improvement because of its
feedstock flexibility, which was particularly beneficial early
in 2005. These higher margins were driven by a general
improvement in the market environment and a widening light to
heavy oil price differential. In the case of Grangemouth,
margins benefited from a tightening supply and demand balance in
the market for distillates.
Corporate and Other
Revenues
Revenues of our Corporate and Other segment increased from
$24 million in the six months ended June 30, 2004 to
$46 million in the six months ended June 30, 2005,
reflecting increased sales of acrylonitrile and polypropylene
catalysts.
Adjusted EBITDA
Adjusted EBITDA of our Corporate and Other segment decreased
from a loss of $73 million in the six months ended
June 30, 2004 to a loss of $254 million in the six
months ended June 30, 2005. This increased loss reflects a
number of factors, principally a loss of $45 million which
we incurred as a result of the early repayment of the loans
secured by the petrochemical assets of our site in Grangemouth,
United Kingdom, which was partially offset by a gain of
$3 million on derivative contracts associated with this
debt. This compares with a derivative contract gain of
$13 million in 2004. The increased loss also reflects
approximately $80 million of additional costs for employee
incentive compensation, reflecting the improved results of the
business, costs of $20 million in the first six months of
2005 related to foreign currency options contracts put in place
to manage some of our currency exposure and $18 million of
costs related to our stand-alone insurance programs, which were
put in place at the beginning of 2005 with BP's captive
insurance company. Previously we were part of BP's
self-insurance program.
Year Ended December 31, 2004 Compared with Year Ended
December 31, 2003
Consolidated
Revenues
Revenues increased by 34%, from $13,422 million in 2003 to
$17,937 million in 2004, reflecting higher market prices
for our products in both our petrochemical and our refining
business.
Gross margin
Gross margin increased by 40%, from $836 million in 2003 to
$1,172 million in 2004. As a percentage of revenues, gross
margin improved slightly from 6% to 7%. The improvement in gross
margin was driven by increasingly favorable market conditions
for refining and olefins products due to tight supply relative
to strong demand, which increased our product prices in excess
of the increase in feedstock costs. The effects of this
improvement were partially offset by revenues lost to
turnarounds at our sites in Grangemouth, United Kingdom,
Cologne, Germany, and Lavéra, France, and the impact of the
weakening of the U.S. dollar relative to the euro and the
British pound, which resulted in higher fixed and variable
manufacturing costs in Europe.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by 2%,
from $616 million in 2003 to $630 million in 2004. The
impact of the decline in the value of the U.S. dollar
relative to the euro and the British pound resulted in higher
costs. Costs also increased because of expenses in connection
with our formation as a separate legal entity within the BP
group and the establishment of our own corporate functions.
These cost increases were partially offset by early benefits
from the streamlining of business processes in connection with
our separation from BP.
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Research and development expenses
Research and development expenses increased by 19%, from
$115 million in 2003 to $137 million in 2004. Activity
levels across the two years were similar, with the main
contributing factor being the weakening of the U.S. dollar
relative to the euro and the British pound.
Restructuring and asset impairment charges
In 2004, we incurred restructuring and impairment charges in the
amount of $345 million relating to various events,
including:
•
a $228 million charge related to the anticipated closure of
    the LAO facility in Pasadena, Texas, currently operated for us
    by BP under a toll manufacturing agreement, in late 2005,
    consisting of an impairment charge of $185 million and
    costs to close and decommission the facility in the amount of
    $42 million; and
•
a $69 million charge related to the closure of an HDPE line
    at our Grangemouth site; and
•
a $19 million write-down of assets related to our maleic
    catalyst business.
In 2003, restructuring and asset impairment charges in the
amount of $72 million included:
•
a $36 million charge related to write-off of alkylations
    and sulfur units located at our Grangemouth site, and of a part
    of the facility damaged by a fire;
•
a $20 million charge related to employee severance and
    transition costs at our Grangemouth site; and
•
an $11 million charge related to restructuring activities
    at our facilities in Geel, Belgium and Grangemouth and a
    reorganization of our alpha olefins businesses.
Interest expense
Interest expense increased by 11%, from $44 million in 2003
to $49 million in 2004. This increase primarily reflects
the weakness of the U.S. dollar relative to the British
pound, leading to higher interest payments on the loans secured
by the petrochemical assets of our site in Grangemouth.
Other income (expense), net
Other income (expense), net improved from a loss of
$123 million in 2003 to a loss of $24 million in 2004.
This decrease in the loss was the result of $63 million of
lower losses associated with the put liability under our former
joint ventures with Solvay and approximately $29 million of
gains associated with foreign exchange derivative contracts.
These contracts were put in place to help manage certain foreign
exchange exposures. As described in note 9 of our combined
financial statements, this put liability arose due to a put
instrument held by Solvay giving Solvay the right to require us
to purchase its interests in the joint ventures at certain dates
and prices. Solvay exercised this right on November 2, 2004.
Provision for income taxes for continuing operations
Provision for income taxes for continuing operations increased,
from $90 million in 2003 to $128 million in 2004. Our
effective tax rates for 2003 and 2004 were higher than the
statutory tax rates due principally to our inability to
recognize losses from foreign currency transactions in certain
jurisdictions and the non-deductibility of the change in fair
value of the Solvay put liabilities and losses. In addition, our
inability to recognize deferred tax asset balances in respect of
losses brought forward limited the amount of tax benefits we
were able to recognize to the amount of deferred tax expense in
loss-making jurisdictions. The provision for income taxes for
continuing operations in 2004 increased from 2003 in line with a
lower loss from continuing operations before income taxes.
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Loss from discontinued operations, net of income tax expense
(benefit)
Loss from discontinued operations, net of income tax expense
(benefit), increased from $25 million in 2003 to
$128 million in 2004. This increase was caused primarily by
an asset impairment charge of $148 million (before tax) in
2004, which related to the write-down of assets associated with
our BDO business prior to its disposal in March 2005.
Net loss
Net loss increased from $240 million in 2003 to
$261 million in 2004, reflecting the factors described
above.
The following table provides an overview of the historical
revenues and adjusted EBITDA of each of our segments for the
periods indicated:
For the year
ended
December 31,
2003
2004
($ in millions)
Revenues
(1)
O&P North America
2,698
3,680
O&P Europe
5,609
7,424
Global Derivatives
1,769
2,090
Refining
4,779
6,555
Corporate and Other
69
97
Intersegmental eliminations
(1,502
)
(1,909
)
Total
13,422
17,937
Adjusted
    EBITDA
(2)
O&P North America
171
257
O&P Europe
54
334
Global Derivatives
74
5
Refining
199
410
Corporate and Other
(26
)
(137
)
Total
472
869
(1)
Revenues exclude revenues from discontinued operations. Revenues
    from discontinued operations for the year ended
    December 31, 2003 and 2004 were $52 million and
    $59 million, respectively.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
O&P North America
Revenues
Revenues of our O&P North America segment increased by 36%,
from $2,698 million in 2003 to $3,680 million in 2004.
Revenues included intersegmental sales of $389 million in
2003 and $500 million in 2004. The increase in
intersegmental sales was due to increased prices, the effect of
which was partially offset by decreased volumes. The increase in
total revenues primarily reflected higher market prices across
all products as a result of higher feedstock prices.
Adjusted EBITDA
Adjusted EBITDA of our O&P North America segment increased
by $86 million, or 50%, from $171 million in 2003 to
$257 million in 2004. Higher margins for our olefins
products due to favorable market conditions were partially
offset by lower margins for polymer products. The segment's
adjusted EBITDA also benefited from lower fixed manufacturing
costs, primarily as a result of the fact that there were no
turnarounds at
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our site in Chocolate Bayou, Texas in 2004. Another factor
contributing to the improved adjusted EBITDA figure was the
first full year of operations of our HDPE joint venture with
Chevron Phillips.
O&P Europe
Revenues
Revenues of our O&P Europe segment increased by 32%, from
$5,609 million in 2003 to $7,424 million in 2004.
Revenues included intersegmental sales of $500 million in
2003 and $550 million in 2004. The overall increase in
revenues primarily reflects higher sales prices as a result of
higher raw material costs, which increased revenues by
$1,385 million. The remainder of the increase reflects the
impact of higher sales volumes.
Adjusted EBITDA
Adjusted EBITDA of our O&P Europe segment increased from
$54 million in 2003 to $334 million in 2004. The
increase in adjusted EBITDA primarily reflects the fact that we
were able to achieve higher unit margins due to favorable market
conditions. In the first half of 2004, we were not always able
to pass on increases in our feedstock costs to our customers,
who were under pressure due to lower economic growth rates in
Europe and mounting competitive pressures from imports as the
euro and the British pound continued to strengthen against the
U.S. dollar. In the second half, feedstock costs peaked and
product markets tightened allowing us to raise our product
prices and achieve higher margins.
Reliability issues at the derivatives units at our site in
Grangemouth, United Kingdom in the first half of 2004 resulted
in reduced utilization of these units. In the second half of the
year, reliability improved as we took steps to address these
issues. The improvement in reliability enabled us to take
advantage of market opportunities, following a series of
unplanned shutdowns of our competitors' crackers. In
addition, we started to benefit from more responsive pricing
provisions in our customer contracts. Further benefits resulted
from the elimination of certain product grades in our LDPE
business and efficiency gains realized in our polypropylene
business. The effect of these factors was partially offset by
higher levels of fixed manufacturing costs and selling, general
and administrative expenses due to increased turnaround activity
and the continued weakening of the U.S. dollar relative to
the euro and the British pound.
Another factor contributing to the higher adjusted EBITDA figure
was the fact that we incurred lower losses associated with the
joint venture put liability under our former joint ventures with
Solvay. Losses associated with the European joint venture were
$99 million in 2004 compared to $120 million in 2003.
Global Derivatives
Revenues
Revenues of our Global Derivatives segment increased by 18%,
from $1,769 million in 2003 to $2,090 million in 2004.
This increase reflects a 23% increase due to higher prices and a
5% decrease in volumes. The price increases were driven by
acrylonitrile and, to a lesser extent, LAOs and PAOs.
Acrylonitrile prices received a boost from record propylene
prices. Acrylonitrile volumes declined as a result of price
increases and scheduled turnarounds at our Lima, Ohio facility
and from the larger acrylonitrile unit at our site in Cologne,
Germany. LAO and PAO revenues were driven by increased prices
and volumes, reflecting improved market conditions. This
improvement was partially offset by weaker volumes of the
heavier LAOs.
Adjusted EBITDA
Adjusted EBITDA of our Global Derivatives segment decreased from
$74 million in 2003 to $5 million in 2004. This
decrease was due primarily to restructuring costs incurred in
connection with our decision to cease production at the
Pasadena, Texas, facility which is operated for us by BP under a
toll manufacturing agreement, due to overcapacity in the LAO
industry, the age of the facility, its product mix/quality and
its relatively high fixed costs. Adjusted EBITDA was also
negatively impacted by operational problems at the ammonia unit
of our site in Cologne, Germany, which led to higher
manufacturing costs and lower efficiency at that facility. We
addressed these issues in connection with a scheduled turnaround
at that facility in the second half of the year.
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Further reductions of adjusted EBITDA resulted from the
continued weakening of the U.S. dollar relative to the
euro. These factors more than offset margin improvements for our
acrylonitrile, LAO and PAO product lines, due to increasingly
favorable market conditions.
Refining
Revenues
Revenues of our Refining segment increased by 37%, from
$4,779 million in 2003 to $6,555 million in 2004.
Revenues included intersegmental sales of $613 million in
2003 and $859 million in 2004. The overall increase in
revenues was driven by higher sales prices, especially for
diesel and gasoline. Volumes were slightly lower in 2004 as a
result of a major turnaround at Lavéra, and these lower
overall volumes reduced revenues by $35 million.
Adjusted EBITDA
Adjusted EBITDA of our Refining segment increased from
$199 million in 2003 to $410 million in 2004. Both
refineries contributed to this increase, reflecting
significantly higher cash margins per barrel, as improved sales
prices outpaced rising feedstock costs due to favorable market
conditions as a result of strong global demand for refined
products, low industry inventory levels and high refinery
utilization. The weighted average cash margin of our refineries
increased by approximately $1.65 per barrel in 2004
relative to 2003. The effect of these factors was partially
offset by higher fixed manufacturing costs resulting from a
turnaround at the Lavéra refinery, higher maintenance
charges, pension costs and expenses incurred at the Grangemouth
refinery in preparation for recommissioning the refinery's
FCC. Another offsetting factor was the continued weakening of
the U.S. dollar against the euro and the British pound.
Corporate and Other
Revenues
Revenues of our Corporate and Other segment increased from
$69 million in 2003 to $97 million in 2004, primarily
reflecting increased polymer catalyst sales.
Adjusted EBITDA
Adjusted EBITDA of our Corporate and Other segment decreased
from a loss of $26 million in 2003 to a loss of
$137 million in 2004. This increased loss reflects several
factors, including an increase in the provision for intercompany
profit in inventory of $37 million and a net charge of
$15 million due to the effect of the weaker U.S. dollar
relative to the British pound on the loans secured by the
petrochemical assets of our site in Grangemouth, United Kingdom,
and derivative contracts associated with this debt. Property
management and separation costs contributed a further
$14 million and $8 million, respectively, to the
increase in the loss.
Year Ended December 31, 2003 Compared with Year Ended
December 31, 2002
Consolidated
Revenues
Revenues increased by 14%, from $11,776 million in 2002 to
$13,422 million in 2003. This increase was driven by higher
sales prices in both our petrochemical and our refining
businesses.
Gross margin
Gross margin decreased by 17%, from $1,001 million in 2002
to $836 million in 2003. As a percentage of revenues, gross
margin declined from 9% to 6%. The decrease in gross margin in
both absolute and relative terms reflects an increase in fixed
manufacturing costs and higher levels of depreciation. The rise
in fixed manufacturing costs was caused by turnarounds at our
Chocolate Bayou, Texas, Grangemouth, United Kingdom and Cologne,
Germany facilities. In addition, both fixed manufacturing costs
and depreciation went up as a result
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of the weakening of the U.S. dollar against the euro and
the British pound. The effect of these factors was partially
offset by more favorable market conditions for olefins and
refining products, which allowed us to increase our product
prices in excess of the increase in our feedstock costs.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased by 16%,
from $734 million in 2002 to $616 million in 2003. The
decrease in selling, general and administrative expenses was due
primarily to cost reduction programs, particularly in the
administrative functions of our businesses and in our corporate
area.
Research and development expenses
Research and development expenses decreased by 4%, from
$120 million in 2002 to $115 million in 2003,
reflecting consolidation of our research facilities in Europe.
The effect of this decrease was partially offset by weakening of
the U.S. dollar relative to the euro and the British pound.
Restructuring and asset impairment charges
In 2003, we incurred restructuring and impairment charges in the
amount of $72 million relating to various events, including:
•
a $36 million charge related to the write-off of the
    alkylation and sulfur units located at our Grangemouth, United
    Kingdom, site, as well as a part of the facility damaged by a
    fire;
•
a $20 million charge related to employee severance and
    transition costs at our Grangemouth site; and
•
an $11 million charge related to restructuring activities
    at our facilities in Geel, Belgium and Grangemouth, and a
    reorganization of our alpha olefins businesses.
In 2002, restructuring and asset impairment charges in the
amount of $93 million included:
•
a $32 million charge primarily related to employee
    severance and asset impairments in connection with the
    polypropylene business we acquired from Solvay in 2001 and our
    former joint ventures with Solvay;
•
a $21 million charge related to the restructuring of our
    technology function, consisting of employee severance and
    relocation costs as well as asset impairments;
•
a $20 million charge related to the closure of a
    polypropylene line at our site in Chocolate Bayou;
•
a $12 million charge related to asset impairments recorded
    in connection with a redundant pipeline at our Grangemouth,
    site; and
•
an $8 million charge related to various other activities,
    including restructuring activities at our site in Lavéra,
    France.
Interest expense
Interest expense increased by 26%, from $35 million in 2002
to $44 million in 2003. This increase reflects the
strengthening of the British pound relative to the
U.S. dollar and the resulting impact on the interest
payments on the loans secured by the petrochemical assets of our
Grangemouth, United Kingdom, site.
Other income (expense), net
Other income (expense), net increased from an expense of
$65 million in 2002 to an expense of $123 million in
2003. This change primarily reflects:
•
a gain of $25 million related to the disposal of a partial
    interest in the Aethylen Rohrleitungs Gesellschaft mbH & Co.
    KG (ARG) pipeline in 2002, compared with a loss of
    $7 million related to an adjustment in the level of the
    gain on this disposal in 2003;
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•
the expense related to the change in value of put liabilities
    related to our former joint ventures with Solvay increased from
    $128 million in 2002 to $168 million in 2003; and
•
the remaining change is due to gains associated with foreign
    exchange derivatives in 2003.
Provision for income taxes for continuing operations
Provision for income taxes for continuing operations decreased
from $118 million in 2002 to $90 million in 2003. This
decrease was due to an increase in our loss from continuing
operations before income taxes. In each of 2002 and 2003, our
effective tax rate exceeded the statutory tax rate due
principally to our inability to recognize losses from foreign
currency transactions in certain jurisdictions and the
non-deductibility of the change in fair value of put liabilities
and losses related to our former joint ventures with Solvay. In
addition, our inability to recognize deferred tax asset balances
in respect of losses brought forward limited the amount of tax
benefits we were able to recognize to the amount of deferred tax
expense in loss-making jurisdictions.
Loss from discontinued operations, net of income tax expense
(benefit)
Loss from discontinued operations decreased by 14%, from
$29 million in 2002 to $25 million in 2003, but the
continued losses reflect the difficult business environment of
the BDO unit of our Lima, Ohio facility, which we sold in
March 2005.
Net loss
Net loss increased from $195 million in 2002 to
$240 million in 2003, reflecting the effect of the factors
described above.
The following table provides an overview of the historical
revenues and adjusted EBITDA of each of our segments for the
periods indicated:
For the year ended
December 31,
2002
2003
($ in millions)
Revenues
(1)
O&P North America
2,341
2,698
O&P Europe
4,863
5,609
Global Derivatives
1,749
1,769
Refining
3,876
4,779
Corporate and Other
112
69
Intersegmental eliminations
(1,165
)
(1,502
)
Total
11,776
13,422
Adjusted
    EBITDA
(2)
O&P North America
91
171
O&P Europe
148
54
Global Derivatives
211
74
Refining
44
199
Corporate and Other
(52
)
(26
)
Total
442
472
(1)
Revenues exclude revenues from discontinued operations. Revenues
    from discontinued operations for the year ended
    December 31, 2002 and 2003 were $39 million and
    $52 million, respectively.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
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O&P North America
Revenues
Revenues of our O&P North America segment increased by 15%,
from $2,341 million in 2002 to $2,698 million in 2003.
Revenues included intersegmental sales of $301 million in
2002 and $389 million in 2003. The increase in revenues was
due mainly to an increase in average sales prices. In addition,
the consolidation of our facility in Carson, California,
following the acquisition of our joint venture partner's
share in 2003, contributed $86 million to revenues.
Adjusted EBITDA
Adjusted EBITDA of our O&P North America segment increased
from $91 million in 2002 to $171 million in 2003. This
increase was mainly driven by polypropylene, resulting from a
beneficial time lag in our contracts with customers that allowed
us to achieve higher polypropylene prices in the second half of
2003 at a time when the price for propylene was declining.
Higher ethylene margins were offset by lower volumes and a rise
in fixed costs due to a turnaround of the crackers at our
Chocolate Bayou, Texas site. In addition, the growth of adjusted
EBITDA reflects the fact that we purchased ethylene from another
manufacturer at a time when gas prices temporarily spiked
relative to feedstocks whose prices are linked to crude oil
prices, enabling us to purchase ethylene at a lower cost than we
would have had to incur had we produced it internally based on
gas.
O&P Europe
Revenues
Revenues of our O&P Europe segment increased by 15%, from
$4,863 million in 2002 to $5,609 million in 2003.
Revenues included intersegmental sales of $400 million in
2002 and $500 million in 2003. The overall increase in
revenues was due to higher selling prices, which increased
revenues by $357 million with the remainder due to higher
sales volumes. For the most part, the increase in sales volumes
was driven by olefins and polyethylene. The main contributing
factors were higher cracker utilization rates and the
commencement of operations of the expanded cracker at our
Cologne, Germany site, which increased our ethylene capacity at
that site by around 10%. Volumes also benefited from the first
full-year contribution of our new HDPE production unit at our
Lillo, Belgium, facility which had been commissioned in the
second half of 2002. However, the effect of this addition was
partially offset by competitive pressures in the polyethylene
markets due to increased competition from commodity producers
with manufacturing operations in the Middle East, which limited
our volume growth.
Adjusted EBITDA
Adjusted EBITDA of our O&P Europe segment decreased by 64%,
from $148 million in 2002 to $54 million in 2003. This
decrease was driven by continued pressure on our margins, which
were squeezed by increasing feedstock prices and our inability
to pass on these increases to our customers due to a lack of
market growth. The pressure was particularly strong in the
polyethylene markets, which were characterized by intense
competition from Middle East commodity imports. In addition,
manufacturing, distribution and overhead costs increased in
U.S. dollar terms due to the weakening of the U.S. dollar
relative to the euro and the British pound. Also contributing to
the decrease in adjusted EBITDA were higher expenses of
$42 million related to the change in the value of the put
liability in relation to our former joint ventures with Solvay.
Expense related to the change in value of this obligation was
$120 million in 2002 compared to $162 million in 2003.
In addition, 2002 included a $25 million gain on the
disposal of a partial interest in the ARG pipeline whereas 2003
reflected a loss of $7 million because of an adjustment of
the gain on this disposal.
Global Derivatives
Revenues
Revenues of our Global Derivatives segment increased by 1%, from
$1,749 million in 2002 to $1,769 million in 2003. The
slight increase in revenues was driven by a 4% increase in
prices, which was offset by a
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4% decrease in volumes. In both cases, the development was
primarily driven by acrylonitrile and, to a lesser extent, LAOs
and PAOs. In the case of acrylonitrile, the decline in volumes
was caused by scheduled turnarounds, whereas in the case of LAOs
and PAOs the decline reflects our attempt to preserve prices by
cutting volumes.
Adjusted EBITDA
Adjusted EBITDA of our Global Derivatives segment decreased by
65%, from $211 million in 2002 to $74 million in 2003,
driven by acrylonitrile, LAOs and PAOs. The decrease in adjusted
EBITDA for acrylonitrile and LAOs and PAOs was due primarily to
higher feedstock and energy costs, which rose faster than we
were able to raise our sales prices. LAO margins also suffered
from industry overcapacity, which put additional pressure on our
margins. Adjusted EBITDA also suffered from turnarounds at our
Green Lake, Texas, and Cologne, Germany, facilities and
reliability issues at the ammonia unit of our Cologne facility,
which forced us to purchase ammonia on the market, leading to an
increase in feedstock costs and higher maintenance expenses. The
weakening of the U.S. dollar relative to the euro and the
British pound further contributed to the decline in adjusted
EBITDA. The effect of these factors was partially offset by
headcount reductions in our alpha olefins business in connection
with a restructuring of that business.
Refining
Revenues
Revenues of our Refining segment increased by 23%, from
$3,876 million in 2002 to $4,779 million in 2003.
Revenues included intersegmental sales of $465 million in
2002 and $613 million in 2003. The overall increase in
revenues was driven by higher prices, while volumes were 4%
lower than in 2002 as a result of a turnaround at our
Grangemouth, United Kingdom facility. Revenues increased for
both refineries across all products, with diesel, gasoline and
naphtha experiencing the strongest increases.
Adjusted EBITDA
Adjusted EBITDA of our Refining segment increased from
$44 million in 2002 to $199 million for 2003,
reflecting improved cash margins at both our refineries. The
weighted average cash margin of our refineries increased by
approximately $1.20 per barrel in 2003 relative to 2002. This
development was driven by more favorable market conditions, the
effects of which were partially offset by the continued
weakening of the U.S. dollar against the euro and the
British pound.
Corporate and Other
Revenues
Revenues of our Corporate and Other segment decreased by 38%,
from $112 million in 2002 to $69 million in 2003. This
decrease reflects a decline in licensing revenues, as 2002
included revenues from certain major projects which were not
repeated in 2003.
Adjusted EBITDA
EBITDA of our Corporate and Other segment increased from a loss
of $52 million in 2002 to a loss of $26 million in
2003. This reduction reflects lower administration expenses and
gains associated with foreign exchange derivatives contracts.
Liquidity and Capital Resources
The primary source of liquidity for our business is cash
generated from operations. In periods during which we
experienced shortfalls in cash generated from operations, BP has
historically provided us with additional funds. In the past, we
primarily used cash for capital expenditures, working capital
and pension contributions. Over the next several years, we
expect to use a portion of our cash reserves to service debt.
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We believe we will have sufficient cash to meet both our
short-term and long-term liquidity requirements, including our
debt service requirements. If our cash flow from operations is
insufficient to fund our debt service and other obligations, we
may need to raise funds using other means available to us, such
as increasing our borrowings, decreasing or delaying capital
expenditures, accelerating improvements in working capital
management, making divestitures, raising additional capital or
restructuring or refinancing our indebtedness. However, there
can be no assurance that such funds would be available on
commercially reasonable terms or at all.
Cash Flows
Net Cash Provided by Operating Activities of Continuing
Operations
Cash flow from operating activities of continuing operations
increased by $251 million, from $513 million in the
six months ended June 30, 2004 to $764 million for the
six months ended June 30, 2005. This increase primarily
reflects improved operating results, mainly as a result of a
better margin environment for all of our businesses in the six
months ended June 30, 2005.
Net cash provided by operating activities from continuing
operations was $177 million, $695 million, and
$383 million for each of 2002, 2003 and 2004, respectively.
The primary reason for the significant changes in net cash
provided by operating activities was changes in our working
capital and other operating assets and liabilities. Our working
capital balances typically develop in line with feedstock
prices, although timing factors can affect flows of capital in
any individual year. Over the three years, operating working
capital and other operating assets and liabilities increased by
$934 million, reflecting the impact of higher oil and gas
prices on inventories and higher product prices, which increased
our net accounts receivable. In 2002, we experienced a cash
outflow in the amount of $411 million associated with
working capital and other operating assets and liabilities. In
2004, this outflow amounted to $545 million. In both cases,
the outflow was caused by increasing feedstock prices. The cash
impact in 2003 was not as significant because of lower inventory
levels, offsetting some of the effect of higher prices.
Net Cash Used in Investing Activities of Continuing
Operations
Net cash used in investing activities of continuing operations
increased from $218 million in the six months ended
June 30, 2004 to $250 million in the six months ended
June 30, 2005, reflecting higher levels of capital
expenditure.
Net cash used in investing activities of continuing operations
was $579 million, $561 million and $565 million
for each of 2002, 2003 and 2004, respectively. The consistent
level of cash requirements for investing activities reflects the
steady level of capital investment over the three-year period.
Net Cash Provided by (Used in) Financing Activities of
Continuing Operations
Net cash used in financing activities of continuing operations
increased from $260 million in the six months ended
June 30, 2004 to $559 million in the six months ended
June 30, 2005. In both periods, our net cash provided by
operating activities was transferred to BP, thereby reducing
owner's equity. The increase in cash available to BP
reflects the improvement in net cash provided by operating
activities. We repaid the debt that was secured by our
Grangemouth, United Kingdom petrochemical assets on
March 22, 2005. The repayment was financed through a loan
granted by BP, which matures on March 30, 2006, unless
repaid earlier.
Net cash provided by (used in) financing activities of
continuing operations was $422 million, $(140) million
and $203 million in 2002, 2003 and 2004, respectively.
During 2004, we acquired the outstanding minority interests in
our former joint ventures with Solvay in Europe and North
America, which required an expenditure of $1,538 million.
This expenditure was funded by BP through an increase in
owner's equity. Our 2003 cash flow from financing
activities reflects the excess of operating cash over cash
required for our investing activities. In 2002, we issued
$290 million of additional debt and made cash calls of
$100 million in the Solvay joint ventures in order to fund
the joint ventures.
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Working Capital
Historically, BP has used a worldwide, centralized approach to
cash management. Cash accounts were reduced to zero on a daily
basis and the financing of our operations and all related
activity between our company and BP was reflected as business
equity transactions in the parent net investment line of our
combined balance sheets.
Similarly, following the completion of the offering, we will
adopt a centralized approach to cash management. Short-term
fluctuations in our cash requirements will be funded by
short-term investments, through issuances of commercial paper or
through drawdowns on our revolving credit agreements.
Debt
Debt Due to BP
As of April 1, 2005, we had $1,700 million of
intercompany debt outstanding to BP under an intra-group loan
facility. The interest rate on the loan is LIBOR plus five basis
points, with interest payable every three months. LIBOR has been
calculated based on the April 1, 2005 three-month LIBOR
rate, which was 3.12%. This loan replaced the debt secured by
the petrochemical assets of our site in Grangemouth, United
Kingdom, described below under "— Other Long-term
Debt", which was repaid on March 22, 2005. The loan we
have been granted by BP matures on March 30, 2006, unless
repaid earlier. The annual impact of an increase or decrease of
ten basis points in the interest rate on the loan would decrease
or increase our pre-tax income by $1.7 million. We are
currently in discussions with banks for term loans and other
short-term facilities with which we intend to replace this loan.
Accordingly, our interest expense may be higher or lower,
depending on the maturity and interest rate of the bank
financing we plan to obtain, the timing of repayment of the loan
and the then-applicable LIBOR rate.
Other Long-Term Debt
Our combined balance sheets included long-term debt of
$1,585 million and $1,729 million at December 31,
2003, and 2004, respectively, related to loans secured by the
petrochemical assets of our Grangemouth, United Kingdom site.
The loans had terms of between 20 and 30 years and would
have matured between 2018 to 2022. The average interest rate was
3.14%, 3.16% and 3.58% for the years ended December 31,
2002, 2003 and 2004, respectively, and we incurred interest
charges of $37 million, $45 million and
$58 million in 2002, 2003 and 2004, respectively.
In connection with our separation from BP, the loans were repaid
on March 22, 2005. The termination payment was
$1,755 million, which exceeded the book value of the loans
and resulted in a loss of $45 million, which is included in
other income (expense), net.
Post-Employment Benefit Obligations
Certain of our employees participate in benefit plans sponsored
by us. These "standalone" plans, most of which are
unfunded, were generally transferred from BP to us on
April 1, 2005. At March 31, 2005, our
actuarially-determined projected benefit obligations under these
plans was $367 million.
Our employees also participate in benefit plans sponsored by BP.
Our employees will continue to participate in these plans until
BP's investment in our company falls below certain
thresholds, generally 80% for U.S. group-wide plans and 50%
for all other plans. During the participation period, we are
generally required to reimburse BP for service costs incurred by
it in administering these plans to the extent these costs relate
to our employees.
When BP's investment in our company falls below certain
thresholds, the net assets and benefit obligations of the
relevant group-wide plans, to the extent they relate to our
employees, will be assumed by separate standalone plans
established by us. At December 31, 2004, it was estimated
that the aggregate amount of benefit obligations that would
transfer to us was $250 million if BP's investment in
our company fell below 80%, and $615 million if BP's
investment in our company fell below 50%. If the net assets
transferred to us differ from the
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actuarially-determined benefit obligations, we or BP, as the
case may be, will make a balancing payment to compensate the
other party for the difference. We intend to contribute any
balancing payments we may receive from BP to the relevant plans,
subject to local laws and other considerations.
Based on actuarial valuations, at December 31, 2004, our
annualized pension and other post-retirement benefit expenses
for group-wide and standalone plans was estimated to be between
$100 million and $120 million. Based on the projected
level of funding, our initial annual funding requirements for
these plans were estimated to be $20 million to
$30 million lower than this pension and post-retirement
benefit expense. We will fund our plans in accordance with
applicable local regulations and practice, and will provide
additional funding as management deems appropriate from time to
time.
Capital Expenditures
Total capital expenditures for the six months ended
June 30, 2005 were $250 million, primarily reflecting
capital expenditures of $43 million related to the
Distinctive Compliance Project (DCP) at our site in Chocolate
Bayou, Texas, which was initiated in 2002 to meet new
environmental laws and regulations, expand the facility's
ethylene capacity and improve process efficiency. With the
exception of the DCP, there were no individually significant
projects in the period. The remainder of the expenditure was
primarily for HSSE projects and normal sustaining capital
expenditures at our sites in addition to certain expenditures
relating to our establishment as a standalone operation.
Total capital expenditures for 2005 are expected to be slightly
less than in 2004.
Our capital expenditures were $567 million for the year
ended December 31, 2004, reflecting capital expenditures of:
•
$129 million related to the DCP at the Chocolate Bayou site;
•
$83 million related to the replacement of the reformer
    tubes in the ammonia plant and the first phase of an expansion
    to de-bottleneck the acrylonitrile plant of our Cologne, Germany
    site; and
•
$48 million related to the FCC rebuild at our refinery in
    Grangemouth, United Kingdom.
Our capital expenditures were $556 million for the year
ended December 31, 2003, reflecting capital expenditures of:
•
$97 million related to the DCP at the Chocolate Bayou site;
•
$48 million related to various projects at the Cologne
    site; and
•
$32 million related to the FCC rebuild at the Grangemouth
    refinery.
Our capital expenditures were $614 million for the year
ended December 31, 2002, primarily reflecting capital
expenditures of:
•
$57 million related to the DCP at the Chocolate Bayou site;
•
$49 million related to the closure of the alcohols
    production line and reconfiguration of the LAO unit of the
    Pasadena, Texas, facility, which is operated for us by BP under
    a toll manufacturing agreement;
•
$49 million related to the construction of an HDPE plant in
    Lillo, Belgium;
•
$36 million related to the construction of the Cedar Bayou,
    Texas, facility, which is operated by Chevron Phillips in a
    50/50 joint venture between us and Chevron Phillips; and
•
$26 million related to an expansion of the cracker of the
    Cologne site to enable it to recycle ethane by-products.
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The following table provides a breakdown of our capital
expenditures by segments for the periods indicated:
For the
six months
For the year ended
ended
December 31,
June 30,
2002
2003
2004
2004
2005
($ in millions)
O&P North America
153
174
191
79
78
O&P Europe
261
209
164
72
103
Global Derivatives
88
45
66
22
9
Refining
58
110
117
45
23
Corporate and Other
54
18
29
—
37
Total
614
556
567
218
250
We incurred $96 million, $151 million,
$172 million and $54 million in HSSE-related capital
expenditures for 2002, 2003, and 2004 and for the six months
ended June 30, 2005, respectively. We expect to incur an
estimated $140 million of such expenditures for the
remainder of 2005. Although we cannot predict with certainty
future capital expenditures, from 2005 to 2010 we expect to
incur an estimated total of $830 million in HSSE-related
capital expenditures, which includes $660 million in
capital expenditures to comply with various regulations related
to health, safety, security and the environment and an
additional $170 million to meet industry good practice and
internal safety standards. An estimated $490 million of
this estimated total is expected to be made specifically to
comply with various environmental regulations, which include an
estimated $350 million related to compliance with the EU
directive on integrated pollution prevention and control (IPPC).
We anticipate that HSSE regulations will continue to require us
and the industry in general to make capital expenditures. Since
capital expenditures vary with applicable HSSE legal
requirements, we cannot assure you that our recent capital
expenditures are indicative of the amounts we may be required to
spend to comply with future HSSE legal requirements.
Contractual Obligations
While we own most of our major facilities, we lease certain
office, factory and warehouse space and land, as well as data
processing and other equipment, principally under non-cancelable
operating leases.
The following table provides a maturity analysis of our material
contractual obligations as of December 31, 2004:
Payments due by period
Less than
More than
Total
1 year
1-3 years
3-5 years
5 years
($ in millions)
Contractual obligations
Long-term debt obligations
1,729
—
—
—
1,729
Capital lease obligations
21
2
4
4
11
Operating lease obligations
547
73
89
81
304
Unconditional purchase obligations
5,687
2,223
1,921
825
718
Other long-term liabilities reflected on Innovene's balance
    sheet
528
30
65
70
363
Total
8,512
2,328
2,079
980
3,125
The unconditional purchase obligations shown in the table
primarily include arrangements to secure long-term access to
supplies of feedstock which are used in our facilities in the
ordinary course of business.
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Other long-term liabilities are liabilities for pensions and
other post-employment benefits. BP has agreed to retain
approximately $262 million of obligations associated with
retired employees participating in our German pension and
post-employment benefit plans.
Off-Balance Sheet Arrangements
We use various customary off-balance sheet arrangements, such as
operating leases, to finance our business. None of these
arrangements has or is likely to have a material effect on our
results of operations, financial condition or liquidity.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various types of market risk, including
changes in interest rates, currency exchange rates and the
prices of certain commodities. In the case of commodities, this
exposure arises from movements in the prices of the feedstocks
we require to make our products. To manage this exposure, we
generally acquire raw materials and sell finished products at
posted or market-related prices, which are typically set on a
quarterly, monthly or more frequent basis in line with industry
practice. We seek to minimize reductions in our margins by
passing through feedstock cost increases to our customers
through higher prices for our products. In the three years ended
December 31, 2004, we were not engaged in commodity or
financial transactions that would have created additional or
different exposures than those described above.
Our cash flows and earnings are subject to exchange rate
fluctuations. In our Refining segment, the prices of finished
products and of the underlying raw materials are primarily
denominated in U.S. dollars, whereas our other costs are
largely denominated in euros and British pounds. In our European
petrochemical business, product prices, certain feedstock costs
and most other costs are denominated in euros and British
pounds. From time to time, we may enter into foreign currency
exchange instruments to minimize the short-term impact of
movements in foreign exchange rates. On February 24, 2005,
we entered into a transaction with BP to purchase options at a
cost of $20 million. The exercise dates of these options
are spread equally over eleven months from February 2005 to
December 2005 and each gives the company the right to purchase
an amount of $83 million at an exchange rate of $1.35/euro
and an amount of $42 million at an exchange rate of
$1.90/British pound. The options are reflected in our unaudited
summary combined financial data on a mark-to-market basis. We
recorded realized and unrealized losses in connection with these
options of approximately $20 million through June 30,
2005.
As of April 1, 2005, we had $1,700 million of
intercompany debt outstanding to BP under an intra-group loan
facility. The loans under this facility accrue interest at a
rate of LIBOR plus five basis points, with interest payable
every three months and will mature on March 30, 2006,
unless repaid earlier. This facility replaced debt secured by
the petrochemical assets of our site in Grangemouth, United
Kingdom, which was repaid on March 22, 2005. A quarter
percentage point increase or decrease in the interest rates on
the total borrowings is estimated to change pre-tax income by
approximately $4 million. In connection with the offering,
our capital structure is expected to change. This change will
change our exposure to interest rate risk. See
"Capitalization" for more information on our capital
structure.
Critical Accounting Policies
The preparation of financial statements and related disclosures
in accordance with accounting principles generally accepted in
the United States requires our management to make judgments,
assumptions and estimates that affect the amounts reported in
our combined financial statements and the accompanying notes.
Our management bases its estimates and judgments on historical
experience, current economic and industry conditions and on
various other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. If actual
results differ significantly from management's estimates,
there could be a material adverse effect on our results of
operations, financial condition and liquidity.
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Our significant accounting policies are summarized in
note 3 to our combined financial statements. Summarized
below are those of our accounting policies where the nature of
the estimates or assumptions involved is material due to the
levels of subjectivity and judgment necessary to account for
highly uncertain matters or the susceptibility of such matters
to change and the impact of the estimates and assumptions on
financial condition or results of operations is material.
Revenue Recognition
We generate substantially all of our revenues through sales of
products in the open market. We recognize revenue when it has
been earned. Revenue for product sales is recognized when risk
and title to the product transfer to the customer,
collectibility is reasonably assured and pricing is fixed or
determinable. Generally, revenue is recognized at the time of
shipment or delivery of a product, depending on contractual
terms. Revenue is recognized net of discounts and other price
adjustments.
Inventory Valuation
Our inventories are valued at the lower of cost or market value.
Elements of cost in inventories include raw materials, direct
labor, and manufacturing overhead. The majority of our
inventories in the United States are valued at cost using the
"last-in, first-out" method (LIFO). The balance of our
inventories are valued using the "first-in, first-out"
method (FIFO). Management adjusts the carrying value of U.S.
inventories using a LIFO reserve account, requiring estimates of
the impact of inflation on existing LIFO inventory pools as of
each reporting date. LIFO inventories comprise approximately 10%
and 7% of total inventories at December 31, 2004 and 2003,
respectively.
We establish reserves for excess or obsolete inventory based on
experience.
Property, Plant and Equipment
Our business is capital-intensive and has required, and will
continue to require, significant investments in property, plant
and equipment. At June 30, 2005, December 31, 2004 and
December 31, 2003, the carrying value of our property,
plant and equipment was $6,737 million,
$7,136 million, and $7,050 million, respectively. The
average of the estimated useful lives of our refineries and
petrochemical plants is 20 years. Depreciation for
property, plant and equipment is recorded on the straight-line
method.
We estimate the useful lives of our property, plant and
equipment based on our historical experience, engineering
estimates and industry information. Such lives are reviewed when
economic events indicate that we may not be able to recover the
carrying value of the assets. Management's estimates of our
assets' useful lives assume periodic maintenance and an
appropriate level of annual capital expenditures. Without
ongoing capital improvements and maintenance, the productivity
and cost efficiency of our machinery and equipment would decline
and the useful lives of our assets would be shorter.
If the useful life of our property, plant and equipment as of
June 30, 2005 were to have been estimated to be one year
longer or shorter, our depreciation charge for the six months
ended June 30, 2005 would have been $18 million less
or $20 million greater, respectively.
Accounting for Business Combinations
We allocate the purchase price paid for assets acquired and
liabilities assumed based on their relative fair value at the
date of acquisition pursuant to SFAS No. 141,
"
Business Combinations
." In estimating the fair
value of tangible and intangible assets acquired and liabilities
assumed, we consider information obtained during the underlying
due diligence process and utilize various valuation methods and
measures, including market prices, where available, appraisals,
comparisons to transactions for similar assets and liabilities
and the net present value of estimated future cash flows.
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Recoverability of Long-Lived Assets
We review the carrying value of our long-lived assets, including
property, plant and equipment and definite-lived intangible
assets whenever events or changes in circumstances indicate that
the carrying value of the assets may not be fully recoverable.
An impairment loss may be recognized when the undiscounted
future cash flows expected to result from the use of the asset,
including disposition proceeds, are less than the carrying value
of the asset. The amount of the impairment loss to be recognized
is based on the difference between the estimated fair value and
the carrying amounts of the assets. Fair value is generally
determined based on a discounted cash flow analysis. In order to
determine whether an asset has been impaired, assets are grouped
and tested at the bottom of the range of available estimates for
identifiable future cash flows.
The determination of both undiscounted and discounted cash flows
requires us to make significant estimates and considers expected
future development as of the balance sheet date. Subsequent
changes in estimated undiscounted and discounted cash flows
arising from changes in anticipated developments could impact
the determination of whether an impairment exists, the amount of
the impairment charge recorded and whether the effects could
materially impact our net income.
Goodwill
Goodwill represents the excess of the purchase price paid for an
asset and related costs over the value assigned to the net
tangible and identifiable intangible assets of businesses
acquired. At June 30, 2005 and December 31, 2004, we
had $258 million and $261 million of goodwill and
other intangible assets, respectively. We assess the
recoverability of the carrying value of goodwill at least
annually or whenever events or changes in circumstances indicate
that the carrying value may not be fully recoverable.
Recoverability of goodwill is measured at the reporting unit
level based on a two-step approach. First, the carrying amount
of the reporting unit is compared to its fair value as estimated
using a discounted cash flow analysis and terminal value model
for expected future cash flows. To the extent that the carrying
value of the reporting unit exceeds the fair value of the
reporting unit, a second step is performed, whereby the
reporting unit's assets and liabilities are fair valued.
The implied fair value of goodwill is calculated as the fair
value of the reporting unit in excess of the fair value of all
non-goodwill assets and liabilities allocated to the reporting
unit. To the extent that the reporting unit's carrying
value of goodwill exceeds its implied fair value, impairment
exists and must be recognized. The annual goodwill impairment
test requires us to make a number of assumptions and estimates
concerning future levels of earnings and cash flow, which are
based upon our strategic plans. While we use available
information to prepare estimates and to perform the impairment
evaluation, actual results could differ significantly resulting
in future impairment and losses related to recorded goodwill
balances.
Restructuring and Plant Closing Costs
Restructuring and plant closing costs represent charges related
to the closing of plant locations, work force reductions and
other cost savings programs. These charges are recorded when
management has committed to a plan to implement the relevant
measures and incurred a liability related to the plan. Estimates
for plant closing costs include write-offs of the carrying value
of the relevant plant, any costs incurred for necessary
environmental and/or regulatory measures, contract termination
costs and demolition costs. Amounts provided for work force
reductions and other cost savings programs are based upon
estimates of the number of positions to be terminated,
termination benefits to be paid and other relevant information.
While management evaluates the relevant estimates as of the end
of each reporting period and adjusts the reserve when
information indicates that the estimate is above or below the
initial estimate, management's estimates on a
project-by-project basis historically have not varied to a
material degree. See note 15 to our combined financial
statements for a further discussion of our restructuring
activities in the three years ended December 31, 2004.
Environmental Liabilities and Expenditures
Because we refine oil products and manufacture and sell a range
of petrochemical products, our operations are subject to various
hazards incidental to the refining of oil and the production of
industrial chemicals, including the use, handling, processing,
storage and transportation of hazardous materials. Environmental
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restoration and remediation costs are recorded as liabilities
and expensed when site restoration and environmental remediation
and cleanup obligations are either known or considered probable
and the amount can be reasonably estimated. Environmental
accruals are measured based on an evaluation of currently
available information with respect to each site, considering
factors such as existing technology, currently applicable laws
and regulations and our prior experience in the remediation of
contaminated sites. The measurement of environmental liabilities
is based on a range of estimates of costs required to carry out
the remediation efforts. We use our best estimate within this
range to establish our environmental accruals. For environmental
accruals, actual costs can differ from estimates because of
changes in laws and regulations, public expectations, discovery
and analysis of site conditions and changes in clean-up
technology.
Income Taxes
We recognize deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and
the tax bases and operating losses of our assets and
liabilities. We regularly review our deferred tax assets for
recoverability and establish a valuation allowance based on
historical taxable income, projected future taxable income, the
expected timing of the reversals of existing temporary
differences and the implementation of tax-planning strategies
when we determine that it is more likely than not that we will
not be able to realize all or a portion of a deferred tax asset.
If we continue to operate at a loss or are unable to generate
sufficient future taxable income in the relevant tax
jurisdictions or if there is a material change in the applicable
effective tax rates or time period within which the underlying
temporary differences become taxable or deductible, we could be
required to increase our valuation allowance against our
deferred tax assets, resulting in an increase in our effective
tax rate and a reduction of our net income. We have implemented
a centralized procurement and sales organization within Europe
along with dedicated manufacturing companies. During periods of
low margins, our tax rate will likely increase as our
manufacturing companies may earn a profit for their
manufacturing services while our central procurement and sales
organization may incur losses which will not immediately reduce
income taxes.
Our operating results have been included as a part of BP's
consolidated group for tax purposes. Our provisions for income
taxes have been determined on a separate return basis. Pursuant
to SFAS No. 109,
"Accounting for Income
Taxes"
, we are required to assess our deferred tax
assets and the need for a valuation allowance on a separate
return basis and exclude from that assessment the utilization of
all or a portion of those losses incurred by BP under the
separate return method. This assessment requires considerable
judgment on the part of management with respect to benefits that
could be realized from future taxable income as well as other
positive and negative factors. Because we were unable to
accurately determine the amount of pre-2000 deferred tax assets
in respect of operating loss carry-forwards and tax credits, we
have only recognized current tax benefits in the periods
presented equal to, but not exceeding, any deferred tax expense
with any excess amounts evaluated. Evaluation allowances were
provided for any deferred tax assets to the extent it was not
likely that these tax assets would be realized in the future.
Employee Benefit Programs
We sponsor pension and other post-retirement benefit plans for
some of our employees in France and Germany. These plans cover
most of our employees in these countries and provide for pension
payments to eligible employees upon retirement. Pension benefits
for employees generally are based on years of service. Some of
our pension plans are unfunded while others are partially
funded, consistent with local practice in the relevant
jurisdictions.
The amounts shown in our combined financial statements as net
periodic pension costs are determined on an actuarial basis. We
use various assumptions in calculating the actuarial valuation
of pensions, including weighted average discount rates, rates of
increases in compensation levels, and plan withdrawal, turnover
and mortality rates. Our net periodic pension costs for all
pension plans sponsored by us were $24 million and
$24 million for the six months ended June 30, 2005 and
2004, respectively, and $51 million, $71 million and
$19 million for the years ended December 31, 2004,
2003 and 2002, respectively.
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The discount rate we have selected for our pension plans
represents our best estimate of the interest rate that should be
used to determine the present value of future cash flows
currently expected to be required to settle our future pension
obligations. Historically, we have determined the discount rate
based upon current market indicators, primarily the yield on
high-quality corporate fixed-income securities. At
December 31, 2004, 2003 and 2002, the weighted-average
annual discount rate of our sponsored plans was 5%, 6% and 6%,
respectively.
The rate of compensation increase we have selected represents
our best estimate of the annual rate at which the average
compensation for our employees included in the plan will
increase. Historically, we have determined the rate of
compensation increase based on an analysis of historical and
projected compensation trends within our industry and specific
regions for employees covered by our plans. For the years ended
December 31, 2004, 2003 and 2002, the annual rate of
compensation increase for our sponsored plans was 4%.
A change in the two key assumptions of discount rate and rate of
compensation increase of 100 basis points would have the
following effects on our net periodic pension cost for the year
ended December 31, 2004:
100 basis point
Assumption
Increase
Decrease
($ in millions)
Discount rate
(6
)
7
Rate of compensation increase
7
(6
)
Additionally, we have other post-retirement benefit plans that
provide for lump sum benefits depending on an employee's
length of service and earnings at, or near, retirement, and
post-retirement healthcare benefits in the form of healthcare
cost reimbursements for retirees and dependents. These
post-retirement benefit plans are also unfunded, in line with
local practice in the relevant jurisdictions.
The amounts recognized in our combined financial statements as
other post-retirement benefit costs are determined on an
actuarial basis. We use various assumptions in calculating the
actuarial valuation of other post-retirement benefit costs,
including the weighted average discount rate, health care cost
trend rates, and plan withdrawal, turnover and mortality rates.
Our other post-retirement benefit cost for all sponsored plans
were less than $1 million in each of the six month periods
ended June 30, 2005 and 2004, respectively, and
$2 million for each of the years ended December 31,
2004, 2003 and 2002.
The other post-retirement benefit costs described in the
paragraph above are calculated using the same discount rate
selected for the pension plans.
A change in the two key assumptions of discount rate and assumed
health care cost trend of 100 basis points would have the
following effects on our other post-retirement benefit cost for
the year ended December 31, 2004:
100 basis point
Assumption
Increase
Decrease
($ in millions)
Discount rate
(1
)
1
Assumed health care cost trend
1
(1
)
In addition, we incur costs related to pension plans and other
post-retirement benefit plans sponsored by the BP group that
also cover certain of our employees. These costs are generally
allocated to us based on BP's calculation of net periodic
pension cost and an assessment of our share of such costs given
our employee and retiree base. Aggregate allocated costs for
BP-sponsored pension and post-retirement benefit plans incurred
by us were $29 million and $26 million for the six
months ended June 30, 2005 and 2004, respectively, and
$55 million, $(1) million, and $(8) million for
the years ended December 31, 2004, 2003, and 2002,
respectively.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, please see
"Notes to Combined Financial Statements —
Adoption of New Accounting Standards" and "Notes to
Combined Financial Statements — Recently Issued
Accounting Standards."
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INDUSTRY OVERVIEW
Petrochemicals
Market Environment
The petrochemical industry produces olefins and polymers and
manufactures various petrochemical products directly or
indirectly derived from olefins. The olefins industry is
primarily regional, with market dynamics and prices varying
between regions, while the polymers and derivatives industries
and the plastics, rubbers and fibers industries served by them
are becoming increasingly global. The petrochemical industry is
highly commoditized. Some petrochemical products, mainly
polymers and derivatives, have characteristics which permit
petrochemical companies to engage in price differentiation, but
these products account for a small portion of the overall market
and most of them may become commodities at some point in their
lifecycle.
Cyclicality and Volatility
The relationship between supply and demand in the petrochemical
industry historically has been highly cyclical, with margins
typically increasing when demand approaches or exceeds available
supply. This is primarily because product supply is driven by
periods of substantial capacity additions and followed by
periods in which no or limited capacity is added. In addition,
product demand fluctuates with overall economic conditions.
As a general matter, companies are more likely to add capacity
in periods when current or expected future demand is strong and
margins are, or are expected to be, high. Investments in new
capacity can result, and in the past frequently have resulted,
in overcapacity, which typically leads to a reduction of
margins. In response, companies typically reduce capacity or
limit further capacity additions, eventually causing the market
to be relatively undersupplied. The alternation between periods
of substantial capacity addition and periods of limited capacity
addition, or even capacity reduction, produces recognizable
swings in petrochemical capacity utilization, which typically
result in swings in industry margins. This long-term pattern is
often referred to as the petrochemical cycle.
Margins are also susceptible to potentially significant swings
in the short term. This volatility, which may be global or
isolated in individual regions, can be caused by a number of
factors, including fluctuations in utilization rates due to
planned or unplanned plant outages, political and economic
conditions driving rapid changes in prices for key feedstocks,
exchange rate fluctuations and changes in inventory management
policies by customers of the petrochemical industry.
Because the petrochemical industry's profitability
historically has been highly correlated with swings in
utilization of the industry's ethylene capacity, the
petrochemical cycle is often described by reference to the
ethylene cycle. The bottom of the last cycle was reached in 2001
and continued through 2003 due to weak demand and substantial
capacity additions.
Since 2004, stronger demand and limited capacity additions have
led to improved utilization rates and rising profit margins.
While a number of industry observers, including CMAI, a
chemicals consulting company, have forecast that the current
recovery of the ethylene cycle may last longer than previous
upturns, the duration of the present upturn is difficult to
predict and depends on a number of factors, including the extent
of the global economic expansion and the amount of capacity that
will be built over the coming years. Those observers who predict
an extended upturn believe that, among other things, the
prevailing high level of energy prices and low growth in the
consumption of petrochemical products in North America and
Europe may cause petrochemical companies to focus their
investments in these regions on de-bottlenecking existing
facilities, rather than adding new capacity. Given that there
are several recently completed world-scale petrochemical
complexes which will be able to meet growth requirements over
the coming years and the absence of recent announcements of
large-scale construction projects, CMAI forecasts that there
will likely not be a substantial increase in industry capacity
in these two regions before 2010. However, CMAI expects that the
majority of new ethylene capacity will be built in the Middle
East to take advantage of the low-cost gas feedstock available
in this region. Although some of this new capacity could be used
to supply product to Europe, the majority of production is
expected to be exported to Asia. According to CMAI, the demand
growth projected for China should absorb a significant
proportion of the
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capacity expected to be added in the Middle East over the next
several years. However, if demand in China fails to reach
current projections, a greater proportion of the product
manufactured in the Middle East would likely be delivered to
Europe, potentially resulting in an oversupply of the European
market.
Petrochemical Feedstock
The principal feedstocks of our petrochemical business are
naphtha and gas. Naphtha is mainly obtained in the process of
refining crude oil. Gas is recovered either from oil in the form
of associated gas obtained together with oil and natural gas
liquids (NGL), or directly from gas fields. Gas includes ethane,
butane and propane. Butane and propane are transported and
stored as liquids, referred to as liquified petroleum gas (LPG).
For most petrochemical processes, feedstock costs are the most
significant cost item. The costs of the feedstocks we require to
make our petrochemical products (naphtha, ethane, butane and
propane) are principally driven by the price of oil and natural
gas. Oil and gas prices are influenced by numerous factors,
including the balance between supply and demand and geopolitical
factors, making accurate price forecasts virtually impossible.
Because gas is not as readily transportable between regions as
oil and the amount of interregional trade in gas is thus
limited, gas prices tend to vary by geographic region. In the
current environment of high oil prices, petrochemical facilities
located in the Middle East enjoy the advantage of direct access
to gas feedstocks which are priced at a significant advantage to
naphtha. To the extent petrochemical companies are integrated
with their feedstock sources, are geographically diversified or
have the ability to change their feedstock mix quickly and
easily, they are better able to manage the volatility in oil and
gas prices than other petrochemical manufacturers. Also,
petrochemical producers with a more diversified product
portfolio are less exposed to price movements in any single
product category.
Petrochemical Products
According to CMAI, worldwide demand for petrochemical products
has grown steadily over the past 15 years at a greater rate
than the growth rate of gross domestic product (GDP), reflecting
the ongoing substitution of thermoplastics for other industrial
materials, including glass, metal, wood and paper. CMAI projects
demand growth for petrochemical products to moderate slightly
from historical levels but still to grow slightly faster than
GDP, despite petrochemical growth rates below GDP growth rates
in North America and western Europe. For 2006, CMAI projects GDP
to grow at an annual rate of 3.6% in North America, 2.3% in
western Europe and 5.1% in north east Asia, excluding Japan.
Within north east Asia, China is expected to experience the
strongest growth, with a projected growth of 8.0% for 2006.
GDP and demand growth rates vary not only by region but also
among different types of petrochemical products, as detailed in
the table below:
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Average annual GDP and demand growth
rates
(1)(2)
1999-2004
2004-2009
North
Western
North
North
Western
North
America
Europe
east Asia
Global
America
Europe
east Asia
Global
(%)
GDP
2.7
1.9
3.3
2.8
3.6
2.3
3.5
3.4
Ethylene
0.6
2.2
4.3
3.4
0.7
1.2
4.0
4.6
Propylene
2.8
2.7
5.9
5.2
2.7
0.6
4.8
4.9
Butadiene
0.3
3.9
4.7
3.0
0.8
1.4
4.2
2.9
Polyethylene
1.6
2.5
6.1
4.0
3.5
2.7
6.5
4.8
HDPE
1.9
3.5
7.0
4.5
4.1
4.1
6.5
5.5
LDPE
(0.3)
(0.7)
3.6
1.4
1.2
0.1
5.3
2.5
LLDPE
2.6
6.3
7.4
6.1
4.2
3.7
7.4
5.8
Polypropylene
3.2
3.6
8.1
6.1
4.1
3.1
5.6
5.4
Styrene
(0.4)
1.1
6.9
3.6
2.1
1.4
5.1
3.7
Polystyrene
(1.4)
(0.5)
2.2
1.1
1.6
1.5
3.7
3.1
Acrylonitrile
0
(1.2)
5.5
2.7
(0.3)
0
4.3
2.7
Alpha olefins
4.7
4.1
4.9
6.0
(1.3)
4.3
0.5
2.7
Ethylene oxide
2.0
3.3
6.6
4.7
(4.0)
(1.3)
4.2
5.3
Propylene oxide
3.8
6.6
10.1
6.0
3.0
0.9
4.8
2.7
(1)
Source: CMAI, July 2005.
(2)
The growth rates shown for each region reflect the growth of
    domestic demand in that region.
Set forth below is an overview of the principal petrochemical
products and their applications.
•
Ethylene.
Ethylene is a flammable gas obtained in a
    process called cracking, in which hydrocarbons are briefly
    heated to 750-950 °C, causing chemical reactions that split
    the carbon-hydrogen or carbon-carbon bonds of the feedstock. The
    chemical mixture resulting from cracking contains ethylene,
    propylene, butadiene and other compounds in varying amounts
    depending on the feedstock. The majority of this mixture is in
    the form of ethylene. Because ethylene is a gas, it must be
    transported either by pipeline or in the form of highly
    pressurized or refrigerated liquids, which is expensive. While
    ethylene itself has no consumer applications, it is a key
    building block for polyethylene, polystyrene, EO and other
    derivatives.
According to CMAI, ethylene is the most widely consumed
petrochemical product in the world. Global ethylene demand is
primarily driven by the use of ethylene as a feedstock for the
production of polyethylene. Other important demand drivers
include the use of ethylene in the manufacture of EO, ethylene
dichloride and ethylbenzene.
•
Propylene.
Propylene is a flammable gas which is derived
    either as a co-product of the refinery FCC process used to make
    gasoline or as a co-product of the steam cracking process used
    to make ethylene. While propylene has virtually no independent
    end use, it is an important input for a significant number of
    industrial products and the main feedstock for polypropylene and
    acrylonitrile. Propylene is marginally easier to transport than
    ethylene and may be shipped by pipeline, road, rail or ship.
Global propylene demand is primarily driven by the use of
propylene as a feedstock for the production of polypropylene.
Other important demand drivers include the use of propylene in
the manufacture of acrylonitrile, propylene oxide (PO),
oxo-alcohols, cumene and acrylic acid.
•
Styrene.
Styrene, a hydrocarbon which under normal
    conditions is a flammable liquid, is derived from ethylene and
    benzene, which are brought together in a reaction with a
    catalyst to form ethylbenzene. Virtually all worldwide
    ethylbenzene production is consumed in the manufacture of
    styrene. The largest use of styrene is in the production of
    polystyrene. It is also used, in combination with acrylonitrile,
    in the manufacture of styrene-acrylonitrile (SAN). SAN has a
    variety of applications, including housewares and appliances. In
    combination with butadiene, styrene is also used in the
    manufacture of styrene-butadiene rubber (SBR) and
    styrene-butadiene latex (SBL), two common types of synthetic
    rubbers, and to make
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acrylonitrile-butadiene styrene (ABS), a plastic with a high
    degree of tensile strength and a variety of end uses.
Styrene demand is mainly driven by various types of
polystyrene, with general purpose polystyrene and EPS accounting
for approximately two thirds of global demand. According to
CMAI, China will be the principal driver of demand growth for
styrene in the future as industrial users of polystyrene, EPS
and ABS are moving their operations to this region.
•
Butadiene.
Butadiene is a gas which condenses to a liquid
    at minus 4.5°C. It is one of the co-products of the steam
    cracking process used to manufacture ethylene and propylene, and
    can also be made from NGL through chemical transformations or
    the separation of natural components. Butadiene is used
    primarily in the production of polymers, principally synthetic
    rubbers such as SBR, which is used to make tires and other
    rubber products. Other polymers made from butadiene include ABS
    and SBL.
Butadiene demand is driven primarily by growth in consumption
of synthetic rubber.
•
Polyethylene.
Polyethylene is the world's most
    widely used thermoplastic. A thermoplastic is a plastic which
    softens when heated and hardens again when cooled. Polyethylene
    is made by aggregating many ethylene molecules in a process
    called polymerization. Polyethylene has a wide variety of
    applications, including soft plastics, such as those used in
    plastic films, hard plastics such as those used in plastic
    bottles and extremely hard plastics found, for example, in
    bulletproof vests.
Polyethylene is often classified by its density, because the
denser the polyethylene used in a material, the greater the
material's rigidity. The world's largest volume
polyethylene is HDPE, which has a relatively high degree of
tensile strength. Its most common household use is plastic
containers. At the opposite end of the spectrum is LDPE, which
was the first type of polyethylene to be developed. Its most
common household use is plastic bags. Both HDPE and LDPE are
also commonly used for molding applications. LLDPE, which was
developed in the 1970s and can usually be manufactured at a
lower cost than LDPE, has basic properties similar to LDPE.
While LDPE and LLDPE are to a certain extent substitutable for
each other, for certain applications one of them is usually more
suitable than the other.
Film is the largest use of global polyethylene production and
the primary driver of demand, representing approximately one
half of worldwide polyethylene consumption. Film includes a
myriad of end use applications, from food packaging to trash
bags, stretch films and shrink films. Blow-molding and
injection-molding are the next largest uses and are also
important demand drivers. In the blow-molded category,
blow-molded bottles are the single largest end use.
•
Polypropylene.
Polypropylene is the world's second
    most widely-used thermoplastic after polyethylene. It is a
    thermoplastic characterized by its rigidity and resistance to
    high temperatures, chemicals and fatigue. Polypropylene has a
    heat distortion temperature of 150 to 200 °C, which makes
    it particularly suitable for "hot-fill" applications,
    which are manufactured using injection molding production
    methods. As a result, polypropylene is the most significant
    material used in molded containers and automotive applications.
    In addition, polypropylene can be configured to a high degree of
    purity, making it useful for the semiconductor industry.
    Polypropylene fibers are also used in fabrics and carpets.
Polypropylene represents the largest category of
thermoplastics, and it is among the fastest growing categories
of thermoplastics. The fast growth of polypropylene-based
products reflects the superior cost and performance
characteristics of this material. As one of the industry's
most versatile and historically least expensive polymers,
polypropylene is achieving a portion of its growth by displacing
other polymers, such as polyethylene and polystyrene. The
largest end use segment of the polypropylene industry is
injection-molding, followed by film and sheet. Injection-molded
polypropylene includes a wide variety of end uses, such as
packaging, automotive and appliances. End use segments for film
and sheet include food bags, tape and wrappings for consumer
goods. According to CMAI, North America, western Europe and
north-east Asia will account for approximately 75% of global
demand in 2005. CMAI expects that Asia will continue to grow at
higher rates than North America and Europe, primarily as a
result of growth in the Chinese market.
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•
Polystyrene.
General purpose, or "crystal,"
    polystyrene and high impact polystyrene are hard and brittle
    materials which are used for packaging, appliance and electrical
    housings and insulation. Both forms are also used for plastic
    molding applications. Styrene is the main feedstock used to make
    polystyrene. EPS is used to manufacture lightweight foam for
    packaging and insulation purposes.
The largest demand driver for polystyrene is rigid durable
products, such as television and computer cabinets.
•
Solvents and industrial chemicals.
Solvents are used to
    dissolve solids and keep them in liquid form. They serve a
    variety of industrial and consumer markets, including in the
    pharmaceuticals, cosmetics, inks, adhesives, detergents and
    coatings industries. One important solvent is ethanol. Important
    industrial chemicals include EO, ethylene glycols (EG), PO and
    propylene glycols (PG). EO is used mainly to make EG and
    industrial detergents, and EG is, in turn, primarily used in the
    manufacture of polyesters and antifreeze/coolants. PO is used to
    make PG, which, in turn, is primarily used to produce polyester,
    paints and coatings, airplane de-icers, antifreeze and
    industrial coolants.
EO demand is driven by demand for EO derivatives, principally
EG. In recent years, EG has become the most important derivative
of EO. As a result of increased consumption of polyester, EG has
become the second largest application of ethylene after
polyethylene. The lack of sufficient supplies of EG to satisfy
demand for polyester has recently fueled a strong market
environment. Similarly, PO demand is driven by demand for PO
derivatives, principally PG.
•
Acrylonitrile.
Acrylonitrile is a well-established
    commodity that has been in commercial use for more than
    70 years. It is used in the production of acrylic fiber,
    ABS and SAN. Acrylic fiber is used in a wide variety of consumer
    products, including clothing and carpets. Acrylonitrile is
    manufactured from propylene, ammonia and air with the use of a
    special catalyst. Acrylonitrile is toxic and flammable and,
    unless chemical stabilizers are added for storage and shipment,
    can undergo an explosive chemical reaction.
Historically, acrylonitrile demand has been driven by acrylic
fiber. More recently, ABS and SAN polymers have taken over as
the main drivers of demand for acrylonitrile, with annual growth
rates of approximately 4% over the past four years. As with
other petrochemicals, the growth in demand for ABS and SAN
polymers has been fueled by Asia while demand in North America
and Europe has declined. Currently, Asia is a net importer of
acrylonitrile. Much of the Asian imports come from North America.
•
Alpha olefins.
Alpha olefins include LAOs and PAOs. LAOs
    are hydrocarbons in a chain formation with physical
    characteristics and commercial uses that vary according to the
    length of the hydrocarbon chain. Ethylene is the primary
    feedstock for the production of LAOs, and LAOs, in turn, are
    important feedstocks for the manufacture of certain types of
    polyethylene. In addition, they have many applications in the
    petrochemical industry, including as surfactant intermediates,
    base oil for synthetic lubricants and drilling fluids. Demand
    for LAOs has increased substantially since they first became
    commercially available. PAOs, which are made by merging several
    LAOs together, are primarily used as synthetic lubricants. PAOs
    are value-added products compared with LAOs, and, accordingly,
    command higher margins. However, PAOs account for only
    approximately 10% of the overall market for alpha olefins.
Producers of LAOs may be divided into two groups:
"full-range" producers, which manufacture a whole
range of LAOs and "on purpose" or "single
product" producers, which specialize in those LAOs which
historically have experienced the fastest growth. Demand for
LAOs has experienced an increasing divergence between demand for
LAOs with shorter carbon chains, which have grown more quickly,
and demand for LAOs with higher carbon numbers, which on average
have experienced slower growth. As a result, the industry has
focused on developing single product technologies to target the
fastest growing LAOs. Demand for PAOs is driven by the European
automotive industry and lubricant substitutes. Following a
period of flat demand for PAOs in North America, North American
PAO demand has recently shown signs of improvement.
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•
PIB.
PIB is a synthetic hydrocarbon polymer available in
    a wide variety of viscosities for use in a broad range of
    industrial applications, such as lubricants and fuel additives,
    and consumer applications, such as adhesives and sealants.
Consolidation
Several of the major oil companies have recently restructured
their petrochemical businesses. At the same time, there has been
a trend in the North American and European petrochemical
industry since the early 1980s towards consolidation, a
development which has gained pace during the 1990s. At the
global level, the industry is still relatively fragmented due to
the continuous emergence of new manufacturers, primarily in the
Middle East but also in Asia. The world's top ten ethylene
and propylene producers, for example, account for less than 50%
of global capacity for the relevant products.
Regional Outlook
It is expected that few new olefins crackers will be built in
North America and Europe, with the exception of Russia, which,
although not currently a focus of foreign investment,
potentially has low-cost gas feedstock reserves and thus may
attract new projects in the future. Instead, petrochemical
companies operating in North America and Europe are expected to
focus on upgrading and expanding existing facilities. Slower
demand growth in these regions relative to China and the rest of
Asia and fewer sources of low-cost feedstocks compared with the
Middle East are the primary drivers behind this outlook. Another
contributing factor is the fact that the North American and
European petrochemical industries are becoming subject to ever
more stringent environmental laws and regulations. Although
significant merger and acquisition activity in Europe in recent
years has led to consolidation, much of the infrastructure is
still local. Several projects to address this problem are
underway, including connecting the principal ethylene pipeline
networks in Europe and building a European propylene pipeline.
While only very few facilities are thus expected to be built in
North America and Europe, significant projects are underway in
Asia and the Middle East. Petrochemical investments in Asia are
primarily targeted at China and surrounding countries to take
advantage of the strong growth of the Chinese manufacturing
industry. The growth in Chinese exports, along with increased
local demand as China grows, are driving demand growth for
petrochemical products, much of which is met through imports.
While new capacity is expected to come on-stream in China over
the next several years, it is expected that, for the foreseeable
future, China's strong demand growth will exceed supply
growth and China will remain a major importing country of
petrochemical products.
The Middle East is attracting investment in petrochemical
capacity because of its significant reserves of low-cost gas
feedstock obtained as a co-product of the oil production
process. There is political support in many Middle Eastern
countries for building an export-oriented industry around these
gas reserves, and joint ventures with foreign companies
providing technology expertise and market access are supported
as a means of exploiting these reserves. As discussed above,
much of the capacity in the Middle East is being built for
export to China. However, as the capacity buildup continues,
some product may be exported to Europe and the Americas.
Furthermore, if China fails to grow as expected, substantially
greater volumes may be directed from the Middle East to North
America and Europe.
Refining in Europe
The refining industry in Europe historically has been
characterized by steady growth in demand for refinery products,
cyclical margins due to periodic overcapacity and supply
shortages in various regional markets, and seasonal fluctuations
in the consumption of particular types of refinery products,
such as gasoline and diesel during the summer driving season in
the northern hemisphere and home heating oil during the winter
months.
In aggregate, refining industry margins have experienced a sharp
upturn since 2002 to reach record levels in late 2004. With
growth in product demand exceeding capacity additions, and crude
oil supply shifting towards heavier and higher sulfur crudes,
refineries with more sophisticated technical configurations have
been able to capture greater margins. According to PGI, the
average cash margin for a hydrocracking refinery in north west
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Europe was $6.04 per barrel in 2004 and $6.15 in the six
months ended June 30, 2005, compared with $2.73 per barrel
in 2003.
The current supply and demand fundamentals should continue to
underpin refining cash margins in the immediate future, and
therefore margins are expected to stay above the European
historical average during the period from 1992 to 2002 of
approximately $1.50 per barrel. Furthermore, with global
inventories remaining relatively low, and tightening product
specifications limiting the flexibility of the global supply
system, the risk of supply disruptions remains high, with
associated volatility in product prices and cash margins.
Crude oil distillation capacity in Europe has declined slightly
over the past five years, from 15.3 million barrels per day
in 1999 to 15.2 million barrels per day in 2004. The
industry still has some spare capacity left but the amount of
this extra capacity is declining. According to PGI, industry
utilization rates in Europe have increased since 2002 and
averaged 91.6% in the six months ended June 30, 2005. No
new crude oil distillation capacity is expected to be built in
the foreseeable future, due principally to the high cost of
entry into the European refining markets and the capital to
comply with increasingly stricter environmental standards.
Furthermore, the process of planning, obtaining permission to
build and constructing a new refinery typically takes between
three and four years, and therefore capacity forecasts may be
made with a high degree of certainty for up to three years.
Instead of building new refining capacity, refinery operators
are expected to focus their investments on de-bottlenecking and
upgrading existing production facilities to enable them to
process higher volumes of crude oil and to manufacture higher
volumes of more valuable products. These investments are
expected to be driven by changes in consumption patterns and the
introduction of stricter environmental laws and regulations,
such as clean fuels legislation.
The quality of crude oil dictates the level of processing and
conversion necessary to achieve the optimal mix of finished
refinery products. For these purposes, crude oil may be
classified by its density (ranging from light to heavy) and
sulfur content (ranging from sweet to sour). Light, sweet crude
oils are more expensive than heavy, sour crude oils because they
require less treatment and produce a slate of products with a
greater percentage of high-value refinery products, such as
gasoline, naphtha and kerosene. The heavy, sour crude oils
typically sell at a discount to the lighter, sweet crude oils
because they produce a greater percentage of lower-value
products with simple distillation and require additional
processing to produce the higher-value light products. We
believe that increasing worldwide supplies of heavy, sour crude
oil will result in continuing cost advantages for refineries
with complex configurations which are able to process these
crude oils. The upgrading capability, or complexity, of a
refinery is a measure of its ability to process less expensive
feedstock, such as heavier and higher-sulfur content crude oils,
into lighter value-added products, such as gasoline, diesel and
jet fuel. The greater a refinery's complexity and the more
flexible its feedstock slate, the better positioned it is to
take advantage of the more cost-effective crude oils, resulting
in incremental cash margins. From 2002 to 2004, the price
differential between light, sweet crude oil and heavy, sour
crude oil widened substantially. According to PGI, this price
differential (as measured by the Urals/ Brent differential)
averaged $4.14 per barrel in 2004 and $4.33 per barrel
in the six months ended June 30, 2005, compared with $1.76
per barrel in 2003. In Europe, the average crude oil quality is
expected to decline, as significant volumes of sour crude oils
are expected to be imported from the countries of the former
Soviet Union.
The main refinery products, apart from naphtha, which is used as
a petrochemical feedstock, are gasoline, middle distillates, jet
fuel and kerosene, and fuel oil. Middle distillates, or gas
oils, include road diesel, light gas oils, which are used as
industrial and commercial fuels, and heavy gas oils, which are
used as refinery feedstock. Fuel oil is used by marine vessels,
power plants, commercial buildings and industrial facilities for
heating and processing.
The most important transport fuels are gasoline and diesel.
Refineries blend together various gasoline components to achieve
specifications for regular and premium grades in both summer and
winter formulations. Additives are often used to enhance the
performance of gasoline and provide protection against oxidation
and rust formation. According to PGI, in European countries that
are members of the Organization for Economic Cooperation and
Development (OECD Europe) there is an overall net gasoline
surplus of approximately 210 million barrels per year. Most
of this surplus is exported to the United States but tight
quality specifications
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make it difficult for some refineries to comply with U.S.
requirements. Other gasoline destinations are eastern Europe,
the countries of the former Soviet Union and Africa.
Specifications for fuel products are becoming more and more
stringent. By 2009, transport fuels such as gasoline and diesel
are expected to have to comply with a 10 parts per million
(ppm) maximum sulfur specification in the European Union.
This constitutes a significant reduction from the 50 ppm of
sulfur currently permitted by European Union diesel and gasoline
specifications, as well as the 500 ppm of sulfur (which
will be reduced to 15 ppm beginning June 1, 2006) and
the 30 ppm of sulfur currently permitted by the more
restrictive specifications for diesel and gasoline,
respectively, in the United States. To comply with these
stringent specifications, refineries must make expensive
technology upgrades.
With respect to middle distillates, western Europe has a net
deficit of approximately 148 million barrels per year. Most
of this shortfall is imported from the countries of the former
Soviet Union. These imports typically require further processing
to reduce the oil's sulfur content before they can be
marketed.
Fuel oil is balanced in northern Europe, with a small excess in
high sulfur grades. Southern Europe has a deficit of fuel oil
resulting in net imports of approximately 33 million
barrels per year, which come predominantly from northern Europe
and Africa. However, imports have significantly declined over
the last ten years in line with declines in consumption.
Further details on the growth outlook for each major type of
refinery product are provided below:
•
Naphtha.
According to PGI, demand for naphtha increased
    by 0.8% in 2004 in OECD Europe. Naphtha demand is primarily
    driven by the petrochemical industry. North west Europe has a
    growing deficit position in naphtha, which is met by imports
    from the Middle East and the Mediterranean.
•
Gasoline.
Although gasoline demand is seasonal and peaks
    during the summer months, the long-term trend is clearly toward
    a sustained decline, reflecting the continued replacement of
    gasoline-powered vehicles with vehicles powered by diesel and
    benefiting from greater engine efficiency. PGI reports a decline
    of 1.7% in gasoline demand in OECD Europe for 2004 and forecasts
    further declines of 2.5% and 2.0% for 2005 and 2006,
    respectively. The excess supply in Europe is expected to
    increase steadily as demand continues to decrease, while
    production remains broadly flat. By contrast, in North America,
    demand for gasoline is expected to continue to increase at
    faster rates than the increase in North American supply, which
    in turn should enable European manufacturers to export their
    surplus to North America.
•
Diesel and heating gas oil.
According to PGI, in 2004,
    road diesel demand in Europe continued to grow strongly at 4.6%,
    led by the United Kingdom, which experienced growth at a rate of
    7.9%. Road diesel is expected to show a consistent and
    significant uptrend for the foreseeable future. PGI forecasts
    gas oil/diesel growth rates of 1.8% and 1.6% for 2005 and 2006,
    respectively. In contrast to road diesel, which has its seasonal
    peak in the summer and is set for positive growth, demand for
    heating gas oil peaks in the winter and is expected to continue
    to decline. The diesel and heating gas oil shortfall in Europe
    is covered by imports from the countries of the former Soviet
    Union.
•
Jet fuel and kerosene.
According to PGI, demand for jet
    fuel and kerosene in OECD Europe grew by 4.4% in 2004. Going
    forward, jet fuel demand in Europe is expected to grow faster
    than any other transportation fuel, driven by increasing air
    traffic. According to PGI, kerosene consumption in OECD Europe
    will grow at a rate of 2.9% for each of 2005 and 2006. Given
    north west Europe's deficit position and flat capacity,
    this region is expected to increasingly rely on imports from the
    Middle East and the Mediterranean.
•
Fuel oil.
According to PGI, demand in OECD Europe for
    fuel oil, both high sulfur and low sulfur, declined by 0.9% in
    2004. Fuel oil demand is expected to continue to decline as a
    result of emissions restrictions, including sulfurous and
    nitrous emissions, and a continuing shift to natural gas as a
    source of fuel. PGI forecasts a further decline of 2% for each
    of 2005 and 2006 in OECD Europe. However, the marine bunker fuel
    market is expected to remain strong, particularly in the
    Mediterranean markets.
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BUSINESS
Introduction
We are among the world's largest petrochemical companies
with revenues of $17.9 billion in 2004. We conduct our
business through petrochemical manufacturing sites in eight
countries, as well as two refineries which are fully integrated
with our petrochemical facilities. At June 30, 2005, our
total petrochemical production capacity was approximately
40 billion pounds per year and our refineries had a
combined crude oil distillation capacity of approximately 400
mbd. Our business is structured around five major sites, which
account for approximately 70% of our petrochemical production
volumes and approximately 85% of our overall production volumes.
We have a global reach and leading market positions with respect
to our key petrochemical products, which enable us to manage our
business on a worldwide basis. We benefit from the cost
advantages of operating large-scale petrochemical facilities and
the high degree of integration at our major sites. We have an
expanding position in the fast-growing Asian markets, which we
serve through our operations in North America and Europe. We
have an established regional office in Shanghai, China to manage
our operations in Asia. Our competitive position in the
petrochemical industry is supported by a portfolio of
proprietary process technologies. Our two European refineries
have the scale, location, product slate, feedstock flexibility
and clean fuels capabilities necessary to be competitive in
their respective markets and provide an earnings stream that is
not driven by the same cyclical patterns as our petrochemical
businesses. Our safety performance track record is among the
best in the industry.
Our business comprises certain assets, liabilities and
associated infrastructure that were formerly part of BP's
Petrochemicals, Refining and Marketing, and Gas, Power and
Renewables segments. We believe our separation from BP has
created new opportunities for us. Historically, our business was
a small part of a much larger organization and our performance
lagged behind that of other companies in the petrochemicals
sector. As a separate entity with our own management structure,
we will be able to focus on the factors that are critical to the
success of our petrochemical and refining businesses and
benchmark ourselves directly against the performance of our
competitors. Our benchmarking work has identified significant
opportunities to improve the performance and optimize the use of
our existing assets and to increase our margins. We intend to
pursue growth opportunities by investing in new assets and
forming joint ventures in regions that have access to low-cost
feedstocks.
In connection with our formation as a separate legal entity, BP
has agreed to provide various administrative and operational
support services to us. In addition, we have entered into a
range of commercial arrangements with BP for the supply of
refining and petrochemical feedstocks, the purchase and sale of
our refined products, the sharing of common infrastructure and
the provision of utilities at various sites which we share with
BP. See "Certain Relationships and Related Transactions
— Commercial Interface Agreements" for more
information on these arrangements.
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The following chart provides an overview of our two principal
businesses, the segments which each business comprises and the
products we make in each of these segments:
(1)
Intersegmental sales amounted to $1,909 million for the
    year ended December 31, 2004.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
In our petrochemical business, we make olefins and related
products, a broad range of polymers and various other
petrochemical products directly or indirectly derived from
olefins. The focus of our olefins business is on ethylene and
propylene, which are the two largest volume olefins and key
building blocks for polymers and derivatives. The olefins we
make are primarily used as feedstock for our polymers and
derivatives businesses. In addition, we sell olefins to third
party customers for a variety of industrial and consumer
applications involving plastics, rubber and fiber. In our
polymers business, we focus on polyethylene and polypropylene.
The largest volume product of our global derivatives business is
acrylonitrile. See "— Products" for more
information on the markets in which we sell our products. We are
among the largest volume manufacturers of olefins and polymers
in the world. In addition, we have developed several proprietary
process technologies for the production of polymers, including
our gas phase polyethylene and polypropylene processes, which we
use both internally and license to customers, and our HDPE
process, which we use internally. In addition, we have developed
the market-leading acrylonitrile manufacturing technology and
related catalysts, which are used in more than 90% of
acrylonitrile production processes in the world.
The following table provides an overview of our capacity, global
market position and certain regional market positions with
respect to our key petrochemical products:
Full-year
capacity
(1)
Global
as of June
market
Selected regional
Key products
30, 2005
position
(2)
market positions
(2)
(mmlbs)
Ethylene
8,860
#7
#4 in Europe
Polypropylene
5,680
#3
#2 in North America
HDPE
4,780
#3
#2 in Europe
#4 in North America
Propylene
3,830
#9
#4 in Europe
Acrylonitrile
2,010
#1
#1 in Europe
#1 in North America
Other
15,200
Total
40,360
(1)
Capacity is defined as nameplate capacity. See
    "Business — Manufacturing —
    Overview" for more information on how we calculate capacity.
(2)
According to Chemical Markets Associates, Inc. (CMAI) data
    as of July 2005.
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Our petrochemical business has developed significantly over the
past five years. We obtained full ownership of our Cologne,
Germany, site in 2001 when we acquired Bayer AG's
(Bayer's) 50% stake in Erdölchemie GmbH, a joint
venture between us and Bayer that had been existence since 1957.
In 2001, we acquired Solvay's U.S. and European
polypropylene businesses. At the same time, we combined our HDPE
businesses to form BP Solvay Polyethylene North America, in
which we owned a 49% stake, and BP Solvay Polyethylene Europe,
in which we owned a 50% stake. We contributed the HDPE units of
our Grangemouth, United Kingdom, and Lavéra, France, sites
to these joint ventures. In November 2004, Solvay exercised its
put option with respect to these joint ventures. As a result, we
obtained full ownership of the HDPE operations at our
Grangemouth and Lavéra sites, as well as our Battleground,
Texas, Lillo, Belgium, Rosignano, Italy, and Sarralbe, France,
sites. In the three years ended December 31, 2004, we
started a program of restructuring our polymers and derivatives
assets in North America and Europe with a view to rationalizing
and modernizing our asset base. In May 2005, we signed an
agreement with NOVA to establish a 50/50 joint venture. Under
the agreement, we and NOVA will contribute our respective
European polystyrene and EPS businesses to the joint venture.
In our refining business, we operate two large refineries in
Grangemouth and Lavéra. Our principal refining products are
transport fuels, particularly diesel fuel and gasoline, naphtha,
and heating and fuel oils. Our refineries are physically
integrated with petrochemical plants located at the same sites.
We have recently implemented a single management structure at
these sites to further leverage the benefits of integration. The
majority of the naphtha output of our refineries is used as
inputs by the petrochemical plants located at the relevant
sites. We have entered into agreements with BP pursuant to which
BP has agreed to buy the balance of our refinery products and to
either market these products to its local customers or trade
them on the commodity markets on our behalf.
Both of our refineries have made substantial investments to
bring their units into compliance with European Union clean
fuels specifications. Clean fuels are low-polluting transport
fuels which are capable of replacing ordinary gasoline and
diesel, including unleaded, low benzene, low sulfur gasoline and
low sulfur diesel. Both refineries are able to produce clean
fuels meeting current European Union specifications. Grangemouth
is also able to manufacture clean fuels in accordance with the
stricter rules currently applicable in certain parts of the
United States and the even more stringent specifications that
are expected to become applicable in the European Union in 2009.
Lavéra is compliant with current European Union
specifications, and we are in the process of making further
investments in the refinery to achieve compliance with the
expected 2009 European Union specifications by the end of 2007.
Following reliability issues at several of our key petrochemical
and refinery facilities, including Chocolate Bayou, Texas,
Grangemouth and Lavéra in 2000 and 2001, we made
substantial investments. We believe that these programs have
resulted in better reliability and expect to achieve further
improvements in the future.
We have approximately 8,000 employees.
Competitive Strengths
Our key competitive strengths are the following:
•
Global Reach and Leading Market positions.
We are
    among the world's largest petrochemical companies with
    24 manufacturing sites in eight countries in North America
    and Europe and a total petrochemical production capacity of
    approximately 40 billion pounds per year. From these sites,
    we serve approximately 2,700 customers who are located in the
    principal industrial regions of the world and use our products
    across a broad range of end-use applications, which we believe
    has allowed us to achieve and hold leading market positions with
    respect to each of our key products. According to CMAI, as
    measured by expected average annual capacity for 2005, we are
    among the top three companies globally for each of HDPE,
    polypropylene and acrylonitrile. We believe that our access to
    the world's principal markets and our leading positions
    with respect to key products enable us to identify and capture
    demand opportunities in all major market centers.
•
Vertically Integrated, Large Scale Producer.
We
    have five large-scale sites, accounting for approximately 85% of
    our total production volumes. All of these large-scale sites are
    integrated with major
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crackers and polymers and derivatives units, giving us the
    ability to capture margins across the value chain. Two of them
    are also integrated with onsite refineries, which differentiates
    us from many of our competitors. In addition, we own and operate
    several large global derivatives sites, including the largest
    acrylonitrile site in the world. We believe the scale and
    integration of our key sites enable us to realize economies of
    scale, improve energy management and minimize logistics costs.
    In addition, this gives us flexibility to adjust our product
    slate to capture greater value, which is particularly important
    in volatile markets. We believe that the scale of our global
    operations provides benefits by reducing our selling,
    administrative, and research and development costs on a per unit
    basis.
•
Strong Refining Platform.
We own and operate two
    refineries focused on serving their respective markets with the
    product slate, feedstock flexibility and clean fuels
    capabilities necessary to be competitive. Each of our
    Grangemouth and Lavéra refineries has a crude oil
    distillation capacity exceeding 200 mbd, which is larger
    than the average refinery size of each of our top five European
    refining competitors. Each of our refineries is equipped with an
    HC and an FCC, which provides them with significant flexibility
    in processing heavy, sour crude oils into light, sweet middle
    distillates. The product slates of our refineries are geared to
    their respective markets, with Lavéra focusing on middle
    distillates and Grangemouth focusing on gasoline and gasoline
    blending components. Both refineries are able to produce clean
    fuels meeting current European requirements. Furthermore,
    Grangemouth already complies with the more stringent standards
    for clean fuels expected to become applicable in 2009, and we
    expect to achieve the same capability in Lavéra by the end
    of 2007.
•
Extensive Portfolio of Leading Proprietary
    Technologies.
Our technologies are positioned around our
    key products, including our gas phase polyethylene, gas phase
    polypropylene, slurry HDPE and acrylonitrile technologies. We
    believe that our technologies are recognized as being among the
    lowest-cost in the petrochemical industry. As a result of their
    low cost, our technologies are widely used in the industry. For
    example, according to Nexant, Inc. (Nexant), our acrylonitrile
    technology is used in more than 90% of the world's
    acrylonitrile production, while our gas phase polyethylene
    technology is used in 15% of worldwide LLDPE/ HDPE capacity. The
    successful recent completion of a large petrochemical complex in
    Shanghai, China, which is operated by Shanghai SECCO
    Petrochemical Company Limited (SECCO) and which was designed and
    constructed by our and BP's employees in collaboration with
    local partners and continues to form part of BP's
    petrochemical business, demonstrates our ability to utilize our
    technologies as a competitive advantage when seeking
    opportunities to expand our position in foreign markets. We
    intend to continue to use our technological expertise to seek
    similar projects in regions with low-cost feedstock access or
    high growth, such as the Middle East and north Africa. In
    addition, we view technology licensing as an effective way of
    establishing our products in the market, as well as providing a
    stable contribution to our adjusted EBITDA of approximately
    $50 million to $75 million per year.
•
Experienced Management Team.
We have a talented
    and experienced management team recruited from both within BP
    and externally. Our management team is led by Ralph Alexander,
    our Chief Executive Officer, who has worked in a variety of
    roles within BP, including as Chief Executive Officer of
    BP's Gas, Power, and Renewables segment, as Group Vice
    President in BP's Exploration and Production segment and
    its Refining and Marketing segment and, most recently, as Chief
    Executive Officer of BP's Petrochemicals segment.
    Mr. Alexander is supported by a team of business and
    functional leaders, including Mark Tomkins, our Chief Financial
    Officer, who have extensive experience in petrochemicals,
    refining, supply and trading and who we believe have the
    requisite skill set to successfully execute our strategy.
    Mr. Tomkins has 15 years of experience with public
    chemical companies.
Strategy
We believe we have an opportunity to significantly improve our
competitive position and future financial performance by
implementing the key components of our strategy, which are to:
•
Achieve Performance Improvement Through Our Accelerator
    Program and By Implementing a Simplified Organizational
    Structure.
To reduce our operating costs and maximize
    our operating efficiency, we have embarked on a comprehensive
    performance improvement program, which we refer to
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as our Accelerator program. The actions we have identified under
    this program and intend to implement over the period from 2005
    to 2007 are based on a detailed analysis of our operational
    performance relative to our peers in the petrochemical and
    refining industries, and encompass all of our global operations
    from procurement to manufacturing, sales, marketing and
    logistics, as well as overhead costs. Projects include
    eliminating unprofitable product lines, redesigning and
    enhancing our sales and marketing activities by optimizing
    channels of trade, reducing our overhead and functional costs
    commensurate with our status as a standalone petrochemical
    company and making targeted investments to maximize our asset
    utilization and productivity.
We are also taking a number of steps to ensure that the
    performance improvements we intend to achieve through our
    Accelerator program become a basis for continued action.
    Throughout our organization, we have reduced management and
    other organizational layers, focusing the business around three
    operating companies which are responsible for driving the
    performance of our overall business.
•
Maximize Cash Flow.
We have revamped our incentive
    compensation programs for 2005 to focus every employee on a
    single financial goal, improving our adjusted EBITDA. In 2006,
    our incentive compensation programs will focus on three
    measures, adjusted EBITDA, capital expenditures and working
    capital, to further enhance the focus in our organization on
    delivering sustainable cash flow. Performance management systems
    are being put in place to allow employees to monitor the impact
    of their actions on our performance. We believe in a focused
    capital expenditure plan dedicated to attractive investment
    projects, as well as projects that maintain and improve our cost
    and technology positions. We intend to use our free cash flow to
    reduce indebtedness and selectively expand our businesses,
    particularly to access low-cost feedstocks and serve growth
    markets.
•
Enhance the Value of Our Portfolio.
We intend to
    focus on businesses that we believe have the potential to
    maintain or achieve cost and market leadership positions. We
    plan to manage our assets and businesses to achieve strong unit
    cost and gross margin performance relative to competitive
    benchmarks and make a meaningful financial contribution to our
    company. We expect that as a result of our Accelerator program,
    the substantial majority of our assets and businesses will meet
    these benchmarks by 2007. In those cases where an asset or
    business is unable to meet these benchmarks, or where it would
    be uneconomical for us to implement the necessary improvements,
    we will consider selling or closing the relevant asset or
    business. This strategy has already led to the divestment of
    businesses and the closure or planned closure of certain assets
    in 2004 and 2005, including, for example, the sale of the BDO
    unit of our Lima, Ohio facility, the planned closure of the LAO
    facility in Pasadena, Texas in late 2005, and the planned merger
    of our European polystyrene and EPS business into a 50/50 joint
    venture with Nova Chemicals Corporation.
•
Expand Position in Locations with Low Cost Feedstocks.
We intend to improve our long-term competitiveness by
    accessing low-cost feedstocks in the Middle East and north
    Africa through strategic collaborations with local partners and
    governments to build petrochemical complexes in these regions.
    In June 2005, we entered into a non-binding memorandum of
    understanding to construct a world-scale cracker and associated
    derivative complex in Saudi Arabia. Our goal is to sign a
    binding agreement and secure a guaranteed feedstock supply for
    the facility by year-end 2005 and commission the facility by
    2009. We believe we are well-positioned to provide all of the
    technology, project management skills, operational experience
    and market positions needed to build, operate and market the
    products of world-scale petrochemical complexes. The successful
    completion of the SECCO facility in Shanghai, China, in which
    our employees played a significant part, is a recent example of
    this partnering approach. Investments in the Middle East or
    north Africa can further enhance our ability to serve the
    fast-growing Asian market from a low-cost base and serve as a
    platform for future long-term growth opportunities.
•
Maximize Profitability by Optimizing Supply and Trading
    Flows.
We intend to continue to strengthen our supply
    and trading capabilities to ensure we derive maximum benefit
    from optimizing our operations, channels to market and market
    positions. The capabilities we have developed closely mirror the
    commercial model which BP has established and successfully
    operated in the oil and gas markets for many years. We believe
    this model distinguishes us from our peers in the petrochemical
    industry.
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Petrochemicals
Introduction
In our petrochemical business, we produce olefins and a broad
range of polymers and derivatives. The following table provides
a breakdown of the revenues, adjusted EBITDA and total assets of
each of the three segments included in our petrochemical
business for the periods and as of the dates indicated:
As of and for
As of and for the year
the six months
ended December 31,
ended June 30,
2002
2003
2004
2004
2005
($ in millions)
Revenues
(1)
O&P North America
2,341
2,698
3,680
1,615
2,150
O&P Europe
4,863
5,609
7,424
3,328
4,399
Global Derivatives
1,749
1,769
2,090
1,015
1,272
Total
8,953
10,076
13,194
5,958
7,821
Adjusted
    EBITDA
(2)
O&P North America
91
171
257
77
250
O&P Europe
148
54
334
195
492
Global Derivatives
211
74
5
41
164
Total
450
299
596
306
909
Total assets
O&P North America
2,021
2,314
2,478
O&P Europe
5,738
6,376
5,796
Global Derivatives
1,790
1,520
1,639
Total
9,549
10,210
9,913
(1)
Revenues exclude revenues from discontinued operations. See
    "Managements Discussion and Analysis of Financial Condition
    and Results of Operations — Results of
    Operations" for more information on revenues from
    discontinued operations.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
Products
Overview
The following table provides an overview of our key
petrochemical products along with their principal applications:
Key products
Principal applications
O&P
Olefins and related products
Ethylene
Polyethylene, polyvinyl chloride, ethylene oxide and styrene
Propylene
Polypropylene, acrylonitrile and propylene oxide
Butadiene
Synthetic rubbers and acrylonitrile butadiene styrene
Benzene
Styrene, cumene and nylon
Styrene
Polystyrene and acrylonitrile butadiene styrene, synthetic
    rubbers and certain polyesters
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Key products
Principal applications
Polymers
Polyethylene
Films for packaging, agricultural applications, molded products,
    pipes and coatings
Polypropylene
Molded products, filaments, fibers and films
Polystyrene
Food packaging and appliance/electrical housings
Expandable polystyrene
Insulation and consumer packaging
Solvents and industrial chemicals
Synthetic ethanol
Solvent used in personal care products, inks, household
    chemicals and industrial applications
Ethylene oxide and derivatives, including ethylene glycols
Polyester, antifreeze/coolants and industrial detergents
Propylene oxide and derivatives, including propylene glycols
Polyurethane foam and polyester resins
Global Derivatives
Acrylonitrile
Acrylic fibers and acrylonitrile butadiene styrene and styrene
    acrylonitrile polymers
Linear alpha olefins
Comonomers for polyethylene, synthetic lubricants, detergents
    and oil drilling chemicals
Poly alpha olefins
Synthetic lubricants
Polyisobutylene
Additives, lubricants, sealants, shrink wrap, cables and
    adhesives
The following table breaks down the total capacity of the
facilities comprising our petrochemical business by each
petrochemical product, including our pro rata shares of the
capacity of facilities operated by joint ventures and the
capacity of third-party facilities that provide us with products
under various commercial agreements:
Full-year
capacity
(1)
as of
June 30, 2005
(Pounds in millions
(mmlbs))
O&P
Olefins and related products
Ethylene
8,860
Propylene
3,830
Butadiene
1,000
Benzene
1,540
Styrene
1,820
Polymers
Polyethylene
HDPE
4,780
LDPE/ LLDPE
1,850
Polypropylene
5,680
Polystyrene
Polystyrene
910
EPS
360
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Full-year
capacity
(1)
as of
June 30, 2005
(Pounds in millions
(mmlbs))
Solvents and industrial chemicals
Synthetic ethanol
560
EO and derivatives
1,470
PO and derivatives
620
Other
1,000
Global Derivatives
Nitriles
Acrylonitrile
2,010
Other nitriles
1,240
Alpha olefins
LAOs
2,180
PAOs
310
PIB
340
Total
40,360
(1)
Capacity is defined as nameplate capacity. See
    "— Manufacturing — Overview" for
    more information on how we calculate capacity.
Our most important olefins in terms of production volumes are
ethylene and propylene. Most of our production of these olefins
is consumed internally in the manufacture of polymers. Our most
important polymers in terms of production volumes are
polyethylene and polypropylene. The products that made the
largest contributions to our consolidated revenues in the three
years ended December 31, 2004 were polyethylene and
polypropylene.
O&P
Olefins and related products
According to CMAI, measured by expected average annual capacity
for 2005, we are the seventh largest manufacturer of ethylene
globally. In Europe, we consume more ethylene than we produce.
By contrast, our olefins crackers at our Chocolate Bayou
facility manufacture substantially more ethylene than is needed
by our polymers and derivatives units in the Gulf coast region.
As a result, we sell substantial amounts of the ethylene we
produce to customers in the Gulf coast region.
According to CMAI, measured by expected average annual capacity
for 2005, we are the ninth largest propylene manufacturer in the
world. In both North America and Europe, we consume more
propylene than we produce, primarily to produce polypropylene
and acrylonitrile.
According to CMAI, measured by expected average annual capacity
for 2005, we are the seventh largest manufacturer of butadiene
in the world. Since we have no internal use for the butadiene we
manufacture in North America and Europe, our entire production
is sold externally.
In 2004, all of our benzene production volumes were manufactured
in Europe and were primarily used to produce styrene, with the
remainder sold externally.
According to CMAI, measured by expected average annual capacity
for 2005, we are the eighth largest manufacturer of styrene in
the world. A portion of our styrene production in Europe is
sourced from third parties based on long-term supply agreements.
Because we have no polystyrene operations in North America, all
of our North American styrene volumes are sold to external
customers. In Europe, our entire styrene production is used in
the manufacture of polystyrene, as discussed in greater detail
below.
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Polymers
According to CMAI, measured by expected average annual capacity
for 2005, we are the fifth largest manufacturer of polyethylene,
the third largest manufacturer of HDPE and the sixth largest
manufacturer of LLDPE. In North America, the only type of
polyethylene we make is HDPE. Our HDPE products in this region
are targeted at three main markets: (1) durables, which
comprise industrial applications, such as pipes, consumer
applications, automotive applications, including car fuel
systems, and building and construction applications,
(2) packaging applications, such as organoleptic caps and
closures (that is, caps and closures which do not affect flavor
or odor), organoleptic blow-molded long-life milk bottles and
other blow molded or injection-molded applications and
(3) commodities, which are products where there is little
scope for differentiation, such as novelty toys, disposable
shopping bags and pails. In Europe, we manufacture LDPE, LLDPE
and HDPE. Our European LLDPE production is primarily sold to
customers in the film sector, while our LDPE products are
primarily marketed to customers in the coatings sector. With
respect to HDPE, we are a leader in a number of European markets
that permit a significant scope for product differentiation. The
applications targeted by us include markets for premium products
such as pressure pipes, organoleptic caps and closures,
organoleptic blow-molded long-life milk bottles and car fuel
systems. We are also present in other commodity blow-molded and
injection-molded applications.
Our competitive position in the worldwide polyethylene markets
is supported by our proprietary swing technology for the
production of HDPE and LLDPE. See "— Research and
Technology — Our Key Technologies" for more
information on our various polyethylene manufacturing
technologies.
According to CMAI, measured by expected average annual capacity
for 2005, we are the third largest polypropylene manufacturer in
the world. In North America, we target our polypropylene
products at similar markets as our HDPE products, including
consumer and industrial durables, rigid and flexible packaging
applications, and fiber and film applications. We believe this
approach allows us to efficiently market our polymers through a
common sales and marketing team. In Europe, our focus is on the
fiber, film and rigid packaging sectors. In addition, we are a
leading European supplier in the heat seal films market, which
we believe offers significant scope for product differentiation.
Our competitive position in the polypropylene markets is
supported by our proprietary technology for the production of
polypropylene. See "— Research and
Technology — Our Key Technologies" for more
information on our polypropylene manufacturing technology.
According to CMAI, measured by expected average annual capacity
for 2005, we are the sixth largest producer of polystyrene in
the world. In May 2005, we signed an agreement with NOVA to
combine our and NOVA's European polystyrene and EPS
businesses in a 50/50 joint venture, to be called NOVA Innovene,
which we believe will substantially strengthen our competitive
position in the polystyrene and EPS markets in Europe.
Solvents and industrial chemicals
We make several solvents and industrial chemicals, including EO,
EG, PO and PG. We primarily sell our EO products to third party
manufacturers and use the balance to produce EG, glycol ethers
and esters and ethanolamines. Our most important solvent is
synthetic ethanol. According to CMAI, measured by expected
average annual capacity for 2005, we are the second largest
provider of synthetic ethanol in the world. Given the high level
of purity of our synthetic ethanol compared with fermentation
ethanol, we market this product to the cosmetics and
pharmaceuticals sectors.
Global Derivatives
Nitriles
Our main product in the nitriles sector is acrylonitrile. We
also make acetonitrile and hydrogen cyanide, which are specialty
nitriles that are derived as co-products of acrylonitrile.
According to CMAI, measured by expected average annual capacity
for 2005, we are the largest manufacturer of acrylonitrile in
the world. The primary applications for acrylonitrile are
acrylic fiber and ABS plastics. We have the capability to purify
our own acetonitrile and can also purchase and purify crude
acetonitrile from other companies which do not have the
necessary purification equipment. The resulting purified
acetonitrile is primarily marketed as a solvent for
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pharmaceutical applications. Hydrogen cyanide, the other
co-product derived in the acrylonitrile production process, is
an extremely hazardous gas used mainly to manufacture polymers
(coatings and nylon) and for chemicals used in gold extraction.
We have developed significant safeguards to ensure the safe
handling of our nitriles, including the use of specially
designed railcars and pipelines for transportation to nearby
customers. We believe that our leading market position is a
result of the fact that our acrylonitrile production process and
the catalysts we use in that process are the leading
acrylonitrile production technology in the world. See
"— Research and Technology — Our Key
Technologies" for more information on our acrylonitrile
manufacturing technology.
Alpha olefins
Measured by expected average annual capacity for 2005, we are
among the largest suppliers of LAOs and PAOs worldwide. As a
"full-range" LAO producer, we manufacture a whole
range of LAOs and, accordingly, must sell our LAO production in
the proportions yielded by our facilities. This exposure often
creates commercial challenges, as different segments of the LAO
market tend to grow at different rates. We benefit from the fact
that our technology provides us with a certain amount of
flexibility in adjusting our yield slate, thereby emphasizing
certain products and deemphasizing others. However, our
technology is not an "on-purpose" or "single
product" technology that would permit us to manufacture
only specific types of LAOs.
Other
In Europe, we operate units that make nitrogen products such as
ammonia and nitric acid. We also make PIB. According to CMAI,
measured by expected average annual capacity for 2005, we are
the largest supplier of PIB in the world.
Manufacturing
Overview
We believe that the manufacturing operations of our
petrochemical business benefit from the large scale of our key
sites, a high degree of integration and proprietary process
technologies. Our petrochemical facilities are located in North
America and Europe. Our key assets include the following:
•
our Chocolate Bayou, Texas facility, which comprises one of the
    largest cracker installations in North America, and our
    Battleground, Texas, facility, which is one of the largest North
    American HDPE facilities and is integrated with our Chocolate
    Bayou site through a pipeline system owned by us; and
•
our three large petrochemical facilities in Cologne, Germany,
    Grangemouth, United Kingdom, and Lavéra, France, of which
    the latter two are fully integrated with onsite refineries, plus
    a number of market-facing facilities which are located in close
    proximity to our customers.
All of our olefins crackers are either co-located with, or
connected by pipeline to, polymers and derivatives units,
enabling us to realize economies of scale, improve our
facilities' energy management and minimize logistics costs.
In addition, two of our European crackers are integrated with
onsite refineries, allowing further hydrocarbon optimization. We
believe that the global reach of our operations enables us to
optimize our production across different regions. Our focus has
been on increasing the size and efficiency of our crackers and
preparing them for compliance with new environmental laws and
regulations and expanding and improving our polyethylene and
polypropylene assets by replacing less efficient units with new
installations. We believe these investments have positioned us
well to participate in the current upswing of the petrochemical
cycle. In addition, on June 8, 2005, we entered into a
nonbinding memorandum of understanding to construct a
world-scale cracker and associated derivative complex in Saudi
Arabia. Our goal is to sign a binding agreement by year-end
2005, secure a guaranteed feedstock supply for the facility by
year-end 2005 and commission the facility towards the end of
2008 or early in 2009. We believe that this constitutes an
attractive investment opportunity due to the significant
reserves of low-cost gas reserves available in the Middle East.
See "— Facilities" for more information on
our facilities, "— Research and Technology"
for more information on our proprietary process technologies and
"— Joint Ventures" for more information on
our joint ventures.
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The size of our manufacturing operations has grown in recent
years, both through organic growth and as a result of
acquisitions. Our most significant acquisitions were our
purchase in 2001 of Bayer's 50% stake in Erdölchemie
GmbH, a joint venture which operated our Cologne site, our
acquisition of Solvay's polypropylene businesses and the
formation of two HDPE joint ventures between us and Solvay in
2001 and our acquisitions of Solvay's interests in these
joint ventures in January 2005. We believe that the growth of
our business has opened up significant opportunities for
efficiency gains and for streamlining our operations as we
integrate the acquired assets into our existing organization.
The following table sets forth the total capacity of the
production facilities of our petrochemical business, including
our pro rata shares of the capacity of facilities operated by
joint ventures and the capacity of third-party facilities that
provide us with products under various commercial agreements:
Average capacity
(1)
Full-year
for the year ended
capacity
(1)
as of
December 31,
June 30,
2004
2005
(mmlbs)
(mmlbs)
North America
13,680
14,430
Europe
24,850
25,930
Total
38,530
40,360
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(1)
Capacity is defined as nameplate capacity, which is calculated
    as the result of (1) the aggregate MSDR for all of our
    facilities multiplied by the actual number of days in the period
    for which the calculation is made, minus (2) on an average
    annual basis, the expected amount of volumes expected to be lost
    due to reliability constraints inherent in the operation of a
    facility, scheduled turnarounds and transition products.
    Transition products result when a production unit is adjusted to
    change product grades, typically in response to customer
    requirements. Because such adjustments are made while the unit
    is up and running, it may temporarily yield products which do
    not fit within a specific grade level. For each facility, the
    MSDR is calculated by dividing the highest monthly production
    volumes ever achieved by that facility by the number of days in
    the month in which those volumes were achieved, subject to
    adjustment in the event that the facility was unable to operate
    at its full potential in the relevant month. Capacity figures
    are reviewed annually for each facility and typically adjusted
    upwards each year due to upgrades or expansions. We believe it
    is appropriate to exclude from capacity figures production
    volumes expected to be lost due to anticipated manufacturing
    constraints in order to give a more realistic picture of the
    volumes we are able to achieve. However, you should be aware
    that there is no uniform definition of capacity in the
    petrochemical industry, and other companies may define capacity
    differently than we do.
In 2004, our petrochemical facilities operated on average at 88%
of their capacity. The main reason why our facilities'
utilization is less than their capacity is that we periodically
adjust our production volumes in response to changes in the
consumption of our petrochemical products and variations in
feedstock and product prices. Our facilities' utilization
is also affected by unexpected outages due to unforeseen
reliability problems and unscheduled turnarounds.
As described in greater detail in the regional discussion below,
we faced major reliability problems at several sites in 2000 and
2001, mainly affecting our crackers. We began to address these
issues through targeted investments in our plants and
infrastructure, workforce assessment and development programs
and process automation. Since 2001, these initiatives have led
to significant improvements in the reliability of our assets,
particularly our olefins crackers and refineries. However,
issues remain with respect to some of our assets, in particular
some of our polymers and derivatives units. We intend to build
on the initial improvements we achieved in 2002 and focus our
efforts on those assets with respect to which we continue to
have reliability issues. Moreover, we plan to improve the
reliability of our assets with remediation measures as part of
our ongoing performance improvement program. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations — Key Factors
Driving Our Results — Asset utilization, reliability
and turnarounds" for more information on the reliability of
our assets.
Turnarounds are outages of a unit scheduled to carry out
necessary inspections and testing to comply with industry
regulations. These outages also permit us to perform any
additional maintenance activities that may be necessary. Where
possible, we seek to schedule the timing of turnarounds to
coincide with periods of relatively low demand for the products
of the relevant unit. Olefins crackers typically undergo major
turnarounds every four to five years, with each turnaround
lasting four to six weeks. Polymers and derivatives units are
subject to more frequent maintenance shutdowns, typically one
turnaround every one or two years, but each of them lasts only
seven to ten days.
We have recently implemented a new managerial structure which we
believe will assist us in improving the utilization of our
facilities. Historically, we have managed our petrochemical
business by product line. As a result, it was not uncommon for
different units at the same site to be under different
management. In some cases, this has resulted in conflicting
maintenance strategies and a lack of focus on shared
infrastructure. We have recently installed a single point of
accountability at each of our sites. We believe that this change
has resulted in a simplified, integrated management structure
that will enable us to identify synergies and manage our sites
accordingly. In addition, we expect that our ongoing efforts to
simplify our product portfolio will enable us to minimize losses
from transition products. By focusing on those products which
generate the highest profits, we believe we will be able to
increase utilization rates and create incremental margin
opportunities.
North America
In North America, our petrochemical business comprises eleven
sites including our major facilities in Chocolate Bayou, Texas,
and Battleground, Texas. In 2004, these facilities had total
production volumes of 12,170 mmlbs.
Chocolate Bayou is our largest site in North America. In 2001,
several furnaces of one of the facility's crackers were
destroyed due to an offsite power surge combined with the
failure of certain control technologies.
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Following this incident, we rebuilt the destroyed furnaces and
initiated a program to modernize the facility to improve the
cracker's availability and reliability. As a result, the
facility's reliability increased from 83% in 2001 to
98% in 2002 and remained relatively constant in 2003 and
2004. However, on August 10, 2005, we experienced a fire at
one of the facility's crackers, which will result in a loss
of some of our olefins production volumes for 2005.
In May 2005, we completed the DCP, a program involving
investments of $337 million over a period of several years,
to increase the Chocolate Bayou facility's ethylene
capacity by approximately 650 mmlbs and improve its
efficiency and to meet new environmental laws and regulations.
As a result, Chocolate Bayou now has one of the largest cracker
installations in the region. Its central location in the Gulf
coast area and access to pipeline and storage facilities permit
the site to place its surplus ethylene either directly in the
local merchant market or in storage to bridge time lags between
production and consumption. We expect that the scale of the
crackers will also enable us to better leverage the
facility's infrastructure and work force. Another key
strength of the facility is the crackers' flexible design.
While their main feedstock is gas, which is obtained from
various sources, including our gas fractionator near Hobbs, New
Mexico, the commodity markets and BP's refinery in Texas
City, Texas, the facility also has the ability to process
naphtha. This flexibility enables us to manage our feedstock mix
in response to changes in economic and market conditions. All of
our polymers and derivatives facilities in North America are
either connected with the Chocolate Bayou crackers or are
adjacent to facilities operated by BP or third parties with whom
we have feedstock arrangements.
Among our North American polymers and derivatives sites, our key
facility is our Battleground, Texas, site, which is one of the
largest HDPE complexes in North America. Battleground is
integrated with Chocolate Bayou by way of a pipeline system
owned by us. Our manufacturing assets in this region also
include several major global derivatives facilities, principally
Green Lake, Texas, Joffre, Canada, and Lima, Ohio. Measured by
capacity, Green Lake is the largest facility for acrylonitrile
and related products in the world. Joffre is one of the newest
LAO units in the world and has access to low-cost third party
ethylene feedstock derived from Canadian gas. Lima is an
integrated nitriles complex, producing acrylonitrile and related
products, with access to feedstock from an adjacent refinery.
Lima also manufactures acrylonitrile catalysts for other
facilities on a global basis. Our facilities in Carson,
California, Texas City, Texas, and Whiting, Indiana, are
operated by our onsite management teams in cooperation with
employees from the respective adjacent BP refineries. The
facility in Cedar Bayou, Texas, is operated by Chevron Phillips
in a 50/50 joint venture between us and Chevron Phillips.
Historically, we have also operated many sites that were
significantly smaller and less efficient. Our strategy is to
gradually replace or modernize these facilities. For example, in
March 2005, we sold the BDO unit at our Lima, Ohio, facility.
Furthermore, we intend to close down the LAO facility in
Pasadena, Texas, which BP currently operates for us under a toll
manufacturing agreement, in late 2005.
Europe
In Europe, we own and operate three major cracker complexes, one
in Cologne, Germany, one in Grangemouth, United Kingdom, and one
in Lavéra, France. Each of these sites includes polymers
and derivatives units, and the Grangemouth and Lavéra
facilities are also integrated with refineries. The Lavéra
facility consists of a combination of units fully owned by us
and various 50/50 joint ventures between us and Total. These
joint ventures operate their respective units within the
Lavéra facility. We also own and operate several standalone
polyethylene and polypropylene plants at our sites in Lillo,
Belgium, Geel, Belgium, Sarralbe, France, and Rosignano, Italy.
In addition, we own and operate a standalone styrene,
polystyrene and EPS plant at our Marl, Germany, facility and a
polysterene and EPS plant at our Trelleborg, Sweden, facility.
In 2004, our European facilities had production volumes of
21,720 mmlbs.
In May 2005, we signed an agreement with NOVA to combine our and
NOVA's European polystyrene and EPS businesses in a 50/50
joint venture, to be called NOVA Innovene, which we believe will
substantially strengthen our competitive position in the
polystyrene and EPS markets. We expect to commence operations
under the joint venture, pending regulatory and other approvals,
in the third quarter of 2005. The joint venture will be
headquartered in Fribourg, Switzerland, and will include six
manufacturing facilities in France, Germany, The Netherlands,
Sweden and the United Kingdom. We will contribute our
polystyrene and EPS production
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facilities in Marl, Germany and our polystyrene production
facilities in Trelleborg, Sweden. BP's polystyrene and EPS
facility in Wingles, France, may be transferred to the joint
venture in 2007 if put or call options provided for in the
agreements relating to the formation of the joint venture are
exercised. The joint venture will enter into a commercial
agreement with BP under which the joint venture will supply
feedstock to, and purchase and distribute all of the production
of, the Wingles facility. We have retained full ownership of our
styrene operations. NOVA will contribute four polystyrene and
EPS production facilities in The Netherlands, France, and the
United Kingdom to the joint venture. We expect to account for
the joint venture under the equity method.
The key strength of our operations in Europe is the high degree
of upstream infrastructure integration between our crackers and
their feedstock sources. In the case of Grangemouth and
Lavéra, our crackers are physically integrated with
refineries located on the same site. This integration allows us
to leverage the sites' infrastructure, energy management
and work force and realize feedstock synergies in both
directions. For example, each of the refineries provides the
associated petrochemical plant with naphtha, LPG, butanes and
propylene and in return receives pygas, which is a gasoline
blending component, and hydrogen. Moreover, because each of
these crackers and the respective refineries share a single
site, we incur virtually no transportation costs in connection
with moving petrochemical feedstock from the refinery into the
cracker complex. Grangemouth is connected with the Forties
Pipeline System (FPS), which carries oil from a variety of North
Sea fields, and BP's oil and gas processing complex at
Kinneil, Scotland, which separates the associated gas from the
oil carried through the FPS and delivers it directly into the
petrochemical facility. Although our cracker complex in Cologne,
Germany is not co-located with a refinery, it is located in the
center of one of the key industrial regions of Germany and has
access by pipeline and ship to the Rotterdam area in The
Netherlands, one of the world's most competitive naphtha
supply regions. It also benefits from a balanced polymers and
derivatives portfolio behind a large and reliable olefins
cracker. Cologne also has the ability to sell its excess
ethylene to buyers in the merchant market through the ethylene
pipeline owned by ARG. ARG is a company owned by BP and five
other European petrochemical companies. BP is in the process of
transferring its stake in the ARG ethylene pipeline to us. In
the future, the Cologne facility will also have access to the
propylene pipeline owned by the European Pipeline Development
Company, in which we own a stake.
Our Grangemouth and Lavéra sites have historically suffered
from reliability issues. In 2000 and 2001, both sites
experienced mechanical breakdowns, utility failures and fires at
both sites, although these issues primarily affected
Grangemouth. In the case of Grangemouth, these incidents
culminated in a government inspection and the imposition of
fines. We have made significant investments in both sites, and
we believe that these investments have resulted in better
reliability. We expect further improvements in the future as we
continue to make appropriate investments. The reliability of the
petrochemical units at Grangemouth was 81% in 2001, 91% in
2002, 90% in 2003 and 90% in 2004, while the reliability of the
petrochemical units at our Lavéra site was 90% in 2001,
94% in 2002, 93% in 2003 and 94% in 2004. Our Cologne site
has consistently achieved significantly higher reliability rates
during this period.
We also have four large standalone polyethylene and
polypropylene sites in Lillo, Geel, Sarralbe and Rosignano.
While these sites are not integrated with crackers, Lillo, Geel
and Sarralbe are connected to olefins pipelines and Rosignano
imports ethylene by ship, providing each of these facilities
with flexibility in sourcing their feedstock. Moreover, all of
these sites are located in close proximity to their customers.
We have also made significant investments in our facilities,
particularly at our Grangemouth site. In 2000, we commissioned a
new polypropylene unit and a new LLDPE unit and converted one of
the existing LLDPE units into an HDPE unit. In 2001, we expanded
the capacity of the gas cracker. In 2002, we commissioned a new
synthetic ethanol plant. In addition, we commissioned a new HDPE
unit at our facility in Lillo in 2002. At our Lavéra site,
we focused mainly on de-bottlenecking our existing units. Since
these investments were made, we have continued to upgrade our
facilities. In 2004, we improved the reliability of the LLDPE
unit we commissioned at Grangemouth in 2000 by upgrading its
catalyst. We have also taken a series of steps to rationalize
our European polymers and derivatives units, including by
closing two inefficient HDPE lines at Grangemouth in 2003 and
2005.
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Raw Materials and Energy
The primary raw materials of our petrochemical business are the
basic feedstocks of our olefins crackers, naphtha and gas.
Consistent with the industry, our principal cracker feedstock in
North America is gas, whereas our European crackers primarily
process naphtha. In aggregate, our most important feedstock is
naphtha, reflecting the weighting of our asset base towards
Europe. A portion of our European crackers' naphtha
requirements is sourced from our refineries in Grangemouth,
United Kingdom, and Lavéra, France.
The vast majority of our crackers' production is consumed
as feedstock by our polymers and derivatives units. However, the
olefins supplied by our crackers are not sufficient to match the
overall requirements of our polymers and derivatives units.
While we have an ethylene surplus in North America, in Europe
the situation is reversed and we consume more ethylene than we
produce. In addition, we have a propylene deficit in both
regions. In Europe, these shortages are due to the fact that
many of our European sites comprise polymers and derivatives
units that are not integrated with onsite olefins crackers. In
North America, our propylene shortage is in part a result of the
fact that the principal feedstock of most North American
crackers, including our crackers at Chocolate Bayou, is gas, and
that gas-fed crackers yield substantially less propylene than
crackers processing naphtha. It is also a legacy of the fact
that when we were a part of BP our crackers were integrated with
BP's refineries and processed BP's surplus refinery
propylene. To redress our olefins shortage, we purchase ethylene
and propylene on the merchant market through supply contracts
and swaps with other petrochemical and refining companies,
including BP.
Overall, BP is our single most important external supplier of
naphtha and gas. Although most of our external feedstock
supplies are available from a variety of third parties, some of
our sites are substantially reliant on BP refineries. For
example, our facilities in Carson, California and Texas City,
Texas depend on raw materials from the respective BP refineries
located on the same sites and have no convenient access to
alternative supply channels. We plan to make investments at
Texas City to allow us to access the commodity markets if we
choose to do so and import benzene from the U.S. Gulf coast
merchant market. The substantial majority of the petrochemical
feedstocks we obtain from BP are provided to us under various
Hydrocarbon Sale and Purchase Agreements with varying durations.
See "Certain Relationships and Related
Transactions — Commercial Interface
Agreements — Hydrocarbons Sale and Purchase
Agreements" for a description of these agreements.
We also obtain a substantial proportion of our feedstock
requirements on the commodity markets. BP assists us and will
continue to assist us in making and optimizing feedstock
purchases of naphtha and gas on the commodity markets under
various Master Services Agreements, which may be terminated by
either party with notice periods ranging from three to twelve
months, provided that no notice may be given prior to
December 31, 2005. We expect to eventually carry out some
or all of this commodity trading and related hedging ourselves
and have entered into transitional arrangements with BP which
provide for the training of our staff and the transfer of
knowledge with a view to enabling us to develop these functions
within our organization. See "Certain Relationships and
Related Transactions — Commercial Interface
Agreements — Supply and Trading Agreements —
Master Services Agreements" for a description of these
agreements.
The costs of the feedstocks we require to make our petrochemical
products (naphtha, ethane, butane and propane) are principally
driven by the price of oil and natural gas. In the current
environment of relatively high oil prices, crackers located in
the Middle East enjoy the advantage of access to low-cost gas
feedstock.
Although energy is generated at several of our sites, including
as part of petrochemical manufacturing processes, we are a
significant net purchaser of both electricity and gas. Typically
we procure our requirements from local producers or utilities at
local market prices.
Transportation
We have access to a comprehensive transportation network and
associated logistics infrastructure through a combination of
ownership and long-term contracts. This network allows us to
move feedstocks and products at competitive rates and provides
us with access to the merchant market, enabling us to manage
demand and supply imbalances across the petrochemical value
chain in response to market conditions.
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Our transportation modes include pipelines, ship, rail and road.
The choice of transportation mode depends on the local
infrastructure and geography and the physical properties of the
product or feedstock being transported.
Because pipelines are the most efficient and least expensive
mode of transportation, we consider them to be of strategic
importance. Some of the pipelines we use are owned by us, while
others are consortium-owned pipelines in which we hold a stake
or are provided to us by dedicated operators under long-term
contracts. Rules and conventions governing pipeline ownership
vary substantially between North America and Europe, as does the
regulatory framework governing the setting of transportation
tariffs.
Where we are reliant on access to shipping channels, we either
own or hold stakes in the relevant terminals and storage
facilities or have secured access to them through long-term
contracts. However, we do not own any of the ships we use and
instead rely on an extensive network of third party shipping
companies which make capacity available to us on a spot or term
contract basis.
BP will for a limited period provide us with shipping and global
assurance services under various agreements. We expect that,
when these agreements expire, we will have built sufficient
in-house capability to carry out the relevant services ourselves.
Sales and Marketing
We have structured our sales and marketing organization to match
the sector and regional requirements of our customers. Each
sales team is led by a sales manager focusing on a particular
product or market sector. In addition, each team includes sector
and regional key account managers who are responsible for our
largest customers in the relevant region, account managers
focusing on smaller customers in specific countries and sales
executives working at customer service centers located at our
sales offices. In light of the specialized nature of our
petrochemical products, we ensure that our sales force possesses
appropriate technical knowledge of our products and their
applications. In Europe, we use a separate sales organization to
market those products in our HDPE and polypropylene portfolio
which are more differentiated. Those of our customers who are
not serviced through one of our sales offices are supplied
through a network of third party distributors. We also maintain
a network of agents, particularly in countries for which we do
not have direct sales teams. We remunerate these agents on a
commission basis.
A critical element of our sales and marketing approach is to
assist our customers in optimizing the use of our products in
their internal processes. Our dedicated technical service teams
work closely with our sales force and are available to our
customers for advice and support. They also provide a critical
link between our sales and marketing personnel and our product
development and manufacturing staff. We believe that the
extensive market knowledge and industry experience of our sales
and marketing teams, our focus on technical support and our
strong emphasis on customer satisfaction have helped us
establish and maintain long-term customer relationships.
In order to ensure that we are in a position to meet our
customers' rapid delivery requirements, we carry
inventories of finished products at our facilities and
distribution centers.
We have approximately 2,700 customers worldwide. Our industrial
customers include a large number of companies in a variety of
downstream industries involving rigid packaging, fibers,
flexible packaging and chemical intermediates. For more
information on the product markets served by us, see
"— Products." No single customer accounts
for more than 5% of our revenues.
Most of our sales are to customers in the merchant market and
are made on contract or spot terms. These terms allow us to
reset prices at regular intervals, typically monthly or
quarterly, to reflect changes in market prices. Some contracts
are based on negotiated prices, while others are based on
pricing formulas or refer to spot market rates.
Although our production facilities are located in Europe and
North America, we also ship significant quantities of our
products to Asia for sale in that region. We have an established
regional office in Shanghai, China to manage our operations in
Asia.
In China, our current business license does not permit us to
make local sales of product directly to customers in local
currency. Instead, we work with our customers and distributors
who take title to our products offshore
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and clear customs on their own. As part of the conditions under
which China gained entry to the World Trade Organization, new
regulations came into effect in December 2004 that permit
foreign companies to import and export products and engage in
wholesale activities and distribution within China. These new
regulations are in the process of being implemented. We intend
to apply to the Chinese authorities later in 2005 for a license
that would include import, export, wholesale and distribution
rights. However, there can be no assurance as to whether and
when we will be able to obtain such a license.
Research and Technology
Overview
We consider R&T to be a key element of both the short-term
performance and the long-term growth of our petrochemical
business. By investing in R&T, we seek to:
•
decrease our production costs with a view to increasing the
    margins we achieve in the manufacture and sale of our products;
•
make better products in order to increase our market
    share; and
•
reduce our capital expenditures to minimize the investments
    necessary to meet demand.
In 2002, 2003 and 2004, we had research and development expenses
of approximately $120 million, $115 million and
$137 million, respectively. Our formation as a separate
legal entity within the BP group and the integration of
Solvay's HDPE-related research projects in our own R&T
program will allow us to rationalize our R&T activities with
respect to polymers in North America and to integrate R&T
teams in Europe which have worked separately. These steps have
enabled us to improve the focus of our R&T activities and to
reduce the overall level of our research and development
expenses.
We operate three principal R&T centers, one in
Neder-over-Heembeek, Belgium, one in Naperville, Illinois, and
one at our Battleground, Texas, facility. We also maintain pilot
plant facilities at a number of sites, including Lavéra,
France, Grangemouth, United Kingdom, and Rosignano, Italy.
A substantial portion of our R&T expenditures in any given
period is dedicated to the continuous improvement of our
existing processes, products, assets and operations and is
intended to yield returns in less than two years. This R&T
work is carried out by a combination of integrated teams based
at our facilities and centrally located specialists and research
teams in one of our R&T centers. In addition, we allocate a
portion of our R&T budget to longer-term projects targeted
at more fundamental improvements, which we typically intend to
yield returns within two to five years. We seek to protect our
process technologies and products by seeking patents or
retaining them as trade secrets.
The market position of our petrochemical business is supported
by a range of technologies. Among them are the following four
highly competitive proprietary process technologies:
•
our gas phase polyethylene technology;
•
our gas phase polypropylene technology;
•
our slurry HDPE technology; and
•
our acrylonitrile technology.
The four technologies listed above are the primary focus of our
R&T efforts. Together, they form one of the most
comprehensive technology packages available in the petrochemical
industry. We use these technologies in our own production
processes and also license them to external customers. We view
technology licensing as an effective way of establishing our
products in the market and of generating additional income. In
addition, we believe that the ability to offer a comprehensive
technology package is a substantial advantage in attracting
joint venture partners for investments in regions characterized
by low feedstock costs or high growth, such as the Middle East,
north Africa, Russia and China.
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We believe that the quality of our scientific staff is important
to our success. The employees working in our R&T centers
have comprehensive expertise in a variety of areas, including
catalysis, process development, product and material science,
modeling and project management. When we form teams for R&T
projects, we seek to ensure that each team has both technical
and commercial expertise. We consistently aim to improve the
effectiveness of our R&T efforts by targeting our projects
at the most valuable applications and using project management
tools to monitor progress. At April 1, 2005, 659 of our
employees — about 8% of our petrochemical
workforce — worked in R&T functions. To attract
and retain the best-qualified scientists and develop a high
level of capability and competence in the key areas of
processes, products and operations, we offer our employees
challenging development opportunities and a competitive
compensation package.
In addition, we draw on external resources to enhance the scope,
depth and effectiveness of our internal R&T efforts. We
proactively seek mutually beneficial partnerships with third
parties, including other petrochemical companies and leading
universities. For example, we have a partnership with NOVA,
which has led to the development of substantially improved
catalysts for our gas phase polyethylene technology.
Our key technologies
Gas phase polyethylene technology
Our proprietary gas phase polyethylene technology is designed to
serve the LLDPE and HDPE markets, which are the fastest growing
segments of the commodity polyethylene markets. The technology
is characterized by low capital investments, low operating
costs, low emissions and waste, and the fact that it does not
require the use of additional solvents. It is known as a swing
technology because it allows both LLDPE and HDPE to be produced
from a single reactor, thereby permitting the manufacture of a
broad range of products. We have licensed our technology to 25
petrochemical companies in more than 15 countries. According to
Nexant, in 2004 the technology was used in 15% of the worldwide
LLDPE/ HDPE capacity, second only to the polyethylene technology
offered by Univation Technologies.
Our technology uses our proprietary Ziegler-Natta catalysts. We
use these catalysts internally and also sell them to external
customers. We constantly improve our existing catalysts and seek
to develop new ones, both alone and in collaboration with third
parties. For example, we are currently in the process of
expanding the reach of our gas phase polyethylene technology by
commercializing products from our proprietary metallocene
catalysts. These catalysts allow the cost-effective manufacture
of LLDPE products with better strength and clarity
characteristics compared with traditional Ziegler-Natta and
chromium-based catalysts.
Gas phase polypropylene technology
Our gas phase polypropylene technology is recognized in the
industry as offering low capital investments and low operating
cost. The design of our technology enables the cost-effective
production of high-performance polypropylene plastics. In
addition, the simplicity of the equipment used with this
technology combined with our proprietary catalysts allows us to
achieve very high reliability. We have licensed the technology
to eight companies. According to Nexant, our technology
accounted for 13% of the 24 mmlbs in capacity added by the
industry between 2000 and 2005. Overall, it accounted for 7% of
the worldwide polypropylene capacity in 2004. We intend to
continue to improve this technology through a combination of
process improvements, the development of new catalysts and
engineering design work.
HDPE technology
In addition to our gas phase technologies, we own a specialized
technology for the manufacture of HDPE, which we acquired from
Solvay. This technology is based on a slurry production process
and is characterized by low capital investments and low
operating costs. The technology may be used in combination with
either a Ziegler-Natta catalyst or a chromium-based catalyst to
make a range of superior products. It is particularly
well-adapted to the manufacture of high-performance materials
such as high pressure pipe, one of the fastest growing segments
of the HDPE market, and one in which we hold a leading position.
From both a cost and product perspective, we believe that our
production technology is the leading HDPE technology available
on the market, and we plan to license it selectively.
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Acrylonitrile technology
Our main technology assets in the derivatives area are our
proprietary fluid bed acrylonitrile process and related
catalysts. Our technology is based on a chemical process for the
transformation of propylene into acrylonitrile called
ammoxidation. We have provided five generations of acrylonitrile
catalysts, and there is continuing industry demand for these
catalysts. Our technology is the leading nitriles manufacturing
technology and, according to Nexant, it is used in more than 90%
of the world's acrylonitrile production. We continue to
invest in acrylonitrile R&T to further improve the catalysts
and maintain our competitive position.
Intellectual property
Our policy is to protect all of our significant technologies by
seeking patents, retaining it in the form of trade secrets, and
defending and enforcing our intellectual property rights, where
appropriate. We expect that this strategy allows us to preserve
the advantages of the products we sell and the technologies we
use and license, and helps us to maximize the return on our
investment in research and development. We own, or have rights
to, approximately 6,200 patents, divided into 650 patent
families, in the United States, Europe and various other
regions. In 2004, we filed 61 applications for new patent
families. To protect confidential technical information which is
not subject to patent protection, we rely on trade secret law
and frequently enter into confidentiality agreements with our
employees, customers and partners.
While our patents and trade secrets constitute valuable assets,
we do not view any one of them as being material to our
operations as a whole. Instead, we believe it is the combination
of our patents and trade secrets that creates advantages for our
business.
In addition to our own patents and trade secrets, we are party
to licensing and other agreements authorizing us to use patents,
trade secrets, confidential technical information and related
technology owned by third parties and/or operate within the
scope of patents owned by third parties.
In addition, we own a number of registered trademarks, including
our Innovene® brand. We continuously develop new names for
new products, secure trademark protection for them, police our
existing trademarks and enforce our legal entitlements in
situations where third parties infringe upon any of these rights.
In connection with our separation from BP, BP has transferred to
us certain intellectual property rights and assets we require to
operate our petrochemical business and our gas fractionator near
Hobbs, New Mexico, pursuant to an Intellectual Property and
Information Technology Separation Agreement. There are also
certain technologies and associated intellectual property in
which both we and BP have a common interest. In these cases, we
or BP, as the case may be, have granted the other party licenses
in a series of Common Interest Intellectual Property Agreements
to ensure that both parties have specified access to such
intellectual property and technology. See "Certain
Relationships and Related Transactions —
Reorganization Agreements  — Intellectual Property and
Information Technology Separation Agreement" for more
information regarding these agreements.
Competition
We face intense competition in all petrochemical markets in
which we compete. The main competitive criterion is price. In
certain segments of the HDPE and polypropylene markets, where
products must satisfy specified technical performance criteria,
competition is also based on performance, quality and customer
service. Given that most of our products are commodities, a key
component of our competitive position is our ability to manage
our costs successfully, requiring continuous management focus on
reducing unit costs and improving efficiency. The main drivers
in this respect are technology, scale, feedstock access, asset
utilization, logistics and the ability to execute capital
projects efficiently. We believe we are well-positioned with
respect to each of these criteria.
Our competitors vary in terms of the degree to which they are
integrated with their feedstock sources. Companies like Dow
Chemical Company (Dow Chemical), Borealis A/ S (Borealis) and
NOVA have no refineries of their own. Companies like Chevron
Phillips, Basell, N.V. (Basell) and Lyondell Chemical Company,
including its Equistar operations (Lyondell/ Equistar), benefit
from some degree of refinery integration resulting from
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relationships with their current or former parent companies or
joint venture partners. Companies such as ExxonMobil Corporation
(ExxonMobil), Royal Dutch/ Shell Group (Shell) and Total are
fully integrated energy companies with deep integration between
refining and olefins crackers.
The principal competitors of our petrochemical business are
Basell, Borealis, Chevron Phillips, China Petroleum and Chemical
Corporation (Sinopec), Dow Chemical, ExxonMobil,
Lyondell/Equistar, NOVA, Saudi Basic Industries Corporation
(Sabic), Shell and Total. Several of our competitors, including
Iran's National Petrochemical Company, Saudi Arabia's
Sabic and China's Sinopec, are fully or partially
state-owned and could have broader goals than maximizing their
profits, such as investing in the economies of their respective
countries and providing local employment. In China, we also
compete with Sino-foreign joint ventures, some of which are
partnered by the competitors discussed above, and a variety of
Asian importers. Most of our competitors market their products
in North America, Europe and Asia.
According to CMAI, measured by expected average annual capacity
for 2005, we are the seventh largest manufacturer of ethylene,
the ninth largest manufacturer of propylene, the fifth largest
manufacturer of polyethylene and the third largest manufacturer
of polypropylene in the world. The following table provides an
overview of the market position of the principal competitors of
our petrochemical business, measured by expected average annual
capacity for these products in 2005:
Competitor
Market position
(1)
Basell
Polyethylene (8th), polypropylene (1st)
Borealis
Polyethylene (10th), polypropylene (7th)
Chevron Phillips
Ethylene (8th), polyethylene (6th)
Dow Chemical
Ethylene (1st), propylene (4th), polyethylene (1st)
    polypropylene (10th)
ExxonMobil
Ethylene (2nd), propylene (1st), polyethylene (2nd),
    polypropylene (5th)
Lyondell/ Equistar
Ethylene (5th), propylene (6th), polyethylene (7th)
NOVA
Ethylene (11th)
Sabic
Ethylene (3rd), polyethylene (3rd), polypropylene (6th)
Shell
Ethylene (4th), propylene (2nd)
Sinopec
Ethylene (6th), propylene (5th), polyethylene (4th),
    polypropylene (2nd)
Total
Ethylene (9th), propylene (3rd), polyethylene (9th)
    polypropylene (4th)
(1)
According to CMAI data as of July 2005.
Our global derivatives business operates in a relatively mature
market environment. Royal Dutch, Chevron Phillips and Sasol
Limited are our main competitors with respect to LAOs. Although
there are numerous manufacturers of acrylonitrile, we are the
largest producer in the world. In addition, more than 90% of the
world's acrylonitrile volumes are based on our process
technology. Our most significant competitor is Asahi Kasei
Corporation, which is the market leader in Asia. Other
competitors include E.I. du Pont de Nemours and Company and
Solutia, Inc. in North America and Koninklijke DSM N.V. in
Europe.
Facilities
Some of our facilities are located on sites wholly-owned by us,
while others are located at sites which we share with other
parties, including BP. As part of our separation from BP, we
have entered into agreements to establish rules and procedures
to facilitate operations at shared sites. See "Certain
Relationships and Related Transactions — Commercial
Interface Agreements — Site Cooperation
Agreements" for a description of these agreements.
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The following table sets forth the location, primary products
and capacity of the major facilities in our petrochemical
business, including our pro rata shares of the capacity of
facilities operated by joint ventures:
Full-year
capacity
(1)
as of
Location
Primary products
June 30, 2005
(mmlbs)
Battleground, Texas
HDPE, polypropylene
2,560
Chocolate Bayou,
    Texas
(2)
Ethylene, propylene, butadiene, polypropylene
6,280
Cologne, Germany
Ethylene, propylene, butadiene, benzene, LDPE, LLDPE, ammonia,
    acrylonitrile and related products, EO and derivatives, PO and
    derivatives, other solvents and industrial chemicals
9,570
Geel, Belgium
Polypropylene
1,080
Grangemouth, United Kingdom
Ethylene, propylene, butadiene, benzene, ethanol, HDPE, LLDPE,
    polypropylene
5,600
Green Lake, Texas
Acrylonitrile and related products
1,330
Lavéra,
    France
(3)
Ethylene, propylene, butadiene, benzene, PIB, HDPE,
    polypropylene, EO and derivatives, other solvents and industrial
    chemicals
3,950
Lillo, Belgium
Polypropylene, HDPE
1,350
Marl,
    Germany
(4)
Styrene, polystyrene, EPS
1,290
Sarralbe, France
Polypropylene, HDPE
1,050
Texas City,
    Texas
(5)
Styrene
1,070
Other
    facilities
(6)
5,230
Total
40,360
(1)
Capacity is defined as nameplate capacity. See
    "— Manufacturing — Overview" for
    more information on how we calculate capacity. For facilities
    that we operate in a joint venture, the table shows only the
    portion of the facilities' capacity attributable to our
    share in the joint venture.
(2)
On August 10, 2005, we experienced a fire at one of the
    crackers at our Chocolate Bayou facility, which will result in a
    loss of some of our olefins production volumes for 2005.
(3)
This facility consists of a combination of units fully owned by
    us and various 50/50 joint ventures between us and Total.
(4)
Capacity figures include 100% of the capacity of the facilities
    we agreed in May 2005 to contribute to our polystyrene and EPS
    joint venture with NOVA in May 2005. Excludes the
    facility's cumene capacity, as the plant that we own and
    operate is used exclusively for supplying a third party under a
    toll manufacturing agreement.
(5)
Capacity figures do not include the propylene capacity of the
    facility's propylene concentration unit which we plan to
    close by the end of 2005.
(6)
Capacity figures include the capacity of third-party facilities
    that provide us with products under various commercial
    agreements.
Refining
Introduction
We own and operate two refineries, one in Grangemouth, United
Kingdom, and one in Lavéra, France. Both refineries are
fully integrated with our petrochemical plants located at the
same sites. Grangemouth has direct access to crude oil from the
North Sea, and Lavéra benefits from its ability to process
a broad range of crude oil blends. Our principal refining
products are transport fuels, naphtha, and heating and fuel
oils. Most of the naphtha we manufacture is used as feedstock by
the olefins crackers of our O&P Europe segment. We have
entered into
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contracts with BP for the purchase of crude oil and the
marketing of all of our refinery production except for the
naphtha we use in our petrochemical business, until
December 31, 2006 and beyond, with contract terms varying
by product and customer segment. In addition, we have entered
into agreements with BP under which they assist us with the
disposal of bulk refinery products to ensure our continued
access to the commodity markets. See "Certain Relationships
and Related Transactions — Commercial Interface
Agreements — Supply and Trading Agreements —
Sale and Purchase Agreements" and "— Inland
Refined Products Sale and Purchase Agreements" for a
description of these agreements.
The following table provides a breakdown of the revenues,
adjusted EBITDA and total assets of our refining business for
the periods and as of dates indicated:
As of and for
As of and for the year ended
the six months
December 31,
ended June 30,
2002
2003
2004
2004
2005
($ in millions)
Revenues
(1)
3,876
4,779
6,555
2,699
4,331
Adjusted
    EBITDA
(2)
44
199
410
164
436
Total assets
1,354
1,609
2,604
(1)
Revenues exclude revenues from discontinued operations. See
    "Managements Discussion and Analysis of Financial Condition
    and Results of Operations — Results of
    Operations" for more information on revenues from
    discontinued operations.
(2)
For more information on how we calculate adjusted EBITDA, see
    "Selected Combined Financial Data — Use of
    Non-GAAP Financial Measures."
The increase in the revenues of our Refining segment in 2003 and
2004 reflects the fact that oil prices increased significantly
over the past several years. The rise in our adjusted EBITDA is
consistent with higher refining cash margins across the
industry, which were driven by continued strong demand for
refinery products, modest capacity growth in the industry and
growth in supply of cheaper, heavier and more sour crude oil
relative to more expensive, lighter and sweeter crude oil.
Our Refineries
Overview
Both of our refineries are strategically important to us as they
benefit from extensive integration with the petrochemical plants
located on the respective sites. This integration is beneficial
because it allows us to maximize the value from hydrocarbon
flows between refining and petrochemicals, as well as to
leverage the sites' infrastructure, energy management and
work force and realize feedstock synergies in both directions.
Both of our refineries are larger than the European average, as
each has a distillation capacity of over 200 mbd. They are
also unusual refineries by European standards in that both
combine an HC with an FCC. The combination of these two units
permits us to manufacture light, low sulfur middle distillates,
principally diesel. Moreover, with the hydrocracking technology
employed by them, both refineries are able to produce high
quality diesel. This constitutes a competitive advantage as
Europe is short of high quality diesel, a position that is not
likely to change as the demand for middle distillates continues
to grow. Middle distillates currently account for approximately
45% of the volumes manufactured by Grangemouth and approximately
50% of the volumes produced by Lavéra.
Both of our refineries are able to produce clean fuels meeting
current European Union specifications, which limit the sulfur
content of these fuels to 50 ppm. Our clean fuels
investments in the Grangemouth refinery have enabled it to
manufacture clean fuels containing no more than 10 ppm of
sulfur, which is expected to become the maximum allowable level
in the European Union in 2009. This specification requires a
lower sulfur content than the 500 ppm of sulfur (which will be
reduced to 15 ppm beginning June 1, 2006) and the
30 ppm of sulfur currently permitted by the more
restrictive diesel and gasoline specifications, respectively, in
the United States. Lavéra is compliant with the current
European Union specifications, and we are in the process of
making further investments to achieve compliance with the
10 ppm sulfur specifications by the end of 2007.
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As with our petrochemical facilities, we undertake turnarounds
of our refineries to carry out necessary inspections and testing
to comply with industry regulations. These outages also permit
us to perform additional maintenance activities, as necessary.
Where possible, we seek to schedule the timing of turnarounds to
coincide with periods of relatively low demand for the products
of the relevant refinery. Refineries typically undergo major
turnarounds every four to five years, with each turnaround
lasting several weeks.
One of the challenges faced by our refining business is that
both of our refineries have an ageing infrastructure which
requires significant investments. We believe our investments in
the infrastructure, utilities and logistics of our refineries
historically have been below industry average. In recent years,
we have increased our investments at Grangemouth, and we intend
to continue to make appropriate investments in the future to
improve our refineries' reliability and to meet tightening
regulatory requirements.
As is the case with other refineries that are integrated with
petrochemical facilities, both of our refineries are slightly
below industry average in terms of their upgrading complexity.
This is primarily because the naphtha produced by integrated
refineries such as ours is used as feedstock for the adjacent
petrochemical plants, whereas the naphtha manufactured by
non-integrated refineries is typically upgraded into gasoline.
Another consequence of their lower than average upgrading
complexity is that our refineries have a higher than average
fuel oil yield.
Grangemouth
Our Grangemouth refinery has a maximum crude oil distillation
capacity of 205 mbd. On the supply side, the refinery
benefits from the fact that it is vertically integrated with its
feedstock sources through a direct connection with the FPS, a
pipeline that carries crude oil from a variety of oil fields in
the North Sea. Known as the Forties blend, this light, sweet
crude oil accounts for the majority of the refinery's
feedstock mix. We have entered into a two-year agreement with BP
for the supply of Forties blend at market-related prices, after
which we intend to have completed an $8 million investment
in our infrastructure, which will allow us to purchase Forties
blend from any of the oil companies using the FPS. The balance
of the refinery's feedstock consists of heavier, more sour
crude oils from the North Sea, Russia and Africa. The
composition of the refinery's crude slate will change and
become heavier and more sour with the entry of the Buzzard oil
field into the Forties blend, which is currently expected to
occur in 2006. Due to its technology and configuration,
Grangemouth will be able to process this crude oil and will also
have the ability to process other low-cost, high-acid crude
oils, such as crude oils from Russia, and other crude oils
available from non-traditional sources. The rising proportion of
low-cost, high-acid crude oil in Grangemouth's crude oil
slate over in the past several years has improved the
refinery's cash margins.
On the product side, Grangemouth is well-positioned due to the
fact that it is the only refinery in Scotland and has convenient
access to the markets in Scotland, Ireland and northern England.
The refinery produces more gasoline than its local markets can
consume. Accordingly, it exports gasoline components to other
markets. The refinery can access the U.S. markets for
gasoline and gasoline blending components by shipping from the
west coast of Scotland via a pipeline which starts at the
refinery, runs across Scotland and terminates at the deep-water
Finnart terminal at Loch Long.
Grangemouth has a cogeneration unit operated by a third party,
which provides steam and electricity at a lower cost than
traditional generation facilities. Cogeneration is a highly
efficient process that enables us to have flexibility in the use
of various by-product fuels from our refining and petrochemical
units in the generation of steam and electricity.
As discussed above under
"— Petrochemicals —
Manufacturing," we experienced significant reliability
problems at Grangemouth in 2000 and 2001. These problems, among
other things, damaged the refinery's FCC and culminated in
a government inspection and the imposition of fines. We have
made significant investments in our Grangemouth site to address
these issues. In 2004, we brought the FCC back online. The
reliability of our Grangemouth refinery improved from
88% in 2001 to 94% in 2002, 94% in 2003 and 96% in 2004.
However, we experienced reliability issues at our Grangemouth
refinery in the first six months of 2005, and as a result our
reliability rate at Grangemouth during this period was 88%.
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Lavéra
Our Lavéra refinery has a maximum crude oil distillation
capacity of 207 mbd. On the supply side, the refinery
benefits from its location and its high level of flexibility in
processing a broad range of qualities of crude oil. Its ability
to upgrade heavy, sour crude oil into light, low sulfur
products, enables it to take advantage of the wide variety of
crude oils available primarily through the Mediterranean
markets. This is especially beneficial in light of the
increasing availability of new crude oils from Russia and other
countries of the former Soviet Union. According to Wood
Mackenzie Limited (WM), in 2004, Lavéra ranked first
for distillation capability in France.
The reliability of the refinery at our Lavéra site improved
from 91% in 2001 to 91% in 2002, 94% in 2003 and 96% in
2004.
On the product side, Lavéra benefits from its ability to
export both to continental Europe and other Mediterranean
markets, including the Middle East and north Africa. In
addition, Lavéra has a product slate rich in middle
distillates, for which there is a shortage in the European
market. The refinery also has the capability to manufacture
asphalt, a liquid used in road surfacing and roofing, which can
be sold to customers in profitable specialty markets in France,
the Middle East, Africa and other regions. This capability gives
us increased flexibility in our selection of crude oil and in
the optimization of our operations at Lavéra. Furthermore,
the bunker fuel market served by Lavéra is currently
strong, and, unlike the market for domestic fuel oil, we do not
expect it to become subject to further sulfur restrictions for
the foreseeable future.
Products
The following table shows the sales volumes of our refined
products for the period indicated:
For the
year ended
December 31,
2004
(Barrels in
thousands)
LPG
8,030
Naphtha
19,620
Gasoline
31,830
Jet fuel/kerosene
15,710
Diesel
33,160
Gas oil/heating oil
15,420
Fuel oil
16,150
Asphalt
1,190
In 2004, high-value transport fuels (gasoline, jet fuel and
diesel) accounted for approximately 60% of our total volumes. We
are well-positioned to serve the transport fuel market in the
future, given that Grangemouth is able to manufacture clean
fuels in accordance with the stringent clean fuels requirements
currently applicable in certain parts of the United States and
the even stricter requirements which are expected to become
applicable in Europe in 2009 and that we are in the process of
making investments in Lavéra to achieve compliance with the
expected 2009 European requirements by the end of 2007.
The naphtha output of our refineries is primarily used as inputs
by the co-located petrochemical facilities. The balance of our
refinery products is transferred to BP, which either markets
them to its customers or trades them on the commodity markets on
our behalf. All transfers from us to BP are made at prices which
are based on market prices.
Raw Materials and Energy
The primary feedstocks of our refineries are crude oil,
condensates, atmospheric residues, hydrogen and a range of blend
components such as pygas. Both of our refineries are able to
process different qualities of crude oil. The main variables in
the selection of a particular type of crude oil are price and
quality. Heavy, high-sulfur, sour slates are cheaper than
lighter, sweeter slates. However, because high-sulfur crude oils
require more
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processing, refineries that purchase primarily lower cost crude
oils incur higher fixed costs. Processing high-sulfur crude oil
also requires greater energy expenditures.
Our Grangemouth, United Kingdom, refinery has a light, sweet
crude oil slate, reflecting the dominance of the Forties blend
in its crude slate, which accounts for more than three quarters
of its total feedstock requirements. The balance comprises
heavier crude oils from the North Sea, Russia and Africa. The
composition of the refinery's crude slate will change and
become heavier and more sour with the entry of the Buzzard oil
field into the Forties blend, which is currently expected to
occur in 2006. Our refinery in Lavéra, France has a
heavier, more sour crude slate than Grangemouth, comprising
various blends, principally from Russia and the countries of the
former Soviet Union, the Middle East and North and West Africa.
In Grangemouth, we obtain the crude oil sourced through the FPS
from BP through a Master Feedstock Sale and Purchase Agreement
for Crude Oil, with rates based on market prices. The agreement
has a minimum duration of two years, and when it expires, we
expect to either enter into another contract with BP or purchase
Forties blend oil from other suppliers, as we currently do with
the respect to the balance of our requirements. We believe we do
not depend on BP as a supplier of crude oil or other feedstocks
and would be able to replace the feedstocks obtained through the
FPS by purchases on the spot market. See "Certain
Relationships and Related Transactions — Commercial
Interface Agreements — Supply and Trading
Agreements — Sale and Purchase Agreements" for a
description of these agreements.
Energy cost is the single largest operating expense of a
refinery. The main sources of energy for our refineries are gas
and fuel derived from the crude oil feedstock, supplemented by
methane, electricity and steam. Our refineries and associated
petrochemical units are fully integrated and use a single steam
and power generation infrastructure at each refinery, consisting
of power stations, long-term contracts with local utility
companies and, at Grangemouth, a cogeneration unit operated by a
third party.
Transportation
Grangemouth receives all of its crude oil requirements by ship
and pipeline, while Lavéra receives all of its oil
requirements by tanker ships. With the exception of the Finnart
pipelines, which deliver crude oil to our Grangemouth refinery
and refinery product to the deep-water Finnart terminal at Loch
Long on the west coast of Scotland, we do not own any pipelines
for crude oil or refinery products. All arrangements with third
party pipeline operators are entered into by BP. Where we use
third party shipping companies, BP negotiates the terms of
contracts with the relevant third parties on our behalf, subject
to our final approval before the execution of any contract. In
addition, BP maintains the relationships with these third
parties and provides shipping services, global assurance
services and price information to us. The Grangemouth refinery
serves its customers, the majority of which are located in the
United Kingdom, by road, rail and ship and through a pipeline
link to a nearby shipping terminal. The Lavéra
refinery's customers are located in a broader geographic
region, and therefore most of the refinery's off-take is
shipped through pipelines.
Sales and Marketing
We have made the strategic choice of focusing our refining
business on bulk sales out of the refinery and not to set up a
retail sales and marketing organization of our own. We have
chosen to sell our refinery products to BP, which allows us to
use BP's extensive distribution capabilities for the onward
transportation and sales of our refinery products to our
customers. Accordingly, we do not currently need a sales and
marketing organization of our own.
Substantially all of the naphtha output of our refineries is
used as inputs by the petrochemical plants located at the
relevant sites. In addition, we have entered into an Inland
Refined Products Sale and Purchase Agreement with BP for each of
our Grangemouth and Lavéra refineries, pursuant to which BP
has agreed to take off the balance of our refinery products and
to either market these products to its local customers or trade
them on the commodity markets on our behalf. All transfers under
these agreements are made at market-related prices. Most of the
term sheets under the agreements entered into with respect to
our Grangemouth refinery have fixed terms ranging from three to
seven years from January 1, 2005. Under the Grangemouth
agreements, we are required to sell our refinery products
exclusively to BP for so long as BP continues to hold more than
50% of the voting
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power of our capital stock. The term sheets under the agreements
entered into with respect to our Lavéra refinery expire
between 2008 and 2011 and generally may be terminated upon
written notice with periods ranging from one to three years,
depending upon the refinery product. All transfers under the
agreements are made at market-related prices. Under the
Lavéra agreements, we are required to sell all of our
products to BP. However, there are exceptions for the supply of
products to specified third parties for those third
parties' own use. See "Certain Relationships and
Related Transactions — Commercial Interface
Agreements — Inland Refined Products Sale and Purchase
Agreements" for a description of these agreements.
Intellectual Property
BP has agreed to grant us long-term access to any intellectual
property owned by it that is required for our refining
operations, such as refining process models used to optimize the
performance of our units. We have also signed agreements with BP
providing for the continuation of process support through the
end of 2006. Process support includes assistance with the
day-to-day operation of our refineries and also with projects
and developments aimed at increasing our profitability through
improvements in the various refining technologies. In addition,
all existing licenses that have been granted to BP in order to
operate specific process units have been or will be transferred
to us. We are utilizing the transition period to review our
support needs and are developing options for operational support.
Competition
The refining industry is highly competitive. The main
competitive factors are feedstock prices, refinery configuration
and operating costs. According to WM, measured by capacity at
December 31, 2004, we were the ninth largest refining
company in Europe. Grangemouth is the only refinery in Scotland
and one of eleven refineries in the United Kingdom. As
Scotland's infrastructure for distributing imported oil is
limited, the refinery has a competitive advantage since
competitors must either exchange product with us or import from
abroad in order to access the Scottish market. Some competition
results from the fact that several large refineries in north
west Europe are able to supply the market via third party
storage facilities. Lavéra is the largest refinery in its
region, which comprises south-eastern France, Switzerland and
south-western Germany. In its local market, it competes with
four other refineries.
We have entered into an Inland Refined Products Sale and
Purchase Agreement for each of our refineries, pursuant to which
BP has agreed to purchase all of our refining products, except
for the petrochemical feedstock which we use internally. If
either we or BP terminate one or both these agreements, we will
need to establish a sales and trading function in order to sell
our products through wholesale and retail outlets. In Scotland,
the market is dominated by integrated companies with refining
and retail marketing operations, which supply the Scottish
market from the refineries in other countries or through
exchange arrangements with BP, while in France independent
marketers account for a larger portion of the retail market.
While our location in Scotland would provide us with a strong
basis for selling refinery products into the retail market once
our agreements with BP expire, in France there is open access to
the transportation infrastructure, which results in a very
competitive market for suppliers. See "Certain
Relationships and Related Transactions — Commercial
Interface Agreements — Inland Refined Products Sale
and Purchase Agreements" for more information on these
arrangements.
Health, Safety, Security and the Environment
General
Our operations involve the transportation, manufacturing,
storage, handling and processing of large volumes of hazardous
materials, including toxic and flammable compounds. As a result,
HSSE risks are inherent in our business. In the ordinary course
of our business, we are subject to environmental inspections,
monitoring and occasional investigations by governmental
authorities, which in some cases have resulted in, and may in
the future result in, fines or penalties or other expenditures.
In addition, our production facilities require us to hold
multiple operating permits that are subject to renewal,
modification and, in certain circumstances, revocation. Any
actual or alleged violations of HSSE laws, regulations or permit
requirements or failure to obtain any
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required permits could result in restrictions or prohibitions on
our operations, civil or criminal sanctions, as well as, under
some HSSE laws, strict liability and/or joint and several
liability. Changes in HSSE regulations have the potential to
inhibit or interrupt our operations, or require us to modify our
facilities or operations. HSSE regulatory matters may cause us
to incur significant unanticipated losses, costs or liabilities.
HSSE Management Systems
The health, personal safety and security of our employees,
customers and the communities in which we operate are vital to
our success, as are the security and integrity of the places in
which our employees work and the equipment and other assets they
use. We have a set of HSSE policies and procedures in place at
all of our facilities that build upon those BP HSSE systems that
were already in place at many of our facilities. As a separate
company, our HSSE management systems will assist us in achieving
our HSSE compliance goals while also improving our operational
efficiency and minimizing our overall risks of doing business.
An important aspect of our HSSE management strategy will be to
manage HSSE compliance requirements on a site-specific basis,
taking into account the various operational and HSSE-related
risks associated with a particular site.
HSSE Related Liabilities
Environmental Remediation and Closure Liabilities
Environmental laws and regulations may require us to remediate
or otherwise redress the effects on the environment of prior
disposal or the release of hazardous substances by us or, in
some cases, other parties. We presently have remediation and
closure obligations at certain sites, including refineries,
petrochemical plants and waste disposal sites and will likely
incur obligations at other sites in the future.
BP has agreed to indemnify us, subject to certain limitations,
for certain liabilities, including any claims and losses we may
incur with respect to:
•
any liabilities related to off-site waste disposal prior to
    April 1, 2005 (excluding liabilities related to certain
    waste disposal sites located near our facilities in Cologne,
    Germany, and Sarralbe, France,); and
•
any liabilities related to former facilities which, as of
    April 1, 2005, had been sold, closed or decommissioned.
We will retain all other environmental remediation or closure
obligations, whether known or unknown, relating to the
businesses and assets being transferred from BP to us, including
any interests in pipelines or jetties, irrespective of whether
they occurred before April 1, 2005 or thereafter. We will
also retain liability for off-site waste disposal from our
facilities that occur on or after April 1, 2005.
HSSE Accruals
At December 31, 2004, we had recorded approximately
$17 million in financial accruals relating to anticipated
environmental related obligations, including offsite waste
liabilities and contaminated land liabilities at certain sites.
In addition, we had established approximately $19 million
in financial accruals for decommissioning and demolition
obligations at certain sites. Under GAAP, accruals are
established when potential liabilities are either known or
considered probable and have been reasonably estimated. These
estimates do not include accruals established relating to
liabilities retained by BP. In addition, there exist other
potential remediation risks at some of our sites where financial
accruals have not been provided, because these potential
liabilities are either not probable or are considered probable
but are not currently estimable.
Furthermore, we may in the future be required to establish
additional financial accruals for environmental liabilities
associated with onsite waste disposal activities, off-site waste
disposal activities from our sites occurring after April 1,
2005, obligations relating to any future site closures, process
equipment at our facilities that is already idle or for which
demolition or decommissioning estimates have been made, and
potential liabilities associated with contaminated land and
groundwater at our sites.
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Health and Safety Liabilities
We also may incur costs for health and safety liabilities
associated with our products. Potential liabilities could also
exist from employee or contractor exposure to hazardous
materials. We currently are not aware of any facts that would
require us to make provisions for any such potential
liabilities, although we may need to establish financial
accruals for them in the future as more information becomes
available.
Under the terms of our separation from BP, BP has agreed to
indemnify us, subject to certain limitations, for:
•
any claims for exposure to hazardous materials at our facilities
    to the extent that such claims were either made prior to
    April 1, 2005 or threatened in writing prior to
    April 1, 2005 and made prior to April 1, 2006 or, in
    certain cases, to the extent that such exposure related to
    events that occurred prior to April 1, 2005; and
•
certain product liability claims related to products
    manufactured prior to April 1, 2005.
We have agreed to assume all other health and safety related
liabilities related to the assets transferred to us in
connection with the separation.
HSSE Related Capital Expenditures
We incurred $96 million, $151 million,
$172 million and $54 million in HSSE-related capital
expenditures for 2002, 2003, and 2004 and for the six months
ended June 30, 2005, respectively. We expect to incur an
estimated $140 million of such expenditures for the
remainder of 2005. Although we cannot predict with certainty
future capital expenditures, from 2005 to 2010 we expect to
incur an estimated total of $830 million in HSSE-related
capital expenditures, which includes $660 million in
capital expenditures to comply with various regulations related
to health, safety, security and the environment and an
additional $170 million to meet industry good practice and
internal safety standards. An estimated $490 million of
this estimated total is expected to be made specifically to
comply with various environmental regulations, which include an
estimated $350 million related to compliance with the EU
directive on IPPC. We anticipate that HSSE regulations will
continue to require us and the industry in general to make
capital expenditures. Since capital expenditures vary with
applicable HSSE legal requirements, we cannot assure you that
our recent capital expenditures are indicative of the amounts we
may be required to spend to comply with future HSSE legal
requirements.
Environmental Regulatory Matters and Developments
North America
United States Clean Air Act
In the United States, the Clean Air Act requires, among other
things, sulfur reductions; enhanced monitoring of major sources
of specified pollutants; stringent air emission limits and new
operating permits for chemical plants. This law affects our
facilities in the United States producing, manufacturing and
distributing petrochemical products. Federal and state controls
on ozone, carbon monoxide, benzene, sulfur, and nitrogen dioxide
impact our activities and products in the United States.
Title V of the Clean Air Act imposes federal requirements
which dictate that all of our facilities in the United States
obtain operating permits. Our facilities either currently have
operating permits or have submitted Title V permit
applications and are awaiting approval from the appropriate
regulatory agencies. Affected facilities with Title V
permits are required to make regular reports, certify compliance
with operating permit conditions and report all deviations from
any operating permit conditions. Some of our facilities which
have submitted these reports have reported a number of
deviations to the conditions of their Title V permits,
though we believe these deviations to not be material at this
time.
By 2007, our facilities in south Houston, Texas, and Lima, Ohio
must comply with new nitrogen oxide emission standards under the
Clean Air Act. These new standards are being phased in through
2007. While we may purchase emissions allowances to partially
meet these new nitrogen oxide emission standards, modifications
to existing equipment and the installation of additional control
equipment are required. Clean Air Act regulations
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have also been issued concerning emissions of highly-reactive
volatile organic compounds (such as ethylene and propylene). We
expect that additional estimated capital expenditures of
$40 million will be required to comply with the Clean Air
Act standards and regulations.
In April 2005, the United States Environmental Protection Agency
(EPA) inspected our Lima, Ohio facility as part of a
broader investigation by the EPA of the chemical industry's
compliance with certain emission standards relating to hazardous
organic pollutants. We have not yet received the results of the
inspection or received any notices of violations, but if an
enforcement action is brought by the EPA, it is reasonable to
believe that we may be subject to fines or penalties in excess
of $100,000 or be required to undertake other actions.
European Union
Directive for Integrated Pollution Prevention and Control
The IPPC is the most significant environmental regulation
affecting our operations in Europe over the next three years.
The IPPC attempts to minimize pollution from various point
sources throughout the European Union through a single
permitting process and requires facilities covered by the
Directive to obtain an IPPC operating permit from the
authorities in the relevant EU member states. The permits must
be based on the concept of Best Available Technology (BAT),
which in some cases involve environmental control improvements
to prevent, minimize and control pollution from a facility. If
the use of BAT is likely to result in the breach of an
environmental quality standard under IPPC, plant emissions must
be reduced accordingly.
All plants in Europe affected by IPPC must obtain an IPPC
operating permit by November 2007 or have an agreed improvement
program in place. The Directive encompasses most activities and
processes undertaken by the oil and petrochemical industry
within the EU. All of our affected facilities in the EU have
applied for their IPPC permits as required by local EU member
state legislation, but as the implementation deadline
approaches, there may be amendments to our permits and, in some
cases, a requirement to apply for new permits. We expect to
incur increased costs in maintaining compliance with IPPC and we
expect to incur estimated capital expenditures of
$350 million to comply with these standards at our
facilities in Europe through 2010.
Large Combustion Plant Directive
Our European operations are also subject to the EU Large
Combustion Plant Directive, which aims to reduce acidification,
ground level ozone and particles throughout Europe by
controlling emission limit values for sulfur dioxide, nitrogen
oxides and particulates from combustion plants with a thermal
output of greater than 50 megawatts. The initial Directive
required phased-in reductions in emissions from existing large
combustion plants on or before April 1, 2001. A revised
Large Combustion Plant Directive has been agreed and
implementation plans by the EU member states for the revised
Directive were required to be submitted to the EU by
November 27, 2003 and large combustion plants must be in
full compliance with the Directive by January 1, 2008. Our
expected capital expenditures for complying with IPPC will also
assist in us in complying with the Large Combustion Plant
Directive, but we will still need to incur additional estimated
capital expenditures of $40 million through 2010 to comply
with such regulations at several of our facilities in Europe.
European Union Emissions Trading Scheme
Some of our operations in Europe are also subject to the
European Union Emissions Trading Scheme (EU ETS). By setting an
overall cap on carbon dioxide emissions, the EU ETS authorizes
emissions allowances to be issued to specified EU large
stationary installations and allows for the trading of such
allowances across the EU. Each installation achieves compliance
by surrendering enough allowances to cover its emissions in each
annual period. Emissions are treated as a liability and emission
allowances are treated as an intangible asset. Allocations of
carbon dioxide emissions allowances to each of our affected
facilities have been made under each EU member state's
National Allocation Plan. The National Allocation Plans have
been approved by the European Commission and allowances have now
been issued for each of our installations. However, since our
emissions can vary, we may be required to purchase additional
allowances at the prevailing market price which may increase our
operating costs.
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Health and Safety Regulatory Matters and Developments
Product Stewardship
While most of our products have some hazardous properties, some
of them, such as acrylonitrile, require specialized handling
procedures due to their acute and chronic toxicity. Furthermore,
our polymer products have widespread end-uses in a variety of
tightly regulated consumer industries, including in food
packaging and medical applications. To manage these risks, our
product stewardship team works closely with industry
associations, government regulators and other stakeholders to
strive for positive solutions in setting regulations which are
based in science and are commensurate with the magnitude of the
risk. The various aspects of our business are also careful to
ensure that transporters and customers have the appropriate
information and processes to properly manage our products.
Registration, Evaluation, and Authorization of Chemicals
(REACH)
The European Union is currently proposing to introduce new
legislation requiring much greater control of the use of
chemical products within the European Union by giving the
affected industries the responsibility for ensuring and
demonstrating the safe manufacture, use and disposal of
chemicals. In 2003, the European Commission adopted an official
proposal for a future regulation on European chemical policy
referred to as Registration, Evaluation and Authorization of
Chemicals (REACH). This proposal is being discussed by the
European Parliament and the Council of the European Union.
Depending on the outcome of these discussions, the regulation
could enter into force by 2007 and could require additional
testing, documentation and risk assessments for products
manufactured by the chemical industry. We are currently part of
a collaborative industry approach to comply with these
regulations, which will affect both our petrochemicals and
refinery products. The ultimate cost of REACH may vary depending
on the final requirements of the regulation and at this time it
is uncertain what the estimated costs of complying with the
final regulations may be, although such costs could be
substantial. The costs of registering and authorizing certain
products and the restrictions placed upon them may affect the
demand for those products from our customers.
Major Accident Risk
The safety of our sites is a top priority because system
failures or accidents can present a health and safety risk to
our employees and people who live or work near our facilities.
Within the European Union, the EU directive on the control of
major-accident hazards (Seveso II Directive) regulates
facilities that present a risk of accidents involving hazardous
materials and impose specific plans and procedures, particularly
for the storage of such materials. The directive contains
general and specific obligations on both operators and the
member states' authorities. The provisions provide for
control measures aimed at the prevention of major accidents and
the limitation of consequences of major accidents. All operators
of establishments coming under the scope of the Directive must
provide a safety plan to the competent authority and establish a
major-accident prevention policy. In addition, facilities
holding even larger quantities of dangerous substances above the
upper threshold contained in the Directive (upper tier
establishments) must establish a safety reporting system, a
safety management system and an emergency plan. We have ten
facilities in Europe which are considered upper tier
establishments under the Directive.
Within the United States, our facilities are subject to the
Occupational Safety and Health Administration Process Safety
Management (PSM) standard, implemented in 1992, which
requires management of major accident risk with fourteen
elements of management controls. Included in the mandatory
management controls are requirements for operator training,
mechanical integrity, incident investigation, and process hazard
analysis. All facilities subject to the PSM standard undergo PSM
compliance audits every three years.
Security and Crisis Management
The Department of Homeland Security Act, Marine Transportation
Security Act (MTSA) and Department of Transportation Hazardous
Material security compliance regulations require many of our
sites and facilities in the United States to conduct security
vulnerability assessments, which include the preparation of
security mitigation
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plans, implementation of upgrades to security measures,
appointment and training of a designated security person and
submission of plans for approval and inspection. Additionally,
proposed EU legislation would require similar standards at our
petrochemical facilities in Europe. Our United States
facilities, in partnership with American Chemical Council, meet
the requirements of the Responsible Care Security Code, a
facility security plan to protect our chemical facilities, our
communities and our products. All of our facilities worldwide
have a multi-tiered response system for emergency response and
crisis management. Facilities in other regions are periodically
assessed to ensure that they meet appropriate security standards
and safeguards.
Employees
We have a diverse and highly skilled workforce with a high
degree of commitment to our business and our strategic and
operational goals. A significant percentage of our employees are
covered by collective bargaining agreements that determine such
matters as compensation, working hours and other conditions of
employment, and are represented by works councils. During the
last three years, we have not experienced any material labor
disputes resulting in work stoppages. We believe that our
relationship with our employees is good, and we have taken steps
to ensure the continued support of our employees while we
transition to a separate, standalone company. To that end, we
have committed to our employees that we would maintain
equivalent employment terms and conditions to those offered by
BP for a period of at least one year after completion of the
offering. While this decision has allowed us to continue our
good relations with our employees, we cannot assure you how our
employees would respond if we were to make any changes after the
one-year period has expired.
We have approximately 8,000 employees. This figure includes
employees who became employed by our company as a result of our
acquisitions of Solvay's interests in our former HDPE joint
ventures with that company. The figure excludes the
approximately 180 employees who will move to our joint venture
with NOVA, as well as the employees at BP's facility in
Wingles, France, which may be transferred to the joint venture
in 2007 if put or call options provided for in the agreements
relating to the formation of the joint venture are then
exercised. The figure also excludes employees of the various
joint ventures at our site in Lavéra, France. In addition,
the figure excludes the approximately 270 individuals seconded
to us by BP, some of whom will be retained by us and become
employees of our company, and some of whom will be redeployed to
BP or be made redundant. Finally, the figure excludes BP
employees who work at our Carson, California, Texas City, Texas,
and Whiting, Indiana, facilities, which for labor law reasons
have not been transferred to us as part of our separation from
BP, as well as employees at the LAO facility in Pasadena, Texas,
which is owned by BP and operated for us on a toll manufacturing
basis.
In addition, we employ a significant number of contractors at
our sites. Our contractors are mostly engaged in turnarounds,
maintenance and construction work.
Legal Proceedings
As is the case with many companies in the petrochemical
industry, we are and may from time to time become a party to
claims and lawsuits incidental to the ordinary course of our
business. We are not currently involved in any legal or
arbitration proceedings that we expect to have a material
adverse effect on our financial position, and, to our knowledge,
no such legal or arbitration proceedings are currently
threatened.
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MANAGEMENT
Directors and Executive Officers
Set forth below are the names, ages, as of July 1, 2005,
and current positions of our present directors and executive
officers:
Name
Age
Position
Ralph Alexander
50
President, Chief Executive Officer and Director
Ross Pillari
55
Chairman of the Board and Director
Stephen Elbert
58
Director
Stephen Riney
44
Director
Stephen Winters
55
Director
Mark Tomkins
50
Chief Financial Officer
Henry Kleeman
47
Senior Vice President, General Counsel and Secretary
Didier Baudrand
50
Senior Vice President, European Operations
Dennis Seith
49
Senior Vice President, North American Operations
K'Lynne Johnson
37
Senior Vice President, Global Derivatives
Peter Cella
47
Senior Vice President, Business Support and External Affairs
Paul Adams
46
Senior Vice President, Business Optimization and Procurement
Jay Kouba
52
Senior Vice President, Strategy
Stephen Davies
50
Senior Vice President, Human Resources, HSSE & Internal
    Communications
Jim White
49
Senior Vice President, Portfolio
Tom Muething
49
Controller
Set forth below is a brief description of the business
experience of the persons who serve as our directors and
executive officers.
Ralph Alexander — President, Chief Executive
Officer and Director.
Mr. Alexander has been our Chief
Executive Officer since our formation as a separate legal entity
within the BP Group in 2005. Prior to this appointment,
Mr. Alexander held a variety of roles within BP. From
January 2005 to June 2005, Mr. Alexander was the Chief
Executive Officer of BP's olefins and derivatives business.
From July 2004 to December 2004, Mr. Alexander was the
Chief Executive Officer of BP's Petrochemicals business,
and from April 2002 to June 2004, he was the Executive Vice
President and Chief Executive Officer of BP's Gas, Power
and Renewables segment. From September 2001 to March 2002,
Mr. Alexander served as a Group Vice President in BP's
Exploration and Production segment. In this position, he held
responsibilities for various regions of the world, including
Russia, the Caspian, Africa and Middle East. Additionally, he
was responsible for the segment's recruitment, diversity
and marketing activities. From September 1999 to August 2001,
Mr. Alexander was Group Vice President with responsibility
for global onshore oil activities as well as emerging gas
activities in the Asia-Pacific region. Mr. Alexander has
also held senior roles in BP's Refining and Marketing
segment. In addition, Mr. Alexander held senior roles in
strategy development, mergers and acquisitions and performance
management for the BP Group. Mr. Alexander holds a
bachelor's degree and master's degree in nuclear
engineering from New York Polytechnic University and a
master's degree in management science from Stanford
University Business School. He is currently vice chairman of the
Board of Trustees of New York Polytechnic University, a
member of Stanford University's Sloan Advisory Board, the
Liquid Engine Advisory Board and the Society of Petroleum
Engineers. In addition he serves as a nonexecutive director on
the Board of Directors of Anglo American plc.
Ross Pillari — Chairman of the Board of Directors.
Mr. Pillari is a Group Vice President for BP and, since
2001, has been President and Chief Executive Officer of BP
America Inc. Prior to this appointment, Mr. Pillari
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was BP's Group Vice President for Downstream Marketing and
was responsible for BP's global marketing operations.
Mr. Pillari is a member of the Board of Directors of The
American Petroleum Institute, The Chicago Symphony Orchestra,
The Foreign Policy Association, The Baker Institute Energy
Forum, and The Alliance to Save Energy. Mr. Pillari is a
graduate of Case Western Reserve University and the Stanford
Executive Program.
Stephen Elbert — Director.
Mr. Elbert is
Senior Vice President for remediation management of BP America
Inc. and is responsible for managing BP's environmental
liabilities worldwide. Mr. Elbert also serves as Chairman
and CEO of Atlantic Richfield Company, an affiliate of BP.
Before his current position, Mr. Elbert was Vice President
of Health, Safety and Environment (HSE) for BP's
Petrochemicals segment, with responsibility for HSE policies and
performance. Mr. Elbert holds a Ph.D., master's and
bachelor's degrees in biological science from the
University of Louisville, DePauw University and The Ohio State
University, respectively. He is a graduate of the Northwestern
University's Executive Management Program and the Advanced
Management Program of the Harvard Graduate School of Business
Administration.
Stephen Riney — Director.
Mr. Riney was
appointed Vice President of Finance in the Americas for BP in
March 2005. From January 2004 to March 2005, Mr. Riney
served as the performance unit leader for BP's Marlin and
Horn Mountain production facilities in the Deepwater Gulf of
Mexico. From February 2001 to January 2004, Mr. Riney was
Vice President of Planning for BP's global exploration and
production business. Mr. Riney holds a bachelor's
degree in accounting from the University of Notre Dame and a
master's degree in business administration from the
University of Chicago.
Stephen Winters — Director.
Mr. Winters is
Associate General Counsel for BP's Refining and Marketing
segment and is responsible for BP's corporate and specialty
legal practice groups in the United States. Mr. Winters is
a member of the Kansas, Illinois and U.S. Supreme Court
bars, the American Bar Association and the American Corporate
Counsel Association. He obtained his bachelor's degree in
English and psychology and a law degree from Kansas University.
Mark Tomkins — Chief Financial Officer.
Mr. Tomkins joined our company in May 2005 as Chief
Financial Officer. Previously he was Senior Vice President,
Chief Financial Officer and Treasurer of Vulcan Materials
Company, a provider of construction materials and chemicals, a
position he held since January 2001. Prior to that,
Mr. Tomkins held the same position at Great Lakes Chemicals
Chemical Corporation, which is now a part of Chemtura
Corporation, and worked as Vice President, Finance and Business
Development, for two chemical divisions of Allied Signal, Inc.
Mr. Tomkins is a certified public accountant and holds a
bachelor's degree in business and a master's degree in
business administration from Eastern Illinois University.
R. Henry Kleeman — Senior Vice President,
General Counsel and Secretary.
Mr. Kleeman joined our
company as Senior Vice President and General Counsel in June
2005. Previously he was Vice President, Deputy General Counsel
and Business Practices Officer at Sara Lee Corporation (Sara
Lee) from 1999 to 2005. He was also the assistant secretary for
Sara Lee and secretary to the audit committee of its Board of
Directors. Mr. Kleeman holds a bachelor's degree in
English and economics from Colgate University and a law degree
from the University of Chicago Law School. From June 2000 until
June 2005, Mr. Kleeman was a director of Delta Galil
Industries, Inc., a publicly traded apparel manufacturer.
Didier Baudrand — Senior Vice President, European
operations.
Mr. Baudrand is the head of our O&P Europe
segment. Mr. Baudrand held a variety of roles within BP
over the past 26 years, including in the areas of
lubricants, sales, marketing, logistics and chemicals. From July
2004 to June 2005, Mr. Baudrand served as Senior Vice
President, European operations, for BP's olefins and
derivatives business. From January 2004 to July 2004,
Mr. Baudrand was the Chief Executive Officer of our former
joint venture with Solvay in Europe. From January 2002 to
December 2003, Mr. Baudrand was the business unit leader of
BP's global polymers business and from January 2001 to
December 2001 he was the business unit leader of BP's
European polypropylene business. Prior to this period, he served
as Chief Executive Officer for BP's European polypropylene
business. Mr. Baudrand holds a master's degree in
physical chemistry from Paris University and a chemical
engineering degree from the Ecole Nationale Superieure de Chimie
de Paris. Mr. Didier Baudrand is a board member of the
CEFIC organization and Vice President of Plastic Europe.
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Dennis Seith — Senior Vice President, North
American operations.
Mr. Seith is the head of our O&P
North America segment. Mr. Seith has 26 years of
experience within BP's Petrochemicals and Refining and
Marketing segments, including in the areas of manufacturing,
business management, project development, and management sales
and planning. From July 2004 to June 2005, Mr. Seith was
Senior Vice President, North American operations, for BP's
olefins and derivatives business. From January 2004 to June
2004, Mr. Seith was the business unit leader of BP's
refinery in Whiting, Indiana. From January 1999 to December
2003, he was the business unit leader of BP's olefins
business in North America with additional duties for the North
American styrene business added in 2002. Mr. Seith holds a
bachelor's degree in chemical engineering from Texas
A&M University.
K'Lynne Johnson — Senior Vice President,
Global Derivatives.
Ms. Johnson is the head of our Global
Derivatives segment. From May 2005, to June 2005, Ms. Johnson
was Senior Vice President, Global Derivatives, for BP's
olefins and derivatives business. From January 2004 to April
2005, Ms. Johnson led BP's global nitriles business as
performance unit leader and Vice President, Business
Optimization. From September 2002 to December 2003, Ms. Johnson
was responsible for the global development of BP's
petrochemical e-commerce business, back office and demand supply
planning automation. From February 2001 to September 2002, Ms.
Johnson served as a director for demand supply planning. From
January 1999 to February 2001, Ms. Johnson worked as a human
resources manager for BP's global specialty intermediates
chemical business and the petrochemical technology function.
Ms. Johnson holds a bachelor's degree in psychology
from Brigham Young University and a master's degree in
organizational behavior from the Marriot School of Management at
Brigham Young University.
Peter Cella — Senior Vice President, Business
Support and External Affairs.
Mr. Cella is responsible
for planning and performance management, information technology,
property management and services, and external affairs. From
July 2004 to June 2005, Mr. Cella served as Senior Vice
President, Business Support and External Affairs, for BP's
olefins and derivatives business. From May 2002 to June 2004,
Mr. Cella served as the business unit leader of BP's
global olefins specialties and derivatives business. Between
June 1999 and May 2002, Mr. Cella was the business unit
leader of BP's global fabrics and fibers business.
Mr. Cella holds a bachelor's degree in finance from
the University of Illinois and a master's degree in
business administration from Northwestern University's
Kellogg Graduate School of Management.
Paul Adams — Senior Vice President, Business
Optimization and Procurement.
Mr. Adams is responsible
for trading, procurement and business optimization.
Mr. Adams has 24 years of experience within BP. From
July 2004 to June 2005, Mr. Adams served as Senior Vice
President, Business Optimization and Procurement, for BP's
olefins and derivatives business. In 2003 and 2004,
Mr. Adams served as special advisor to BP's Group Vice
President, Supply and Trading. Between 1998 and 2003, he was the
head of BP's U.S. oil trading and supply operations.
Mr. Adams holds a bachelor's of science degree from
the London School of Economics and Political Science.
Jay Kouba — Senior Vice President, Strategy.
Mr. Kouba is responsible for developing our long-term
business strategy, marketing, technology and licensing.
Mr. Kouba has 24 years of experience with BP's
Petrochemicals segment. From July 2004 to June 2005,
Mr. Kouba served as Senior Vice President, Strategy, for
BP's olefins and derivatives business and, earlier in 2004,
as Vice President of Marketing, Sales and Logistics for
BP's Petrochemicals segment. Between 1999 and 2003,
Mr. Kouba was Vice President, Technology, for BP's
Petrochemicals segment. Mr. Kouba holds a bachelor's
degree in chemistry from Stanford University, a master's
degree and doctorate in chemistry from Harvard University and a
master's degree in business administration from the
University of Chicago.
Stephen Davies — Senior Vice President, Human
Resources, HSSE & Internal Communications.
Mr. Davies is responsible for human resources, HSSE and
internal communications. From July 2004 to June 2005,
Mr. Davies served as Senior Vice President, Human
Resources, HSSE and Communications, for BP's olefins and
derivatives business. From January 2003 to June 2004,
Mr. Davies was Vice President of Global People
(HR) Operations of BP's human resources global
operations department. From January 1999 to December 2002,
Mr. Davies was Vice President, Downstream Human Resources,
of BP's downstream human resources department.
Mr. Davies holds a bachelor's degree from the
University of Manchester. As a result of the design of
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certain BP pension arrangements, Mr. Davies is employed by
BP and has been seconded to us. The secondment arrangement will
expire in 2006.
Jim White — Senior Vice President, Portfolio.
Mr. White is responsible for developing and managing our
portfolio options, transactions and opportunities.
Mr. White's 25-year career with BP spanned research,
refining & marketing, marine fuels and lubricants,
corporate head of BP's Indonesian operations and, since
1996, petrochemicals. From July 2004 to March 2005,
Mr. White served as Senior Vice President, Portfolio for
BP's olefins and derivatives business. From January 2004 to
June 2004, he was Director, Portfolio Management, for BP's
petrochemical business. From January 2000 to December 2003, he
was the business unit leader for BP's global olefins and
polymers development, where he led mergers and acquisitions
activity, joint venture relationships, licensing and polymers
technology. Mr. White holds a Ph.D and a bachelor's of
science degree in chemistry from City University, London. As a
result of the design of certain BP pension arrangements,
Mr. White is employed by BP and has been seconded to us.
The secondment arrangement will expire in 2006.
Tom Muething — Controller.
Mr. Muething is our
financial controller. Prior to his current role,
Mr. Muething served as the Controller for BP's olefins
and derivatives business within BP's Petrochemical's
segment from July 2004 to June 2005. From June 2003 to June
2004, Mr. Muething served as Segment Controller for
BP's Gas, Power and Renewables segment. From September 2000
to June 2003, Mr. Muething was a business unit leader
within BP's Gas, Power and Renewables segment accountable
for marketing and business development activities in North
America. Prior to September 2000, Mr. Muething was
responsible for BP's North American accounting services
organization. Mr. Muething holds a bachelor's degree
in accounting from Xavier University and is a certified public
accountant.
Board Practices
Board Structure
Immediately upon completion of the offering, our Board of
Directors will consist of up to nine directors,
including   , who are independent directors. Our
Board of Directors will be divided into three classes serving
staggered three-year terms.
At each annual meeting of our stockholders, directors will be
elected to succeed the class of directors whose terms have
expired. Class I directors' terms will expire at the
first annual meeting of our stockholders following the
completion of the offering. Class II directors' terms
will expire at the second annual meeting of our stockholders
following the completion of the offering. Class III
directors' terms will expire at the third annual meeting of
our stockholders following the completion of the offering. Our
classified board structure could have the effect of increasing
the length of time necessary to change the composition of a
majority of our Board of Directors. In general, at least two
annual general meetings of stockholders will be necessary for
stockholders to effect a change in a majority of the members of
our Board of Directors.
For so long as BP owns at least 50% of the voting power of the
outstanding shares of our capital stock entitled to vote, we
intend to avail ourselves of the "controlled company"
exemption under the NYSE rules from the requirements that a
listed company has a majority of independent directors on its
Board of Directors and that its compensation and nominating and
governance committees be composed entirely of independent
directors.
Board Committees
Our Board of Directors has an audit committee, a compensation
committee, and a nominating and governance committee.
Audit committee
Immediately upon completion of the offering, our audit committee
will consist of no fewer than three members, each of whom our
Board of Directors will have determined has no material
relationship with us and is otherwise independent under the
rules and regulations of the NYSE and the SEC. Our Board of
Directors will also have determined that each member of the
audit committee is financially literate and that the chairman of
the audit committee, is an "audit committee financial
expert" as defined under the rules of the SEC.
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Our audit committee has general responsibility for the oversight
of our accounting, reporting and financial control practices.
Among other functions, the committee is responsible for
(1) the appointment, compensation, retention and oversight
of the work of our independent auditor; (2) assisting our
Board of Directors in monitoring the integrity of our financial
statements, our independent auditor's qualifications and
independence, the performance of our independent auditor and our
internal audit function, and our compliance with legal and
regulatory requirements; (3) reviewing with the chief
executive officer and chief financial officer the design and
operation of internal controls over financial reporting;
(4) annually reviewing our independent auditor's
report describing the audit firm's internal quality-control
procedures and any material issues raised by the most recent
internal quality-control review, or peer review, of the audit
firm; (5) discussing the annual audited financial and
quarterly financial statements with management and our
independent auditor; (6) discussing earnings press
releases, as well as financial information and earnings guidance
provided to analysts and rating agencies; (7) discussing
policies with respect to risk assessment and risk management;
(8) meeting separately and periodically, with management,
internal auditors and our independent auditor;
(9) reviewing with our independent auditor any audit
problems or difficulties and managements' response;
(10) setting hiring policies for employees or former
employees of our independent auditor; (11) annually
reviewing the adequacy of the audit committee's written
charter and evaluating the performance of the audit committee;
(12) handling such other matters that are specifically
delegated to the audit committee by our Board of Directors from
time to time; (13) establishing procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters;
(14) reporting regularly to the full Board of Directors and
(15) preparing an audit committee report for inclusion in
the company's annual proxy statement.
In addition, for so long as BP remains our affiliate, the
committee has the authority to review and approve any material
contract, amendment to a material contract or other intercompany
transaction between us and BP or any subsidiary or affiliate of
BP (other than us and our subsidiaries) and to decide on the
initiation and escalation of disputes between us and BP.
Compensation committee
Immediately upon completion of the offering, our compensation
committee will consist of up to three members, one of whom will
be designated by BP and up to two of whom the Board of Directors
will have determined have no material relationship with us and
will otherwise be independent under the rules and regulations of
the NYSE and the SEC. None of our executive officers serves on
the compensation committee or Board of Directors of any other
company of which any of the members of the compensation
committee or the Board of Directors is an executive officer.
Our compensation committee is responsible for (1) reviewing
key employee compensation policies, plans and programs;
(2) reviewing and approving the compensation of our chief
executive officer and other executive officers;
(3) reviewing and approving employment contracts and other
similar arrangements between us and our executive officers;
(4) overseeing compliance with any applicable compensation
reporting requirements of the SEC; (5) retaining
consultants to advise the committee on executive compensation
practices and policies and (6) handling such other matters
that are specifically delegated to the compensation committee by
the Board of Directors from time to time.
Nominating and governance committee
Immediately upon completion of the offering, our nominating and
governance committee will consist of five members, one of whom
will be an executive officer of our company, three of whom will
be designated by BP and one of whom the Board of Directors will
have determined has no material relationship with us and is
otherwise independent under the rules and regulations of the
NYSE and the SEC.
Our nominating and governance committee is responsible for
making recommendations to our Board of Directors regarding
candidates for directorships and the size and composition of the
board, overseeing our corporate governance guidelines and
reporting and making recommendations to the board of directors
concerning corporate governance matters.
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BP Common Stock Ownership of Directors and Executive
Officers
All of our common stock is currently owned by BP. Accordingly,
none of our directors and executive officers currently owns any
shares of our common stock. However, upon consummation of the
offering, those of our executive officers who currently hold
unvested performance units under BP's Long-Term Performance
Plan (LTPP) will receive restricted stock units with respect to
our common stock under the Conversion Plan. In addition, upon
consummation of the offering, our executive officers will
receive stock options and restricted shares under the Incentive
Plan and will be entitled to purchase shares and receive stock
options under the Executive Share Matching Plan. See
"— Innovene "BP LTPP" Conversion
Plan", "— Innovene Incentive Plan 2005"
and "— Innovene Executive Share Matching
Plan" for more information on each of these plans.
The following table sets forth, as of August 1, 2005 the
number of shares of BP common stock and options to purchase BP
common stock held by our directors, those of our executive
officers named in the Summary Compensation Table below under
"— Executive Compensation" and all of our
directors and executive officers as a group. Except as otherwise
noted, each of the directors and executive officers named in the
table below (including their respective family members) had sole
voting and investment power with respect to the BP common stock.
BP common stock and
securities underlying
options beneficially
Name
owned
(1)(2)(3)
Ralph Alexander
580,612
Ross Pillari
515,152
Stephen Elbert
187,836
Stephen Riney
83,730
Stephen Winters
405,303
Didier Baudrand
129,597
Dennis Seith
120,240
All directors and executive officers as a group (17 persons)
*
(4
)
(1)
Beneficial ownership is determined in accordance with the rules
    of the SEC and generally includes voting or investment power
    with respect to securities. Shares of BP common stock subject to
    options that are exercisable or will become exercisable within
    60 days of June 30, 2005 are deemed to be outstanding
    and to be beneficially owned by the person holding the options.
(2)
ADSs held by the relevant director or executive officer have
    been converted into shares at a ratio of one ADS for every six
    shares of BP common stock.
(3)
Includes (a) awards of restricted shares of BP common
    stock, ADSs and stock units under the BP LTPP which have not
    been deferred by the relevant executive officer or director,
    (b) shares of BP common stock and ADSs currently held in a
    BP retirement plan and (c) shares of BP common stock and
    ADSs underlying options that are currently exercisable or will
    become exercisable within sixty days of June 30, 2005 for
    each of the following executive officers or directors: Ralph
    Alexander (528,444); Stephen Elbert (157,224); Stephen
    Riney (79,800); Stephen Winters (385,974); Didier
    Baudrand (53,200); and Dennis Seith (68,940). ADSs
    underlying options have been converted into shares at a ratio of
    one ADS for every six shares of BP common stock.
(4)
The shares of BP common stock and securities underlying options
    beneficially owned by all directors and executive officers as a
    group does not exceed 1% of the outstanding shares of BP's
    common stock.
Board of Directors' Compensation
Directors who are employed by us or are employees of BP do not
receive a retainer or fees for service on our Board of Directors
or any of its committees.
Our independent directors receive an annual retainer of $120,000
and an annual committee retainer of $5,000 with respect to each
committee on which they serve. An independent chairperson of our
Board of Directors would receive an annual retainer of $200,000.
An independent chairperson of our audit committee would receive
an annual retainer of $25,000, and independent chairpersons of
our compensation committee and our nominating and governance
committee would each receive an annual retainer of $20,000 and
$15,000,
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respectively, in each case in lieu of the $5,000 annual
committee retainer to which ordinary committee members are
entitled. All retainers are paid on a quarterly basis, with 50%
in cash and 50% in stock.
Each of our directors is entitled to be reimbursed for
reasonable out-of-pocket expenses incurred in attending board or
committee meetings and for other reasonable expenses related to
the performance of his or her duties as a director.
Executive Compensation
The following table discloses compensation information for 2004
for our chief executive officer and those of our other executive
officers who were employed by BP in 2004 and are expected to be
among our four most highly compensated employees in 2005, as
determined by reference to their total salary and bonus for
2005. The compensation figures shown in the table reflect
salaries paid by BP. Because Mr. Tomkins and
Mr. Kleeman joined our company in May and June 2005,
respectively, no summary compensation information has been
provided for these individuals with respect to 2004.
Summary Compensation Table
Annual compensation
Long-term compensation
Awards
Payouts
Securities
Long-term
Other annual
Restricted
underlying
incentive
All other
Name
Year
Salary
Bonus
compensation
stock awards
(1)
options
(2)
plans
(3)
compensation
(4)
($)
($)
($)
(#)
($)
($)
Ralph Alexander
2004
451,875
482,000
864,574
(5)
*
126,000
—
69,711
Didier
    Baudrand
(6)
2004
337,367
147,970
384,720
(7)
*
42,000
65,085
(8)
9,126
Dennis Seith
2004
269,550
119,600
79,894
(9)
*
31,500
—
27,240
(1)
All awards of restricted stock made to the named executive
    officers in 2004 were payouts under BP's 2001 LTPP and,
    accordingly, have been reflected in the column captioned
    "Payouts — long-term incentive plans".
(2)
ADSs have been converted into shares at a ratio of one ADS for
    every six shares of BP common stock.
(3)
Payouts under long-term incentive plans represent awards of
    restricted shares of BP's common stock or restricted stock
    units under BP's 2001 LTPP. Under this plan, performance
    units were granted in 2001 and converted into an award of
    restricted shares of BP common stock or restricted stock units
    in 2004. See "— Awards of Performance Units Under
    the BP LTPP" for additional information with respect
    to these awards. Performance units are notional units that give
    participants the right to be considered for an award of
    restricted shares of BP common stock or restricted stock units
    (without payment by the participant) at the end of a three-year
    performance period if demanding performance conditions are met.
    Any restricted shares of BP common stock or restricted stock
    units awarded are held in trust for three years before they are
    released to the individual. In addition, shares are released at
    the end of the retention period only if BP's minimum
    shareholding guidelines are met.
(4)
"All other compensation" includes amounts contributed
    or credited by BP to Mr. Alexander's and Mr.
    Seith's respective BP savings plan accounts and life, death
    and disability insurance premiums paid by BP for
    Mr. Baudrand in 2004. The insurance premium payments have
    been converted from euros to U.S. dollars at the noon
    buying rate published by the U.S. Federal Reserve Bank in
    New York for December 31, 2004, which was $1.3538 per
€
1.00.
(5)
Represents $455,896 in perquisites and other expatriate-related
    or personal benefits provided to Mr. Alexander and a
    restricted share award under BP's 2001 LTTP on
    February 11, 2004, which was deferred at the election of
    Mr. Alexander. The restricted share award was made in the
    form of BP ADSs and for purposes of this table has been valued
    based on the price of one BP ADS on the award date, which was
    $47.92.
(6)
Mr. Baudrand's salary and bonus have been converted
    from euros to U.S. dollars at the noon buying exchange rate
    published by the U.S. Federal Reserve Bank in New York
    for December 31, 2004, which was $1.3538 per
€
1.00.
(7)
Represents perquisites and other expatriate-related or personal
    benefits provided to Mr. Baudrand in 2004. The payments were
    made in a combination of U.S. dollars, euros and British pounds
    and have been converted from euros and British pounds to U.S.
    dollars at the noon buying rates published by the U.S. Federal
    Reserve Bank in New York for December 31, 2004, which were
    $1.3538 per
€
1.00
    and $1.9160 per £1.00, respectively.
(8)
Represents the fair market value of a restricted share award
    under BP's 2001 LTPP on February 11, 2004. The
    restricted share award was made in the form of shares of BP
    common stock and for purposes of this table has been valued
    based on the price of one share of BP common stock on the award
    date, which was £4.14. The value has been converted from
    British pounds to U.S. dollars at the noon buying rate
    published by the U.S. Federal Reserve in New York on the
    grant date, which was $1.885 per British pound.
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(9)
Represents the fair market value of a restricted share award to
    Mr. Seith under BP's 2001 LTPP on February 11, 2004,
    which was deferred at the election of Mr. Seith. The
    restricted share award was made in the form of BP ADSs and for
    purposes of this table has been valued based on the price of one
    BP ADS on the award date, which was $47.92.
The following table discloses compensation information for 2005
for our chief executive officer and our four executive officers
(other than our chief executive officer) who are expected to be
our most highly compensated employees in 2005, as determined by
reference to their expected total salary and target bonus, for
that of July 1, 2005.
Summary Future Compensation Table
Grant date value of
shares of common
stock restricted
stock units and
shares underlying
Name
Salary
Target bonus
(1)
options
(2)
($)
($)
($)
Ralph Alexander
750,000
1,200,000
2,600,000
Mark Tomkins
450,000
675,000
1,575,000
Didier
    Baudrand
(3)
365,850
402,436
902,625
Henry Kleeman
350,000
525,000
1,225,000
Dennis Seith
305,000
335,500
752,500
(1)
The target figures shown in this column represent the amounts on
    which the calculation of the respective executive officer's
    bonus will be based if certain performance targets are reached.
    These amounts are subject to upward or downward adjustment based
    on various criteria, including the achievement of goals
    established under our Accelerator program.
(2)
Upon consummation of the offering, each of the persons shown in
    the table will receive a combination of restricted shares of our
    common stock (or restricted stock units) and stock options under
    the Executive Share Matching Plan and the Incentive Plan. Dollar
    amounts shown in this column represent the estimated fair value
    of these awards on the grant date. See
    "— Innovene Incentive Plan 2005" and
    "— Innovene Executive Share Matching Plan"
    for more information on restricted cash grants made, and
    restricted shares (or restricted stock units) and stock options
    issued, under these plans.
(3)
Mr. Baudrand's salary and target bonus amounts have
    been converted from euros to U.S. dollars at the noon
    buying rate published by U.S. Federal Reserve Bank in New
    York for August 1, 2005, which was $1.2195 per
€
1.00.
Grants of Options to Acquire Shares of BP Common Stock
The following table discloses information regarding options with
respect to shares of BP common stock granted to the executive
officers named in the Summary Compensation Table in 2004.
Number of shares
Potentially realizable value at
of BP common
assumed annual rates of
stock underlying
Percent of total
stock price appreciation over
options/ stock
options/ SARs
option term
(2)
appreciation
granted to BP
Exercise
Name
rights (SARs)
(1)
employees
price
(1)
Expiration date
5%
10%
(#)
(%)
($/£)
($/£)
($/£)
Ralph Alexander
126,000
0.171
$
8.09
February 24, 2014
$
3,845,552.30
$
9,745,384.50
Didier Baudrand
42,000
0.057
£4.22
(3)
February 25, 2014
£111,465.28
(4)
£282,474.91
(4)
Dennis Seith
21,000
0.029
$
8.09
February 24, 2014
$
392,901.92
$
995,690.60
10,500
0.014
$
9.92
December 6, 2014
$
640,925.38
$
1,624,230.80
(1)
ADSs have been converted into shares at a ratio of one ADS to
    six shares of BP common stock, and exercise prices have been
    adjusted accordingly.
(2)
Potentially realizable values have been determined assuming the
    stock options will be exercised at the end of their ten-year
    life.
(3)
This amount would correspond to $8.09, assuming conversion at
    the noon buying rate published by the U.S. Federal Reserve Bank
    in New York for December 31, 2004, which was $1.9160
    per £1.00.
(4)
The potentially realizable values shown for Mr. Baudrand
    would correspond to $213,567.48 and $541,221.93, respectively,
    assuming conversion at the noon buying rate published by the
    U.S. Federal Reserve Bank in New York for December 31,
    2004, which was $1.9160 per £1.00.
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Exercises of Options to Acquire Shares of BP Common Stock
The following table discloses information regarding options with
respect to shares of BP common stock exercised by the executive
officers named in the Summary Compensation Table in 2004.
Number of BP shares
Value of unexercised in-the-
underlying unexercised
money options at
BP shares
options at year-end
December 31, 2004
(2)
acquired on
Value
Name
exercise
(1)
realized
Exercisable
Unexercisable
Exercisable
Unexercisable
(#)
($)
(#)
($/£)
Ralph Alexander
—
—
395,444
286,020
$
1,335,220
$
748,671
Didier Baudrand
—
—
53,200
95,200
—
£99,960
Dennis Seith
20,640
121,484
68,940
58,200
$
111,114
$
124,880
(1)
ADSs have been converted into shares at a ratio of one ADS to
    six shares of BP common stock.
(2)
Options have been treated as "in the money" if their
    exercise price at December 31, 2004 was less than the
    market price of a share of BP common stock at that date. Option
    values have been calculated based on the closing price of a
    share of BP common stock or ADS, as reported on the NYSE or the
    London stock exchange on December 31, 2004, which were
    £5.08 and $58.40, respectively.
Awards of Performance Units Under BP's LTPP
The following table discloses information regarding grants of
performance units under BP's LTPP to the executive officers
named in the Summary Compensation Table in 2004. Under the
Conversion Plan, each of these executive officers has agreed to
convert unvested performance units granted to him under
BP's LTPP in 2004 into Innovene restricted stock units. See
"Innovene "BP LTPP" Conversion Plan" for
more information regarding this plan.
Estimated future payouts under
Number of
non-stock price-based plans
performance
Date of maturation
Name
units
or payout
Threshold
Target
Maximum
(#)
(#)
Ralph Alexander
91,000
*
(1)
—
91,000
182,000
Didier Baudrand
27,300
March 1, 2007
(2
)
—
27,300
54,600
Dennis Seith
21,650
March 1, 2007
(2
)
—
21,650
43,300
(1)
Performance units awarded to Mr. Alexander under BP's 2004
    LTPP are scheduled to be paid out in the form of BP ADSs
    ten years after the completion of his employment at BP.
(2)
Represents the date on which the performance units granted under
    BP's 2004 LTPP are expected to result in an award of
    restricted stock.
Innovene Equity-Based Compensation Plans
In connection with the offering, we have adopted the Conversion
Plan, the Incentive Plan and the Executive Share Matching Plan
to attract, retain and motivate our executive officers, certain
key employees and others and align their financial interests
with those of our shareholders. These plans are unfunded, are
not qualified under Section 401(a) of the United States
Internal Revenue Code and are not subject to the provisions of
U.S. Employee Retirement Income Security Act. The following
plan summaries are not complete and are qualified in their
entirety by reference to the actual plans, copies of which are
filed as exhibits to the registration statement of which this
prospectus is a part.
The plans will be administered by our compensation committee or
any other committee designated by our Board of Directors. Our
compensation committee has the exclusive power to administer the
plans and to take all actions that are specifically contemplated
in the plans or are necessary or appropriate in connection with
their administration.
If we subdivide or consolidate the outstanding shares of our
common stock, declare a stock dividend or undertake a stock
split, our compensation committee is authorized to make
appropriate adjustments to (1) the number of shares of our
common stock reserved under the plans, (2) the number of
shares of our common stock covered by outstanding awards,
(3) the exercise or other price in respect of such awards,
(4) the appropriate fair
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market value and other price determinations for such awards and
(5) the award limitations applicable to the Executive Share
Matching Plan, as described below.
Innovene "BP LTPP" Conversion Plan
Under the Conversion Plan, if the offering is completed on or
before December 29, 2006, those of our executive officers
and key employees who were awarded performance units under
BP's LTPP in 2003 or 2004 will have any unvested
performance units exchanged for restricted stock units with
respect to shares of our common stock. Each participant's
unvested performance units will be valued on the date of the
offering as the equivalent of two shares of BP common stock,
using the highest single closing price for these shares as
reported on the London stock exchange during the five trading
days prior to the offering and converted from British pounds
into U.S. dollars value using the exchange rate on the close of
business on the date of the offering. Each participant's
performance units will then be converted into restricted stock
units at a ratio calculated by dividing the deemed value of one
performance unit by the initial public offering price of our
shares. The restricted stock units will vest on the third
anniversary of the completion of the offering and entitle their
holders to receive one share of our common stock of our for each
restricted stock unit held by them, subject to certain transfer
restrictions imposed by our compensation committee.
We have
reserved                      shares
of our common stock for issuance under the Conversion Plan. The
number of shares authorized to be issued under the plan is
subject to adjustment in certain circumstances, as described
under "— Innovene Equity-Based Compensation
Plans." Shares subject to awards that are forfeited,
terminated or settled in cash instead of shares of our common
stock, will no longer be reserved and will not again be
available for awards under the Conversion Plan.
If a participant ceases to be employed by us, any unvested
restricted stock units held by him or her will lapse. However,
if a participant ceases to be employed by us because of death,
disability, retirement, termination by us without cause,
termination by the participant for good reason, such as a
significant change in his or her duties that could lead to an
adverse change in the participant's responsibilities or a
reduction in his or her salary, or a participant's employer
ceasing to be our affiliate, the participant's restricted
stock units will vest immediately.
During the vesting period, participants are entitled to cash
dividend equivalents in respect of the number of shares
represented by the restricted stock units held by them. A cash
dividend equivalent represents an entitlement to receive upon
vesting of a restricted stock unit any cash dividends paid on
the underlying share of common stock during the vesting period.
Restricted stock units do not entitle participants to exercise
voting rights or receive any other types of dividend equivalents
with respect to the underlying shares.
At our compensation committee's discretion, restricted
stock units generally may be settled by a cash payment in an
amount equal to the fair market value of the number of shares of
our common stock underlying those units on the date of vesting
or date of payment, as determined by the compensation committee.
Innovene Incentive Plan 2005
To incentivize our executive officers and key employees, we
launched the Incentive Plan in 2005. Because there was no public
trading market for our common stock prior to the offering, no
shares have been granted under the Incentive Plan. Instead, each
participant received a restricted cash grant equal to a multiple
of the participant's basic annual salary. If the offering
is completed on or before December 29, 2006, the restricted
cash grant will lapse and be replaced by an award of restricted
shares of our common stock and stock options. Restricted shares
are shares that are subject to transfer restrictions and
forfeiture during a vesting period. In some jurisdictions, we
may grant participants restricted stock units instead of
restricted shares. The number of restricted shares or restricted
stock units issuable to a participant under the Incentive Plan
will be equal to 30% of the participant's restricted cash
grant divided by the initial public offering price of our
shares. The restricted shares or restricted stock units will
vest on January 1, 2008. The number of stock options
issuable to participants will be equal to five multiplied by the
quotient of 70% of the restricted cash grant and the initial
public offering price of our shares. The stock options will vest
on January 1, 2008 and entitle their holders to purchase
one share of our common stock for each stock option held by them
at a price equal to the initial public offering price of our
shares. In
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addition, the Incentive Plan provides for the grant of SARs to
participants either in connection with the grant of stock
options or separately.
We have
reserved                      shares
of our common stock for issuance under the Incentive Plan. The
number of shares authorized to be issued under the plan is
subject to adjustment in certain circumstances, as described
above under "— Innovene Equity-Based Compensation
Plans." Shares subject to awards that are forfeited or
terminated, or settled in cash instead of shares of our common
stock, will no longer be reserved and will not again be
available for awards under the Incentive Plan.
If a participant ceases to be employed by us, any unvested
restricted shares, restricted stock units and stock options held
by him or her will lapse. However, if a participant ceases to be
employed by us because of death, disability, retirement,
termination by us without cause, termination by the participant
for good reason, such as a significant change in duties that
could lead to an adverse change in the participant's
responsibilities or a reduction in salary, or a
participant's employing entity ceasing to be our affiliate,
then his or her restricted shares, restricted stock units and
stock options will vest immediately. A vested stock option
generally will remain exercisable until it expires. However,
stock options generally will expire and cease to be exercisable
60 days following termination of employment, except that if
a participant dies, becomes disabled or is terminated without
cause or terminates for good reason, or if the
participant's employing entity ceases to be a member of the
group, his or her stock options will expire on the third
anniversary after the relevant event.
During the vesting period, participants are entitled to cash
dividends with respect to restricted shares and cash dividend
equivalents in respect of the number of shares represented by
the restricted stock units held by them. Restricted shares also
entitle participants to exercise voting rights with respect the
underlying shares. No cash dividend or voting rights are
associated with stock options.
At our compensation committee's discretion, restricted
shares and restricted stock units generally may be settled by a
cash payment in an amount equal to the fair market value of the
relevant number of shares as of the date of vesting or the date
of delivery, as determined by the committee. Likewise, at the
compensation committee's discretion, stock options
generally may be settled by a cash payment in an amount equal to
the difference between the fair market value of the number of
shares of our common stock underlying the options on the date of
exercise and the exercise price of the award.
Innovene Executive Share Matching Plan
We have adopted a compensatory benefit plan under which we
intend to offer our executive officers and key employees an
opportunity, at the time of the offering to purchase shares of
newly issued common stock at the initial public offering price
and in addition receive stock options under the Executive Share
Matching Plan. The maximum number of shares that each
participant will be permitted to purchase will be equal to
one-half of his or her basic annual salary at the time of
purchase. Shares purchased under the plan will be subject to
transfer restrictions for a period of up to 180 days from
the date of purchase and certain additional transfer
restrictions for up to one year from the date of purchase or, if
earlier, the date the participant ceases to be our employee. The
number of shares underlying each stock option granted will equal
five times the number of shares purchased by the executive in
connection with the offering. The stock options will have an
exercise price equal to the initial offering price, a term of
ten years and a vesting period of three years from the date of
purchase and otherwise will have the same terms and conditions
as stock options granted under the Incentive Plan, as described
above under "— Innovene Incentive Plan 2005."
We have
reserved                      shares
of our common stock for issuance under the Executive Share
Matching Plan. The number of shares authorized to be issued
under the plan is subject to adjustment in certain circumstances
as described under "— Innovene Equity-Based
Compensation Plans." Shares subject to awards that are
forfeited or terminated, or settled in cash instead of common
stock, will no longer be reserved and will not again be
available for awards under the Executive Share Matching Plan.
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Retirement Plans
The executive officers named in the Summary Compensation Table
participate in various pension and other post-employment benefit
plans sponsored by BP or us. In those cases where a plan is
currently sponsored by BP, we intend to set up and sponsor
corresponding plans once BP's ownership of our common stock
drops below certain levels, at which point our employees will no
longer be entitled to participate in these plans.
Mr. Alexander, Mr. Kleeman, Mr. Seith and
Mr. Tomkins are covered by various U.S. retirement plans.
Mr. Baudrand is covered by a French retirement plan.
U.S. Retirement Plans
Mr. Alexander and Mr. Seith participate in the BP
Retirement Accumulation Plan (RAP). Under this plan's
"cash balance" formula, participants earn monthly pay
credits based on their eligible compensation (salary plus
bonus), age and years of service, subject to a maximum of 11% of
eligible compensation. Accumulated pay credits accrue interest
at U.S. Treasury interest rates, with a minimum of 5% per
year. As a former Amoco employee, Mr. Seith also accrues
benefits pursuant to the grandfathered Amoco plan formula under
the RAP. Mr. Seith's total pension benefit will be the
greater of the benefit to which he is entitled pursuant to the
"cash balance" formula and the benefit to which he is
entitled under the Amoco plan formula. The Amoco plan formula
provides for an annual annuity to be paid from the time a
participant reaches the age of 65. The annuity amounts to 1.67%
of the participant's final average earnings times years of
service, offset by a portion of his or her social security
benefits. A participant's final average earnings are
determined by calculating the sum of the participant's
average basic earnings during his or her three highest
consecutive years of basic earnings and his or her average bonus
awards during his or her three highest consecutive years of
bonus awards. Mr. Tomkins and Mr. Kleeman participate
in the BP Polyethylene Pension Plan, which mirrors the structure
of the RAP.
In addition, Mr. Alexander, Mr. Kleeman,
Mr. Seith and Mr. Tomkins participate in the BP
Supplemental Executive Retirement Benefit plan (SERB), which is
an unfunded "top-up" arrangement for certain members
of senior management. The benefits payable upon retirement under
the SERB equal 1.3% of a participant's final average
earnings times years of service, with an offset for benefits
payable under any other qualified and non-qualified pension plan
of BP, including the RAP and the BP Polyethylene Pension Plan. A
participant's final average earnings are determined in the
same manner as described above under the RAP. Benefits are
payable in the form of a lump sum.
Mr. Alexander, Mr. Kleeman, Mr. Seith and
Mr. Tomkins are also eligible to participate in the BP
Employee Savings Plan, a qualified savings plan which matches
100% of an employee's contributions for the first 7% of his
or her eligible compensation, including bonuses. Unfunded
non-qualified plans have been established to enable matching
contributions that could not be made under the qualified savings
plan due to applicable IRS limits.
At June 30, 2005, Mr. Alexander and Mr. Seith had
accrued 22.75 and 27.08 years of service and estimated lump
sum benefits upon retirement of $2,193,251 and $1,034,591,
respectively, assuming no future growth in their final average
earnings, which, as of June 30, 2005, were expected to be
$893,709 and $405,375, respectively. Savings plan balances for
Mr. Alexander and Mr. Seith, both qualified and
non-qualified as of June 30, 2005, were $1,751,208 and
$1,022,133, respectively. Mr. Tomkins and Mr. Kleeman
joined our company in May and June 2005, respectively and do not
currently have any accrued pension benefit entitlements under
any company plans.
French Retirement Plans
Mr. Baudrand participates in BP's Caisse de Retraite
plan, a partially funded non-contributory pension plan which
"tops up" (but is not dependent on the future
development of) state and mandatory benefit arrangements to
provide annual retirement benefits depending on final earnings
and years of service. Under the plan's formula, benefits
cannot exceed 65% of final base salary, inclusive of state and
mandatory benefits. The normal retirement age under this plan is
60.
At June 30, 2005, Mr. Baudrand had accrued
25.5 years of service and estimated benefits upon
retirement, payable in the form of an annual annuity, of $7,500
per month, assuming no future growth in his final earnings.
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Change in Control Severance Agreements
We intend to enter into change in control severance agreements
with Mr. Alexander, Mr. Baudrand, Mr. Seith and
certain other executive officers to provide severance pay and
benefits in the event that their employment with us were to
terminate under certain change in control scenarios defined in
the agreement. The change in control severance agreements have
similar terms and terminate on the earliest of (1) the
relevant executive officer's termination of employment,
unless such termination is a qualifying termination as defined
below or (2) December 31, 2007; provided that if a
change in control occurs during this period, the term of the
agreement will continue for an additional two years after such
change in control. Mr. Alexander's change in control
agreement will be entered into by BP and it is expected that BP
will assign this agreement to us following the consummation of
the offering.
A qualifying termination means (1) a termination of
employment by us or our successors other than for cause or
(2) a termination by the relevant executive officer for
good reason, as defined in the applicable change in control
agreement. Termination because of death, disability or
retirement does not constitute a qualifying termination.
A termination of employment by us other than for cause within
the 90-day period preceding a change in control is deemed to be
a qualifying termination and entitles the relevant executive
officer to the benefits payable as if a change in control had
occurred provided that such benefits will be offset by any
severance payments or benefits payable to that executive officer
as a result of his or her termination.
Under the change in control severance agreements, if an
executive officer becomes subject to a qualifying termination
during the time period commencing with a change in control and
ending two years after such change in control, we will generally
provide him or her the following severance benefits:
•
a lump sum cash payment equal to (1) twice the sum of the
    executive officer's current annual base salary, plus the
    greater of (a) the executive officer's current-year
    target bonus and (b) his or her most recent actual annual
    bonus and (2) an amount equal to the daily pro rata portion
    of the executive officer's annual target bonus for the year
    of termination (subject to certain performance-based parameters
    if the termination occurs in 2005); if the executive officer
    terminates his or her employment because of a reduction in base
    salary or target bonus opportunity, then the base salary or
    target bonus amount prior to such reduction will be used in
    calculating the lump sum cash payments;
•
twelve months of medical benefits (if the executive elects
    extended medical coverage) and group term life insurance;
•
job placement services with a provider selected and paid by us
    for a period no less than one year; and
•
certain gross-up payments in the event the executive officer is
    subject to the golden parachute excise tax under
    Section 4999 of the Internal Revenue Code.
If Mr. Alexander experiences a qualifying termination under
his change in control agreement prior to January 1, 2008,
he will in addition be entitled to a lump sum benefit equal to
no less than $3,210,000 for his participation in our and
BP's defined benefit pension plans.
During the one year-period following a qualifying termination,
each relevant executive officer will be subject to certain
restrictions on competition with us (and in, certain limited
circumstances, BP) and solicitation of our employees, customers
and suppliers. In addition, the executive officer must maintain
the confidentiality of BP's and our non-public information.
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PRINCIPAL SHAREHOLDER
Prior to the offering, all of the outstanding shares of our
common stock were owned by BP. After the offering, BP will
own           %
of the outstanding shares of our common stock, assuming the
underwriters do not exercise their option to purchase additional
shares. Except for BP, we are not aware of any person or group
that will beneficially own more than 5% of our outstanding
shares of common stock following the offering. None of our
executive officers, directors or director nominees currently
owns any shares of our common stock, but those who own shares of
BP common stock will be treated on the same terms as other
holders of BP stock in any distribution by BP.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Overview of Arrangements Between Us and BP
In connection with our separation from BP, we and BP have
entered into numerous agreements. These agreements comprise:
•
reorganization agreements under which BP has transferred
    substantially all of the assets and liabilities comprising our
    current business activities to us, subject to the retention by
    BP of certain historic liabilities; and
•
commercial interface agreements which (1) have established
    arm's length commercial arrangements between us and BP and
    (2) require BP to provide us with support services for a
    limited period of time.
The reorganization agreements assume that our separation from BP
and the transfer of all relevant assets and liabilities occurred
on April 1, 2005, whereas the commercial interface
agreements regulate our commercial relationships with BP with
effect from January 1, 2005.
Reorganization Agreements
Local Transfer Agreements
Effective April 1, 2005, BP transferred to us substantially
all of the assets and liabilities relating to the former olefins
and derivatives business of BP's Petrochemicals segment,
our refineries at Grangemouth, United Kingdom, and Lavéra,
France, which formed part of BP's Refining and Marketing
segment, and the gas fractionator located near Hobbs, New
Mexico, which formed part of BP's Gas, Power and Renewables
segment, in each case, together with associated infrastructure.
The transfers were made on the basis of a series of Local
Transfer Agreements. As a result of these transfers, we acquired
BP's title or other interest in the relevant assets and,
with limited exceptions, the unencumbered ability to operate and
transfer these assets to third parties.
However, given the scale and complexity of our business, some
transfers were structured differently to facilitate the relevant
transaction and to protect the interests of one or both parties.
The most important examples of such transfers are:
•
Pasadena, Texas.
Instead of transferring BP's
    facility in Pasadena, Texas to us, BP has agreed to operate the
    facility for us on a toll manufacturing basis and to close it in
    late 2005.
•
Wingles, France.
Due to restrictions on the
    transferability of BP's facility in Wingles, France, BP has
    retained ownership of that facility. However, we have entered
    into agreements with BP under which BP has agreed to purchase
    all of the facility's styrene requirements from us, and to
    sell all of the polystyrene and EPS made by the facility to us.
    Following the commencement of operations of our polystyrene and
    EPS joint venture with NOVA, we expect to supply approximately
    half of the styrene requirements of that joint venture, which in
    turn will supply all of the Wingles facility's styrene
    requirements. The joint venture will also purchase all of the
    polystyrene and EPS made by the Wingles facility. In addition,
    we have entered into a put and call option agreement with BP,
    under which we have the option to purchase and transfer to the
    joint venture, and BP has the option to sell to the joint
    venture, the Wingles facility and associated assets and
    liabilities, in each case at the fair market value of the
    facility and related assets and liabilities at the time of
    transfer. Our call option is exercisable in January 2007. If we
    do not exercise the option at that time, BP may exercise its put
    option in February 2007.
•
Grangemouth, United Kingdom.
BP has retained ownership of
    certain assets of our Grangemouth, United Kingdom, site,
    including the power station, two of the high voltage electricity
    substations and certain tankage and pipelines associated with
    the transportation of condensate from Grangemouth to other
    destinations, to ensure that the FPS remains in operation
    throughout the term of certain supply agreements between us and
    BP at that site. BP has agreed to lease these assets to us on a
    long-term basis. Under the terms of the leasing arrangement, BP
    has reserved the right to temporarily step in as operator of the
    leased assets in the event this is necessary to protect itself
    against our failure to take off hydrocarbons from, or to provide
    utilities to, BP or otherwise fail to transport condensate
    through the relevant pipelines. BP is
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entitled to terminate the leasing arrangement if we become
    insolvent or materially breach our various Framework Interface
    Agreements (FIAs) with BP with respect to that site.
•
Pipelines in North America.
We have entered into a 50/50
    joint venture with BP in relation to certain pipelines in Texas.
    This joint venture lasts until December 31, 2025, unless it
    is terminated earlier. In addition, certain other pipelines are
    wholly-owned by us and operated by BP on our behalf under
    arrangements which expire on December 31, 2006.
•
RMR Pipeline Access.
A significant portion of the annual
    naphtha supply required by the petrochemical cracker at our
    Cologne, Germany, site is transported through the RMR pipeline.
    BP is entitled to a certain amount of RMR pipeline capacity
    every year, consistent with its overall 35% interest in the
    pipeline. We have agreed with BP to use some of this capacity,
    along with associated infrastructure at Nerefco, The
    Netherlands, to enable us to meet approximately 50% of the
    current naphtha requirements of our Cologne site.
In instances where a third party consent would have been
necessary to transfer an asset from BP to us but was not
obtained, we and BP have agreed to alternative arrangements so
that, to the maximum extent possible, we will receive the same
benefits as if the consent had been obtained.
Amended and Restated Master Reorganization
Agreement
The Amended and Restated Master Reorganization Agreement sets
out a framework for dealing with assets or liabilities not
specifically covered by the Local Transfer Agreements described
above, such as liabilities arising from our or BP's past
and future conduct.
Subject to the exceptions described below, we generally have
assumed all liabilities relating to the businesses and assets BP
has transferred to us, and BP has agreed to retain all
liabilities relating to the businesses and assets it has
retained. In each case, these indemnities cover all losses
arising from such liabilities, regardless of whether they arise
from events occurring before or on or after April 1, 2005.
Notwithstanding this overall allocation of liabilities, BP has
specifically agreed to indemnify us, subject to certain
limitations, for claims and losses relating to:
•
any liabilities related to off-site waste disposal prior to
    April 1, 2005 (excluding liabilities related to certain
    waste disposal sites located near our facilities in Cologne,
    Germany, and Sarralbe, France);
•
any liabilities related to former facilities which, as of
    April 1, 2005, had been sold, closed or decommissioned;
•
any claims for exposure to hazardous materials at our facilities
    to the extent that such claims were either made prior to
    April 1, 2005 or threatened in writing prior to
    April 1, 2005 and made prior to April 1, 2006 or, in
    certain cases, to the extent that such exposure related to
    events that occurred prior to April 1, 2005; and
•
certain product liability claims related to products
    manufactured prior to April 1, 2005;
The Amended and Restated Master Reorganization Agreement
provides that we will maintain employee benefits at the same or
comparable levels for a period of at least twelve months
from the date of the consummation of the offering. With respect
to retirement benefit arrangements, in particular, we plan to
meet this commitment by either continuing to participate in
BP's arrangements after the date of consummation of the
offering for a prescribed period or by establishing replacement
pension, saving and post-employment medical plans. With respect
to funded retirement benefit arrangements being retained by BP,
BP has agreed to transfer to us the relevant plan assets
relating to our employees together with associated liabilities
that accrued prior to the date of the offering and to make any
necessary equalization payments to ensure that the sum of the
value of these plan assets and the amount of these payments
equals the amount of the liabilities transferred to us. Our
employees may continue to participate in BP's retirement
plans until BP's stake in our company falls below certain
thresholds. The relevant threshold is 80% with respect to our
U.S. employees and 50% with respect to all our other
employees. Our U.K. and Belgian employees may continue to
participate in BP's retirement plans until the
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later of the date on which BP's stake in our company falls
below 50% or the expiration of twelve months from the
consummation of the offering.
Intellectual Property and Information Technology
Separation Agreement
We have entered into an Intellectual Property and Information
Technology Separation Agreement (IPITSA) with BP, which governs
the transfer of intellectual property and intellectual property
related agreements from BP to us and addresses certain related
third-party issues.
The IPITSA provides for the transfer from BP to us of certain
registered patents, trademarks and domain names along with any
other intellectual property relating exclusively to our
petrochemical business, our refineries in Grangemouth, United
Kingdom, and Lavéra, France, and our gas fractionator near
Hobbs, New Mexico. In addition, BP has agreed to assign to us
all intellectual property-related contracts, such as licenses,
research and development agreements, technology sharing
agreements, software licenses and support agreements relating
exclusively to our business.
BP has also granted us licenses in respect of certain
intellectual property in which we and BP have a common interest.
The terms and conditions of these licenses are set forth in
separate common interest license agreements.
Under the IPITSA, we have assumed all liabilities relating to
the intellectual property and related contracts transferred from
BP to us, whether existing at April 1, 2005 or arising
thereafter. In this connection, we have agreed to indemnify BP
for any losses it may incur in the event a third party raises a
claim in respect of our use of any of this transferred
intellectual property on or after April 1, 2005. In return,
BP has agreed to indemnify us in the event and to the extent
that we notify it before the end of September 2005 of any
failure or inability to transfer a material intellectual
property-related third-party contract to us or to extend a
material common interest intellectual property agreement to
cover our activities.
BP has also transferred to us in separate agreements various
U.S. and foreign trademarks, including our Innovene® brand.
Pursuant to a separate endorsement agreement, BP has allowed us
to describe ourselves as "forming part of the BP
group" and to use certain BP trademarks in connection with
this description, so long as BP holds 50% or more of our share
capital. We have not been granted any other rights to use the
"BP" trademark and are required to phase out all uses
of this trademark on or before April 1, 2006.
Master Tax Agreements
We have entered into two Master Tax Agreements with BP, one with
respect to taxation in the United States (the U.S. Tax
Agreement), and one with respect to taxation in the rest of the
world (the ROW Tax Agreement).
U.S. Master Tax Agreement
The U.S. Tax Agreement regulates the ongoing arrangements
between us and BP in relation to U.S. tax matters, including the
preparation and submission of tax returns and the conduct of tax
audits and litigation. Under the U.S. Tax Agreement, BP has
generally agreed to assume, and to indemnify us for, U.S.
federal, state or local tax liabilities of our businesses
arising on or before April 1, 2005, and U.S. federal, state
or local tax liabilities of any BP entity not associated with
our businesses arising after April 1, 2005. We have agreed
to assume, and to indemnify BP for, any U.S. federal, state or
local tax liabilities of our businesses arising after
April 1, 2005.
BP has also agreed to assume, and to indemnify us for, any U.S.
federal, state and local tax liabilities arising as a result of
our deconsolidation from BP. As a general matter, U.S. state or
local transfer tax liabilities arising as a result of our legal
separation from BP will be borne by the entity that is legally
responsible for such taxes under applicable law. In addition,
the U.S. Tax Agreement requires us to indemnify BP in the event
that our actions cause a recapture of any dual consolidated loss
incurred prior to the offering that is related to any business
owned by us at the time of the offering. Moreover, each party to
the U.S. Tax Agreement will be required under certain
circumstances to pay compensation if one party uses a tax credit
or loss generated by the other party.
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Rest of the World Tax Agreement
Under the ROW Tax Agreement, BP has generally agreed to assume,
and indemnify us for, non-U.S. tax liabilities arising prior to
April 1, 2005, and we have generally agreed to assume, and
indemnify BP for, non-U.S. tax liabilities arising on or after
April 1, 2005. Any other separation-related non-U.S. tax
liabilities generally will be paid by the party on which it has
been assessed provided that taxes payable on the transfer of
shares and assets will be borne by us. We will also be liable
for any separation-related non-U.S. tax liabilities where the
relevant tax is jointly payable by us and BP. The ROW Tax
Agreement also regulates the ongoing relationship between us and
BP in relation to other non-U.S. tax matters, for example, in
relation to tax compliance, and includes provisions which allow
both parties to share tax assets, subject to appropriate
compensation payments.
Commercial Interface Agreements
We have entered into a series of commercial interface agreements
with BP to maintain and enhance our existing relationships by
establishing medium- to long-term arrangements for services,
utilities and infrastructure access rights in situations where
we or BP depend on each other or where reasonable alternatives
do exist but it is nevertheless economical for us and BP to
continue preexisting arrangements. We have also established
agreements for the sale and purchase of refining and
petrochemical feedstocks and refined products in situations
where we or BP have an interest in establishing a secure source
of feedstock supply or ensure the off-take of products, with the
term of these agreements in part depending on the availability
of third-party alternatives. In addition, we have entered into
various agreements for the provision by BP to us of short-term
transitional services, such as information technology
infrastructure, which we cannot readily replicate as a new
company but which we expect to have the ability to provide
in-house or outsource to a third party at the end of the initial
term of these agreements.
The commercial interface agreements include:
•
Hydrocarbons Sale and Purchase Agreements (SPAs);
•
Supply and Trading Agreements, which include the Master Services
    Agreements, the Sale and Purchase Agreements and the Foreign
    Exchange and Precious Metals Agreements;
•
Shipping Services Agreements;
•
Inland Refined Product Sale and Purchase Agreements;
•
FIAs, including the Utilities FIAs, Complex Infrastructure FIAs,
    Shared Services FIA and Functional Services FIAs; and
•
Site Cooperation Agreements.
Set forth below is a summary of the key principles on which
these commercial interface agreements are based. We believe that
these principles will allow us to operate successfully as a
standalone entity and maintain secure commercial relationships
with BP.
No stranding of key infrastructure.
We have agreed with
BP that when a term sheet under a Hydrocarbons SPA or site-based
FIA expires neither party should be left stranded, land-locked
or cut off from alternative sources of supply of the feedstock
or service covered by the term sheet. Accordingly, upon
expiration of a term sheet, the stranded party generally will be
entitled to request the other party to allow it to access and
use for a period of not more than five years any infrastructure
owned by that party which it considers in good faith to be
necessary for the continued supply or purchase, as applicable,
of the relevant feedstock or service from the relevant third
party.
Pricing arrangements.
Prices for the sale and purchase of
petrochemical and refining feedstocks as between us and BP are
generally based on formulas designed to reflect market prices.
Services, utilities and complex infrastructure access rights
provided to us by BP are generally priced at cost, which
includes BP's fixed and variable costs and, where fixed
assets are involved in providing the service, a fixed return on
capital investment.
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Term and termination.
The initial term of the commercial
interface agreements and related term sheets generally runs from
January 1, 2005. The medium- to long-term nature of many of
these agreements allows us to secure the supply of products and
services for which we may not have ready third-party
alternatives and also reflects BP's desire to have a
guaranteed purchaser for certain of its products and services.
Hydrocarbons Sale and Purchase Agreements
The Hydrocarbons SPAs govern the sale and purchase of
petrochemical feedstocks at or between sites where we and BP
have a continuing relationship with each other.
Each of the agreements is in substantially the same form, with
only minor jurisdiction- and site-specific differences. Each
agreement is a master agreement describing the general terms and
conditions on which the relevant feedstocks are sold and
purchased as between us and BP. The commercial terms for each
relevant petrochemical feedstock are set out in a separate term
sheet appended to the relevant agreement.
Neither the agreements themselves nor the relevant term sheets
executed on the basis of these agreements may be terminated
prior to the expiry of an initial term set forth in the relevant
term sheet, unless a termination event or extended force majeure
event occurs or the parties mutually agree to terminate the
relevant term sheet. Termination events include breach of a
material obligation, insolvency and failure to make any payment
of an amount (other than an amount subject to a bona fide
dispute) in excess of, in most cases, $500,000 when due and such
amount is not paid for 60 days following notification by
the other party. Unless terminated, most of the term sheets
automatically renew at the end of their initial term.
The most significant term sheets we have entered into with BP
are discussed below.
NGLs in South Houston, Texas.
To address our and
BP's mutual requirements for the sale and purchase of NGLs
at our Chocolate Bayou, Texas, site, we have entered into a term
sheet for the purchase by us of NGLs provided by BP for
processing at our gas fractionator near Hobbs, New Mexico,
further processing at BP's gas fractionator in Mont
Belvieu, Texas, and the supply of the resulting gas to the
olefins crackers of our Chocolate Bayou site. The NGL processing
arrangements have an initial term of ten years, while the gas
supply arrangements to our Chocolate Bayou site have
a five-year initial term. All of the relevant term sheets
are thereafter terminable on one year's notice. If, prior
to the end of the initial term, we become subject to a change in
control (other than a change in control caused by BP), BP has
the right to terminate these arrangements by providing notice in
accordance with the notice period set forth in the term sheet.
Propylene in Toledo, Ohio, Texas City, Texas, Whiting,
Indiana, and Carson, California.
We have entered into four
term sheets for the purchase by us of propylene from BP's
refineries in Toledo, Ohio, Texas City, Texas, Whiting, Indiana,
and Carson, California. The term sheet for the Carson facility
has a five-year initial term and is thereafter terminable on two
years' notice, and the term sheet for the Toledo facility
has a three-year initial term and is thereafter terminable on
two years' notice. The term sheets for the Texas City and
Whiting facilities each have an initial term of three years with
a notice period thereafter of one year.
NGLs in Grangemouth, United Kingdom.
Our Grangemouth,
United Kingdom, site is connected with the FPS, which transports
oil and gas from the North Sea to Scotland. BP stabilizes the
oil and separates the associated gas at its Kinneil, Scotland,
site, which is adjacent to our Grangemouth site and provides dry
gas, propane, butane and condensate to Grangemouth. BP requires
a constant off-take of these products and a constant supply of
utilities to enable the FPS to continue in operation, and we
depend on constantly purchasing feedstocks for our operations at
the site. Accordingly, we have entered into a term sheet for the
off-take of feedstocks from the FPS with an initial term of
13 years, which is thereafter terminable on three
years' notice. If, prior to the end of the initial term, we
become subject to a change in control (other than a change in
control caused by BP), BP has the right to terminate these
arrangements by providing notice in accordance with the notice
period set forth in the term sheet.
Naphtha in Cologne, Germany.
Our Cologne, Germany, site
primarily uses naphtha as the feedstock for its cracker.
Approximately one-third of the facility's naphtha
requirements is provided under a term sheet pursuant to which BP
has agreed to supply naphtha from a facility in Nerefco, The
Netherlands, via the RMR pipeline. The
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term sheet has an initial term of three years from
January 1, 2005 and is thereafter terminable on two
years' notice.
Supply and Trading Agreements
We have entered into various Supply and Trading Agreements with
BP under which BP will, for a limited period of time, provide us
with certain supply, trading and optimization services in areas
in which we currently have no or only limited in-house
capability. The agreements have been structured so as to enable
us to develop the necessary capabilities in-house by the end of
the initial term of these agreements. The main agreements may be
divided into Master Services Agreements and Sale and Purchase
Agreements. We have also entered into a series of Foreign
Exchange and Precious Metals Agreements with BP for the
provision of foreign exchange and interest rate services and
services relating to the sale and/or lease of certain precious
metals used as catalysts but because these agreements are less
material, they are not described below.
Master Services Agreements
We have entered into a series of Master Services Agreements with
BP under which BP has agreed to provide us with certain
commercial services where we currently have no or only limited
in-house capability. We have entered into Master Services
Agreements for:
•
commercial optimization services, including asset trading, cargo
    balancing and inventory and working capital management with
    respect to (1) naphtha, gas and benzene at our facilities
    in North America, (2) crude oil, feedstocks and refined
    products in Europe and (3) the trading of certain
    petrochemical products in Asia;
•
sale and purchase execution services for (1) naphtha and
    gas at our facilities in North America and (2) crude oil,
    feedstocks and refined products in Europe; and
•
various other services, such as inventory and excise tax
    accounting and invoicing services at our facilities in the
    United Kingdom and France.
Each service provided under a Master Service Agreement may be
terminated by either party. Notice periods range from three to
twelve months, depending on the agreement, provided that in most
cases no notice may be given prior to December 31, 2005.
The termination of a particular type of service does not affect
any contracts or agreements that have already been entered into
between us and BP under one of the Master Services Agreements or
any schedules entered into under the Sale and Purchase
Agreements described below. The prices payable by us for the
various types of services are set out in schedules to the
relevant agreements and generally consist of a combination of a
fixed fee and a value sharing element.
Each agreement provides that, following a change in control, we
and BP will enter into negotiations in good faith for a period
of two months following the event to make any amendments
necessary to enable us to comply with law. If no amendment is
agreed, either party may terminate the agreement without
liability to the party, except for certain mark-to-market
termination payments that may be due in respect of certain
terminated transactions.
The various agreements remain in effect until a termination
event, a change in control (as described above) or an extended
force majeure event occurs. Termination events include breach of
a material obligation, insolvency of either party and failure to
make any payment in an amount (other than an amount subject to a
bona fide dispute) greater than that set forth in the agreement
when due for 60 days following notification by the other
party.
Sale and Purchase Agreements
We have also entered into a series of Sale and Purchase
Agreements with BP under which BP has agreed to sell to, or
purchase from, us crude oil, naphtha, gas and refined products
purchased from, or to be sold to, a third party in situations
where BP has the commercial relationship with the third party.
Each agreement governs a different type of product. The
agreements include an Amended and Restated Master Feedstock
Sales and
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Purchase Agreement in respect of Crude Oil, an Amended and
Restated Master Refined Products Sale and Purchase Agreement and
two Amended and Restated Master Feedstock Sales and Purchase
Agreement for Naphtha, NGL and Other Feedstock Volumes,
including one for our facilities in Europe and one for those in
the United States.
None of the agreements has a fixed term. Instead, the agreements
remain in effect until a termination event or a change in
control occurs (as described above) or one of the parties
terminates the agreement on twelve months' notice at the
end of a calendar year quarter. Termination events include
breach of a material obligation, insolvency of either party or
failure to make any payment in an amount greater than
$10 million when due for 60 days following
notification by the other party.
For each trade or series of trades under an agreement, a
separate schedule to the relevant agreement will be executed.
Each schedule contains the specific terms associated with the
relevant trade and incorporates by reference the relevant
provisions of the underlying initiating contract, which is the
contract under which BP has purchased the product to be sold to
us or the contract under which BP will on-sell the product
purchased from us. Termination of an agreement will not in
itself affect schedules already executed.
Shipping Services Agreements
We have entered into two Shipping Services Agreements with BP
under which BP will, for a short transitional period, provide us
with certain services where we currently have no or only limited
in-house capability. The shipping services we receive from BP
under these agreements include chemical movement services in
Europe and container movement services in Asia. The services
generally involve the negotiation of shipping contracts and
charters, assistance with maintaining shipping supplier
relationships, the provision of shipping market and price
information and assistance with identifying and recruiting
resources for building our own chartering capabilities. Each of
the agreements is in substantially the same form, subject to
service-specific and jurisdictional differences. The agreements
were intended to be transitional in nature, and we have already
terminated services under some of the agreements.
We have also entered into a Global Assurance Services Agreement
with BP under which BP will provide us with global assurance
services for certain marine activities. These services include
ship and shore interface audits, vessel owner audits, physical
inspections of ships and barges and support services in case of
marine emergencies. The agreement may be terminated, at our
option, by providing not less than one month's notice
provided that such notice may not be given prior to
June 30, 2005. BP may terminate the agreement in the event
of a termination event, such an extended force majeure, or six
months after BP ceases to have the power to remove or appoint a
majority of our Board of Directors or otherwise control our
affairs and policies. We are currently developing the necessary
plans to obtain these services from non-BP sources before the
possible occurrence of any termination event.
Inland Refined Products Sale and Purchase
Agreements
We have entered into Inland Refined Products Sale and Purchase
Agreements with BP for the domestic sale of certain refined
products. We have entered into separate agreements for our
Grangemouth, United Kingdom, and Lavéra, France,
refineries. Under each agreement, BP has agreed to purchase all
of the refined products we sell into the relevant domestic
market at market-based prices.
The agreement with respect to our Grangemouth refinery leverages
the refinery's position in its domestic market by providing
it with guaranteed access to BP's distribution network in
Scotland and northern England. Similarly, under the agreement
with respect to our Lavéra refinery, the vast majority of
the refinery's products are sold domestically and the
refinery's guaranteed access to BP as a customer for its
refined products in France under the relevant agreement should
help to mitigate competitive pressures from other refineries in
the region.
The agreements remain in effect until a termination event or an
event of extended force majeure occurs. Termination events
include breach of a material obligation, insolvency of either
party (but only in the case of the Grangemouth agreement) or
failure to make any payment in an amount greater than
$10 million when due for 60 days following
notification by the other party.
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Most of the term sheets under the Grangemouth agreement have
fixed terms ranging from three to seven years. Most of the term
sheets under the Lavéra agreement terminate between 2008
and 2011 and may generally be terminated upon written notice
with notice periods ranging from one to three years, depending
on the refined product.
Under the Grangemouth agreement, we are required to sell our
refinery products exclusively to BP, but only for so long as BP
holds a majority of the voting rights in our company. If BP
ceases to hold at least 50% of our voting rights, the
exclusivity arrangements may be terminated by either party on
twelve months' notice from the earlier of the date that
BP's voting rights in us falls below 50% or January 1,
2007 (except in the case of jet fuel). Under the Lavéra
agreement, we are required to sell our refinery products
exclusively to BP, with certain limited exceptions. In return,
BP has agreed to compensate us for the restraints that this
exclusivity imposes on our business.
Framework Interface Agreements
General
We have entered into various FIAs for the provision by us to and
vice-versa BP of services and utilities at certain shared sites
and in some cases between our respective sites. These agreements
range from short-term, transitional arrangements for services
which we will eventually establish on an in-house basis or will
outsource to an alternative supplier to long-term arrangements
in areas where we and BP depend on each other.
The agreements may be categorized as follows:
•
Utilities FIAs, which govern arrangements for utility supply,
    including electricity, water and gas;
•
Complex Infrastructure FIAs, which govern access rights to
    infrastructure, such as jetties, pipelines and storage
    facilities at our facilities in Texas City, Texas, and
    Grangemouth, United Kingdom;
•
Shared Services FIAs, which govern shared services, such as
    laboratory services, medical services and facilities management
    services; and
•
Functional Services FIAs, which govern the provision of
    functions, such as information technology, accounting, human
    resources, tax, legal and health and safety services.
Each agreement describes the general terms and conditions on
which services are to be provided. The specific terms applicable
to particular services are set forth in separate term sheets
appended to the relevant agreement. Most of the term sheets
continue on an evergreen basis and automatically renew, unless a
termination event or extended force majeure event occurs prior
to the expiration of the term.
The services provided under the various agreements generally may
be categorized as strategic, normal, transitional or
pass-through.
Strategic services are characterized by a high degree of mutual
dependence between us and BP and the lack of viable
alternatives. Strategic services include certain
infrastructure-related services, such as marine, road or rail
services, access to storage facilities and, generally, pipelines
and key utilities. Strategic services are terminable by either
party on 48 months' notice, provided that no notice
may be given prior to January 1, 2015.
Transitional services are services provided on a temporary
basis. Most of the services terminate no later than
December 31, 2006, although certain term sheets are
renewable until December 31, 2007. Examples of transitional
services include the services provided under the Functional
Services FIAs, such as employee training and ancillary
facilities services. Transitional services are terminable at our
option on six months' notice or four months' notice in
the case of term sheets executed under the Functional Services
FIAs.
Pass-through services are services provided to either us or BP
by a third party where the benefit of the service is
"passed through" to the other party as the third
party's customer. Examples of such services include payroll
services, corporate relationship services, security services and
certain utility supplies. Pass-through services are terminable
in accordance with the terms of the underlying third party
pass-through contract.
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Services that do not fall within any of these categories are
categorized as "normal" services and include services
where reasonable alternatives exist but where it is nevertheless
economical for both parties to continue preexisting
arrangements. Examples of this type of service include
facilities management, medical services, security services,
storehousing services, canteen services and fire brigade
services. Most normal services are terminable by either party on
12 months' notice provided that no notice may be given
prior to January 1, 2008.
Utilities FIAs
We have entered into Utilities FIAs with BP at our sites in
Carson, California, Whiting, Indiana, and Texas City, Texas, in
North America and Geel, Belgium and Grangemouth, United Kingdom,
in Europe for the provision of certain utilities at cost-based
prices. Depending on the type of utility, the initial term under
the relevant term sheets ranges from one month to several years.
The most significant term sheets include:
•
a five-year term sheet for the provision of gas fuel from BP to
    us in Texas City. The term-sheet can be terminated by BP on 30
    days notice at any time and by us after December 31, 2009
    on two years notice; and
•
ten-year term sheets with a four-year notice period for the
    provision of steam and power services from us to BP in
    Grangemouth.
Complex Infrastructure FIAs
We have entered into Complex Infrastructure FIAs with BP at our
sites in Texas City, Texas, and Grangemouth, United Kingdom, for
the provision of certain access rights. Generally these rights
are provided at cost. The term of the complex infrastructure
term sheets ranges from two to 13 years. The most
significant term sheets include:
•
a 13-year term sheet with a two-year notice period granting us
    long-term access to the LPG export/import terminals at our
    Grangemouth site; and
•
a 13-year term sheet granting BP long-term access to the
    condensate systems which we lease from BP near the Grangemouth
    site.
Shared Services FIAs
We have entered into Shared Services FIAs with BP with respect
to our sites in Grangemouth, United Kingdom, Hull, United
Kingdom, and Geel, Belgium, in Europe and Carson, California,
La Porte, Texas, Pasadena, Texas, Texas City, Texas, and
Whiting, Indiana, in North America for the provision of certain
shared services at cost-based prices. Most of the services
provided under the Shared Services FIAs are normal, transitional
or pass-through services and thus have initial terms ranging
from two to five years with notice periods ranging from six to
twelve months.
Functional Services FIAs
We have entered into eight Functional Services FIAs under which
BP has agreed to provide us with head office services at
cost-based prices in areas such as information technology,
accounting, human resources, tax, legal and health and safety,
pending our development of internal capabilities in these areas.
In some instances, we have agreed to provide functional services
to BP where BP no longer has the relevant capabilities as a
result of the separation.
Agreements have been established for our sites in Belgium,
Canada, France, Germany, the United Kingdom and the United
States and for our operations in Asia. In addition, we have
entered into separate agreements for certain administrative
services provided from BP to our operations in the United States
and Asia. The agreements are all in substantially the same form,
subject to jurisdictional variations. The key commercial terms
for each service to be provided are set forth in separate term
sheets appended to the relevant agreements.
All of the functional services are either transitional or
pass-through in nature and terminate on or before
December 31, 2006. We are entitled to terminate most
transitional services at any time on four months' notice.
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Following termination of a service, BP is generally required to
use reasonable efforts to assist us in migrating the relevant
service to a new service provider or an in-house function.
Site Cooperation Agreements
We have entered into various Site Cooperation Agreements with BP
to establish rules and procedures to facilitate our operations
at certain key sites that we share with BP. We have agreements
in place for our sites in Carson, California, Naperville,
Illinois, Texas City, Texas, Whiting, Indiana, Geel, Belgium,
and Grangemouth, United Kingdom.
At each shared site, a site board has been established, which is
comprised of one representative from us and one representative
from BP. Each site board is responsible for governance and
policy coordination (including the implementation and oversight
of joint site rules), strategy and new developments, reputation
and conflict resolution. Each site board is authorized to
establish joint site committees responsible for matters relating
to the relevant sites, such as HSSE matters.
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DESCRIPTION OF CAPITAL STOCK
The following descriptions are summaries of material terms of
our certificate of incorporation and bylaws as each will be in
effect upon the completion of the offering. These descriptions
may not contain all of the information that is important to you.
To understand the material terms of our certificate of
incorporation and bylaws fully, you should read our certificate
of incorporation and bylaws, copies of which are filed with the
SEC as exhibits to the registration statement of which this
prospectus is a part. The following descriptions are qualified
in their entirety by reference to the certificate of
incorporation and bylaws and applicable law.
Upon the completion of the offering, our authorized capital
stock will consist
of                      shares
of common stock, par value $0.01 per share
and                      shares
of preferred stock, par value $0.01 per share. As
of                     ,
2005, there
were                      shares
of common stock outstanding, all of which were held by the BP
group. Upon completion of this offering, we will
have                      shares
of common stock outstanding. In addition, as
of                     ,
2005, shares of our common stock were reserved for issuance
under our stock option plans, and options to
purchase                      shares
of our common stock were outstanding.
Description of Common Stock
We are authorized to issue one class of common stock. Our
shareholders will be entitled to one vote for each share of our
common stock held of record on all matters on which shareholders
are entitled or permitted to vote. Our common stock will not
have cumulative voting rights with respect to the election of
directors. As a result, holders of a majority of the shares of
our common stock voting for the election of directors can elect
all the directors standing for election. Upon completion of this
offering, BP will own a majority of the shares of our
outstanding common stock. See "Principal Shareholder"
and "Risk Factors — Risks Related to Our
Relationship with BP." Holders of our common stock will be
entitled to receive dividends, if any, out of legally available
funds when and if declared from time to time by our Board of
Directors. See "Dividend Policy." In the event of our
liquidation, dissolution or winding up, the holders of our
common stock will be entitled to share ratably in all assets
remaining after payment of liabilities, subject to the rights of
any then-outstanding preferred stock. Our common stock will have
no preemptive, subscription or conversion rights, and there are
no redemption or sinking fund provisions applicable to our
common stock. The rights, preferences and privileges of holders
of our common stock will be subject to, and may be adversely
affected by, the rights of holders of shares of any series of
preferred stock that we may designate and issue in the future.
All outstanding shares of our common stock are fully paid and
nonassessable and the shares of common stock offered hereby will
be fully paid and nonassessable.
Anti-Takeover Effects of Provisions of Our Amended and
Restated Certificate of Incorporation and Bylaws
Certain provisions of our certificate of incorporation and
bylaws that may have the effect of delaying, discouraging, or
preventing a merger or acquisition that our shareholders may
consider favorable, including transactions in which shareholders
might receive a premium for their shares. These provisions
include:
•
authorizing our Board of Directors to issue shares of preferred
    stock in one or more series and to fix the rights and
    preferences of the shares of any such series without stockholder
    approval;
•
providing that no more than one-third of the members of our
    Board of Directors stand for re-election by the stockholders at
    each annual meeting;
•
permitting the removal of a director from office only for cause
    and only by the affirmative vote of the holders of at least a
    majority of the shares of our capital stock entitled to vote;
•
vesting the Board of Directors with sole power to set the number
    of directors;
•
providing that any vacancy on the Board of Directors, however
    occurring, including a vacancy resulting from an enlargement of
    the board, may only be filled by vote of the directors then in
    office;
•
allowing a special meeting of the stockholders to be called only
    by a majority of the Board of Directors, the chairman of our
    Board of Directors, the president, the chief executive officer
    or BP (for so long as the BP group or any designated direct
    transferee beneficially owns at least 10% of the outstanding
    shares of our common stock);
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•
prohibiting stockholder action by written consent on or after
    the first date on which the BP group or any designated direct
    transferee of the BP group ceases to beneficially own at least
    50% of the shares of our capital stock entitled to vote;
•
requiring the affirmative vote of the holders of at least 80% of
    the outstanding shares of our common stock to effect certain
    amendments to our charter or bylaws, for so long as the BP group
    or its designated direct transferee owns at least 10% of the
    outstanding shares of our common stock; and
•
requiring formal advance notice by shareholders for nominations
    for election to our Board of Directors or for proposing matters
    that can be acted upon at shareholders' meetings, other
    than BP or any designated direct transferee of the BP group (so
    long as such person owns at least 10% of the outstanding shares
    of our common stock).
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, our
certificate of incorporation and bylaws contain provisions that
limit or eliminate the personal liability of our directors for a
breach of their fiduciary duty of care as a director. The duty
of care generally requires that, when acting on behalf of a
corporation, directors exercise an informed business judgment
based on all material information reasonably available to them.
Consequently, a director will not be personally liable to us or
our shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability for:
•
any breach of the director's duty of loyalty to us or our
    shareholders,
•
any act or omission not in good faith or that involve
    intentional misconduct or a knowing violation of law,
•
any act related to unlawful stock repurchases, redemptions or
    other distributions or payment of dividends, or
•
any transaction from which the director derived an improper
    personal benefit.
The duty of loyalty generally requires that, when acting on
behalf of a corporation, officers and directors act in the best
interests of the corporation and its shareholders. In
circumstances where an officer or director owes fiduciary duties
to more than one entity it can be difficult for such person to
satisfy duties of loyalty to both entities. Our bylaws provide
that transactions that we enter into in which a director or
officer has a conflict of interest are generally permissible so
long as (1) the material facts relating to the
director's or officer's relationship or interest as to
the transaction are disclosed to our Board of Directors and a
majority of our disinterested directors approves the
transaction, (2) the material facts relating to the
director's or officer's relationship or interest as to
the transaction are disclosed to our shareholders and a majority
of our disinterested shareholders approves the transaction, or
(3) the transaction is otherwise fair to us.
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission.
Additionally, as permitted by the Delaware General Corporation
Law, our certificate of incorporation and bylaws provide that:
•
we shall indemnify our directors and officers to the fullest
    extent permitted by the Delaware General Corporation Law,
•
we shall advance expenses to our directors and officers in
    connection with a legal proceeding to the fullest extent
    permitted by the Delaware General Corporation Law, subject to
    limited exceptions, and
•
the rights provided in our certificate of incorporation and
    bylaws are not exclusive.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is           .
Listing
We have our common stock approved for quotation on the NYSE
under the trading symbol "INV."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for the
shares of our common stock. The sale of a substantial number of
shares of our common stock in the public market after the
offering, or the perception that such sales may occur, could
adversely affect our share price. Furthermore, because some of
our shares will not be available for sale shortly after the
offering due to the contractual and legal restrictions on resale
described below, the sale of a substantial number of shares of
our common stock in the public market after these restrictions
lapse could adversely affect our share price and our ability to
raise equity capital in the future.
Upon completion of the offering, we will
have            million
shares of common stock outstanding.
Of those shares, all of the shares of our common stock sold in
the offering will be freely tradable without restriction or
further registration under the Securities Act, unless the shares
are purchased by "affiliates" as that term is defined
in Rule 144 under the Securities Act. Any shares purchased
by an affiliate may not be resold except in compliance with
Rule 144 volume limitations, manner of sale and notice
requirements, pursuant to another applicable exemption from
registration or pursuant to an effective registration statement.
The shares of our common stock held by BP are "restricted
securities" as that term is defined in Rule 144 under
the Securities Act. These restricted securities may be sold in
the public market by BP only if they are registered or if they
qualify for an exemption from registration under Rule 144
or Rule 144(k) under the Securities Act. These rules are
summarized below.
Rule 144
In general, under Rule 144 as currently in effect, starting
90 days after the date of this prospectus, a person or
persons whose shares are aggregated, who have beneficially owned
restricted shares for at least one year, including persons who
may be deemed to be our "affiliates," would be
entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
•
1.0% of the number of shares of common stock then outstanding,
    which will equal
    approximately            million
    shares immediately after this offering; or
•
the average weekly trading volume of our common stock on the
    NYSE during the four calendar weeks before a notice of the sale
    on Form 144 is filed with the SEC.
Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability
of certain public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been
one of our "affiliates" at any time during the
90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including
the holding period of any prior owner other than an
"affiliate," is entitled to sell these shares without
complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Stock Issued Under Employee Plans
We intend to file registration statements on Form S-8 under
the Securities Act to register
approximately        million
shares of common stock issuable, with respect to options to be
granted, or otherwise, under the Conversion Plan, the Incentive
Plan and the Innovene Executive Share Matching Plan. Currently,
there are no outstanding options to purchase shares of our
common stock. These registration statements are expected to be
filed following the closing of the offering. Shares issued upon
the exercise of stock options after the effective date of the
Form S-8 registration statements will be eligible for
resale in the public market without restriction, subject to
Rule 144 limitations applicable to affiliates.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS
This section summarizes certain United States federal income and
estate tax consequences of the ownership and disposition of
common stock by a non-U.S. holder. You are a
non-U.S. holder if you are, for United States federal
income tax purposes:
•
a nonresident alien individual,
•
a foreign corporation, or
•
an estate or trust that in either case is not subject to United
    States federal income tax on a net income basis on income or
    gain from common stock.
This section does not consider the specific facts and
circumstances that may be relevant to a particular
non-U.S. holder and does not address the treatment of a
non-U.S. holder under the laws of any state, local or
foreign taxing jurisdiction. This section is based on the tax
laws of the United States, including the Internal Revenue Code
of 1986, as amended, existing and proposed regulations, and
administrative and judicial interpretations, all as of the date
hereof. These laws are subject to change, possibly on a
retroactive basis.
If a partnership holds common stock, the United States federal
income tax treatment of a partner will generally depend on the
status of the partner and the tax treatment of the partnership.
A partner in a partnership holding common stock should consult
its tax advisor with regard to the United States federal income
tax treatment of an investment in common stock.
You should consult a tax advisor regarding the United States
federal tax consequences of acquiring, holding and disposing of
common stock in your particular circumstances, as well as any
tax consequences that may arise under the laws of any state,
local or foreign taxing jurisdiction.
Dividends
If you are a non-U.S. holder of common stock, dividends
paid to you are subject to withholding of United States federal
income tax at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a
lower rate. Even if you are eligible for a lower treaty rate, we
and other payors will generally be required to withhold at a 30%
rate (rather than the lower treaty rate) on dividend payments to
you, unless you have furnished to us or another payor:
•
a valid Internal Revenue Service Form W-8BEN or an
    acceptable substitute form upon which you certify, under
    penalties of perjury, your status as (or, in the case of a
    non-U.S. holder that is a partnership or an estate or
    trust, such forms certifying the status of each partner in the
    partnership or beneficiary of the estate or trust as) a
    non-United States person and your entitlement to the lower
    treaty rate with respect to such payments, or
•
in the case of payments made outside the United States to an
    offshore account (generally, an account maintained by you at an
    office or branch of a bank or other financial institution at any
    location outside the United States), other documentary evidence
    establishing your entitlement to the lower treaty rate in
    accordance with U.S. Treasury regulations.
If you are eligible for a reduced rate of United States
withholding tax under a tax treaty, you may obtain a refund of
any amounts withheld in excess of that rate by filing a refund
claim with the Internal Revenue Service.
If dividends paid to you are "effectively connected"
with your conduct of a trade or business within the United
States, and, if required by a tax treaty, the dividends are
attributable to a permanent establishment that you maintain in
the United States, we and other payors generally are not
required to withhold tax from the dividends, provided that you
have furnished to us or another payor a valid Internal Revenue
Service Form W-8ECI or an acceptable substitute form upon
which you represent, under penalties of perjury, that:
•
you are a non-United States person, and
•
the dividends are effectively connected with your conduct of a
    trade or business within the United States and are includible in
    your gross income.
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"Effectively connected" dividends are taxed at rates
applicable to United States citizens, resident aliens and
domestic United States corporations.
If you are a corporate non-U.S. holder, "effectively
connected" dividends that you receive may, under certain
circumstances, be subject to an additional "branch profits
tax" at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a
lower rate.
Gains on Disposition of Common Stock
If you are a non-U.S. holder, you generally will not be
subject to United States federal income tax on any gain that you
recognize on a disposition of common stock unless:
•
the gain is "effectively connected" with your conduct
    of a trade or business in the United States, and the gain is
    attributable to a permanent establishment that you maintain in
    the United States, if that is required by an applicable income
    tax treaty as a condition for subjecting you to United States
    taxation on a net income basis,
•
you are an individual, you hold the common stock as a capital
    asset, you are present in the United States for 183 or more days
    in the taxable year of the sale and certain other conditions
    exist, or
•
we are or have been a United States real property holding
    corporation for United States federal income tax purposes and
    you held, directly or indirectly, at any time during the
    five-year period ending on the date of disposition, more than 5%
    of the common stock and you are not eligible for any treaty
    exemption.
If you are a corporate non-U.S. holder, "effectively
connected" gains that you recognize may also, under certain
circumstances, be subject to an additional "branch profits
tax" at a 30% rate or at a lower rate if you are eligible
for the benefits of an income tax treaty that provides for a
lower rate.
We have not been, are not and do not anticipate becoming a
United States real property holding corporation for United
States federal income tax purposes.
Federal Estate Taxes
Common stock held by a non-U.S. holder at the time of death
will be included in the holder's gross estate for United
States federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
Backup Withholding and Information Reporting
If you are a non-U.S. holder, you are generally exempt from
backup withholding and information reporting requirements with
respect to:
•
dividend payments and
•
the payment of the proceeds from the sale of common stock
    effected at a United States office of a broker, as long as the
    income associated with such payments is otherwise exempt from
    United States federal income tax, provided, in each case:
•
the payor or broker does not have actual knowledge or reason to
    know that you are a United States person and:
•
you have furnished to the payor or broker a valid Internal
    Revenue Service Form W-8BEN or an acceptable substitute
    form upon which you certify, under penalties of perjury, that
    you are (or, in the case of a non-U.S. holder that is a
    partnership or an estate or trust, such forms certifying that
    each partner in the partnership or beneficiary of the estate or
    trust is) a non-United States person, or
•
you have furnished to the payor or broker other documentation
    upon which it may rely to treat the payments as made to a
    non-United States person in accordance with U.S. Treasury
    regulations, or
•
you otherwise establish an exemption.
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However, we, or a paying agent, are required to report payments
of dividends on common stock on Internal Revenue Service
Form 1042-S.
Payment of the proceeds from the sale of common stock effected
at a foreign office of a broker generally will not be subject to
information reporting or backup withholding. However, a sale of
common stock that is effected at a foreign office of a broker
will be subject to information reporting and backup withholding
if:
•
the proceeds are transferred to an account maintained by you in
    the United States,
•
the payment of proceeds or the confirmation of the sale is
    mailed to you at a United States address, or
•
the sale has some other specified connection with the United
    States as provided in U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to
know that you are a United States person and the documentation
requirements described above are met or you otherwise establish
an exemption.
In addition, a sale of common stock will be subject to
information reporting if it is effected at a foreign office of a
broker that is:
•
a United States person,
•
a controlled foreign corporation for United States tax purposes,
•
a foreign person 50% or more of whose gross income is
    effectively connected with the conduct of a United States trade
    or business for a specified three-year period, or
•
a foreign partnership, if at any time during its tax year:
•
one or more of its partners are "U.S. persons,"
    as defined in U.S. Treasury regulations, who in the
    aggregate own more than 50% of the income or capital interest in
    the partnership, or
•
such foreign partnership is engaged in the conduct of a United
    States trade or business,
unless the broker does not have actual knowledge or reason to
know that you are a United States person and the documentation
requirements described above are met or you otherwise establish
an exemption. Backup withholding will apply if the sale is
subject to information reporting and the broker has actual
knowledge that you are a United States person.
You generally may obtain a refund of any amounts withheld under
the backup withholding rules that exceed your United States
federal income tax liability by filing a refund claim with the
Internal Revenue Service.
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UNDERWRITING
We and the underwriters named below have entered into an
underwriting agreement with respect to the shares of our common
stock being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs &
Co. and Morgan Stanley & Co. Incorporated are the
representatives of the underwriters.
Underwriters
Number of shares
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc
UBS Securities LLC
Total
The underwriters are committed to take and pay for all of the
shares being offered, if any are taken, other than the shares
covered by the option described below unless and until this
option is exercised.
If the underwriters sell more shares than the total number set
forth in the table above, the underwriters have an option to buy
up to an
additional                     shares
from us to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option,
the underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.
The following table shows the per share and total underwriting
discounts and commissions to be paid to the underwriters by BP.
Such amounts are shown assuming both no exercise and full
exercise of the underwriters' option to
purchase                     additional
shares.
No exercise
Full exercise
($)
Per share
Total
Shares sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$          per
share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount
of up to
$          per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms.
Prior to the offering, there has been no public market for the
shares. The initial public offering price has been negotiated
among us and the representatives. Among the factors to be
considered in determining the initial public offering price of
the shares, in addition to prevailing market conditions, will be
our historical performance, estimates of the business potential
and earnings prospects of us, an assessment of our management
and the consideration of the above factors in relation to market
valuation of companies in related businesses.
An application has been made to list the common stock on the New
York Stock Exchange under the symbol "INV." In order
to meet one of the requirements for listing the common stock on
the NYSE, the underwriters have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial holders.
In connection with the offering, the underwriters may purchase
and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Shorts
sales involve the sale by the underwriters of a greater number
of shares than they are required to purchase in the offering.
"Covered" short sales are sales made in an amount not
greater than the underwriters' option to purchase
additional shares from us in the offering. The underwriters may
close out any covered short position by either exercising their
option to purchase additional shares or purchasing shares in the
open market. In determining the source of shares to close out
the covered short position, the underwriters will consider,
among other things, the price of shares available for purchase
in the open market as compared to the
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price at which they may purchase additional shares pursuant to
the option granted to them. "Naked" short sales are
any sales in excess of such option. The underwriters must close
out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of various
bids for or purchases of common stock made by the underwriters
in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of such underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or retarding a decline in the
market price of our common stock, and together with the
imposition of the penalty bid, may stabilize, maintain or
otherwise affect the market price of the common stock. As a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued at any time.
These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
Each of the underwriters has represented and agreed that:
(a) it has not made or will not make an offer of shares to
the public in the United Kingdom within the meaning of section
102B of the Financial Services and Markets Act 2000 (as amended)
(FSMA) except to legal entities which are authorised or
regulated to operate in the financial markets or, if not so
authorised or regulated, whose corporate purpose is solely to
invest in securities or otherwise in circumstances which do not
require the publication by us of a prospectus pursuant to the
Prospectus Rules of the Financial Services Authority (FSA);
(b) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section 21 of FSMA) to persons who
have professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 or
in circumstances in which section 21 of FSMA does not apply
to us; and
(c) it has complied with, and will comply with all
applicable provisions of FSMA with respect to anything done by
it in relation to the shares in, from or otherwise involving the
United Kingdom.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
"Relevant Member State"), each underwriter has
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the "Relevant Implementation
Date") it has not made and will not make an offer of shares
to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the shares which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive,
except that it may, with effect from and including the Relevant
Implementation Date, make an offer of shares to the public in
that Relevant Member State at any time:
(a) to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the last
financial year; (2) a total balance sheet of more than
€
43,000,000 and
(3) an annual net turnover of more than
€
50,000,000, as
shown in its last annual or consolidated accounts; or
(c) in any other circumstances which do not require the
publication by us of a prospectus pursuant to Article 3 of
the Prospectus Directive.
For the purposes of this provision, the expression an
"offer of shares to the public" in relation to any
shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the shares to be offered so as to enable an
investor to decide to purchase or subscribe
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the shares, as the same may be varied in that Member State by
any measure implementing the Prospectus Directive in that Member
State and the expression Prospectus Directive means Directive
2003/71/ EC and includes any relevant implementing measure in
each Relevant Member State.
The shares may not be offered or sold by means of any document
other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public
within the meaning of the Companies Ordinance (Cap. 32) of
Hong Kong, and no advertisement, invitation or document
relating to the shares may be issued, whether in Hong Kong
or elsewhere, which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the securities laws of
Hong Kong) other than with respect to shares which are or
are intended to be disposed of only to persons outside
Hong Kong or only to "professional investors"
within the meaning of the Securities and Futures Ordinance
(Cap. 571) of Hong Kong and any rules made thereunder.
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation or subscription or purchase, of the
securities may not be circulated or distributed, nor may the
securities be offered or sold, or be made the subject of an
invitation for subscription or purchase, whether directly or
indirectly, to persons in Singapore other than under
circumstances in which such offer, sale or invitation does not
constitute an offer or sale, or invitation for subscription or
purchase, of the securities to the public in Singapore.
The securities have not been and will not be registered under
the Securities and Exchange Law of Japan (the Securities and
Exchange Law) and each underwriter has agreed that it will not
offer or sell any securities, directly or indirectly, in Japan
or to, or for the benefit of, any resident of Japan (which term
as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any
other applicable laws, regulations and ministerial guidelines of
Japan.
The underwriters do not expect sales to discretionary accounts
to exceed five percent of the total number of shares offered.
We and BP estimate that their share of the total expenses of the
offering, excluding underwriting discounts and commissions, will
be approximately
$                    .
We and BP have agreed to indemnify the several underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933.
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for us and BP, for which they received or will receive
customary fees and expenses.
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VALIDITY OF THE SHARES
The validity of our common stock offered by this prospectus will
be passed upon for us by Sullivan & Cromwell LLP, New
York, New York, and for the underwriters by Davis
Polk & Wardwell.
EXPERTS
The combined financial statements of Innovene Inc. at December
31, 2003 and 2004 and for each of the three years in the period
ended December 31, 2004, appearing in this prospectus and
registration statement have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set
forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority
of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1 under the Securities Act that registers the shares
of our common stock to be sold in this offering. The
registration statement, including the attached exhibits and
schedules, contains additional relevant information about us and
our capital stock. The rules and regulations of the SEC allow us
to omit various information included in the registration
statement from this document.
In addition, upon completion of the offering, we will become
subject to the reporting and information requirements of the
Exchange Act and, as a result, will file periodic reports, proxy
statements and other information with the SEC. You may read and
copy this information at the public reference room of the SEC at
100 F Street, N.E., Washington, DC 20549. You may also obtain
copies of this information by mail from the public reference
room of the SEC, 100 F Street, N.E., Washington, DC 20549, at
prescribed rates. You may obtain information on the operation of
the public reference room by calling the SEC at
1 (800) SEC-0330.
The SEC also maintains an Internet website at http://www.sec.gov
that contains reports, proxy statements and other information
about issuers like us who file electronically with the SEC.
We intend to furnish our shareholders with annual reports
containing audited financial statements and make available to
our shareholders quarterly reports containing unaudited interim
financial information for the first three quarters of each
fiscal year.
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GLOSSARY
Term
Definition
Acrylonitrile-butadiene styrene (ABS)
ABS is a tough thermoplastic that has a variety of consumer
    appliance and automotive component uses. It is made from
    acrylonitrile, butadiene and styrene.
Acetonitrile
Acetonitrile is co-produced in the manufacture of acrylonitrile
    and is largely used in solvents.
Acrylic acid
Acrylic acid is produced from propylene and used in
    manufacturing absorbent polymers, coatings and
    adhesives/sealants.
Acrylonitrile
Acrylonitrile is a commodity used in a wide variety of consumer
    applications. It is used in the production of acrylic fiber, ABS
    and SAN. Acrylonitrile is manufactured from propylene, ammonia
    and air with the use of a catalyst.
Alkylation
Alkylation is a process for refining light products from the FCC
    to make high-octane gasoline.
Alpha olefins
See "Linear alpha olefins" and "Poly alpha
    olefins."
Ammonia
Ammonia is used in the manufacture of acrylonitrile, although
    its largest end use is in the manufacture of fertilisers. It is
    made from nitrogen and hydrogen with the use of a catalyst.
Asphalt
Asphalt, a refinery product, is a liquid used for road surfacing
    and roofing.
Benzene
Benzene is a building block for styrene and is also used to make
    cumene and nylon. It is mainly produced from refinery processes
    or as a co-product of steam cracker operations.
Butadiene
Butadiene, a gas, is one of the co-products of the steam
    cracking process and is used primarily in the production of
    polymers, principally synthetic rubbers such as SBR, which is
    used to manufacture tires and other rubber products.
Co-monomer
Co-monomers are mainly used in combination with ethylene to make
    some types of polyethylene.
Cracker
See "Olefins cracker."
Cumene
Cumene is produced from benzene and propylene and is used as a
    feedstock for producing phenol/acetone, which have large uses in
    the manufacture of plastics and resins.
Ethylene glycol (EG)
EG is an industrial chemical, primarily used in the manufacture
    of polyesters and antifreeze/coolants. It is produced from
    ethylene oxide.
Ethylene oxide (EO)
EO is mainly used to produce EG and industrial detergents. It is
    manufactured from ethylene and oxygen.
Ethanolamines
Ethanolamines are derivatives of EO used largely in industrial
    detergents and herbicides.
Ethylbenzene
Ethylbenzene is an intermediate made from benzene and ethylene
    and used to make styrene. Virtually all worldwide ethylbenzene
    production is consumed in the manufacture of styrene.
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Term
Definition
Ethylene
Ethylene is a flammable gas obtained in a process called steam
    cracking. Ethylene itself has no consumer applications, but is
    the basic feedstock for a large number of industrial uses,
    including the manufacture of polyethylene. Ethylene is a key
    building block for polyethylene, polystyrene, EO and other
    derivatives.
Ethylene dichloride
Ethylene dichloride is a liquid used as an intermediate to make
    polyvinyl chloride, which is used for water piping
    (outside/underground), sidings, as well as for sewers, drains,
    wastes and venting pipes and fittings. It is made from ethylene
    and chlorine.
Expandable polystyrene (EPS)
EPS is polystyrene that, when heated, forms a lightweight foam
    used for packaging and insulation purposes. Styrene is the main
    feedstock to manufacture EPS.
Fluidized catalytic cracker (FCC)
An FCC is a type of oil refining cracker that makes gasoline
    components with high octane levels and some co-produced lighter
    products.
Fractionator
A fractionator splits gas into its components ethane, propane,
    butane and other NGLs.
Gas
Gas includes methane, ethane, butane and propane.
Glycol ethers
Glycol ethers are used as solvents in paints, inks and cleaning
    fluids, and are derivatives of EO.
Hydrocracker (HC)
An HC is a type of oil refining cracker which makes refined
    products such as diesel and jet fuel, as well as some co-product
    quantities of LPGs.
High-density polyethylene (HDPE)
HDPE is a type of polyethylene and is a relatively tough
    thermoplastic. Its most common household use is container
    plastics. HDPE is also commonly used for molding, pipe and thin
    film applications.
Heating gas oil
Heating gas oil is a refinery product.
Hydrocarbons
Hydrocarbons is used to describe all compounds that consist of
    hydrogen and carbon. These include crude oil, natural gas, gas,
    olefins and their derivatives.
Hydrogen cyanide
Hydrogen cyanide is manufactured as a co-product of
    acrylonitrile. Hydrogen cyanide is an extremely hazardous gas
    used mainly to produce polymers, coatings and nylon, and for
    chemicals used in gold extraction.
Linear alpha olefins (LAOs)
LAOs are hydrocarbons in a straight chain formation which have
    physical characteristics and commercial uses that vary according
    to the length of the hydrocarbon chain. LAOs are co-monomers for
    certain types of polyethylene. They also have applications as
    surfactant intermediates, base oil for synthetic lubricants and
    drilling fluids. They are made from ethylene.
Low-density polyethylene (LDPE)
LDPE was the first type of polyethylene to be invented. Its most
    common household use is in plastic bags.
Linear low-density polyethylene (LLDPE)
LLDPE is a type of polyethylene and has basic properties similar
    to LDPE. LDPE and LLDPE are to a certain extent substitutable
    for each other. The most significant end use for LLDPE is film.
134
Table of Contents
Term
Definition
Liquified petroleum gas (LPG)
LPG is a mixture of gases, usually propane and butane, used as
    fuel in heating appliances and vehicles and also as a
    petrochemical feedstock.
Naphtha
Naphtha is a refinery product that is used as a gasoline
    component, but also serves as feedstock for petrochemical plants.
Natural gas liquids (NGL)
NGLs generally comprise a mixture of ethane, propane, butanes
    and smaller amounts of other lighter hydrocarbons.
Nitriles
Nitriles is used to describe acrylonitrile, its co-products and
    other products produced from ammonia feedstock.
Olefins
Olefins, including ethylene and propylene, are the key building
    blocks of the petrochemical industry and produce a large range
    of derivative products.
Olefins cracker
An olefins cracker breaks down naphtha or gas feedstocks into
    olefins, principally ethylene and propylene.
Organoleptic products
Organoleptic products, including caps and closures made from
    polyethylene, impart no taste or odor to the contents of the
    container.
Oxo-alcohols
Oxo-alcohols are a feedstock for intermediates which are used in
    many soft plastic products and solvent applications. They are
    largely produced from propylene feedstock.
Poly alpha olefins (PAOs)
PAOs are made by polymerising, or merging, several LAOs together
    and are mainly used as synthetic lubricants.
Propylene glycols (PGs)
PGs are an industrial chemical, mainly used to produce
    polyester, paints and coatings, airplane de-icers, antifreeze
    and industrial coolants. PG is made from propylene oxide.
Polyisobutylene (PIB)
PIB is a synthetic polymer available in a wide variety of
    viscosities for use in a broad range of industrial applications
    including lubricants, sealants, cling film, cables and adhesives.
Propylene oxide (PO)
PO is used in manufacture of polyurethane foams and to make
    propylene glycols (PG). PO is primarily made from propylene
    feedstock.
Polyethylene
Polyethylene (including HDPE, LDPE, and LLDPE) is the
    world's most widely used thermoplastic, manufactured by
    aggregating many ethylene and co-monomer molecules in a process
    called polymerization. Polyethylene is used primarily to produce
    films for packaging, agricultural applications, molded products,
    pipes and coatings.
Polymer
A polymer is a chemical compound usually made up of a large
    number of identical components linked together into long
    molecular chains.
Polypropylene
Polypropylene is the world's second most widely used
    thermoplastic after polyethylene. It is manufactured by the
    polymerization of propylene. It is used mainly for molding,
    filaments, fibers and films. Polypropylene is the most
    significant thermoplastic material used in molded containers and
    automotive applications.
Polystyrene
General purpose, or "crystal," polystyrene and high
    impact polystyrene are hard and brittle materials which are used
    mainly for packaging, appliance and electrical housings and
    insulation. Both forms are also used for plastic molding
    applications. Styrene is the main feedstock used to manufacture
    polystyrene.
135
Table of Contents
Term
Definition
Propylene
Propylene is a flammable gas which is largely derived either as
    a co-product of the refinery FCC process used to make gasoline
    or as a co-product of the steam cracking process used to make
    ethylene. Propylene has virtually no independent end use, but is
    an important input for a significant number of industrial
    products, and is the main feedstock used to make polypropylene
    and acrylonitrile.
Pygas
Pygas is a by-product of olefins production from steam crackers
    and is used by refineries as a liquid gasoline blending
    component.
Styrene-acrylonitrile (SAN)
SAN is made from styrene and acrylonitrile, used in variety of
    applications, including housewares and appliances.
Styrene-butadiene latex (SBL)
SBL is a polymer derivative made from styrene and butadiene,
    used mainly in paper coatings and carpet backing applications.
Styrene-butadiene rubber (SBR)
SBR is a polymer derivative made from styrene and butadiene,
    used mainly in manufacture of tires and other rubber products.
Solvents
Solvents are used to dissolve solids and keep them in liquid
    form.
Styrene
Styrene, a hydrocarbon which under normal conditions is a
    flammable liquid, is produced from ethylene and benzene, via
    ethylbenzene. The largest use of styrene is in the production of
    polystyrene, although it is also used in many other derivatives
    such as ABS, SBR, SBL and SAN.
Synthetic ethanol
Synthetic ethanol is a solvent used in personal care products,
    inks, household chemicals and industrial applications as well as
    in the manufacture of other chemical products.
Thermoplastic
A thermoplastic is a plastic which softens when heated and
    hardens again when cooled. Thermoplastics include polyethylene,
    polypropylene and polystyrene.
136
Table of Contents
INNOVENE Inc.
Index to Combined Financial Statements
Page
Combined Financial Statements as of and for the years ended
    December 31, 2002, 2003 and 2004 and the six months ended
    June 30, 2004 and 2005
Report of Independent Registered Public Accounting Firm
F-2
Combined Balance Sheets as of December 31, 2003 and 2004,
    and June 30, 2005 (unaudited)
F-3
Combined Statements of Operations for the years ended
    December 31, 2002, 2003 and 2004 and the six months ended
    June 30, 2004 and 2005 (unaudited)
F-4
Combined Statements of Owner's Equity and Comprehensive
    Income for the years ended December 31, 2002, 2003 and 2004
    and the six months ended June 30, 2005 (unaudited)
F-5
Combined Statements of Cash Flows for the years ended
    December 31, 2002, 2003 and 2004 and the six months ended
    June 30, 2004 and 2005 (unaudited)
F-6
Notes to Combined Financial Statements
F-8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Owner
Innovene Inc.
We have audited the accompanying combined balance sheets of
Innovene Inc. as of December 31, 2004 and 2003, and the
related combined statements of operations, owner's equity
and comprehensive income, and cash flows for each of the three
years in the period ended December 31, 2004. Our audits
also included the financial statement schedule listed at
Item 16(b). These financial statements and schedule are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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 financial statements referred to above
present fairly, in all material respects, the combined financial
position of Innovene Inc. at December 31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
Ernst & Young LLP
London, United Kingdom
September 9, 2005
(except for Note (1) as to which the date
is                     ,
2005)
The foregoing report is in the form that will be signed upon the
    completion of certain transactions as described in Note (1)
    to the combined financial statements.
/s/ Ernst & Young LLP
London, United Kingdom
September 9, 2005
F-2
Table of Contents
INNOVENE Inc.
Combined Balance Sheets
As of December 31,
As of
June 30,
2003
2004
2005
(unaudited)
($ in millions)
ASSETS
Current assets
Cash
24
45
—
Trade accounts receivable, net of allowance for doubtful
    accounts of $18 million, $23 million, and
    $23 million, at December 31, 2003 and 2004 and
    June 30, 2005, respectively
1,619
1,940
1,923
Receivables from affiliates
—
—
576
Inventories (Note 6)
1,393
1,746
2,030
Other current assets (Note 7)
484
667
600
Total current assets
3,520
4,398
5,129
Property, plant, and equipment, net (Note 8)
7,050
7,136
6,737
Investment in and advances to affiliates
137
150
145
Goodwill and other intangible assets (Note 11)
259
261
258
Deferred tax assets (Note 18)
167
106
61
Prepayments and other assets
145
148
133
Assets of discontinued operations (Note 10)
178
15
—
Total assets
11,456
12,214
12,463
LIABILITIES, MINORITY INTEREST AND OWNER'S EQUITY
Current liabilities
Trade accounts payable
1,103
1,168
718
Payables to affiliates
—
—
1,075
Accrued liabilities
725
643
692
Other current liabilities (Note 12)
196
352
323
Due to parent (Note 13)
—
—
1,700
Deferred income taxes (Note 18)
61
47
—
Total current liabilities
2,085
2,210
4,508
Long term debt (Note 13)
1,585
1,729
—
Other non-current liabilities (Note 14)
481
553
347
Deferred income taxes (Note 18)
746
699
317
Liabilities of discontinued operations (Note 10)
40
10
—
Total liabilities
4,937
5,201
5,172
Minority interest
1,242
—
—
Owner's equity
Parent net investment
4,095
5,548
6,174
Accumulated other comprehensive income, net of tax
1,182
1,465
1,117
Total owner's equity
5,277
7,013
7,291
Total liabilities, minority interests and owner's equity
11,456
12,214
12,463
See accompanying notes to combined financial statements.
F-3
Table of Contents
INNOVENE Inc.
Combined Statements of Operations
For the six
months ended
For the year ended December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Revenues
11,776
13,422
17,937
7,791
11,131
Cost of sales
(10,775
)
(12,586
)
(16,765
)
(7,253
)
(9,876
)
Gross margin
1,001
836
1,172
538
1,255
Selling, general and administrative expenses
(734
)
(616
)
(630
)
(341
)
(341
)
Research and development expenses
(120
)
(115
)
(137
)
(64
)
(51
)
Restructuring and asset impairment charges (Note 15)
(93
)
(72
)
(345
)
(5
)
(21
)
Operating profit
54
33
60
128
842
Equity income (loss) from investments in affiliates
(2
)
9
8
5
4
Interest expense
(35
)
(44
)
(49
)
(25
)
(25
)
Other income (expense), net (Note 5)
(65
)
(123
)
(24
)
27
(42
)
Income (loss) from continuing operations before income taxes
(48
)
(125
)
(5
)
135
779
Provision for income taxes for continuing operations
    (Note 18)
(118
)
(90
)
(128
)
(86
)
(233
)
Net income (loss) from continuing operations
(166
)
(215
)
(133
)
49
546
Loss from discontinued operations, net of income tax expense
    (benefit) of $0, $0, $(52) million, $0, and $0 (Notes 10
    and 18)
(29
)
(25
)
(128
)
(11
)
(3
)
Net income (loss)
(195
)
(240
)
(261
)
38
543
See accompanying notes to combined financial statements.
F-4
Table of Contents
INNOVENE Inc.
Combined Statements of Owner's Equity and Comprehensive
Income
Accumulated other
Parent net
comprehensive
Owner's equity
Comprehensive
investment
income
total
income
($ in millions)
Balance at December 31, 2001
4,461
(5
)
(1)
4,456
—
Net loss
(195
)
—
(195
)
(195
)
Foreign currency translation adjustment
—
610
610
610
Minimum pension liability, net of tax $9 million
—
(15
)
(15
)
(15
)
Tax effect of transaction with affiliate
148
—
148
—
Transfers from parent, net
56
—
56
—
Balance at December 31, 2002
4,470
590
5,060
400
Net loss
(240
)
—
(240
)
(240
)
Foreign currency translation adjustment
—
602
602
602
Minimum pension liability, net of tax $8 million
—
(10
)
(10
)
(10
)
Transfers to parent, net
(135
)
—
(135
)
—
Balance at December 31, 2003
4,095
1,182
5,277
352
Net loss
(261
)
—
(261
)
(261
)
Foreign currency translation adjustment
—
302
302
302
Minimum pension liability, net of tax $14 million
—
(19
)
(19
)
(19
)
Transfers from parent, net
1,714
—
1,714
—
Balance at December 31, 2004
5,548
1,465
7,013
22
Net income
543
—
543
543
Foreign currency translation adjustment
—
(371
)
(371
)
(371
)
Minimum pension liability, net of tax $10 million
—
23
23
23
Net transfers upon legal separation (Note 4)
589
—
589
—
Transfers to parent, net
(506
)
—
(506
)
—
Balance at June 30, 2005 (unaudited)
6,174
1,117
7,291
195
Note:
(1) Balance solely relates to minimum pension liabilities,
net of tax of $3 million.
See accompanying notes to combined financial statements.
F-5
Table of Contents
INNOVENE Inc.
Combined Statements of Cash Flows
For the six
For the year ended
months ended
December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Cash flows from operating activities:
Net income (loss) from continuing operations
(166
)
(215
)
(133
)
49
546
Adjustments to reconcile net profit/(loss) to net cash provided
    from (used in) operating activities:
Depreciation and amortization
423
517
545
244
284
Asset impairments
32
36
280
—
—
Restructuring charges, net of cash paid
(10
)
(53
)
9
(17
)
(2
)
Deferred income taxes
78
49
(24
)
44
(5
)
(Gain) loss from foreign exchange revaluation
112
155
123
11
(19
)
Loss on extinguishment of debt
—
—
—
—
45
(Gain) loss on disposal of assets
(25
)
7
—
—
—
Decrease (Increase) in the fair value of the BP Solvay Ventures
    liabilities
128
168
105
(10
)
—
Other
16
9
23
(4
)
(4
)
Changes in assets and liabilities, net of acquisitions:
(411
)
22
(545
)
196
(81
)
Net cash provided by operating activities of continuing
    operations
177
695
383
513
764
Net cash used in operating activities of discontinued operations
(21
)
(17
)
(10
)
(6
)
(18
)
Net cash provided by operating activities
156
678
373
507
746
Cash flows from investing activities:
Capital expenditures
(614
)
(556
)
(567
)
(218
)
(250
)
Proceeds from the sale of assets
30
—
—
—
—
Acquisitions of businesses
5
—
—
—
—
Dividends received
—
2
2
—
—
Investments in and advances to affiliates
—
(7
)
—
—
—
Net cash used in investing activities of continuing operations
(579
)
(561
)
(565
)
(218
)
(250
)
Net cash used in investing activities of discontinued operations
(3
)
(2
)
(3
)
—
20
Net cash used in investing activities
(582
)
(563
)
(568
)
(218
)
(230
)
Cash flows from financing activities:
Acquisition of minority interest
—
—
(1,538
)
—
—
Proceeds from subsidiary capital calls
100
21
40
37
—
Repayments of long term debt
—
(7
)
—
—
(1,755
)
Proceeds from issuance of long term debt
290
—
—
—
—
Proceeds from issuance of short term debt
—
—
—
—
1,700
Transfers (to) from parent, net
32
(154
)
1,701
(297
)
(504
)
Net cash provided by (used in) financing activities of
    continuing operations
422
(140
)
203
(260
)
(559
)
Net cash provided by (used in) financing activities of
    discontinued operations
24
19
13
6
(2
)
Net cash provided by (used in) financing activities
446
(121
)
216
(254
)
(561
)
Net increase (decrease) in cash and cash equivalents
20
(6
)
21
35
(45
)
Cash and cash equivalents at beginning of period
10
30
24
24
45
Cash and cash equivalents at end of period
30
24
45
59
—
Supplemental disclosure:
Income taxes paid
40
41
152
42
239
Interest paid
35
44
49
25
25
See accompanying notes to combined financial statements.
F-6
Table of Contents
INNOVENE Inc.
Combined Statements of Cash Flows — (Continued)
For the six
For the year ended
months ended
December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Changes in assets and liabilities, net of acquisitions:
Trade accounts receivable
(298
)
(364
)
(324
)
68
17
Receivables from affiliates
—
—
—
—
(576
)
Inventories
(197
)
(157
)
(346
)
(88
)
(291
)
Other current assets
79
(135
)
(183
)
63
68
Prepayments and other assets
(15
)
(25
)
(3
)
21
15
Trade accounts payable
106
494
65
247
(450
)
Payables to affiliates
—
—
—
—
1,075
Accrued liabilities
49
115
(82
)
(141
)
49
Other current liabilities
(3
)
73
293
5
(31
)
Other non-current liabilities
(132
)
21
35
21
43
Changes in assets and liabilities, net of acquisitions
(411
)
22
(545
)
196
(81
)
See accompanying notes to combined financial statements.
F-7
Table of Contents
INNOVENE Inc.
Notes to Combined Financial Statements
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
(1)
Background
Innovene Inc. ("Innovene" or the "Company")
is currently an indirect wholly-owned subsidiary of BP p.l.c.
("BP"). The Company anticipates completing an initial
public offering before December 31, 2005. Prior to the
offering, BP will transfer to Innovene certain assets,
liabilities and the associated operations that were formerly
part of BP's Petrochemicals, Refining and Marketing, and
Gas, Power and Renewables segments. Specifically, the Company
combines (a) all of BP's petrochemical operating units
for olefins, polymers and other derivatives (collectively
"O&D"), (b) two integrated refinery plants in
Grangemouth, Scotland, and Lavéra, France, (c) a gas
fractionator located in Hobbs, New Mexico and certain related
pipelines, and (d) existing O&D strategic joint venture
investments (collectively, the Company's
"Manufacturing Interests"). The most important
products manufactured from the Company's Manufacturing
Interests are ethylene, propylene, polyethylene (including
high-density polyethylene), polypropylene, styrene, polystyrene,
acrylonitrile, alpha olefins, solvents, transport fuels,
particularly diesel fuel and gasoline, naphtha, and heating and
fuel oils. Innovene will be a worldwide manufacturer and
marketer of these products, with major manufacturing sites at
Grangemouth in Scotland, Cologne in Germany, Lavéra in
France and Chocolate Bayou and Battleground in the United States.
In accordance with the Amended and Restated Master
Reorganization Agreement, BP transferred to separate legal
entities effective April 1, 2005, substantially all of the
assets and liabilities, including fixed assets, inventory, and
non-monetary working capital related to the Company's
Manufacturing Interests (the "Separation"). Innovene
will conduct the ongoing operations relating to the
Manufacturing Interests transferred to it as part of the
Separation. Prior to the offering, the separate legal entities
will be transferred to Innovene Inc.
Until the transfers occur, Innovene has no material assets,
liabilities or operations. These combined financial statements
describe Innovene and its financial condition and operations as
if it held the operations and separate entities that will be
transferred to it for all historical periods presented.
Innovene and BP have entered into a series of agreements which
provide for the transfer of substantially all of the assets and
liabilities within the scope of our current and future business
activities from BP to the Company, subject to the retention by
BP of certain historic liabilities. These agreements include a
series of Local Transfer Agreements, the Intellectual Property
and Information Technology Separation Agreement, the Master
Reorganization Agreement and the tax sharing agreements
(together, the "Reorganization Agreements"). The
agreements also establish arm's length commercial
arrangements between the Company and BP and require BP to
provide the Company with transitional support for a limited
period of one to three years, (the "Commercial Interface
Agreements"). For purposes of these agreements, the legal
separation is deemed to have occurred on April 1, 2005,
whereas, except for the tax sharing agreements, the commercial
arrangements are effective from January 1, 2005.
(2)
Basis of Presentation
The combined financial statements have been prepared using the
historical cost basis in the assets and liabilities and
historical results of operations related to the Company's
Manufacturing Interests, and may not be indicative of the actual
results of operations and financial position of the Company had
it operated as a separate entity.
Because direct ownership relationships did not exist among the
various Manufacturing Interests, BP's net investment in the
Company is presented as "Parent net investment". The
accompanying combined balance sheets do not include certain BP
assets and liabilities that are not specifically identifiable to
the Company's Manufacturing Interests.
F-8
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
BP manages its cash, accounts payable and certain related
matters on a centralized basis for the entire BP group, which in
the three years and six months ended June 30, 2005 included
the Company. BP's financial systems are not designed to
track intercompany working capital balances, accounts payable,
cash receipts, and payments separately for each production unit.
Accordingly, in preparing the combined financial statements, it
was not practicable to determine certain assets and liabilities
associated with the Company. Assets and liabilities not
specifically identifiable to the Company include:
•
Cash and cash equivalent balances that are recorded in the
    Parent net investment account. The cash that is presented on the
    balance sheet is cash belonging to certain consolidated joint
    ventures.
•
Accounts payable related to trade purchases that are made
    centrally by BP, but nonetheless related to the Company that are
    reflected in the Parent net investment account.
•
Accrued liabilities related to corporate allocations that are
    reflected in the Parent net investment account.
•
Intercompany working capital balances between BP and its
    affiliates (unless directly traceable to a third-party
    relationship), which are not settled on a current basis and are
    not tracked separately for each production unit. To the extent
    that such balances relate to the Company, they are reflected in
    the Parent net investment account.
•
Hedging positions through which derivative and other financial
    contracts are used to offset exposures to interest rates,
    commodity prices or foreign exchange rates, unless individual
    instruments are specifically attributable to an underlying
    Innovene asset, liability or anticipated series of cash flows
    (see Note 21).
•
Third party financing and related balances, such as debt and
    capital leases that are managed centrally by BP and which are
    not secured by Company assets.
•
Until BP's shareholding in the Company falls below the
    limits set out in the Master Reorganization Agreement of 80% in
    the U.S. and 50% elsewhere, the Company's employees
    generally will continue to participate in BP's group-wide
    pension and other post employment plans. As long as this is the
    case, assets and obligations related to these plans will be
    owned directly by BP.
•
Assets and obligations related to the Company's
    participation in BP's stock option schemes, and, in
    particular, the BP ESOP trusts are not separately allocable to
    employees or employee costs.
The combined statements of operations include all revenues and
costs attributable to the Manufacturing Interests including an
allocation of the cost of shared utilities, overhead and
administrative expenses related to general management,
information technology, human resources and other services
provided to the Company by BP. As further described in
Note 4, these allocations were made based on such criteria
as personnel or business volume. All of the allocations and
estimates in the combined statements of operations are based on
assumptions that management believes are reasonable under the
circumstances. However, these allocations and estimates are not
necessarily indicative of the costs that the Company would have
incurred if it had operated on a standalone basis or as an
entity independent of BP.
(3)
Summary of Significant Accounting Policies
Basis of Combination
The accompanying combined financial statements are presented on
the basis of accounting principles generally accepted in the
United States of America. Within the Company's group, all
intercompany accounts and transactions have been eliminated.
Companies and joint ventures in which Innovene has or had a
significant influence, but not a controlling interest, are
carried on the equity basis and are included in "Investment
in and advances to affiliates". The Company's share of
earnings or losses in these investments is included in
"Equity
F-9
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
income/ (loss) from investments in affiliates". As a result
of Innovene's adoption of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities,
all variable
interest entities in which the Company is determined to be the
primary beneficiary are consolidated in the combined financial
statements.
Use of Estimates
The preparation of the combined financial statements in
conformity with generally accepted accounting principles in the
United States requires management to make estimates and
assumptions affecting the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the dates presented and the reported amounts of revenues and
expenses during the periods presented. Significant estimates
include: the recognition of an impairment, if any, relating to
property, plant, and equipment, intangibles, and goodwill;
litigation-related obligations; valuation allowances for
receivables, inventories, and deferred income tax assets;
environmental liabilities; allocation of the purchase price for
businesses acquired; recoverability of long-lived assets;
restructuring and plant closing costs; revaluation of derivative
instruments; and assets and obligations related to employee
benefits, such as amounts reported for pensions, plan assets,
and post-employment benefits. Actual results could differ from
those estimates.
Inventories
Inventories are valued at the lower of cost or market value.
Elements of cost in inventories include raw materials, direct
labor and manufacturing overhead. Inventory consists of the
balance on hand of raw materials, work in progress, and finished
goods held for sale. Stores inventory include catalysts and
consumable materials used in the production process.
The majority of the Company's inventories in the United
States are valued at cost using the "last in, first
out" ("LIFO") method. Inventories valued using
the LIFO method comprised approximately 10% and 7% of total
inventories at December 31, 2003 and 2004, respectively.
The balance of the Company's inventories are valued using
the "first in, first out" method. The Company's
stores inventories are mainly valued using the average cost
method or, if lower, at their market value.
The Company uses the dollar value method for computing its LIFO
inventory valuation in the United States. This method, by its
nature, involves an annual calculation. In preparing quarterly
balance sheets, the Company spreads forecast movements in the
LIFO layers across the year based on movements in inventory
during the year.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated
over their estimated useful lives using the straight line
method. The average of the estimated useful lives of the
Company's refineries and petrochemical manufacturing plants
is 20 years.
Expenditures incurred in connection with major maintenance
operations, refits or repairs are capitalized only where they
enhance the performance of the asset being maintained, refitted
or repaired above its originally assessed standard of
performance or replaces an asset (or part of an asset) which was
separately depreciated and then written off or restore the
economic benefits of an asset that has been fully depreciated.
Such expenditures are amortized over their respective estimated
useful lives. All other maintenance costs are expensed as
incurred.
Interest costs incurred as part of major construction projects
are capitalized. Net annual interest expense capitalized as part
of property, plant and equipment was $2 million,
$9 million, and $10 million during the years ended
December 31, 2002, 2003 and 2004, respectively.
F-10
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
The cost and accumulated depreciation are removed from the
respective accounts upon retirement or sale of property, plant
and equipment. Upon retirement, any resulting loss is included
in costs of goods sold in the combined statement of operations
and upon sale, the resulting gain or loss is included in other
income (expense) in the combined statement of operations.
Long-Lived Assets
The Company reviews the carrying value of its long-lived assets,
including property, plant and equipment and definite-lived
intangible assets whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the
total of the undiscounted future cash flows is less than the
carrying amount of the asset or asset group, an impairment loss
is recognized for the difference between the estimated fair
value and the carrying value of the asset or asset group. The
Company recorded impairments on long-lived assets of
$32 million, $36 million and $280 million for the
years ended December 31, 2002, 2003 and 2004, respectively.
In addition, an impairment of $148 million was reflected as
discontinued operations in 2004.
The Company complies with FASB Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets
. An impairment loss on a long-lived asset is
recognized if the asset's carrying amount is not
recoverable and exceeds its fair value. Long-lived assets to be
sold are separately classified as held for sale when the Company
commits to a plan for sale or disposal.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of an acquired entity
or business over the fair value of the net assets acquired.
Goodwill impairment is considered at least annually or when
events or circumstances indicate the fair value of a reporting
unit may be less than its carrying value. The Company recorded
no goodwill impairment charges for the years ended
December 31, 2002, 2003 and 2004.
Upon adoption of FASB Statement No. 142,
Goodwill and
Other Intangible Assets,
on January 1, 2002, the
Company ceased to amortize goodwill. Intangible assets with
definite useful lives (other than goodwill) are amortized over
their estimated useful lives up to a maximum period of
20 years. The Company has no intangible assets with
indefinite useful lives other than goodwill.
Capitalized costs associated with computer software developed
for internal use are amortized on a straight-line basis over 4
to 7 years.
Investments in Affiliates
Investments in non-consolidated companies over which the Company
has significant influence are accounted for under the equity
method. The Company assesses any decline in the value of
individual investments to determine whether such decline is
other than temporary and thus whether the relevant investment is
impaired. This assessment is made by considering available
evidence, including changes in general market conditions,
specific industry and individual Company data, the length of
time and the extent to which the market value has been less than
cost, the financial condition and near term prospects of the
individual entity, and the Company's intent and ability to
hold the investment. Investments in Affiliates is primarily
comprised of Innovene's investments in five manufacturing
joint ventures in Lavéra, France.
Financial Instruments
The estimated fair value of financial instruments has been
determined by using available market information and appropriate
valuation methodologies. The carrying values of all current
assets and current liabilities approximate their fair value
because of their short-term nature. The carrying value of
long-term debt
F-11
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
approximates its fair value based on management's estimates
for similar debt, giving consideration to rating, interest
rates, maturity and other significant characteristics.
Derivative Instruments and Hedging Activities
The Company accounts for derivatives and hedging activities in
accordance with FASB Statement No. 133,
Accounting for
Derivative Instruments and Certain Hedging Activities
, as
amended, which requires that all derivative instruments be
recorded on the balance sheet at their respective fair values.
If the derivative is designated as a fair-value hedge, the
changes in the fair value of the derivative and the hedged items
are recognized in earnings. If the derivative is designated as a
cash flow hedge, changes in the fair value of the derivative are
recorded in other comprehensive income and will be recognized in
the income statement when the hedged item affects earnings.
The purpose for which a derivative contract is used is
identified at inception. To qualify as a derivative for hedging,
the contract must be in accordance with established guidelines
that ensure that it is effective in achieving its objective. All
contracts not identified at inception as being for the purpose
of hedging are designated as being held for trading purposes and
accounted for using fair value method.
Employee Benefit Plans
For pension and other post-employment benefit plans in which
Innovene employees participate, costs are determined in
accordance with FASB Statement No. 87,
Employers'
Accounting for Pensions,
FASB Statement No. 88,
Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination
Benefits
, and FASB Statement No. 106,
Employers' Accounting for Postretirement Benefits Other
Than Pensions
.
Post-retirement benefit costs consist of service cost, interest
cost on accrued obligations and the expected return on assets
(calculated using a smoothed market value of assets). Any
difference between actual and expected returns on assets during
a year and actuarial gains and losses on liabilities together
with any prior service costs are charged (or credited) to income
over the average remaining service lives of employees which is
estimated to be 10 years. No amortization has been applied
for plans outside of the U.S. in the historic results
presented.
For BP plans in which BP employees (including those of the
predecessor businesses of Innovene) participate (Group plans),
BP determined pensions and other post-employment benefit costs
on a consolidated basis. Separate Company information is not
readily available. The benefit cost components shown in the
combined statements of operations reflect an allocation of the
costs (including the costs for retirees and former employees of
the predecessor businesses) for these BP Group Plans. The
allocation was based on the predecessor businesses of
Innovene's active population for each period presented.
For pension and other post-employment plans in which only
Innovene employees participate, disclosures are provided in
accordance with FASB Statement No. 132 (revised 2003),
Employers' Disclosures about Pensions and Other
Postretirement Benefits
.
Commitments and Contingencies
Liabilities for loss contingencies, including environmental
remediation costs not within the scope of FASB Statement
No. 143,
Accounting for Asset Retirement
Obligations
, arising from claims, assessments, litigation,
fines, and penalties and other sources are recorded when it is
probable that a liability has been incurred and the amount of
the assessment and/or remediation can be reasonably estimated.
F-12
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Environmental Expenditures
Environmental expenditures that relate to current or future
revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations and that do not impact future earnings are expensed.
Liabilities for environmental costs are recognized when
environmental assessments or clean-ups are probable and the
associated costs can be reasonably estimated. Generally, the
timing of these provisions coincides with the commitment to a
formal plan of action or, if earlier, the divestment or closure
of the relevant sites. The amount recognized reflects
management's best estimate of the expenditures expected to
be required. Where a liability is not to be settled for a number
of years, the amount recognized is the estimated future
expenditure on an undiscounted basis.
Revenue Recognition
Revenue is recognized when risk and title to the product
transfers to the customer, collectibility is reasonably assured
and the price is fixed or determinable. Revenue is typically
recognized at the time of shipment or delivery of a product,
depending on the contractual terms. Revenue is recognized net of
discounts and other price adjustments.
Historically, the Company's Refining operating segment was
integrated within BP's Refining & Marketing
("R&M") reporting entities. No revenue was
recognized for refining in the R&M business, since there
were no direct sales to third parties. For the purposes of the
combined financial statements, revenue presented was determined
based on production throughput, valued at an average sales price
per product grade in the applicable periods. With effect from
January 1, 2005, revenues of the Company's Refining
segment have been recognized in a manner consistent with the
Company's revenue recognition policy described above.
Cost of Sales
The Company classifies the costs of manufacturing and
distributing its products as cost of sales. Manufacturing costs
include raw materials and variable and fixed manufacturing costs
associated with production. Fixed manufacturing costs include,
among other things, plant site operating costs and overhead,
production planning, depreciation and amortization, repairs and
maintenance, plant site purchasing costs, and engineering and
technical support costs.
Research and Development Costs
The Company conducts a broad range of research and development
activities aimed at improving existing products and
manufacturing processes and developing new products and
processes. Research and development costs are expensed as
incurred.
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount.
The allowance for doubtful accounts reflect management's
best estimate of the amount of probable losses with respect to
the Company's accounts receivable. The Company determines
the allowance based on a monthly review of the collectibility of
each overdue balance. Account balances are charged against the
allowance after all means of collection have been exhausted and
the potential for recovery is considered remote. The Company
does not have any off-balance sheet credit exposure to its
customers.
F-13
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Lease Transactions
The Company leases certain machinery, equipment and facilities
under long-term lease agreements with third parties. The Company
reviews the terms of each lease at inception of the lease in
order to determine whether it should be treated as an operating
or a capital lease under FASB Statement No. 13,
Accounting for Leases,
and its interpretations. Operating
leases are expensed on a straight line basis over the term of
the lease.
Stock Based Compensation
Certain of the Company's employees participate in BP's
long term incentive plans. Under the plans, employees received
various stock-based compensation awards, including stock
options, restricted stock, stock opportunity grants and
performance units, some of which have yet to be exercised. The
Company currently accounts for stock-based compensation related
to participants in BP's plans using the intrinsic value
method prescribed by Accounting Principles Board (APB) Opinion
No. 25,
Accounting for Stock Issued to Employees,
whereby the options are granted at market price, and therefore
no compensation costs are recognized. Compensation cost for
stock options, if any, would be measured as the excess of the
quoted market price at the grant date of the Company's
stock over the amount an employee must pay to acquire the stock.
FASB Statement No. 123,
Accounting for Stock-Based
Compensation,
and FASB Statement No. 148,
Accounting
for Stock-Based Compensation — Transition and
Disclosure,
an amendment of FASB Statement No. 123,
established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic value method of accounting described above, and has
adopted only the disclosure requirements of FASB Statement
No. 123, as amended. Had compensation costs attributable to
awards granted to employees of the Company been determined using
the fair value accounting method, pro forma net loss would have
been as follows:
For the year ended
December 31,
2002
2003
2004
($ in millions)
Net loss, as reported
(195
)
(240
)
(261
)
Deduct: Additional stock-based employee compensation expense
    under the fair value based method for all awards, net of tax
(7
)
(7
)
(7
)
Net loss, pro forma
(202
)
(247
)
(268
)
The fair value of BP's stock-based awards attributed to
employees of the Company was estimated using the following
weighted average assumptions for each of the years ended
December 31, 2002, 2003 and 2004:
For the year ended
December 31,
2002
2003
2004
Risk-free interest rate
4.00
%
3.50
%
4.00
%
Expected life (in years)
1 to 5
1 to 5
1 to 5
Expected volatility
26.00
%
30.00
%
22.00
%
Dividend yield
3.75
%
4.00
%
3.75
%
Using the Black-Scholes pricing model, the weighted-average fair
value of an option granted in 2002, 2003, and 2004, was $1.64,
$1.44, and $1.40 respectively.
F-14
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Foreign Currency Translation
The accounts of the Company's subsidiaries outside of the
United States generally consider local currency to be their
functional currency. Foreign currency transactions are recorded
in the functional currency at the relevant exchange rates on the
date of the transaction. Foreign currency assets and liabilities
are translated into the functional currency at relevant exchange
rates at the balance sheet date. Exchange differences are
included in operating profit.
Assets and liabilities are translated from the respective
functional currency into U.S. dollars using exchange rates
at the relevant balance sheet date. Revenues, expenses and cash
flows are translated from the functional currency into
U.S. dollars using average exchange rates for the reporting
period. Exchange adjustments arising from the translation of the
accounts from the respective functional currency into
U.S. dollars are recorded as a component of owner's
equity.
Income Taxes
The results of the Company have been included in the
consolidated income tax assessments of BP for the periods
presented. In the periods presented prior to  April 1,
2005, there was no formal tax sharing agreement between the
Company and BP. Tax losses and credits generated by one member
of the BP group that were utilized by another BP group member
generally were compensated by the utilizing member. In preparing
the combined financial statements the provision for income taxes
has been calculated as if Innovene had been a standalone entity
and filed separate returns during the periods presented. In
light of the complexities and numerous assumptions inherent in
preparing tax returns involving interactions between the
U.S. tax system and the relevant non-U.S. tax systems
including foreign tax credit computations, allocation and
apportionment (including complying with national transfer
pricing rules) of various expenses, such as consolidated
interest expense, stewardship, research and development, etc.,
the provision for income taxes has been determined based on the
assumption that such expenses would give rise to tax relief
where incurred.
The Company accounts for income taxes in accordance with the
asset and liability method prescribed by FASB Statement
No. 109,
Accounting for Income Taxes
. Deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period in which the rates have
changed.
BP manages its tax position for the benefit of its entire
portfolio of businesses, and its tax strategies are not
necessarily reflective of the tax strategies that Innovene would
have followed or will follow as a standalone entity. Losses
generated by the Company's businesses historically were
available to, and were often utilized by BP in its tax
strategies with respect to entities or operations not forming
part of the Company's businesses. Due to difficulties
inherent in separating the Company's results from BP's
consolidated results during periods pre-dating the periods
presented, any deferred tax assets in respect of operating loss
carryforwards and tax credits have been fully offset by
valuation allowances. This treatment also reflects the
Company's inability to quantify the amounts of these
deferred tax assets, although the existence of these assets is
acknowledged but the assets are not susceptible to accurate
estimation. In the periods presented, current tax benefits are
recognized to the extent of any deferred tax expense and
increase in deferred tax liabilities recognized in the same
period. Existing deferred tax liability balances are not
considered in the evaluation of the ability to recognize current
tax benefits and the associated deferred tax assets due to the
inability to estimate the amount of deferred tax assets existing
at the beginning of the periods presented which could partially
or fully offset the existing deferred tax liabilities. Where
loss carryforwards generated by one of the Company's
businesses were available to offset income from the same
F-15
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
business or another of the Company's businesses within a
given jurisdiction during the periods presented, the Company has
reflected such loss carryforwards in the period they arose and
has assessed its ability to realize these deferred tax assets
based on the available evidence.
Income taxes are deemed to have been paid on behalf of the
Company by BP and are included in the parent net investment line
of the combined balance sheets. The Company will be required to
file separate United States federal income tax returns only
after the sale of greater than 20% of the securities held by BP.
The Company may be included in consolidated/ combined returns
with BP for other tax jurisdictions, such as states, where
consolidated/ combined ownership thresholds are different than
the U.S. federal consolidated ownership threshold.
The Company and BP have entered into tax sharing agreements
effective April 1, 2005, that will generally govern
BP's and the Company's respective rights,
responsibilities and obligations for taxes after the
registration of Innovene's shares. With respect to all
taxes for any tax period ending on or before April 1, 2005,
BP generally will retain responsibility for any federal,
foreign, and certain state taxes due and will benefit from tax
refunds available. For any tax years subsequent to that date,
the Company will be responsible for federal, foreign, and state
taxes due and will benefit from tax refunds available. Following
April 1, 2005, the Company will file tax returns, pay taxes
due and receive the benefits from losses generated in foreign
jurisdictions in which it operates. For the U.S., dependent on
BP's ownership share of the Company, the Company will
either file its own U.S. tax return or the Company will pay
to BP its allocable share as if the Company were a standalone
taxpayer pursuant to the terms of the tax sharing agreements,
for tax on income generated and BP will retain the benefits of
tax losses, and will pay the Company for the benefits BP obtains
from such tax losses, as long as the Company is part of any BP
consolidated tax computations.
Effective April 1, 2005, the Company received its assets
from BP in a taxable asset transaction; accordingly, the Company
will obtain a depreciable basis equal to the fair market value
of the assets received from BP. The majority of
non-U.S. asset transfers were taxable such that the
depreciable assets are recorded at fair market value for tax
purposes. Accordingly, the existing deferred tax asset and
liability balances were reversed through Parent Net Investment
and a deferred tax asset recorded, with an offsetting entry to
equity, to the extent that the tax depreciable basis exceeded
the depreciable net book value. The net effect of these
transactions was to increase Parent Net Investment by
$483 million.
While BP's US affiliates continue to own at least
80 percent of the Company, BP will include the Company in
its consolidated US Federal tax return and, pursuant to the
terms of the US Master Tax Agreement, the Company will not
be entitled to claim the benefits of the tax depreciation in
excess of the historical BP US group tax basis in the
depreciable assets.
Earnings per share
Historical earnings per share are not presented since Innovene
common stock was not part of the capital structure of BP for the
periods presented. Innovene will present basic and diluted
earnings per share in the first report it issues after the
effective date of the initial public offering.
Adoption of New Accounting Standards
In 2002, the FASB issued FASB Statement No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities
. This standard requires companies to recognize
costs associated with exit or disposal activities when they are
incurred, rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by the standard include
lease termination costs and certain employee severance costs
that are associated with a restructuring, plant closing, or
other exit or disposal activity. Statement 146 is required
to be applied
F-16
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
prospectively to exit or disposal activities initiated after
December 31, 2002, with earlier application encouraged. The
Company adopted Statement 146 as of January 1, 2003. The
adoption of Statement 146 did not have a significant impact
on the Company's financial position or results of
operations.
In November 2002, the FASB issued FASB Interpretation
No. 45
Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others
(FIN 45). FIN 45 modifies
existing disclosure requirements for most guarantees and
requires at the time the Company issues a guarantee, the Company
must recognize an initial liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial
recognition and measurement provisions of FIN 45 apply on a
prospective basis to guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have
a significant effect on the Company's financial position or
results of operations.
In June 2001, the FASB issued FASB Statement No. 143,
Accounting for Asset Retirement Obligations,
which
applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition,
construction, development, or the normal operation of the asset.
Statement 143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period
in which it is incurred if a reasonable estimate of fair value
can be made. Such estimates are generally determined based upon
estimated future cash flows discounted using a credit-adjusted
risk-free interest rate. The fair value of the liability is
added to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period
through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, the
Company will recognize a gain or loss on settlement. The
adoption of Statement 143 did not have a significant impact on
the Company's financial position or results of operations.
In April 2003, the FASB issued FASB Statement No. 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities,
which amends and clarifies the financial
accounting and reporting of derivative instruments and hedging
activities under Statement 133. Statement 149 applies to
contracts entered into or modified after June 30, 2003, and
hedging relationships designated after June 30, 2003. The
adoption of Statement 149 did not have a significant effect on
the Company's financial position or results of operations.
In May 2003, the FASB issued FASB Statement No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.
Statement
150 establishes standards for classifying and measuring certain
financial instruments that have characteristics of both
liabilities and equity. The adoption of Statement 150 did not
have a significant impact on the Company's financial
position or results of operations.
In January 2003, the FASB issued FASB Interpretation
No. 46,
Consolidation of Variable Interest Entities
(FIN 46). FIN 46 clarifies the application of existing
consolidation requirements to entities where a controlling
financial interest is achieved through arrangements that do not
involve voting interests. Under FIN 46, a variable interest
entity ("VIE") is consolidated if a company is subject
to a majority of the risk of loss from the VIE's activities
or entitled to receive a majority of the entity's residual
returns.
Based on management's analysis of arrangements created
prior to February 1, 2003, Innovene identified
BP Solvay Polyethylene North America ("BP Solvay North
America") and BP Solvay Polyethylene Europe
("BP Solvay Europe") (collectively, the "BP
Solvay Ventures") as VIEs, based on the lack of equity at
risk for Innovene's venture partner and its obligation to
absorb losses if the venture partner elected to sell its
interest to Innovene. The Company further determined that it was
the primary beneficiary of the BP Solvay Ventures. No other
VIE's were identified.
Innovene retroactively applied the provisions of FIN 46
upon its adoption of the Interpretation from inception of the
BP Solvay Ventures. As a result the consolidated assets,
liabilities, and noncontrolling interests of the BP Solvay
Ventures are reflected in Innovene's combined financial
statements using values at which these
F-17
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
amounts would have been carried in the consolidated financial
statements if FIN 46 had been effective at the inception of
the BP Solvay Ventures in November 2001.
In December 2003, the Staff of the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin (SAB)
No. 104,
Revenue Recognition,
which supersedes
SAB No. 101. The primary purpose of
SAB No. 104 is to rescind accounting guidance
contained in SAB No. 101 and the SEC's
Revenue
Recognition in Financial Statements Frequently Asked Questions
and Answers
(the FAQ) related to multiple element revenue
arrangements. Adoption of SAB No. 104 did not have a
significant effect on the Company's financial position or
results of operations.
In December 2003, FASB Statement No. 132 (revised),
Employers' Disclosures about Pensions and Other
Postretirement Benefits,
was issued. Statement 132
(revised) prescribes employers' disclosures about pension
plans and other postretirement benefit plans; it does not change
the measurement or recognition of those plans. The Statement
retains and revises the disclosure requirements contained in the
original Statement 132. It also requires additional disclosures
about the assets, obligations, cash flows, and net periodic
benefit cost of defined benefit pension plans and other
postretirement benefit plans. The new annual disclosure
requirements became effective for the Company as of the year
ended December 31, 2004. The Company's disclosures in
Note 17 incorporate the requirements of Statement 132
(revised).
In accordance with FASB Staff Position Nos. 106-1 and 106-2,
Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003
, BP adopted the standard for the fiscal year beginning
January 1, 2004. The provisions of the Medicare Act provide
for a federal subsidy for post-retirement medical plans that
provide prescription drug benefits and meet certain
qualifications, and alternately would allow prescription drug
plan sponsors to co-ordinate with the Medicare benefit.
BP reflected the impact of the legislation by reducing its
actuarially determined obligation for post-retirement medical
benefits at December 31, 2004 and will reduce the net cost
for post-retirement benefits in subsequent periods.
In November 2004, the EITF reached a consensus on Issue
No. 03-13,
Applying the Conditions in Paragraph 42
of FASB Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, in Determining Whether to Report
Discontinued Operations
(EITF 03-13). Under
EITF 03-13, a disposed component of an enterprise is
classified as a discontinued operation only where the ongoing
entity has no continuing direct cash flows and does not retain
an interest, contract or other arrangement sufficient to enable
the entity to exert significant influence over the disposed
component's operating and financial policies after
disposal. EITF 03-13 is effective for a component of an
enterprise that is either disposed of or classified as held for
sale in accounting periods beginning after December 15,
2004.
Recently Issued Accounting Standards
In December 2004, the FASB issued FASB Statement No. 153,
Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29
. Statement 153 eliminates the Accounting
Principles Board Opinion No. 29 exception for nonmonetary
exchanges of similar productive assets and replaces it with an
exception for exchanges of nonmonetary assets that do not have
commercial substance. Statement 153 is effective for
nonmonetary asset exchanges occurring in accounting periods
beginning after June 15, 2005. The Company does not expect
the application of Statement 153 to have a material impact on
its financial position or the results of operations.
In November 2004, the FASB issued FASB Statement No. 151,
Inventory Costs an amendment of ARB No. 43,
Chapter 4
. Statement 151 requires that items, such
as idle facility expense, excessive spoilage, double freight and
re-handling costs, be recognized as current-period charges.
Statement 151 also requires that the allocation of fixed
production overheads to the costs of conversion be based on the
normal capacity of the
F-18
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
production facilities. Statement 151 is effective for
accounting periods beginning after June 15, 2005. The
Company does not expect this Statement to have a material impact
on its financial position or the results of operations.
In December 2004, the FASB issued FASB Statement No. 123
(revised 2004),
Share-Based Payment
(SFAS 123R).
Statement 123R, which is a revision of FASB Statement
No. 123,
Accounting for Stock-Based Compensation,
supersedes APB Opinion No. 25, Accounting for Stock Issued
to Employees
. Under Statement 123R, share-based payments to
employees and others are required to be recognized in the income
statement based on their fair value. Pro forma disclosure of the
anticipated impact of Statement 123R (as disclosed above)
is no longer a permitted alternative. Statement 123R has
been adopted for the first interim period beginning
January 1, 2005.
In December 2004, the FASB issued Staff Position No. 109-1,
Application of FASB Statement No. 109, Accounting for
Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of
2004
(FSP 109-1). FSP 109-1, effective upon
issuance, requires that the manufacturers' deduction
provided for under the American Jobs Creation Act of 2004 (the
Jobs Creation Act) be accounted for as special deduction in
accordance with FASB Statement No. 109,
Accounting for
Income Taxes,
rather than a tax rate reduction. The Company
will recognize the manufacturers' deduction in the year the
benefit is earned.
In March 2005, the FASB issued FASB Interpretation No. 47
Accounting for Conditional Asset Retirement Obligations an
interpretation of FASB Statement No. 143
(FIN 47).
Under FIN 47, a conditional asset retirement obligation
("ARO") represents an unconditional obligation to
perform an asset retirement activity where the timing or method
of settlement are conditional on a future event that may or may
not be within the control of the entity. FIN 47 clarifies
that an entity is required to recognize a liability, when
incurred, for the fair value of a conditional ARO if the fair
value of the liability can be reasonably estimated. Uncertainty
about the timing or method of settlement of a conditional ARO is
factored into the measurement of the liability when sufficient
information exists. Statement 143 acknowledges that in some
cases, sufficient information may not be available to reasonably
estimate the fair value of an ARO. FIN 47 also clarifies
when an entity would have sufficient information to reasonably
estimate the fair value of an asset ARO. FIN 47 is
effective for fiscal years ending after December 15, 2005.
The Company has not yet completed its evaluation of the impact
of adopting FIN 47.
Interim Financial Information (unaudited)
The financial statements as of June 30, 2005 and for the
six-month periods ended June 30, 2005 and 2004 are
unaudited; however, in the opinion of management, all
adjustments, consisting solely of normal recurring adjustments
necessary for a fair presentation of the financial statements
for the interim periods, have been included. The results of
operations for the six-months ended June 30, 2005 are not
necessarily indicative of the results to be achieved for the
full fiscal year.
(4)
Relationship with BP
The Company engages in transactions with BP and BP's
subsidiaries in the normal course of business. These
transactions include the purchase of feedstock used as raw
material by the Company as well as the sharing of certain
infrastructure sites. Additionally, the Company utilizes
centralized functions of BP to support its operations and in
return, BP allocates certain of its expenses to the Company.
Such intercompany transactions are included in Transfers from
Parent net investment in the combined financial statements
unless directly traceable to a third party.
Funding is derived from inter-company transactions with BP, from
operations, or other sources. Cash requirements met through
transfers from BP include funds used to purchase investments, to
fund operating losses
F-19
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
and for other liquidity needs. All transaction activity between
Innovene and BP is netted and recorded as Transfers to/from
parent within Parent net investment. Except for interest accrued
on a short-term note extended upon legal separation on
April 1, 2005, no intercompany interest charges have been
recognized between BP and the Company.
Transactions with BP Group are summarized in the table below:
For the year ended
December 31,
2002
2003
2004
($ in millions)
Sales to BP
3,589
4,385
6,145
Purchases from BP
(3,670
)
(2,869
)
(2,703
)
Selling, general, and
    administrative
(1)
(145
)
(164
)
(259
)
Note:
(1)
Selling, general and administrative comprises corporate cost
    allocations and recharges from functions hosted elsewhere within
    BP.
The BP Group was both the Company's most significant
customer and supplier, accounting for over 10% of the
Company's total revenues and purchases. The majority of
sales were generated from the Company's refining segment,
all of which historically were sold on by BP to third parties.
Purchases were made across all segments of the Company.
Corporate Cost Allocations
Certain expenses reflected in the combined statement of
operations include allocations of costs from BP. Such expenses
represent costs related to treasury, legal, insurance, payroll
administration, human resources, and other services. These
costs, together with an allocation of central BP overhead costs,
are included within selling, general, and administrative
expenses, as described above. Where it is possible to
specifically attribute such expenses to activities of the
Company, these amounts have been charged or credited directly to
the Company without allocation or apportionment. Allocation of
all other such expenses is based on factors depending on the
relevant respective activity.
Where employees of the Company participate in pension and other
post-employment benefit arrangements sponsored by BP, the
Company has reflected the cost BP incurs on its behalf of
providing the pensions as a charge (or credit) to income based
on the number of the Company's active employees.
BP also sponsors other benefit plans, including profit sharing
plans, incentive plans and stock purchase plans in which Company
employees participate. Costs related to these plans are
allocated to the Company according to an analysis of the number
of current and historic employees.
In management's opinion, the methods used in allocating
expenses are reasonable. However, resulting expenses may not
represent the amounts that would have been incurred had such
transactions been entered into with third parties at
"arm's length".
For purposes of governing certain of the ongoing relationships
between Innovene and BP at and after the Separation and to
provide for an orderly transition, Innovene and BP have entered
into various agreements. A brief description of each of the
material agreements follows.
F-20
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Reorganization Agreements
The following are some key reorganization agreements in
connection with interfaces with BP.
Local Transfer Agreements
Effective April 1, 2005, BP transferred to separate legal
entities substantially all of the assets and liabilities
relating to the former olefins and derivatives business of
BP's Petrochemicals segment, the Company's refineries
at Grangemouth, United Kingdom, and Lavéra, France, which
formed part of BP's Refining and Marketing segment, and the
gas fractionator located near Hobbs, New Mexico, which formed
part of BP's Gas, Power and Renewables segment, in each
case, together with associated infrastructure. The transfers
were made on the basis of a series of Local Transfer Agreements
for each country in which the Company has operations. As a
result of these transfers, the separate legal entities acquired
BP's title or other interest in the relevant assets and,
with limited exceptions, the unencumbered ability to operate and
transfer their assets to third parties.
Master Reorganization Agreement
The amended and restated Master Reorganization Agreement sets
out a framework for dealing with assets or liabilities not
specifically covered by the Local Transfer Agreements described
above, such as liabilities arising from the Company's or
BP's past and future conduct. Subject to the exceptions
described in the agreement, the Company generally has agreed to
assume, and indemnify BP for, all liabilities relating to the
assets BP has transferred to the Company, and BP has agreed to
retain, and indemnify the Company for, all liabilities relating
to assets BP has retained. In each case, these indemnities cover
all losses arising from such liabilities, regardless of whether
they arise from events occurring before or on or after
April 1, 2005.
New Common Terms Memorandum
The Company also entered into a New Common Terms Memorandum with
BP where it and BP have agreed to transfer restrictions on the
Company's assets in connection with certain of the
commercial interface agreements as described below. Under these
restrictions, neither the Company nor BP can transfer an asset
reasonably related to any relevant commercial interface
agreement to a non-affiliated third party without assigning that
commercial interface agreement to the same third party. Such
assignment of the relevant commercial interface agreement by the
Company or BP will require prior consent of the other party, but
the other party may refuse prior consent only if it is
reasonable to believe that the unaffiliated transferee will not
act as a reasonable and prudent operator under the agreement or
does not have sufficient financial standing to perform the
obligations under the agreement.
Intellectual Property and Information Technology Separation
    Agreement
The Company has entered into an Intellectual Property and
Information Technology Separation Agreement (IPITSA) with BP,
which governs the transfer of intellectual property and
intellectual property related agreements from BP to the Company
and addresses certain related third-party issues. The IPITSA
provides for the transfer from BP to the Company of certain
registered patents, trademarks and domain names along with any
other intellectual property relating exclusively to the
Company's petrochemical business, the Company's
refineries in Grangemouth, United Kingdom, and Lavéra,
France, and the Company's gas fractionator near Hobbs, New
Mexico. In addition, BP has agreed to assign to the Company all
intellectual property-related contracts, such as licenses,
research and development agreements, technology sharing
agreements, software licenses and support agreements relating
exclusively to the Company's business. BP has also granted
the Company licenses in respect of certain intellectual property
in which the Company and BP have a common interest under
separate common interest intellectual property agreements.
F-21
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
U.S. Master Tax Agreement
BP and the Company have entered into a U.S. Master Tax Agreement
pursuant to which BP has agreed to retain, and indemnify the
Company for, among other things, the U.S. tax liabilities
arising prior to April 1, 2005, including any income and
franchise and other taxes measured by income incurred as a
result of transferring assets to the Company, and the Company
has agreed to assume, and indemnify BP for, among other things,
the U.S. tax liabilities arising on or after April 1, 2005.
Any other separation-related U.S. tax liabilities generally will
be paid by the party legally responsible and BP and the Company
have agreed to cooperate in the resolution of such taxes. The
Company additionally will be liable should it take any actions
that trigger recapture of taxes in respect of any foreign
affiliate to the extent that prior losses claimed in relation to
such affiliate by the BP U.S. Federal consolidated group were
certified to only be deductible by the BP U.S. Federal
consolidated group (i.e., dual consolidated losses). The U.S.
Master Tax Agreement also deals with the ongoing relationship
between the Company and BP in relation to other U.S. tax
matters, for example, in relation to tax compliance, and
includes provisions which allow both parties to share tax
assets, subject to appropriate compensation payments.
Rest of the World Tax Agreement
Under the Rest of the World tax Agreement, BP has generally
agreed to retain, and indemnify the Company for, among other
things, non-U.S. tax liabilities arising prior to
April 1, 2005 including any income and other taxes measured
by income which are incurred as a result of transferring assets
to the Company, and the Company has generally agreed to assume,
and indemnify BP for, among other things, non-U.S. tax
liabilities arising on or after April 1, 2005. Any other
separation-related non-U.S. tax liabilities generally will
be paid by the party on which it has been assessed provided that
all transfer taxes will be borne by the Company. The Rest of the
World Tax Agreement also deals with the ongoing relationship
between the Company and BP in relation to other
non-U.S. tax matters, for example, in relation to tax
compliance, and includes provisions which allow both parties to
share tax assets, subject to appropriate compensation payments.
Net Transfers Upon Legal Separation
Effective April 1, 2005, certain transactions occurred in
accordance with the agreements between BP and the Company. The
results of these transactions have been recorded as adjustments
to the parent company investment in the Company. The result of
these transactions was to increase the Parent Net Investment in
the Company by $589 million.
On the basis of the Local Transfer Agreements between the
Company and BP for each country in which the Company has
operations, the separate legal entities of the Company acquired
title to assets and operations from other entities of BP.
Income Taxes
On April 1, 2005, the Company received its assets from BP
in a taxable asset transaction; accordingly, the Company will
obtain a depreciable basis equal to the fair market value of the
assets received from BP. The majority of non-U.S. asset
transfers were taxable such that the depreciable assets are
recorded at fair market value for tax purposes. Accordingly, the
existing deferred tax asset and liability balances were reversed
through Parent Net Investment and a deferred tax asset recorded,
with an offsetting entry to equity, to the extent that the tax
depreciable basis exceeded the depreciable net book value. The
net effect of these transactions was to increase Parent Net
Investment by $483 million.
In the U.S., pursuant to the terms of the U.S. Master Tax
Agreement, the Company will not be entitled to the benefits of
the depreciation associated with this additional tax basis until
the Company is no longer included in
F-22
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
the BP U.S. consolidated tax return. This will occur when
BP's ownership in the Company is less than 80%. As the
Company currently is wholly-owned by BP no adjustment to the
existing tax position was made as of April 1, 2005.
Grangemouth assets and Geel Infrastructure
Certain of the asset transfers made in accordance with the Local
Transfer Agreements resulted in BP transferring to the Company
certain assets and the Company transferring to BP certain
assets. Among those assets transferred to the Company were
certain logistic assets at the Grangemouth, UK site. Among the
assets transferred by the Company to BP were certain previously
shared assets at the Grangemouth, UK site and the Geel, Belgium
site. The net effect of these transfers was to decrease Parent
Net Investment in the Company by $25 million.
Pensions
In accordance with the Master Reorganization Agreement, BP
agreed to retain the obligations for retirees related to the
Company's pension plans in Germany. The effect of this is
to increase the Parent Net Investment by $262 million. The
Company has agreed to certain reimbursement arrangements with BP
related to its U.S. post-retirement health care obligations and
other unfunded arrangements related to the U.S. and France. The
effect of this was to decrease Parent Net Investment by
$52 million.
Other
Other Reorganization Agreements between BP and the Company have
resulted in an increase in Parent Net Investment of
$14 million. These primarily relate to BP agreeing to
assume certain obligations previously recorded by the
Company's predecessor operations.
The tax effects of transactions other than tax related to the
legal separation reduced Parent Net Investment by
$93 million.
Commercial Interface Agreements
The Company has entered into a series of commercial interface
agreements with BP to maintain and enhance its existing
relationships by establishing medium- to long-term arrangements
for services, utilities and infrastructure access rights in
situations where the Company or BP depend on each other or where
reasonable alternatives do exist but it is nevertheless
economical for the Company and BP to continue pre-existing
arrangements. The Company has also established agreements for
the sale and purchase of refining and petrochemical feedstocks
and refined products in situations where the Company or BP have
an interest in establishing a secure source of feedstock supply
or ensure the off-take of products, with the term of these
agreements in part depending on the availability of third-party
alternatives. In addition, the Company has entered into various
agreements for the provision by BP to the Company of short-term
transitional services, such as information technology
infrastructure, which the Company cannot readily replicate as a
new company but which it expects to have the ability to provide
in-house or outsource to a third party at the end of the initial
term of these agreements.
Each of the major commercial interface agreements are briefly
summarized below.
Hydrocarbons Sale and Purchase Agreements
The Hydrocarbons Sale and Purchase Agreements govern the sale
and purchase of petrochemical and refining feedstocks at or
between sites where the Company and BP have a continuing
relationship with each other. Each of the agreements is in
substantially the same form, with only minor jurisdiction and
site-specific differences. Each agreement is a master agreement
describing the general terms and conditions on which the
relevant feedstocks are sold and purchased as between the
Company and BP. The commercial terms for each
F-23
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
relevant petrochemical or refining feedstock are set out in a
separate term sheet appended to the relevant agreement.
Supply and Trading Agreements
The Company has entered into various Supply and Trading
Agreements with BP under which BP will, for a limited period of
time, provide the Company with certain supply, trading and
optimization services in areas in which the Company currently
has no, or limited, in-house capability. The agreements have
been structured so as to enable the Company to develop the
necessary capabilities in-house by the end of the initial term
of these agreements. The main agreements may be divided into
Master Services Agreements and Sale and Purchase Agreements. The
Company has also entered into a series of Foreign Exchange and
Precious Metals Agreements with BP for the provision of foreign
exchange and interest rate services and services relating to the
sale and/or lease of certain precious metals used as catalysts.
Inland Refined Products Sale and Purchase Agreements
The Company has entered into Inland Refined Products Sale and
Purchase Agreements with BP for the domestic sale of certain
refined products. The Company has entered into separate
agreements for its Grangemouth, United Kingdom, and Lavéra,
France, refineries. Under each agreement, BP has agreed to
purchase all of the refined products the Company sells into the
relevant domestic market at market-based prices for the term of
the respective agreements and related term sheets.
Framework Interface Agreements
The Company has entered into various Framework Interface
Agreements for the provision by the Company to and vice-versa BP
of services and utilities at certain shared sites and in some
cases between our respective sites. These agreements range from
short-term, transitional arrangements for services which the
Company will eventually establish on an in-house basis or will
outsource to an alternative supplier to long-term arrangements
in areas where the Company and BP depend on each other.
Site Cooperation Agreements
The Company has entered into various Site Cooperation Agreements
with BP to establish rules and procedures to facilitate its
operations at certain key sites that the Company shares with BP.
The Company has agreements in place for its sites in Carson,
California, Naperville, Illinois, Texas City, Texas, Whiting,
Indiana, Geel, Belgium, and Grangemouth, United Kingdom.
F-24
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
(5)
Other Income (Expense)
Other income (expense) consisted of the following:
For the
six months
For the year ended
ended
December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Gain (loss) from disposals of fixed assets
25
(7
)
—
—
—
Gain (loss) from foreign exchange revaluation net of gains
    (losses) from derivatives
20
49
78
13
3
Decrease (increase) in the fair value of the BP Solvay Ventures
    put liabilities
(128
)
(168
)
(105
)
10
—
Accelerated interest on loan termination
—
—
—
—
(45
)
Other
18
3
3
4
—
Total
(65
)
(123
)
(24
)
27
(42
)
(6)
Inventories
Inventories consisted of the following:
As of
December 31,
As of
June 30,
2003
2004
2005
(unaudited)
($ in millions)
Crude oil
251
323
478
Oil products
196
235
306
Petrochemicals products
792
1,061
1,072
Total inventories
1,239
1,619
1,856
Stores
154
127
174
1,393
1,746
2,030
As disclosed in Note 3, the Company values the majority of
inventories in the United States using the LIFO method. At
December 31, 2003 and 2004 and June 30, 2005, the
excess of current cost over the stated LIFO value was
$102 million, $228 million, and $194 million,
respectively.
F-25
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
(7)
Other Current Assets
Prepayments and other current assets are summarized as follows:
As of
December 31,
As of
June 30,
2003
2004
2005
(unaudited)
($ in millions)
Prepayments and other accrued income
73
77
131
Taxes and duties
83
98
209
Derivative instruments
204
155
—
Other
124
337
260
Total
484
667
600
(8)
Property, Plant, and Equipment
Property, plant, and equipment are summarized as follows:
As of
December 31,
2003
2004
($ in millions)
Land
100
109
Buildings
415
472
Machinery and equipment
11,350
11,939
Construction in progress
403
493
Total
12,268
13,013
Less accumulated depreciation
(5,218
)
(5,877
)
Net
7,050
7,136
Depreciation expense from continuing operations for the years
ended December 31, 2002, 2003, and 2004 was
$406 million, $492 million, and $527 million,
respectively.
(9)
Consolidation of Variable Interest Entities
Innovene adopted FASB Interpretation No. 46,
Consolidation of Variable Interest Entities,
which
addresses the consolidation of variable interest entities
("VIEs"). Under FIN 46, arrangements that are not
controlled through voting or similar rights are accounted for as
VIEs. An enterprise is required to consolidate a VIE if it is
the primary beneficiary of the VIE.
Under FIN 46, a VIE is created when (i) the equity
investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial
support from other parties or (ii) equity holders either
(a) lack direct or indirect ability to make decisions about
the entity through voting or similar rights, (b) are not
obligated to absorb expected losses of the entity or (c) do
not have the right to receive expected residual returns of the
entity if they occur. If an entity is deemed to be a VIE,
pursuant to FIN 46, an enterprise that absorbs a majority
of the expected losses or residual returns of the VIE is
considered the primary beneficiary and must consolidate the VIE.
F-26
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Innovene's analysis of its arrangements identified
BP Solvay North America and BP Solvay Europe as VIEs.
This determination primarily was based on a put instrument held
by Innovene's venture partner allowing the partner to put
its interest in the BP Solvay Ventures to Innovene at
specified dates and at specified prices. The pricing of the put
arrangement effectively resulted in the obligation by Innovene
to absorb losses of the BP Solvay Ventures. Innovene further
determined that it was the primary beneficiary as a result of
its obligations under the put instrument.
The BP Solvay Ventures were formed for the purpose of
manufacturing and selling high density polyethylene in Europe
and North America. Innovene held a 50% voting interest in BP
Solvay Europe entities and a 49% interest in the BP Solvay
North America entity. Innovene retroactively applied the
provisions of FIN 46 upon its adoption of the
Interpretation from inception of the BP Solvay Ventures. As
a result the assets, liabilities and noncontrolling interests
have been consolidated in Innovene's combined financial
statements from November, 2001. The noncontrolling interests
have been included as Minority Interest in the Combined Balance
Sheets. Changes in the fair value of the BP Solvay Ventures put
liabilities from the date of initial consolidation to exercise
of the put have been recognized as Other income (expense) in the
Combined Statement of Operations.
On November 2, 2004, the Company's former venture
partner in the BP Solvay Ventures exercised its option to
sell its interests in the two joint ventures to Innovene at the
previously determined and established prices based on the terms
of the put instrument. On completion, the two ventures, which
manufacture and market high-density polyethylene, became
wholly-owned subsidiaries of BP.
(10)
Discontinued Operations
During 2004, Innovene's management committed to a plan to
sell its butanediol ("BDO") operations based in Lima,
Ohio. As a result of this commitment, the Company recorded a
charge of $148 million to record the BDO asset group at
fair value less cost to sell. For reporting purposes, the
results of operations related to BDO, including the 2004
impairment charge, are classified as discontinued operations for
all periods presented. In the first quarter of 2005, the Company
signed a definitive sales agreement and closed the sale. There
was no gain or loss on disposal following the impairment charge
recorded in 2004.
The major classes of assets and liabilities of discontinued
operations included in the Combined Balance Sheets are
summarized as follows:
As of
December 31,
2003
2004
($ in millions)
Current assets
34
15
Non-current assets
144
—
Total assets of discontinued operations
178
15
Current liabilities
(6
)
(10
)
Non-current liabilities
(34
)
—
Total liabilities of discontinued operations
(40
)
(10
)
F-27
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
(11)
Goodwill and Other Intangible Assets
Goodwill
Upon adoption of FASB Statement No. 142 on January 1,
2002, the Company ceased to amortize goodwill.
The Company's goodwill balance relates solely to the
Olefins and Polymers Europe segment.
The following table summarizes the changes in the Company's
goodwill balance during 2003 and 2004:
($ in millions)
Balance at December 31, 2002
26
Effect of exchange rate on translation
5
Balance at December 31, 2003
31
Effect of exchange rate on translation
3
Balance at December 31, 2004
34
Other Intangible Assets
The Company does not have any indefinite-lived Other Intangible
Assets. The gross carrying amounts and accumulated amortization
in total and by major class of other intangible assets are as
follows:
As of December 31, 2003
Accumulated
Gross
Amortization
Net
($ in millions)
Intangible assets subject to amortization (definite-lived):
Pension — unamortized prior service costs
32
—
32
Capitalized software development costs
78
(13
)
65
Favorable contracts (customer lists, distribution logistics)
116
(16
)
100
Technology
25
(3
)
22
Other
33
(24
)
9
284
(56
)
228
As of December 31, 2004
Accumulated
Gross
Amortization
Net
($ in millions)
Intangible assets subject to amortization (definite-lived):
Pension — unamortized prior service costs
32
—
32
Capitalized software development costs
90
(18
)
72
Favorable contracts
116
(23
)
93
Technology
25
(5
)
20
Other
37
(27
)
10
300
(73
)
227
F-28
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Amortization expense from continuing operations for the years
ended December 31, 2002, 2003, and 2004 was
$17 million, $25 million, and $18 million,
respectively.
Estimated future amortization expense for intangible assets
through December 31, 2009 is $16 million annually.
(12)
Other Current Liabilities
Other current liabilities consist of the following:
As of
December 31,
As of
30 June
2003
2004
2005
(unaudited)
($ in millions)
Deferred income
8
6
5
Restructuring
84
97
81
Taxes and duties
3
31
156
Short term debt held in affiliate
—
82
—
Other
101
136
81
Total
196
352
323
Short term debt was held from December 27, 2004 and repaid
on January 3, 2005.
(13)
Debt
Long term debt
The combined balance sheets include long-term loans of
$1,585 million and $1,729 million at December 31,
2003 and 2004, respectively, for borrowings secured by certain
of the Olefins & Polymers Europe assets located at the
Grangemouth site in the United Kingdom.
The borrowings have terms of between 20 and 30 years and
would have matured between 2018 to 2022. The average rate of
interest for these loans was 3.14%, 3.16% and 3.58% for the
years ended December 31, 2002, 2003 and 2004, respectively.
The related interest charges total $37 million,
$45 million and $58 million for the years ended
December 31, 2002, 2003 and 2004, respectively.
According to the terms of the long term loans, Innovene was
required to pledge assets to secure a portion of the outstanding
loan balance. In accordance with the loan terms, the net book
value of the assets securing these loans was $643 million
and $652 million at December 31, 2003 and 2004,
respectively.
Short term debt
In anticipation of the separation of the Company from BP, the
long-term debt was repaid in full by the Company on
March 22, 2005 for $1,755 million. This funding was
replaced with a $1,700 million short-term interest-bearing
loan from the Parent, with an interest rate of LIBOR plus five
basis points. The termination payment on the debt exceeded the
book value resulting in a loss being recognised on
extinguishment of the debt of $45 million which is included
in Other income (expense) in the Combined Statements of
Operations.
F-29
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
(14)
Other Non-current Liabilities
Other non-current liabilities consist of the following:
As of
December 31,
2003
2004
($ in millions)
Pension and other post-employment benefits
443
528
Deferred income
14
10
Other
24
15
Total
481
553
(15)
Impairments and Restructuring Charges
Restructuring activities represent the integration of
acquisitions into the business, divestment activities, as well
as ongoing cost rationalization programs at manufacturing sites
and other locations.
As of December 31, 2003, the Company had reserves for
severance related cost and site exit and other costs of
$51 million and $33 million, respectively. During the
year ended December 31, 2004, the Company recorded
additional charges of $345 million, including
$280 million of charges for asset impairment and write
downs, and $65 million of costs for workforce reductions,
demolition and decommissioning and other restructuring costs.
For the purposes of measuring impairment charges, the fair value
of the assets was largely determined by using the
F-30
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
present value of expected cash flows or expected sales proceeds,
depending on the circumstances. During the 2004 period, the
Company made cash payments against reserves of $56 million.
Write-down
Severance-related
Site exit and
of assets
costs
other costs
Total
($ in millions)
Accrued liabilities as of December 31, 2001
—
64
64
128
Charges during the period
32
32
29
93
Payments during the period
—
(39
)
(32
)
(71
)
Asset write offs
(32
)
—
—
(32
)
Exchange rate movements
—
3
2
5
Accrued liabilities as of December 31, 2002
—
60
63
123
Charges during the period
36
26
10
72
Payments during the period
—
(42
)
(47
)
(89
)
Asset write offs
(36
)
—
—
(36
)
Exchange rate movements
—
7
7
14
Accrued liabilities as of December 31, 2003
—
51
33
84
Charges during the period
280
19
46
345
Payments during the period
—
(33
)
(23
)
(56
)
Asset write offs
(280
)
—
—
(280
)
Exchange rate movements
—
3
1
4
Accrued liabilities as of December 31, 2004
—
40
57
97
Charges during the period
—
21
—
21
Payments during the period
—
(21
)
(2
)
(23
)
Transfer to parent net investment
—
(13
)
(1
)
(14
)
Accrued liabilities as of June 30, 2005 (unaudited)
—
27
54
81
F-31
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Restructuring accruals by reportable segments are summarized as
follows:
Olefins and
Polymers
North
Global
Corporate
Europe
America
Derivatives
Refining
and Other
Total
($ in millions)
Accrued liabilities as of December 31, 2001
101
8
16
—
3
128
Charges during the period
32
20
1
12
28
93
Payments during the period
(45
)
(6
)
(4
)
—
(16
)
(71
)
Asset write offs
—
(20
)
—
(12
)
—
(32
)
Exchange rate movements
5
—
—
—
—
5
Accrued liabilities as of December 31, 2002
93
2
13
—
15
123
Charges during the period
26
—
4
41
1
72
Payments during the period
(67
)
—
(4
)
(5
)
(13
)
(89
)
Asset write offs
—
—
—
(36
)
—
(36
)
Exchange rate movements
12
—
1
—
1
14
Accrued liabilities as of December 31, 2003
64
2
14
—
4
84
Charges during the period
83
—
228
7
27
345
Payments during the period
(39
)
(2
)
(5
)
(7
)
(3
)
(56
)
Asset write offs
(76
)
—
(185
)
—
(19
)
(280
)
Exchange rate movements
3
—
1
—
—
4
Accrued liabilities as of December 31, 2004
35
—
53
—
9
97
Charges during the period
—
—
—
—
21
21
Payments during the period
(6
)
—
(1
)
—
(16
)
(23
)
Transfer to parent net investment
—
—
—
—
(14
)
(14
)
Accrued liabilities as of June 30, 2005 (unaudited)
29
—
52
—
—
81
First Half 2005 Segmental Restructuring Activity and
Impairments
As of December 31, 2004, the Olefins and Polymers Europe
segment reserve consisted of $35 million related to the
restructuring activities at the Grangemouth, UK site (as
announced in 2003), the restructuring activities at the
Lavéra, France site (as announced in 2000 and 2002), the
restructuring activities at the Geel, Belgium site (as announced
in 2000 and 2003) and the integration of the BP Solvay entities.
During the six months ended June 30, 2005, the segment made
cash payments of $6 million.
As of December 31, 2004, the Corporate and Other segment
reserve consisted of $9 million related to the
restructuring of the global Research & Technology support
function and facilities and liabilities in respect of workforce
reduction across the global operations. During the six months
ended June 30, 2005, the segment recorded additional
restructuring charges of $21 million in respect of further
global workforce reductions. Cash payments were $16 million
in the six months ended June 30, 2005. The reserve balance
as of April 1, 2005 was retained by BP and the
$14 million was reclassified to Parent net investment.
As of December 31, 2004, the Global Derivatives segment
reserve consisted of $53 million, related to the closure of
the Pasadena, North America site (as announced in 2004) and the
restructuring activities at the Feluy, Belgium site (as
announced in 2001). Cash payments were $1 million in the
six months ended June 30, 2005.
F-32
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
2004 Segmental Restructuring Activity and
Impairments
As of December 31, 2003, the Olefins and Polymers Europe
segment reserve consisted of $64 million related to the
restructuring activities at the Grangemouth, UK site (as
announced in 2003), the restructuring activities at the
Lavéra, France site (as announced in 2000 and 2002), the
restructuring activities at the Geel, Belgium site (as announced
in 2000 and 2003) and the integration of the BP Solvay entities.
During the year ended December 31, 2004, the segment
recorded additional charges of $83 million consisting of
asset impairments at the Grangemouth site ($69 million) and
within the Solvay JV, Belgium ($7 million) and
$7 million of other charges and made cash payments of
$39 million. As of December 31, 2004 the balance of
the Olefins and Polymers Europe segment reserve totaled
$35 million.
As of December 31, 2003, the Global Derivatives segment
reserve consisted of $14 million related to the
restructuring activities at the sites in Feluy, Belgium (as
announced in 2001), Texas City, North America (as announced in
2001), and Whiting, North America (as announced in 2001). During
the year ended December 31, 2004, the segment recorded
additional charges of $228 million consisting of
$185 million of asset impairment and $43 million of
other charges and made cash payments of $5 million. The
charges followed the Company's decision to exit the
Pasadena, North America site (as announced in December 2004). As
of December 31, 2004 the balance of the Global Derivatives
segment reserve totaled $53 million.
During the year ended December 31, 2004, the Refining
segment recorded restructuring charges and made cash payments of
$7 million relating to the Grangemouth, UK site.
As of December 31, 2003, the Corporate and Other segment
reserve consisted of $4 million related to the
restructuring of the global Research & Technology support
function and facilities. During the year ended December 31,
2004, the segment recorded additional charges of
$27 million consisting of $19 million of asset
impairment and $8 million of other charges and made cash
payments of $3 million. The asset impairment in the
Licencing business relates to the decision to exit the
butanediol ("BDO") business (see Note 10). The
charges are in respect of workforce reductions across the global
operation. Further workforce reductions resulted in additional
restructuring charges of approximately $21 million in 2005.
As of December 31, 2004 the balance of the Corporate and
Other segment reserve totaled $9 million.
2003 Segmental Restructuring Activities and
Impairments
During the year ended December 31, 2003, the Olefins and
Polymers Europe and Refining segments announced a joint
transformation program at the Grangemouth, UK site.
Restructuring charges of $20 million were recorded for
estimated workforce reductions of 190 employees.
During the year ended December 31, 2003, the Refining
segment recorded $36 million of asset impairment in respect
of units at the Grangemouth, UK site.
During the year ended December 31, 2003, the Olefins and
Polymers Europe segment recorded $11 million of charges in
respect of the restructuring of the Solvay, UK and Geel, Belgium
sites.
2002 Segmental Restructuring Activities and
Impairments
During the year ended December 31, 2002, the Olefins and
Polymers Europe segment recorded $38 million charges in
respect of the integration of the BP Solvay entities
($28 million, announced 2001), the cessation of Ethylene
Oxide-based Glycol Ether manufacturing at the Lavéra site
($8 million, fourth quarter of 2002) and the anticipated
final costs associated with the closure of a sales and
administrative office in Geneva, Switzerland ($2 million,
announced 2000). The net charge included the reversal of a
$6 million historical provision relating to the
Grangemouth, UK site (announced in 2000).
F-33
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
During the year ended December 31, 2002, the Olefins and
Polymers North America segment recorded a $20 million asset
impairment following the decision to close a polypropylene
production line at the Chocolate Bayou, North America site in
the first quarter of 2002.
During the year ended December 31, 2002, the Refining
segment recorded a $12 million asset impairment in respect
of a redundant pipeline at the Grangemouth, UK site.
During the year ended December 31, 2002, the Corporate and
Other segment recorded $28 million of charges in respect of
the restructuring of the global Research & Technology
support function and facilities ($21 million, announced
second quarter of 2002), the refit of an administrative office
at Naperville, North America ($3 million) and sundry
functional transformation projects.
(16)
Employee Benefit Plans
BP Pension and Other Post-Employment Benefit Plans (Group
Plans)
A number of the Company's employees in the United States,
United Kingdom, Canada and Belgium participate in BP pension and
other post-employment benefit plans (the Group Plans). BP
pension plans typically provide pension payments that depend on
an employee's length of service and earnings at, or near,
retirement or have a "cash balance" design. Such plans
are funded by the employer, and in certain countries employee
contributions to external funds, with contributions and costs
being determined after receiving advice from independent
actuaries.
BP also provides post-retirement healthcare benefits and
post-retirement life insurance that reimburse healthcare costs
for retirees and dependants, or pay a lump sum to a
beneficiary's spouse upon death. Entitlement to these
benefits is generally based on an employee's service at
retirement. The cost of providing post-retirement healthcare
benefits and post-retirement life insurance is assessed annually
by independent actuaries.
BP determines pension and post-employment benefit cost for its
Group Plans on a consolidated basis and therefore accurate
information relating to the Company's assets and
obligations cannot be determined with any certainty prior to
April 1, 2005. For the years ended December 31, 2002,
2003 and 2004 and the three months ended March 31, 2005 the
Statements of Operations include an allocation to the Company of
the benefit costs of the Group Plans. The costs for retirees and
former employees of the BP Group Plans were allocated based on
the Company's active employee population from each of the
periods presented.
In relation to the Company's participation in the Group
Plans, the Company recorded pension and other post-employment
benefit amounts for the three years ended December 31, 2004
as follows:
For the year ended
December 31,
2002
2003
2004
($ in millions)
Pension expense/(credit)
(25
)
(23
)
32
Other post employment benefits
17
22
23
Total expense/(credit)
(8
)
(1
)
55
Prior to January 1, 2004, a net pension credit is reported
due to the combined effect of the unrecognized actuarial gain
and unrecognized transitional gain being amortized through the
pension expense. The transitional obligation was fully amortized
by December 31, 2003 and the actuarial gain recorded in
prior years has reversed to become an actuarial loss for the
year ended December 31, 2004.
F-34
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
The pension and other post-employment benefit amounts recognized
in future periods could be materially different from these
amounts, principally because pension and other post-employment
obligations relating to retired and terminated vested Group Plan
employees prior to April 1, 2005 remained the
responsibility of BP, and the Company has generally continued to
participate in the Group Plans from April 1, 2005 under the
terms of the Master Reorganization Agreement. From April 1,
2005 and until BP's shareholding in Innovene falls below
50% (80% in the US) Innovene will pay to BP the International
Financial Reporting Standards ("IFRS") Service Cost
for Innovene employees who continue to participate in the BP
Group funded plans and reimburse BP for benefits paid to
Innovene employees who continue to participate in the BP Group
unfunded arrangements and who reach eligibility after
March 31, 2005.
BP's U.S. tax-qualified pension plan has a design that
is based in part upon a "cash balance" formula. It
should be noted that in 2003, a Federal district court in
Illinois ruled that the benefit formula used in International
Business Machines Corporation's (IBM) cash balance pension
plan violated the age discrimination provisions of ERISA and
that IBM must make back payments to workers covered under the
plan. The IBM decision conflicts with decisions of at least
three other district courts, including most recently a June 2004
decision of the Federal district court in Maryland. Proposed
regulations validating the cash balance design have been
withdrawn by the Treasury Department while Congress considers
legislative action to clarify the legal status of cash balance
plans under age discrimination rules. At this time, it is
unclear what effect, if any, these decisions or Congressional or
regulatory action may have on BP's tax-qualified pension
plan.
Company Pension and Other Post-employment Benefit
Plans
The Company sponsors pension and other post-employment benefit
plans for certain of its employees in the U.S., France and
Germany. The pension plans provide payments to eligible
employees upon retirement. Pension benefits for employees are
generally based on an employee's length of service, and in
the case of France, earnings at or near retirement. Other
post-employment benefits are in the form of lump sum benefits
that depend on an employee's length of service and earnings
at, or near retirement, and post-employment healthcare benefits
that reimburse healthcare costs for retirees and dependants. The
BP Solvay North America Pension Plan is funded by the Company.
Contributions to external funds are determined after receiving
advice from independent actuaries. The other pension and other
post-employment benefit plans are unfunded in line with local
practice.
The cost of providing pension and other post-employment benefits
is assessed annually by independent actuaries.
Pension plan assets for funded arrangements are generally held
in trusts. The primary objective of the trusts is to accumulate
pools of assets sufficient to meet the obligations of the
various plans. The assets of the trusts are invested in a manner
consistent with fiduciary obligations and principles that
reflect current practices in portfolio management.
A significant proportion of the assets are held in equities
owing to a higher expected level of return over the long term
with an acceptable level of risk. In order to provide a
reasonable assurance that no single security or type of security
has an unwarranted impact on the total portfolio, the investment
portfolios are diversified.
The asset allocation for the major funded Company pension plan
(BP Solvay North America) at December 31, 2002, 2003 and
2004 was as follows:
Asset category
2002
2003
2004
Equities
66
%
66
%
67
%
Bonds
34
%
34
%
33
%
F-35
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Return on asset assumptions reflect the Company's
expectations built up by asset class. The Company's
expectation is derived from a combination of historical returns
over the long term and forecasts of market professionals.
Plan Obligations, Assets and Funded Status at
December 31:
Other Post-
Pension Benefits
employment Benefits
Change in benefit
2002
2003
2004
2002
2003
2004
($ in millions)
Benefit obligation at beginning of year
222
324
443
17
21
21
Service cost
5
15
18
1
1
1
Interest cost
14
20
24
1
1
1
Benefits paid
(15
)
(24
)
(29
)
—
—
—
Plan amendments
19
—
7
—
—
—
Curtailments
—
31
4
—
—
—
Actuarial loss (gain)
34
8
35
1
(3
)
1
Foreign currency exchange rate changes
45
69
42
1
1
1
Benefit obligation at end of year
324
443
544
21
21
25
Other Post-
Pension Benefits
employment Benefits
Change in plan assets
2002
2003
2004
2002
2003
2004
($ in millions)
Fair value of plan assets at beginning of year
1
4
4
—
—
—
Employer contributions
18
24
33
—
—
—
Plan participants' contributions
—
—
—
—
—
—
Benefits paid
(15
)
(24
)
(29
)
—
—
—
Fair value of plan assets at end of year
4
4
8
—
—
—
Funded status at end of year
(320
)
(439
)
(536
)
(21
)
(21
)
(25
)
Unrecognized prior service cost
36
41
50
—
—
(1
)
Unrecognized net actuarial loss
40
56
94
5
2
5
Net amount recognized
(244
)
(342
)
(392
)
(16
)
(19
)
(21
)
Amounts recognized in the Combined Financial Statements at
December 31:
Other Post-
Pension Benefits
employment Benefits
2002
2003
2004
2002
2003
2004
($ in millions)
(Accrued) benefit cost
(305
)
(424
)
(507
)
(16
)
(19
)
(21
)
Intangible assets
29
32
32
—
—
—
Accumulated other comprehensive income
32
50
83
—
—
—
Net amount recognized
(244
)
(342
)
(392
)
(16
)
(19
)
(21
)
F-36
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
The Accumulated Benefit Obligation for defined benefit pension
plans was $297 million, $414 million and
$505 million respectively as of December 31, 2002,
2003 and 2004, respectively.
Components of net periodic benefit cost:
For the year ended
For the six months
December 31,
ended June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Pension benefits:
Service cost
5
15
18
9
11
Interest cost
14
20
24
12
10
Amortization of prior service cost
1
2
2
1
1
Amortization of net loss (gain)
(1
)
3
3
2
2
Curtailments
—
31
4
—
—
Net periodic benefit cost for pension benefits
19
71
51
24
24
Other Post-employment benefits:
Service cost
1
1
1
—
—
Interest cost
1
1
1
1
1
Amortization of prior service cost
—
—
—
—
—
Amortization of net loss (gain)
—
—
—
—
—
Curtailments
—
—
—
—
—
Net periodic benefit cost for other post-employment benefits
2
2
2
1
1
Total net periodic benefit cost
21
73
53
25
25
Pension plan contributions paid during the six months ended
June 30, 2004 and June 30, 2005 were $15 million
and $11 million respectively. Expected contributions for
the year ended December 31, 2005 are $15 million.
Expected other post-employment benefit contributions for the
year ended December 31, 2005 are $0 million.
Additional information:
Pension Benefits
2002
2003
2004
($ in millions)
Increase in minimum liability included in other comprehensive
    income
24
18
33
F-37
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Weighted average assumptions used to determine benefit
obligations at December 31:
Pension Benefits
Other Post-employment Benefits
2002
2003
2004
2002
2003
2004
Discount rate
5.79
%
5.53
%
5.04
%
6.32%
5.98%
5.50%
Rate of compensation increase
4.01
%
4.00
%
4.00
%
4.14%
4.00%
4.00%
Healthcare cost trend rate
—
—
—
7.02%- 4.15%
(1)
5.89%- 3.98%
(1)
6.02%- 4.01%
(1)
Note:
(1)
Reduction in average assumed healthcare trend rate occurs in
    period until 2009
Weighted average assumptions used to determine net periodic
benefit cost for years ended December 31:
Other Post-employment
Pension Benefits
Benefits
2002
2003
2004
2002
2003
2004
%
Discount rate
6.12
%
5.79
%
5.53
%
6.68%
6.32%
5.98%
Expected long-term return on plan assets
5.75
%
8.11
%
7.98
%
n/a
n/a
n/a
Rate of compensation increase
3.21
%
4.01
%
4.00
%
3.78%
4.14%
4.00%
Healthcare cost trend rate
—
—
—
6.60%- 3.72%
(1)
7.02%- 4.15%
(1)
5.89%- 3.98%
(1)
Note:
(1)
Reduction in average assumed healthcare trend rate occurs in
    period until 2009
A one percentage point change in the assumed healthcare cost
trend rate would have the following effect:
One percentage
One percentage
point increase
point decrease
($ in millions)
Effect on service and interest cost in 2004
1
(1
)
Effect on postretirement benefit obligation at December 31,
    2004
4
(4
)
Actuarial gains and losses are amortized on a straight-line
basis over current employees' average remaining service
lives.
The following benefit payments, which reflect expected future
service, as appropriate, are anticipated to be paid:
Other Post-
Pension
employment
Benefits
Benefits
($ in millions)
2005
15
—
2006
10
—
2007
11
—
2008
14
—
2009
17
—
2010 - 2014
98
2
F-38
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
The pension and other post-employment benefit amounts recognized
in future periods could be materially different from these
amounts, principally because pension obligations relating to
retired and terminated vested German employees prior to
April 1, 2005, remained the responsibility of BP under the
terms of the Master Reorganization Agreement.
Defined Contribution Plans
The Company contributed to defined contribution pension plans
for the three years ended December 31, 2004 as follows:
For the year ended
December 31,
2002
2003
2004
($ in millions)
Defined contribution pension expense
10
10
10
(17)
Stock Based Compensation
During the years ended December 31, 2002, 2003, and 2004, a
number of Innovene employees participated in BP sponsored long
term incentive plans. Under the plans, employees received
various stock-based compensation awards, including stock
options, restricted stock, stock opportunity grants and
performance units.
Under these plans, BP offered most of its employees the
opportunity to acquire a shareholding in BP through
savings-related and/or matching share plan arrangements. BP also
used long-term performance plans and the granting of share
options as elements of remuneration for executive directors and
senior employees.
BP Share Option and Share Save Plans
Share options were granted under the BP Share Option Plan to
certain categories of employees. Subject to certain vesting
requirements, the options are exercisable between the third and
10th anniversaries of the date of grant. There are no
performance conditions attaching to the options granted during
the year.
Under the BP ShareSave Plan (a savings-related share option
plan), employees save on a monthly basis over a three- or
five-year period towards the purchase of shares at a price fixed
when the option is granted. The option must be exercised within
six months of maturity of the savings contract; otherwise it
lapses. The plan is run in the UK and a small number of other
countries.
No compensation expense is recognized by the Company for the BP
ShareSave Plan or in respect of share options granted to
employees under the BP Share Option Plan. The Company has made
pro forma disclosure in Note 3 of the impact on the results
of operations had compensation costs attributable to awards
granted to employees of the Company been determined using the
fair value-based accounting method in accordance with FASB
Statement No. 123, as amended.
BP ShareMatch Plan
Under the BP ShareMatch Plan, BP matches employees' own
contributions of shares, up to a predetermined limit. The shares
are then held in trust for a defined minimum period. The plan is
run in the UK and in over 70 other countries.
F-39
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Long-term Performance Plans
During 2004, BP operated two long-term performance plans: the
Executive Directors' Incentive Plan (EDIP) for executive
directors and the Long Term Performance Plan (LTPP) for senior
employees. Executive directors participated in the LTPP prior to
2002 or to their appointment as an executive director, whichever
was the later. Both plans are incentive schemes under which the
Company may award shares to participants or fund the purchase of
shares for participants if long-term targets are met. Awards
were made in 2004 in respect of the 2001-2003 LTPP.
The costs of potential future awards for both the EDIP and LTPP
are accrued over the three-year performance periods of each plan
and have been allocated to the Innovene statement of operations
based on Innovene senior executive headcount.
Employee Share Ownership Plans (ESOPs) have been established to
acquire BP shares to satisfy any awards made to participants
under the EDIP and LTPP and then to hold them for the
participants during the retention period of the plan. BP
provides funding to the ESOPs.
BP's own shares held by the ESOP have not been included in
the Innovene balance sheet.
(18)
Income Taxes
Current and deferred income tax expense (benefit) consisted of
the following:
For the year ended
December 31,
2002
2003
2004
($ in millions)
Income tax expense
Federal and state
Current
—
—
—
Deferred
—
—
(87
)
Foreign
Current
40
41
152
Deferred
78
49
63
Income tax expense from continuing operations
118
90
128
F-40
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Income before income taxes consists of the following:
Year ended
December 31,
2002
2003
2004
($ in millions)
Continuing Operations
Domestic
(48
)
(51
)
(312
)
Foreign
—
(74
)
307
Net income (loss) from continuing operations
(48
)
(125
)
(5
)
Discontinued Operations
Domestic
(29
)
(25
)
(180
)
Foreign
—
—
—
Net income (loss) from discontinued operations
(29
)
(25
)
(180
)
(77
)
(150
)
(185
)
Income taxes reflected in owner's equity are as follows:
For the year ended
December 31,
2002
2003
2004
($ in millions)
AOCI — minimum pension liability
(9
)
(8
)
(14
)
Deferred income taxes result from temporary differences between
the financial and tax bases of the Company's assets and
liabilities.
F-41
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
The tax effect of temporary differences giving rise to the
significant components of deferred tax assets and liabilities is
as follows:
As of
December 31,
2003
2004
($ in millions)
Deferred tax assets:
Net operating losses
Foreign
80
70
Domestic
101
169
Restructuring reserves
4
12
Other reserves
33
30
Employee benefit plans
149
190
Research and development
10
17
Other
1
8
Total deferred tax assets
378
496
Valuation allowance
(66
)
(134
)
Net deferred tax assets
312
362
Deferred tax liabilities:
Financial instruments
(61
)
(47
)
Property
(866
)
(908
)
Other reserves
(39
)
(45
)
Other
(20
)
(2
)
Total deferred tax liabilities
(986
)
(1,002
)
Net deferred tax liabilities
(674
)
(640
)
Reported as:
Deferred tax assets — non-current
167
106
Deferred tax liabilities — current
(61
)
(47
)
Deferred tax liabilities — non-current
(746
)
(699
)
Discontinued operations
Deferred tax liabilities — non-current
(34
)
—
(674
)
(640
)
As more fully described in Note 3, Summary of Significant
Accounting Policies, Income Taxes, the Company assesses the
realizability of deferred tax assets by consideration of the
potential for future taxable income in the jurisdiction to which
the deferred tax asset relates. Deferred tax assets in respect
of operating loss carryforwards and tax credits arising in
periods before those covered by these financial statements have
been reduced by valuation allowances. To the extent that
deferred tax expense is recognized in respect of current period
increases in deferred tax liabilities during the same period in
which losses are incurred, a current tax benefit is recognized
to the extent of the increase in deferred tax liabilities. Any
excess amounts were assessed against the ability to realize
these tax benefits in the future. As a result, the Company has
provided valuation allowances to the extent that it was not
likely to be realized in the future.
F-42
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
The Company's actual tax charge from continuing activity
differs as follows from the expected tax charge calculated at a
statutory federal income tax rate of 35% for the following
periods:
For the year ended
December 31,
2002
2003
2004
($ in millions)
Expected tax charge/(benefit) at statutory tax rate
(17
)
(44
)
(2
)
State income tax
(2
)
(2
)
(15
)
Change in valuation allowances
17
30
53
Foreign tax rate differential
15
10
3
Change in fair value of Solvay put liabilities and losses
54
77
53
Charitable contribution
—
(11
)
—
Foreign currency transactions
34
47
37
Income tax rate changes
—
(7
)
(6
)
Other
17
(10
)
5
Actual income tax charge
118
90
128
Differences between the effective and statutory tax rates arise
due principally to the effects of management's assessment
of the realizability of tax loss carryforwards, the
Company's inability to determine its deferred tax asset
balances in respect of operating and tax loss carryforwards for
periods before those covered by these financial statements, the
inability to offset carryforwards from one jurisdiction against
income arising in other jurisdictions on a separate return
basis, the non-deductibility of losses associated with the
accounting for the Solvay put liabilities, foreign exchange rate
losses on long term debt, and higher rates and currency-related
items in foreign jurisdictions.
For the periods 2002, 2003 and 2004 the Company has followed its
parent's policy to permanently reinvest the earnings of its
non-U.S. operations. The Company intends to partially reinvest
the earnings of its non-U.S. subsidiaries after deduction
of non-U.S. income taxes, to maintain and enhance its
international operations. New non-U.S. investments will
generally be held from the U.S. Because non-U.S. income
taxes are, on average, equal to or higher than the comparable
U.S. rates, and in accordance with the U.S. foreign
tax credit assumptions described in Note 3, no provision
has been made for U.S. income taxes that might be payable
upon repatriation of such earnings.
(19)
Commitments and Contingencies
Operating Leases
The Company is obligated under operating leases with remaining
non-cancelable terms of one year or more for property, office
equipment, rail cars, storage facilities and automobiles. Rental
expense for these operating leases for the years ended
December 31, 2002, 2003, and 2004 was $37 million,
$68 million, and $89 million, respectively.
F-43
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
At December 31, 2004, future payments under non-cancelable
operating leases with a remaining term greater than one-year are
as follows over each of the next five years and thereafter:
Operating Leases
($ in millions)
2005
73
2006
49
2007
40
2008
39
2009
42
Thereafter
304
Total minimum lease payments
547
Less executory costs
(9
)
Less sub-lease receivables
(6
)
Total
532
Environmental Matters
As at December 31, 2004, the Company had accrued
$17 million which relates to environmental liability
provisions for various sites.
The Company is subject to numerous national and local
environmental laws and regulations concerning its products,
operations and other activities.
These laws and regulations may require the Company to take
future action to remediate the effects on the environment of
prior disposal or release of chemicals or other substances by
the Company or other parties. The ultimate requirement for
remediation and its cost are inherently difficult to estimate.
However, the estimated cost of known environmental obligations
has been accrued in accordance with the Company's
accounting policies. While the amounts of future costs could be
significant to the Company's results of operations in the
period in which they are recognized, Innovene does not expect
these costs to have a material effect on the Company's
financial position or liquidity.
Tax Matters
As part of the separation from BP, the Company will incur
liability for stamp duty in various countries related to the
transfer of assets from BP to Innovene. In the United Kingdom,
liability for stamp duty land tax will be chargeable to Innovene
if and when BP's interest in the assets transferred falls
below 75%. This potential future liability for stamp duty land
tax in the United Kingdom and other stamp duties is estimated to
be approximately $100 million to $150 million.
Committed Capital Expenditures
Externally committed and internally authorized future capital
expenditure by the Company as at December 31, 2004 amounted
to $149 million.
F-44
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
(20)
Subsequent Events
In May 2005, the Company signed the previously announced
transaction with NOVA Chemicals Corporation to combine their
European polystyrene and expandable polystyrene
("EPS") businesses into a joint venture named NOVA
Innovene. Under the terms of the agreement, upon closing, which
is expected to occur in late 2005, Innovene will contribute its
polystyrene and EPS assets at Marl, Germany and Trelleborg,
Sweden while NOVA will contribute four polystyrene and EPS
plants located in France, the Netherlands and the United
Kingdom. Each party will receive a 50% equity interest in NOVA
Innovene as consideration in the exchange. In addition, Innovene
has entered into an agreement which provides for put and call
options for the purchase by the Company, and transfer to NOVA
Innovene, of BP's polystyrene and EPS assets and
liabilities at Wingles in the first quarter of 2007. On the
exercise of either a put or call option, the consideration for
the transfer is the fair market value of such assets and
liabilities at the time of any transfer.
On August 10, 2005, the Company experienced a fire at one
of the crackers at the Company's Chocolate Bayou, Texas
facility. The affected unit primarily produces ethylene and
represents approximately 50% of the facility's total
ethylene capacity. We are continuing to assess the operational
and financial impact the incident may have on our business.
(21)
Financial Instruments and Derivative Contracts
Innovene is exposed to a number of different market risks
arising from the Company's normal business activities.
Market risk is the possibility that changes in currency exchange
rates, interest rates, or commodity prices will adversely affect
the value of the Company's financial assets, liabilities or
expected future cash flows. The Company has developed policies
aimed at managing the volatility inherent in certain of these
natural business exposures and, in accordance with these
policies, the Company enters into various transactions using
derivative financial and commodity instruments (derivatives),
including conventional exchange-traded derivative instruments
such as futures and option contracts, as well as
non-exchange-traded instruments such as swaps,
"over-the-counter" options, and forward contracts.
Derivatives are contracts whose value is derived from one or
more underlying financial instruments, indices, or prices that
are defined in the contract.
The Company accounts for derivatives and hedging activities in
accordance with FASB Statement No. 133,
Accounting for
Derivative Instruments and Certain Hedging Activities,
as
amended, which requires that all derivative instruments be
recorded on the balance sheet at their respective fair values.
The purpose for which a derivative contract is used is
identified at inception. To qualify as a hedge for accounting
purposes, the contract must comply with established guidelines
that ensure that it is effective in achieving its objective. In
such circumstances where the Company designates a derivative as
a hedge against changes in the value of a recognized asset or
liability, the Company's exposure to market risk created by
the derivative is offset by the opposite exposure arising from
the asset or liability being hedged. In other circumstances
where the Company designates a derivative as a cash flow hedge
of an anticipated transaction, the changes in value of the
derivative are included in Other Comprehensive Income until the
occurrence of the future transaction, and then are offset by the
effects of the transaction being hedged in the period it occurs.
In all other cases where derivatives are not designated as a
hedge for accounting purposes, changes in market value give rise
to realized and unrealized gains and losses, which are
recognized in current period operating results. For the periods
presented herein, none of the Company's derivative
instruments were designated as hedges for accounting purposes.
F-45
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
All derivative activity, whether designated as a hedge for
accounting purposes or not, is carried out by specialist teams
that have the appropriate skills, experience and supervision.
These teams are subject to close financial and management
control, meeting generally accepted industry practice and
reflecting the principles of the Group of Thirty Global
Derivatives Study recommendations.
The estimated fair value of financial instruments has been
determined by using available market information and appropriate
valuation methodologies. The following table provides the fair
values of all material derivatives instruments outstanding as at
each period.
Derivative instruments fair value and notional
amounts
As of December 31,
As of June 30,
2002
2003
2004
2005
($ in millions)
Foreign exchange contracts
Purchased options
—
—
—
1
Foreign exchange swaps
116
204
155
—
Contractual notional amounts
1,318
1,402
1,595
750
Foreign Currency Exchange Rate Risk
BP and Innovene's foreign exchange management policy is to
minimize economic and material transactional exposures arising
from currency movements against the U.S. dollar.
Until December 31, 2004, Innovene did not separately manage
these risks, with the exception of specific risks around the
sterling-denominated debt, as all exposures were managed
centrally by BP on a net BP Group basis. The BP Group
co-ordinated the handling of foreign exchange risks centrally,
by netting off naturally occurring opposite exposures wherever
possible, to reduce the risks, and then dealing with any
material residual foreign exchange risks.
The Company entered into foreign exchange derivative contracts
to manage the exposure related to the sterling-denominated debt
as this was a specific identifiable risk. These contracts, which
all have a maturity of less than one year, are not designated as
hedges for financial reporting purposes and are recorded at fair
value. As of December 31, 2002, 2003, and 2004, the fair
value of outstanding foreign exchange derivative contracts was
$116 million, $204 million, and $155 million,
respectively. Settlement of the foreign exchange swaps resulted
in net pre-tax gains of $16 million, $2 million, and
$4 million in 2002, 2003, and 2004 respectively.
In early 2005, the Company began separately managing its
significant non-U.S. dollar economic exposures using
derivative contracts that have not been designated as hedges for
accounting purposes. The most significant of such exposures are
the net cash flows of the Euro and Sterling related to the
Company's activities within Continental Europe and the UK.
The following table provides information about the
Company's foreign currency purchased options that were
negotiated at the beginning of 2005 for a premium cost of
$20 million. These financial instruments are sensitive to
changes in the Sterling/U.S. dollar, Euro/U.S. dollar
exchange rates.
The fair values for the foreign exchange options in the table
below are based on pricing models that take into account
relevant market data.
F-46
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Purchased options
Notional amount by
expected maturity date
Fair value
As of June 30, 2005
2005
2006
2007
Total
Asset
Liability
Receive sterling/pay U.S. dollars
Contract amount ($ in millions)
250
—
—
250
0.4
—
Weighted average strike price ($)
1.9
—
—
1.9
—
—
Receive Euro/pay U.S. dollars
Contract amount ($ in millions)
500
—
—
500
0.2
—
Weighted average strike price ($)
1.35
—
—
1.35
—
—
Currency options which matured during the first half of 2005
resulted in a realized loss of $4 million from inception to
June 30, 2005. Changes in fair values of outstanding
options account for $15 million unrealized loss.
Commodity Prices
Within the Company's normal business activities, Innovene
is exposed to commodity prices that could adversely affect the
value of the Company's financial assets, liabilities or
expected future cash flows. Commodity price trading and hedging
activities have been carried out by BP's supply and trading
function. Service agreements have been negotiated in order to
ensure the continuity of such activities.
BP risk management policy with respect to commodity price risk
is to manage certain short-term exposures in respect of its
business activities. To this end, BP's supply and trading
function uses the full range of conventional financial and
commodity derivatives available in the relevant markets. The
derivative instruments used for hedging purposes do not expose
the Company to market risk because the change in their market
value is offset by an equal and opposite change in the market
value of the asset, liability or transaction being hedged.
A Trading Risk Management Committee has oversight of the quality
of internal control in BP's supply and trading function.
Independent control functions monitor compliance with BP's
policies. The control framework includes prescribed trading
limits that are reviewed regularly by senior management, daily
monitoring of risk exposure using value-at-risk principles,
marking trading exposures to market and stress testing to assess
the exposure to potentially extreme market situations. BP's
supply and trading activities in oil, natural gas, power and
financial markets are managed within a single integrated
function. This function has the responsibility for ensuring high
and consistent standards of control, making investments in the
necessary systems, and supporting infrastructure and providing
professional management oversight.
The Company measures its market risk exposure, i.e.
potential gain or loss in fair values, on its trading activity
using value-at-risk techniques. These techniques are based on a
variance/ covariance model or a Monte Carlo simulation and make
a statistical assessment of the market risk arising from
possible future changes in market values over a 24-hour period.
The calculation of the range of potential changes in fair value
takes into account a snapshot of the end-of-day exposures, and
the history of one-day price movements over the previous twelve
months, together with the correlation of these price movements.
The potential movement in fair values is expressed to three
standard deviations, equivalent to a 99.7% confidence level.
This means that, in broad terms, one would expect to see an
increase or a decrease in fair values greater than the
value-at-risk on only one occasion per year if the portfolio
were left unchanged.
The Company calculates value-at-risk on all instruments that are
held for trading purposes and that therefore give an exposure to
market risk. The value-at-risk models take account of derivative
financial instruments such as interest rate forward and futures
contracts and swap agreements; foreign exchange forward and
futures contracts
F-47
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
and swap agreements; and oil, natural gas and power price
futures and swap agreements. Financial assets and liabilities
and physical crude oil and refined products that are treated as
trading positions are also included in these calculations. For
options a linear approximation is included in the value-at-risk
models. The value-at-risk calculation for oil, natural gas and
power price exposure also includes derivative commodity
instruments (commodity contracts that permit settlement either
by delivery of the underlying commodity or in cash), such as
forward contracts.
Commodity
The following table provides the gain and losses, excluding any
costs relating to such activities, that have been recognized in
the Company's income statement due to hedging and trading
activities performed by BP's supply and trading function.
For the year ended
December 31,
2002
2003
2004
($ in millions)
Hedging
Petrochemicals
8
12
15
Refining
(3
)
—
1
Trading
Petrochemicals
4
4
5
Refining
13
—
—
(22)
Geographic and Segment Information
The Company derives its revenues, earnings and cash flows from
the manufacture and sale of a wide variety of specialty and
commodity chemical products and refined oil products. The
Company has five reportable operating segments: Olefins and
Polymers North America, Olefins and Polymers Europe, Global
Derivatives, Refining, and Corporate. The major products of each
reportable operating segment are as follows:
Segment
Primary Products
Olefins and Polymers North America
Ethylene, Propylene, Butadiene, Polypropylene, High Density
    Polyethylene, Styrene Monomer
Olefins and Polymers Europe
Ethylene, Propylene, Butadiene, Benzene, Polypropylene, Low-,
    Linear Low- and High-Density Polyethylene, Styrene Monomer,
    Polystyrene, Expandable Polystyrene, Solvents and Industrial
    Chemicals
Global Derivatives
Acrylonitrile, and Linear and Poly Alpha Olefins
Refining
Gasoline, Diesel, Jet Fuel, Naphtha, LPG, Gas Oil
Corporate and other
Polymers and Acrylonitrile licensing
The BDO business has historically been included in the Global
Derivatives operating segment and is included in this segment in
this note.
F-48
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
Financial information for each of the Company's geographic
regions is as follows:
For the
For the year ended
six months
December 31,
ended June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Revenues:
United States
3,060
3,346
4,400
1,958
2,543
United Kingdom
3,353
3,887
4,516
1,949
3,287
Germany
1,190
1,438
1,935
765
1,110
France
2,529
2,569
3,352
1,498
2,396
Belgium
430
800
999
478
373
Rest of world
1,253
1,434
2,794
1,173
1,433
Total revenues
11,815
13,474
17,996
7,821
11,142
Less discontinued operations
(39
)
(52
)
(59
)
(30
)
(11
)
Total continuing operations
11,776
13,422
17,937
7,791
11,131
As of
December 31,
As of June 30,
2003
2004
2005
(unaudited)
($ in millions)
Long-lived
    Assets
(1)
United States
2,198
1,935
1,950
United Kingdom
2,501
2,528
2,279
Germany
1,000
1,113
967
France
519
705
551
Belgium
560
476
563
Rest of world
416
379
427
Total long-lived assets
7,194
7,136
6,737
Less discontinued operations
(144
)
—
—
Total continuing operations
7,050
7,136
6,737
Note:
(1)
Represents property, plant and equipment, net of accumulated
    depreciation
Revenue by geographic region was determined based on the
location of the manufacturing facility generating the revenues.
Long-lived assets by geographic region were determined based on
where these assets were physically located.
F-49
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
For the
For the year ended
six months
December 31,
ended June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Revenues
(1)
:
Olefins and Polymers
North America
2,341
2,698
3,680
1,615
2,150
Europe
4,863
5,609
7,424
3,328
4,399
Global Derivatives
1,788
1,821
2,149
1,045
1,283
Refining
3,876
4,779
6,555
2,699
4,331
Corporate and Other
112
69
97
24
46
Eliminations
(1,165
)
(1,502
)
(1,909
)
(890
)
(1,067
)
Total revenues
11,815
13,474
17,996
7,821
11,142
Less discontinued operations
(39
)
(52
)
(59
)
(30
)
(11
)
Total continuing operations
11,776
13,422
17,937
7,791
11,131
Adjusted
    EBITDA
(2)
:
Olefins and Polymers
North America
91
171
257
77
250
Europe
148
54
334
195
492
Global Derivatives
188
58
(16
)
34
167
Refining
44
199
410
164
436
Corporate and Other
(52
)
(26
)
(137
)
(73
)
(254
)
Total adjusted EBITDA
419
456
848
397
1,091
Add back (deduct) adjusted EBITDA from discontinued operations
23
16
21
7
(3
)
Total adjusted EBITDA from continuing operations
442
472
869
404
1,088
Reconciliation of adjusted EBITDA from continuing operations to
    net income (loss) from continuing operations
Interest expense
(35
)
(44
)
(49
)
(25
)
(25
)
Provision for income taxes for continuing operations
(118
)
(90
)
(128
)
(86
)
(233
)
Asset impairments
(32
)
(36
)
(280
)
—
—
Depreciation and amortization
(423
)
(517
)
(545
)
(244
)
(284
)
Net income (loss) from continuing operations
(166
)
(215
)
(133
)
49
546
Notes:
(1)
Revenues on products sold between operating segments are
    recorded at market prices.
(2)
Adjusted EBITDA represents income (loss) before income tax
    benefit (expense), adjusted for interest expense, depreciation
    and amortization, and asset impairments.
F-50
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
For the
six months
For the year ended
ended
December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
($ in millions)
Depreciation and Amortization:
Olefins and Polymers
North America
95
112
116
44
60
Europe
184
232
248
122
130
Global Derivatives
92
107
125
55
43
Refining
51
54
54
21
40
Corporate and Other
8
19
11
6
11
Total depreciation and amortization
430
524
554
248
284
Less discontinued operations
(7
)
(7
)
(9
)
(4
)
—
Total continuing operations
423
517
545
244
284
Capital Expenditures:
Olefins and Polymers
North America
153
174
191
79
78
Europe
261
209
164
72
103
Global Derivatives
90
47
69
24
9
Refining
58
110
117
45
23
Corporate and Other
54
18
29
—
37
Total capital expenditures
616
558
570
220
250
Less discontinued operations
(2
)
(2
)
(3
)
(2
)
—
Total continuing operations
614
556
567
218
250
F-51
Table of Contents
INNOVENE Inc.
Notes to Combined Financial
Statements — (Continued)
(Information as of June 30, 2005 and for the six months
ended
June 30, 2004 and 2005 is unaudited)
As of December 31,
As of June 30,
2003
2004
2005
(unaudited)
($ in millions)
Total Assets:
Olefins and Polymers
North America
2,021
2,314
2,478
Europe
5,738
6,376
5,796
Global Derivatives
1,790
1,520
1,639
Refining
1,354
1,609
2,604
Corporate and Other
553
395
330
Eliminations
—
—
(384
)
Total assets
11,456
12,214
12,463
Less discontinued operations
(178
)
(15
)
—
Total continuing operations
11,278
12,199
12,463
F-52
Table of Contents
Goldman, Sachs & Co.
Morgan Stanley
Lehman Brothers
UBS Investment Bank
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table sets forth the estimated costs and expenses,
other than underwriting discounts and commissions, payable in
connection with the sale of common stock being registered, all
of which will be paid by the Registrant:
Amount
SEC registration fee
$
117,700
NASD filing fee
75,500
NYSE listing fee
*
Printing expenses
*
Legal fees and expenses
*
Accounting fees and expenses
*
Blue sky fees and expenses
*
Miscellaneous
*
Total
*
*
To be filed by amendment
Item 14.
Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of
Delaware provides as follows:
"A corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
A corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of
such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or
matter. as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such
II-1
Table of Contents
person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall
deem proper."
As permitted by the Delaware General Corporation Law, the
Registrant has included in its certificate of incorporation and
bylaws provisions to eliminate the personal liability of its
directors for monetary damages for breach of their fiduciary
duties as directors, subject to certain exceptions. In addition,
the Registrant's certificate of incorporation and bylaws
provide that the Registrant is required to indemnify its
officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be
discretionary, and the Registrant is required to advance
expenses to its officers and directors as incurred in connection
with proceedings against them for which they may be indemnified.
The underwriting agreement provides that the underwriters are
obligated, under certain circumstances, to indemnify directors,
officers and controlling persons of the Registrant against
certain liabilities, including liabilities under the Securities
Act of 1933. Reference is made to the form of underwriting
agreement filed as Exhibit 1.1 hereto.
The Registrant intends to maintain directors and officers
liability insurance for the benefit of its directors and
officers.
Item 15.
Recent Sales of Unregistered Securities
The Registrant has not sold any securities, registered or
otherwise, within the past three years, except for the shares
issued upon formation to Registrant's sole shareholder, BP.
Item 16.
Exhibits and Financial Statement Schedules
(a)
Exhibits
Exhibit number
Exhibit title
1
.1
Underwriting Agreement*
2
.1
Amended and Restated Master Reorganisation Agreement, dated
    June 30, 2005, between BP p.l.c., Innovene LLC, Innovene
    Europe Holdings Limited and BP Chemicals East China Investments
    Limited
3
.1
Form of Innovene Inc.'s Amended and Restated Certificate of
    Incorporation*
3
.2
Form of Innovene Inc.'s Amended and Restated Bylaws*
4
.1
Form of Specimen Certificate for Innovene Inc.'s Common
    Stock*
5
.1
Opinion of Sullivan & Cromwell LLP*
10
.1
Intellectual Property and Information Technology Separation
    Agreement, dated April 1, 2005, between certain members of
    the Innovene Group and BP p.l.c.*
10
.2
U.S. Master Tax Agreement, dated as of April 1, 2005,
    between Innovene LLC., BP America Inc and
    BP p.l.c.*
10
.3
Rest of World Master Tax Agreement, dated as of August 3,
    2005 between Innovene LLC, Innovene European Holdings Limited
    and BP p.l.c., each signing on behalf of various BP and
    Innovene entities*
10
.4
Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Crude Oil, dated June 16, 2005, between
    BP Trade and Supply (Germany) GmbH and Innovene Europe
    Limited (formerly O&D Trading Limited)*
10
.5
Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Naphtha, NGL and other Feedstock volumes, dated
    June 16, 2005, between BP Oil International Limited
    and Innovene Europe Limited (formerly O&D Trading
    Limited)*
10
.6
Amended and Restated Master Refined Product Sale and Purchase
    Agreement, dated June 16, 2005, between BP Oil
    International Limited and Innovene Europe Limited (formerly
    O&D Trading Limited)*
II-2
Table of Contents
Exhibit number
Exhibit title
10
.7
Master Services Agreement in relation to Refining Commercial
    Optimisation Services, Naphtha Commercial Optimisation Services
    and NGL Commercial Services and LME Plastics Hedging, dated
    March 31, 2005, as amended by an amendment deed, dated
    June 10, 2005, and an amendment deed, dated August 18,
    2005, between BP Oil International Limited and Innovene
    Europe Limited (formerly O&D Trading Limited)*
10
.8
Amended and Restated Master Services Agreement in relation to
    NGL Commercial Optimisation Services, Naphtha Commercial
    Optimisation Services and Benzene Commercial Optimisation
    Services, dated June 16, 2005, between BP North
    Products America Inc and Innovene USA LLC (formerly
    O&D USA LLC)*
10
.9
Amended and Restated Feedstock Sale and Purchase Agreement for
    Naphtha and NGL, dated June 16, 2005, between
    BP Products North America Inc and Innovene
    USA LLC (formerly O&D USA LLC)*
10
.10
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbons Streams produced at Carson, dated April 1,
    2005, between BP West Coast Products LLC and ARCO
    Polypropylene LLC*
10
.11
Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, Mont
    Belvieu, Conway and the Hobbs Fractionator, dated June 30,
    2005, between BP North Products America Inc and
    Innovene USA LLC (formerly O&D USA LLC)*
10
.12
Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, dated
    June 16, 2005, between BP Amoco Chemical Company and
    Innovene USA LLC (formerly O&D USA LLC)*
10
.13
Amended and Restated Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Whiting, dated June 16,
    2005, between BP Products North America Inc and
    Innovene USA LLC (formerly O&D USA LLC)*
10
.14
Master Refined Products Sale and Purchase Agreement in respect
    of the domestic sale of Refined Products at Lavéra, dated
    March 31, 2005 between O&D Trading Limited and
    BP France SA*
10
.15
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Cologne, dated March 31,
    2005 between Deutsche BP AG and O&D Trading
    Limited*
10
.16
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Nerefco, dated March 31,
    2005 between BP Oil International Limited and
    O&D Trading Limited*
10
.17
Amended and Restated Agreement regarding the Use of
    Infrastructure at the Nerefco Facilities in Rotterdam (Nerefco
    Infrastructure Agreement), dated June 16, 2005, between
    BP Oil International Limited and Innovene Europe Limited
    (formerly O&D Trading Limited)*
10
.18
Amended and Restated Agreement regarding Transportation of
    Naphtha through the RMR Pipeline, dated June 16, 2005,
    between Deutsche BP AG and Innovene Europe Limited
    (formerly O&D Trading Limited)*
10
.19
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams supplied to Grangemouth, dated
    March 31, 2005, between BP Exploration Operating
    Company Limited and O&D Trading Limited*
10
.20
Amended and Restated Master Refined Products Sale and Purchase
    Agreement in respect of the domestic sale of Refined Products
    produced at Grangemouth, dated June 16, 2005, between
    Innovene Europe Limited (formerly O&D Trading Limited)
    and BP Oil UK Limited*
10
.21
The Innovene "BP LTPP" Conversion Plan, dated
    June 23, 2005.*
10
.22
The Innovene Incentive Plan 2005, dated June 23, 2005.*
10
.23
The Innovene Executive Share Matching Plan, dated June 23,
    2005.*
10
.24
Change in Control Severance Agreement for Ralph Alexander*
10
.25
Change in Control Severance Agreement for Didier Baudrand*
10
.26
Change in Control Severance Agreement for Dennis Seith*
10
.27
Form of Change in Control Severance Agreement for
    U.S. executive officers*
II-3
Table of Contents
Exhibit number
Exhibit title
21
.1
Subsidiaries of Innovene Inc.*
23
.1
Consent of Ernst & Young LLP, Independent Registered
    Public Accounting Firm
23
.2
Consent of Sullivan & Cromwell LLP (included in
    Exhibit 5.1)*
24
.1
Power of Attorney**
*
To be filed by amendment.
**
Included on signature page.
(b) Financial Statement Schedules
Schedule II — Valuation and Qualifying
Accounts
Deduction from asset accounts, allowance for doubtful
debt:
Balance at
Charged to
Charged to
beginning
costs and
other
Balance at
$m
of year
expenses
accounts
Deductions
(a),(b)
end of year
($ in millions)
Year ended December 31, 2002
(13
)
(1
)
—
(14
)
Year ended December 31, 2003
(14
)
(7
)
3
(18
)
Year ended December 31, 2004
(18
)
(7
)
3
(23
)
Notes:
(a)
Includes foreign currency translation effects
(b)
Uncollected accounts written off, net of recoveries
Item 17.
Undertakings
The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) That for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To provide to the underwriters at the closing specified
in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(4) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
II-4
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Innovene Inc. has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Chicago, Illinois, on
September 12, 2005.
Innovene Inc.
By:
/s/ Ralph C. Alexander
Ralph C. Alexander
President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints each of
Ralph C. Alexander, Mark Tomkins and Henry Kleeman, and
each of them acting individually, as his or her true and lawful
attorneys-in-fact and agents, each with full power of
substitution, for the undersigned in any and all capacities, to
sign any and all amendments to this Registration Statement
(including post-effective amendments or any abbreviated
registration statement and any amendments thereto filed pursuant
to Rule 462(b) increasing the number of securities for
which registration is sought), and to file the same, with all
exhibits thereto and other documents in connection therewith,
with the SEC, granting unto said attorneys-in-fact and agents,
with full power of each to act alone, full power and authority
to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully for all
intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Ralph C. Alexander
Ralph
    C. Alexander
President, Chief Executive Officer, and Director
September 12, 2005
/s/ Mark Tomkins
Mark
    Tomkins
Chief Financial Officer
September 12, 2005
/s/ Thomas C. Muething
Thomas
    C. Muething
Controller
September 12, 2005
/s/ Ross J. Pillari
Ross
    J. Pillari
Chairman of the Board and Director
September 12, 2005
/s/ Stephen A. Elbert
Stephen
    A. Elbert
Director
September 12, 2005
/s/ Stephen Riney
Stephen
    Riney
Director
September 12, 2005
/s/ Stephen R. Winters
Stephen
    R. Winters
Director
September 12, 2005
II-5
Table of Contents
EXHIBIT INDEX
Exhibit number
Exhibit title
1
.1
Underwriting Agreement*
2
.1
Amended and Restated Master Reorganisation Agreement, dated
    June 30, 2005, between BP p.l.c., Innovene LLC, Innovene
    Europe Holdings Limited and BP Chemicals East China Investments
    Limited
3
.1
Form of Innovene Inc.'s Amended and Restated Certificate of
    Incorporation*
3
.2
Form of Innovene Inc.'s Amended and Restated Bylaws*
4
.1
Form of Specimen Certificate for Innovene Inc.'s Common
    Stock*
5
.1
Opinion of Sullivan & Cromwell LLP*
10
.1
Intellectual Property and Information Technology Separation
    Agreement, dated April 1, 2005, between certain members of
    the Innovene Group and BP p.l.c.*
10
.2
U.S. Master Tax Agreement, dated, as of April 1, 2005,
    between Innovene LLC, BP America Inc and BP p.l.c.*
10
.3
Rest of World Tax Master Agreement, dated as of August 3,
    2005 between Innovene LLC, Innovene European Holdings Limited
    and BP p.l.c., each signing on behalf of various BP and Innovene
    entities*
10
.4
Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Crude Oil, dated June 16, 2005, between BP
    Trade and Supply (Germany) GmbH and Innovene Europe Limited
    (formerly O&D Trading Limited)*
10
.5
Amended and Restated Master Feedstock Sale and Purchase
    Agreement for Naphtha, NGL and other Feedstock volumes, dated
    June 16, 2005, between BP Oil International Limited and
    Innovene Europe Limited (formerly O&D Trading Limited)*
10
.6
Amended and Restated Master Refined Product Sale and Purchase
    Agreement, dated June 16, 2005, between BP Oil
    International Limited and Innovene Europe Limited (formerly
    O&D Trading Limited)*
10
.7
Master Services Agreement in relation to Refining Commercial
    Optimisation Services, Naphtha Commercial Optimisation Services
    and NGL Commercial Services and LME Plastics Hedging, dated
    March 31, 2005, as amended by an amendment deed, dated
    June 10, 2005 and an amendment deed, dated August 18,
    2005, between BP Oil International Limited and Innovene Europe
    Limited (formerly O&D Trading Limited)*
10
.8
Amended and Restated Master Services Agreement in relation to
    NGL Commercial Optimisation Services, Naphtha Commercial
    Optimisation Services and Benzene Commercial Optimisation
    Services, dated June 16, 2005, between BP North Products
    America Inc and Innovene USA LLC (formerly O&D USA LLC)*
10
.9
Amended and Restated Feedstock Sale and Purchase Agreement for
    Naphtha and NGL (and other feedstock volumes), dated
    June 16, 2005, between BP Products North America Inc and
    Innovene USA LLC (formerly O&D USA LLC)*
10
.10
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbons Streams produced at Carson, dated April 1,
    2005, between BP West Coast Products LLC and ARCO Polypropylene
    LLC*
10
.11
Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, Mont
    Belvieu, Conway and the Hobbs Fractionator, dated June 30,
    2005, between BP North Products America Inc and Innovene USA LLC
    (formerly O&D USA LLC)*
10
.12
Amended and Restated Hydrocarbons Sale and Purchase Agreement in
    respect of Hydrocarbon Streams produced at Texas City, dated
    June 16, 2005, between BP Amoco Chemical Company and
    Innovene USA LLC (formerly O&D USA LLC)*
10
.13
Amended and Restated Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Whiting, dated June 16,
    2005, between BP Products North America Inc and Innovene USA LLC
    (formerly O&D USA LLC)*
II-6
Table of Contents
Exhibit number
Exhibit title
10
.14
Master Refined Products Sale and Purchase Agreement in respect
    of the domestic sale of Refined Products at Lavéra, dated
    March 31, 2005 between O&D Trading Limited and BP
    France SA*
10
.15
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Cologne, dated March 31,
    2005 between Deutsche BP AG and O&D Trading Limited*
10
.16
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams produced at Nerefco, dated March 31,
    2005 between BP Oil International Limited and O&D Trading
    Limited*
10
.17
Amended and Restated Agreement regarding the Use of
    Infrastructure at the Nerefco Facilities in Rotterdam (Nerefco
    Infrastructure Agreement), dated June 16, 2005, between BP
    Oil International Limited and Innovene Europe Limited (formerly
    O&D Trading Limited)*
10
.18
Amended and Restated Agreement regarding Transportation of
    Naphtha through the RMR Pipeline, dated June 16, 2005,
    between Deutsche BP AG and Innovene Europe Limited (formerly
    O&D Trading Limited)*
10
.19
Hydrocarbons Sale and Purchase Agreement in respect of
    Hydrocarbon Streams supplied to Grangemouth, dated
    March 31, 2005, between BP Exploration Operating Company
    Limited and O&D Trading Limited*
10
.20
Amended and Restated Master Refined Products Sale and Purchase
    Agreement in respect of the domestic sale of Refined Products
    produced at Grangemouth, dated June 16, 2005, between
    Innovene Europe Limited (formerly O&D Trading Limited) and
    BP Oil UK Limited*
10
.21
The Innovene "BP LTPP" Conversion Plan, dated
    June 23, 2005.*
10
.22
The Innovene Incentive Plan 2005, dated June 23, 2005.*
10
.23
The Innovene Executive Share Matching Plan, dated June 23,
    2005.*
10
.24
Change in Control Severance Agreement for Ralph Alexander*
10
.25
Change in Control Severance Agreement for Didier Baudrand*
10
.26
Change in Control Severance Agreement for Dennis Seith*
10
.27
Form of Change in Control Severance Agreement for U.S. executive
    officers*
21
.1
Subsidiaries of Innovene Inc.*
23
.1
Consent of Ernst & Young LLP, Independent Registered Public
    Accounting Firm
23
.2
Consent of Sullivan & Cromwell LLP (included in
    Exhibit 5.1)*
24
.1
Power of Attorney**
*
To be filed by amendment.
**
Included on signature page.
II-7