20-F

As Filed with the Securities and Exchange Commission on February 1, 2005

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2004

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Ciba Specialty Chemicals Holding Inc.

(Exact name of Registrant as specified in its charter)

Switzerland

(Jurisdiction of incorporation or organization)

Klybeckstrasse 141
4002 Basel
Switzerland
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

	Name of each exchange
Title of each class	on which registered
American Depositary shares, Each representing one half of one ordinary share, nominal value CHF 3 per share	New York Stock Exchange
Ordinary shares, par value CHF 3 per share*

*Not for trading but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

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

None

(Title of Class)

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

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report, December 31, 2004.

70 826 617 Registered Shares

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

Yes þ                      No o

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

Item 17 o                      Item 18 þ

Item 16. [Reserved]

 Exhibit 4.1

 Exhibit 4.2

 Exhibit 4.3

 Exhibit 4.4

 EX-8.1

 EX-10.1

 EX-12.1

 EX-12.2

 EX-13.1

Introduction
This Annual Report on Form 20-F relates to the registered shares with a nominal value of 3 Swiss francs per share (the “Shares”) of Ciba Specialty Chemicals Holding Inc., the American Depositary Shares (“ADSs”), each representing one half of one Share, and the American Depositary Receipts (“ADR”) evidencing the ADSs under the Deposit Agreement among the Company, Citibank, N.A. (the “Depositary”), and the registered holders and beneficial owners from time to time of the ADRs.

In this Annual Report, “Company” refers to Ciba Specialty Chemicals Holding Inc. and its consolidated subsidiaries. In certain cases, where indicated or where the context requires it, “Company” refers to Ciba Specialty Chemicals Holding Inc.

The consolidated financial statements and selected consolidated financial data as of December 31, 2004, 2003, 2002, 2001 and 2000, and for each of the years in the five-year period ended December 31, 2004 (the “Consolidated Financial Statements”), included in this Annual Report, have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Statements in this Annual Report with respect to such financial information are based on U.S. GAAP information.

All market share data contained in this Annual Report is based on management’s estimates.

Currency Translation
Unless otherwise indicated, all amounts herein are expressed in Swiss francs (“CHF”) or United States dollars (“U.S. dollars”, “dollars”, “USD”, “US$” or “$”). Amounts stated in U.S. dollars, unless otherwise indicated, have been translated from Swiss francs at the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2004, which was CHF 1.1412 per US$ 1.00. This rate should be used solely for convenience and should not be construed as a representation that the Swiss franc amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or at all. This rate may differ from the actual rates used in the preparation of the Consolidated Financial Statements of the Company as of December 31, 2004, 2003 and 2002, and for each of the years in the three year period ended December 31, 2004, included in Item 18 of this Annual Report, which are expressed in Swiss francs. Accordingly, U.S. dollar amounts appearing herein may differ from the actual U.S. dollar amounts that were translated into Swiss francs in the preparation of such financial statements.

Cautionary Statement Regarding Forward-Looking Information
This Annual Report contains certain forward-looking statements and information with respect to the financial condition, results of operations and business of the Company and certain of such statements and information with respect to plans, objectives and market position of the Company are based on the opinions and beliefs of the Company’s management as well as assumptions made by and information currently available to the Company. In particular, among other statements, certain statements in “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects” with regard to trends, revenues, costs, net income, accounting policies, market size, market share, market demands, volumes, prices, margins, research and development, capital expenditures, cash flows, debt levels, patents, outlook the effect of technological developments, strategy and management objectives, opinions and beliefs and sufficiency of environmental reserves and insurance arrangements are forward-looking in nature. Such statements reflect the current views of the Company with respect to market conditions and future events and are subject to certain risks, uncertainties and assumptions. Investors are cautioned that all forward-looking statements involve risks and uncertainty as there are certain important factors that could cause actual results, performance or events to differ materially from those anticipated including, but not limited to, the following: the timing and strength of new product offerings, pricing strategies of competitors, introduction of competing products by other companies, lack of acceptance of new products and services by the Company’s targeted customers, changes in the Company’s business strategy, the Company’s ability to continue to receive adequate raw materials from its suppliers on acceptable terms, or at all, or to continue to obtain sufficient financing to meet its liquidity needs, the effects of the Company’s reorganization and restructuring and changes in the political and regulatory framework in which the Company operates or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis and various other factors. For more information regarding some of these factors, see “Item 3. Key Information – Risk Factors.” All forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Furthermore, the Company does not assume any obligation to update these forward looking statements.

PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The tables below set forth selected consolidated financial data for the Company for the periods indicated and are qualified by reference to, and should be read in conjunction with, the Company’s Consolidated Financial Statements and the Notes thereto, which are included elsewhere in this Annual Report, and “Item 5. Operating and Financial Review and Prospects”.

The selected consolidated financial data as of December 31, 2004, 2003, 2002, 2001 and 2000, and for each of the years in the five-year period ended December 31, 2004, have been taken or are derived from the audited consolidated financial statements of the Company for the relevant periods. The selected financial data have been prepared in accordance with U.S. GAAP.

	2004			2003			2002			2001			2000
Result of operations
Net sales		7 027			6 646			7 085			7 367			7 902
Operating income		519			571			788			761			876
Income from continuing operations, net of tax(1) (4) (5)		283			360			406			380			418
Income from discontinued operations, net of tax(5)		28			0			0			0			34
Cumulative effect of change in accounting principles, net of tax		0			(16	)		0			2			0
Net income(1) (4)		311			344			406			382			452
Earnings per share, basic and diluted		0			0			0			0			0
Continuing operations(1)(4)		4.28			5.26			5.92			5.72			6.31
Discontinued operations(5)		0.43			0.00			0.00			0.00			0.50
Cumulative effect of change in accounting principles		0.00			(0.23	)		0.00			0.04			0.00
Net income per share(1) (4)		4.71			5.03			5.92			5.76			6.81
Equity per share		62.76			62.64			63.16			59.08			56.82
Dividend per share(6)		1.00			0.00			0.00			2.00			2.00
Capital reduction per share(6)		2.00			3.00			3.00			1.00			0.00
Weighted average number of shares outstanding
Basic		66 059 479			68 361 123			68 549 964			66 419 147			66 311 879
Diluted		66 059 479			68 361 123			68 575 058			66 419 147			66 311 879
Other data -  continuing operations
Net sales development percentage		6	%		(6	)%		(4	)%		(7	)%		9	%
Depreciation and amortization of other intangibles		394			366			385			408			406
Amortization of goodwill		0			0			0			61			64
Restructuring and special charges		91			0			0			0			2
EBITDA		913			937			1 173			1 230			1 346
Operating income margin		7.4	%		8.6	%		11.1	%		10.3	%		11.1	%
EBITDA margin		13.0	%		14.1	%		16.6	%		16.7	%		17.0	%
Capital expenditures		294			233			250			259			249
Research and development		288			281			294			276			293
Personnel costs		1 762			1 713			1 752			1 796			2 047
Number of employees at year end		19 338			18 658			19 007			19 683			20 306
Balance sheet data
Current assets		4 382			4 939			5 314			4 827			4 797
Property, plant and equipment, net		3 015			2 963			3 196			3 565			3 787
Total assets		11 006			11 098			11 792			11 718			12 105
Short-term debt		559			259			1 496			316			371
Long-term debt		2 917			3 187			2 344			3 678			3 859
Common stock		212			433			649			721			721
Shareholders’ equity		4 151			4 245			4 354			3 908			3 754

Business segment data(7)	2004			2003			2002			2001			2000
Plastic Additives
Net sales		1 895			1 822			1 903			1 913			2 023
Operating income		224			165			226			256			285
Depreciation and amortization of other intangible assets		95			100			106			119			108
EBITDA		319			265			332			375			393
Operating income margin		11.9	%		9.1	%		11.9	%		13.4	%		14.1	%
EBITDA margin		16.8	%		14.6	%		17.5	%		19.6	%		19.4	%
Coating Effects
Net sales		1 818			1 807			1 920			1 944			2 118
Operating income		291			300			341			312			371
Depreciation and amortization of other intangible assets		103			97			99			99			104
EBITDA		394			397			440			411			475
Operating income margin		16.0	%		16.6	%		17.7	%		16.1	%		17.5	%
EBITDA margin		21.7	%		22.0	%		22.9	%		21.1	%		22.4	%
Water & Paper Treatment
Net sales		2 014			1 616			1 718			1 837			1 920
Operating income		126			130			173			151			184
Depreciation and amortization of other intangible assets		131			103			109			114			113
EBITDA		257			233			282			265			297
Operating income margin		6.3	%		8.1	%		10.1	%		8.2	%		9.6	%
EBITDA margin		12.7	%		14.4	%		16.4	%		14.5	%		15.5	%
Textile Effects
Net sales		1 300			1 401			1 544			1 673			1 841
Operating income		61			69			142			181			204
Depreciation and amortization of other intangible assets		56			60			66			67			71
EBITDA		117			129			208			248			275
Operating income margin		4.7	%		4.9	%		9.2	%		10.8	%		11.1	%
EBITDA margin		9.0	%		9.2	%		13.5	%		14.8	%		14.9	%
Discontinued operations(8)
Net sales														774
Operating income														57
Gain on sale, net of tax														34

Restructuring and special charges are corporate items and are therefore not reflected in the Company’s segments. Accordingly, segment operating income and EBITDA, and related margins thereof, are not impacted by restructuring and special charges.

Trading prices on the Swiss Exchange
(Price per share in CHF)
Annual highs	96.14	101.50	128.00	115.75	122.50
Annual lows	76.70	74.75	89.75	75.00	94.25
Period End	86.50	92.37	89.79	95.81	101.35

(1)	As of January 1, 2002, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) No. 142 “Goodwill and Other Intangible Assets”, which requires that goodwill no longer be amortized to earnings. The results of operations on an adjusted basis, excluding goodwill amortization, for the years prior to 2002 had SFAS No. 142 been applied retroactively for all periods presented, would have been: income from continuing operations, net of tax - in 2001 CHF 441 million, in 2000 CHF 482 million; basic and diluted earnings per share for income from continuing operations - in 2001 CHF 6.64, in 2000 CHF 7.27; net income - in 2001 CHF 443 million, in 2000 CHF 520 million; basic and diluted earnings per share for net income - in 2001 CHF 6.68, in 2000 CHF 7.83. For the year 2000, net income as adjusted excludes goodwill amortization from continuing operations and from discontinued operations.
(2)	The Company applied FASB Interpretation No. 46 to a previously unconsolidated trust that leases an asset to the Company, resulting in the consolidation by the Company of the trust in 2003.
(3)	As of January 1, 2001, the Company adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” as amended which replaced existing pronouncements and practices with a single, integrated accounting framework for derivatives and hedging activities.
(4)	Effective January 1, 2003, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123, as amended. Had the Company applied the fair value method for all periods prior to 2003, pro forma income from continuing operations, net of tax would have been - in 2002 CHF 395 million, in 2001 CHF 368 million, in 2000 CHF 410 million; pro forma basic and diluted earnings per share for income from continuing operations would have been - in 2002 CHF 5.76, in 2001 CHF 5.53, in 2000 CHF 6.19; pro forma net income would have been - in 2002 CHF 395 million, in 2001 CHF 370 million and in 2000 CHF 444 million; pro forma basic and diluted earnings per share for net income would have been - in 2002 CHF 5.76, in 2001 CHF 5.57 and in 2000 CHF 6.69.
(5)	The 2000 income from discontinued operations of CHF 34 million represents the gain on sale of discontinued operations, net of tax for the Company’s Performance Polymers business, which was sold on May 31, 2000. This gain includes income from continuing operations, net of taxes, of CHF 37 million and a CHF (3) million loss from the sale of the net assets of the Performance Polymers business. See footnote (8) below. The 2004 income from discontinued operations of CHF 28 million resulted from the release of previously established reserves following the settlement in 2004 of a dispute and related arbitration proceedings that had been initiated by Vantico, the purchaser of the Performance Polymers business.
(6)	The Board of Directors proposes a cash payment to the Company’s shareholders in 2005 totaling CHF 3 per share, based on 2004 results, consisting of a dividend of CHF 1 per share and a capital reduction of CHF 2 per share, which is reflected in the 2004 column in the table above. The dividend and capital reduction are subject to shareholder approval at the Annual General Meeting to be held on March 3, 2005. If approved the capital reduction will take the form of a reduction in the nominal value of each share from CHF 3 per share by CHF 2 per share to CHF 1 per share. The Company expects, subject to various conditions and approval that the payments of the capital reduction will be made to the shareholders on May 18, 2005.
	The proposed dividend per share and capital reduction per share, based on the USD exchange rate of December 31, 2004 is USD 0.88 and USD 1.76, respectively. Based on the USD exchange rate at the payment date of May 14, 2004, the 2003 capital reduction per share was USD 2.30, at the payment date of May 23, 2003, the 2002 capital reduction per share was USD 2.32 and at the payment date of June 28, 2002, the 2001 capital reduction per share was USD 0.67.
	Based on the USD exchange rate at the respective payment dates of the 2001 and 2000 dividends, the USD equivalent of the dividend per share was USD 1.19 and USD 1.23, respectively.

(7)

In 2002, the Company implemented SFAS No. 142 “Goodwill and Other Intangible Assets”. As a result of adopting this standard, the Company reclassified certain goodwill and other intangible assets to the segments that were previously reported as corporate items and not allocated to the segments. In addition, the Company reclassified goodwill amortization that was previously allocated to the segments to corporate and reclassified other intangible amortization from corporate to the segments corresponding to the other intangible asset reclassification. Amounts reported for the previous periods have been restated to conform to the 2002 presentation. In addition, in 2004 the Company reorganized from five into four reporting segments and restated all current and prior period segment information to reflect the new structure.

(8)

Reflects the results of the Performance Polymers business as a discontinued operation due to its sale on May 31, 2000. The results represent substantially all of the operations of the Performance Polymers division’s business and do not include an allocation of the Company’s interest costs or unallocated corporate general and administrative expenses. For 2000, the results are for the five month period ended May 31, 2000, the date of the divestment. Included in the Performance Polymers results is goodwill amortization of CHF 4 million in 2000.

Exchange Rate Information
The table below sets forth, for the periods indicated, the average, high, low and period-end Noon Buying Rate for Swiss francs expressed in Swiss francs per U.S. dollar.

Year		Average(1)		High		Low		Period End
2000			1.6930		1.8250		1.5526		1.6202
2001			1.6893		1.8185		1.5878		1.6598
2002			1.5566		1.7190		1.3833		1.3833
2003			1.3374		1.4181		1.2380		1.2380
2004			1.2426		1.3202		1.1338		1.1412
Months
2004	January				1.2659		1.2190		1.2593
	February				1.2680		1.2269		1.2680
	March				1.3038		1.2560		1.2677
	April				1.3202		1.2627		1.2984
	May				1.3076		1.2460		1.2533
	June				1.2678		1.2371		1.2520
	July				1.2796		1.2243		1.2796
	August				1.2830		1.2405		1.2641
	September				1.2729		1.2471		1.2471
	October				1.2663		1.1962		1.1988
	November				1.2075		1.1389		1.1421
	December				1.1613		1.1338		1.1412
2005	January (through January 28)				1.1960		1.1466		1.1876

⁽¹⁾ Represents the average of the Noon Buying Rates on the last business day of each month during the relevant year.

Capitalization and Indebtedness (N/A)

Reasons for the Offer and use of proceeds (N/A)

Risk Factors
Prospective purchasers and existing holders of the ADSs of the Company should consider carefully all of the information set forth in this Annual Report and, in particular, should evaluate the following risks in connection with an investment in the ADSs. Information contained or incorporated by reference in this Annual Report contains “forward-looking statements” which can be identified by the use of forward-looking terminology such as “believes”, “opinion”, “expects”, “may”, “will”, “should” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Such statements include, without limitation, the Company’s beliefs about trends in the global economy, in the specialty chemicals industry and its views about the long-term future of the industry and the Company. See “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects.” We cannot assure you that the future results covered by the forward-looking statements will be achieved. The following matters constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to vary materially from the future results covered in such forward-looking statements. Other factors could also cause actual results to vary materially from the future results covered in such forward-looking statements.

The Company is subject to various changing competitive, economic, political, legal and social conditions, including the following:

As an international business, the Company is exposed to various global economic, political, social and local business risks that may have a material adverse effect on its financial condition and results of operations.

The Company has a small home market for its products and has for many years operated on a global basis. The Company currently has manufacturing facilities in 28 countries and sells its product in more in more than 120 countries. This means the Company is faced with

different complex legal and regulatory requirements in many jurisdictions. These include tariffs and trade barriers, requirements relating to withholding taxes on remittances and other payments by subsidiaries and different intellectual property regimes. The Company’s international operations also expose it to many different local business risks and challenges. The Company’s overall success as a global business depends, in part, upon its ability to succeed in differing economic, social and political conditions. The Company may not continue to succeed in developing and implementing policies and strategies that are effective in each location where it does business.

The Company’s results of operations and financial position also are affected by developments and trends in the world economy. The year 2004 was, for example, characterized by a general improvement in the economic environment. The recovery in the United States that began late 2003 was more evident in 2004, with real GDP growth of 4 percent in 2004, although this was held back slightly by rising energy and oil prices. The major European economies tended to stagnate in varying degrees through 2004, with real GDP growth at below 2 percent as the impact of the strong euro hampered exports. The recovering economies in Germany and France were contrasted by negative growth in the United Kingdom. In the Asia-Pacific region, economic expansion continued in Japan, growing at 4 percent in GDP terms in 2004. The China Region continued to grow strongly, with real GDP growth remaining between 9 to 10 percent. In most of the regions of the world, with the exception of China, the industrial sector growth was below total GDP growth.

The economic conditions in NAFTA, Europe and parts of Asia-Pacific may worsen or not continue to recover, which could have a material adverse effect on the Company’s results of operations and financial position.

In addition, an adverse development in the political and social stability in the regions where the Company operates, may have a material adverse effect on the Company’s results and financial condition.

The Company currently has operations in more than 120 countries, and its results of operations may be adversely affected by currency fluctuations.

The results of the operations and the financial position of the Company’s subsidiaries outside of Switzerland are reported in the relevant foreign currencies and then translated into Swiss francs at the applicable exchange rates for inclusion in the Company’s Consolidated Financial Statements. The exchange rates between these currencies and the Swiss franc may fluctuate substantially. Because the Company generates a significant percentage of its revenues and a substantially lower percentage of its operating expenses in currencies other than the Swiss franc, fluctuations in the value of the Swiss franc against other currencies have had in the past, and may have in the future, a material effect on the Company’s operating margins as well as its competitive position compared with local producers in affected markets. Currency fluctuations also may significantly affect the comparability of the Company’s results between financial periods. The Company’s results and financial condition are particularly affected by significant changes in the value of the Swiss franc, euro, U.S. dollar, Japanese yen, and British pound relative to each other. For more information, see “Item 5. Operating and Financial Review and Prospects - Currency Trends” in this Annual Report.

Significant competition may force the Company to reduce its product prices which may adversely impact its results of operations.

The Company faces significant competition in the markets in which it operates. Although competition in specialty chemicals is based upon a number of considerations, such as product innovation, product range and quality, relationships with customers, reliability of delivery, technical support and distribution capability, price competition does exist in certain of the Company’s markets due to factors such as industry overcapacity and low-cost local competition. Increased price competition may also occur in certain product areas due to consolidation and globalization among the Company’s customers and competitors and as industry segments mature. As a result of the trends toward global expansion and consolidation by competitors, the Company anticipates that it will continue to face new competitive challenges, continued price competition as well as additional risks inherent in international operations in developing regions.

The Company’s inability to remain technologically innovative and to offer improved products and applications cost-effectively could negatively impact its operating results.

The Company’s operating results depend to a significant extent on its ability to be a low-cost producer of its core products and to continue to introduce new products and applications that offer distinct value in use for its customers. In many of the industry sectors to which the Company sells its products, products are subject to a traditional product life cycle. The Company must devote significant resources to the development of new technologically advanced products and applications, and the Company may not be successful in these efforts at all times.

The cyclicality in the various industries served by the Company may have a material adverse effect on the Company’s business and financial condition.

The Company’s results are affected by cyclicality in various industries served directly or indirectly by the Company, including the automotive, plastics, textiles and clothing, paper, packaging, paint and coating, electronics and construction industries. The Company’s results of operations and financial position have in the past been affected adversely, for example, by slow growth in the textile and paper industries, reduced demand in the automotive industry and by declining demand in a number of industries. The cyclical nature of pricing and investment in the specialty chemicals business is likely to continue, and the Company will continue to experience periods of overcapacity, declining prices and lower profit margins. In addition, external factors beyond the Company’s control, such as general economic conditions, competitors’ actions, international events and circum stances and governmental regulation in the United States and in other jurisdictions, can cause volatility in raw material prices and product demand, as well as fluctuations in the Company’s prices, volumes and margins.

The Company depends upon proprietary technologies, and its competitive position may be adversely affected if it fails to protect its intellectual property rights or is subject to claims that it is infringing upon the rights of others.

Proprietary rights are important to the success and competitive position of the Company. If the Company is unable to maintain the relative exclusivity of certain of its products following patent expiration, through manufacturing scale, technical know-how, advanced applications and service expertise, increased competition may result with consequent erosion of profit margins. Actions taken by the Company to protect its proprietary rights may be insufficient to prevent others from developing similar products to those of the Company. In addition, the laws of many foreign countries do not protect the Company’s intellectual property rights to the same extent as the laws of Switzerland, other European countries, the United States and Japan.

The Company has in the past received and may continue to receive communications asserting that certain of its products or their applications infringe on the proprietary rights of others. The Company has continued to experience a significant increase in intellectual property conflicts, either initiated by the Company or by third parties. In management’s opinion there is no material pending litigation against the Company regarding any intellectual property claim but there could be in the future. Such legal proceedings or claims, with or without merit, and whether initiated by the Company or another party, could subject the Company to costly and time-consuming litigation and divert its research, technical and management personnel from their regular responsibilities. Furthermore, successful legal proceedings or claims against the Company could suspend the development and manufacture of products using the contested invention, or require the Company to pay substantial penalties or royalties.

Any disruption or deterioration in the quality of the raw materials available for the Company’s products may have a material adverse effect on the results of the Company’s operations.

The Company utilizes specialty chemicals and base chemicals as its main raw material in its manufacturing process. Raw material costs represent a significant component of the Company’s cost of goods sold. The prices and availability of these raw materials vary with market conditions and can be highly volatile. As a result of these factors, the Company’s operating margins may decrease if it cannot pass on increased raw material prices to customers, if prices for its products decrease faster than raw material prices or if the price it pays under long-term supply contracts is above the market price.

There have been in the past, and may be in the future, periods of time during which raw material price increases cannot be passed on to customers in whole or in part. Even in periods during which raw material prices decrease the Company may suffer decreasing operating profit margins if raw material price reductions occur at a slower rate than decreases in the selling prices of its products. Historically, the Company typically has not entered into significant hedging arrangements with respect to prices of raw materials but the Company has entered into long-term supply contracts for some raw materials. Any major dislocation in the supply or price of these raw materials or any material difference between the price the Company pays under its supply contracts and market price may have a material adverse effect on its financial condition and results of operations. Additionally, the Company requires raw materials to be of a satisfactory standard for manufacturing its products. Any deterioration in the quality of the raw materials available to the Company may adversely impact the Company’s ability to manufacture its products to an acceptable standard and may have a material adverse effect on the results of its operations. Even if it could obtain acceptable substitute raw materials, the Company could incur increased expenses in securing the raw materials from an alternative source and suffer reduced profit margins and an adverse impact on its business.

Environmental laws and regulations may expose the Company to liability and result in increased costs.

The Company’s business is subject to stringent environmental laws and regulations in the various countries in which it operates. Such laws and regulations govern, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal and the investigation and remediation of soil and groundwater contamination. As with other companies engaged in similar activities, a risk of environmental liability is inherent in its current and historical activities. See “Item 4. Information on the Company - Environmental Matters” in this Annual Report.

The EU Chemicals Policy may result in significant additional costs for the Company.

The EU Chemicals Policy, if adopted by the appropriate EU bodies and Member States in its current draft form (as published on October 29, 2003) would require all companies to register with defined data requirements, their substances manufactured or imported in the EU at levels above 1 ton per year. Whilst presently, the Company cannot assess the complete impact of the EU Chemicals Policy, it believes that the proposed regulatory system will be highly resource intensive and therefore costly to industry and regulators alike. At present, the exact timing of the legislative process and the resulting definitive regulations cannot be estimated.

The Company’s business may be adversely affected by rigorous health and safety regulation.

Certain of the Company’s products are subject to rigorous health and safety regulations. There is a risk that key raw materials or one of the Company’s products may be recharacterized as or found to have a toxicological or health related impact on the environment or on third parties, its customers or employees. Health and safety regulations are continually strengthened and relevant raw materials or products may be banned or the Company may incur increased costs in complying with new requirements.

Liabilities arising from the development, manufacturing and use of the Company’s products may adversely impact the Company’s financial condition.

The Company’s operations are subject to various hazards associated with the production of chemicals, including the use, handling, processing, storage and transportation of hazardous materials. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, and environmental damage, and may result in the suspension of operations and the imposition of civil and criminal liabilities. The Company has been subject to claims of injury from direct exposure to such materials and from indirect exposure when such materials are incorporated into other companies’ products. As a result of past or future operations, there may be additional claims of injury by employees or members of the public due to exposure, or alleged exposure, to such materials. Furthermore, the Company also has exposure to present and future claims with respect to workplace exposure, workers’ compensation and other matters arising from events both prior to and after the date of this Annual Report. The Company cannot predict the actual amount of these liabilities or the timing thereof, if any.

Change of control provisions and limitations on shareholder voting rights may render the Company an unattractive target for any transaction in which the Company’s investors could receive a premium for their Shares or ADSs.

Certain contractual arrangements with Novartis and restrictions on the voting rights of shareholders of the Company may make an acquisition of the Company less likely, and thus may limit any opportunity for the Company’s shareholders to receive a premium for their Shares or ADSs. Similarly, the Company may face adverse tax consequences if certain material parts of the business are divested. Accelerated vesting provisions and the elimination of restriction periods under one or more employee incentive plans instituted by the Company could result in a significant cost to the Company in the event of a change of control not recommended by the Company’s board of directors.

Additionally, a change in control of the Company or a sale of substantially all the assets of the Company could relieve Novartis of its contractual obligation to indemnify the Company for a portion of specified environmental liabilities arising from prior activities of the predecessor of the Company in the United States.

Pursuant to the Company’s articles of association, no shareholder or group of shareholders of the Company will be recognized in the Company share register as owning the voting rights of more than 2 percent of the Company’s share capital. No shareholder or group of shareholders may represent more than 5 percent, by proxy or otherwise, of the Company’s share capital at a shareholders’ meeting.

Under certain circumstances, the Company may not be permitted to continue to use the name “CIBA”, which could adversely affect its brand name recognition and its results of operations.

Pursuant to an agreement between the Company and Novartis, the Company is permitted to use “Ciba Specialty Chemicals” as part of its registered corporate name, while Novartis may continue to use the name “Ciba” in the Ciba Vision Group and in certain other cases. The Company is entitled to use the “Ciba” trademarks and trade names outside the core business of Novartis (pharma specialties, pharma OTC and generics, eyecare, crop protection, seeds, animal health and nutrition). Novartis remains entitled to continue to use trademarks and trade names containing the term “Ciba” as they were being used at the date of the Spin-off. In addition, Novartis is entitled to use trademarks and tradenames containing the term “Ciba” in the areas for its marketing concept for the “Ciba” line of pharmaceutical products and for products and services of the Ciba Vision Group. In addition, the Master Spin-off Agreement entered into by the Company and Novartis includes provisions which specify that upon the occurrence of certain change of control events or acquisitive transactions involving the Company or other members of the Company, or in the event any member of the Company begins to compete materially with Novartis’ business as in existence as of the time of the Spin-off, the Company may be required to cease using “Ciba” as a corporate name or to pay Novartis significant liquidated damages for its continued use. The above restrictions could affect the Company’s ability to conduct its business with its present and future customers. Even if the Company is able to establish brand name recognition under a new name, it may incur significant expenses in doing so, which could adversely affect its future results of operations.

The introduction of the euro and the replacement of currencies in which the Company presently conducts business may adversely affect the operations of the Company.

The introduction of the euro in twelve of the twenty-five member states of the European Union may continue to have an impact on the Company’s operations. These potential impacts include, but are not limited to, increased cross-border price transparency and tax and legal implications (such as easier harmonization).

The Company’s share price may be highly volatile and subject to sudden and significant drops.

The trading price of the Shares and the ADSs has been, and could in the future continue to be, subject to significant fluctuations in response to variations in the Company’s financial performance, regulatory and business conditions in the specialty chemicals and the chemicals industry, general economic trends and other factors, some of which are unrelated to the operating performance of the Company. For more information on the historical price ranges of the Company’s shares and the ADSs see “Item 9. The Offer and Listing Principal Trading Market and Price Range.” From time to time, following periods of volatility in the market price of a company’s securities, securities litigation has been instituted against that company. The institution of any such litigation against the Company could result in substantial costs and a diversion of the Company’s management’s attention and resources, which could materially adversely affect its business, results of operation and financial condition.

The Company’s inability to successfully manage and integrate businesses acquired or its alliances may adversely impact the Company’s results of operation and financial condition.

The Company has made and expects to continue to make acquisitions and to enter into alliances from time to time. Acquisitions and alliances present significant challenges and risks relating to the integration of the acquired business into the existing business of the Company. There can be no assurances that the Company will manage the integration of acquisitions and alliances successfully.

Other risks we face with respect to acquisitions or alliances include:

•   greater than expected costs and management time and effort involved in completing and integrating acquisitions or alliances;

•   potential disruption of our ongoing business and difficulty in maintaining or upgrading our standards, controls, information systems and procedures;

•   our inability to successfully integrate the services, products and personnel of any acquisition into its operations;

•   the potential incurrence of a significant amount of debt and contingent liabilities; and

•   realizing little, if any, return on the Company’s investment.

Integration or other acquisition or alliance difficulties could have a material adverse impact on the Company’s financial condition and results of operations.

Item 4. Information on the Company

History and Development
Ciba Specialty Chemicals Holding Inc.’s registered office is located at Klybeckstrasse 141, CH-4002 Basel, Switzerland, telephone +41 61 636 1111.

Ciba Specialty Chemicals Holding Inc. was first registered as a corporation in Switzerland on April 24, 1996, and began to conduct the specialty chemicals business of the former Ciba-Geigy Limited (“Ciba-Geigy”) as of January 1, 1997. Until the merger of Ciba-Geigy and Sandoz Limited (“Sandoz”) into Novartis AG (“Novartis”), as described below, the businesses of the Company were part of Ciba-Geigy. Ciba-Geigy was formed in 1970 through the merger of CIBA Aktiengesellschaft (“CIBA”) and J.R. Geigy AG (“Geigy”), two Basel, Switzerland-based chemicals and pharmaceuticals multinationals.

The Company’s roots go back to 1757 when Geigy, the oldest chemical company in Basel began trading in chemicals and dyes. In 1925, Geigy began research into textile chemicals and in the 1930s turned its attention to agrochemicals. A pharmaceuticals division was formed in 1938.

In 1970, Geigy merged with CIBA, a chemical company founded in 1884 in Basel. CIBA developed its first pharmaceutical products in 1889 and added other products such as textile auxiliaries and finishing products, cosmetics and plastics in the 1920s. It introduced epoxy resins in 1946 and began to manufacture plant protection products in 1954, followed by products for animal health and hygiene in 1959.

In 1996, Ciba-Geigy and Sandoz merged to form Novartis (the “Merger”). As part of the Merger, Ciba-Geigy’s specialty chemicals business was spun off to form Ciba Specialty Chemicals Holding Inc. (the “Spin Off”), which on March 13, 1997, was listed on the Swiss Exchange.

Recent acquisition and divestiture activities
To expand its flame retardant business and its offerings to combine flame retardancy with other effect additives in customized solutions, the Company, in 2002, purchased Melapur BV (“Melapur”) from DSM NV for approximately CHF 24 million, including additional purchase consideration paid or payable after 2002 based on sales growth achieved in 2003 and 2004. Melapur markets and distributes halogen-free melamine-based flame retardants.

In 2003, the Company acquired additional equity interests in Diamond Dye-Chem Limited for approximately CHF 11 million, increasing its holdings to 69 percent. Also in 2003, the Company purchased additional shares in Shanghai Ciba Gao-Ciao Chemical Co. Ltd., for approximately CHF 12 million, increasing its holdings to 75 percent.

In 2004, in order to establish a stronger world-wide presence in the paper chemicals business, the Company completed three acquisitions: in June 2004 the Company acquired Raisio Chemicals from the Raisio Group, headquartered in Raisio, Finland, for approximately CHF 662 million; in July 2004 the Company acquired LPM Technologies Inc., a Canadian paper chemicals company, for approximately CHF 11 million; and in August 2004, Ciba Specialty Chemicals acquired AB CDM, a Swedish based supplier of chemicals, from Imerys SA for approximately CHF 22 million. The AB CDM acquisition also provides the Company with a direct presence in the Swedish water treatments market.

In order to enhance its Expert Services program, which provides a wide range of specialty chemicals services to customers, the Company in March 2004 acquired Pira International, based in the United Kingdom, for approximately CHF 5 million.

In December 2004, in order to expand access to Asian markets outside of Japan and build market share in pigments, the Company increased its interest in the Daihan Swiss Chemical Corporation from 50% to 100%, for approximately CHF 31 million. Daihan Swiss Chemical Corporation is a Korean manufacturer, marketer and distributor of pigments and preparations for the Korean coatings, plastics and inks markets.

Capital expenditures
Ciba Specialty Chemicals’ aggregate capital expenditures for property, plant and equipment were CHF 294 million in 2004, CHF 233 million in 2003 and CHF 250 million in 2002. In 2004, 2003 and 2002, capital expenditures have been focused primarily on efficiency and safety improvement-related items. Recent projects include investments in new production facilities for stabilizers and pigments, upgrades to water and paper treatment production facilities, and investment in emerging markets, particularly Asia.

Business Overview
Ciba Specialty Chemicals is one of the world’s leading developers and producers of specialty chemicals, which are high value-added chemical products used as key components and in a wide variety of consumer and industrial products. The Company operates on a global basis with manufacturing facilities in 28 countries and sales in more than 120 countries.

In 2004, the Company had net sales from continuing operations of CHF 7 027 million, operating income of CHF 519 million and net income of CHF 311 million.

Net sales, by geographic region of the Company for the past three years were as follows:

	2004					2003					2002
Amounts in CHF millions, except percentages	Sales		in %			Sales		in %			Sales		in %
Europe		3 050		44	%		2 731		41	%		2 721		38	%
Americas (i)		2 046		29	%		2 066		31	%		2 459		35	%
Asia Pacific (ii)		1 931		27	%		1 849		28	%		1 905		27	%
Total net sales		7 027		100	%		6 646		100	%		7 085		100	%

(i)	The Americas are comprised of North, Central and South America.
(ii)	Asia Pacific is comprised of Asia, Africa, the Middle East, Australia and New Zealand.

Organization
The Company is organized into four reporting segments (“Segments”) focused on specific customer markets. The four Segments are Plastic Additives, Coating Effects, Water & Paper Treatment and Textile Effects. Each Segment is responsible for marketing, research and development, technology, production and sales. The mission of each Segment is to provide the best and most complete service to its customers’ industries and strive for market leadership in its respective area.

While each Segment has a lasting role in providing for a well-balanced portfolio for the Company, they are positioned for growth and higher profitability through different approaches: innovation (Plastic Additives and Coating Effects), cost leadership (Textile Effects) and business growth (Water & Paper Treatment).

From 2001 until 2004, the Company had been organized into five Segments. However, in August 2004, the former Home and Personal Care Segment, which had not achieved a critical mass, was integrated into the Plastic Additives and Water and Paper Treatment Segments.

The Company’s organizational structure also includes Group Service Units focused on providing cost efficient support services to the Segments. To ensure that innovation efforts are successfully shared across Segments, the Company has a corporate technology office under the leadership of a Chief Technology Officer. In 2004, a Chief Strategy Officer was appointed to oversee strategic development and portfolio management for the Company. All Segments share the support functions provided by the Group Service Units, which include finance and accounting, human resources, communications, information technology (“IT”) infrastructure, legal and supply chain services.

Segments
Net sales, by Segment, of the Company for the each of the past three years were as follows:

	2004					2003					2002
Amounts in CHF millions, except percentages	Sales		in %			Sales		in %			Sales		in %
Plastic Additives		1 895		26.9	%		1 822		27.4	%		1 903		26.9	%
Coating Effects		1 818		25.9	%		1 807		27.2	%		1 920		27.1	%
Water & Paper Treatment		2 014		28.7	%		1 616		24.3	%		1 718		24.2	%
Textile Effects		1 300		18.5	%		1 401		21.1	%		1 544		21.8	%
Total net sales		7 027		100.0	%		6 646		100.0	%		7 085		100.0	%

Plastic Additives develops, manufactures and markets products and provides services to the plastic and lubricant industries. The Segment’s products are additives, which are ingredients added in small quantities to polymers and lubricants that prevent aging and corrosion and help improve appearance, durability and performance of finished goods such as polyolefins and engineering plastics as well as high-performance motor oils and lubricants. The Segment’s service business provides customers with product application solutions.

Coating Effects is a leading global manufacturer of organic pigments and the leading supplier of photoinitiators and light stabilizers to the coatings, graphic arts and electronic industries. The Segment develops, manufactures and markets additives, pigments, as well as additive and pigment concentrates, for the coatings, printing, imaging, electronic, plastics and fibers industries. The end-user markets for its products and services are, among others, the automotive, packaging, publication, electronics, construction, photographic and digital printing industries.

Water & Paper Treatment serves the paper and water treatment as well as the detergents and hygiene industries. The Segment offers products and services to the global paper and board industry focused on increasing mill productivity as well as “effect chemicals” which provides solutions for its customers in order to determine appearance, handling and performance of the paper or board. The Segment’s research and development operations are designed to bring new and unique products and services to the global paper industry. The Segment also offers products and services used to treat the water streams in industrial and municipal applications and to improve the efficiency of mineral and oil processing as well as soil additives and specialty monomers. Furthermore the Segment provides whiteners for detergents and hygiene effects for a variety of personal care products.

Textile Effects serves customers throughout the textile value chain, offering full, integrated solutions for textile processing and value adding effects. The Segment’s products include dyes and chemicals for preparation, dyeing, printing, whitening and finishing of all major textiles, as well as sizing agents for fabric weaving. The Segment also provides comprehensive services to help customers achieve their color, comfort and performance requirements.

Group Services
The Company has established a number of Group Service Units that are responsible for providing cost efficient support services to the Segments. The utilization of these centralized Group Service Units has two primary benefits to the Company: they allow the Segments to fully concentrate on serving their markets and customers and they reduce overall costs as a consequence of increased economies of scale. The functions of the Group Service Units of the Company are described in the following paragraphs.

The Supply Chain Services unit is responsible for the supply chain process from finished product stage onwards, which includes order processing, warehousing and transportation of products. The Supply Chain Services unit maintains shared order desks on a regional/country level that service all Segments with regards to order taking, order processing, shipping and customer invoicing. Different customer service solutions are actively explored and implemented with the goal of increasing the ease with which customers are able to do business with the Company and minimizing product distribution costs. The Company, through its Supply Chain Services unit, utilizes a global network of both Company- and third-party-owned warehouses and distribution centers to ensure adequate coverage of the Company’s distribution requirements. The global and regional distribution networks are actively and systemically reviewed to ensure an optimized relationship between warehousing costs, distribution costs and customer service levels.

The Company maintains Business Support Centers that provide finance and accounting services to geographic regions, instead of using numerous country organizations. The Business Support Centers, using standardized financial systems, provide control, treasury and information management services to the Company for financial and corporate applications. They are responsible for ensuring the accuracy, validity and timeliness of financial reporting. As part of it’s strategy to streamline administrative operations and reduce costs, the Company in 2004 consolidated the functions of its Central European and Central American Business Support Centers into other existing Business Support Centers, thereby reducing the number of centers from 12 to 10. In addition, in connection with the acquisition of Raisio Chemicals in June 2004, the Company created a new Business Support Center in Finland to support business operations in the Nordic region. As a result of these actions, the Company will operate in 2005 with 11 Business Support Centers.

Beginning in 2005, the Company is consolidating responsibility for all information technology and data processing and management functions under a newly appointed Chief Information Officer. Included in these functions is the Global Infrastructure unit, which working with outsourcing partners, has the principal objective of optimizing the Company’s information technology infrastructure including its wide area networks.

Corporate functions such as legal, environmental, communications and human resources are managed through eight Regional Presidents Offices.

Headquarters is responsible for strategy and corporate governance.

Equity Affiliates
The Company, from time to time, acquires and disposes of participations in entities to help achieve strategic objectives. The Company’s investments in equity affiliates resulted in total income from earnings of equity affiliates of CHF 1 million in 2004, CHF 3 million in 2003 and CHF 6 million in 2002.

The Company invests in equity affiliates to support and supplement the growth of its core business. Some of these investments are made in countries where legislation requires or custom dictates local investor control or participation. The Company holds an active interest in its equity affiliates.

The Company’s most significant investment in equity affiliates as of December 31, 2004 is a 50 percent interest in CIMO Compagnie Industrielle de Monthey SA, which is a joint venture with Syngenta that provides infrastructure services and utilities to the partner’s manufacturing facilities in Monthey, Switzerland.

Company Strategy
The key components of the Company’s strategy to drive profitable growth and to maximize value for its shareholders are to place the customer first, offer leading edge innovation, aim for best-in-class manufacturing, and attract, develop and retain the very best people. Placing the customer first involves utilizing an industry-focused organization that is closely aligned with customers’ industries. A focus on leading edge innovation enables the Company to make everyday products better and makes breakthrough products possible. The Company offers its customers both significant innovation as well as steady improvements by fostering a creative culture and by sharing and leveraging its core competencies. In aiming for best-in-class manufacturing, the Company seeks lowest-cost manufacturing coupled with focused capital expenditures, while maintaining an overriding policy of ‘safety first’. A single, streamlined global supply system supports both manufacturing and customer supply concerns, and increases efficiency across the Company.

Competition
The Company competes in the global specialty chemicals market. Its major competitors include BASF, Bayer, Buckman, Clariant, Cognis, Croda, Crompton, Cytec, Degussa, Dow, DuPont, GE Water Technologies, Great Lakes, Hercules, Johnson Polymer, Kemira, Lubrizol, Nalco, Rhodia, Rohm and Haas, SNF Floerger, Songwon and Stockhausen.

Plastic Additives
Overview
Plastic Additives’ products provide, maintain and improve the desirable properties, or suppress the adverse properties, of plastics, rubber, adhesives, lubricant materials and home and personal care products. Additives increase the stability of a variety of materials during processing and use, thereby facilitating or improving the efficiency of industrial processes or enhancing their value for home and personal use. Additives can improve quality and provide long-term stability and economical viability of final industrial and consumer products by, for example, protecting products against aging, light degradation, corrosion or wear. Specialty colors for home and personal care products deliver unique properties.

Plastic Additives’ business has for many years experienced strong growth and profitability resulting from its leadership in the additives markets. The Segment is the leading supplier of stabilizers and stabilizer systems to the plastics, rubber and adhesive industries, and is a

leading supplier of ashless antioxidants and extreme pressure and antiwear agents to the lubricant industry. In addition, the Segment delivers high value chemical ingredients for manufacturers of non-durable home and personal care consumer goods.

Plastic Additives is managed as an integrated global business and primarily focuses on four Business Lines: (i) Polymer Products, (ii) Base Polymers, (iii) Process and Lubricant Additives and (iv) Home & Personal Care. Plastic Additives also includes the small Business Unit Ciba® Expert Services.

The additives market is mainly related to the plastics industry, which has generally been experiencing long-term growth. However, this growth is affected by shorter-term economic and industrial cycles, particularly in the oil, automotive, construction and packaging industries. Increasing environmental and safety regulations governing the industries of the Company’s customers have also affected the additives market. These regulations have resulted in an increased demand for more innovative products with lower environmental impacts. The company’s products are developed for sensitive applications, such as use in contact with food and drinking water or for home and fabric care and personal care. These applications are subject to a higher degree of regulatory control. Other regulatory initiatives being introduced in the area of environmental control (for example, the removal of volatile organic chemicals) have led to the reformulation of some products and greater engineering oversight in production by the Company.

The Segment’s Expert Services business unit provides knowledge-based services under the Company’s Ciba® Expert Services brand to customers seeking professional consulting, testing and information support. Its global network of experts - providing environmental, regulatory, safety, testing and educational services - helps customers in highly regulated industries get products to market faster, increase productivity and improve product quality. In 2004, the Expert Services business unit was strengthened with the acquisition of Pira International Ltd, a leading consultancy and testing business with major conference and publications activities serving the packaging, paper, printing and publishing industries and their value chains.

The table below sets forth certain historical combined financial information and the percentage contribution to the consolidated Company net sales from continuing operations for Plastic Additives for the years ended December 31, 2004, 2003 and 2002.

Amounts in CHF millions, except percentages	2004			2003			2002
Total Segment net sales		1 895			1 822			1 903
Operating income		224			165			226
Capital expenditures		76			64			94
Research and development expenditures		97			107			107
Contribution to the consolidated Company net sales from continuing operations, in %		26.9	%		27.4	%		26.9	%

Products
Plastic Additives products add value to the polymer, rubber, adhesive, lubricant, and home and personal care industries. The Segment’s product offerings include:

•   Polymer protection products such as antioxidants, non-staining antiozonants, processing stabilizers, UV absorbers and hindered amine light stabilizers (“HALS”):

•   Special effects such as antifogging agents, antistatic agents, slip agents, antimicrobials, clarifying agents, shelf life extension, flame retardants, optical brighteners and additives for degradable plastics:

•   Products for polymer recycling such as PET chain extenders, antioxidants and light stabilizer systems:

•   Specialized product forms and multi-component product packages, which simplify the incorporation process and improve worker hygiene and resin quality:

•   Products for polymer design such as polymerization regulators:

•   Products for lubricants such as antioxidants, metal deactivators, and antiwear additives:

•   Light absorbers for fabric and personal care, rheology modifiers, actives for skin protection, carrier systems, conditioners, specialty colors for home and personal care products, laundry additives for comfort enhancement, and stain removers.

The Segment’s leading product lines in the polymer protection category are Ciba® IRGANOX® antioxidants, Ciba® IRGAFOS® processing stabilizers, Ciba® CHIMASSORB® light stabilizers/UV absorbers, Ciba® TINUVIN® light stabilizers/UV absorbers, Ciba® IRGAMOD® additives for polyesters, Ciba® FIBERSTAB® L phenol-free processing stabilizers, Ciba® IRGASTAB® FS phenol-free processing stabilizers and Ciba® IRGAZONE™ non-staining antiozonants.

The Ciba® IRGAFOS® processing stabilizer range ensures efficiency in processing and maintenance of polymer properties across a broad range of processing conditions. Ciba® POLYAD® customer-specific blends are multi-component additive packages in easy-to-handle forms.

Ciba® TINUVIN® light stabilizers/UV absorbers constitute a complete range providing light stability to polyolefins, engineering plastics, adhesives and rubbers. Examples of new innovative products include Ciba® TINUVIN® 1577 as an innovative UV absorber for glazing, thin films and laminates, Ciba® TINUVIN® XT 833 for improved light stability and weather resistance and Ciba® TINUVIN® FR 2011/2021 providing flame retardancy and light stability.

In addition to the Segment’s traditional Ciba® IRGANOX® range, Ciba® IRGANOX® HP, Ciba® IRGANOX® XP, Ciba® IRGASTAB® PUR, Ciba® IRGASTAB® PVC and Ciba® IRGASTAB® STYL are examples of how additives support the polymer industry with new, innovative products and services. Both the Ciba® IRGANOX® HP and Ciba® IRGANOX® XP ranges combine HP-136, the Company’s innovative lactone technology, with established high-performance phosphites for the stabilization and protection of polyolefins, polyurethane foams and adhesives during processing. Ciba® IRGASTAB® PUR, Ciba® IRGASTAB® PVC and Ciba® IRGASTAB® STYL are new liquid, environmentally friendly solutions for the polyurethane, vinyl and styrenics markets, respectively.

The Ciba® IRGAMOD® range comprises multifunctional PET additives reducing acetaldehyde and oligomers, avoiding discoloration and acting as chain extenders by modifying the properties of PET via reactive extrusion. Recent product launches are Ciba® IRGATEC® CR 76 and Ciba® IRGAMOD® RA 20.

Ciba® FIBERSTAB® L and Ciba® IRGASTAB® FS phenol-free processing stabilizers systems set with excellent gas-fade resistance a new standard in the processing stabilization of polyolefin fibers. They also provide good long-term thermal stability and enhanced light stability. Ciba® FIBERSTAB® L is particularly suited for PP fiber applications such as carpets and hygienic non-wovens and Ciba® IRGASTAB® PVC 11 EM is an environmentally friendly antioxidant for PVC.

Ciba® IRGAZONE™ 997 non-staining antiozonant provides rubber products with very good protection against ozone, heat, flex and fatigue. Opposite to classical rubber antiozonants, it is non-staining, is not leaching from rubber vulcanizates and has various food contact approvals.

The Segment is adding to its polymer product offerings by branching out from its core polymer protection and stabilization business to take advantage of new market opportunities in the area of property enhancement. With a focus on surface modification, the Segment is improving materials with special physical effects, thereby improving surface properties and product performance. A step in this direction has been the expansion of an antistatic and antifogging product range, which modifies surfaces to temper the buildup of static charge or water as fog. The Segment’s leading product lines in this special effects additives category are ATMER™ antifogging agents, Ciba® IRGASTAT® and ATMER™ antistatic agents, ATMER™ SA - slip and antisticking agents, Ciba® IRGAGUARD® antimicrobial line, including Ciba® IRGAGUARD® A – antialgae and Ciba® IRGAGUARD® B - antibacterial, and Ciba® IRGACLEAR® F– antifungi, Ciba® IRGACLEAR® - clarifying agents, Ciba® SHELFPLUS® - shelf life extension, Ciba® FLAMESTAB® NORTM and Ciba® MELAPUR® - flame retardants, Ciba® TINUVIN® FR flame retardant/light stabilizer combinations and Ciba® UVITEX® optical brighteners. Ciba® SHELFPLUS® UV 4100 blocks a broad spectrum of UV radiation protecting package contents in food, home and pharmaceutical applications. The novel agricultural growth promoter Ciba® SMARTLIGHTTM RL100 utilizes photo-selective properties of the product to improve crop quality and productivity. Ciba® IRGASURF TM HL 560 delivers durable hydrophilicity for polyolefin fibers and nonwovens. Ciba® IRGAZONETM 997, launched in 2003 for rubber applications, represents a technology that offers protection against ozone, fatigue and oxygen, with non-staining properties and extraction resistance. Ciba® IRGAMOD® 195 is an effective catalyst and stabilizer for rosin esters and is an extraction resistant antioxidant for rubber applications, especially ones based on NBR and ECO.

The trend of plastics replacing other materials, such as glass and wood, is expected to continue. This offers the Segment opportunities to further work with customers to develop new applications for the Segment’s products in, for example, the automotive industry where engineered plastics are replacing traditional materials. In addition, in the area of base polymers the Segment is continuously expanding its services business areas to provide customers with tailor-made additives blends as part of a market approach that emphasizes customer contact and quick response times.

To cope with the increased temperature stress in modern engine oils, two new high temperature antioxidant systems, Ciba® IRGANOX® L 93 and Ciba® IRGANOX® L94 were introduced.

For the lubricant industry, the Segment offers single components for engine oils and industrial lubricants such as antioxidants, extreme pressure/antiwear additives, friction modifiers, corrosion inhibitors and metal deactivators, and additives packages for industrial lubricants.

In the Process and Lubricant Additives business, the focus is on working with customers to develop additives for lubricants, such as Ciba® IRGALUBE® F10, that enhance the performance of engine oils while providing environmental benefits. Management is of the opinion that products such as additives for plastics recycling and ashless antioxidants for lubricants are becoming more important with increased environmental awareness and regulation.

The home & personal care products market is served by five business platforms:

UV Protection & Actives for the personal care industry:

Ciba® TINOSORB® UV absorbers are used to provide protection against the harmful effects of UVA (long wave-length) and UVB (short wave-length) radiation in a variety of products applied directly to the skin, including sunscreens, lotions, and day creams. Growth prospects are particularly strong in regions where concern for effective protection from sunlight is high. Ciba® TINODERM® Actives Delivery Systems facilitate the transport of actives through the skin barrier to the site of interaction. TINOCARE® GL, a Scleroglucan polysaccharide, retains skin moisture in a natural way and improves the sensory characteristic of personal care formulations.

Polymer Systems for the personal care and home and fabric care industries:

Rheology modifiers, conditioners, and gel thickeners allow customers to produce formulations to the highest standards of quality and consistency. Ciba® RHEOVIS® and Ciba® GLASCOL® are for the home care industry and Ciba® SALCARE® and Ciba® TINOVIS® are for the personal care industry.

Colorants & Stabilizers for the personal care and home and fabric care industries:

Ciba® TINOGARD® provides product stabilization against oxidation and UV induced degradation. Ciba® VIBRACOLOR® products are hair dyes. Ciba® PURICOLOR® and Ciba® VIBRACOLOR® pigments and anionic, water-soluble dyes are used in personal care as well as home and fabric care products.

Fabric Appearance for the laundry care industry:

Ciba® TINOFIX® dye fixatives maintain the color integrity of fabrics. Ciba® TINOTEX® Comfort & Easy Care ingredients bring easy care properties to laundered fabrics. Ciba® TINOLUX® is a unique photocatalytic system that uses sun rays to safely and effectively bleach stains. Ciba® TINOSORB® UV absorbers are applied to clothing via the laundry washing process to clothing to convert cotton fabrics into effective UV shields.

Stain Removal for the laundry care industry:

Ciba® TINOCAT™ oxidation catalysts enable efficient stain removal at lower wash temperatures and with shorter wash cycles and as well provide an anti-graying effect on white fabrics.

The Expert Services business unit delivers services for regulatory, environment, safety, materials testing, and conducts training, and offers strategic and technical consulting.

Customers and End-User Markets
In 2004, end-user markets such as the packaging industry accounted for approximately 26 percent of the Segment’s sales, the construction industry for 19 percent, the durable goods industry for 9 percent, the automotive industry for 7 percent, the agricultural industry for 6 percent and the lubricants industry for 10 percent. The top ten customers of the Segment accounted for approximately 31 percent of the Segment’s 2004 sales.

Research and Development
Plastic Additives spends approximately 5 percent of sales each year on research and development activities (CHF 97 million in 2004). The primary objective of these research and development activities is to achieve and maintain a high level of the Segment’s sales of “innovative products”. Innovative products are defined as patent protected products or products and applications younger than five years. Management is of the opinion that Plastic Additives has a growing product pipeline. The goal is to further improve sales with new and innovative products, and to protect product and application innovations by appropriate patents. Products currently being developed include new classes of light stabilizers, anti-static additives, process stabilizers for plastics, non-staining antiozonants for rubbers, flame retardants, process chemicals for reactive monomers, new UV absorbers for sunscreens, a new photobleach agent for laundry detergents, a new class of oxidation catalysts for use in home and fabric care applications and new nanocolloid encapsulated active ingredients for skin care products.

Research and development activities focus on new product development as well as process improvements that aim to lower costs and increase productivity, speeding time-to-market of new products and improving responsiveness to customers by increased integration of manufacturing processes with the Segment’s distribution network.

Coating Effects
Overview
Coating Effects develops, manufactures and markets additives, pigments, pigment and additive concentrates for the coatings, printing, imaging, plastics, synthetic fibers, electronics and information storage industries. Coating Effects is a leading global manufacturer of organic pigments and the leading supplier of photoinitiators and lightstabilizers to the coatings, graphic arts and electronic industries.

Coating Effects is managed as an integrated global business and serves five industry-focused markets: (i) coatings, (ii) plastics, (iii) electronic materials, (iv) imaging & inks and (v) masterbatches.

Pigments are insoluble coloring materials used for the coloration of printing inks, paints, plastics and synthetic fibers in products such as automotive paints, transportation coatings, synthetic carpets and upholstery, printed materials and publications, building paints, packaging, cables, flooring, toys, industrial goods and equipment, furniture, consumer goods and electronics.

Additives maintain or improve the desirable properties, or suppress the adverse properties, of materials and improve the stability of these materials during processing, thereby facilitating or improving the efficiency of industrial processes. In addition, additives can improve quality and provide long-term stability and economical viability for the final product by, for example, protecting the product against aging, destruction or wear.

Growth in the global pigments market tends to track Gross Domestic Product (“GDP”) development. There is a move towards high value pigments and improved additives as customers upgrade their products and the technical performance requirements of the colorants and additives they incorporate in their formulations. Changes in technology in the customer base provide opportunities for new products, for example in the fast changing electronics industry. In recent years, environmental pressure to replace heavy metals such as cadmium and lead has led to an increased demand in organic pigments. The impact of the low volatile organic content (“VOC”) regulations is that solvent usage is being reduced in the printing ink and coatings industries with alternative technologies, such as UV-curing, powder coatings, high solid paint systems and water-based systems. With the Segment’s current portfolio and innovation projects, the Company believes the Segment is well placed to take advantage of these trends. There also is a need for products that make processing easier and more cost effective for customers in all traditionally served industries. In particular, there is a focus on ease of product handling, for example, low dusting colorants and additives. The Segment’s range of products includes liquid forms, granules, dispersions and concentrates. As pigment manufacturers have traditionally had strong market positions in particular colors (for example, the Segment has a strength in high performance, opaque red pigments used in automotive paint), color trends can benefit particular producers while negatively affecting others.

The high performance and high value pigments market are characterized by capital-intensive production facilities and demanding standards for high and constant quality. The major applications for these pigments are automotive paints, general industrial paints, decorative paints, plastics and packaging and specialty inks, with competition based mainly upon the technical properties of the products. In contrast, the classical pigments market is characterized by relatively mature products with minimal patent protection and strong competition from low cost manufacturers in emerging countries. The major application for these pigments is printing inks. The dispersions market for organic and inorganic pigments is characterized primarily by the provision of customer-specific solutions and delivery service. The major application for dispersions is the plastics industry and the major applications for inorganic pigments are plastics and industrial paint.

The additives market is affected by shorter-term economic and industrial cycles experienced by its customers, particularly in the coatings industry, which in turn is dependent on the automotive industry. Increasing environmental and safety regulations governing the industries of the Company’s customers also have affected the additives market. These regulations have resulted in an increased demand for more innovative products with lower environmental impacts. The Company’s products are developed for sensitive applications, such as use with food and drinking water. These applications are subject to a higher degree of regulatory control.

The table below sets forth certain historical combined financial information and the percentage contribution to the consolidated Company net sales from continuing operations for Coating Effects for the years ended December 31, 2004, 2003 and 2002.

Amounts in CHF millions, except percentages	2004			2003			2002
Total Segment net sales		1 818			1 807			1 920
Operating income		291			300			341
Capital expenditures		82			79			74
Research and development expenditures		101			95			100
Contribution to the consolidated Company net sales from continuing operations, in %		25.9	%		27.2	%		27.1	%

Products
The Segment’s leading colorant product lines include the high performance pigments, Ciba® IRGAZIN®, Ciba® CINQUASIA® and Ciba® CROMOPHTAL®, used in coatings, inks, plastics and synthetic fibers, the IRGAPHOR®, functional dye products used for optical information storage (CD-R and DVDR) and Ciba® IRGALITE® classical pigments used primarily in printing inks. The Segment also produces pigment dispersions and masterbatches. The Segment’s management is of the opinion that its Diketo-Pyrrolo-Pyrrol (“DPP”) technology offers distinct advantages to users of its high performance pigments for coatings and plastics. DPP pigments are currently being used in automotive paints and high performance plastics materials. Current environmental pressure on cadmium pigments opens up good growth opportunities for DPP pigments in the plastics industry. The Segment does not believe it has yet fully exploited the benefits of DPP technology in the automotive industry or in other paint, plastics or inks applications.

The Segment’s leading additives products lines include, Ciba® TINUVIN® light stabilizers for coatings, inks and photographic applications, Ciba® IRGACURE® photoinitiators and photoinitiators blends for ultraviolet curing of coatings, paints, inks and electronic materials and the environmental friendly polymer specialty rheology agents and dispersants for coatings. The Segment also offers, stabilizers and process chemicals for photographic and photo-reproduction systems, algaecides for antifouling and dispersion paints. Management is of the opinion that products such as photoinitiators for solvent-free coatings are becoming more important with increased environmental awareness and regulation.

Customers and End-User Markets
In 2004, Coating Effects supplied pigments and additives to the paint and coatings industries, the printing ink industry, the plastics industry, the synthetic fibers industries and the electronic materials industry. The top ten customers of the Segment accounted for approximately 27 percent of the Segment’s 2004 sales.

In 2004, the end-user markets such as the automotive industry accounted for approximately 24 percent of the Segment’s sales, the imaging and publication industry for 12 percent, the packaging industry for 19 percent, the electronics industry for 9 percent and the construction industry for 19 percent of the Segment’s sales.

Consolidation and globalization have occurred in certain of the customer industries served by the Segment, particularly in the coatings and printing ink industries. The effect of such consolidation and globalization is that pricing pressure is exerted on suppliers.

Research and Development
Coating Effects spends approximately 5 percent of sales each year on research projects (CHF 101 million in 2004). The primary objective of these research and development activities is to achieve and maintain a high level of the Segment sales of “innovative products”. Innovative products are defined as patent protected products or products and applications younger than five years. Pigment products currently being developed by the Segment include high value pigments with a new standard of performance to price ratio (a novel range of polymer soluble dyes), novel granule forms of pigments, solvent-free dispersions, pigments for optical storage and color filters. The Segment is also developing colorants for digital ink jet printing on paper and plastic.

Additive products currently being developed include high performance photoinitiators for coatings, imaging and information storage, new classes of light stabilizers, UV-absorbers, sterically hindered amines for coatings as well as algaecides for antifouling paints. In addition, in response to increasing environmental and safety regulations, Coating Effects is developing various additives for waterborne, powder or radiation curable systems.

One of the photoinitiator patents for ink applications expired in 2003. Management is of the opinion that expiration of this patent will only have a limited effect on its result of operations because of the Company’s level of customer service associated with the related products and processes. Although patent protection for part of the DPP product range expired in 2003, the Company has newer patents covering more recently launched or yet to be launched products.

Water & Paper Treatment
Water & Paper Treatment is one of the leading global suppliers to the paper industry, the municipal and industrial water treatment industries and the detergents and hygiene industries, and is managed as an integrated global business. The markets in which the Segment is present have been affected by increasing environmental and safety regulations that govern the industries of the Company’s customers. These regulations have resulted in an increased demand for more innovative products with lower environmental impact.

Water & Paper Treatment products and services for the paper and board industry increase the speed, run-ability and quality of the paper making process (retention and drainage aids, deposit control aids). Furthermore, they improve the visual appearance, optical properties and printability of the paper (paper whiteners, paper coloration, starch and latex binders, coating additives and surface modifiers), impart water, oil and grease resistance (barrier effects and sizing), and provide stable images on carbonless and thermal papers. The Segment’s newly acquired Technical Centers in Finland further enhance our position as a total solution provider to the paper industry.

The products and services offered in the area of water treatment improve the separation of solids from liquids, purify water, dewater sludge for disposal and enhance dredging applications. In extractive and process technologies, the Segment’s products improve the efficiency of all extraction and mineral processing. The Segment also serves a number of niche markets including soil additives where products improve plant nutrition and soil fertility, and performance intermediates where high purity specialty monomers are supplied by the Segment for various applications (e.g. rubbers and adhesives). The Segment’s activities in industrial water management aim to bring a service oriented approach by providing customers with complete solutions that meet all their industrial water treatment needs. Strong, local support is available through a network of partners, each providing expertise and industry leading Ciba^® IRGATREAT^TM product technology, equipment and services.

In the area of detergents and hygiene, the Segment’s products and services are used in the home and fabric care industries as well as the personal care market. Whiteners, used in detergents, enhance the whiteness and brightness of textiles while antimicrobial solutions are used in personal care products and promote good health, prevent infections and contribute to the personal well being.

The table below sets forth certain historical combined financial information and the percentage contribution to the consolidated Company net sales from continuing operations for Water & Paper Treatment for the years ended December 31, 2004, 2003 and 2002.

Amounts in CHF millions, except percentages	2004			2003			2002
Total Segment net sales		2 014			1 616			1 718
Operating income		126			130			173
Capital expenditures		81			55			45
Research and development expenditures		42			33			33
Contribution to the consolidated Company net sales from continuing operations, in %		28.7	%		24.3	%		24.2	%

Products
In the paper industry, there is an ongoing demand for more efficient production processes and this is where Ciba^’ patented technologies such as the Ciba^® TELIOFORM^® retention and drainage aid system and Ciba^® PERGAFAST^TM Color Developer for the Color Former market bring value to customer. At the same time, consumers are demanding more innovative paper products and here the Company’s range of effect chemicals – whiteners, colors, color formers, barrier effects and coating and surface solutions - allow the Company to be a leading innovator in meeting consumer requirements. The rapid change of technology, the globalization of the customer base and the growing importance of emerging economies are likely to shape the future direction of these markets. Of particular importance are the growing environmental regulations, which are expected to contribute to a growth in chemical demand in excess to that of the paper and board industry.

The Segment develops, produces and sells the following products to the water treatments market segment: Ciba^® ZETAG^®, Ciba^® MAGNAFLOC^® and Ciba^® MAGNASOL^® polyacrylamide polymers, organic coagulants, and poly acrylic acid polymers. The main usage of these products is as flocculants for the separation of solid particles from water. The recently launched Ciba^® KRYSALIS^® products for the dredging industry enhance solid liquid separation and the separation of contaminants from the dredging sediment. Ciba^® RHEOMAX^TM tailings management products for the mining industry allow minimalization of water consumption and maximization of water recovery, thereby reducing disposal areas and hence generating cost savings in waste disposal. The water treatments product range also includes Ciba^® IRGATREAT^TM specialty formulations for the full range of water purification and conditioning applications, dispersants to reduce the viscosity and to increase the performance of inorganic pigments and fillers in water systems, monomers as building blocks used in water treatment, adhesives, synthetic fibers and antistatic finishes as well as Ciba^® LIBFER^® iron chelate to correct deficiencies in crops grown intensively.

The leading product lines in detergents and hygiene include Ciba® TINOPAL® whiteners for detergents and Ciba® IRGASAN®, Ciba® IRGACARE® and Ciba® TINOSAN® antimicrobials providing hygiene effects for personal care products. Whiteners are supplied to the detergents industry. In detergents, the demand for whiteners has stagnated in the European, United States and Japanese markets, while the emerging markets of Asia and South America continue to show signs of growth. Hygiene effects are high value-adding antimicrobial ingredients supplied to the personal care and home and fabric care industries. Main applications include soaps, deodorants, toothpastes, dishwashing liquids, detergents and disinfectants for hospitals and medical purposes. The Segment’s antimicrobial solutions continue to be recognized as the industry standard for efficiency, performance and safety by key customers.

Customers and End-User Markets

In 2004 Water & Paper Treatment supplied products and services to the paper and board, municipal and industrial water treatment as well as detergents and hygiene industries. The top ten customers of the Segment accounted for approximately 23 percent of the Segment’s 2004 sales.

In 2004, end-user markets such as the paper and board industry accounted for approximately 54 percent, the detergents and hygiene industries accounted for 12 percent, the water and wastewater services industry accounted for 15 percent, the extractives and process technologies industry accounted for 8 percent and the agricultural industry accounted for 2 percent.

Research and Development
Water & Paper Treatment spends approximately 2 percent of sales each year on research and development activities (CHF 42 million in 2004). The Segment’s integrated research and development philosophy is aimed at driving process/production technology improvements, development of novel targeted offerings to the industry and expansion to novel markets using existing and emerging technologies.

Textile Effects
Overview
Textile Effects develops, manufactures and markets organic and inorganic synthetic dyes and other chemicals for natural and synthetic fibers, focusing on cellulose, polyester, wool and polyamide and their blends.

Based on 2004 sales, management estimates that the Segment Textile Effects is one of the largest textile effects businesses in the world. The Segment is the world’s second largest manufacturer of textile dyes, the largest manufacturer of dyes for wool, polyamide carpets and automotive fabrics, the second largest manufacturer of reactive dyes and one of the leading suppliers of textile chemicals to the textile industry. Other major product offerings to these industries are whiteners, disperse dyes for polyester, antimicrobials, ultraviolet (“UV”) protection products and auxiliaries for textile processing and finishing for the textile industries. The textile chemicals business provides customers with an integrated range of products and services for fabric processing and finishing, including sizing, pretreatment, dyeing and printing auxiliaries, whiteners, comfort and easy care, UV protection, oil and water repellents, flame retardants and coating chemicals.

Demand for textile dyes and chemicals is mainly driven by developments in the textiles markets, such as fashion trends, the level of personal disposable incomes and by environmental regulations. The textile industry continues to shift to Asia, and even within Asia production of textiles is moving from higher wage countries (such as Japan, South Korea and Taiwan) to lower wage countries, particularly those with fast growing internal markets (such as China, India and Vietnam).

The table below sets forth certain historical combined financial information and the percentage contribution to the consolidated Company net sales from continuing operations for Textile Effects for the years ended December 31, 2004, 2003 and 2002.

Amounts in CHF millions, except percentages	2004			2003			2002
Total Segment net sales		1 300			1 401			1 544
Operating income		61			69			142
Capital expenditures		35			29			34
Research and development expenditures		29			32			36
Contribution to the consolidated Company net sales from continuing operations, in %		18.5	%		21.1	%		21.8	%

Products
The Segment’s leading dyestuffs product lines include CIBACRON^® reactive dyes for cellulose, Ciba^® LANASET^® and Ciba^® NEOLAN^® dyes for wool, Ciba^® TECTILON^® acid dyes for carpet and Ciba^® TERASIL^® and Ciba^® TERATOP^® disperse dyes for polyester. In addition, the Segment manufactures vat and direct dyes for cellulose, and cationic dyes for polyacrylonitril. The Segment’s leading textile chemical product lines include Ciba^® UVITEX^® whiteners for textiles, CIBATEX^® UV absorbers for the protection of textiles against ultraviolet radiation; Ciba^® PYROVATEX^® flame retardants and Ciba^® ALCOPRINT^® print thickeners. In February 2002, a global cooperation agreement between Ciba and Invista was announced. The agreement enables both companies to share intellectual and technical resources and serve the increasingly sophisticated needs of the consumer for easy care and other effects. It includes Ciba^® OLEOPHOBOL^® fabric protector products for protection against stains as well as access to DuPont’s TEFLON^® brand.

The Segment’s core European markets are experiencing a plateau in demand, however, substantial growth opportunities continue in Eastern Europe, Asia and Latin America.

Customers and End-User Markets
Textile Effects supplies the clothing/apparel, home furnishing and industrial textile industries (including automotive textiles). In 2004, the top ten customers of the Segment accounted for approximately 9 percent of the Segment’s sales. The customer base of the textile dyes and chemicals market is highly fragmented. In 2004, the end-user markets of the textile, fiber and carpet industries accounted for most of the Segment’s sales with the automotive industry accounting for a small percentage. While the clothing/apparel industry is predominant in Asia, the automotive textiles and the carpet industry is focused primarily in North America and Europe.

Research and Development
Textile Effects spends approximately 2 percent of sales each year on research projects (CHF 29 million in 2004). The primary objective of these research and development activities is to achieve and maintain a high level of the Segment sales of “innovative products”. Innovative products are defined as patent protected products or products and applications younger than five years. Textile dyes currently being developed by the Segment include reactive dyes with improved technical and economical performance, a range of disperse dyes with new

state-of-the-art wetfast performance, metal free dyes for polyamide with unmatched wetfast and lightfast performance, alternatives to sulphur and naphthol dyes. Textile chemicals currently being developed by the Segment include ecologically improved flame retardants, more efficient UV absorbers and optical brighteners, economical oil and water repellents, range of improved products for easy care and the whole process chemicals range to increase the efficiency and simplify dyeing and printing processes. The Segment’s research and development focus also includes technologies geared towards new effects, such as microencapsulation, application of nanoparticles and use of biotechnological processes.

Manufacturing
The Company has 85 manufacturing sites in 28 countries in important regions of the world. Currently, 55 of these sites are used primarily for chemical synthesis and the others are used for physical operations and to manufacture formulations that meet customer specific requirements. Europe and North America account for over 80 percent of the fixed asset base of the Company, with approximately 70 percent of the Company’s assets located in Switzerland, the United States, Germany and the United Kingdom. All of the Company’s major manufacturing facilities have qualified for International Organization for Standardization (“ISO”) 9001 or ISO 9002 certification. The Company has also entered into several manufacturing arrangements and participates with shares of up to 50 percent in four non-consolidated joint ventures, all in Asia.

The Company’s production costs, excluding raw materials, amounted to approximately 22 percent of sales in 2004, 23 percent of sales in 2003 and 23 percent in 2002.

In recent years, the Company has achieved significant capacity increases at its facilities, through process and production improvements. For example, through de-bottlenecking, production capacities have been increased for high performance pigments, whiteners and antioxidants and newly developed production processes have increased capacities for hindered amine stabilizers and antimicrobials. The Company’s manufacturing facilities generally operate within a range of sixty to eighty percent of capacity. Management is of the opinion that capacity utilization provides adequate growth potential. However, improved asset utilization is a priority for the Company generally and the Company conducts an ongoing monitoring study of capacity utilization on a cross-segmental basis to improve asset utilization. In 2004, the Company announced a program entitled “Shape”, which will result in the closure of certain sites and the movement of production activities to other sites in China and in Europe.

The Company’s manufacturing strategy is to be a low cost producer, to increase productivity and to concentrate production on higher value-added products. To this end all Segments plan to dedicate considerable capital expenditure on capacity, product and process improvements spending yearly more than CHF 100 million in the next 5 years. For example, Textile Effects is spending CHF 15 million to streamline their dyestuff production facilities at Basel and Water & Paper Treatment CHF 15 million to streamline its stilbenics production facilities at Grenzach, Germany and McIntosh, USA.

Plastic Additives has invested in the Hindered Amine Stabilizer area, primarily in the NAFTA region. These projects were completed in 2004 at a total estimated total cost of approximately CHF 70 million. Plastic Additives plans to invest CHF 6 million in a new flame retardent production unit at Lampertheim, Germany and another CHF 7 million in a new GMP approved plant for a UV absorber for skin protection at Kaohsiung, Taiwan.

Coating Effects is investing CHF 30 million in a new production unit for DPP pigments at Monthey, Switzerland and plans to invest another CHF 15 million in a new DPP plant in China. Coating Effects is also investing CHF 10 million to increase its Benzotriazol capacities at McIntosh, USA and Lampertheim, Germany and CHF 30 million for the expansion of its ink production facility at Maastricht, Netherlands.

During the period from 2002 to 2004, Water & Paper Treatment has invested more than CHF 40 million to upgrade its production sites at Bradford United Kingdom and West Memphis Arkansas, United States. Water & Paper Treatment plans to invest CHF 10 million in a new acrylamide plant at Kwinana, Australia.

Textile Effects is investing CHF 7 million to increase the capacity for textile dyes at Mahachai, Thailand. In addition, Textile Effects has implemented a new Key Manufacturing Base Concept in Panyu, China, which was finished in 2002, at a total cost of approximately CHF 15 million. In 2003 another CHF 3 million have been spent at Panyu for a new solid softener plant.

The Company is further strengthening its position in emerging markets, particularly Asia, by expanding its facilities in these areas. For example, Coating Effects invested CHF 5 million from 2002 to 2003 to increase the capacity for classical pigments at Qingdao, China. Plastic Additives started in 2003 the production of UV absorbers at their Goa site in India and is investing CHF 10 million for the expansion of its antioxidants production facility at Shanghai, China.

The Company is not dependent on any single production site. The five largest production sites of the Company are in Basel (Switzerland), Grenzach (Germany), McIntosh (Alabama, United States), Bradford (United Kingdom) and Monthey (Switzerland).

Sales, Marketing and Distribution
The Company sells its products in more than 120 countries through a global sales network. The sales and marketing functions are decentralized within the Company, with each Segment having its own sales and marketing strategy for its products and services. The organization of these functions varies from Segment to Segment.

Sales in all Segments are generally on a purchase order basis. However, the Company has established longer-term arrangements with certain key customers or where required by customers. Such arrangements generally do not extend beyond one year. Bidding on one to three year supply arrangements has become common in the paper and detergent whiteners markets, with contracts in the paper industry tending to be for longer periods. Such bidding has tended to increase price pressure in these product segments.

All distribution and order processing, warehousing and transportation are centrally managed by the Supply Chain Services unit on behalf of the Segments.

Shared order desks on a regional/country level service all Segments with regards to order taking and processing, shipping and invoicing. A global network of warehouses and distribution centers, both externally and internally operated, ensures adequate coverage of the Company’s

distribution requirements. Contracts with major transport partners are negotiated/managed centrally. The strategy is to significantly reduce the number of partners in this field with the ultimate goal to co-operate with one global lead logistics provider for all intercontinental transports.

In 2000, the Company was one of the first chemical companies to offer a comprehensive e-business service to all its customers: mybusiness@cibasc. The site is a secure, user-customized one-stop shop that lets customers place and track orders from all Segments. In addition, various complementary services are offered to customers such as on-line access to material safety data sheets, certificates of analysis and technical data sheets. Both current and potential customers also have the ability to locate the Company’s products based on their industry/sub-industry/application and desired effect using a comprehensive product finder application covering all Segments’ products. mybusiness@cibasc is available in 12 languages and has over 15,000 active users in 140 countries. In addition, the Company participates in Elemica, a specialized business-to-business exchange that allows the Company, in one step, to link its Enterprise Resource Planning system directly to those of major suppliers and customers, allowing the Company to achieve higher efficiency and reduce supply-chain costs.

The Company is focusing production and process development efforts on better integration of the manufacturing process with the supply chain in order to increase customer responsiveness while at the same time reducing inventories by increasing the volume of products shipped directly from the production facility to the customers.

Sourcing of Raw Materials
The Company purchases a large number of raw materials and intermediates from third parties around the world for its manufacturing processes, and strives to optimize the supply chain for each Segment. Raw material costs represent a significant component of the Company’s cost of goods sold. The prices and availability of these raw materials vary with market conditions and can be highly volatile. The Company has limited backward integration and has out-sourced production where economically feasible and desirable.

Throughout the first half of 2004, the Company was generally able to maintain raw material costs at the same level as 2003, but the second half of the year saw significant cost increases driven by the continued high price of crude oil and its derivatives and also by increasing demand, especially in Asia. The Company expects this trend to continue in the near future. To offset some of these cost increases, the Segments continue to source more raw materials and intermediates from newly established suppliers in Asia. The Company adjusts its currency portfolio to mitigate exchange rate fluctuations.

Although the Segments purchase certain raw materials from single suppliers, management does not believe that the loss of any supplier would have a material adverse effect on the Company’s business or financial condition.

Intellectual Property
Where appropriate, the Company protects its new products and processes by obtaining patents and registering trademarks in selected regional markets. The Company has over 19 000 granted patents and pending applications world-wide and has trademark protection for approximately 400 product names. The Company continues to experience a constant increase in intellectual property conflicts, either initiated by the Company or by third parties. The Company relies on its know-how and technical expertise in many of its manufacturing processes to develop and maintain its market position. Management is of the opinion that intellectual property rights as a sole measure do not create a sustainable competitive advantage in the specialty chemicals industry. The Company’s ability to extract the maximum value from its patent protected products and processes is dependent upon the Company’s ability to apply its technical expertise in its manufacturing processes to meet customer requirements. In general, the Company historically has not licensed or sold its intangibles to third parties. In addition, separate cash flow streams cannot, in general, be identified with intangible assets separately from the cash flows associated with the related productive assets. The value of internally developed patent and process protection is, therefore, generally inseparable from the Company’s productive assets and processes.

In connection with the Spin-off, Novartis assigned to the Company certain patents relating to the specialty chemicals business. Pursuant to the Master Spin-off Agreement, Novartis also granted the Company a non-exclusive royalty-free worldwide license with respect to (i) certain patents that were originally registered by Ciba-Geigy’s central research department and (ii) those patents remaining with Novartis which the Company was using, or had a specific plan to use, at the effective date of the Spin-off. The Master Spin-off Agreement also provides that Novartis and the Company may enter into other arrangements with respect to certain patents pursuant to which royalties would be payable. Although relative exclusivity can be maintained for certain products following patent expiration through know-how and technical expertise, the expiration of a basic patent can result in intense competition, including from lower cost producers, and erosion of profit margins. Prior to and following expiration of the basic patent for a key product, the Company will generally focus efforts on developing patentable enhancements to the product or new patentable formulations for which the product is used. Management is of the opinion that the loss of patent protection for any particular product or process would not have a material adverse effect on the Company’s results of operation or financial condition.

The Company and Novartis also entered an “Agreement Regarding Use of Ciba as a Corporate Name”. Pursuant to such agreement, the Company and its subsidiaries and affiliates may use “Ciba Specialty Chemicals” as part of their registered corporate names, while Novartis may continue to use the name “Ciba” in connection with the Ciba Vision Group and in some other special cases. The Company and its subsidiaries and affiliates are entitled to use the “Ciba” trademarks and trade names outside of the core business of Novartis (defined as pharma specialties, pharma over-the-counter and generics, eyecare, crop protection, seeds, animal health and nutrition). Novartis is entitled to continue to use trademarks and trade names containing the term “Ciba” as they were used at the of the agreement and to use new and existing trademarks and trade names containing the term “Ciba” to market the “Ciba” line of pharmaceutical products and for products and services of the Ciba Vision Group.

Regulatory Affairs
National and international laws regulate production, marketing and use of chemical substances. Although almost every country has its own legal procedure for control of chemical substances, the most significant to the Company’s business are the laws and regulations in the European Union, the United States and Japan. Some facets of the regulations in these regions are continuously being revised but probably none more so than the control for production and import within the European Union where a complete overhaul of the requirements is being undertaken. The Company has been actively involved in the development of the regulations and does not expect significant concerns from the final changes. Within the U.S., the Environmental Protection Agency (“EPA”), have revised the High Production Volume program and

this has been evaluated by the Company. EPA and other U.S. agencies have also become increasingly active in the area of global chemical control and are taking the lead on many issues of global concern within the OECD. The Company actively supports these initiatives for more globally harmonized requirements and the effort being applied to minimize resource and cost for both industry and government.

The Company continues to actively seek approvals for their products within certain specially controlled applications. Within the U.S., the Food and Drug Administration (“FDA”), oversee the approval of specialty chemicals that will come in contact with food. For many years, the Company has been a leader in this area and is diligent in maintaining its expertise. The EPA’s Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) controls the use of such applications as material preservation and microbial control for the manufacture of polymeric, plastics and textile products together with the protection of the finished article itself. The Company, through its expertise, regularly gains approval for its products in the area and is also supporting other companies in achieving approval for these exacting requirements.

Agreements with Novartis in Connection with the Spin-off

Novartis and the Company entered into a Master Spin-off Agreement (“MSA”) dated December 20, 1996, which governed the separation of the specialty chemicals business from Novartis. In addition, this agreement, together with certain ancillary agreements, established various interim and ongoing relationships between Novartis and the Company.

Pursuant to the MSA, Novartis and the Company provide each other with chemical products and intermediates and certain services, such as provision of utilities, waste handling and security at shared production sites. Such products and intermediates are provided at market prices or, in the absence of market prices, at full cost, and such services are provided at the lower of market price or full cost. In addition, pursuant to the MSA, the Company and Novartis agreed on the allocation of taxes relating to the transaction and past operations of the businesses. The Company is responsible for taxes relating to the past operations of entities engaged exclusively in the specialty chemicals business and Novartis is responsible for transaction related taxes and taxes relating to the past operations of entities other than those engaged exclusively in the specialty chemicals business.

Pursuant to the “Agreement Regarding Use of Ciba as Corporate Name”, the Company is permitted to use “Ciba Specialty Chemicals” as part of its registered corporate name, while Novartis may continue to use the name “Ciba” in the Ciba Vision Group and in certain other cases. See “Intellectual Property”.

Novartis and the Company have also entered into certain arrangements with respect to the responsibility for environmental liabilities associated with operation of the specialty chemicals business prior to the Spin-off. See “Environmental Matters.”

Insurance

Management is of the opinion that the Company’s insurance arrangements regarding property, liability and marine are adequate and sufficient.

Organizational Structure

Ciba Specialty Chemicals Holding Inc. is the ultimate holding company of the Ciba Specialty Chemicals group. Its Shares are listed on the Swiss Exchange, traded on virt-x, and its ADSs trade on the New York Stock Exchange (see Item 9 – The Offer and Listing).

The following table identifies the Company’s significant subsidiaries, their jurisdiction of incorporation or residence, the Company’s ownership interest in each subsidiary and the principal function of the subsidiary.

	Group Holdings in %		Principal Function of Company
			Selling	Manufacturing	Research	Service, Finance
AMERICAS
Argentina
Ciba Especialidades Químicas S.A., Buenos Aires		100	•
Bermuda
Chemical Insurance Company Ltd., Hamilton		100				•
Ciba Specialty Chemicals Eurofinance Ltd., Hamilton		100				•
Ciba Specialty Chemicals International Finance Ltd., Hamilton		100				•
Ciba Specialty Chemicals Investment Ltd., Hamilton		100				•
Brazil
Ciba Especialidades Químicas Ltda., São Paulo		100	•	•
Latexia Brazil Ltda., São Paulo		100	•	•
Canada
Ciba Specialty Chemicals Canada Inc., Mississauga		100	•
Chile
Ciba Especialidades Químicas Ltda., Santiago de Chile		100	•	•
Colombia
Ciba Especialidades Químicas S.A., Bogotà		100	•	•
Raisio Química Andina S.A., Medellin		96	•	•
Guatemala
Ciba Especialidades Químicas, S.A. (ACC), Guatemala		100	•	•
Mexico
Ciba Especialidades Químicas Mexico S.A. de C.V., Mexico		100	•	•
Panama
Ciba Especialidades Químicas Colon S.A., Colon		100	•
United States of America
Ciba Specialty Chemicals Corporation, Tarrytown, NY		100	•	•	•
ASIA PACIFIC
Australia
Ciba Specialty Chemicals Pty. Ltd., Thomastown		100	•	•
Bahrain
Ciba Specialty Chemicals Middle East W.L.L., Manama (Al Seef District)		100	•
China
Ciba Specialty Chemicals (China) Ltd., Shanghai		100	•			•
Ciba Specialty Chemicals (Hong Kong) Ltd., Hong Kong		100	•
Ciba Specialty Chemicals (Shanghai) Ltd., Shanghai		100	•
Guangdong Ciba Specialty Chemicals Co. Ltd., Panyu, Guangdong		95	•	•
Guangzhou Ciba Specialty Chemicals Co. Ltd., Guangzhou		80	•	•
Qingdao Ciba Dyes Co. Ltd., Qingdao		94	•	•
Qingdao Ciba Pigments Co. Ltd., Qingdao		91	•	•
Raisio Chemicals (Shanghai) Co. Ltd., Shanghai		100	•
Raisio Tianma Chemicals (Suzhou) Co. Ltd., Suzhou, Jiangsu		100	•	•
Shanghai Ciba Gao-Qiao Chemical Co. Ltd., Shanghai		75	•	•
Shenzhen Ciba Specialty Chemicals Co. Ltd., Shenzhen		85	•	•
Xiangtan Chemicals & Pigments Co. Ltd., Xiangtan		49	•	•
India
Ciba India Private Ltd., Mumbai		100			•	•
Ciba Specialty Chemicals (India) Ltd., Mumbai (1)		69	•	•
Diamond Dye-Chem Ltd., Mumbai (2)		69	•	•
Indonesia
P.T. Ciba Specialty Chemicals Indonesia, Jakarta		80	•	•
PT Intercipta Kimia Pratama, Jakarta		60	•	•
PT Latexia Indonesia, Jakarta		100	•	•
Japan
Chemipro Fine Chemical Kaisha Ltd., Kobe		51	•	•
Ciba Specialty Chemicals K.K., Osaka		100	•		•
Musashino-Geigy Company Ltd., Kitaibaraki (Ibaraki)		60	•	•
Nippon Alkyl Phenol Co. Ltd., Tokyo		46	•	•
Republic of Korea (South Korea)
Ciba Specialty Chemicals Korea Ltd., Seoul		100	•
Daihan Swiss Chemical Corporation, Seoul		100	•	•	•
Doobon Fine Chemical Co., Ltd., Chongwon-kun		63	•	•
Raisio Chemicals Korea Inc., Chonan		51	•	•
Malaysia
Ciba Specialty Chemicals (Malaysia) SDN BHD, Klang		70	•	•
New Zealand
Ciba Specialty Chemicals N.Z. Ltd., Auckland		100	•	•
Singapore
Ciba Specialty Chemicals (Singapore) Pte. Ltd., Singapore		100	•
South Africa
Ciba Specialty Chemicals (Pty) Ltd., Spartan		100	•
Taiwan
Ciba Specialty Chemicals (Taiwan) Ltd., Kaohsiung		100	•	•
Thailand
Ciba Specialty Chemicals (Thailand) Ltd., Bangkok		100	•	•

	Group Holdings in %		Principal Function of Company
			Selling	Manufacturing	Research	Service, Finance
EUROPE
Austria
Ciba Spezialitätenchemie GmbH, Hard		100	•
Latexia Österreich GmbH, Pischelsdorf/Zwentendorf		100	•	•
Belgium
Ciba Specialty Chemicals N.V., Groot-Bijgaarden		100	•
Latexia S.A., Veurne		100				•
Raisio Belgium N.V., Veurne		100	•	•
Finland
Ciba Specialty Chemicals Finland OY, Helsinki		100	•
Ciba Specialty Chemicals Oy, Raisio		100	•	•	•	•
Finnamyl Oy, Raisio		100	•	•
Latexia SB Oy, Raisio		100	•	•
Latexia Suomi Oy, Raisio		100	•	•	•
Oy Kationi Ab, Raisio		100	•	•
France
Ciba Spécialités Chimiques SA, Saint Fons		100	•	•
Ciba Specialty Chemicals Masterbatch SA, Saint Jeoire en Faucigny		100	•	•	•
Germany
Ciba Spezialitätenchemie Grenzach GmbH, Grenzach-Wyhlen		100		•	•
Ciba Spezialitätenchemie Holding Deutschland GmbH, Lampertheim		100				•
Ciba Spezialitätenchemie Lampertheim GmbH, Lampertheim		100	•	•	•
Ciba Spezialitätenchemie Pfersee GmbH, Langweid/Lech		100	•	•	•
Greece
Ciba Specialty Chemicals Hellas ABEE, Thessaloniki		100	•
Hungary
Ciba Specialty Chemicals Magyarorszag Kft., Budapest		100	•
Italy
Ciba Specialty Chemicals S.p.A., Sasso Marconi (Bologna)		100	•	•	•
Magenta Master Fibers S.r.l., Milano		60	•	•	•
Luxembourg
Ciba Specialty Chemicals Finance Luxembourg S.A., Luxembourg		100				•
Netherlands
Ciba Specialty Chemicals International Nederland B.V., Maastricht		100				•
Ciba Specialty Chemicals (Maastricht) B.V., Maastricht		100	•	•	•
EFKA Additives B.V., Heerenveen		100	•	•	•
Portugal
Ciba Especialidades Químicas Lda., Porto		100	•
Raisio Portugal-Produtos Químicos, Lda., Nogueira Maia		51	•
Spain
Ciba Especialidades Químicas S.L., Barcelona		100	•
Latexia Iberia, S.L., Madrid		100	•	•
Raisio Echeveste, S.A., Tolosa		51	•	•
Sweden
Ciba Specialty Chemicals Sweden AB, Göteborg		100	•
AB CDM, Västra Frölunda		100	•
Raisio Svenska AB, Gothenburg		100	•
Switzerland
Ciba Specialty Chemicals Holding Inc., Basel (3)						•
Ciba Spécialités Chimiques Monthey SA, Monthey		100		•
Ciba Spezialitätenchemie AG, Basel		100	•	•	•
Ciba Spezialitätenchemie Finanz AG, Basel		100				•
Ciba Spezialitätenchemie International AG, Basel		100				•
Ciba Spezialitätenchemie Kaisten AG, Kaisten		100		•
Ciba Spezialitätenchemie Schweizerhalle AG, Muttenz		100		•
Ciba Spezialitätenchemie Services AG, Basel		100				•
CIMO Compagnie Industrielle de Monthey SA, Monthey		50				•
Turkey
Ciba Özel Kimyevi Ürünler Sanayi ve Ticaret Ltd., Istanbul		100	•
United Kingdom
Ciba Specialty Chemicals PLC, Macclesfield		100	•	•	•
Ciba Specialty Chemicals Investment PLC, Macclesfield		100				•
Ciba Specialty Chemicals Water Treatments Ltd., Bradford		100	•	•	•
Pira International Limited, Leatherhead		100	•		•
Raisio Chemicals UK Limited, Blackburn		100	•	•

To enhance the readability of this report and because of being less relevant, the share or quota capitals of Ciba group companies are not indicated herein, with the exception of Ciba Specialty Chemicals Holding Inc. and of Ciba Specialty Chemicals (India) Ltd., two publicly listed companies.

(1)	The shares of Ciba Specialty Chemicals (India) Ltd., Mumbai, (“CSCIL”) are listed on the Mumbai Stock Exchange (www.bseindia.com) under the scrip name “CIBA SPE CH”; the scrip code is 532184. The total market value of the 13 280 819 outstanding shares of CSCIL as of December 31, 2004 was approximately CHF 107 million (INR 4 060 million). As of December 31, 2004 the Company held 9 200 887 Equity Shares, representing 69.28 percent of the paid-up share capital of CSCIL.
(2)	Diamond Dye-Chem Limited is a wholly owned subsidiary of CSCIL.
(3)	Ciba Specialty Chemicals Holding Inc. is the ultimate holding company of Ciba Specialty Chemicals Group. Its Shares are listed on the Swiss Exchange and, since August 2, 2000, the Company’s American Depository Shares (“ADSs”) are listed on the New York Stock Exchange. Two ADSs represent one Share of the Company’s common stock.

Property, Plant and Equipment; Manufacturing

The Company owns all of its principal manufacturing facilities and owns substantially all the land on which such facilities are located. In certain cases, infrastructure is either shared with Novartis or with its recent spin-off Syngenta or outsourced to third parties as in some Swiss facilities. The Company also has other properties, including office buildings, research laboratories and warehouses. The principal office buildings are the headquarters in Basel, Switzerland. The principal research and development facilities are located in Basel, Switzerland and Tarrytown, New York, USA.

The following table sets forth the Company’s principal manufacturing facilities by geographic region together with the Segment or Segments that maintain principal responsibility for the management and production at the site and the major product lines that each facility is designed to manufacture.

	Size in
Location	hectares (1)		Major Product Lines
EUROPE
Basel, Switzerland		14	Textile Effects (reactive dyes for cellulose and wool, disperse, vat and acid dyes)
Bradford, United Kingdom		28	Water & Paper Treatment (water treatment and paper chemicals, inks, soil additives, intermediate monomers, rheology modifiers and textile chemicals)
Clayton, United Kingdom		22	Textile Effects (direct, disperse and acid dyes) Water & Paper Treatment (specialty chemicals for paper coating)
Grenzach, Germany		52	Water & Paper Treatment (whiteners, specialty colors, antimicrobials, new businesses, cationic and solvent soluble dyes) Coating Effects (high performance pigments)
Grimsby, United Kingdom		19	Water & Paper Treatment (water treatment chemicals)
Guturrybay, Spain		2	Water & Paper Treatment (latex production)
Heerenveen, Netherlands		2	Coating Effects (defoamers, slip and leveling, high molecular weight dispersants, wetting and dispersing agents)
Huningue, France		12	Coating Effects (high performance pigment preparations, imaging and coating additives)
			Plastic Additives (polymer additives and process and lubricant additives)
Kaipiainen, Finland		-	Water & Paper Treatment (latex production)
Kaisten, Switzerland		59	Plastic Additives (polymer additives)
Kokemaeki, Finland		10	Water & Paper Treatment (starch production)
Lampertheim, Germany		80	Plastic Additives (polymer additives, imaging and coating additives and process and lubricant additives)
Langweid/Lech, Germany		29	Textile Effects (fabric finishing and dyeing and printing auxiliaries)
Lapua, Finland		23	Water & Paper Treatment (starch production)
Maastricht, Netherlands		11	Coating Effects (dispersions and inorganic pigments)
Mietoinen, Finland		8	Water & Paper Treatment (starch production)
Monthey, Switzerland (2)		11	Water & Paper Treatment (whiteners) Coating Effects (high performance pigments)
Mortara & Trivolzio, Italy		17	Coating Effects (imaging and coating additives)
Paisley, United Kingdom		17	Coating Effects (classical pigments)
Pischelsdorf, Austria		-	Water & Paper Treatment (latex production)
Pontecchio Marconi, Italy		12	Plastic Additives (polymer additives and production of insecticides for a third party)
Raisio, Finland		1	Water & Paper Treatment (sizing agents and additives for the paper industry)
Ribecourt, France		-	Water & Paper Treatment (latex production)
Saint Fons, France		9	Textile Effects (metal-complex and acid dyes)
Saint Jeoire, France		5	Coating Effects (masterbatches)
Schweizerhalle, Switzerland		1	Coating Effects (polymer additives, Imaging and coating additives) Textile Effects (standardization)
Toulouse, France		1	Water & Paper Treatment (sizing agents and additives for the paper industry)
Veurne, Belgium		1	Water & Paper Treatment (starch production)

	Size in
Location	hectares (1)		Major Product Lines
AMERICAS
Atotonilquillo, Mexico		43	Textile Effects (disperse, basic and acid dyes, textile chemicals) Water & Paper Treatment (whiteners, photobleach)
Berwick, USA		10	Water & Paper Treatment (sizing agents and additives for the paper industry)
Camaçari, Brazil		14	Plastic Additives (polymer additives)
Charlotte, North Carolina USA		6	Textile Effects (dyeing and printing auxiliaries)
Estrada do Colégio, Brazil		4	Water & Paper Treatment (whiteners, fabric finishing)
McIntosh, Alabama, USA		637	Plastic Additives (polymer additives and imaging and coating additives) Water & Paper Treatment (whiteners)
Medellin, Colombia		4	Water & Paper Treatment (sizing agents and additives for the paper industry)
Newport, Delaware USA		15	Coating Effects (high performance pigments)
Paulinia, Brazil		-	Water & Paper Treatment (latex production)
Puebla, Mexico		22	Plastic Additives (polymer additives and process and lubricant additives)
St. Gabriel, Louisiana USA		81	Textile Effects (reactive and acid dyes)
Suffolk, Virginia USA		89	Water & Paper Treatment (water treatment chemicals)
West Memphis, Arkansas USA		60	Water & Paper Treatment (water treatment chemicals)
ASIA-PACIFIC
Ai-oi, Japan (3)		-	Plastic Additives (polymer additives and imaging and coating additives)
Ankleshwar, India		2	Water & Paper Treatment (whiteners)
Candra Sari, Indonesia		5	Textile Effects (textile chemicals)
Chiba, Japan (4)		-	Plastic Additives (polymer additives)
Goa, India		14	Plastic Additives (polymer additives)
Isohara, Japan (5)		8	Plastic Additives (polymer additives)
Kaohsiung, Taiwan		4	Plastic Additives (polymer additives)
Mahachai, Thailand		4	Textile Effects (reactive dyes for cellulose)
Merak, Indonesia		6	Water & Paper Treatment (latex production)
Panyu, China (6)		5	Textile Effects (textile chemicals)
Perth, Australia		2	Water & Paper Treatment (water treatment chemicals)
Qingdao, China (7)		1	Coating Effects (classical pigments)
Qingdao, China (8)		1	Textile Effects (wool and disperse dyes)
Serang, Indonesia		-	Water & Paper Treatment (sizing agents and additives for the paper industry)
Shanghai, China (9)		6	Plastic Additives (polymer additives)
Ulsan, South Korea		7	Coating Effects (classical pigments)
Zhenjiang, China		10	Water & Paper Treatment (latex production)

⁽¹⁾   One hectare is equal to 2.471 United States acres.

⁽²⁾   Most of the infrastructure facilities are shared with Syngenta and Huntsman through a joint venture in which the Company holds a 50 percent interest.

⁽³⁾   Joint venture with Chemipro Kasai Kaisha, Ltd., in which the Company holds a 51 percent interest.

⁽⁴⁾   Joint venture with Mitsui Petrochemical and Musashino-Geigy, in which the Company holds a 40 percent interest.

⁽⁵⁾   Effective January 2001, the Company acquired a controlling interest in Musashino-Geigy Co. Ltd., increasing its holdings from 50 percent to 60 percent in this joint venture with Musashino Chemical Laboratory Co. Ltd.

⁽⁶⁾   Venture with Panyu City Shilou Town Economical Development Company Limited, in which the Company holds a 95 percent interest.

(7)	Venture with Qingdao Double Peach, in which the Company holds a 91.4 percent interest.
(8)	Venture with Qingdao Double Peach, in which the Company holds a 94 percent interest.

⁽⁹⁾   Joint venture with Shanghai Gao-Qiao Petrochemical Company, in which the Company holds a 75 percent interest.

The Company’s management is of the opinion that its principal manufacturing facilities and other significant properties are in good condition and that they are adequate to meet the Company’s needs. Except as disclosed in this Annual Report, the Company does not currently plan to construct, expand or improve facilities significantly.

Environmental Matters

     Operating in the chemical industry, the Company is subject to stringent environmental, health and safety laws and regulations. It is the Company’s policy to continuously develop and improve the environmental performance of key manufacturing processes through an active program to address environmental matters. In addition to process improvements, the Company uses advanced waste treatment and disposal facilities at all major manufacturing sites that allow the sites to comply with laws and regulations applicable to waste streams. In management’s opinion, the Company substantially complies with all such laws.

     For outstanding environmental matters that are currently known and estimable by the Company, provisions of approximately CHF 509 million as of December 31, 2004 and CHF 557 million as of December 31, 2003 have been recorded in the accompanying Consolidated Balance Sheets. The decrease in the provision of CHF 48 million in 2004 compared to 2003 relates to usage of the provisions of CHF 43 million and a CHF 18 million reduction related mainly to currency effects, offset in 2004 by additional reserves established in connection with the acquisition of Raisio Chemicals. The Company’s environmental protection and improvement cash expenditures were approximately CHF 54 million in 2004 (CHF 31 million in 2003), including investments in construction, operations and maintenance and usage of the provision.

     Under the Company’s agreement with Novartis, Novartis agreed to reimburse the Company 50 percent of United States environmental liabilities arising from past operations of the Company in excess of the agreed reserves. Outside the United States based, environmental liabilities are allocated between Novartis and the Company based on the ownership of the site or, if environmental liabilities do not relate to production sites or these are not owned by either entity, according to the polluter pays principle. If causation between the parties cannot be determined, costs are shared equally. The agreement with Novartis is not subject to any time or amount limits but could terminate for certain liabilities in the United States (i) upon a sale of substantially all of the Company’s assets, (ii) upon a change in control of the Company, or (iii) for individual facilities, upon the sale of the facility (unless the Company retains responsibility for any clean-up at such site).

     The contractual terms of the sale of the Performance Polymers business stipulate that, in general, the Company will retain responsibility for environmental claims relating to the operations of the Performance Polymers business prior to May 31, 2000, whereby damages for remediation in connection with sites outside the United States shall cover only 80 percent of the respective costs. The responsibility with respect to any non-United States sites covers environmental liabilities incurred within fifteen years from May 31, 2000 and is limited to CHF 75 million. With respect to any such environmental liabilities in the United States, the Company’s obligation to indemnify is unlimited in time and/or amount. Novartis’ environmental indemnification obligations to the Company described above are not affected by the sale of the Performance Polymers business.

     The Company continues to participate in environmental assessments and clean-ups at a number of locations, including operating facilities, previously owned facilities and United States Superfund sites. The Company accrues reserves for all known environmental liabilities for remediation costs when a clean-up program becomes probable and costs can be reasonably estimated. Clean-up of the most significant sites has been or is nearly completed, except as described in the following paragraphs.

     At its Toms River, New Jersey remediation site, the Company’s subsidiary in the United States is engaged in a large bio-remediation project that is expected to take up to eight years to complete. Based on management’s current estimates, the Company’s environmental provisions are adequate to cover the expected costs to complete this remediation plan.

     In October 2003, the Company’s subsidiary in the United States received a letter from the New Jersey Department of Environmental Protection (“NJDEP”) seeking to begin discussions on natural resource damage liability issues (“NRDs”) at the Toms River site for alleged injury to groundwater. The subsidiary is engaged in on-going settlement discussions with the State to see if it can reach a mutually beneficial settlement to avoid litigation. If a mutual agreement cannot be reached and NJDEP decides to initiate litigation, the Company believes that it has significant defenses to these potential NRD claims.

The planning for the total remediation of the waste disposal site in Bonfol, Switzerland, which was closed in 1976, is ongoing. The responsibility for the remediation lies with eight chemical enterprises including among others the Company. The responsible companies cooperate with the governmental authorities to define the necessary measures in view of a final remediation of the site. The planning and remediation effort could require up to fifteen years to complete. In management’s opinion, based on the current remediation plans, the Company’s environmental provisions are adequate to cover the Company’s share of the expected costs to complete the remediation at this site.

In the Basel region, several landfills (Switzerland, France and Germany) contain chemical waste besides other industrial and household wastes. Presently eleven landfills are the subject of investigations carried out with the authorities by the ‘Interessengemeinschaft Deponiesicherheit Regio Basel’, an association of the involved pharmaceutical and chemical enterprises (including the Company). As of December 31, 2004, no remedial actions have been defined or required in a legally binding form.

In management’s opinion, the environmental reserves accrued are sufficient to meet all currently known and estimable environmental claims and contingencies. Because of the nature of the Company’s operations, however, there can be no assurance that significant costs and liabilities from ongoing or past operations will not be incurred in the future. In addition, environmental clean-up periods are protracted in length and environmental costs in future periods are subject to changes in environmental remediation regulations.

See Item 3. Key Information—Risk Factors—Environmental laws and regulations may expose the Company to liability and result in increased costs.

Item 5. Operating and Financial Review and Prospects.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion and Analysis) is based on, and should be read in conjunction with Item 3 — Key Information and the Consolidated Financial Statements and the Notes thereto, which are prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP) and are included in Item 18 – Financial Statements. For a definition of certain financial terms used herein, see Glossary of Financial Terms at the end of this Management’s Discussion and Analysis. Except for percentages, share, per share data or exchange rate data and except as otherwise stated, all numbers in tables are in millions of Swiss francs (CHF).

Year in review – 2004 compared to 2003

Results of operations	2004			2003
Net sales		7 027			6 646
Gross profit		2 171			2 067
Operating income		519			571
Income from continuing operations		283			360
Income from discontinued operations, net of tax		28			0
Cumulative effect of change in accounting principles		0			(16	)
Net income		311			344
Earnings per share, basic and diluted
Continuing operations		4.28			5.26
Discontinued operations		0.43			0.00
Cumulative effect of change in accounting principles		0.00			(0.23	)
Net income per share		4.71			5.03
Other data
Depreciation and amortization of other intangible assets		394			366
Restructuring and special charges		91			0
EBITDA (1)		913			937
Net cash provided by operating activities		631			1 033
Free cash flow (1)		270			728
Net debt (1)		1 840			1 049
Shareholders’ equity at year end		4 151			4 245
Dividend per share (2)		1.00			0.00
Capital reduction per share (2)		2.00			3.00
Key performance ratios
Net sales development		6	%		(6	)%
Net sales development in local currencies		8	%		0	%
Expressed as a percentage of sales:
Gross profit		30.9	%		31.1	%
Operating income		7.4	%		8.6	%
Income from continuing operations		4.0	%		5.4	%
Net income		4.4	%		5.2	%
EBITDA		13.0	%		14.1	%

⁽¹⁾   EBITDA, free cash flow and net debt are non-U.S. GAAP financial measures. See Use of Certain Supplementary Financial Indicators in this Management’s Discussion and Analysis for further discussion of the use of these measures.

⁽²⁾   The Board of Directors proposes a cash payment to the Company’s shareholders in 2005 totaling CHF 3 per share, based on 2004 results, consisting of a dividend of CHF 1 per share and a capital reduction of CHF 2 per share, which is reflected in the table above. The per share amounts presented above for 2003 reflect that no dividend was paid in 2004, based on 2003 results, as well as the capital reduction approved by the Company’s shareholders in 2004, based on 2003 results. For further information see the Operational Review section of this Management’s Discussion and Analysis and Item 6. Directors, Senior Management and Employees - Dividends and Dividend Policy.

Executive summary

Highlights

Ciba Specialty Chemicals (the “Company”) experienced in 2004 generally favorable market conditions, particularly in certain areas of the world, and unfavorable currency effects from the continued weakening of the U.S. dollar against the Swiss franc and the euro. Organic growth during 2004 resulted in net sales, excluding those of businesses acquired during the year, matching 2003 levels in Swiss francs despite negative currency effects and increasing by 2 percent in local currencies.

During 2004, the Company completed the acquisition of Raisio Chemicals Oy in addition to a number of other minor acquisitions. Comments relating to acquisition effects throughout this Management’s Discussion and Analysis refer to these acquisitions in totality, other than where specifically indicated. Acquisitions contributed 6 percent to sales growth in 2004, mainly from Raisio Chemicals. Including acquisitions, net sales in 2004 of CHF 7 027 million increased over 2003 levels by 8 percent in local currencies and by 6 percent in Swiss francs.

The Company implemented in 2004 Project Shape, a restructuring program to assure that synergies resulting from the integration of Raisio Chemicals are achieved and to address the continuing shift in the textiles market to Asia. Project Shape will take until 2007 to complete and is expected to result in after tax charges totaling CHF 125 million, the reduction of approximately 950 positions worldwide and annualized after tax earnings improvement of approximately CHF 90 million, once fully implemented.

Operational review

The global economy regained momentum to varying degrees during 2004, therefore providing the Company with opportunities for further growth in certain markets. Geographically, solid sales growth was achieved in Asia, particularly in China and Japan. In the Americas, sales benefited from stronger demand, particularly for specialty applications in market sectors such as polymers, industrial and decorative coatings and transportation. Sales in European markets were mixed, with Continental European sales flat to slightly improved and U.K. sales declining from prior year levels. Additional sales from acquired companies, mainly Raisio Chemicals, contributed strongly to sales growth in 2004. The acquisition of Raisio Chemicals enables the Segment Water and Paper Treatment to expand its already broad product range into its existing core markets and strengthen its presence in the Nordic regions and in Asia.

Gross profit increased in absolute terms in 2004 to CHF 2 171 million from CHF 2 067 million last year, benefiting from higher sales volumes and productivity improvements resulting from higher capacity utilization. Despite higher volumes, underlying production costs, excluding acquisition effects, were stable. Gross profit margin for 2004 was 31 percent, the same as prior year. Selling, general and administrative expenses, while higher than 2003 levels due to acquisition effects, decreased as a percentage of net sales due to continued cost control efforts.

Under Project Shape, the Company will close its Clayton manufacturing facility in the U.K. in a phased shutdown until 2007 and transfer production capacity mostly to Asia. The program also involves the closure of several smaller production and administrative facilities, primarily from the former Raisio Chemicals, and various other rightsizing initiatives across the Company’s global production base. This will enable the Company to optimize regional productive capacities within growing markets, particularly in textile effects, and to further balance the currency impact between the location of sales and cost generation.

Operating income decreased to CHF 519 million from CHF 571 million in 2003. Operating income margin was also lower in 2004 at 7.4 percent of sales compared to 8.6 percent in 2003. These decreases were primarily attributable to the CHF 80 million of restructuring expenses incurred in 2004 in connection with Project Shape, in addition to the expensing of acquired in-process research and development costs of CHF 11 million resulting from the Raisio Chemicals acquisition.

Cash flow and balance sheet review

Cash flows from operating activities in 2004 were, as expected, substantially lower than 2003, which had benefited by CHF 229 million from reductions in inventories and receivables. During 2004, approximately CHF 46 million of cash outflows were attributable directly to specific events at Raisio Chemicals, consisting of the build up of current assets for two new plants in China, higher receivables following the cessation of factoring and seasonal cash flow patterns in the starch business. In addition, the Company had higher payments for taxes, interest and contributions to certain of its pension plans. These factors, together with a combined CHF 107 million of higher capital expenditures and lower proceeds from sales of assets, resulted in lower free cash flow of CHF 270 million compared to CHF 728 million in 2003.

Net cash flows from investing activities was an outflow of CHF 1 051 million in 2004, an increase in outflow of CHF 812 million from CHF 239 million last year. The increase primarily consisted of the cash paid for the acquisition of Raisio Chemicals. Capital expenditures increased by CHF 61 million to CHF 294 million in 2004 from CHF 233 million last year. Such expenditures remain focused primarily on productivity improvement projects and maintenance of existing capacity.

Net cash flows used in financing activities were CHF 304 million in 2004 primarily consisting of a further capital reduction payment to shareholders totaling CHF 197 million and treasury stock purchases, net of sales, of CHF 162 million.

Net debt increased by CHF 791 million to CHF 1 840 million in 2004, due primarily to the reduction in cash used for the Raisio Chemicals acquisition, the capital reduction payment to shareholders and treasury stock purchases. Of the Company’s CHF 3.5 billion of total debt, more than 80 percent has long-term maturity dates. In addition, the Company continues to maintain a strong cash balance in excess of CHF 1.6 billion.

The Board of Directors will propose at the Annual General Meeting of shareholders on March 3, 2005 that the 1.8 million shares that were purchased in 2004 in connection with the share buy-back program initiated in 2003, be cancelled; this proposal is subject to shareholder approval. In 2003 under this program, the Company purchased 1.3 million treasury shares. The shareholders approved the cancellation of these shares in 2004; consequently, the shares were cancelled.

Significant other events

As a result of a dispute, Vantico International SA (now owned by the Huntsman Group) had initiated arbitration proceedings against the Company. The dispute and related arbitration proceedings were settled during 2004 resulting in the release of previously established reserves totaling CHF 28 million, net of tax. During 2004, the Company released CHF 15 million of previously established reserves following the settlement of certain outstanding tax matters.

To streamline the Group structure, the Company in 2004 integrated the Home & Personal Care Segment into two other existing segments. In recent years, the Company has evaluated numerous potential acquisitions in the home and personal care market, however none met the Company’s strict criteria for strategic fit and return on investment. This left the segment with a lack of critical mass and the Company therefore decided to save the cost of the segment support structure. The segment information presented herein reflects the new segment structure and all current and prior period segment information has been restated accordingly.

To further streamline processes, the Company plans over the next few years to harmonize business processes and implement a company-wide, unified system structure with new software. The project is expected to take up to 4 years.

Critical accounting policies

The Consolidated Financial Statements of the Company are sensitive to accounting methods, assumptions and estimates that form the basis of these financial statements and accompanying notes. Critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered in conjunction with reviewing the Company’s financial statements and the discussion in this Management’s Discussion and Analysis.

Note 1 to the Consolidated Financial Statements in Item 18 – Financial Statements describes the significant accounting policies and methods used in the preparation of the Company’s Consolidated Financial Statements. Following are the Company’s critical accounting policies impacted by judgments, assumptions and estimates.

Impairment testing of property, plant and equipment, goodwill and other intangible assets

As discussed in Note 1, Summary of Significant Accounting Policies, in the Company’s Consolidated Financial Statements in Item 18 – Financial Statements, the Company periodically evaluates property, plant and equipment, goodwill and other intangible assets for potential impairment. If such assets are considered to be impaired, they are written down to fair value as appropriate.

The impairment review process requires management to make significant estimates and judgments regarding the future cash flows expected to result from the use and, if applicable, the eventual disposition of the respective assets as well as other factors to determine the fair value of the respective assets. The key variables that management must estimate in determining these expected future cash flows and fair values include sales volumes, sales prices, sales growth, production and operating costs, capital expenditures, market conditions, and other economic factors. Significant management judgment is involved in estimating these variables, and such estimates are inherently uncertain; however, the assumptions used are consistent with the Company’s internal planning. Management periodically evaluates and updates the estimates based on the conditions that influence these variables.

The assumptions and conditions for determining impairments of property, plant and equipment, goodwill and other intangible assets, reflect management’s best assumptions and estimates, but these items involve inherent uncertainties as described above, many of which are not under management’s control. As a result, the accounting for such items could result in different estimates or amounts if management used different assumptions or if different conditions occur in future accounting periods.

Environmental compliance and expenditures

The measurement of environmental liabilities is based on an evaluation of currently available facts with respect to each individual site and considers factors such as existing technology, presently enacted laws and regulations and prior experience in remediation of contaminated sites. Inherent uncertainties exist in such evaluations primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, the protracted length of the clean-up periods and evolving technologies. Environmental operations and maintenance as well as remediation costs are accrued when environmental assessments and the need for remediation are probable and the costs can be reasonably estimated. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available.

The assumptions and conditions for determining the level of the environmental liabilities reflect management’s best assumptions and estimates, but these items involve inherent uncertainties as described above, many of which are not under management’s control. As a result, the accounting for such items could result in different amounts if management used different assumptions or if different conditions occur in future accounting periods.

For further discussion related to environmental matters, see Note 21 to Consolidated Financial Statements in Item 18 – Financial Statements and Item 4 – Information on the Company – Environmental Matters.

Pension and other postretirement benefits

Many of the amounts recognized in the Consolidated Financial Statements related to pension and other postretirement benefits are determined from actuarial valuations. Inherent in these valuations are assumptions including discount rates, expected return on plan assets, rates of increase in future compensation levels, mortality rates and health care cost trend rates. These assumptions are updated annually based on current economic conditions and, if required, also for any changes to the terms and conditions of the pension and postretirement plans. These assumptions can be affected by (i) for the discount rate, changes in rates of return on high-quality fixed income investments currently available in the markets and those expected to be available during the period to maturity of the pension benefits; (ii) for the expected return on plan assets, changes in the pension plans’ strategic asset allocations to various investment types or to long-term return trend rates in the capital markets in which the pension fund’s assets are invested; (iii) for future compensation levels, changes in labor market conditions; and (iv) for health care cost trend rates, the rate of medical cost inflation in the regions of the world where these benefits are offered to the Company’s employees.

The weighted average actuarial assumptions used to compute the Company’s pension and postretirement benefit obligations for 2004 and 2003, as well as the U.S. GAAP requirements for accounting for the differences between actual results that differ from the assumptions used in calculating the annual retirement benefit liabilities and costs, are disclosed in Note 18 to the Consolidated Financial Statements in Item 18 – Financial Statements. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension and other postretirement obligations and expenses in future accounting periods.

Income taxes

Deferred tax assets and liabilities are determined using enacted tax rates for temporary differences between the book and tax bases of assets and liabilities, as well as the effects of tax losses carried forward in certain tax jurisdictions in which the Company operates that may be utilized to offset future taxable income and similar tax credits carried forward that may be utilized to reduce future taxes payable. The Company records valuation allowances on deferred tax assets when appropriate to reflect the expected future tax benefits to be realized. In determining the appropriate valuation allowances, certain judgments are made by management relating to recoverability of deferred tax assets, use of tax loss and tax credit carryforwards, levels of expected future taxable income and available tax planning strategies.

The assumptions involved in making these judgments are updated periodically by management based on current business conditions that affect the Company and overall economic conditions. These management judgments are therefore subject to change based on factors that include, but are not limited to (i) changes in the profitability of the Company’s subsidiaries, as well as for the Company as a whole, (ii) the ability of the Company to successfully execute its tax planning strategies and (iii) the accuracy of the Company’s estimates of the potential effect that changes in tax legislation, in the jurisdictions where the Company operates, may have on the Company’s future taxable profits. Failure by the Company to achieve forecasted taxable income or to execute its tax planning strategies may affect the ultimate realization of certain deferred tax assets. Factors that may affect the Company’s ability to achieve sufficient forecasted taxable income or successfully execute its tax planning strategies include, but are not limited to, increased competition, general economic conditions, a decline in sales or earnings, loss of market share, delays in product availability or changes in tax legislation.

In addition, the Company operates within multiple taxing jurisdictions and is subject to audits in these jurisdictions. These audits can involve complex issues that may require an extended period of time for resolution. In management’s opinion, adequate provisions have been made for any additional taxes that may result from any tax audits of historical periods that are currently ongoing or that may occur.

Financial review

Total sales higher, comparable sales also higher in local currencies and stable in Swiss francs

Sales increased by 6 percent overall to CHF 7 027 million including acquisition effects. Comparable sales excluding acquisition effects increased by 2 percent in local currencies and were stable in Swiss francs. Sales development in 2004 compared to 2003 resulted from the following factors :

Consolidated sales development	2004 compared to 2003
Volume/product mix		5	%
Price		(3	)%
Currency		(2	)%
Total in Swiss francs excluding acquisitions		0	%
Acquisitions		6	%
Total in Swiss francs		6	%

Market conditions mostly improved in 2004 across the majority of the Company’s core businesses, as an overall more favorable economic environment led to a pick-up in industry activity and underlying demand levels. Consequently, higher sales volumes resulted in most segments reporting higher sales in local currencies. The ongoing impact of a strongly competitive sales environment particularly in the first half of the year resulted in further downward pressure on selling prices. However, the Company was successful in abating this trend in the second semester. These factors, in addition to adverse currency development and a slightly weakening sales trend in the last quarter resulted in stable sales in Swiss francs, excluding acquisition effects.

In Europe, the major economies failed to gain momentum in 2004, particularly in the second half of the year, which was characterized by generally weak business months towards the year-end. Conditions were more favorable across the NAFTA regions, where good sales development in the U.S. was generally in keeping with an improved economic environment. Consequently sales increased in local currency. Further economic growth in Asia enabled another good performance in the region.

Sales levels were adversely impacted by the continued appreciation of the Swiss franc against the U.S. dollar in particular. This was partially offset by the strengthening of the euro and the British pound against the Swiss franc. Volume gains compensated for further price erosion resulting from the strongly competitive sales environment. As a result, comparable sales were 2 percent higher in local currencies and were stable in Swiss francs. Sales including acquisition effects were 6 percent higher than prior year in Swiss francs.

Sales in local currencies excluding acquisition effects were lower in Europe. However the appreciation of the euro resulted in slightly higher sales in Swiss francs. Most major sales territories experienced slow market conditions to varying degrees, although both Germany and France posted slight increases in local currencies. Sales including acquisition effects were higher in all major territories, with the exception of the U.K., where sales declined after a difficult year across the major businesses. In the Americas, sales in the U.S. increased in local currency but were lower in Swiss francs, both excluding and including acquisition effects. Sales in South America were well ahead in local currencies and to a lesser extent in Swiss francs. In Asia Pacific, sales again increased in local currencies and to a lesser extent also in Swiss francs. Region China again achieved double-digit growth in local currencies, and Japan also reported strong sales increases in both local currency and in Swiss francs.

Geographic sales distribution	2004			2003
Europe		44	%		41	%
Americas(1)		29	%		31	%
Asia Pacific(2)		27	%		28	%

⁽¹⁾   The Americas are comprised of North, Central and South America.

⁽²⁾   Asia Pacific is comprised of Asia, Africa, the Middle East, Australia and New Zealand.

Gross profit benefits from sales growth and acquisition effects

In absolute terms gross profit levels increased by 5 percent to CHF 2 171 million but decreased to 30.9 percent of sales compared to 31.1 percent in prior year. The increase in absolute terms resulted from sales volume gains and positive acquisition effects that offset both selling price reductions and adverse currency impact. Higher sales volumes in turn generated productivity improvements leading to lower levels of unabsorbed fixed costs that combined with further savings in base production costs to positively affect margins. Raw material costs were relatively stable overall but showed an increasing trend towards year-end. Gross margins however decreased slightly as a percentage of sales, mainly due to the effect of relatively higher variable to total cost ratio of Raisio Chemicals that was partially offset in operating income.

Selling, general and administrative costs increase; lower in sales terms

Selling, general and administrative expenses in Swiss francs increased by CHF 42 million to CHF 1 227 million in 2004, an increase of 3 percent from CHF 1 185 million last year. This was mainly due to acquisition effects. However as a percentage of sales selling, general and administrative expenses decreased to 17.4 percent of sales in 2004 from 17.8 percent in 2003, partially due to the relatively lower fixed to total cost structure of Raisio Chemicals. Underlying costs on a comparable basis were stable.

Investment in research and development sustained

Research and development expenses as a percentage of sales were 4.1 percent in 2004, a slight decrease from 4.2 percent last year. In absolute terms, research and development expenses increased slightly by CHF 7 million to CHF 288 million in 2004 from CHF 281 million in 2003.

The Company has historically invested and plans to continue to invest approximately 4 percent of sales in research and development activities. In addition, pursuant to its commitment to innovation, the Company maintains a Research Fund for high risk/high reward projects, allowing up to CHF 15 million additional research and development expenses annually for such projects.

Operating income and EBITDA lower due to acquisition and restructuring effects

	2004			2003
Operating income		519			571
EBITDA		913			937
Operating income margin		7.4	%		8.6	%
EBITDA margin		13.0	%		14.1	%
2004 compared to 2003
Operating income		(9	)%		(28	)%
EBITDA		(3	)%		(20	)%

Operating income decreased by 9 percent to CHF 519 million in 2004 from CHF 571 million in 2003. Expressed as a percentage of sales, operating income fell to 7.4 percent in 2004 from 8.6 percent in the prior year. Despite higher sales volumes and positive acquisition effects that helped offset price erosion and adverse currency development, operating income decreased due to restructuring charges totaling CHF 80 million incurred in connection with Project Shape and special charges totaling CHF 11 million consisting of the expensing of the fair value of acquired in-process research and development activities in connection with the acquisition of Raisio Chemicals. Without these items, in 2004 operating income would have been CHF 610 million, or 8.7 percent of sales. See Note 23 to Consolidated Financial Statements in Item 18 – Financial Statements.

As a result of the decline in operating income as described above, EBITDA in 2004 decreased to CHF 913 million, a decrease of CHF 24 million from CHF 937 million in the prior year. Currency adjusted EBITDA increased by CHF 29 million from 2003. EBITDA margin decreased to 13.0 percent of sales in 2004 from 14.1 percent in 2003.

Segments results

Plastic Additives results

Sales increased to CHF 1 895 million in 2004 or by 4 percent in Swiss francs and by 7 percent in local currencies. Sales development in 2004 compared to 2003 resulted from the following factors:

Sales development	2004 compared to 2003
Volume/product mix		9	%
Price		(2	)%
Currency		(3	)%
Total in Swiss francs		4	%

Sales development across the Segment was generally positive both in local currencies and to a lesser extent in Swiss francs. In base polymers an upturn in the final quarter of the year helped to offset an intentional reduction in low-margin businesses.

Strong sales growth was achieved in polymer products, with all core markets performing well. Process and lubricant additives sales were well above prior year levels, with good market conditions evident across all major territories. Home and personal care sales were significantly higher, with new product launches in colors and stabilization applications and further gains in UV absorbers as the main growth drivers. The effect on sales of ongoing downward pressure on selling prices was fully offset by increased sales volume.

Geographically, sales in Europe increased in Swiss francs and to a lesser extent in local currencies. Sales performance was mixed, with a good result in Germany contrasting more sluggish conditions elsewhere across the region. In the Americas, sales levels increased in both Swiss francs and in local currencies. Sales levels rebounded in the U.S. benefiting from the gradual economic recovery there, and were much higher in local currency and to a lesser extent in Swiss francs. Sales in South America were higher in both local currencies and Swiss francs. Further sales growth was also achieved in Asia Pacific, with China and Japan again achieving excellent results in both local currencies and in Swiss francs. Sales development in local currencies was generally positive across the remainder of the region, and to a lesser extent also in Swiss francs.

Operating income and EBITDA	2004			2003
Operating Income:
Absolute in CHF		224			165
As a percentage of sales (operating income margin)		11.9	%		9.1	%
EBITDA:
Absolute in CHF		319			265
As a percentage of sales (EBITDA margin)		16.8	%		14.6	%

Operating income and EBITDA increased both in absolute terms and as a percentage of sales. Despite an increase in raw material costs in the latter part of the year, gross margins improved due to the combined effects of positive sales volume mix development and also productivity gains that resulted from higher plant utilization levels. Selling, general and administration expenses were higher, both in local currencies and to a lesser extent in Swiss francs. The Segment maintained its investment level in research and development activities at approximately 5 percent of sales.

Asset management	2004			2003
Net current operating assets:
Absolute in CHF		393			362
As a percentage of sales		21	%		20	%
Capital expenditures in CHF		76			64
Invested capital in CHF		1 322			1 247
Total assets in CHF		1 604			1 514

Net operating assets increased from 2003 levels. This was due to higher levels of receivables and inventories, both in absolute terms and as a percentage of sales. Payable levels were higher than prior year levels. Capital expenditures were mainly focused on debottlenecking and productivity improvement programs, and were well below the level of depreciation. Both invested capital and total assets increased slightly over prior year.

Coating Effects results

Sales in Swiss francs increased to CHF 1 818 million in 2004 or by 1 percent and increased by 3 percent in local currencies. Sales development in 2004 compared to 2003 resulted from the following factors:

Sales development	2004 compared to 2003
Volume/product mix		6	%
Price		(3	)%
Currency		(2	)%
Total in Swiss francs		1	%

Strong volume gains across most of the Segment’s key businesses contributed to overall sales growth in both Swiss francs and in local currencies. In the coatings business, sales increased in both Swiss francs and in local currencies, benefiting from strong demand for new product applications in the industrial and decorative coating markets, coupled with higher sales in the transportation market despite downward pressure on automobile sales. The Segment again managed to increase sales into the highly competitive plastics market and also posted higher sales in electronic materials due to further gains in the fast-growing displays sector, although demand slowed in the latter part of the year. Sales of Optical Information Storage products deteriorated throughout the year due principally to overcapacity in the CD-R market. The imaging and inks business continued to experience tougher conditions particularly in the publications market, although this was partially offset by a positive mix effect resulting from sales of higher margin pigments in packaging.

Geographically, in Europe sales levels were stable in Swiss francs and were slightly lower in local currencies. Of the major sales regions, France and Italy delivered positive sales growth both in local currencies and in Swiss francs, as did Germany to a lesser extent. This was contrasted by a difficult year in the U.K. where sales decreased markedly both in Swiss francs and in local currency. In the Americas in general and in the USA in particular, sales levels increased in local currencies but were lower in Swiss francs. Sales in Central and South America increased both in local currencies and in Swiss francs. Asia Pacific sales grew in local currencies and to a lesser extent in Swiss francs, enabled by an excellent result in Japan. Sales in Region China were stable in local currencies, but decreased in Swiss francs. Of the remaining sales territories in the region, growth was generally positive in local currencies and to a lesser extent in Swiss francs.

Operating income and EBITDA	2004			2003
Operating Income:
Absolute in CHF		291			300
As a percentage of sales (operating income margin)		16.0	%		16.6	%
EBITDA:
Absolute in CHF		394			397
As a percentage of sales (EBITDA margin)		21.7	%		22.0	%

Operating income and EBITDA decreased both in absolute terms and as a percentage of sales. Margins deteriorated due to sales price erosion, higher production costs that resulted mainly from higher personnel costs, and adverse currency development. These were partially offset by positive volume mix gains and lower residual capacity costs resulting from increased capacity utilization. Selling, general and administrative costs increased due to higher personnel costs. Investment in research and development was approximately 6 percent of sales.

Asset management	2004			2003
Net current operating assets:
Absolute in CHF		501			520
As a percentage of sales		28	%		29	%
Capital expenditures in CHF		82			79
Invested capital in CHF		1 853			1 773
Total assets in CHF		2 100			2 020

Net operating assets decreased from prior year levels. Both receivables and inventory levels were lower, in absolute terms as well as in percentage of sales. Payable levels were higher than in prior year. Capital expenditures increased slightly; these remain focused primarily on enhancement of existing capacity and were below the level of depreciation. Both invested capital and total assets increased slightly.

Water & Paper Treatment results

Sales increased to CHF 2 014 million in 2004 or by 25 percent in Swiss francs and by 27 percent in local currencies. Sales development in 2004 compared to 2003 resulted from the following factors:

Sales development	2004 compared to 2003
Volume/product mix		6	%
Price		(4	)%
Currency		(2	)%
Total in Swiss francs before acquisitions		0	%
Acquisitions		25	%
Total in Swiss francs		25	%

The acquisition effect of Raisio Chemicals is included from June 1, 2004; all comments regarding sales that follow are on a comparable basis with 2003 thereby excluding acquisition effects other than where specifically indicated.

Sales in water treatments exceeded prior year levels both in Swiss francs and in local currencies, driven by good performances across most major markets despite further competitive downward pressure on selling prices in the sector. Business line paper reported sales growth in local currencies with most markets outperforming the prior year, although sales remained stable in Swiss francs. Sales in detergents and hygiene suffered from the adverse competitive impact of the weak U.S. dollar, especially in whiteners, resulting in sales decreases both in local currencies and in Swiss francs.

Geographically, sales in Europe increased in Swiss francs and were stable in local currencies. Germany achieved sales growth in both Swiss francs and local currency, benefiting from slightly improved economic conditions. Performance was more muted across the remainder of the region amid tighter markets. In the Americas, sales increases in local currencies were achieved in all regions to varying degrees. Sales in the U.S. were slightly higher than prior year in local currency, but were much lower in Swiss francs. Canada posted growth in both local currency and in Swiss francs, while Central America delivered sales growth in local currencies but sales were stable in Swiss francs. Sales increased in Asia Pacific, particularly in Region China where sales were once again well ahead in both Swiss francs and in local currency, augmented by another good performance in Africa and Middle East where sales increased in both local currency and in Swiss francs.

Including acquisition effects, sales development was positive across all regions in both local currencies and to a lesser extent in Swiss francs.

Operating income and EBITDA	2004			2003
Operating Income:
Absolute in CHF		126			130
As a percentage of sales (operating income margin)		6.3	%		8.1	%
EBITDA:
Absolute in CHF		257			233
As a percentage of sales (EBITDA margin)		12.7	%		14.4	%

Operating income decreased both in absolute terms and as a percentage of sales. EBITDA increased in absolute terms but decreased as a percentage of sales. Gross profit was higher in absolute terms, benefiting from higher capacity utilization levels in addition to favorable acquisition and volume mix gains that compensated for sales price reductions and higher costs for raw materials. Gross margins overall however decreased as a percentage of sales due to relatively higher variable to total cost ratio of Raisio Chemicals’ sales. Selling, general and administrative costs were much higher in both Swiss francs and in local currencies, chiefly due to acquisition effects, leading to a further reduction in net margins. Investments in research and development remained at the prior year level of approximately 2 percent of sales.

Asset management	2004			2003
Net current operating assets:
Absolute in CHF		458		346
As a percentage of sales		23	%	21	%
Capital expenditures in CHF		81		55
Invested capital in CHF		3 184		2 432
Total assets in CHF		3 528		2 661

The Segment’s operating assets were higher than prior year levels both in absolute and intensity terms. Both inventories and receivables increased in both absolute and intensity terms. The increase in intensities was mostly due to acquisition effects that did not include a full year’s sales. Payables were higher than in prior year. Capital expenditures increased from prior year but

were well below depreciation expense and were again targeted primarily on productivity improvement projects. These factors led to an overall increase in both invested capital and total assets.

Textile Effects results

Sales decreased to CHF 1 300 million in 2004 or by 7 percent in Swiss francs and by 5 percent in local currencies. Sales development in 2004 compared to 2003 resulted from the following factors:

Sales development	2004 compared to 2003
Volume/product mix		(2	)%
Price		(3	)%
Currency		(2	)%
Total in Swiss francs		(7	)%

The textiles market remained difficult in 2004 and continues to present the Segment with many challenges. Textile dyes sales were lower both in local currencies and in Swiss francs, characterized by heavy competitive pressures and slow core markets. Sales in textile chemicals were stable in local currencies, where most key markets held up reasonably well, notably sizing and pretreatments.

Geographically, sales in Europe decreased from prior year levels both in Swiss francs and in local currencies. All major sales territories suffered sales declines in local currencies, particularly in the second half of the year, with the exception of Turkey where sales increased both in local currencies and in Swiss francs. In the Americas, sales declined in Swiss francs and in local currencies across all regions. In the Asia Pacific region, sales remained stable in local currencies but were lower in Swiss francs. A strong result in both China and in India in local currencies and to a lesser extent in Swiss francs helped to offset sales declines across the remainder of the region.

Operating income and EBITDA	2004			2003
Operating Income:
Absolute in CHF		61			69
As a percentage of sales (operating income margin)		4.7	%		4.9	%
EBITDA:
Absolute in CHF		117			129
As a percentage of sales (EBITDA margin)		9.0	%		9.2	%

Operating income and EBITDA decreased in both absolute terms and as a percentage of sales, mainly due to the difficult sales environment. The Segment again managed to partially mitigate this effect through further cost reductions in the production area combined with lower raw material costs. Selling, general and administrative costs were also lower in Swiss francs and in local currencies compared to the prior year. Investment in research and development remained stable at approximately 2 percent of sales.

Asset management	2004			2003
Net current operating assets:
Absolute in CHF		393			439
As a percentage of sales		30	%		31	%
Capital expenditures in CHF		35			29
Invested capital in CHF		1 162			1 115
Total assets in CHF		1 365			1 304

The Segment managed to reduce net operating assets below prior year levels. Both receivables and inventory levels decreased in absolute terms and were stable in intensity terms compared to prior year. Payable levels were higher than last year. Capital expenditures increased slightly from last year, but remain well below depreciation expense for the period. Both invested capital and total assets increased slightly.

Consolidated balance sheets

Selected balance sheet data as of December 31,	2004		2003
Cash and cash equivalents and short-term investments		1 636		2 397
Total assets		11 006		11 098
Total shareholders’ equity		4 151		4 245

Cash and cash equivalents and short-term investments decreased by CHF 761 million from 2003 to 2004 primarily due to cash used for acquisitions. Totals assets were slightly lower than prior year levels. The Company continues to target further reductions in its operating assets base but the same levels of reductions as in 2003 could not be achieved, which was partially due to higher sales and resulting production activities. Proposed investments in additional production capacity continue to be carefully evaluated to ensure that sufficient market demand exists to justify the investment. The Company also continues its practice of maintaining total investments in property, plant and equipment at less than the annual depreciation cost.

The remaining asset reduction resulted from the change between December 31, 2003 and 2004 in year-end currency exchange rates, which are used to translate the Company’s various non-Swiss franc denominated balance sheet items located around the world into Swiss francs. During 2004, the U.S. dollar depreciated by a further 8 percent and the Chinese renminbi by 8 percent from prior year against the Swiss franc.

Liquidity and capital resources

In recent years, the Company’s sources of liquidity have primarily been provided by operations and funds from capital markets. Management of the Company is of the opinion that the funding available to it from these sources will be sufficient to satisfy its working capital and debt service requirements for the foreseeable future.

Treasury management

The international financial markets remained volatile in 2004. The major trends in the markets, which were the focus of the Company’s treasury management initiatives, included movements in interest rates as well as the continued weakening of the U.S. dollar against the Swiss franc, and the further strengthening of the euro against the U.S. dollar.

As a consequence of the improving economic recovery especially in the U.S. and receding political instability in 2004, global interest rates started to rise during 2004. Through the effective anticipation of market conditions and the use of financial instruments available in the financial markets, the Company was able to keep the average cost of its total borrowings almost constant at 4.03 percent in 2004 compared to 3.84 percent in 2003. The Company’s net interest cost, which is interest expense less interest income, was stable at CHF 108 million in 2004 as for 2003.

During 2004, the U.S. dollar fluctuated against the Swiss franc from a high of approximately CHF 1.32 to a low of approximately CHF 1.13. The Swiss franc balance sheet year-end rate was at CHF 1.15 against the U.S. dollar in 2004 versus CHF 1.25 at the end of 2003. During 2004, the euro fluctuated against the Swiss franc from a high of approximately CHF 1.59 to a low of approximately CHF 1.50. At the end of 2004, the Swiss franc was at a level of CHF 1.54 against the euro versus CHF 1.56 at the end of 2003.

The Company, in accordance with its stated risk management policy, continues to monitor its currency exposures and, where appropriate, enters into transactions to minimize its overall exposures to volatility in the currency markets. The Company selectively executes foreign currency transactions, when considered cost effective, to protect the cash flows of its operating companies against unfavorable foreign currency movements.

In 2004, other financial expense, net which includes foreign currency exchange gains and losses, net hedging expenses, and losses on financial investments, was CHF 39 million, an increase of CHF 15 million from CHF 24 million in 2003. The increase in 2004 is mainly due to the fact that in 2003, the Company sold its remaining shares in Hexcel Corporation realizing a CHF 16 million gain. Otherwise, other financial expenses, net were relatively stable between the two periods.

Capital resources

The Company’s policy is to maintain a high degree of flexibility in its funding process by using a broad variety of financial instruments and currencies depending on market conditions. The Company enters into derivative financial instruments in the ordinary course of business to mitigate its exposure to adverse changes in foreign exchange rates and to manage its interest rate exposures. Various risk exposures, arising from existing assets and liabilities, from future transactions in which the Company is firmly committed and from future anticipated transactions, are assessed and managed centrally by the Company’s treasury group based on the Company’s aggregate exposure.

Under the Company’s written hedging policy, treasury management continuously monitors and reports the results of its risk management programs to senior management and may choose to partially or fully hedge exposures. In accordance with its hedging policy, the Company primarily utilizes foreign exchange currency forwards, swaps and options contracts. The Company’s risk management policies do not permit the utilization of financial instruments for speculative or trading purposes.

For further information see Note 9 to Consolidated Financial Statements and Item 11 - Quantitative and Qualitative Disclosures About Market Risks.

Throughout 2004, the Company continued to maintain its long-term debt ratings of ‘A’ from Standard & Poor’s and of ‘A2’ from Moody’s. In management’s opinion, based on the Company’s current financial position, its credit protection ratios are strong for its rating category. Consequently, management believes that the Company will continue to be able to access global capital markets to meet its capital requirements as required.

The Company’s capital requirements are primarily dependent on management’s business plans regarding the levels and timing of capital expenditures and investments. Subject to developments affecting the Company which cannot be predicted or controlled, management, for the next one to two years, intends to maintain the Company’s capital expenditure levels generally in the range of the past three years. The Company is not currently subject to any commitment for capital expenditures that individually is material to the Company.

For further information on capital resources available to the Company, see Notes 12 and 13 to Consolidated Financial Statements in Item 18 – Financial Statements.

Net debt

The table below shows the components of net debt at December 31, 2004 and 2003:

Net debt	2004			2003
Short-term debt		559			259
Long-term debt		2 917			3 187
Total debt		3 476			3 446
Less: cash and cash equivalents		(1 614	)		(2 386	)
Less: short-term investments		(22	)		(11	)
Net debt		1 840			1 049

The Company maintains short-term debt facilities, including commercial paper programs and bank overdraft and credit line facilities to finance its working capital requirements, which are described in Note 12 to the Consolidated Financial Statements in Item 18 – Financial Statements.

The Company’s long-term debt in 2004 and 2003 consisted primarily of Euro Medium-Term Notes (EMTN Program) and straight bonds, which are described in Note 13 to the Consolidated Financial Statements in Item 18 – Financial Statements. The current portion of long-term debt totaled CHF 258 million at December 31, 2004 and CHF 1 million at December 31, 2003.

Net debt levels increased by CHF 791 million in 2004 due to a number of factors, being mainly the cash used to fund the acquisition of Raisio Chemicals, totaling CHF 662 million. Also, the Company made a capital reduction payment of CHF 197 million in 2004. The Company also used a total of CHF 162 million to purchase treasury stock. These uses of cash were partially offset by cash flows from operating activities totaling CHF 631 million.

Long-term debt levels, including current portion, were similar to prior year levels. See Note 13 to Consolidated Financial Statements in Item 18 – Financial Statements.

The Company’s commercial paper program is uncommitted and the availability of future funds thereunder depends to a large extent on market conditions. The Company may, if and when it is economically advantageous, issue new debt.

Cash flows

The net decrease in cash and cash equivalents of CHF 772 million from December 31, 2003 to December 31, 2004 resulted from cash flows provided by or used in the Company’s operating, investing and financing activities.

Cash flows from operating activities	2004			2003
Net income		311			344
Deduct net income form discontinued operatons, net of tax		(28	)		0
Depreciation and amortization		394			366
Net change in operating assets and liabilities		(226	)		302
Other, net		180			21
Net cash provided by operating activities		631			1 033

Cash flows provided by operating activities of CHF 631 million did not reach the same high levels of recent years, which was partially due to higher working capital requirements necessary to fund higher sales volumes. Also in 2004, the Company had higher cash payments for interest, taxes and pensions that together resulted in an adverse development of CHF 144 million compared to the prior year. Together, these factors contributed to the decline in operating cash flows.

The Company continues to prioritize cash flow generation and is satisfied that operating cash flow levels are sufficient to satisfy both short-term and mid-term funding requirements.

Cash flows from investing activities	2004			2003
Capital expenditures		(294	)		(233	)
Sale (acquisition) of businesses, net of cash		(810	)		(71	)
Proceeds from sale of assets and changes in loans and other long- term assets		53			65
Cash flows used in investing activities, discontinued operations		0			0
Net cash used in investing activities		(1 051	)		(239	)

Net cash used in acquisition and divestment activities in 2004 consisted primarily of the cash used for the acquisition of Raisio Chemicals, of CHF 662 million. In addition, the Company completed a number of other minor acquisitions during 2004 for an aggregate consideration of CHF 91 million. Also included in cash flows from investing activities in 2004 was the receipt of a long-term note receivable of CHF 42 million in connection with the sale in 2000 of the Company’s investment in Hexcel Corporation.

Net cash used in acquisition and divestment activities in 2003 consisted primarily of a CHF 71 million payment for separation costs attributable to the past divestment of the Performance Polymers business. Also included is an aggregate CHF 23 million for the acquisition of additional interests in two equity affiliates in Asia, where the Company is experiencing significant sales growth. These cash outflows were partially offset by proceeds of CHF 21 million from the sale of the Company’s remaining Hexcel shares.

Cash flows from financing activities	2004			2003
Increase (decrease) in short-term and long-term debt, net		55			(394	)
Dividends paid		0			0
Capital reduction paid		(197	)		(206	)
Treasury stock transactions and other		(162	)		(142	)
Net cash flows (used in) provided by financing activities		(304	)		(742	)

For discussion of cash flows from short-term and long-term debt, see the Net Debt section of this Management’s Discussion and Analysis and Notes 12 and 13 to Consolidated Financial Statements in Item 18 – Financial Statements.

At the Company’s Annual General Meeting on February 26, 2004, the shareholders approved the Board of Directors’ proposal for a payment to the shareholders in the form of a capital reduction of CHF 3 per share. The capital reduction was in the form of a reduction in the nominal value of each common share from CHF 6 per share to CHF 3 per share. The Company paid the capital reduction on May 14, 2004, which totaled CHF 197 million.

At the Company’s Annual General Meeting on March 6, 2003, the shareholders approved the Board of Directors’ proposal for a payment to the shareholders in the form of a capital reduction of CHF 3 per share. The capital reduction was in the form of a reduction in the nominal value of each common share from CHF 9 per share to CHF 6 per share. The Company paid the capital reduction on May 23, 2003, which totaled CHF 206 million.

In connection with its share buy-back program initiated in 2004, the Company purchased 1.8 million treasury shares in 2004 for CHF 157 million. The Board of Directors will propose at the Annual General Meeting of shareholders on March 3, 2005 that these shares be cancelled; this proposal is subject to shareholder approval. In 2003 in connection with the share buy-back

program, the Company purchased 1.3 million treasury shares for CHF 117 million. The shareholders approved the cancellation of these shares at the Company’s Annual General Meeting on February 26, 2004; consequently, the shares were cancelled on May 7, 2004. For further details, refer to Note 16 to Consolidated Financial Statements in Item 18 – Financial Statements.

Free cash flow	2004			2003
Net cash from continuing operations		631			1 033
Add: restructuring payments		11			0
Less: net cash used in investing activities		(1 051	)		(239	)
Add: (sale) acquisition of businesses, net of cash		810			71
Less: dividends(1)		(131	)		(137	)
Free cash flow		270			728

⁽¹⁾   The Company considers CHF 2 per share to be the normal annual per share dividend amount expected by its shareholders. As a result, this amount is used in the Company’s calculation of free cash flow. Actual per share dividends or other distributions to shareholders may differ from this per share amount (see the Operational Review section of this Management’s Discussion and Analysis above).

The Company historically has utilized free cash flow to maintain short-term debt at stable levels, to repay long-term debt according to payment terms or earlier when economically advantageous to the Company, for acquisitions of businesses or treasury shares, and to pay distributions to shareholders.

Free cash flow was lower by CHF 458 million in 2004 compared to prior year. This was mainly due to lower cash from operating activities in 2004, as the Company’s investment in working capital increased due to sales growth.

Long-term obligations, commitments and contingencies

The Company has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary course of business. Management believes that these commitments are not in excess of current market prices and reflect normal business operations. The Company had outstanding at December 31, 2004, various long-term obligations that will become due in 2005 and beyond. These various purchase commitments and long-term obligations will have an effect on the Company’s future liquidity and capital resources. The table below shows, by major category of commitment and long-term obligations outstanding as of December 31, 2004, the Company’s current estimate of their annual maturities.

Payments by year, as from December 31, 2004

	Total	Less than 1 year	1 to 3 years	3 to 5 years	More than 5 years
Long-term debt, including current(i)	3 129	258	8	1 311	1 552
Long-term obligations, including current portion(ii)	1 366	87	158	159	962
Raw material purchase commitments	402	226	176	—	—
Fixed assets and other purchase commitments	375	156	161	48	10
Lease commitments	128	41	41	21	25
Total	5 400	768	544	1 539	2 549

⁽ⁱ⁾   Long-term debt shown is the face amount of the debt obligations. The amounts reported on the Consolidated Balance Sheets and in Note 13 to Consolidated Financial Statements in Item 18 – Financial Statements are net of discounts and premiums, in accordance with U.S. GAAP.

⁽ⁱⁱ⁾   Estimated payments for long-term obligations have been determined by the Company based on payment schedules for those long-term obligations where set payments exist. For long-term obligations with no set payment schedules, estimates have been made by the Company based on the most likely timing of cash payments based on the facts and circumstances that exist as of December 31, 2004. The ultimate timing of these future cash flows may differ due to events and circumstances that are out of the direct control of the Company. Also included are liabilities related to environmental matters, which are further discussed in Note 21 to Consolidated Financial Statements in Item 18 – Financial Statements.

In addition to the long-term obligations and commitments disclosed above, the Company, in the normal course of business, provided guarantees to third parties. The Company estimates that the fair value of these guarantees is not material and does not expect to incur material losses as a result of these guarantees. As of December 31, 2004, the Company has provided guarantees to third parties for indebtedness of others of approximately CHF 17 million of which CHF 12 million expire in 2005 and CHF 5 million thereafter.

Effective income tax rate

The Company reported an effective income tax rate of 23 percent in 2004, an increase of 6 percent compared to 17 percent reported in 2003. The 2004 rate is reduced by 4 percent due to a non-recurring release of previously established tax reserves following the settlement during 2004 of certain outstanding tax matters. The 2003 effective income tax rate of 17 percent had been reduced by 10 percent from different non-recurring releases of previously established tax reserves, consisting principally of 9 percent resulting from the settlement in 2003 of a dispute with Novartis. Excluding the effects of these different non-recurring events, the Company’s 2004 and 2003 effective income tax rates would have each been 27 percent. See Note 14 to Consolidated Financial Statements in Item 18 — Financial Statements.

Year in review – 2003 compared to 2002

Results of operations	2003			2002
Net sales		6 646			7 085
Gross profit		2 067			2 356
Operating income		571			788
Income from continuing operations		360			406
Income from discontinued operations, net of tax		0			0
Cumulative effect of change in accounting principles		(16	)		0
Net income		344			406
Earnings per share, basic and diluted
Continuing operations		5.26			5.92
Discontinued operations		0.00			0.00
Cumulative effect of change in accounting principles		(0.23	)		0.00
Net income per share		5.03			5.92
Other data
Depreciation and amortization of other intangible assets		366			385
EBITDA (1)		937			1 173
Net cash provided by operating activities		1 033			1 038
Free cash flow (1)		728			683
Net debt (1)		1 049			1 463
Shareholders’ equity at year end		4 245			4 354
Dividend per share (2)		0.00			0.00
Capital reduction per share (2)		3.00			3.00
Key performance ratios
Net sales development		(6	)%		(4	)%
Net sales development in local currencies		0	%		3	%
Expressed as a percentage of sales:
Gross profit		31.1	%		33.3	%
Operating income		8.6	%		11.1	%
Income from continuing operations		5.4	%		5.7	%
Net income		5.2	%		5.7	%
EBITDA		14.1	%		16.6	%

⁽¹⁾   EBITDA, free cash flow and net debt are non-U.S. GAAP financial measures. See Use of Certain Supplementary Financial Indicators in this Management’s Discussion and Analysis for further discussion of the use of these measures.

⁽²⁾   The per share amounts presented above reflect that no dividends were paid in 2004, based on 2003 results, nor in 2003, based on 2002 results, as well as the capital reductions approved by the Company’s shareholders in 2004, based on 2003 results, and in 2003, based on 2002 results.

Executive summary

The global economic environment continued to present the Company with significant challenges during 2003. Strongly competitive conditions in mature markets such as textile dyes and inks were contrasted by excellent growth in electronic materials and personal care specialties, where the Company was able to benefit from its strong portfolio of effects products. A similar contrast was evident on a geographical basis. The difficult economic environment heavily impacted traditional sales territories. In particular, the delayed effect of the second half recovery in the U.S. did not provide the Company with a respective upturn in 2003. The European markets performed slightly better and although sluggish in certain areas were generally stable. Asia, on the other hand, again confirmed its potential as the platform for growth, driven especially by another excellent year in China.

Operational review - Sales stable in local currencies despite adverse environment, profitability declines

Net sales at CHF 6 646 million were stable in local currencies. Sales in Swiss francs were again adversely impacted by unfavorable currency developments. Consequently, sales decreased by 6 percent in Swiss francs. Stable sales in local currencies were achieved in spite of a fiercely competitive sales environment, with Asian competitors benefiting from the weak U.S. dollar. The Company was able to defend volumes through effective marketing strategies and continued focus on higher margin specialty applications, and at the same time exploit new and emerging market areas with stronger demand levels.

In response to difficult competitive conditions, the Company continued to prioritize cash flow generation by further reducing receivable levels, and in the fourth quarter, selectively scaling back certain production operations. This was highly effective in reducing inventory levels with significant positive cash flow being generated as a result. However, this had an adverse impact on profit levels due to higher unabsorbed capacity costs arising from the lower volumes produced during this period.

Profitability was heavily impacted by adverse currency developments during the year. With the exception of the euro, the Swiss franc appreciated against most major trading currencies, notably the U.S. dollar, and to a lesser extent the British pound and the Japanese yen. Further, price concessions of 3 percent were necessary to maintain competitive position. Raw material costs were relatively stable in 2003.

The Company continued to focus on efficiency and productivity improvements, ensuring that operating expenses were stable in local currencies supported by further headcount reductions in low-growth regions. The manufacturing infrastructure was successfully realigned in key areas ensuring that the Company remains well positioned to balance future growth potential with production capabilities. In connection with its “Managing for Growth” initiative in 2003, the Company further expanded its presence in China, where an additional 80 positions have been filled in order to support growing activities in the region.

Gross profit in absolute terms declined from CHF 2 356 million in 2002 to CHF 2 067 million in 2003.

Operating income decreased by CHF 217 million to CHF 571 million compared to CHF 788 million in 2002. Operating income margin was also lower in 2003 at 8.6 percent compared to 11.1 percent in 2002.

Income from continuing operations was CHF 360 million or CHF 5.26 per share in 2003, compared to CHF 406 million or CHF 5.92 per share in the prior year. Net income was CHF 344 million or CHF 5.03 per share in 2003 compared to CHF 406 million or CHF 5.92 per share in the prior year.

The Company’s EBITDA and EBITDA margin, respectively, were CHF 937 million and 14.1 percent in 2003 compared to CHF 1 173 million and 16.6 percent in 2002.

Cash flow review – Strong operating cash flow enables further strengthening of balance sheet

The Company continued its trend of generating net cash from operating activities in excess of CHF 1 billion and increased free cash flow by 7 percent over prior year to CHF 728 million by offsetting the impact of lower operating performance described above with a successful program in the fourth quarter to substantially reduce its net current operating assets. Every segment succeeded in reducing its working capital requirements. Overall inventories and receivables were reduced significantly resulting in the ratio of net current operating assets to sales decreasing significantly to 24.7 percent. The ratio of inventories to sales dropped from 20.4 percent in 2002 to 18.5 percent in 2003 and the ratio of receivables to sales dropped from 14.3 percent in 2002 to 14.1 percent in 2003.

Net cash flows used in financing activities totaled CHF 742 million in 2003 as the result of the Company using its cash flows from operations to further strengthen its balance sheet by reducing debt, to pay a high CHF 3 per share distribution to shareholders and to purchase treasury shares under the share buy-back program initiated in 2003. Net debt as of year-end 2003 was lowered by CHF 414 million, or 28 percent, from year-end 2002. During 2003, the Company repaid CHF 1 084 million of long-term debt at its scheduled maturity, which was partially offset by CHF 715 million proceeds from the issuance of EUR 500 million fixed rate unsecured notes maturing 2018.

Throughout 2003, the Company maintained strong liquidity and at year-end 2003 had a sizeable cash position of CHF 2.4 billion, maintaining its flexibility for future acquisitions.

In connection with a share buy-back program initiated in 2003, the Company purchased 1.3 million treasury shares for CHF 117 million.

Significant other events

During 2003, the Company settled a tax-related dispute with Novartis that resulted in an additional CHF 39 million of net income from the release of previously established provisions related to the dispute. In addition, the Company capitalized on the recovery in 2003 of the market value of its investment in Hexcel Corporation by selling its remaining Hexcel Corporation shares, which resulted in a CHF 16 million pre-tax gain on sale. The positive income impact of the above two items were partially offset by the recording of an after-tax charge of CHF 16 million for the cumulative effect of the change in accounting that resulted from the adoption in 2003 of a new accounting standard. Each of the above three items are more fully described elsewhere in this Management’s Discussion and Analysis or in the Company’s Consolidated Financial Statements and Notes thereto.

Financial review

Sales stable in local currencies, down in Swiss francs

Net sales in local currencies were similar to those of prior year. In Swiss francs, sales decreased by 6 percent to CHF 6 646 million. Sales development in 2003 compared to 2002 resulted from the following factors:

Consolidated sales development	2003 compared to 2002
Volume/product mix		3	%
Price		(3	)%
Currency		(6	)%
Total in Swiss francs		(6	)%

In local currencies, sales levels at the start of the year recovered from the low levels of late 2002, reflective of more upbeat customer expectations at that time as to the level of economic recovery. However, as economic development continued to be sluggish, this optimism receded and the Company’s sales levels likewise began to recede during the second quarter, ending the year at similar levels to 2002 in local currencies. In Europe, sales levels during the first half of the year were slightly higher than the prior year period in local currencies, but deteriorated in the latter part of the year, ending the year slightly below prior year levels in local currencies. The NAFTA region showed signs of improvement during the first half of the year, with recovery well underway in the U.S. by the end of the year. However, the positive effect of the upturn was not yet fully reflected throughout all industry sectors, including those served by the Company. Asia continues to be the global growth engine, with excellent performances in most of the region, notably China.

Contributing to the sales decline in Swiss francs was the strengthening of the Swiss franc compared to most major trading currencies, particularly against the U.S. dollar, and to a lesser extent the British pound and Japanese yen, partially offset by the appreciation of the euro. This resulted in a reduction in sales in Swiss francs of 6 percent compared to 2002. The Company continued to experience a difficult competitive environment resulting in price erosion of 3 percent. The negative impact of lower prices, however, was offset by volume/product mix gains of 3 percent.

Sales in Swiss francs increased in most of the major markets in Europe, with the exception of the U. K. and Italy. The performance in Swiss francs was partially attributable to the stronger euro. In local currencies, sales declined in varying degrees across most major markets. In the Americas, sales in the U.S. decreased both in local currency and in Swiss francs. Sales in South America grew in local currencies but declined in Swiss francs. In Asia Pacific, sales increased in local currencies fuelled by the strong result in China. Japan also achieved positive growth in local currency. However, sales in the region overall were lower in Swiss francs.

Geographic sales distribution	2003			2002
Europe		41	%		38	%
Americas(1)		31	%		35	%
Asia Pacific(2)		28	%		27	%

(1)	The Americas are comprised of North, Central and South America.
(2)	Asia Pacific is comprised of Asia, Africa, the Middle East, Australia and New Zealand.

Profit margins deteriorate in adverse sales climate

Gross profit margin in 2003 decreased to 31.1 percent of sales from 33.3 percent in the prior year. Margins were adversely impacted by currency exchange rate developments. Sales volume gains of 3 percent were completely offset by price erosion as the Company faced stiff competition particularly in mature markets. Production expenses were lower in Swiss francs and were stable in local currencies. Higher levels of unabsorbed costs occurred in 2003 that were mainly due to temporary production shutdowns in the fourth quarter, improving cash flow due to lower purchasing activities, but adversely impacting profitability. Raw material costs increased in the early part of the year and peaked in the second quarter; by the end of the year raw material prices decreased and overall were similar to prior year levels.

Selling, general and administrative expenses stable

Selling, general and administrative expenses in Swiss francs decreased by CHF 62 million, from CHF 1 247 million in 2002 to CHF 1 185 million in 2003. In local currencies, these costs remained stable. Selling, general and administrative expenses expressed as a percentage of sales were 17.8 percent in 2003 compared to 17.6 percent in the prior year. Higher costs for pensions and insurance were incurred in 2003. Further headcount reductions were made in order to align the Company’s cost structure with its business needs.

Investment in research and development sustained

Research and development expenses as a percentage of sales remained at 4.2 percent in 2003 as for 2002. In absolute terms, research and development expenses decreased slightly by CHF 13 million to CHF 281 million in 2003 from CHF 294 million in 2002. This was mainly due to currency effects.

The Company has historically invested approximately 4 percent of sales in research and development activities.

Operating income and EBITDA adversely affected by lower sales levels and unfavorable currency developments

	2003			2002
Operating income		571			788
EBITDA		937			1 173
Operating income margin		8.6	%		11.1	%
EBITDA margin		14.1	%		16.6	%
2003 compared to 2002
Operating income		(28	)%		4	%
EBITDA		(20	)%		(5	)%

Operating income fell by CHF 217 million in 2003, and operating income margin deteriorated to 8.6 percent of sales in 2003 from 11.1 percent in the prior year. Contributing to this result was the combined effect of adverse currency development, sales price reductions that were partially offset by volume increases, and a stable cost base achieved through tight expense control during the year. The strengthening of the Swiss franc against the U.S. dollar, and to a lesser extent, against most other major currencies negatively impacted operating income by approximately CHF 111 million in 2003.

EBITDA decreased to CHF 937 million in 2003 compared to CHF 1 173 million in the prior year, of which approximately CHF 134 million was due to unfavorable currency developments. EBITDA margin decreased to 14.1 percent of sales in 2003 from 16.6 percent in 2002.

Segments results

During 2004, the Company integrated the Home & Personal Care Segment into two other existing segments. Accordingly, the following 2003 compared to 2002 segment information has been restated to reflect the new segment structure.

Plastic Additives results

Sales decreased to CHF 1 822 million in 2003 or by 4 percent in Swiss francs and increased by 2 percent in local currencies. Sales development in 2003 compared to 2002 resulted from the following factors:

Sales development	2003 compared to 2002
Volume/product mix		4	%
Price		(2	)%
Currency		(6	)%
Total in Swiss francs		(4	)%

Sales increased slightly in local currencies driven by a solid performance in Polymer products, despite ongoing competitive price pressures as a result of the weak U.S. dollar. Base polymers sales decreased marginally in local currencies with the major market areas generally sluggish. Sales in process and lubricant additives increased slightly in local currencies despite customer inventory reductions affecting sales in the fourth quarter. Sales decreased, however, in Swiss francs. Sales in home and personal care were boosted by strong sales of UV absorbers. The Segment continues to experience strong price pressures, and price concessions were necessary to maintain the Segment’s competitive position. The Segment was successful, however, in slowing this trend during the second half of 2003.

Geographically, sales in Europe increased in both Swiss francs and in local currencies. Growth was generally positive across the region, driven by a solid performance in Germany in particular. In the Americas, sales levels were below those of prior year both in Swiss francs and in local currencies. In the United States, sales levels did not recover from a slow start, remaining sluggish throughout the year resulting in lower sales levels in local currency. Sales in South America increased in local currencies. In Asia Pacific, sales increased in local currencies but decreased in Swiss francs. The major territories posted strong sales development in local currencies, buoyed by an excellent result in China and continued recovery in Japan where sales levels were also higher in Swiss francs.

Operating income and EBITDA	2003			2002
Operating Income:
Absolute in CHF		165			226
As a percentage of sales (operating income margin)		9.1	%		11.9	%
EBITDA:
Absolute in CHF		265			332
As a percentage of sales (EBITDA margin)		14.6	%		17.5	%

Operating income and EBITDA decreased primarily due to lower sales and a strongly adverse currency impact. Operating expenses remained at prior year levels in local currencies and were lower in Swiss francs, although idle capacity costs increased due to both start-ups of additional capacity and temporary plant shutdowns for inventory reduction purposes. These higher idle capacity costs coupled with raw material price increases and adverse sales price development resulted in lower gross profit levels. Selling, general and administration expenses were lower both in Swiss francs and in local currencies. The Segment maintained its investment level in research and development activities at approximately 6 percent of sales.

Asset management	2003			2002
Net current operating assets:
Absolute in CHF		362			409
As a percentage of sales		20	%		22	%
Capital expenditures in CHF		64			94
Invested capital in CHF		1 247			1 352
Total assets in CHF		1 514			1 626

The Segment was successful in reducing its asset base in 2003. Despite higher sales volumes, inventory levels decreased in both absolute and intensity terms. Receivable levels were also lower in absolute terms but increased slightly in intensity. Payable levels decreased slightly from prior year levels. Capital expenditures were mainly focused on efficiency and improvements programs at production facilities and were well below the level of depreciation. The combined effects of the reduction in net current assets, lower capital investment than depreciation expense and currency effects led to both total assets and invested capital being slightly lower than prior year levels.

Coating Effects results

Sales decreased to CHF 1 807 million in 2003 or by 6 percent in Swiss francs and were stable in local currencies. Sales development in 2003 compared to 2002 resulted from the following factors:

Sales development	2003 compared to 2002
Volume/product mix		4	%
Price		(4	)%
Currency		(6	)%
Total in Swiss francs		(6	)%

Sales performance across the Segment was mixed. Positive sales growth in local currencies was achieved in the electronic materials market driven by demand for flat-panel monitors and televisions in the displays sector, in addition to strong growth in the optical information storage market for CD-R products. Sales in the coatings business were higher in local currencies fuelled by solid results in both the transportation and the industrial and decorative coating markets. The Segment continues to leverage its wide range of targeted product applications into the plastics market and delivered positive growth in local currencies despite intense competition. Demand remained weak in the traditional printing inks market, although digital printing products continued to grow strongly in 2003.

Geographically, in Europe sales decreased both in local currencies and in Swiss francs. Sales declines were evident across most major countries with the exception of Germany, where sales were stable in local currency and increased in Swiss francs. In the Americas, sales levels decreased slightly in local currencies and more so in Swiss francs. Sales levels in the U.S. were mainly stagnant and ended the year below prior period levels in local currency. Asia Pacific sales grew in local currencies and decreased slightly in Swiss francs. The positive result in local currencies was fuelled by strong performances in both China and Japan. This was augmented by positive growth levels in local currencies throughout the remainder of the region.

Operating income and EBITDA	2003			2002
Operating Income:
Absolute in CHF		300			341
As a percentage of sales (operating income margin)		16.6	%		17.7	%
EBITDA:
Absolute in CHF		397			440
As a percentage of sales (EBITDA margin)		22.0	%		22.9	%

Operating income and EBITDA decreased both in absolute terms and as a percentage of sales, mainly due to lower sales and unfavorable currency development. Production expenses were lower in Swiss francs despite increases in utility costs. Lower raw material and production expenses could not fully offset the effects of sales price declines and adverse currency developments, resulting in gross profit deterioration in both absolute and intensity terms. Selling, general and administrative costs were lower in Swiss francs and were stable in local currencies. Investment in research and development continued at the previous high level of approximately 5 percent of sales.

Asset management	2003			2002
Net current operating assets:
Absolute in CHF		520			575
As a percentage of sales		29	%		30	%
Capital expenditures in CHF		79			74
Invested capital in CHF		1 773			1 834
Total assets in CHF		2 020			2 107

The Segment maintained its focus on effective management of its operating assets. Inventory levels were below those of the prior year and improved in both absolute and intensity terms. Receivable levels were also lower in both absolute and intensity terms. Payable levels decreased from prior year levels. Capital expenditures were focused primarily on efficiency and productivity programs and were below the level of depreciation. The combination of currency effects, lower investment than annual depreciation in fixed assets and the effective management of current assets led to a reduction in total assets and invested capital.

Water & Paper Treatment results

Sales decreased to CHF 1 616 million in 2003 or by 6 percent in Swiss francs, but increased by 1 percent in local currencies. Sales development in 2003 compared to 2002 resulted from the following factors:

Sales development	2003 compared to 2002
Volume/product mix		3	%
Price		(2	)%
Currency		(7	)%
Total in Swiss francs		(6	)%

Water Treatment sales increased in local currencies, but were lower in Swiss francs. Solid performances in local currencies were achieved across the Segment’s main market sectors, although the impact of competitive pricing pressure continues to negatively affect sales performance. Sales levels in the paper business overall were below prior year levels in local currencies and in Swiss francs, although good results were achieved in the paper coloration and water management sectors. Sales levels in detergents and hygiene were below prior year in both Swiss francs and in local currency.

Geographically, sales in Europe increased in both Swiss francs and in local currencies. Positive sales development was evident across much of the region with France and the U.K. leading the way, delivering solid growth levels in local currencies. Germany posted a slight increase in Swiss francs helped by the stronger euro. Sales declined in the Americas both in local currencies and in Swiss francs. Sales in the U.S. remained below prior year levels throughout the year both in local currency and in Swiss francs. South America posted sales growth in local currencies, but sales were lower in Swiss francs. Asia Pacific again demonstrated excellent growth levels in local currencies overall, particularly in China and Japan, augmented by robust performances in Africa/Middle East, where sales increased both in local currencies and in Swiss francs.

Operating income and EBITDA	2003			2002
Operating Income:
Absolute in CHF		130			173
As a percentage of sales (operating income margin)		8.1	%		10.1	%
EBITDA:
Absolute in CHF		233			282
As a percentage of sales (EBITDA margin)		14.4	%		16.4	%

Operating income and EBITDA decreased both in absolute terms and as a percentage of sales. These decreases were due to sales price reductions and higher raw materials costs that could only be partially offset by lower production costs in Swiss francs, although these increased slightly in local currencies. Positive sales volume gains only partially offset the above negative effects. Selling, general and administrative costs were lower in Swiss francs and slightly lower in local currencies. Investments in research and development remained at the prior year level of approximately 2 percent of sales.

Asset management	2003			2002
Net current operating assets:
Absolute in CHF		346			397
As a percentage of sales		21	%		23	%
Capital expenditures in CHF		55			45
Invested capital in CHF		2 432			2 607
Total assets in CHF		2 661			2 829

The Segment managed to reduce its asset base below prior year levels. Inventories decreased both in absolute and intensity terms. Receivable also decreased in absolute terms, but increased slightly in intensity terms. Capital expenditures were higher due partially to certain expenditures deferred from prior year. Investments continued to be focused mainly on small-scale debottlenecking and productivity improvement projects. The combination of currency fluctuations, lower investment than annual depreciation in fixed assets and the effective management of current assets led to a reduction in total assets and invested capital.

Textile Effects results

Sales decreased to CHF 1 401 million in 2003 or by 9 percent in Swiss francs and by 3 percent in local currencies. Sales development in 2003 compared to 2002 resulted from the following factors:

Sales development	2003 compared to 2002
Volume/product mix		0	%
Price		(3	)%
Currency		(6	)%
Total in Swiss francs		(9	)%

The Segment continued to experience a weak textile dyes market subject to fierce competitive activity from both traditional and non-traditional suppliers. Sales levels were well below prior year both in local currencies and in Swiss francs. In the pad and printing dyes sector, gains in the ink jet and printing businesses were offset by lower sales in reactive dyes where market conditions remain sluggish. In the textile chemicals markets, sales levels were higher in local currencies, but were lower in Swiss francs. Continuing the trend of prior year, the Segment again posted a strong result in effects chemicals, where demand for its innovative oil and water repellant products remains strong.

Geographically, sales in Europe were below prior year levels in both Swiss francs and in local currencies. Sales declines were evident across the main European markets, with the exception of Turkey, where sales developed positively both in Swiss francs and in local currency. In the Americas, sales declined in Swiss francs and in local currencies. In the U.S., sales were well below prior year levels in both Swiss francs and in local currency. In the Asia Pacific region, sales increased slightly in local currencies, particularly in the China and South Asia regions, but declined overall in Swiss francs.

Operating income and EBITDA	2003			2002
Operating Income:
Absolute in CHF		69			142
As a percentage of sales (operating income margin)		4.9	%		9.2	%
EBITDA:
Absolute in CHF		129			208
As a percentage of sales (EBITDA margin)		9.2	%		13.5	%

Operating income and EBITDA decreased in both absolute terms and as a percentage of sales, reflective of the overall weak sales performance. The Segment successfully realigned certain key components of its productive infrastructure, with the result that operating expenses were below prior year levels in both Swiss francs and, to a lesser extent, local currencies. Selling, general and administrative costs were lower in Swiss francs compared to the prior year, due to the lower cost base achieved primarily from further headcount reductions. Investment in research and development remained stable at approximately 2 percent of sales.

Asset management	2003			2002
Net current operating assets:
Absolute in CHF		439			532
As a percentage of sales		31	%		34	%
Capital expenditures in CHF		29			34
Invested capital in CHF		1 115			1 291
Total assets in CHF		1 304			1 495

The Segment was successful in reducing its net current operating assets. Inventory levels were significantly lower than prior year levels both in absolute and intensity terms. Receivable levels were also lower in absolute and intensity terms, benefiting from effective credit management. Payable levels decreased from prior year levels partially due to lower purchasing activity in the fourth quarter. Capital expenditures were well below both prior year levels and depreciation expense for the period. The combination of effective management of current assets and lower capital investment than annual depreciation in fixed assets, together with currency fluctuations, resulted in a reduction of total assets and invested capital.

Treasury management

The international financial markets in 2003 remained volatile. The major trends in the markets, which were the focus of the Company’s treasury management initiatives, included movements in interest rates as well as the continued weakening of the U.S. dollar against the Swiss franc, and during the latter part of the year, the strengthening of the euro against the U.S. dollar.

As a consequence of the slow economic recovery and political instability experienced in 2003, global interest rates fell below 2002 levels reaching a trough at approximately mid-year 2003, before rising slightly from mid-year levels. Through the effective anticipation of market conditions and the use of financial instruments available in the financial markets, the Company was able to further reduce the average cost of its total borrowings from 4.02 percent in 2002 to 3.84 percent in 2003. As a consequence of this interest cost reduction as well as lower overall debt levels, the Company’s net interest cost, which is

interest expense less interest income, decreased by CHF 2 million to CHF 108 million in 2003 compared to CHF 110 million in 2002.

During 2003, the U.S. dollar fluctuated against the Swiss franc from a high of approximately CHF 1.42 to a low of approximately CHF 1.24. The Swiss franc balance sheet year-end rate was at CHF 1.25 against the U.S. dollar in 2003 versus CHF 1.43 at the end of 2002. During 2003, the euro fluctuated against the Swiss franc from a high of approximately CHF 1.57 to a low of approximately CHF 1.46. At the end of 2003, the Swiss franc was at a level of CHF 1.56 against the euro versus CHF 1.46 at the end of 2002.

In 2003, other financial expense, net which includes foreign currency exchange gains and losses, net hedging expenses, and losses on financial investments, was CHF 24 million, a decrease of CHF 81 million, compared CHF 105 million in 2002. Of this decrease, CHF 59 million resulted from the Company’s investment in Hexcel Corporation (“Hexcel”). In 2002, the Company recorded a CHF 38 million expense for the unrealized loss on this investment that was deemed to be other than temporary. In 2003, however, the market value of Hexcel improved significantly and the Company sold its remaining shares in Hexcel, realizing a CHF 16 million gain.

Cash flows

Cash flows from operating activities	2003		2002
Net income		344		406
Depreciation and amortization		366		385
Net change in operating assets and liabilities		302		8
Other, net		21		239
Net cash provided by operating activities		1 033		1 038

During 2003, the Company’s focus on operating asset management enabled it to continue to generate cash from operating activities in excess of CHF 1 billion despite having lower net income and depreciation and amortization during 2003 than in 2002. This was accomplished by offsetting the impact of lower operating performance with a successful program in the fourth quarter of 2003 to substantially reduce net current operating assets.

Cash flows from investing activities	2003			2002
Capital expenditures		(233	)		(250	)
Sale (acquisition) of businesses, net of cash		(71	)		(116	)
Proceeds from sale of assets and changes in loans and other long-term assets		65			17
Net cash used in investing activities		(239	)		(349	)

Net cash used in acquisition and divestment activities in 2003 consisted primarily of a CHF 71 million payment for separation costs attributable to the past divestment of the Performance Polymers business. Also included is an aggregate CHF 23 million for the acquisition of additional interests in two equity affiliates in Asia, where the Company is experiencing significant sales growth. These cash outflows were partially offset by proceeds of CHF 21 million from the sale of the Company’s remaining Hexcel shares.

In 2002, the net cash used in acquisition and divestment activities amounted to CHF 116 million. The most significant costs incurred related to additional cash payments for separation cost attributable to the divestment of the Performance Polymers business, which amounted to approximately CHF 69 million. The remaining CHF 47 million was used primarily for minor strategic business acquisitions, including the acquisition of the flame retardant business of Melapur B.V. from DSM N.V.

Cash flows from financing activities	2003			2002
Increase (decrease) in short-term and long-term debt, net		(394	)		4
Dividends paid		0			(134	)
Capital reduction paid		(206	)		(69	)
Treasury stock transactions and other		(142	)		343
Net cash flows provided by (used in) financing activities		(742	)		144

Short-term debt, excluding the current portion of long-term debt, was reduced by CHF 40 million in 2003. This was achieved through the Company’s ability to finance its working capital needs through cash flows generated from its operating activities. Long-term debt, including current portion, decreased by a net CHF 354 million as the result of repayments of existing debt that matured during 2003, partially offset by the issuance of new debt during 2003 (see Note 13 to Consolidated Financial Statements).

At the Company’s Annual General Meeting on March 6, 2003, the shareholders approved the Board of Directors’ proposal for a payment to the shareholders in the form of a capital reduction of CHF 3 per share. The capital reduction was in the form of a reduction in the nominal value of each common share from CHF 9 per share to CHF 6 per share. The Company paid the capital reduction on May 23, 2003, which totaled CHF 206 million.

At the Company’s Annual General Meeting on March 22, 2002, the shareholders approved the Board of Directors proposal for an unchanged dividend of CHF 2 per share and an extraordinary payment to the shareholders in the form of a capital reduction of CHF 1 per share. The capital reduction was in the form of a reduction in the nominal value of each common share from CHF 10 per share to CHF 9 per share. The Company paid the dividend on March 27, 2002, which amounted to CHF 134 million and paid the capital reduction on June 28, 2002, which totaled CHF 69 million.

In connection with its share buy-back program initiated in 2003, the Company purchased 1.3 million treasury shares for CHF 117 million.

Free cash flow	2003			2002
Net cash from continuing operations		1 033			1 038
Add: restructuring payments		0			12
Less: net cash used in investing activities		(239	)		(349	)
Add: (sale) acquisition of businesses, net of cash		71			116
Less: dividends(1)		(137	)		(134	)
Free cash flow		728			683

(1) The Company considers CHF 2 per share to be the normal annual per share dividend amount expected by its shareholders. As a result, this amount is used in the Company’s calculation of free cash flow. Actual per share dividends or other distributions to shareholders may differ from this per share amount.

Free cash flow generation in 2003 remained strong, growing by CHF 45 million over the amount generated in 2002. The Company was able to accomplish this despite the difficult economic environment during 2003 primarily as a result of being able to maintain the consistent level of net cash from operations discussed above combined with having spent in 2003 less on investment-related activities, excluding acquisitions, than in each of the two prior years. Free cash flow generated in 2003 was used for debt repayment and for small strategic acquisitions.

Effective income tax rate

The Company reported an effective income tax rate of 17 percent in 2003, a reduction of 10 percent compared to 27 percent reported in 2002. Substantially all of this reduction in the effective tax rate is due to the occurrence in 2003 of a non-recurring event. In their past tax audit of the Company’s operations in Grenzach, Germany, the German tax authorities had made a substantial tax adjustment. In accordance with the Master Spin-off Agreement with Novartis and with Swiss commercial law, management was of the opinion that the total liability owed resulting from this adjustment was the responsibility of Novartis. This opinion was disputed by Novartis and, in 2001, it initiated arbitration proceedings against the Company in relation to this matter. This dispute was settled in 2003, resulting in the release by the Company of CHF 39 million of previously established tax reserves. This event reduced the Company’s effective income tax rate by 9 percent; 10 percent when combined with another reserve release. Consequently, for comparability with 2002, the Company’s effective income tax rate in 2003 without these events would have been 27 percent instead of the 17 percent effective tax rate reported.

Change in accounting policy and new accounting standards

There were no new accounting standards issued by the Financial Accounting Standards Board (FASB) or other authoritative standard setters that became effective during 2004 and that had a material effect on the Company’s financial statements. In addition, several other new accounting standards were issued by the FASB as of December 31, 2004 that were not required to be adopted during 2004, but will require adoption in 2005 or later. None of these issued but not yet adopted new accounting

standards is expected to have a material effect on the Company’s results of operations or financial position when adopted in the future. See Note 1 to Consolidated Financial Statements in Item 18 – Financial Statements.

Environmental matters

Operating in the chemical industry, the Company is subject to stringent environmental, health and safety laws and regulations. It is the Company’s policy to continuously develop and improve the environmental performance of key manufacturing processes through an active program. In addition to process improvements, the Company uses advanced waste treatment and disposal facilities at all major manufacturing sites that allow the sites to comply with recent laws and regulations applicable to waste streams. Management believes that the Company substantially complies with all such laws. For further information, see Note 21 to Consolidated Financial Statements in Item 18 – Financial Statements and Item 4. — Information on the Company — Property, Plant and Equipment; Manufacturing — Environmental Matters.

Use of certain supplementary financial indicators

The key financial indicators used by the Company’s management to monitor overall performance and liquidity, including the performance of reportable segments, as well as to provide incentives for employees to produce high-quality results with a goal of enhancing shareholder value include certain non-U.S. GAAP financial measures. Such non-U.S. GAAP financial measures are derived from financial measures prepared in accordance with U.S. GAAP and include EBITDA, free cash flow and net debt. The way these non-U.S. GAAP financial measures are derived, as well as definitions of other financial terms used in this Management’s Discussion and Analysis, is shown in the Glossary of Financial Terms.

The Company uses EBITDA margin (EBITDA divided by net sales) and free cash flow as two of the three components of its annual incentive compensation program. The third component of the program is net sales growth. Under the Company’s annual incentive compensation program, employees receive annual payments if target net sales growth, EBITDA margin or free cash flow levels are achieved. The combination of these three indicators focuses management and employees on the profitable (EBITDA margin) growth (sales growth) of the Company without the utilization of unnecessary capital (free cash flow). In addition, the Company uses net debt as an indicator of the strength of its capital structure, as well as certain currency adjusted figures that permit it to evaluate its performance from period to period without such comparisons being impacted by the effects of currency exchange rate movements during these periods. For the same reasons, management believes investors may find the non-U.S. GAAP measures useful.

As with any supplementary financial indicator, these supplementary financial indicators should be considered in addition to, not as a substitute for, operating income, net income, cash flows from operating, investing and financing activities, total assets, total debt, operating income margin and other measures of financial performance and liquidity reported in accordance with U.S. GAAP.

EBITDA

As described in the Business Segment Data section of the Consolidated Financial Statements, the Company evaluates the performance of its reportable segments based on operating income as well as EBITDA. EBITDA, and EBITDA margin derived therefrom, provide management with additional quantitative measures of the quality of sales growth as well as the results of past and current actions taken to manage costs.

More importantly, the Company operates in a multinational environment and competes with companies in different countries. In some of these countries, very significant differences in accounting exist with regard to depreciation as some companies with which the Company competes calculate and report their depreciation expense based on tax considerations. As a result, it is very difficult to meaningfully compare operating income data of such competitors in other countries with that of the Company. In order to adequately evaluate the Company’s performance in the markets as well as to compare and benchmark performance with that of the Company’s competitors, EBITDA was determined to be a key performance measure because it eliminates the above-described major differences.

The material limitation associated with using EBITDA as a performance measure as compared to net income is that EBITDA provides a measure of the Company’s current performance without consideration of the amount of capital that has been historically invested in order to produce the Company’s results. Management believes it compensates for this limitation by including free cash flow as another of its key financial indicators, as discussed above.

The reconciliation of EBITDA to net income is included in the Business Segment Data section of the Consolidated Financial Statements.

Free cash flow

Free cash flow as defined by the Company provides the amount of net cash flow produced that is available for required or discretionary debt principle payments, reinvestment in the Company’s businesses, or the excess of distributions to shareholders over CHF 2 per share and, as such, is limited to being used for this consideration only.

The reconciliation of free cash flow to net cash provided by operating activities is included in the Liquidity and Capital Resources section of this Management’s Discussion and Analysis.

Net debt

The reconciliation of net debt to the Company’s total debt is included in the Liquidity and Capital Resources section of this Management’s Discussion and Analysis.

Invested capital

The reconciliation of invested capital to total shareholders’ equity is included in the Business Segment Data section of the Consolidated Financial Statements.

Currency exchange rates

Amounts “in local currencies” or “currency adjusted” are determined by adjusting current period amounts reported in Swiss francs, which is the Company’s reporting currency under U.S. GAAP, using prior period exchange rates to remove the effects of fluctuations in foreign currency rates against the Swiss franc that occurred from the prior period to the current period. The exchange rates of principle currencies to the Swiss franc, which form the basis of the Company’s disclosures of currency adjusted figures, are presented in Note 2 to Consolidated Financial Statements.

Glossary of financial terms

Basic Earnings per Share is defined as net income divided by the weighted average number of common shares outstanding during the reporting period.

Cash Flows from Operating Activities is the net cash provided from the principal revenue-producing activities of the business. It excludes financing and investing activities.

Cash Flow Hedges are hedges of the exposure to variability in expected future cash flows that is attributable to a particular risk associated with a recognized asset or liability or a forecasted transaction.

Commercial Paper are short-term borrowings in the capital markets that are typically due within 30 to 270 days from the date of issuance and are issued by companies with good credit ratings.

Comprehensive Income is the change in equity of the Company during the year from transactions and other events, other than dividends paid, treasury stock and common stock transactions. It includes (i) net income for the year; (ii) the current year’s currency translation adjustment; (iii) the current year’s unrealized gains and losses on available-for-sale securities, net of tax; (iv) the changes in the effective portion of derivative financial instrument’s fair value, net of tax, that qualify and that are designated as cash flow hedges and (v) the change in the minimum pension liability, less the corresponding intangible asset, net of tax.

Convertible Bonds are debt instruments that may be converted into shares based on predefined conditions as stipulated in the debt agreement.

Defined Benefit Pension Plan is a pension plan that provides employees at their date of retirement, a predefined payment. The payment is, depending on the benefit plan, a function of one or more factors such as age, years of service or compensation level of the employee.

Defined Contribution Pension Plan is a pension plan for employees that provides the employees, at the date of their retirement, benefits based on the amount of capital paid-in by the participant or the Company, plus returns earned on the investment of those contributions.

Derivatives, Derivative Financial Instruments are financial contracts or agreements, the value of which is linked to current or future interest rates, exchange rates, prices of securities, or financial or commodity indices. Derivative financial instruments used by the Company include forward exchange contracts, options and interest and currency swaps. The Company uses these instruments to reduce its exposure to adverse fluctuations in interest and exchange rates and other market risks.

Diluted Earnings per Share is similar to basic earnings per share (net income divided by the weighted average number of common shares outstanding) except that it reflects the potential dilution that could occur if dilutive securities, such as stock options and convertible debt, were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings of the Company. Antidilutive effects are not considered.

EBITDA is calculated as operating income plus depreciation and amortization, and is reconciled to net income in the Business Segment Data section of the Consolidated Financial Statements.

EBITDA Margin is EBITDA expressed as a percentage of net sales.

Equity per Share is calculated by dividing total shareholders’ equity by the number of outstanding common shares (total common shares issued less treasury shares) at the balance sheet date.

Fair Value Hedges are hedges of the exposure to changes in the fair value of a recognized asset or liability, or an identified portion of such asset or liability, (the hedged item) that is attributable to a particular risk.

Free Cash Flow is cash flows from operating activities from continuing operations before restructuring payments, less net cash from investing activities before sale (acquisition) of businesses, net of cash, less a pro forma dividend of CHF 2 per share.

Goodwill is recognized in an acquisition of a business if the amount of the consideration paid by the Company is in excess of the fair value of the acquired entity’s tangible and identifiable intangible net assets.

Gross Profit Margin is gross profit expressed as a percentage of net sales.

A Hedge is an economic relationship between a hedged item and a derivative financial instrument whereby losses or gains are expected to offset each other in whole or in part.

A Hedged Item is specifically identified as either all or a specific portion of a recognized asset, a liability, a forecasted transaction or of an unrecognized firm commitment.

Hedge Effectiveness is the portion of the derivative financial instrument’s change in fair value that offsets the change in the fair value or cash flows of the hedged item.

Hedge Ineffectiveness is the amount by which the derivative financial instrument’s change in fair value does not equal the change in fair value or cash flows of the hedged item.

Intensity is an amount expressed as a percentage of net sales. Intensity of inventories is equal to the inventories divided by net sales. Intensities of accounts receivables and accounts payable are calculated correspondingly.

Invested Capital is calculated as total assets less non-interest bearing current liabilities (i.e. accounts payable, income taxes payable, accruals and other current liabilities, except the current portion of deferred tax liabilities) and less deferred tax assets.

Net Cash Provided by Operating Activities has the same meaning as Cash Flows from Operating Activities.

Net Current Operating Assets is the sum of inventories and accounts receivable less accounts payable.

Net Debt is the sum of short-term debt and long-term debt less cash and cash equivalents and short-term investments.

Net Sales Development percentage is the change in the current period’s net sales in Swiss francs over the previous period’s sales in Swiss francs expressed as a percentage.

Net Sales Development percentage, in local currencies is the change in the current period’s net sales in local currencies over the previous period’s net sales in local currencies expressed as a percentage.

Operating Income Margin is operating income expressed as a percentage of net sales

Other Intangible Assets are assets (excluding financial assets) that lack physical substance, not including goodwill. They may include, but are not limited to, such assets as trademarks; trade names; patented and unpatented developed technology and know how, trade secrets, including processes and formulations; certain agreements such as licensing, royalty, not-to-compete, supply contracts, operating permits; and customer relationships, lists and contracts.

Item 6. Directors, Senior Management and Employees

Corporate Governance

Numbers in square brackets refer to the Directive on Information Relating to Corporate Governance (“DCG”) of SWX Swiss Exchange. An overview of major differences between the Swiss and the U.S. corporate governance practices can be found at: http://www.cibasc.com/investors

The Board of Directors and its Committees
The Board of Directors of Ciba Specialty Chemicals (“Board”) defines the strategic direction and supervises the overall affairs of the Company, while the implementation of strategies and the day-to-day management is vested in the Executive Committee [DCG 3.6]. The Board also reviews the Company’s key plans and objectives, identifies external risks and opportunities and initiates required activities.

The Members of the Board are elected by the General Meeting of Shareholders for a term of between one and four years to allow for a staggered board [DCG 3.4.1]; a re-election is possible [DCG 3.4.1]. For an overview of the individual election terms, see the table on the next page [DCG 3.4.2]. A Board Member may tender his or her resignation during the term of his or her office. The Shareholders’ Meeting may vote to remove a Board Member.

The Board continues to commit itself to maintaining the highest standards of integrity and transparency in its governance of the Company. The Board and Board Committee charters reflect recent developments in corporate governance principles including the Swiss Code of Best Practice and the Sarbanes-Oxley Act of 2002. The Board believes that it is in compliance with well recognized corporate governance standards, in particular with regard to:

-  a Lead Director (to complement the Chairman of the Board) entitled to convene on his own and chair meetings of the Board; in addition the Lead Director chairs the Compensation Committee; based on interviews with other Board members, he prepares a review of the Chairman. He may act as a liaison between the Board and the Chairman in delicate matters

-  broad supervisory and reviewing powers for the Board, directly supported by Internal Audit

-  independence of Board Members who are all non-executives of the Company, with the exception of the Chairman

-  independence of Board Committee Members who are equally all non-executives, with one exception being the Chairman serving on the Human Resources and Nomination and the Finance Committees

-  having Audit Committee Members who are all non-executives with significant expertise particularly in the area of finance

-  having Compensation Committee Members who are non-executives with broad practical experience in the area of employee and executive compensation

-  an annual self-assessment of the Board

-  receiving and providing continuous and comprehensive information including periodic and yearly reports prepared by management on finances, strategies, research and development, production planning and risk management [DCG 3.7].

Topics of the Board in 2004
Apart from the ongoing overall supervision of the Company’s affairs, corporate governance and the preparation of the annual accounts and the Annual General Meeting of the Shareholders, the Board put particular emphasis for the financial year 2004 on the following topics: group business strategy, M&A, IT and ERP strategy, and an assessment of Internal Audit.

Board Committees [DCG 3.5]
Four standing Board Committees in the areas of audit, finance, compensation and human resources/nomination provide guidance and support to the full Board:

Audit Committee
Mission: Evaluates the independence, objectivity and effectiveness of external and internal auditors, approves and pre-approves auditing and other services to be provided by the external auditors, evaluates business risk assessment, scope and overall audit plan, assesses the quality of financial accounting and reporting, reviews audit results and monitors compliance with specific laws and regulations governing the preparation and filing of financial statements. In addition, the Audit Committee proposes the nomination of the external auditors to the full Board. The Audit Committee reviews complaints regarding accounting, internal accounting controls or auditing matters. To facilitate the submission of such complaints, the Company has set up webpages both in its intranet (under: “Corporate Governance”) and on its internet site (http://www.cibasc.com/ - About Us – Corporate Governance). The Board has determined that the chairman of the Audit Committee, Erwin W. Heri, is the Audit Committee’s financial expert as per the requirements of Item 16A of Form 20-F.

Finance Committee
Mission: Develops principles for financial planning, accounting and reporting, disclosure and control, reviews concepts of financial objectives to optimize shareholder value, develops finance policy, is regularly briefed on application/implementation of principles of finance policy, approves financial transactions, investments and acquisitions and supports the preservation and enhancement of the Company’s reputation in the financial markets.

Compensation Committee
Mission: Develops, recommends and reviews the group compensation principles in accordance with the overall Company objectives. Proposes compensation of the Members of the Board and of the Executive Committee to the full Board for approval [DCG 5.1]. The Lead Director is the chairman of the Compensation Committee.

Human Resources and Nomination Committee
Mission: Develops the principles for the selection of candidates for election or re-election to the Board by the AGM and prepares a selection of candidates in accordance with these criteria. In addition, the Human Resources and Nomination Committee recommends and reviews the objectives and principles of the human resource policy and its implementation. The Chairman of the Board is the chairman of the Human Resources and Nomination Committee.

Members of the Board [DCG 3, 3.1, 3.2, 3.4.2]
The Members of the Board are as follows:

			Year
	Date of		appointed		Year term		Significant positions and political mandates
Name	Birth	Nationality	to Board		expires		outside the Company [DCG 3.2.a/b/c]
Armin Meyer Chairman and CEO	July 25, 1949	Swiss		1997		2008	Member of the Board of Directors, Zurich Financial Services, Zurich Member of the Board, CEFIC (European Chemical Industry Council), Brussels Member Foundation Board IMD – International Institute for Management Development, Lausanne
Kurt Feller Vice Chairman, Lead Director	August 31, 1937	Swiss		1999		2007	Chairman of the Board of Directors, Rieter Holding Ltd., Winterthur Chairman of the Board of Directors, Geberit Ltd., Jona Member of the Board of Directors, Scintilla Ltd., Solothurn Member of the Board of Directors, Büro-Fürrer Ltd., Zurich
Erwin W. Heri	March 6, 1954	Swiss		1997		2007	Chairman of the Board of Directors, OZ Bankers AG, Pfäffikon Member of the Board of Directors, Losinger AG, Berne Member of the Board of Directors, Hilti AG, Schaan/FL Chairman of the Investment Committee of State Pension (Publica), Berne
Gertrud Höhler	January 10, 1941	German		1997		2008	Management Consultant Member of the Board of Directors, Bâloise-Holding, Basel Member of the Board of Directors, Georg Fischer Ltd., Schaffhausen
Jean-Marie Pierre Lehn	September 30, 1939	French		1997		2006	Professor of Chemistry, Nobel Prize Winner Member of the Scientific Board of the Novartis Venture Fund, Basel
Peter Littmann	December 21, 1947	German		1997		2006	Chairman and Chief Executive Officer, Brandinsider GmbH, Hamburg Member of the Board of Directors, Compass Ltd. (Bata Shoe Company), Toronto Member of the Advisory Board, Nijenrode University, The Netherlands Member of the Harvard University Art Museum’s Visiting Committee, Cambridge, Massachusetts
Uli Sigg	April 29, 1946	Swiss		1999		2007	Vice-Chairman of the Board of Directors, Ringier Group
Thomas Koch Secretary (not member of the Board)	November 21, 1954	German		2004	—

The Chairman of the Board and CEO [DCG 3.5.1]
The Chairman of the Board is elected by the Board from its Members. As such, Armin Meyer is responsible for the invitation to and the agenda of the Board meetings. He is responsible for the implementation of the Group strategy as defined by the Board, for optimizing shareholder value and for safeguarding the interests of other stakeholders. He represents the overall interests of the Company, ensures close cooperation between the Board and the Executive Committee and supervises the implementation of the resolutions adopted by the Board.

The Company has opted to combine the functions of Chairman and CEO. In the Board’s view the advantages of having fast decision making processes as well as the timely, complete and accurate information flow between the Board and the management of the Company, complemented by a strong Lead Director outweigh the potential risk the combination of the functions may have.

The CEO is appointed by the Board. In this function, Armin Meyer is responsible for the operational management and the overall financial results of the Group. He chairs the meetings of the Executive Committee and ensures the information flow inside and outside the Company.

The Vice-Chairman and Lead Director [DCG 3.5.1]
As Vice-Chairman, Kurt Feller represents the Chairman in the latter’s absence. As Lead Director, Kurt Feller’s primary function is to provide for effective checks and balances in the governance of the Company. He may convene and chair meetings without the Chairman being present. In addition he is, together with the Compensation Committee, responsible for the performance review of the Chairman and CEO and may act as a liaison between the Board and the Chairman in delicate matters.

Additional Information
With the exception of Armin Meyer, who is also CEO of Ciba Specialty Chemicals, all other Board Members are both non-executive directors and independent from the Company [DCG 3.1.b]. The term “independent” used herein satisfies the criteria of the Swiss Code of Best Practice and of Section 303(A)(6) of the NYSE Listed Company Manual, as approved by the SEC on November 4, 2003. None of the non-executive Members of the Board has ever been a member of the management of the Company or any of its subsidiaries and none of them has or had a substantial business relationship with the Company or any of its subsidiaries in the last four financial years [DCG 3.1.c].

More biographical details of the Board Members are available at the Company’s website (http://www.cibasc.com/bod-cv) [DCG 3.1.a].

There is no cross-involvement among the Board Members and the boards of directors of other listed Swiss companies [DCG 3.3]. Other than as disclosed under “Change of Control Provisions” hereunder, there is no service contract between any Member of the Board and the Company providing for benefits upon termination of employment.

Board Committee Memberships [DCG 3.5.2]

			Human Resources and	Compensation
Name	Audit Committee	Finance Committee	Nomination Committee	Committee
A. Meyer		Δ	Δ
K. Feller	l	l	l	Δ
E.W. Heri	Δ	l
G. Höhler			l	l
J.-M. P. Lehn
P. Littmann			l	l
U. Sigg	l

Δ = Chairman

l = Member

All Board Committees meet four to six times per year, usually immediately before the full Board meets. The duration of such meetings generally is between two and four hours. The full Board meets at least 5 times per year. Normally, the duration of these meetings ranges between four and eight hours. In addition, in 2004, the Board held a two consecutive days retreat [DCG 3.5.3].

The Company’s “Rules Governing the Organization“ and Committee charters set out in detail the powers and responsibilities of the Board and its Committees. In order for the Board or any of its Committees to pass resolutions, at least half of their Members must be personally present, which may be deemed satisfied if simultaneous communication is ensured, such as by telephone or video conference.

The Executive Committee [DCG 4, 4.1, 4.2]

	Date of			Significant positions and political mandates
Name	Birth	Nationality	Function	outside the Company [DCG 4.2.a/b/c]
Armin Meyer	July 25, 1949	Swiss	Chief Executive Officer	Member of the Board of Directors, Zurich Financial Services, Zurich Member of the Board of CEFIC (European Chemical Industry Council), Brussels Member of the Foundation Board IMD – International Institute for Management Development, Lausanne
Michael Jacobi	January 30, 1953	German	Chief Financial Officer	Chairman of the Board of Industrie-Holding, Berne Member of the Board of Phonak Holding AG, Stäfa
Christoph Biedermann	March 19, 1957	Swiss	Executive Vice President International Coordination and Human Resources	Member of the Board of SGCI (Schweiz. Gesellschaft für Chemische Industrie), Zurich
Martin Riediker	June 28, 1952	Swiss	Chief Technology Officer	Member of the Board, American Chemistry Council, Arlington Member of the Board, CIIT Centers for Health Research
Hermann Angerer	December 23, 1947	Swiss	Head Segment Coating Effects	None
Eric Marohn	June 3, 1959	American	Head Segment Textile Effects	None

	Date of			Significant positions and political mandates
Name	Birth	Nationality	Function	outside the Company [DCG 4.2.a/b/c]
Mark Garrett	May 11, 1962	Australian	Head Segment Water & Paper Treatment	Member of the Board of TEGEWA Industry Association, Frankfurt am Main
Brendan Cummins	May 18, 1951	Irish	Head Segment Plastic Additives	None

Armin Meyer became Chairman of the Board of Ciba Specialty Chemicals in autumn 2000. Starting January 1, 2001, he in addition took over as Chief Executive Officer. He streamlined the Company structure and shifted priority targets to profitable growth, innovation and highly qualified people as well as cash generation. He has been a Member of the Board of the Company since its spin-off in 1997.

Previously, Armin Meyer was Head of the global Building Technologies Segment of ABB Ltd. As of 1995, he was a member of the Executive Committee of ABB, a global technology Group.

Armin Meyer started his career in 1976 when he joined the former Brown Boveri Ltd. (BBC) as development engineer. In 1980 he became Head of Research and Development for industrial motors and took over as Head of the international business unit for electrical power generators in 1984. Further steps included the presidency of ABB Drives Ltd. as well as of ABB Power Generation Ltd. In 1995, he became Head of the Power Generation Segment. In 1998, he took over as Head of the Building Technologies Segment.

Armin Meyer, born 1949 in Zurich, Switzerland, holds a Ph.D. in electrical engineering from the Swiss Federal Institute of Technology (ETH) in Zurich.

In addition to his responsibilities at ABB, Armin Meyer was also Professor for Electrical Engineering and Drives at ETH, Zurich for twelve years.

Michael Jacobi joined Ciba-Geigy’s finance area in 1978. In 1980, Michael Jacobi moved to Brazil as Corporate Controller and later was appointed Treasurer. In 1986, he moved to the United States where he led the financial department at the Toms River plant in New Jersey. After further management training at Harvard, he returned to the Finance department in Basel, Switzerland in 1987 as Head of Management Accounting. He became Group Controller of Ciba-Geigy in 1990, and is responsible for the Company’s overall corporate financial accounting and reporting. In 1997, he was appointed Chief Financial Officer for Ciba Specialty Chemicals, and is responsible for Treasury, Mergers and Acquisitions, Investor Relations and Control. Michael Jacobi served on the Council of the Foundation for Accounting and Reporting Recommendations and played a significant role in setting Swiss guidelines for accounting and disclosure. He has a Doctorate in Economics from the University of St. Gallen.

Christoph Biedermann was appointed Head of International Coordination and Human Resources effective as of April 1, 2004. In 2001, Christoph Biedermann joined Ciba Specialty Chemicals as Member of the Executive Committee. He was global Head, Textile Effects Segment from 2001 to 2004. From 1982 to 1985, Christoph Biedermann worked for ABB as Project Engineer in Switzerland and Commissioning Engineer in South Africa. From 1986 to 1989, he was Associate and Project Manager at McKinsey in Zurich, Switzerland. In 1990, he joined ABB Drives AG as Manager of High Power Semiconductors. In 1991, he was appointed Manager of Electrical Machines. From 1994 to 1997, he was Manager Business Unit Total Optimization of Processes at ABB Business Area Automation & Drives. In 1997, Christoph Biedermann was appointed President of ABB Industrie AG Switzerland. From 1999 until he joined Ciba Specialty Chemicals, he was also a member of the Management Committee ABB Switzerland, responsible for the Segment Automation. Mr. Biedermann holds a Diploma in Electrical Engineering from the Swiss Federal Institute of Technology, Zurich and has an MBA from INSEAD, Fontainebleau, France.

Martin Riediker was appointed Chief Technology Officer in 2001. Martin Riediker joined Ciba-Geigy in 1982 as a photochemist in central research at Ciba-Geigy in Basel. In 1988, he moved to the United States as Vice President, Research and Development (R&D) for the Polymers Division and was later appointed Vice President and General Manager of the North American Resins Business Unit in 1991. He was named Head of Ciba’s U.S. Polymers Division in 1994. Mr. Riediker was named as Global President of the Consumer Care Division in 1995. He also took direct charge of the Detergents and Cosmetics Business Units. In 1997, he was named Global President of the Consumer Care Division and became a member of the Executive Committee of Ciba Specialty Chemicals. Mr. Riediker has a Doctorate in Chemistry and did Post-Doctoral Studies at Princeton University.

Hermann Angerer was appointed Head of the Coating Effects Segment in 2001. He joined Ciba-Geigy Limited in 1981 as a development chemist in the Additives Division in Basel. In 1985, he assumed the global marketing responsibility for radiation curing additives in the Business Unit Imaging and Coating Additives. In 1990, he was appointed Head of the Business Unit Additives for Lubricants. In 1996, he moved to Japan as Head of the Additives Division, responsible for the markets in Japan and South Korea. In 1999, he moved to Germany, responsible for the German holding company of Ciba Specialty Chemicals and the Additives Division in the Central Europe region. Mr. Angerer holds a Ph.D. in Chemical Engineering from the Swiss Federal Institute of Technology (ETH) in Zurich.

Eric Marohn was appointed Head of the Textile Effects Segment effective as of April 1, 2004. He joined Ciba-Geigy in 1988 in the United States. He held a number of positions in the U.S. and in Basel, Switzerland, as Manager of Production Cost Accounting, Manager of Planning and Reporting and as Controller. In 1997, he took on the role of Global Marketing Head of the Business Segment Whiteners in the Consumer Care Division at Ciba Specialty Chemicals’ headquarters in Basel. In 2000, he returned to the U.S. where he was responsible for the Business Unit Textile Chemicals for North and Central America. Starting in 2001, he was Regional Head for the Business Line Paper and the Segment Representative for Water & Paper Treatment in NAFTA. From 2003 until becoming Head of the Textile Effects Segment, he

headed Marketing and Sales for the Textile Effects Segment in North and South America. Eric Marohn has a B.S.B.A. degree from Appalachian State University and holds an MBA from the University of North Carolina at Greensboro.

Mark Garrett was appointed Head of the Water & Paper Treatment Segment in 2001. He joined Ciba-Geigy in Australia in 1986 and worked there as Information and Planning Manager. In 1989, he moved to the Swiss headquarters in Basel, working in Finance and as Marketing Center Manager and Business Development Manager. In 1995, he became head of the Business Unit Paper and in 1996 he was appointed Global Head of the Business Segment Whiteners. In 1998, Mark Garrett became Global Head of the Textile Chemicals business unit where he successfully integrated three textile chemical businesses into one business unit that became a worldwide leader in its field. Mark Garrett joined DuPont from Ciba Specialty Chemicals in 2000, initially as Director Corporate Plans before becoming the Global Business Director Tyvek/Typar. He rejoined Ciba in 2001. Mark Garrett holds the following degrees: Bachelor of Arts, Economics, University of Melbourne, Melbourne, Australia and Master of Applied Information Systems, Royal Melbourne Institute of Technology, Melbourne.

Brendan Cummins was appointed Head of the Plastic Additives Segment effective as of April 1, 2004. Brendan Cummins joined Ciba-Geigy in Ireland in 1971 as an Accountancy Student. In 1974, he assumed the position of Planning and Information Manager in Ireland. In 1979, he moved to Ciba-Geigy Singapore as Treasury Head and, in 1981, was appointed Head of Finance and Administration South East Asia. In 1984, he transferred to Hong Kong as Head of Finance and HR North Asia with project responsibility for China. In 1990, he moved to the Philippines as Head of Pharmaceutical Division and later that year was appointed, in combination, Group Company Head. In 1994, he transferred to the U.K. as Head of Finance and HR of Ciba-Geigy Horsham. In 1995, he returned to the Far East as Group Company Head China and, in 1997, assumed the position of Regional President Greater China for Ciba Specialty Chemicals. In 1999, he moved to Basel and was appointed Global Head of Whiteners and, in 2000, he established and headed the Global Business Unit Home & Personal Care. In 2001, he worked for Irish Fertilizer Industries as Managing Director. In December 2001, he joined Ciba Specialty Chemicals as a Member of the Executive Committee. From 2001 to 2004, he was Executive Vice-President, International Coordination and Human Resources. He has a degree in accounting and is a Fellow of The Association of International Accountants.

There are no management agreements or other agreements between the Company or its management bodies and any third parties [DCG 4.3] providing for any persons referred to above to be elected a Member of the Company’s Executive Committee.

Changes since December 31, 2003
Felix Meyer, Head of the Plastic Additives Segment, resigned from the Company at the end of March, 2004. With effect from April 1, 2004, Brendan Cummins took over Felix Meyer’s position and was succeeded by Christoph Biedermann as Head of International Coordination and Human Resources. At the same date, Eric Marohn took over as Head of the Textile Effects Segment. Tim Schlange was Head of the Home & Personal Care Segment until the end of August, 2004, when the integration of the Segment’s businesses in two other of the Company’s segments began. Tim Schlange then became Ciba’s Chief Strategy Officer.

Business behavior
So as to promote honest and ethical conduct, legal compliance, prompt internal reporting, accountability, and full, fair, accurate, timely and understandable disclosure in public reports, the Company relies on its “Code of Conduct”, which can be downloaded (http://www.cibasc.com/code-of-conduct-revised-2003_en.pdf). In 2004, the Company did not grant any waiver, whether implicit or explicit, from any provision of its Code of Conduct to the CEO, the CFO, or the Group Controller.

Compensation
Principles of allocation [DCG 5.1]
Base salaries of the Members of the Board and of the Executive Committee are established according to a comparative analysis of base salaries paid within selected peer groups of international companies. Annual short term bonuses are based on corporate financial performance, i.e. on free cash flow, EBITDA and sales growth measured against relevant targets which are established at the beginning of the year. Long term incentives are awarded primarily based on how individual and personal performances contribute to the overall success of the Company. The allocation of these compensatory elements is discussed in the Compensation Committee of the Board of Directors, which makes its recommendations to the full Board. The latter takes the ultimate decision with respect to such allocation. For a more detailed description of the Share and option based compensation plans, see note 17 to Consolidated Financial Statements.

Deviation from accrual principle [DCG 5]
The official commentary to the Directive on Information Relating to Corporate Governance requires the disclosure of management compensation according to the accrual principle. Adherence to this principle would entail that payments received and payments made are not to be accounted for at the time of their receipt or transfer, but rather allocated to the specific periods to which they are attributable in economic terms. As the Company reports its financial results in early February and holds its AGM in early March, there is not enough time for all the performance reviews to be conducted with the Company’s top executives. These reviews are a pre-condition for the determination of the incentive payments. The Company therefore reports amounts effectively paid in the reporting period, irrespective of the period to which they are economically attributable.

Non-executive Members of the Board [DCG 5.2.2.b]
In 2004, the non-executive Members of the Board in the aggregate received as gross remuneration, bonuses and other benefits a total of CHF 702,549 [DCG 5.2.1]. In addition, they were granted 6,740 Shares by the Company [DCG 5.4.b] and held a total of 23,292 Shares as at December 31, 2004 (including those allocated in 2004) [DCG 5.5.b].

In addition, these persons were granted the following options by the Company [DCG 5.6.b]:

							Strike price
Year	Term of allocation (years)		Subscription ratio		Number		(CHF)
1997		8		1:1		23632		107.16
1998		5		1:1		3284		163.70
1999		5		1:1		4108		110.60
2000		5		1:1		2562		105.40
2001		5		1:1		6892		109.20
2002		5		1:1		9280		109.00

The Company did not grant any options to non-executive Members of the Board in 2003 or in 2004.

Executive Member of the Board and Members of the Executive Committee [DCG 5.2.2.a]
In 2004, the executive Member of the Board and the Members of the Company’s Executive Committee in the aggregate received as gross salaries, bonuses and other benefits, inclusive of any voluntary Company pension contributions, a total of CHF 8,199,355 [DCG 5.2.1]. In addition, they were granted 56,593 Shares by the Company (of which most are restricted) [DCG 5.4.a] and held a total of 133,859 Shares as at December 31, 2004 (including those allocated in 2004) [DCG 5.5.a].

In addition, these persons were granted the following options by the Company [DCG 5.6.a]:

							Strike price
Year	Term of allocation (years)		Subscription ratio		Number		(CHF)
1997		8		1:1		63624		107.16
1998		5		1:1		18613		163.70
1999		5		1:1		28970		110.60
2000		5		1:1		23549		105.40
2001		5		1:1		65672		109.20
2001 Supplementary grant	4y and 10.5 months			1:1		19572		109.20
2002		5		1:1		135640		109.00

The Company did not grant any options to the executive Member of the Board nor to the Members of the Company’s Executive Committee in 2003 or in 2004.

Highest total compensation [DCG 5.9]
In 2004, the Member of the Board with the highest total compensation received as salary, bonus and other benefits inclusive of any voluntary Company pension contributions a total of gross CHF 2,407,477. In addition, in 2004, this person was allocated 13,641 restricted Shares and 2,623 unrestricted Shares.

Additional fees and loans
None of the above mentioned persons has received any fees or any compensation for services rendered to the Company during 2004 other than as disclosed in this report [DCG 5.7], nor have they been extended any loans [DCG 5.8].

Former Members [DCG 5.3]
In 2004, one former Member of the Executive Committee has received total compensation of gross CHF 292,063 [DCG 5.3.2.a]. This amount includes voluntary Company pension contributions. In 2004, the Company did not make any payments to former non-executive Members of the Board [DCG 5.3.2.b]. In the reporting period, Felix Meyer, Member of the Executive Committee, left the Company. In the same period, no Member of the Board left the Company [DCG 5.2.3].

Closely Linked Persons
The Company has not made any share [DCG 5.4], option [DCG 5.6] or any cash contribution [DCG 5.2] to any Closely Linked Person, i.e. to a third party that is closely linked to Members of the Board or to Members of the Company’s Executive Committee. However, they may have acquired Shares of the Company or options on their own. Also, the Company has not paid any fees [DCG 5.7] to such persons nor has it granted them any loans [DCG 5.8].

Shareholdings of Closely Linked Persons, if any, are included in the figures reported above [DCG 5.5].

Labor relations
Membership of the Company’s employees in trade unions varies from country to country and the Company has entered into various collective bargaining agreements. It is the Company’s practice to renew or replace its various labor arrangements relating to continuing operations as and when they expire and the Company is not aware of any material arrangements whose expiry is pending and which are not expected to be satisfactorily renewed or replaced in a timely manner. The Company has not experienced any material work stoppages or strikes in the past three fiscal years. The Company’s management is of the opinion that relations with the Company’s employees are good.

The Company requires a number of highly skilled technology, chemical and other specialists. The supply of such employees is highly limited, and competition to hire and retain them is consequently increasingly intense. Competition raises the cost of hiring and retaining these employees and increases employee turnover as competitors seek to lure away employees with particularly rare or sought-after skills. The Company is continually seeking to recruit skilled high-technology, chemical and other specialized workers and management is of the opinion

that the Company offers compensation, benefits and opportunities for development and advancement which will attract and retain a sufficient number of such employees.

Europe
A significant number of the Company’s employees in Europe are represented by trade unions. The Company’s labor relations in Europe have been good and the Company has not experienced any material work stoppages in recent years.

Wages and general working conditions are generally the subject of negotiated collective bargaining agreements. Within the limits established by these agreements, operating companies negotiate directly with unions and other labor organizations representing the Company’s employees. Collective bargaining agreements relating to remuneration typically have a term of one year.

In addition to trade unions, the Company also consults from time to time with various local, national and European work councils. Employees elect the members of work councils. These work councils primarily serve an advisory role. However, under certain circumstances, the Company may be required to consult with one or more of the work councils before proceeding with a course of action. Furthermore, the Company is obligated to apprise the European work councils of activities that affect its workforce in Europe.

Other Regions
The Company’s employees in the Western and Eastern Hemispheres are often represented by trade unions or employed pursuant to other collective bargaining agreements. This includes some of the Company’s United States sites. In Japan, approximately one half of the employees are represented by labor unions. Labor relations in all of these regions have been good and the Company has not experienced any material work stoppages in recent years.

Employees
The Company employees worldwide totaled 19 337 in 2004, 18 658 in 2003 and 19 007 in 2002. The following table shows the number of employees at the end of December 31, 2004, 2003 and 2002.

2004	Europe		Americas		Asia-Pacific		Total
Plastic Additives		1 927		1 127		655		3 709
Coatings Effects		2 956		409		543		3 908
Water & Paper Treatment		2 569		995		626		4 190
Textile Effects		2 007		586		935		3 528
Non-Segment		2 274		930		798		4 002
Total Company		11 733		4 047		3 557		19 337

2003	Europe		Americas		Asia-Pacific		Total
Plastic Additives		1 821		1 179		639		3 639
Coatings Effects		3 000		407		511		3 918
Water & Paper Treatment		2 136		1 019		474		3 629
Textile Effects		2 087		550		899		3 536
Non-Segment		2 235		923		778		3 936
Total Company		11 279		4 078		3 301		18 658

2002	Europe		Americas		Asia-Pacific		Total
Plastic Additives		1 806		1 236		583		3 625
Coatings Effects		3 023		396		491		3 910
Water & Paper Treatment		2 209		1 060		472		3 741
Textile Effects		2 202		611		848		3 661
Non-Segment		2 248		969		853		4 070
Total Company		11 488		4 272		3 247		19 007

Organizational and capital structure
Ciba Specialty Chemicals Holding Inc. is the ultimate holding company of the Ciba Specialty Chemicals group. Its Shares are listed on the Swiss Exchange, traded on virt-x, and its American Depositary Shares (“ADSs”) trade on the New York Stock Exchange See Item 9 — The Offer and Listing. As at December 31, 2004, the Company’s market capitalization amounted to CHF 5 721 139 843 (66 140 345 shares at a price of CHF 86.50 each).

Security	Stock exchange	Ticker symbol	Security number	ISIN code
Share with CHF 3 nominal value	SWX/virt-x	CIBN	581 972	CH 000 581972 4
ADS	NYSE	CSB	CUSIP: 17162 W206	N/A

The Company’s nominal Share capital amounts to CHF 212 459 871 and is divided in 70 826 617 Shares with a nominal value of CHF 3 each. On June 28, 2002, the nominal value per Share had been reduced from CHF 10 to CHF 9. On May 23, 2003, the nominal value per Share was again reduced, this time to CHF 6 per Share, giving effect to a resolution of the Company’s shareholders taken on March 6, 2003. On May 7, 2004, the nominal value per Share was reduced for a third time, to CHF 3 per Share, giving effect to a resolution of the Company’s shareholders taken on February 26, 2004 [DCG 2.1/2.3].

The Board of Directors proposes to the shareholders of the Company to further reduce the Company’s Share capital from CHF 3 per Share to CHF 1 per Share and by making a corresponding cash payment to the Company’s shareholders of CHF 2 per Share. The shareholders will vote on this proposal at the Company’s AGM on March 3, 2005. In addition, the Board will propose to the Company’s shareholders to reduce the Company’s share capital by the cancellation of 1 762 000 Shares it acquired over the second trading line in connection with its share buy-back program.

The Company only has one class of Shares and has no bonus certificates [DCG 2.4/2.5]. Each Share is entitled to any dividends proposed by the Board and approved by the shareholders, and has one vote, subject to the limitations set out below. The Shares do not have any preferential rights attached to them. The Company had and has the following ordinary, authorized and conditional capitals [DCG 2.2/2.3]:

	Nominal		Ordinary
Date of Articles of	value of		share							Conditional capital for
Association	Shares		capital			Authorized capital		Conditional capital		employee participation
Article in Articles
of Association	4 para. 1					4 para. 3		4 para. 4		4 para. 5
						number	nominal	number of	nominal	number of	nominal
						of Shares	value	Shares	value	Shares	value
						(million)	(CHF)	(million)	(CHF)	(million)	(CHF)
	(CHF)		(CHF)				(million)		(million)		(million)
April 20, 1998		10		721 301 170		4	40	4	40	2	20
March 22, 2002		9		649 171 053		4	36	4	36	2	18
March 6, 2003		6		432 780 702		4	24	4	24	2	12
February 26, 2004		3		212 479 851		4	12	4	12	2	6
Proposal to AGM 2005		1		69 064 617	(i)	4	4	4	4	2	2

(i) Reflects both the proposed cancellation of 1 762 000 Shares and the reduction of the nominal value of each Share to CHF 1.

Should the shareholders approve the above mentioned Share capital reduction at the Company’s 2005 AGM through a repayment of CHF 2 per Share, the nominal value for ordinary, authorized and conditional capital would be reduced accordingly. For additional information please refer to article 4 of the Company’s Articles of Association (“Articles”), which can be downloaded (http://www.cibasc.com/index/cmp-index/cmp-about/cmp-abo-corporategovernance.htm). The German version, which is legally binding, can be downloaded from the same internet address.

For information about the Company’s major shareholders see Item 7 — Major Shareholder and Related Party Transactions in the Annual Report. Updated information can be retrieved from the SWX Swiss Exchange (http://www.swx.com/admission/being_public/disclosure_en.html). The Company has no cross holdings [DCG 1.3] nor has it executed any pooling or management agreements [DCG 4.3].

Group structure [DCG 1.1]
For the Company’s major subsidiaries, including listed companies and group structure, see Item 4 - Information on the Company [DCG 1.1.2 and 1.1.3]. For the description of the operational structure of the Company, see Description of Segments in Business Segment Data [DCG 1.1.1].

Voting cap and registration restrictions, nominees [DCG 2.6]

No shareholder may be registered as a shareholder with voting rights for more than 2 percent of the Company’s Share capital. A shareholder purchasing more than 2 percent of the Company’s share capital will be recorded in the Company’s Share register for the Shares in excess of 2 percent of the Company’s Share capital as a shareholder without voting rights. The Board or a committee designated by the Board may, however, on a case-by-case basis allow some or all of the excess Shares to be registered with voting rights. In 2004, the Board granted no such exception and currently no shareholder has the benefit of any such exception [DCG 2.6.2]. For purposes of the 2 percent rule, individuals and/or legal entities acting in concert are considered to be one shareholder [DCG 2.6.1].

Nominees may be entered with the right to vote for more than 2 percent of the voting stock if the nominee discloses the names, addresses and number of Shares of those persons for which it holds the Shares [DCG 2.6.3].

For information about the Company’s treasury stock, see Note 16 to the Consolidated Financial Statements and the Consolidated Balance Sheets.

At the Company’s general meeting, no person may vote more than 5 percent of the Company’s stock, with the exception of depositaries, corporate bodies, independent proxies or nominees complying with their duty to disclose the names, addresses and number of Shares of those persons for which it holds the Shares [DCG 6.1.1]. In 2004, the Board granted no exception with regard to voting cap restrictions [DCG 6.1.2]. In addition to those proxies, a shareholder may also be represented by another individual at a general meeting, but this individual is required to be a shareholder of the Company [DCG 6.1.4]. A resolution on the restriction to vote and on the removal of such a restriction is subject to the approval of two-thirds of the Shares represented at a shareholders’ meeting [DCG 6.1.3].

Annual General Meeting and extraordinary shareholders’ meetings

Any shareholder may demand that an item be put on the agenda of the AGM if she or he holds Shares representing a nominal value of at least CHF 300 000. If, at the Company’s AGM to be held on March 3, 2005, the shareholders approve the motion of the Board to reduce the nominal value of each Share from CHF 3 to CHF 1, the amount required to have an item put on the agenda will be proposed to be reduced accordingly from CHF 300 000 to CHF 100 000.

A demand to have an item put on the agenda must be made in writing at least 60 days before the AGM [DCG 6.4]. For the AGM to be held on March 3, 2005, the Company published the deadline date (January 3, 2005) on its web-site on December 10, 2004. The record date for participation at the AGM is usually fifteen days before the AGM while persons who have subsequently become shareholders may register their voting rights at the AGM Office if the shareholder can prove that he or she is the owner of the Shares and that these Shares are not being voted otherwise [DCG 6.5]. The Articles do not contain any provisions with regard to calling the AGM that differ from the provisions of the Swiss Code of Obligations [DCG 6.3].

There is no provision in the Articles or under Swiss law requiring a presence quorum for the holding of shareholders’ meetings. Resolutions generally require the approval of the “majority” of the shares represented at a shareholders’ meeting (i.e. a simple majority of the shares represented at the shareholders’ meeting, with abstentions having the effect of votes against the resolution). A resolution passed at a shareholders’ meeting with the affirmative vote of at least two-thirds of the shares represented at such meeting is required for [DCG 6.2]:

(i)	any change to the Company’s business purpose,
(ii)	the creation of Shares with privileged voting rights,
(iii)	the creation of restrictions on the transferability of registered Shares, or the elimination of transfer restrictions [DCG 2.6.4],
(iv)	an authorized or conditional increase in the Company’s Share Capital,
(v)	an increase in the Company’s Share Capital by way of capitalization of reserves (Kapitalerhöhung aus Eigenkapital), against contribution in kind, for the acquisition of assets, or involving the grant of special privileges,
(vi)	the restriction or elimination of preemptive rights of shareholders,
(vii)	a relocation of the domicile of the Company, or
(viii)	the dissolution of the Company other than by liquidation (for example, by way of a merger).

In addition, any provision in the Articles for a greater voting requirement than is prescribed by law or the existing Articles must be adopted in accordance with such greater voting requirements.

Dividends and dividend policy

The amount of dividends to be paid by the Company to its shareholders depends on general business conditions, the Company’s financial performance and other relevant factors. Under Swiss law, dividends may be paid out only if approved at a shareholders’ meeting. The Board may propose that a dividend be paid out, but cannot itself set the dividend. In practice, the shareholders usually approve the dividend proposal of the Board.

Since its inception in 1997, the Company has paid or proposed to pay the following amounts per Share:

	dividend payment		capital reduction payment
AGM Year	(CHF)		(CHF)
1998		2		0
1999		2		0
2000		2		0
2001		2		0

	dividend payment		capital reduction payment
AGM Year	(CHF)		(CHF)
2002		2		1
2003		0		3
2004		0		3
2005(i)		1		2

⁽ⁱ⁾   For the financial year 2004, the Board proposes to the shareholders to pay a dividend of CHF 1 per Share and to make an additional cash payment of CHF 2 per Share from a capital reduction. The shareholders will vote on these proposals at the Company’s AGM of shareholders on March 3, 2005. If the shareholders approve these proposals, the dividend payment is expected to be made on March 8, 2005, while the payment stemming from the capital reduction is expected to be made on May 18, 2005.

Equity linked instruments [DCG 2.7]

With the exception of the Company’s employee participation programs, the Company had no equity linked debt outstanding.

Additional Information

Change of control provisions [DCG 7.1]

If a shareholder acquires securities of a listed Swiss company and thereby exceeds the threshold of 33 1/3 percent of the voting rights, it has to offer to acquire the remaining shares (“mandatory offer obligation”). By shareholders’ resolution, this threshold may be raised to 49 percent (“opting up”). A company may also opt out of the mandatory offer obligation. In its Articles, the Company has no opting out or opting up provisions [DCG 7.1].

According to employee retention agreements with the Company, all members of the Executive Committee plus three senior managers are entitled to payments for severance resulting from a change of control. For ten executives, such payments would on average amount to less than twice that of a total annual compensation. One member of the Executive Committee has a contractual provision according to which he would be entitled to receive somewhat less than two and a half times that of his total annual compensation. [DCG 7.2].

Auditors [DCG 8]

The Company’s auditors are Ernst & Young Ltd, Zurich. They have been elected by the shareholders at the 2004 AGM until the AGM 2005 [DCG 8.1.1]. The Board, which bases its proposal upon a recommendation made to it by the Audit Committee, will propose that Ernst & Young Ltd be re-elected for another year. At the Company’s AGM to be held on March 3, 2005, the shareholders will vote on this proposal.

Ernst & Young Ltd’s lead audit partner, Cherrie Chiomento, has supervised the Company’s audit since 2004 [DCG 8.1.2].

Fees paid by the Company in 2004 and 2003 to its auditors were as follows [DCG 8.2/8.3]:

	2004				2003
	thousand		in % of		thousand		in % of
	CHF		total fees		CHF		total fees
Audit fees		5 704		93		3 927		76
Audit-related fees		2		0		237		5
Tax fees		381		6		827		16
All other fees		44		1		165		3
Total fees		6 131		100		5 156		100

Audit related work includes services in connection with the Company’s pension plans. Tax services include tax filings, transfer pricing studies and tax advice, including with regard to VAT. Other services included assistance with translation and credit agency matters. The Audit Committee has introduced a policy for the pre-approval of audit and of non-audit services. A copy of this policy can be downloaded (http://www.cibasc.com/investors). The Audit Committee has not approved a single service pursuant to the de minimis exception according to paragraph (c)(7)(i)(C) of rule 2-01 of regulation S-X.

The auditors of the Company are present at those Board meetings during which the annual accounts of the Company are discussed and the items and proposals to the AGM of the shareholders of the Company are decided upon. They are also present at one of the Company’s Disclosure Committee meetings and at the meetings of the Audit Committee where audit mandate and audit planning are discussed. Any

other participation is as required. In such meetings, the Board and the Audit Committee also assess and discuss the findings of the auditors and evaluate the quality of their services [DCG 8.4].

Information policy [DCG 9]

The Company’s policy is to openly, clearly and regularly inform its stakeholders of all relevant developments. As a primary tool, the Company communicates through its internet site (http://www.cibasc.com) and by email. The Investor Relations homepage (http://www.cibasc.com/investors) contains comprehensive information on the Company, including Corporate Governance, its Code of Conduct and Social Policy.

As the Company is listed on the SWX Swiss Exchange (http://www.swx.com); ticker symbol = CIBN and on the New York Stock Exchange (http://www.nyse.com); ticker symbol = CSB, it regularly files news and reports with these exchanges. The reports furnished or filed by the Company with the U.S. stock exchange supervision authority, the Securities and Exchange Commission (“SEC”), can be downloaded (http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001035497&owner=include).

The Company’s official means of communication is the Swiss Official Gazette of Commerce (http://www.shab.ch), while the invitation to the Company’s AGM is also sent to the registered shareholders by mail. In addition, the Company publishes the AGM meeting notice in several newspapers in Switzerland. The site http://www.cibasc.com/agm contains all AGM relevant information, including the AGM minutes.

For publication dates of the Company’s financial reports, please consult the Investor Relations sub-page (http://www.cibasc.com/view.asp?id=192).

Enquiries by telephone may also be made to: Investor Relations +41 61 636 5081 and to Group Communications +41 61 636 4444.

Share Ownership

The Company applies the fair value method of accounting as defined in SFAS No. 123 “Accounting for Stock-Based Compensation” as amended, for its stock-based compensation plans. Descriptions of the terms of the Company’s plans are presented in the following paragraphs.

In connection with the capital reduction of CHF 3 per share in 2003 (CHF 1 per share in 2002) (see note 16), the Company reduced the exercise price of its then outstanding stock options (“the capital reduction repricing”). No compensation expense was recorded as a result of those capital reduction repricings. For the Leveraged Executive Asset Plan, which is described below, the capital reduction repricing in 2003 was set by the investment bank. All exercise prices disclosed herein have been adjusted to reflect the capital reduction repricings. In connection with the capital reduction of CHF 3 per share in 2004, the exercise price of outstanding stock options was not changed.

LEAP — As of December 31, 2004, a total of 1 042 782 share options that were granted in connection with one-time Leveraged Executive Asset Plan (LEAP) were outstanding. The options were granted in 1997 to the Company’s then key executives and non-executive Board members (participants), have an expiration date of March 15, 2005, and permit the holder thereof to purchase shares of the Company’s common stock at a price per share of CHF 107.16. Because the Company, upon establishment of the LEAP in 1997, paid a fee to a major investment bank to assume all of the Company’s obligations to the participants in the LEAP, the Company has no obligation to issue shares of its common stock nor any other obligation to the participants in connection with the LEAP.

As of January 28, 2005, no additional share options have been exercised or returned to the Company, as compared to December 31, 2004.

LTIP — The Company has a Long-Term Incentive Plan (LTIP), which grants options and restricted shares of common stock of the Company to senior management, other key employees and, in 2002, to non-executive Board members. For grants of options made to participants other than those in the United States, vesting is at the date of grant and the right to exercise is restricted for three years following the grant date. For grants of options made to participants in the United States, vesting and the right to exercise occur over three years. The options expire either five years or ten years after the date of grant. In 2002, no compensation expense was recorded for the options issued under this plan as the options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. As a result of the adoption by the Company in 2003 of SFAS No. 123 as amended, compensation expense of approximately CHF 3 million in 2004 (CHF 5 million in 2003) was recorded comprising of both current year awards and the unvested portion of prior year awards.

The following table summarizes option activity under the LTIP for the three year period ended December 31, 2004 and from January 1, 2005 through January 28, 2005:

	Weighted average		Stock options
	exercise price		outstanding
Balance at December 31, 2001		119.63		1 778 449
Options granted		108.80		481 401
Options exercised		108.99		(32 098	)
Options canceled/forfeited		111.07		(32 413	)
Balance at December 31, 2002		117.53		2 195 339
Options granted		82.60		176 627
Options exercised		0		0
Options canceled/forfeited		105.02		(26 989	)
Options expired		160.00		(264 355	)
Balance at December 31, 2003		109.34		2 080 622
Options granted		95.30		81 024
Options exercised		82.60		(2 762	)
Options canceled/forfeited		114.48		(72 239	)
Options expired		109.60		(314 888	)
Balance at December 31, 2004		108.32		1 771 757
Options granted		0		0
Options exercised		0		0
Options canceled/forfeited		0		0
Options expired		111.40		(3 792)
Balance at January 28, 2005		108.31		1 767 965

The following table summarizes the status of stock options outstanding and exercisable at January 28, 2005:

			Stock options outstanding				Stock options exercisable
	Weighted average				Weighted average				Weighted average
	exercise price		Number of		remaining		Number of		remaining
Exercise price	- outstanding/		outstanding		contractual life		outstanding		contractual life
range	exercisable		options		(in years)		options		(in years)
82.60-111.40		104.76/106.09		1 654 233		3.6		1 062 287		3.2
160.00		160.00/160.00		113 732		2.9		113 732		2.9
				1 767 965				1 176 019

In connection with the LTIP 2002, the Company granted 85 128 restricted shares of common stock, which are restricted for three years from the date of grant, to 683 participants. The market value of the common stock at date of grant was CHF 112 per share. Compensation expense of approximately CHF 10 million has been recognized in 2002 related to the grant of these shares.

In connection with the LTIP 2003, the Company granted 186 503 restricted shares of common stock, which are restricted for three years from the date of grant, to 720 participants. The market value of the common stock at date of grant was CHF 85.30 per share. Compensation expense of approximately CHF 16 million has been recognized in 2003 related to the grant of these shares.

In connection with the LTIP 2004, the Company granted 154 996 restricted shares of common stock, which are restricted for three years from the date of grant, to 705 participants. The market value of the common stock at date of grant was CHF 95.30 per share. Compensation expense of approximately CHF 15 million has been recognized in 2004 related to the grant of these shares.

ESOP — The Company has an Employee Stock Ownership Plan (ESOP) that enables substantially all employees to purchase annually up to 20 shares of common stock at a price equal to 85 percent of the average market price, defined as the average closing price of the shares on the Swiss Exchange for 10 trading days prior to the purchase date of the shares. These shares are restricted from resale for a period of three years from the date of purchase. During 2004, 1 590 employees (2003: 1 768 employees; 2002: 1 660 employees) purchased 28 715 shares (2003: 32 221 shares; 2002: 29 499 shares) for which approximately CHF 2 million (2003: CHF 2 million; 2002: CHF 3 million) was paid to the Company. In 2002, no compensation expense was recorded under this plan. In 2004, CHF 0.4 million (2003: CHF 0.4 million) compensation expense was recorded in connection with the application of SFAS No. 123.

In the period from January 1, 2005 through January 28, 2005, no shares have been purchased under the plan.

MAB — The Company has a “Mitarbeiterbeteiligungsplan” (Employee Investment Plan) which grants annually to most employees in Switzerland (as an enhancement to their pension plan arrangements) the right to purchase 25 shares (prior to 2003, 20 shares) of common stock at CHF 15 per share (as long as the share price is not greater than CHF 200, at which level the Employee Investment Plan price may be adjusted). The rights vest at the grant date and become exercisable at the date of the employees’ retirement or termination. The following table summarizes rights activity under the MAB for the three year period ended December 31, 2004 and from January 1, 2005 through January 28, 2005:

	Exercise price		Rights outstanding
Balance at December 31, 2001		15		302 740
Rights granted		15		86 040
Rights exercised		15		(18 500	)
Balance at December 31, 2002		15		370 280
Rights granted		15		105 275
Rights exercised		15		(20 005	)
Balance at December 31, 2003		15		455 550
Rights granted		15		104 200
Rights exercised		15		(22 955	)
Balance at December 31, 2004		15		536 795
Rights granted		15		102 475
Rights exercised		15		(2 750)
Balance at January 28, 2005		15		636 520

Compensation expense is recorded in the year the rights are granted and, in 2004, CHF 9 million (2003: CHF 9 million; 2002: CHF 8 million) of compensation expense was recorded under this plan.

PSP — The Company’s Performance Share Plan (PSP) expired in 2004. The PSP in 2001 had granted selected senior and key management and non-executive Board members the right to receive up to an aggregate 346 800 shares of common stock of the Company if certain future conditions were met. As these conditions were not met, no shares were issued under the PSP. In 2003, in accordance with the adoption of SFAS No. 123, as amended, the Company recorded CHF 1 million compensation expense for the fair value of the rights that vested during 2003.

Change in control and reserve of shares

Upon a change in control of the Company (defined as 30 percent for LEAP and 33.33 percent for LTIP, each such amount being a percentage of total voting rights), the vesting and restriction periods for the plans stated above will cease to apply and a cash or share payment for the value of the outstanding plans and related taxes and duties will be due to the participants.

At December 31, 2004, the Company had approximately 2.0 million shares (2003: 2.2 million shares; 2002: 2.0 million shares) of treasury stock reserved for issuance under the various stock based compensation plans.

For further information see Item 18 — Financial Statements and pages F-1 through F-47

Item 7. Major Shareholders and Related Party Transactions.
Major Shareholders

According to the Share Registrar of the Company and other publicly available information (Database on Disclosure of Shareholdings maintained by SWX Swiss Exchange). As of January 28, 2005 the following persons in the table below were known by the Company to be the owner of 2 percent or more of the Company’s Shares. These shareholders may use their voting rights up to 2 percent of the common stock.

	January			January 30,			January 31,
	28, 2005			2004			2003
Artisan Partners Limited, USA-Wisconsin		—			—			5.0	%
Chase Nominees Ltd, London*		4.8	%		5.6	%		5.3	%
Mellon Bank N.A., Everett*		—			2.6	%		—
Putnam Group, Boston		2.0	%		—			5.2	%

(*)    Registered as nominees.

As of January 28, 2005, according to the Share Register, there were 182 registered holders of ordinary shares in the United States. These ordinary shareholders in the United States collectively held 1 357 492 ordinary shares, or approximately 1.92 percent of the Company’s total issued and outstanding Shares as of that date. Also as of January 28, 2005, there were 269 registered holders of American depositary receipts under an ADR program (including Cede & Co., the DTC’s nominee). Each ADR issued under the program represents one American Depositary Share, which in turn, represents one-half of one share of the common stock of the Company. All these registered ADR holders have addresses in the United States. They collectively held 923 122 ADRs, or approximately 0.65 percent of the issued and outstanding ordinary Shares as of such date.

To its knowledge, the Company is not owned or controlled, directly or indirectly, by another corporation, by any government or by any other natural or legal person, severally or jointly.

Related Party Transactions

The Company and its subsidiaries have not entered into any material transactions in the last three years in which any director, officer or any associate of any director or officer of the Company has or had any interest. No director, officer or associate of any director or officer is or was during the last three years indebted to the Company or any of its subsidiaries. For further information see Item 18 — Financial Statements and pages F-1 through F-47.

The Company has a number of joint ventures with, and other equity investments in other companies. It has relationships with many of these entities in the ordinary course of business whereby it buys and sells a wide variety of products and services.

Item 8. Financial Information.
Consolidated Financial Statements

See Item 18 — Financial Statements and pages F-1 through F-47

Other Financial Information
Export Sales

The Company’s products and services are primarily sold outside of its home market, Switzerland. In 2004, approximately 98 percent of the Company’s sales of products and services produced in Switzerland were exported to other countries.

Legal, Administrative and Arbitration Proceedings

The Company operates in countries where political, economic, social, and regulatory developments could have a significant impact on its operational activities. The effects of such risks on the Company’s results, which arise during the normal course of business, are not foreseeable and are therefore not included in the accompanying Consolidated Financial Statements of this Annual Report.

In the ordinary course of business, the Company is involved in lawsuits, claims, investigations and proceedings, including product liability, commercial, environmental, and health and safety matters. Although the outcome of any such proceedings cannot be predicted, management is of the opinion that there are no such matters pending which would be likely to have any material adverse effect in relation to its business, financial position or results of operations.

In connection with its Toms River, New Jersey site in the United States, the Company was named as a defendant in several actions, most of which were settled by the end of 2002. See Item 4 — Information on the Company — Environmental Matters.

Dividends and Dividend Policy

The amount of dividends to be paid by the Company to its shareholders depends on general business conditions, the Company’s financial performance and other factors. The Board has adopted a policy on the proposal of dividends, which is to provide shareholders with dividend growth in line with the underlying growth in the earnings of the Company. Under Swiss law, dividends are paid out only if approved at the shareholders’ meeting. The Board may propose that a dividend be paid out, but cannot itself set the dividend. In practice, the shareholders usually approve the dividend proposal of the Board.

For 2001, the shareholders approved the Board’s proposal to pay a dividend of CHF 2 per share at the Company’s Annual General Meeting held on March 22, 2002. The Company paid the dividend on March 27, 2002, which totaled CHF 134 million. At this meeting, the shareholders also approved the Board’s proposal to pay an extraordinary payment to the shareholders in the form of a capital reduction of CHF 1 per share. The capital reduction was in the form of a reduction in the nominal value of each common share from CHF 10 per share by CHF 1 per share to CHF 9 per share. The Company paid the capital reduction on June 28, 2002, which totaled CHF 69 million.

For 2002 the Board of Directors proposed to carry forward the entire retained earnings of Ciba Specialty Chemicals Holding Inc. and not to pay a dividend. The Board of Directors, however, proposed a cash payment to its shareholders resulting from a capital reduction of CHF 3 per share. The capital reduction found shareholder approval at the Annual General Meeting on March 6, 2003. The capital reduction was effected by a reduction in the nominal value of each share from CHF 9 per share by CHF 3 per share to CHF 6 per share. The Company made the payment of the capital reduction on May 23, 2003.

For 2003 the Board of Directors proposed to carry forward the entire retained earnings of Ciba Specialty Chemicals Holding Inc. and not to pay a dividend. The Board of Directors, however, proposed a cash payment to its shareholders resulting from a capital reduction of CHF 3 per share. The capital reduction found shareholder approval at the Annual General Meeting on February 26, 2003. The capital reduction was effected by a reduction in the nominal value of each share from CHF 6 per share by CHF 3 per share to CHF 3 per share. The Company made the payment of the capital reduction on May 14, 2004.

For 2004 the Board of Directors proposes to pay a dividend of CHF 1 per share and to make an additional cash payment to its shareholders resulting from a capital reduction of CHF 2 per Share. Both dividend payment and capital reduction are subject to shareholder approval at the Annual General Meeting to be held on March 3, 2004. If approved, the capital reduction will take the form of a reduction in the nominal value of each share from CHF 3 per Share by CHF 2 per Share to CHF 1 per share. The Company expects, subject to various conditions and approval, that the payment of the capital reduction will be made to the shareholders on May 18, 2005. Dividend payment is expected to be made on March 8, 2005.

For additional information on dividends, see Item 6 — Directors, Senior Management and Employees.

Significant Changes

Except as otherwise disclosed in this Annual Report, no significant change has occurred since the date of the Consolidated Financial Statements included in this Annual Report.

Item 9. The Offer and Listing
Principal Trading Market and Price Range

The Shares are listed on the Swiss Exchange and principally traded on London based virt-x, a Recognized Investment Exchange supervised by the Financial Services Authority (FSA) in the U.K. and are also quoted on International Retail Service, the London Stock Exchange’s automated quotation system for non-U.K. equity securities. The prices for Shares as quoted in the official list of the Swiss Exchange are expressed in Swiss francs. As of August 2, 2000, the ADRs, each representing one-half of one ordinary share of the Company’s common stock, have been listed on the New York Stock Exchange.

The information presented in the table below represents, for the periods indicated, (i) the reported high and low closing sales prices quoted in Swiss francs for the Shares on the Swiss Exchange and (ii) the U.S. dollar equivalent of the price per Share based on the Noon Buying Rate on the last trading day of the periods presented. The Shares began trading on the Swiss Exchange on March 13, 1997, at a price of CHF 116.25 per share.

Trading Prices on the Swiss Exchange	Price per Share
	High		Low		High		Low
Annual highs and lows	in CHF				in USD
2000		122.50		94.25		75.61		58.17
2001		115.75		75.00		69.74		45.19
2002		128.00		89.75		92.53		64.88
2003		101.50		74.75		81.99		60.38
2004		96.14		76.70		81.81		59.77
Quarterly highs and lows
2003
First Quarter		101.50		74.75		74.18		55.21
Second Quarter		94.00		79.85		70.17		60.66
Third Quarter		98.65		80.25		74.69		58.42
Fourth Quarter		98.20		84.50		79.32		65.42
2004
First Quarter		96.14		82.24		75.84		64.87
Second Quarter		90.70		82.05		72.44		65.54
Third Quarter		89.70		76.70		71.93		61.50
Fourth Quarter		86.50		78.00		75.80		68.35
Monthly highs and lows
2004
July		89.50		85.55		69.94		66.86
August		89.65		76.90		70.92		60.83
September		79.75		76.70		63.95		61.50
October		82.95		78.00		69.19		65.07
November		83.95		82.25		73.50		72.02
December		86.50		82.60		75.80		72.38
2005
January (through January 28)		86.55		83.40		72.88		70.23

The information presented in the table below represents, for the periods indicated, the reported high and low closing sales prices quoted in USD on the New York Stock Exchange. The Shares began trading on the New York Stock Exchange on August 2, 2000 at a price of USD 29.50 per ADR.

Trading Prices on the New York Stock Exchange	Price per ADR(1)
	High		Low
	in USD
Annual highs and lows
2000 (from August 2, 2000)		33.25		26.88
2001		35.44		24.00
2002		40.60		30.83
2003		38.75		28.25
2004		40.61		30.10
Quarterly highs and lows
2003
First Quarter		36.60		28.25
Second Quarter		35.31		30.29
Third Quarter		35.57		30.05
Fourth Quarter		38.75		31.50
2004
First Quarter		40.61		33.80
Second Quarter		36.35		31.92
Third Quarter		36.58		30.10
Fourth Quarter		38.23		31.25
Monthly highs and lows
2004
July		36.58		34.19
August		35.20		30.10
September		31.41		30.45
October		34.54		31.25
November		36.39		34.21
December		38.23		35.88
2005
January (through January 28)		37.73		35.45

⁽¹⁾   One ADR represents one half of one share of the Company.

On January 28, 2005, the last reported sale price was for Shares on the Swiss Exchange CHF 85.05 and for ADRs on the New York Stock Exchange USD 35.86. According to the Share Registrar of the Company, as of December 31, 2004, there were 180 United States resident shareholders holding 1 315 011 Shares, representing approximately 1.86 percent of the issued and outstanding Shares as of such date, and there were 269 registered United States resident holders of American Depositary Receipts holding 923 122 ADRs, representing approximately 0.65 percent of the issued and outstanding Shares as of such date.

The information presented in the table below represents, for the periods indicated, the approximate average daily volumes of the Shares traded on the Swiss Exchange:

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2004		380 762		342 204		287 579		289 824
2003		419 000		316 000		343 000		496 000

The information presented in the table below represents, for the periods indicated, the average approximate daily volumes of the ADRs traded on the New York Stock Exchange:

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2004		4 287		2 511		5 353		3 073
2003		5 150		3 140		2 930		3 680

The above information was supplied by the Swiss Exchange via the Swiss Market Feed, Citibank N.A., and Reuters, all of which supply such data to their customers, subscribers and other information providers.

Trading Practices and Procedures on the Swiss Exchange/virt-x

The Swiss Exchange is a private organization, which is supervised by the Swiss Federal Banking Commission. Securities traded on the Swiss Exchange include shares (374), investment funds (20), exchange traded funds (26), bonds (1 268) and derivatives (4 527). In 2004, the exchange turnover achieved in a total of 14.7 million transactions amounted to CHF 766.5 billion.

The Company is included in the SMI®, the Swiss Market Index, an index that as at December 31, 2004, comprised shares of the 27 largest most liquid stocks in the Swiss equity market. At the same date, the market capitalization of the SMI® issuers amounted to CHF 697 billion.

With the creation of virt-x in London in 2001, the SWX Group put in place a securities exchange approved by the UK authorities and based on existing SWX technology. The value-added chain already established in Switzerland was thus extended to cross border trading. The virt-x market is based on an integrated trading, clearing and settlement model, which not only simplifies the process of trading pan- European blue chips but also significantly reduces the costs associated with trading cross border at every stage of the process. The volume of trades in Swiss blue chips has been expanded since virt-x was opened.

Item 10. Additional Information
Memorandum and Articles of Incorporation (“Articles”)

Set out below is a summary of certain provisions of the Company’s Articles and of the Swiss Code of Obligations relating to the Shares. This description does not purport to be complete and is qualified in its entirety by reference to the Articles, which are an exhibit to this Annual Report, and Swiss law.

Purpose of the Company

Section 2 of the Company’s Articles establishes that the purpose of the Company is the acquisition, holding and disposition of enterprises which are also active in the area of specialty chemicals. The Company may acquire, mortgage, liquidate or sell real estate and intellectual property rights in Switzerland or abroad and finance other companies.

Conflict of Interest

Swiss law does not have a general provision regarding conflicts of interest. However, the Swiss Code of Obligations requires directors and members of senior management to safeguard the interests of the Company and, in this connection, imposes a duty of care and a duty of loyalty on directors and officers. The breach of these provisions may result in personal liability for the directors and officers towards the Company or its shareholders. Swiss law also provides that payments made to a shareholder or a director or any person(s) associated therewith other than at arm’s length must be repaid to the Company if the shareholder, director or associated person(s) has or have acted in bad faith. In addition, the by-laws of the Company provide that the Members of the Board of Directors are required to abstain from voting on matters that relate to their own personal interests or to the interests of legal or natural persons with whom they are associated.

Directors

According to Section 25 of the Articles, the Board of Directors can pass resolutions with respect to all matters that are not reserved to the authority of the General Meeting of Shareholders, by law or by the Articles. The power to borrow falls within the competencies of the Board of Directors, which has delegated part of this power to the Finance Committee. Exercise of this power does not require shareholder approval. Neither Swiss law nor the Articles restrict in any way the Company’s power to borrow or otherwise raise funds.

Members of the Board retire upon their 70th birthday. The retirement is effective on the date of the next Ordinary Shareholders Meeting. Under special circumstances the Board can make exceptions to this rule. Both Swiss law and the Articles require that the Directors be shareholders of the Company. Ownership of one Share is sufficient to satisfy this condition.

Shares and Transfer of Shares

For information on the Shares, see also Item 6 — Directors, Senior Management and Employees.

The transfer of shares (for as long as they are book-entry shares) is effected by an entry in the books of a bank or depositary institution following an assignment in writing by the selling shareholder and notification of such assignment to the Company. In the event that the shares are printed, the transfer is effected by delivery of the endorsed share certificate. The right to exercise voting rights with regard to the shares further requires that the name of the purchaser be registered in the share register (Aktienbuch) of the Company. Failing such registration, the purchaser may not vote at shareholders’ meetings.

There are no restrictions on the transfer of shares. However, no shareholder may be registered as a shareholder with voting rights for more than 2 percent of the Company’s share capital. A shareholder purchasing more than 2 percent of the Company’s share capital will be recorded in the Company’s share register for the shares in excess of 2 percent of the Company’s share capital as a shareholder without voting rights. The Board or a committee designated by the Board may, however, on a case-by-case basis allow some or all of the excess shares to be registered with voting rights. For purposes of the 2 percent rule, natural persons and/or legal entities acting in concert are considered to be one shareholder.

A purchaser of shares will be recorded in the Company’s share register if the purchaser discloses its name, citizenship and address and gives a declaration that it has acquired the shares in its own name and for its own account. The Articles provide that shareholders may register their shares in the name of a nominee approved by the Company, including Euroclear Bank S.A./N.V. as operator of the Euroclear System (“Euroclear”), Clearstream Banking, société anonyme (“Clearstream Luxembourg”), and the Depositary, and may exercise their voting rights by giving instructions to such nominee to vote on their behalf. However, the Company has agreed to exempt the Depositary and the custodian and their respective nominees, if any (but no individual Holder or Beneficial Owner of ADSs), from the 2 percent limitation in respect of Deposited Securities held in connection with the ADR facility created by the Deposit Agreement (as defined therein) to the extent that (a) the Depositary requires each Holder who provides voting instructions to the Depositary upon the terms of the Deposit Agreement to certify (the “Voter Certification”) that (i) such Holder does not beneficially own, directly or indirectly, more than 2 percent of the share capital of the Company in the form of Shares or ADSs and (ii) neither such Holder nor any of its affiliates has filed, or is under any obligation to file, a Schedule 13D or 13G under the Exchange Act in respect of the Shares or the ADSs (if any such Holder fails to provide such Voter Certification to the Depositary, the Depositary will disregard any voting instructions received from such Holder unless otherwise instructed by the Company), and (b) the Deposited Securities held in the ADR facility do not exceed the 5 percent limitation.

Annual General Meetings

For information on annual general meetings, see also Item 6 — Directors, Senior Management and Employees.

Under Swiss law, an annual, ordinary shareholders’ meeting must be held within six months after the end of the Company’s business year. Shareholders’ meetings may be convened by the Board or, if necessary, by the statutory auditors. The Board is further required to convene an extraordinary shareholders’ meeting if so resolved by a shareholders’ meeting or if so requested by holders of Shares holding in aggregate at least 10 percent of the nominal Share capital of the Company.

The shareholders at a shareholders’ meeting also have the power to vote on amendments to the Articles, to elect the members of the Board and the statutory auditors, to approve the annual report and the annual Company accounts, to set the annual dividend, to grant the Members of the Board and management discharge from liability for matters disclosed to the shareholders’ meeting, and to order an independent investigation into the specific matters proposed to the shareholders’ meeting (Sonderprüfung).

At shareholders’ meetings, shareholders can be represented by proxy but only by another shareholder, a proxy appointed by the Company, an independent representative nominated by the Company or a depositary institution. Proxy may also be given to the legal representative of the shareholder. Subject to certain exceptions set forth in the Articles, no shareholder (or group of shareholders acting in concert) may represent more than 5 percent of the Company’s Share capital at any shareholders’ meeting. For purposes of this 5 percent limit, natural persons and/or legal entities acting in concert are considered to be one shareholder. The 5 percent limit does not apply to banks exercising proxies granted by their customers, to shareholders’ representatives acting under statutory rules or to nominees, provided such nominees comply with the disclosure requirement discussed above. See Shares and Transfer of Shares. Votes are taken on a show of hands unless it is resolved at the shareholders’ meeting to have a ballot or such ballot is ordered by the Chairman of the meeting.

Liquidation

According to Swiss Law, each shareholder is entitled to receive the part of the assets of a company remaining after its liquidation which is proportional to its paid in shareholding.

Redemption Provision

Swiss law limits the number of Shares that the Company may hold or repurchase. The Company and its subsidiaries may repurchase shares only if (i) the Company has sufficient free reserves to pay the purchase price and (ii) the aggregate nominal value of such shares does not exceed 10 percent of the nominal Share capital of the Company. Shares held by the Company and its subsidiaries do not have any voting rights. Furthermore, the Company must create a reserve on its balance sheet in the amount of the purchase price of the acquired shares. Share buy-backs by the Company may be subject to certain adverse tax consequences in Switzerland.

Sinking Fund Provision

If liabilities exceed assets, the Board of Directors must notify the competent court at the registered office of the Company thereof.

Further Capital Calls by the Company

Since all of the Company’s issued and outstanding shares have been fully paid in, the Company has no further capital calls.

Mandatory Bid Rule

For information on the mandatory bid rule, see Item 6 — Directors, Senior Management and Employees.

Preemptive Rights

Under Swiss law, any share issue, whether for cash or non-cash consideration, is subject to the prior approval at the shareholders’ meeting. Shareholders of the Company have certain preemptive rights to subscribe for new issues of shares in proportion to the nominal amount of shares held. A resolution adopted at a shareholders’ meeting with a two-thirds majority may, however, limit or suspend preemptive rights in certain limited circumstances.

At the 1998 shareholders’ meeting, the shareholders of the Company authorized the Board to issue from time to time up to two million shares for the purpose of accommodating options and conversion rights granted to the Company’s employees and excluded the subscription rights of the holders of the Shares regarding thereto.

At the same meeting, the shareholders of the Company also authorized the Board to issue from time to time up to four million additional shares at its discretion and to allot preferential subscription rights relating thereto to third parties in the event that the additional shares are used by shareholders to takeover a business, in whole or in part, or to participate in or finance such takeover. According to article 651 of the Swiss Code of Obligations, this authorization was only valid for two years. At each Annual General Meeting held on April 13, 2000, March 22, 2002, and February 26, 2004, the shareholders consented to extend this authorization for another two years.

In addition to the above, the shareholders also authorized the Board to issue from time to time up to four million additional Shares in connection with the execution of option and conversion rights and to exclude the subscription rights of the holders of Shares regarding thereto.

Notices

Notices to shareholders are validly made by publication in the Swiss Official Gazette of Commerce. The Board may designate further means of communication for publishing notices to shareholders.

Duration and Liquidation

The Articles do not limit the Company’s duration.

The Company may be dissolved at any time by a shareholders’ resolution which must be passed by (i) a simple majority of the shares represented at the meeting if the Company is being dissolved by way of liquidation and (ii) two-thirds of the shares represented at the meeting if the Company is being dissolved for other reasons (for example, in a merger where the Company is not the surviving entity).

Under Swiss law, any surplus arising out of a liquidation (after settlement of all claims of creditors) is distributed to shareholders in proportion to the paid-up nominal value of shares held.

Disclosure of Principal Shareholders

Under the applicable provisions of the Swiss Stock Exchange Act, shareholders (and groups of shareholders acting in concert) who own shares or other securities representing more than 5 percent, 10 percent, 20 percent, 33 1/3 percent, 50 percent or 66 2/3 percent of the voting rights of a company incorporated in Switzerland of which at least one class of equity securities is listed on the Swiss Exchange are required to notify the company and the Swiss Exchange of such holdings, whether or not the voting rights can be exercised. Following receipt of such notification, the company is required to inform the public. The same disclosure obligation applies to subsequent reductions in the holding of voting rights below the thresholds described above.

An additional disclosure obligation exists under Swiss corporate law pursuant to which the Company must disclose the identity of all of its shareholders (or related groups of shareholders) who hold more than 2 percent of its voting rights (i.e. shareholders owning shares in excess of the limit set forth in the Articles. See Shares and Transfer of Shares. Disclosure of shareholders owning more than 2 percent but less

than 5 percent of the voting rights in the Company must only be made once a year in the notes to the financial statements published in the annual report. See Item 7 — Major Shareholders and Related Party Transactions.

Material Contracts
ADR Deposit Agreement

Pursuant to the Second Amended and Restated Deposit Agreement (including all exhibits thereto, the “Deposit Agreement”) dated as of August 2, 2000 among the Company, Citibank, N.A., and the registered holders and beneficial owners from time to time of the ADRs of the Company, ADRs evidencing ADSs are issuable by Citibank on behalf of the Company. Each ADS represents the right to receive one-half of one share deposited under the Deposit Agreement. Shares are deposited to an account maintained by Citibank, N.A., Zürich Branch, as the custodian and agent of the Depositary in Switzerland. Only persons in whose names ADRs are registered on the books of the Depositary are treated by the Depositary and the Company as the absolute owners of such ADRs.

EMTN Program

In 1997, the Company set up a Euro Medium Term Notes program under which certain specified subsidiaries of the Company may issue bonds up to an aggregate amount of USD 2 billion. The program documentation, among Ciba Specialty Chemicals Corporation, Ciba Specialty Chemicals Eurofinance Ltd., Ciba Specialty Chemicals PLC, Ciba Spezialitätenchemie Holding Deutschland GmbH, the Company and the Dealers named thereon, includes an offering circular, a program agreement, a deed of covenant and a guarantee by the Company. As of December 31, 2004, approximately CHF 705 million (USD 613 million) of indebtedness was outstanding under the program. The Company currently has no plans to utilize this program in the future.

Exchange Controls

There are no legislative or other legal provisions currently in force in Switzerland or arising under the Articles restricting the export or import of capital, including, but not limited to, the availability of cash and cash equivalents for use by the Company’s group, or that affect the remittance of dividends, interest or other payments to nonresident holders of securities of the Company. Cash dividends payable in Swiss francs on Shares and ADSs may be officially transferred from Switzerland and converted into any other convertible currency. There are no limitations imposed by Swiss laws or the Company’s Articles on the right of non-Swiss residents to hold or vote the Shares or ADSs, as described above under Memorandum and Articles of Incorporation (“Articles”).

Taxation

Swiss Taxation
Swiss Tax Consequences of Holding Shares or ADSs

The following is a summary of the material Swiss tax consequences of the ownership of Shares or ADSs, in particular by United States holders (as defined below; see United States Taxation). The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase Shares or ADSs, and prospective investors should consult their professional advisors as to the tax consequences of their purchase, ownership and disposition of shares and ADSs. In particular, the summary does not address the tax treatment of holders subject to special tax rules, such as banks, insurance companies and dealers in securities, investors liable for alternative minimum tax or investors who hold shares or ADSs as part of a straddle or hedging or a conversion transaction, some of which may be subject to special rules. This summary should not be read as extending by implication to matters not specifically discussed herein. Additional rules may apply to holders of 10 percent or more in voting power or value of the Shares and ADSs. With respect to United States holders, this discussion generally applies only to such holders who hold Shares or ADSs as a Portfolio investment.

The description of the Swiss and United States tax laws and practices set forth below is based on the statutes, regulations, rulings, judicial decisions and other authorities as in force and as applied in practice on the date of this Annual Report and is subject to changes to those laws and practices, subsequent to that date, which changes could be made on a retroactive basis.

It is assumed for purpose of this summary that a United States holder is entitled to the benefits of the Swiss-American Treaty on Double Taxation (the “Treaty”). A United States holder would generally be eligible for the benefits of the Treaty. However, certain exceptions apply, including (a) United States citizens or residents that do not have a substantial presence, permanent home or habitual abode in the United States, and (b) United States corporations that fail to satisfy the “limitations on benefits” provisions of Article 22 of the Treaty because of the nature of their activities in the United States and the nature of their shareholders.

Swiss Withholding Tax on Dividends and Distributions

Dividends paid and similar cash or in kind distributions made by the Company to a holder of Shares or ADSs (including dividends on liquidation proceeds and stock dividends) are subject to a Swiss federal withholding tax (the “withholding tax”) at a rate of 35 percent. The withholding tax must be withheld by the Company from the gross distribution and be paid to the Swiss Federal Tax Administration. The withholding tax is refundable in full to a Swiss resident who receives a distribution if such resident is the beneficial owner of the payment and duly reports the gross distribution received on his tax return. However, the Company might be entitled to settle its withholding tax obligations by simply notifying the Swiss Federal Tax administration if the distribution is paid to a Swiss resident company holding at least 20 percent of the Company’s equity. An individual or corporation that is a resident of a country other than Switzerland and that owns or is deemed to own Shares or ADSs will be subject to the 35 percent withholding tax. The withholding tax, however, is a final charge for non-residents unless, such an individual or corporation could be eligible for an exemption or refund of the withholding tax if a tax treaty is in effect between such individual’s or corporation’s country of residence and Switzerland. Switzerland has concluded such treaties with the United States, Canada, Japan, all European Union member states and certain other countries.

The Depositary intends to make use of informal procedures under which it will submit a certificate to the Swiss tax authorities in respect of all United States holders who have provided certifications of their entitlement to treaty benefits. So long as these procedures remain available it generally should be possible for qualifying United States holders to recover on a timely basis withholding tax in excess of the 15 percent rate as provided in the Treaty. There can be no assurance that these informal procedures will remain available.

Alternatively, a United States holder that qualifies for Treaty benefits (a “United States resident”) may apply on an individual basis for a refund of the withholding tax withheld in excess of the 15 percent Treaty rate. The claim for refund must be filed with the Swiss Federal Tax

Administration, Eigerstrasse 65, 3003 Berne, Switzerland (http://www.estv.admin.ch). The form used for obtaining a refund is Swiss Tax Form 82I for individuals, Form 82C for corporations, Form 82 E for other United States citizens, and Form 829 for Swiss citizens resident in the United States, which may be obtained from any Swiss Consulate General in the United States or from the Swiss Federal Tax Administration at the address above. The form must be filled out in triplicate with each copy duly completed and signed before a notary public in the United States. The form may be filed no earlier than July 1 or January 1 following the dividend date but no later than December 31 of the third year following the calendar year that includes the dividend date. The form must be accompanied by evidence of the deduction of withholding tax withheld at the source.

Stamp Duties upon Transfer of Securities (Umsatzabgabe)

The sale of Shares may be subject to a Swiss securities transfer stamp duty of 0.15 percent calculated on the sale proceeds if it occurs through or with a Swiss bank or other Swiss securities dealer as defined in the Swiss Federal Stamp Tax Act.

Summary of Swiss Tax Consequences

A non-resident holder of Swiss Shares will not be liable for any Swiss taxes other than the withholding tax described above and the Swiss Securities transfer stamp duty if the transfer occurs through or with a Swiss securities dealer. If, however, the Shares can be attributed to a permanent establishment or fixed place of business maintained by such person within Switzerland, the Shares may be subject to Swiss taxes generally.

United States Taxation

The following is a general summary of certain United States federal income tax consequences of the purchase, ownership, and disposition of Shares and ADSs. The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase Shares or ADSs, and prospective investors should consult their professional advisors as to the tax consequences of their purchase, ownership and disposition of Shares and ADSs.

For purposes of this discussion, a “United States holder” means any individual, citizen or resident of the United States for United States federal income tax purposes, corporations created or organized under the laws of the United States or any state thereof or the District of Columbia, or estates or trusts which are residents in the United States for United States federal income tax purposes, in each case who:

•   is not also resident of, or ordinarily resident in Switzerland for Swiss tax purposes;

•   is not engaged in a trade or business in Switzerland through a permanent establishment; and

•   does not own, directly, indirectly or by attribution, 10 percent or more of the Shares (by vote or value).

This summary is of a general nature only and does not discuss all aspects of United States and Swiss taxation that may be relevant to a particular investor. This summary deals only with Shares and ADSs held as capital assets and does not address special classes of purchasers, such as dealers in securities, United States holders whose functional currency is not the U.S. dollar and certain United States holders (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions and persons subject to the alternative minimum tax) who may be subject to special rules. In particular, the following summary does not address the adverse tax treatment of United States holders who own, directly, or by attribution, one or more of the Company’s outstanding classes of voting stock in the event that the Company were to be classified as a “Controlled Foreign Corporation” for United States federal income tax purposes. The Company was not classified as a Controlled Foreign Corporation at December 31, 2004. There can, however, be no assurance that it will not be a Controlled Foreign Corporation in the future.

Owners of ADSs are advised to consult their own tax advisors with respect to the United States federal, state and local tax consequences, of the ownership of ADSs and Shares applicable to their particular tax situations.

For purposes of tax treaties and United States tax laws, United States holders will be treated as the owners of the Shares represented by ADSs.

United States Income Tax on Dividends

The gross amount of any dividends received with respect to the ADSs or Shares (including amounts withheld in respect of the Withholding Tax) generally will be subject to United States federal income taxation as foreign source dividend income, and will not be eligible for the dividends received deduction allowed to corporations. For this purpose, a “dividend” will include any distribution paid by the Company with respect to the ADSs or Shares, as the case may be, but only to the extent such distribution is not in excess of the Company’s current and accumulated earnings and profits as defined for United States federal income tax purposes. Any distribution that exceeds the Company’s earnings and profits will be treated as a nontaxable return of capital to the extent of the United States holder’s tax basis in the ADSs or Shares and thereafter as capital gain. Dividends paid in Swiss francs will be includable in the income of United States holders in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt by the holder, or in the case of Shares held in ADS form, by the Depositary. If dividends paid in Swiss francs are converted into U.S. dollars on the date of receipt, holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.

Subject to generally applicable limitations under United States tax law, the non-recoverable portion of the Withholding Tax (at the 15 percent rate as provided in the Treaty) will be treated as a foreign income tax that is eligible for credit against a holder’s United States federal income tax liability or, at the holder’s election, may be deducted in computing taxable income.

United States residents that receive a Treaty refund may be required to recognize foreign currency gain or loss to the extent the amount of the refund (in U.S. dollars) received by the United States resident differs from the U.S. dollar equivalent of the Treaty refund on the date the dividends were received by the United States resident or (in the case of ADSs) the Depositary.

United States Capital Gains Tax upon Disposal of ADSs or Shares

Gains realized by a United States holder on the sale or other disposition of ADSs or Shares generally will be subject to United States federal income taxation as capital gain, and generally will be treated as United States source income. A United States holder will recognize capital gain or loss on the disposition of ADSs or Shares equal to the difference between the amount realized upon the disposition and the United States holder’s tax basis in the ADSs or Shares. Such capital gain will be long-term capital gain if the ADSs or Shares were held for more

than one year. Deposits and withdrawals of Shares in exchange for ADSs will not result in the realization of gain or loss for United States federal income tax purposes.

United States Information Reporting and Backup Withholding Obligations

Dividends paid on ADSs or Shares to a United States person are generally subject to information reporting and may be subject to backup withholding at the rate of 28 percent for payments made after 2002, unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred.

Dividends paid on ADSs or Shares to a holder that is not a United States person are generally exempt from information reporting and backup withholding under current law. However, such a holder may be required to provide a certification to ensure such exemption.

Documents on Display

The documents referred to herein can be obtained from the Company at its registered office at Klybeckstrasse 141, 4002 Basel, Switzerland.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Market risk due to fluctuating foreign currency exchange rates and interest rates

As a result of its global operating and financial activities, the Company is exposed to market risk from changes in foreign currency exchange rates and interest rates. The Company actively manages the resulting exposure through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. In accordance with the written policies of the Company, such instruments are used only as risk management tools and not for speculative or trading purposes. The Company’s written policy with respect to the use of risk management tools has not changed since 1997.

The Company collects global cash flow information on a monthly basis and, based on these cash flows, prepares a consolidated exposure forecast by currency and determines to what extent these consolidated currency exposures will be hedged. Foreign currency forwards and swaps as well as options may be used to reduce the Company’s exposure that results from the market risk arising from the fluctuation of foreign currency exchange rates. To reduce the cost of such activities, the Company may sell covered options. Potential losses, if any, on these sold options would be substantially offset by gains on the underlying transactions that are hedged. The Company’s primary net foreign currency market exposures include the U.S. dollar, the euro, the British pound and the Japanese yen. In 2004, the Company’s hedging activities have to a large extent focused on the U.S. dollar. However, hedging activities on the other major currencies as well as on selected minor currencies have also been undertaken.

The fair value of foreign currency exchange contracts is sensitive to changes in foreign currency exchange rates. As of December 31, 2004, a 10 percent appreciation in foreign currency exchange rates against the Swiss franc, with all other variables held constant, would have resulted in a decrease in the fair value of the Company’s financial instruments of CHF 60 million. Conversely, a 10 percent depreciation in these currencies would have resulted in an increase in the fair value of the Company’s financial instruments of CHF 81 million as of December 31, 2004. As the impact of offsetting changes in the fair value of the underlying positions is not included in the sensitivity model, these results are not indicative of an increase or decrease in the Company’s actual exposure to foreign currency exchange risk. Consistent with the nature of the economic hedge of such foreign currency exchange contracts, such unrealized gains or losses would be compensated by the corresponding decreases or increases of the underlying transaction being hedged. The fair value of foreign currency forwards and swaps is calculated by separating the two components and applying the forward rate and the balance sheet rate as well as a discount factor. The discount factor is composed of the respective yield curves as well as the number of days until maturity. The fair value of options is calculated by applying the Black-Scholes model.

The Company is exposed to market risks due to fluctuating interest rates primarily through its borrowing activities and less so through its investments. The Company utilizes borrowings denominated in Swiss francs and in foreign currencies to fund its working capital and investment needs. The majority of short-term borrowings are in foreign currencies and floating interest rate instruments whereas the majority of long-term borrowings are in fixed interest rate instruments. The Company manages its ratio of fixed to floating interest rate instruments with the objective of achieving a mix which is appropriate both in terms of risk and cost. To manage this mix effectively, the Company, selectively, enters into interest rate swaps and forward rate agreements, in which it agrees to exchange various combinations of fixed and variable interest rates based on agreed-upon nominal amounts.

There is inherent roll-over risk for borrowings as they mature and are renewed at current market rates. Based on the short-term and long-term debt balance outstanding at December 31, 2004, a hypothetical one percentage point increase in interest rates for a one-year period would have reduced net income by CHF 3 million. The assumption is that the floating rate debt would be impacted by this hypothetical one percentage point increase but not fixed rate agreements.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modification to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

Based on management’s evaluation (with the participation of the Chief Executive Officer and Chief Financial Officer), the Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2004, the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective to provide reasonable assurance that information required to be disclosed in this Annual Report on Form 20-F is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Since the last evaluation by the Company of the Company’s internal controls there have not been any significant changes in the internal controls, or in factors that could significantly affect the internal controls.

Item 16A. Audit Committee Financial Expert

For information related to the Audit Committee Financial Expert see Item 6 — Directors, Senior Management and Employees.

Item 16B. Code of Ethics

For information related to the Company’s Code of Ethics see Item 6 — Directors, Senior Management and Employees.

Item 16C. Principal Accountant Fees and Services

For information related to the Audit Committee Financial Expert see Item 6 — Directors, Senior Management and Employees. For information with regard to pre-approval procedures and fees paid to the Company's auditors, see Item 6 — Directors, Senior Management and Employees — Auditors.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable

Item 16E. Purchases of Equity Securities by the Company

	Number of shares purchased
	Purchases outside		Purchases under				Percentage of the
	share buy-back		share buy-back				monthly trading		Monthly trading		Average price paid
Period	program		program		Total purchases		volume		volume		(CHF)
January		25 000		0		25 000		0.35		7 149 141		96.54
February		169 439		1 068 000		1 237 439		9.90		12 502 878		94.37
March		298 265		694 000		992 265		9.56		10 382 276		88.72
April		95 325		0		95 325		0.90		10 646 944		86.70
May		294 158		0		294 158		3.15		9 335 232		88.14
June		64 343		0		64 343		0.66		9 798 848		86.28
July		0		0		0		0.00		5 529 864		0.00
August		381 536		0		381 536		2.98		12 795 714		79.44
September		440 527		0		440 527		5.53		7 972 302		77.67
October		0		0		0		0.00		13 780 748		0.00
November		49 648		0		49 648		0.60		8 211 086		80.84
December		9 221		0		9 221		0.11		8 393 362		81.70
Average		152 289		146 833		299 122				9 708 200		88.11
Total		1 827 462		1 762 000		3 589 462		3.08		116 498 395

The Company’s Share buy-back program over the second trading line began on August 27, 2003 and ended on August 26, 2004. Until the end of 2003, the Company had repurchased 1 303 500 shares. Its Annual General Meeting approved the cancellation of these Shares. From January 1, 2004 until the end of the Share buy-back program, the Company purchased another 1 762 000 Shares, which are proposed to be cancelled. The shareholders will vote on this proposal at the Company’s Annual General Meeting on March 3, 2005.

Under Swiss law (art. 659 para. 1 Swiss Code of Obligations), a company is allowed to purchase and to hold a maximum of 10 percent of its own shares, subject to certain exceptions. Before May 7, 2004, these 10 percent corresponded to a maximum of 7 213 011 Shares the Company could have acquired; as a consequence of the cancellation of 1 303 500, the maximum number of Shares the Company would have been allowed to acquire after the said amounted to 7 082 662.

Shares purchased but not cancelled are held as treasury stock and may be sold back to the market.

PART III

Item 17. Financial Statements

The Company is furnishing financial statements pursuant to the instructions of Item 18 of Form 20-F.

Item 18. Financial Statements

See pages F-1 through F-47

Item 19. Exhibits

(a) The following consolidated financial statements, together with the auditors’ reports of Ernst & Young Ltd, are filed as part of this Annual Report:

Index to Consolidated Financial Statements	Page
Report of Independent Auditors — Ernst & Young Ltd		F-2
Consolidated Statements of Income for the Years ended December 31, 2004, 2003 and 2002		F-3
Consolidated Balance Sheets at December 31, 2004 and 2003		F-4
Consolidated Statements of Cash Flows for the Years ended December 31, 2004, 2003 and 2002		F-5
Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2004, 2003 and 2002		F-6
Business Segment Data		F-7
Geographic Data		F-10
Notes to Consolidated Financial Statements		F-11

All schedules are omitted because they are not applicable or because the required information is contained in the Consolidated Financial Statements or Notes thereto.

(b)   Documents filed as exhibits to this registration statement:

+1.1	Articles of Association of Ciba Specialty Chemicals Holding Inc. dated February 26, 2004.
**1.2	Specimen share certificate of Ciba Specialty Chemicals Holding Inc.
*2.1	Second Amended and Restated Deposit Agreement dated as of August 2, 2000, between Ciba Specialty Chemicals Holding Inc., Citibank, N.A., and the additional parties named therein.
*2.2	Form of American Depositary Receipt of Ciba Specialty Chemicals Holding Inc.
4.1	EMTN Programme Agreement in respect of a USD 2 billion Euro Medium Term Note Programme dated March 27, 2003, among Ciba Specialty Chemicals PLC, Ciba Specialty Chemicals Corporation, Ciba Specialty Chemicals Eurofinance Ltd., Ciba Spezialitätenchemie Holding Deutschland GmbH, Ciba Specialty Chemicals Holding Inc., Credit Suisse First Boston (Europe) Limited and the additional parties named therein.
4.2	EMTN Deed of Covenant in respect of a USD 2 billion Euro Medium Term Note Programme dated March 27, 2003, by each of Ciba Specialty Chemicals Corporation, Ciba Specialty Chemicals Eurofinance Ltd., Ciba Specialty Chemicals PLC, Ciba Spezialitätenchemie Holding Deutschland GmbH, Ciba Specialty Chemicals Holding Inc., in favor of the account holders of Clearstream Banking, société anonyme and the additional beneficiaries named therein.
4.3	EMTN Deed of Guarantee in respect of a USD 2 billion Euro Medium Term Note Programme dated March 27, 2003, by Ciba Specialty Chemicals Holding Inc.
4.4	EMTN Agency Agreement in respect of a USD 2 billion Euro Medium Term Note Programme dated March 27, 2003, among Ciba Specialty Chemicals PLC, Ciba Specialty Chemicals Corporation, Ciba Specialty Chemicals Eurofinance Ltd., Ciba Spezialitätenchemie Holding Deutschland GmbH, Ciba Specialty Chemicals Holding Inc., The JP Morgan Chase Bank and J.P. Morgan Bank Luxembourg S.A. The total amount of long-term debt securities of the Company or of its subsidiaries authorized under any other instrument does not exceed 10 percent of the total assets of the Company on a consolidated basis. The Company hereby agrees to furnish to the Commission, upon its request, a copy of any instruments defining the rights of holders of long-term debt of the Company or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
**4.8	Master Spin-off Agreement dated December 20, 1996, between Novartis AG and Ciba Specialty Chemicals Holding Inc.
**4.9	Transaction Agreement re: Sale of the Performance Polymers division to Morgan Grenfell Private Equity dated December 14, 1999, by and between Ciba Specialty Chemicals Holding Inc. and Avanti N03.
8.1	List of Certain Subsidiaries.
10.1	Consent of Ernst & Young Ltd.
12.1	Certification Pursuant to Rule 13a-14(A)/15d-14(A)

12.2	Certification Pursuant to Rule 13a-14(A)/15d-14(A)
13.1	Certification Pursuant to 18 U.S.C. Section 1350
+	Incorporated by reference from the Form 6-K of Ciba Specialty Chemicals Holding Inc., filed May 14, 2004. (File No. 333-56040)
*	Incorporated by reference to Post-Effective Amendment No. 1 to the Registration Statement of Ciba Specialty Chemicals Holding Inc. on Form F-6, filed August 2, 2000. (File No. 082-04541)
**	Incorporated by reference to the Registration Statement of Ciba Specialty Chemicals Holding Inc. on Form 20-F

Signature

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, Ciba Specialty Chemicals Holding Inc. certifies that it has reasonable grounds to believe that it meets all requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Ciba Specialty Chemicals Holding Inc.,
	By:	/s/ Michael Jacobi
		Name: Michael Jacobi
		Title: Chief Financial Officer
Date: February 1, 2005

Index to Consolidated Financial Statements	Page
Report of Independent Auditors — Ernst & Young Ltd		F-2
Consolidated Statements of Income for the Years ended December 31, 2004, 2003 and 2002		F-3
Consolidated Balance Sheets at December 31, 2004 and 2003		F-4
Consolidated Statements of Cash Flows for the Years ended December 31, 2004, 2003 and 2002		F-5
Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2004, 2003 and 2002		F-6
Business Segment Data		F-7
Geographic Data		F-10
Notes to Consolidated Financial Statements		F-11

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ciba Specialty Chemicals Holding Inc.

We have audited the accompanying consolidated balance sheets of Ciba Specialty Chemicals Holding Inc. (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004, appearing on pages F-3 to F- 47 of this Annual Report. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements 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. An audit includes 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, and 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 consolidated financial position of Ciba Specialty Chemicals Holding Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 2003 the Company adopted Financial Accounting Standards Board Interpretation No. 46 “Consolidation of Variable Interest Entities”. The Company also changed its method of accounting for stock-based employee compensation in 2003.

Ernst & Young Ltd
/s/ Cherrie Chiomento	/s/ Martin Mattes
Cherrie Chiomento	Martin Mattes
Zürich, Switzerland, January 21, 2005

F-2

Consolidated Statements of Income

(in millions of Swiss francs, except share and per share data)

Year ended December 31,	Notes		2004			2003			2002
Net sales				7 027			6 646			7 085
Cost of goods sold				(4 856	)		(4 579	)		(4 729	)
Gross profit				2 171			2 067			2 356
Selling, general and administrative				(1 227	)		(1 185	)		(1 247	)
Research and development				(288	)		(281	)		(294	)
Amortization of other intangible assets		8		(47	)		(33	)		(33	)
Income from earnings of equity affiliates		9		1			3			6
Restructuring and special charges		23		(91	)		0			0
Operating income				519			571			788
Interest expense				(141	)		(142	)		(159	)
Interest income				33			34			49
Other financial expense, net				(39	)		(24	)		(105	)
Income from continuing operations before income taxes
and minority interest				372			439			573
Provision for income taxes		14		(85	)		(74	)		(154	)
Minority interest				(4	)		(5	)		(13	)
Income from continuing operations (i)				283			360			406
Income from discontinued operations, net of tax		21		28			0			0
Income before cumulative effect of change in accounting principles				311			360			406
Cumulative effect of change in accounting principles, net of tax		1		0			(16	)		0
Net income (i)				311			344			406
Earnings per share, basic and diluted		19
Continuing operations (i)				4.28			5.26			5.92
Discontinued operations				0.43			0.00			0.00
Cumulative effect of change in accounting principles				0.00			(0.23	)		0.00
Net income per share (i)				4.71			5.03			5.92
Weighted average shares outstanding
Basic				66 059 479			68 361 123			68 549 964
Diluted				66 059 479			68 361 123			68 575 058

(i)   Effective January 1, 2003, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123, as amended. Had the Company applied the fair value method for all periods prior to 2003, the pro forma income from continuing operations would have been in 2002 CHF 395 million; pro forma basic and diluted earnings per share for income from continuing operations would have been in 2002 CHF 5.76; pro forma net income would have been in 2002 CHF 395 million; pro forma basic and diluted earnings per share for net income would have been in 2002 CHF 5.76. See note 17.

See notes to consolidated financial statements

F-3

Consolidated Balance Sheets

(in millions of Swiss francs, except share and per share data)

December 31,	Notes		2004			2003
Assets
Current assets
Cash and cash equivalents				1 614			2 386
Short-term investments				22			11
Accounts receivable, net		4		1 064			940
Inventories		5		1 292			1 231
Prepaid and other current assets				390			371
Total current assets				4 382			4 939
Property, plant and equipment, net		6		3 015			2 963
Goodwill		7		1 561			1 358
Other intangible assets, net		8		823			647
Financial investments		9		180			147
Other assets		10		1 045			1 044
Total assets				11 006			11 098
Liabilities and shareholders’ equity
Current liabilities
Accounts payable				634			528
Short-term debt		12		559			259
Income taxes payable				116			152
Accruals and other current liabilities		11		831			841
Total current liabilities				2 140			1 780
Long-term debt		13		2 917			3 187
Deferred income taxes		14		424			407
Other liabilities		15		1 306			1 417
Total liabilities				6 787			6 791
Minority interest				68			62
Shareholders’ equity		16
Common stock (i)				212			433
Additional paid-in capital				4 127			4 210
Retained earnings				853			541
Accumulated other comprehensive loss				(567	)		(493	)
Treasury stock, at cost (ii)				(474	)		(446	)
Total shareholders’ equity				4 151			4 245
Total liabilities and shareholders’ equity				11 006			11 098

(i)   Par value CHF 3 per share (December 31, 2003: CHF 6 per share), 80 826 617 shares authorized and 70 826 617 shares issued as of December 31, 2004 (82 130 117 shares authorized and 72 130 117 shares issued as of December 31, 2003).

(ii)   December 31, 2004: 4 686 272 treasury shares; December 31, 2003: 4 363 901 treasury shares.

See notes to consolidated financial statements

F-4

Consolidated Statements of Cash Flows

(in millions of Swiss francs)

Year ended December 31,	2004			2003			2002
Cash flows from operating activities
Net income		311			344			406
Deduct income from discontinued operations, net of tax		(28	)		0			0
Income from continuing operations		283			344			406
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		394			366			385
Deferred income taxes		18			24			50
Restructuring and special charges		91			0			0
Restructuring payments		(11	)		0			(12	)
Loss (gain) on sale/disposal of assets, net		(2	)		(7	)		2
Realized (gain) loss on available-for-sale securities		0			(12	)		38
Minority interest and other non-cash items, net		84			16			161
Changes in operating assets and liabilities:
Short-term investments		(8	)		5			25
Accounts receivable, net		(60	)		56			4
Inventories		(45	)		173			(11	)
Accounts payable		34			(9	)		90
Other operating assets and liabilities		(147	)		77			(100	)
Net cash provided by operating activities		631			1 033			1 038
Cash flows from investing activities
Capital expenditures		(294	)		(233	)		(250	)
Proceeds from sale of assets		21			67			22
Sale (acquisition) of businesses, net of cash (i)		(810	)		(71	)		(116	)
Loans and other long-term assets		32			(2	)		(5	)
Net cash used in investing activities		(1 051	)		(239	)		(349	)
Cash flows from financing activities
Increase (decrease) in short-term debt, net		51			(25	)		22
Proceeds from long-term debt		31			715			1
Repayments of long-term debt		(27	)		(1 084	)		(19	)
Dividends paid		0			0			(134	)
Capital reduction paid		(197	)		(206	)		(69	)
Treasury stock transactions		(162	)		(142	)		344
Other		0			0			(1	)
Net cash provided by (used in) financing activities		(304	)		(742	)		144
Effect of exchange rate changes on cash and cash equivalents		(48	)		(27	)		(74	)
Net (decrease) increase in cash and cash equivalents		(772	)		25			759
Cash and cash equivalents, beginning of year		2 386			2 361			1 602
Cash and cash equivalents, end of year		1 614			2 386			2 361
Supplemental cash flow information
Cash paid for interest		(144	)		(103	)		(177	)
Cash paid for income taxes		(108	)		(60	)		(90	)

(i)   Sale (acquisition) of businesses, net of cash, includes cash paid for acquisitions and cash payments attributable to the divestment in 2000 of the Performance Polymers business. See note 21.

See notes to consolidated financial statements

F-5

Consolidated Statements of Shareholders’ Equity

(in millions of Swiss francs, except share and per share data)

												Accumulated			Treasury			Treasury
						Additional						other compre-			stocks:			stocks:
			Common			paid-in			Retained			hensive			Unreserved			Reserved
	Notes		stock			capital			earnings			loss			shares			shares			Total
Balance at December 31, 2001				721			3 957			(74	)		(240	)		(65	)		(391	)		3 908
Net income										406												406
Currency translation adjustments													(86	)								(86	)
Realization of previously unrealized loss on available-for-sale securities, net of tax of CHF 16		9											28									28
Unrealized loss on available-for-sale securities, net of tax of CHF 2													(5	)								(5	)
Unrealized gain on cash flow hedges, net of tax of CHF 1													1									1
Minimum pension liability adjustment, net of tax of CHF 37		18											(58	)								(58	)
Comprehensive income (loss)										406			(120	)								286
Cash dividends declared and paid (i)										(134	)											(134	)
Capital reduction paid (ii)				(72	)		3															(69	)
Treasury stock transactions		16					216									(13	)		150			353
Other							10															10
Balance at December 31, 2002				649			4 186			198			(360	)		(78	)		(241	)		4 354
Net income										344												344
Currency translation adjustments													(131	)								(131	)
Realization of previously unrealized gain on available-for-sale securities, net of tax of CHF 4		9											(4	)								(4	)
Unrealized gain on available-for-sale securities, net of tax of CHF 4													5									5
Minimum pension liability adjustment, net of tax of CHF 1		18											(2	)								(2	)
Other													(1	)								(1	)
Comprehensive income (loss)										344			(133	)								211
Capital reduction paid (ii)				(216	)		10															(206	)
Treasury stock transactions		16					3									11			(138	)		(124	)
Other							11			(1	)											10
Balance at December 31, 2003				433			4 210			541			(493	)		(67	)		(379	)		4 245
Net income										311												311
Currency translation adjustments													(73	)								(73	)
Other (iii)													(1	)								(1	)
Comprehensive income (loss)										311			(74	)								237
Capital reduction paid (ii)				(213	)		16															(197	)
Share cancellation		16		(8	)		(110	)											118			0
Treasury stock transactions		16					2									(3	)		(143	)		(144	)
Other							9			1												10
Balance at December 31, 2004				212			4 127			853			(567	)		(70	)		(404	)		4 151

(i)   Cash dividend declared and paid in 2002 was CHF 2.00 per share.

(ii)   Capital reduction paid in 2004 and 2003 was CHF 3.00 per share (2002: CHF 1.00 per share).

(iii)   In 2004, other includes CHF 1 million for the movement in minimum pension liability, net of tax. See note 16.

See notes to consolidated financial statements

F-6

Business Segment Data

(in millions of Swiss francs except percentages)

	Plastic			Coating			Water & Paper			Textile						Total
	Additives			Effects			Treatment			Effects			Corporate			Consolidated
2004
Net sales		1 895			1 818			2 014			1 300			—			7 027
EBITDA		319			394			257			117			(174	)		913
Depreciation & amortization		(95	)		(103	)		(131	)		(56	)		(9	)		(394	)
Operating income		224			291			126			61			(183	)		519
Interest expense														(141	)		(141	)
Interest income														33			33
Other financial expense, net														(39	)		(39	)
Provision for income taxes														(85	)		(85	)
Minority interest														(4	)		(4	)
Income from discontinued operations, net of tax														28			28
Net income																	311
EBITDA margin		16.8	%		21.7	%		12.7	%		9.0	%		—			13.0	%
Operating income margin		11.9	%		16.0	%		6.3	%		4.7	%		—			7.4	%
Research and development expenditures		97			101			42			29			19			288
Capital expenditures		76			82			81			35			20			294
2003
Net sales		1 822			1 807			1 616			1 401			—			6 646
EBITDA		265			397			233			129			(87	)		937
Depreciation & amortization		(100	)		(97	)		(103	)		(60	)		(6	)		(366	)
Operating income		165			300			130			69			(93	)		571
Interest expense														(142	)		(142	)
Interest income														34			34
Other financial expense, net														(24	)		(24	)
Provision for income taxes														(74	)		(74	)
Minority interest														(5	)		(5	)
Cumulative effect of change in accounting principles, net of tax														(16	)		(16	)
Net income																	344
EBITDA margin		14.6	%		22.0	%		14.4	%		9.2	%		—			14.1	%
Operating income margin		9.1	%		16.6	%		8.1	%		4.9	%		—			8.6	%
Research and development expenditures		107			95			33			32			14			281
Capital expenditures		64			79			55			29			6			233
2002
Net sales		1 903			1 920			1 718			1 544			—			7 085
EBITDA		332			440			282			208			(89	)		1 173
Depreciation & amortization		(106	)		(99	)		(109	)		(66	)		(5	)		(385	)
Operating income		226			341			173			142			(94	)		788
Interest expense														(159	)		(159	)
Interest income														49			49
Other financial expense, net														(105	)		(105	)
Provision for income taxes														(154	)		(154	)
Minority interest														(13	)		(13	)
Net income																	406
EBITDA margin		17.5	%		22.9	%		16.4	%		13.5	%		—			16.6	%
Operating income margin		11.9	%		17.7	%		10.1	%		9.2	%		—			11.1	%
Research and development expenditures		107			100			33			36			18			294
Capital expenditures		94			74			45			34			3			250

F-7

Business Segment Data

(in millions of Swiss francs)

Net assets	2004			2003
Plastic Additives		1 322			1 247
Coating Effects		1 853			1 773
Water & Paper Treatment		3 184			2 432
Textile Effects		1 162			1 115
Shared operating net assets not allocated to segments (i)		37			(79	)
Non-operating net assets (ii)		1 636			2 852
Invested capital (iii)		9 194			9 340
Items not included in invested capital		(5 043	)		(5 095	)
Total shareholders’ equity (total net assets)		4 151			4 245

Components of items not included in invested capital	2004			2003
Net deferred tax liabilities		(193	)		(170	)
Short-term debt		(559	)		(259	)
Long-term debt		(2 917	)		(3 187	)
Other liabilities		(1 306	)		(1 417	)
Minority interest		(68	)		(62	)
Total items not included in invested capital		(5 043	)		(5 095	)

Total assets	2004		2003
Plastic Additives		1 604		1 514
Coating Effects		2 100		2 020
Water & Paper Treatment		3 528		2 661
Textile Effects		1 365		1 304
Shared operating assets not allocated to segments (i)		357		290
Non-operating assets (ii)		2 052		3 309
Total assets		11 006		11 098

(i)	Shared operating net assets not allocated to segments and shared operating assets not allocated to segments include certain net assets and shared assets of Group Service Units and Headquarters. Group Service Units provide services to the segments.
(ii)	Non-operating net assets and non-operating assets include primarily cash and cash equivalents and certain financial investments. Also included in non-operating net assets are certain Group Service Units’ current liabilities.
(iii)	Invested capital equals total assets less non-interest bearing current liabilities (i.e., accounts payable, income taxes payable as well as accruals and other current liabilities, except the current portion of deferred tax liabilities) and less deferred tax assets.

See notes to consolidated financial statements

F-8

Business Segment Data

(in millions of Swiss francs)

     During 2004, the Company reorganized from five into four reporting segments and restated all current and prior period segment information to reflect the new segment structure. The Company’s four segments are: Plastic Additives, Coating Effects, Water & Paper Treatment and Textile Effects. The Company’s reporting segments develop, manufacture and market different products, services and solutions. They are managed separately because each segment has different customer markets and requires different technology and marketing strategies. The same accounting policies are consistently applied to reportable segments across the Company and all segments generate revenue in the same manner. Reported sales reflect only sales to third parties. Intersegment sales are not material.

     The Company evaluates the performance of its reportable segments based on operating income as well as Earnings Before Interest, Taxes, Depreciation, Amortization and Minority Interest (EBITDA). Segment operating income includes all operating items relating to the segments and excludes restructuring and special charges and other items that principally apply to the Company as a whole. Segment EBITDA and EBITDA margin together provide management with additional quantitative measures of the quality of sales growth as well as the results of past and current actions taken to manage costs. In addition, as the Company operates in a multinational environment and competes with companies in different countries, the use of EBITDA as a performance measure provides improved comparability of the reportable segments’ results with those of their competitors, some of which employ significantly different methods of depreciation. Management is therefore of the opinion that these financial indicators are an important measure of comparative operating performance for the businesses of the Company.

     EBITDA, EBITDA margin derived therefrom and invested capital are non-United States Generally Accepted Accounting Principles (“U.S. GAAP”) supplementary financial indicators. As with any supplementary financial indicator these supplementary financial indicators should be considered in addition to, not as a substitute for, operating income, net income, cash flow from operating activities, total assets, operating income margin and other measures of financial performance and liquidity reported in accordance with U.S. GAAP. The Company derives EBITDA, EBITDA margin and invested capital from financial measures prepared in accordance with U.S. GAAP.

Description of Segments

     The segment Plastic Additives develops, manufactures and markets products and provides services to the plastic, rubber, adhesives lubricant, home and personal care industries. The Segment’s products are additives, which are ingredients added in small quantities to polymers and lubricants that prevent aging and corrosion and help improve appearance, durability and performance of finished goods such as polyolefins, elastomers and engineering plastics as well as adhesives, high-performance motor oils and industrial lubricants. The Segment’s service business provides customers with product application solutions.

     The segment Coating Effects is a leading global manufacturer of organic pigments and the leading supplier of photoinitiators and light stabilizers to the coatings, graphic arts and electronic industries. The Segment develops, manufactures and markets additives, pigments, as well as additive and pigment concentrates, for the coatings, printing, imaging, electronic, plastics and fibers industries. The end-user markets for its products and services are, among others, the automotive, packaging, publication, electronics, construction, photographic and digital printing industries.

     The segment Water & Paper Treatment serves the paper and water treatment as well as the detergents and hygiene industries. The Segment offers products and services to the global paper and board industry focused on increasing mill productivity as well as ‘effect chemicals’ which provides solutions for its customers in order to determine appearance, handling and performance of the paper or board. The Segment also offers products and services used to treat the water streams in industrial and municipal applications and to improve the efficiency of mineral and oil processing as well as soil additives and specialty monomers. Furthermore the Segment provides whiteners for detergents and hygiene effects for a variety of personal care products.

     The segment Textile Effects serves customers throughout the textile value chain, offering full, integrated solutions for textile processing and value adding effects. The Segment’s products include dyes and chemicals for preparation, dyeing, printing, whitening and finishing of all major textiles, as well as sizing agents for fabric weaving. The Segment also provides comprehensive services to help customers achieve their color, comfort and performance requirements.

See notes to consolidated financial statements

F-9

Geographic Data

(in millions of Swiss francs)

Net sales to customers	2004		2003		2002
Europe
Germany		635		584		567
United Kingdom		297		293		334
Italy		355		340		343
France		353		304		298
Rest of European Union (i)		1 140		933		933
Switzerland		80		99		86
Rest of Europe (i)		190		178		160
Total Europe		3 050		2 731		2 721
Americas
United States of America		1 366		1 415		1 703
Canada		212		199		223
Central America		154		167		209
South America		314		285		324
Total Americas		2 046		2 066		2 459
Asia Pacific
Japan		406		381		384
Region China		482		440		439
Rest of Asia		641		627		677
Australia and New Zealand		158		159		155
Africa and Middle East		244		242		250
Total Asia Pacific		1 931		1 849		1 905
Total net sales to customers		7 027		6 646		7 085

     Net sales to customers are based on the final destination of the sale.

Long-lived assets	2004		2003
Europe
Germany		366		378
United Kingdom		453		519
Italy		171		176
France		161		134
Rest of European Union (i)		232		88
Switzerland		593		588
Rest of Europe (i)		1		1
Total Europe		1 977		1 884
Americas
United States of America		663		743
Canada		3		3
Central America		86		94
South America		24		18
Total Americas		776		858
Asia Pacific
Japan		20		23
Region China		165		132
Rest of Asia		52		40
Australia and New Zealand		18		19
Africa and Middle East		7		7
Total Asia Pacific		262		221
Total long-lived assets		3 015		2 963

     Long-lived assets represent property, plant and equipment, net and are shown by the location of the assets.

(i)   Rest of European Union includes all other European Union member countries as of December 31, 2004, that are not specifically listed. Amounts for 2003 and 2002 have been adjusted to include the same member countries.

See notes to consolidated financial statements

F-10

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

1. Summary of significant accounting policies

Company operations

     Ciba Specialty Chemicals Holding Inc. and its consolidated subsidiaries (the “Company”) is a global leader in the discovery and manufacture of innovative specialty chemicals that provide color, performance and care for plastics, coatings, textile, paper and other products. The Company’s products and services are also used to provide clean water and to treat water streams in industrial and municipal applications.

Basis of consolidation and presentation

     The accompanying consolidated financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The assets, liabilities and results of operations of entities in which the Company has a controlling financial interest have been consolidated. Investments in which the Company exercises significant influence (generally 20-50 percent ownership interest), but does not control, are accounted for under the equity method of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

     The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results ultimately may differ from those estimates.

Foreign currency translation

     The Company’s financial statements are prepared in millions of Swiss francs (CHF million). For most operations outside Switzerland, where the functional currency is the local currency, income, expense and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at period-end exchange rates. The translation adjustments are included as a component of accumulated other comprehensive income in shareholders’ equity. The financial statements of subsidiaries that operate in economic environments that are highly inflationary maintain financial information for reporting purposes in U.S. dollars or Swiss francs and include gains and losses from translation in income. For foreign currency transactions, changes in exchange rates that arise between transaction, reporting and settlement dates result in both realized and unrealized exchange gains and losses. These amounts are included in net income for the period.

Cash equivalents

     All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Short-term investments

     Short-term investments consist of securities that are traded in highly liquid markets. Because they are held for the purpose of investing liquid funds and are readily convertible to cash, they are classified as trading securities and are carried at fair value. The fair value of short-term investments is estimated using quoted market prices. Gains and losses thereon are recorded as a component of other financial expense, net in the Consolidated Statements of Income.

Accounts receivable

     Accounts receivable are recorded at their net realizable value after deducting an allowance for doubtful accounts. Such deductions reflect either specific cases or estimates based on historical incurred losses. This also includes an allowance for country specific transfer risks.

Inventories

     The Company values its inventories at the lower of cost, determined principally on a first-in, first-out (FIFO) method, or market. Costs include all costs of production, including applicable portions of plant overhead. Allowances are made for obsolete and slow-moving inventory.

Property, plant and equipment

     Property, plant and equipment are recorded at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets ranging from approximately 20 to 50 years for buildings, 5 to 20 years for machinery and equipment, and 3 to 10 years for office furniture and fixtures and other equipment. The Company assesses its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. In such cases, if the sum of the asset’s expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the asset’s carrying amount over its fair value.

F-11

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

     Property, plant and equipment acquired through finance lease arrangements are recorded as assets at the lesser of the present value of the minimum future lease payments or their fair value at the date of acquisition and depreciated over the useful life of the asset or, if the lease does not provide for the transfer of ownership of the assets to the Company, the lease term if it is shorter than the useful life of the asset. The corresponding obligation is recorded as a liability in the Consolidated Balance Sheets.

Goodwill and other intangible assets

Goodwill

     Goodwill acquired in business combinations is capitalized at acquisition cost and annually evaluated at the reporting unit level for impairment using a two-step impairment test. In the first step, the book value of the reporting unit’s assets, including goodwill and other intangibles, and liabilities (the “net assets”) is compared to the fair value of the reporting unit. If the fair value of the reporting unit exceeds the book value of its net assets, goodwill is deemed not impaired and the second step is not required. If, however, the fair value of the reporting unit is less than the book value of its net assets, the second step is required to measure the amount of impairment loss, if any.

     In the second step, the current fair value of the reporting unit is allocated to all of its tangible assets, other intangible assets (including unrecognized intangible assets but excluding goodwill) and liabilities (the “assets and liabilities”). This fair value allocation to the assets and liabilities is made as if the reporting unit had been acquired as of the impairment testing date in a business combination and the fair value of the reporting unit was the price that would have been paid to acquire the reporting unit. The excess, if any, of the total current fair value of the reporting unit over the sum of the individual fair values assigned to its assets and liabilities is considered to be the current implied goodwill value of the reporting unit. If the book value of the reporting unit’s goodwill exceeds this implied goodwill value, that excess is an impairment loss, which is recorded as a component of operating income in the Consolidated Statements of Income. If the book value of the reporting unit’s goodwill is less than the implied goodwill value, goodwill is not impaired.

     During 2004, 2003 and 2002, the Company completed the annual impairment test of goodwill and determined that its reported goodwill is not impaired.

Other intangible assets

     Purchased identifiable intangible assets (“other intangible assets”) are capitalized at acquisition cost. Other intangible assets with finite lives are amortized on a straight-line basis over the estimated periods that such assets are expected to contribute to the cash flows of the Company (5 to 37 years). Other intangible assets with indefinite lives are not amortized.

     The Company assesses other intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Other intangible assets with indefinite lives are reviewed at least annually for impairment, or on an interim basis if certain circumstances are present. For all other intangible assets that are tested for impairment, if the sum of the asset’s expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the asset’s carrying amount over its fair value.

Financial investments

     Financial investments comprise primarily investments in equity affiliates that are not controlled by the Company, but in which the Company maintains a significant equity ownership or other interest, and investments in unconsolidated companies (less than 20 percent ownership and not otherwise controlled by the Company).

     Investments in equity affiliates are accounted for using the equity method under which the Company originally records these at cost and subsequently adjusts the carrying amount to reflect its share of earnings less any dividends received.

     Investments in unconsolidated companies are designated as available-for-sale securities and, where quoted market prices are available, are recorded at fair value. Unrealized gains and losses on these securities, net of tax, are included as a component of shareholders’ equity in “accumulated other comprehensive income (loss)”. Where quoted market prices do not exist and where it is not cost beneficial to estimate fair value, such investments are accounted for at cost. For financial investments where the Company deems a loss in value to be other than temporary, such loss is recorded in the Consolidated Statements of Income.

Derivative financial instruments

     For derivative financial instruments designated and that qualify as fair value hedges, changes in the fair values of the derivative financial instrument and the hedged item are recognized currently in earnings. The changes in fair value of the hedged item are recorded as adjustments to its carrying amount on the balance sheet. If the derivative financial instrument in a subsequent period is no longer designated or no longer qualifies as a fair value hedge, then the changes in fair value of the hedged item are not recognized in income. The previous changes in fair value that had been recorded as adjustments to the carrying amount of the hedged item are generally amortized to earnings as the hedged item affects earnings.

     For derivative financial instruments designated and that qualify as cash flow hedges, changes in the

F-12

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

effective portion of the derivative financial instrument’s fair value are recorded in accumulated other comprehensive income in the balance sheet until the hedged item is recognized in earnings. The ineffective portion of the change in fair value of the derivative financial instrument is immediately recognized in the income statement as a component of financial income/expense. If the hedged item is a forecasted transaction that later is not expected to or will not occur, then the derivative financial instrument no longer qualifies as a cash flow hedge. As a result, fair value changes that were previously recorded in accumulated other comprehensive income are immediately recognized in earnings as a component of financial income/expense. In all other instances, when a derivative financial instrument ceases to be designated or to qualify as a cash flow hedge, the previously recorded changes in fair value remain in accumulated other comprehensive income until the hedged item affects earnings.

     For derivative financial instruments that are not designated or that do not qualify as accounting hedges, the changes in the fair value of the derivative financial instruments are recognized currently in income as a component of other financial expense, net.

Revenue recognition

     Revenue is recognized upon shipment of goods to customers. Provisions for discounts and rebates to customers, product returns and other adjustments are provided for in the same period the related sales are recorded.

Income taxes

     The provision for income taxes has been determined using the asset and liability approach and consists of income taxes currently paid or payable to taxing authorities in the jurisdictions in which the Company operates plus the change in deferred taxes for the current year. Deferred taxes represent the estimated future tax consequences of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a future tax benefit will not be realized.

     Provision has also been made for taxes that would be levied upon the remittance to the parent company of currently unremitted earnings of foreign operations. However, no such provision is made for unremitted earnings of foreign operations that are intended to be reinvested indefinitely or that can be remitted substantially free of tax. The provision for income taxes also includes income taxes from earnings of equity affiliates.

Environmental compliance and expenditures

     The measurement of environmental liabilities is based on an evaluation of currently available facts with respect to each individual site and considers factors such as existing technology, presently enacted laws and regulations and prior experience in remediation of contaminated sites. Environmental operations and maintenance as well as remediation costs are accrued when environmental assessments and the need for remediation are probable and the costs can be reasonably estimated. The estimated liability is not discounted. Actual costs to be incurred at identified sites in future periods may vary from the estimates given the inherent uncertainties in evaluating environmental exposures.

Earnings per share

     Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is similar to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities, such as stock options and convertible debt, were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings of the Company.

Restructuring

     Costs associated with exit or disposal activities that do not involve discontinued operations are included in Restructuring and special charges in the Company’s Consolidated Statements of Income. Liabilities for costs associated with exit or disposal activities are initially recognized and measured at fair value in the period in which the liability is incurred. Liabilities for one-time termination benefits provided to employees that are involuntarily terminated are recognized and measured at their fair value at the communication date unless the employees are required to render service beyond a minimum retention period in order to receive the termination benefits. If employees are required to render service beyond a minimum retention period, liabilities for the termination benefits are measured initially at the communication date based on the fair value of the liabilities as of the termination date and recognized ratably over the future service period.

     Liabilities for costs to terminate contracts before the end of their term are recognized and measured at their fair value when the contracts are terminated. Liabilities for costs that continue to be incurred under contracts for their remaining term without economic benefit to the Company are recognized and measured at their fair value when the Company ceases using the rights conveyed by the contracts. Liabilities for other costs associated with exit or disposal activities are recognized and measured at their fair value in the periods in which the liabilities are incurred.

F-13

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

New accounting standards

Stock based compensation

     Effective January 1, 2003, the Company adopted the fair value method of accounting for stock option plans as defined in SFAS No. 123 “Accounting for Stock-Based Compensation” as amended. As a consequence, employee stock option grants and other stock based compensation plans are recorded as expense over the vesting period of the award based on their fair values at the date the stock based compensation is granted. In December 2002 the FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment to FASB Statement No. 123” that allows companies adopting the fair value method under SFAS No. 123 to choose from three alternative transition methods. The Company elected to adopt the modified prospective method that recognizes stock-based compensation expense from January 1, 2003 as if the fair value based accounting method had been used to account for all outstanding unvested employee awards granted, modified or settled in prior years.

     In 2002 and prior years, the Company applied the disclosure-only provisions of SFAS No. 123 in accounting for its stock-based compensation plans that permitted the application of the intrinsic value method, as defined in Accounting Principles Board (APB) Opinion No. 25 “Accounting for Stock Issued to Employees” and related interpretations. Under APB Opinion No. 25, the Company recognized no compensation expense related to certain stock based compensation plans, as certain stock options have been granted at a price equal to the market price on the day of the grant and the discount offered under its employee share ownership plan was at a discount rate permitted without requiring compensation costs to be recorded.

Pro forma disclosure

     Pro forma net income and earnings per share determined as if the Company had used the fair value method of accounting for its stock option based compensation plans for 2002 are as follows. These pro forma amounts reflect the portion of the estimated fair value of awards granted in 2002 based on the vesting or service period over which the awards are earned.

Year ended December 31,	2002
Net income, as reported		406
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		12
Deduct: Stock-based employee compensation expense determined as if the fair value based method was used for all plans, net of related tax effects		(23	)
Pro forma net income		395
Earnings per share – basic and diluted:
Basic and diluted – as reported		5.92
Basic and diluted – pro forma		5.76

Consolidation of Variable Interest Entities

     In 2003, the FASB issued Interpretation No. 46, as revised (“FIN No. 46”) “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51”. FIN No. 46 introduced a variable interests model to determine control and consolidation of variable interest entities (“VIE”). A VIE is an entity that, by design, lacks sufficient equity or is structured such that the decision-making ability of its equity holders is limited. FIN No. 46 generally requires consolidation of a VIE by its primary beneficiary. A VIE’s primary beneficiary is the enterprise that, as a result of its interest in the VIE, absorbs a majority of the VIE’s expected losses, receives a majority of the VIE’s expected residual returns, or both. FIN No. 46 became fully applicable for financial statement reporting periods ending after March 15, 2004.

     The Company participates in a leasing arrangement with a trust that is a VIE where the Company is the primary beneficiary. Prior to the implementation of FIN No. 46, the trust was appropriately not consolidated consistent with then existing requirements. The leasing arrangement was entered into in 1995 by Ciba-Geigy, a predecessor of the Company and had been accounted for as an operating lease. The trust was created to issue debt and interest-bearing equity to fund the acquisition of land and construction of a facility thereon that it leased to the Company. The Company has not modified the leasing arrangement since its inception and currently utilizes the facility in its business operations. The lease provides the Company the option to purchase the facility in 2005 for a termination value of CHF 91 million (USD 68 million), which the trust would use to repay its debt. Should the Company choose not to purchase the facility, it will be liable for any shortfall between the market value of the facility and the termination value. Conversely, any excess market value of the facility above the termination value would be retained by the Company.

     The Company applied the provisions of FIN 46 to the trust effective July 1, 2003 resulting in the consolidation of the trust in the Company’s consolidated financial statements and the recording of a charge to 2003 net income of CHF 16 million (CHF 26 million pre-tax less CHF 10 million income taxes) for the cumulative effect of the change in accounting principle. The Company’s consolidated balance sheet as of December 31,

F-14

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

2004 includes fixed assets, net of accumulated depreciation, totaling CHF 53 million that are pledged as collateral on the obligations of the trust.

     The Company is not involved with any other significant entities in which it has ownership or other financial interests and that it currently does not consolidate, that are considered to be VIEs under FIN No. 46. Therefore, except as described above, the adoption of FIN No. 46 has not had a material effect on the Company’s results of operations or financial position.

Disclosures about pensions and other postretirement benefits

     In December 2003, the FASB issued SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, which requires additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The Company fully adopted the revised standard in 2003 (see Note 18).

Other

     There were no new accounting standards issued by the Financial Accounting Standards Board (FASB) or other authoritative standard setters that became effective during 2004 and that had a material effect on the Company’s financial statements. In addition, several other new accounting standards were issued by the FASB as of December 31, 2004 that were not required to be adopted during 2004, but will require adoption in 2005 or later. None of these issued but not yet adopted new accounting standards is expected to have a material effect on the Company’s results of operations or financial position when adopted in the future.

Reclassifications

     Certain other minor reclassifications to the 2003 and 2002 financial statements and related footnotes amounts have been made to conform to the 2004 presentation.

F-15

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

2. Exchange rates of principal currencies

			Statement of income						Balance sheet
			average rates						year-end rates
			2004		2003		2002		2004		2003
1	U.S. dollar	(USD)		1.24		1.35		1.56		1.15		1.25
1	British pound	(GBP)		2.27		2.20		2.34		2.21		2.21
1	Euro	(EUR)		1.54		1.52		1.47		1.54		1.56
100	Japanese yen	(JPY)		1.15		1.16		1.24		1.11		1.17

F-16

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

3. Acquisitions

     Effective May 31, 2004, the Company completed the acquisition of Raisio Chemicals Oy, from Raisio Group Oy, for a gross purchase price of approximately CHF 755 million comprising primarily of cash paid of CHF 662 million (EUR 436 million) and debt assumed of CHF 62 million.

     Raisio Chemicals, headquartered in Raisio, Finland supplies functional paper chemicals to the global paper and board industry. The acquisition strengthens the Segment Water and Paper Treatment’s position as a top-tier supplier in the global paper industry and provides further ‘one-stop-shop’ solutions for the Segment’s customer base, while also establishing a solid presence for the Company in Nordic and Russian markets.

     The acquisition has been accounted for under the purchase method. The other intangible assets acquired, being principally customer relationships, patents and developed technologies, are being amortized over a weighted average useful life of 22 years.

F-17

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

4. Accounts receivable

	2004			2003
Accounts receivable		1 145			1 025
Allowance for doubtful accounts		(81	)		(85	)
Total		1 064			940

F-18

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

5. Inventories

	2004		2003
Raw materials		196		159
Work in process and finished goods		1 096		1 072
Total		1 292		1 231

     Work in process and finished goods are shown after deducting allowances for obsolete, slow-moving and lower of cost or market adjustments of CHF 46 million as of December 31, 2004 and CHF 50 million as of December 31, 2003.

F-19

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

6. Property, plant and equipment

     Changes in the components of property, plant and equipment and accumulated depreciation for the years ended December 31, 2004 and 2003 were as follows:

	2004															2003
							Machinery
							and			Construction
	Land			Buildings			equipment			in progress			Total			Total
Cost at January 1,		99			1 855			5 447			152			7 553			7 700
Additions		0			5			43			246			294			233
Retirements/disposals		(1	)		(45	)		(86	)		(2	)		(134	)		(157	)
Changes in consolidation scope(i)		6			94			160			4			264			90
Currency adjustments		(3	)		(50	)		(149	)		(5	)		(207	)		(213	)
Other		11			22			75			(200	)		(92	)		(100	)
Cost at December 31,		112			1 881			5 490			195			7 678			7 553
Accumulated depreciation at January 1,					(939	)		(3 651	)					(4 590	)		(4 504	)
Depreciation					(59	)		(288	)					(347	)		(333	)
Accumulated depreciation on retirements/disposals					17			75						92			98
Changes in consolidation scope					0			0						0			(21	)
Currency adjustments					21			100						121			91
Other					14			47						61			79
Accumulated depreciation at December 31,					(946	)		(3 717	)					(4 663	)		(4 590	)
Net book value at December 31,		112			935			1 773			195			3 015			2 963

⁽ⁱ⁾    In 2004, changes in consolidation scope result primarily from the acquisition of Raisio Chemicals. In 2003, with the adoption of FIN No. 46, the Company began consolidating an entity from which it has leased a facility.

     The insurance value of the property, plant and equipment was approximately CHF 10 452 million at December 31, 2004 and CHF 10 485 million at December 31, 2003.

F-20

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

7. Goodwill

     Changes in the carrying amount of goodwill by Segment from December 31, 2003 to December 31, 2004 were as follows:

					Foreign
					currency
	December 31,				translation			December 31,
	2003		Acquisitions		adjustments			2004
Plastic Additives		62		2		(2	)		62
Coating Effects		189				0			189
Water & Paper Treatment		951		206		(3	)		1 154
Textile Effects		156				0			156
Total		1 358		208		(5	)		1 561

     Acquisitions in 2004 result mainly from the Raisio Chemicals acquisition in Segment Water & Paper Treatment.

F-21

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

8. Other intangible assets

     Other intangible assets by major class consist of the following:

	Gross					Net
	carrying		Accumulated			carrying
December 31, 2004	amount		amortization			value
Developed technology and know-how		782		(179	)		603
Patents		84		(15	)		69
Trademarks and tradenames		11		(1	)		10
Minimum pension liability — intangible asset		8		0			8
Other		145		(12	)		133
Total		1 030		(207	)		823

						Net
	Gross carrying		Accumulated			carrying
December 31, 2003	amount		amortization			value
Developed technology and know-how		752		(150	)		602
Patents		35		(9	)		26
Trademarks and tradenames		4		0			4
Minimum pension liability — intangible asset		10		0			10
Other		8		(3	)		5
Total		809		(162	)		647

     The intangible asset related to the minimum pension liability is not subject to amortization. For the remaining other intangible assets, 2004 amortization amounted to CHF 47 million (2003: CHF 33 million and 2002: CHF 33 million). Based on the other intangible assets values at December 31, 2004, the estimated future annual other intangible assets amortization expense is expected to be as follows: 2005: CHF 55 million, 2006: CHF 53 million, 2007: CHF 51 million, 2008: CHF 49 million, 2009: CHF 47 million, 2010 and thereafter CHF 560 million.

     Included in 2004 are other intangible assets recognized in connection with the acquisition of Raisio Chemicals, totaling CHF 233 million. These consist mainly of customer relationships of CHF 138 million (included in Other), patents of CHF 47 million and developed technology of CHF 30 million. These assets are being amortized over a weighted average useful life of 22 years.

F-22

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

9. Financial investments and instruments

Fair value of financial investments and instruments

     The Company determines that, due to their short-term nature, financial assets and liabilities such as cash and cash equivalents, accounts receivable, accounts payable and short-term debt, have book values approximating their fair values.

     The book value and fair value of the Company’s long-term debt is as follows:

	2004				2003
	Book		Fair		Book		Fair
	value		value		value		value
Long-term debt, including current portion		3 175		2 677		3 188		3 202

     The fair value of publicly traded long-term debt is estimated using quoted market prices. The fair value of other long-term debt is estimated by discounting future cash flows using interest rates currently available for similar debt with similar terms, credit ratings and remaining maturities.

     The fair value of financial investments for which quoted market prices are available are based on such market prices. Financial investments for which quoted market prices do not exist and where it is not practical to estimate fair value are reflected at their book value. Quoted market prices are not available for investments in equity affiliates.

Financial investments

	2004		2003
Investments in equity affiliates		147		137
Investments in unconsolidated companies		33		10
Total financial investments		180		147

     Investments in equity affiliates in 2004 include an amount of CHF 14 million resulting from the acquisition of Raisio Chemicals and its related equity affiliates.

     At December 31, 2004, the cumulative unrealized loss before tax on investments in unconsolidated companies, which is recorded in accumulated other comprehensive income, was CHF 1 million (December 31, 2003: CHF 1 million loss and December 31, 2002: no gain or loss). In 2002, the decline in the market values below the Company’s cost basis in its financial investments in unconsolidated companies, primarily the Company’s investment in Hexcel Corporation, was in management’s opinion no longer deemed to be temporary. As a result, a loss was realized in the Consolidated Statement of Income for 2002 of CHF 38 million (CHF 23 million, net of tax). In 2003, the Company sold its investment in Hexcel Corporation for net proceeds of CHF 21 million and realized a gain on the sale of CHF 16 million, which is included in the Consolidated Statement of Income for 2003.

     The most significant of investments in equity affiliates are Compagnie Industrielle de Monthey SA (investment interest maintained at 50 percent for 2004, 2003 and 2002), and Daihan Swiss Chemical Corp (investment interest maintained at 50 percent for all of 2002 and 2003, and until December 27, 2004). On December 27, 2004, Daihan Swiss Chemical Corp (Daihan Swiss) acquired the 50 percent of its shares that were not held by the Company and immediately cancelled such shares, which resulted in the Company obtaining ownership of 100 percent of Daihan Swiss. Daihan Swiss obtained the financing for this share repurchase with funds borrowed from the Company. The results of Daihan Swiss will be consolidated within the Company’s financial statements effective January 1, 2005.

     The following table presents as of December 31, 2004, 2003 and 2002, summarized financial information on a 100 percent basis for investments in companies accounted for using the equity method.

	2004			2003		2002
Sales		149			127		152
Income before taxes		1			4		21
Net income		(1	)		2		16
Total assets		178			110		136
Shareholders’ equity		273			259		280

F-23

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

     The income from earnings of equity affiliates of CHF 1 million (CHF 3 million in 2003 and CHF 6 million in 2002) are shown before taxes as a separate line item in the operating income section of the Consolidated Statements of Income. The related income tax provision of CHF 1 million (CHF 1 million in 2003 and CHF 2 million in 2002) is included in the Company’s provision for income taxes.

Derivative financial instruments

     The Company enters into derivative financial instruments in the ordinary course of business to mitigate its exposure to adverse changes in foreign exchange rates and to manage its interest rate exposures. Various risk exposures, arising from existing assets and liabilities, from future transactions in which the Company is firmly committed and from future anticipated transactions, are assessed and managed centrally by the Company’s treasury function based on the Company’s aggregate exposure. Under the Company’s written hedging policy, treasury management continuously monitors and reports the results of its risk management programs to senior management and may choose to partially or fully hedge exposures. The Company’s risk management policies do not permit the utilization of financial instruments for speculative or trading purposes.

     The Company has procedures to monitor the credit exposure amounts and manages exposure to counter-party credit risk through specific minimum credit standards and diversification of counter-parties. The counter-parties to financial instruments generally are financial institutions with a minimum ‘A’ credit rating or its equivalent and with significant experience with such instruments.

Foreign currency risk management

     A substantial portion of the Company’s cash flows is denominated in foreign currencies. The Company collects global expected cash flow information on a monthly basis and, based on these cash flows, prepares a consolidated exposure forecast by currency and determines to what extent these consolidated currency exposures will be hedged. To hedge the balance sheet and income exposure associated with diminution in value of foreign currency cash flows (principally U.S. dollars, euro, British pounds and Japanese yen), the Company primarily utilizes foreign currency forwards and swaps as well as options, which generally expire within twelve months. In order to lower the overall hedging costs, the Company may issue derivatives on existing or future positions.

     Generally, the Company does not designate foreign exchange contracts as accounting hedges. For specific anticipated transactions, the Company may designate the foreign exchange contract as a cash flow hedge. For specific firm purchase or sale commitments or for recognized foreign currency denominated assets and liabilities, the Company may designate the foreign exchange contract as a fair value hedge.

Interest rate risk management

     The Company is exposed to market risks due to fluctuating interest rates primarily through its borrowing activities and to a lesser extent through its investments. The Company issues debt using the most efficient capital markets and products to fund its working capital and investment needs, which can result in a currency or interest rate mismatch with the underlying assets. Most short-term borrowings are in foreign currencies and floating interest rate instruments, whereas the majority of long-term borrowings are in fixed interest rate instruments. The Company manages its ratio of fixed to floating interest rate with financial instruments and the objective of achieving a mix that is appropriate both in terms of risk and cost. To manage this mix effectively, the Company selectively enters into interest rate swaps and forward rate agreements, in which it agrees to exchange various combinations of fixed and variable interest rates based on agreed-upon nominal amounts.

     Interest rate swaps that qualify and are designated as a hedge against the change in the fair value of the Company’s fixed-rate debt obligations are recorded as fair value hedges. Interest rate swaps and forward rate agreements that qualify and are designated as a hedge against the variability of cash flows associated with Company’s variable-rate long-term debt are recorded as cash flow hedges.

Information with respect to fair value hedges

     There was no hedge ineffectiveness for the Company’s fair value hedges in both 2004 and in 2003. Gains resulting from hedge ineffectiveness of fair value hedges of CHF 1 million for 2002 were recorded in ‘other financial expenses, net’, in the consolidated statements of income.

F-24

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

Information with respect to cash flow hedges

     The Company has entered into natural gas forward contracts that are designated as cash flow hedges of price risk related to a portion of the Company’s forecasted natural gas purchases in the United States. The Company used natural gas forward contracts to minimize its exposure to increases in natural gas prices in 2004, 2003 and 2002. At December 31, 2004, the Company had open forward contracts with maturity dates ranging from January 2005 to March 2005. At December 31, 2004, the fair value of open natural gas forward contracts was an unrealized gain of CHF 0.7 million, before taxes (2003: CHF 1.2 million; 2002: CHF 1.7 million) recorded in other comprehensive income. If this amount were to be realized, all of it would be reclassified into cost of goods sold during the next twelve months. During 2004 and 2003, realized gains and losses recorded in cost of goods sold and hedge ineffectiveness were not significant.

Information with respect to other derivative financial instruments

     At December 31, 2004, the fair value of other derivative instruments not designated as accounting hedges was CHF 15 million (2003: CHF 41 million), consisting of CHF 19 million included in Prepaid and other current assets (2003: CHF 46 million) and CHF 4 million included in Accruals and other current liabilities (2003: CHF 5 million).

F-25

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

10. Other assets

	2004		2003
Prepaid pension costs		797		739
Deferred taxes		177		173
Loans to third parties and equity affiliates		19		73
Other		52		59
Total		1 045		1 044

F-26

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

11. Accruals and other current liabilities

	2004		2003
Payroll and employee benefits		178		201
Taxes other than income taxes		77		63
Interest		85		87
Rebates		44		52
Environmental remediation and compliance		32		28
Retirement and postemployment benefits		35		30
Deferred income taxes		70		68
Other		310		312
Total		831		841

F-27

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

12. Short-term debt

	2004		2003
Bank overdrafts		8		23
Loans		139		81
Other (i)		154		154
Current portion of long-term debt		258		1
Total		559		259

⁽ⁱ⁾ Other includes employee and retiree deposits totaling CHF 141 million at December 31, 2004 and CHF 146 million at December 31, 2003.

     The Company maintains certain commercial paper programs. The principle programs are in the United States and provide for short-term borrowings up to USD 1 000 million. At December 31, 2004 and 2003, no amounts were outstanding under these programs in the United States.

     The Company maintains a multicurrency revolving loan facility expiring 2006 that provides for borrowings in USD up to CHF 200 million equivalent as back-up support for the Company’s commercial paper program in the United States, and aggregate borrowings in multiple currencies up to CHF 500 million. A commitment fee of 45 percent of the applicable margin per annum, currently at 0.1125 percent, is paid on the unused portion of the facility. The loans bear interest at a rate of LIBOR plus 25 basis points, subject to adjustment on a sliding scale, in the range of LIBOR plus 22.5 to 42.5 basis points, depending on the Company’s debt rating. As of December 31, 2004 and 2003, there were no borrowings outstanding under this facility.

     The weighted average interest rate for short-term debt (excluding the current portion of long-term debt) calculated at December 31, 2004 was 3.7 percent and at December 31, 2003 was 3.7 percent. Unused short-term credit lines totaled CHF 655 million at December 31, 2004 and CHF 601 million at December 31, 2003.

F-28

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

13. Long-term debt

	2004			2003
Bonds and Euro Medium-Term Notes		3 036			3 071
Amounts owed to credit institutions		95			100
Other long-term debt		44			17
Total		3 175			3 188
Less: current portion of long-term debt		(258	)		(1	)
Total long-term debt		2 917			3 187

Bonds and Euro Medium-Term Notes				2004		2003
CHF	1000		3.25% Straight Bonds, principal due 2008		1 052		1 060
EUR	500		4.875% Unsecured Notes, principal due 2018		771		777
CHF	300		3.25% Straight Bonds, principal due 2009		302		303
USD	178		U.S. pollution control and industrial development bonds, principal due between 2008 and 2028 (weighted average interest rate of 2.88%)		206		224
Total bonds					2 331		2 364
EUR	114	(i)	4.875% Euro Medium-Term Note, principal due 2005		176		178
GBP	243		6.50% Euro Medium-Term Note, principal due 2013		529		529
Total Euro Medium-Term Notes					705		707
Total bonds and Euro Medium-Term Notes					3 036		3 071

(i)   The underlying note was denominated in German Marks (DEM 223).

     The annual maturities of long-term debt outstanding at December 31, 2004 are as follows: 2005 CHF 258 million; 2006 CHF 4 million; 2007 CHF 4 million; 2008 CHF 1 007 million; 2009 CHF 304 million; 2010 and thereafter CHF 1 552 million.

F-29

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

14. Income taxes

     Income from continuing operations before income taxes and minority interest consists of the following:

	2004		2003		2002
Domestic		194		222		258
Foreign		178		217		315
Total income from continuing operations before income taxes and minority interest		372		439		573

     The provision for income taxes in 2004, 2003 and 2002 from continuing operations consists of the following:

	2004		2003			2002
Domestic		24		47			62
Foreign		42		48			42
Total current provision		66		95			104
Domestic		1		(3	)		3
Foreign		17		(19	)		45
Total deferred provision		18		(22	)		48
Share of taxes from earnings of equity affiliates		1		1			2
Total provision for income taxes		85		74			154

     The Company is incorporated in Switzerland, but operates in numerous countries with differing tax laws and rates. Consequently, substantial portions of the Company’s income before income taxes and provision for income taxes are generated outside of Switzerland. The Company’s expected tax rate consists of the weighted average rate applicable in the countries in which the Company operates. The main factors causing the effective tax rate to differ from the expected tax rate are:

In percent	2004			2003			2002
Expected tax rate		30			30			30
Non-deductible items		6			5			2
Tax free income		(2	)		(1	)		(2	)
Income taxed at reduced rates		(4	)		(8	)		(3	)
Changes in valuation allowance		(1	)		1			0
Other		(6	)		(10	)		0
Effective tax rate		23			17			27

     “Non-deductible items” include the tax effect of amortization of other intangible assets in 2004, 2003 and 2002.

     “Income taxed at reduced rates” includes the tax effect of certain subsidiaries of the Company that operate in countries having lower tax rates.

     “Changes in valuation allowance” reflect increases in valuation allowances for deferred tax assets, primarily loss carryforwards in certain tax jurisdictions, the future realization of which is uncertain and decreases resulting from the release of previously established valuation allowances when realization of the related deferred tax asset occurs or becomes likely to occur in the future.

     In 2004, “Other” includes (4) percent for the release of previously established reserves following the settlement of certain outstanding tax matters. In addition, 2004 “Other” also includes the following usual items: (4) percent for the effect of tax deductions in certain of the Company’s subsidiaries that were not recognized for financial reporting purposes, 5 percent for taxes not based on profit such as franchise taxes and tax risk accruals and (3) percent for a variety of other adjustments, none of which is individually significant.

     In 2003, “Other” includes (10) percent for the release of previously established reserves, mostly the reserve released due to the settlement of a dispute between Novartis and the Company. In addition, 2003 “Other” also includes the following usual items: (4) percent for the effect of tax deductions in certain of the Company’s subsidiaries that were not recognized for financial reporting purposes, 6 percent for taxes not based on profit

F-30

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

such as franchise taxes and tax risk accruals and (2) percent for a variety of other adjustments, none of which is individually significant.

     In 2002, “Other” includes approximately 4 percent for tax adjustments, offset by (4) percent reflecting the effect of certain taxable expenses in certain of the Company’s subsidiaries that were not recognized for financial reporting purposes.

     The significant components of activities that gave rise to deferred tax assets and liabilities on the balance sheet at December 31, 2004 and 2003, were as follows:

Deferred tax assets	2004			2003
Pensions and other employee compensation		107			120
Inventory		34			21
Restructuring and special charges		10			10
Environmental reserves		148			164
Tax loss carryforwards		130			152
Other		155			74
Gross deferred tax assets		584			541
Valuation allowance		(110	)		(121	)
Net deferred tax assets		474			420
Deferred tax liabilities
Property, plant and equipment		(361	)		(391	)
Other		(306	)		(199	)
Gross deferred tax liabilities		(667	)		(590	)
Net deferred tax liabilities		(193	)		(170	)
Included in
Prepaid and other current assets		124			132
Other assets		177			173
Accruals and other current liabilities		(70	)		(68	)
Deferred income taxes		(424	)		(407	)
Net deferred tax liabilities		(193	)		(170	)

     In management’s opinion, the majority of deferred tax assets will be realized because of the depletion of certain significant tax deductions and anticipated future taxable income resulting from the Company’s operations. Valuation allowances have been established for certain tax loss carryforwards and certain long-term deferred tax assets of the Company.

     For tax return purposes, the Company has available tax loss carryforwards of approximately CHF 366 million, of which CHF 16 million will expire in the next five years and CHF 270 million will expire between five and twenty years. The remaining carryforwards do not expire.

     At December 31, 2004, unremitted earnings of subsidiaries outside of Switzerland of approximately CHF 450 million were deemed to be permanently invested. Therefore, no deferred tax liability has been recognized for taxes that might be incurred if such earnings were remitted to Switzerland.

F-31

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

15. Other liabilities

	2004		2003
Environmental remediation and compliance		477		529
Retirement and postemployment benefits		665		693
Other		164		195
Total		1 306		1 417

     The environmental remediation and compliance accrual, including the current portion, decreased in 2004 by a net CHF 48 million (2003: CHF 57 million) as a result of a CHF 43 million (2003: CHF 22 million) usage of the accrual (see note 21) and a CHF 18 million (2003: CHF 35 million) reduction related mainly to currency effects, offset in 2004 by additional reserves established in connection with the acquisition of Raisio Chemicals.

F-32

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

16. Shareholders’ equity

     The Company’s shareholders have approved the creation of authorized and conditional capital of the Company. The approval allows for the issuance of an additional 10 million registered shares with a par value of CHF 3 per share (2003: CHF 6 per share; 2002: CHF 9 per share). Of these 10 million shares, 6 million may be issued only through the exercise of option or conversion rights and the remaining 4 million may be issued until February 2006, but would be subject to certain transfer restrictions.

     At the Company’s Annual General Meeting on February 26, 2004, the shareholders voted in favor of a proposal made by the Board of Directors not to pay a dividend in 2004 (2003: no dividend payment; 2002: CHF 134 million paid on March 27, 2002). The shareholders approved an extraordinary payment to the shareholders in the form of a capital reduction of CHF 3 per share. The capital reduction was in the form of a reduction in the nominal value of each common share from CHF 6 per share to CHF 3 per share. The capital reduction payment was made on May 14, 2004, totaling CHF 197 million (2003: CHF 206 million paid on May 23, 2003; 2002: CHF 69 million paid on June 28, 2002).

     The shareholders also approved the cancellation of 1 303 500 shares of treasury stock purchased in 2003 under the Company’s share buyback program. These treasury shares were cancelled on May 7, 2004.

     According to the Swiss Code of Obligations, the Company may under certain conditions, as defined, acquire up to 10 percent of its own shares. The Company sold 1 963 591 shares in 2004 (1 202 797 shares in 2003 and 4 970 437 shares in 2002) of previously acquired treasury stock at market prices. In addition, in 2004, the Company purchased 3 589 462 shares of treasury stock (2003: 2 374 611 shares of treasury stock and 2 174 577 in 2002) at market prices. At December 31, 2004, the Company held 4 686 272 treasury shares (2003: 4 363 901 treasury shares).

     The Company designated a total of 3 751 972 shares in 2004 (3 496 234 shares in 2003) of its treasury stock as reserved shares primarily for satisfaction of future share requirements under its various outstanding employee stock option plans and also for possible future cancellation under the Company’s share repurchase program. The remaining 934 300 shares in 2004 (867 667 shares in 2003) of treasury stock have been designated as unreserved shares.

     The after-tax components of accumulated other comprehensive loss are as follows:

	2004			2003
Currency translation adjustment		(489	)		(416	)
Minimum pension liability, net of tax		(78	)		(79	)
Other, net of tax		0			2
Accumulated other comprehensive loss		(567	)		(493	)

     There was no deferred tax effect on the unrealized gains/(losses) on available-for-sale securities in either 2004 or in 2003. There was no deferred tax effect on cash flow hedges in either 2004 or in 2003 (in 2002: a tax expense of CHF 1 million). The deferred tax effect on the minimum pension liability adjustment is a deferred tax benefit of CHF 49 million in 2004 (2003: CHF 50 million; 2002: CHF 49 million). The currency translation adjustment is not adjusted for income taxes as it relates primarily to indefinite investments in non-Swiss subsidiaries.

F-33

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

17. Stock based compensation plans

     The Company applies the fair value method of accounting as defined in SFAS No. 123 “Accounting for Stock-Based Compensation” as amended, for its stock-based compensation plans. Descriptions of the terms of the Company’s plans are presented in the following paragraphs.

     In connection with the capital reduction of CHF 3 per share in 2003 (CHF 1 per share in 2002) (see note 16), the Company reduced the exercise price of its then outstanding stock options (“the capital reduction repricing”). No compensation expense was recorded as a result of those capital reduction repricings. For the Leveraged Executive Asset Plan, which is described below, the capital reduction repricing in 2003 was set by the investment bank . All exercise prices disclosed herein have been adjusted to reflect the capital reduction repricings. In connection with the capital reduction of CHF 3 per share in 2004, the exercise price of outstanding stock options was not changed.

     LEAP – As of December 31, 2004, a total of 1 042 782 share options that were granted in connection with one-time Leveraged Executive Asset Plan (LEAP) were outstanding. The options were granted in 1997 to the Company’s then key executives and non-executive Board members (participants), have an expiration date of March 15, 2005, and permit the holder thereof to purchase shares of the Company’s common stock at a price per share of CHF 107.16. Because the Company, upon establishment of the LEAP in 1997, paid a fee to a major investment bank to assume all of the Company’s obligations to the participants in the LEAP, the Company has no obligation to issue shares of its common stock nor any other obligation to the participants in connection with the LEAP.

     LTIP –The Company has a Long-Term Incentive Plan (LTIP), which grants options and restricted shares of common stock of the Company to senior management, other key employees and, in 2002, to non-executive Board members. For grants of options made to participants other than those in the United States, vesting is at the date of grant and the right to exercise is restricted for three years following the grant date. For grants of options made to participants in the United States, vesting and the right to exercise occur over three years. The options expire either five years or ten years after the date of grant. In 2002, no compensation expense was recorded for the options issued under this plan as the options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. As a result of the adoption by the Company in 2003 of SFAS No. 123 as amended, compensation expense of approximately CHF 3 million in 2004 (CHF 5 million in 2003) was recorded comprising of both current year awards and the unvested portion of prior year awards.

     The following table summarizes option activity under the LTIP during 2004, 2003 and 2002:

	Weighted average		Stock options
	exercise price		outstanding
Balance at December 31, 2001		119.63		1 778 449
Options granted		108.80		481 401
Options exercised		108.99		(32 098	)
Options canceled/forfeited		111.07		(32 413	)
Balance at December 31, 2002		117.53		2 195 339
Options granted		82.60		176 627
Options exercised		0		0
Options canceled/forfeited		105.02		(26 989	)
Options expired		160.00		(264 355	)
Balance at December 31, 2003		109.34		2 080 622
Options granted		95.30		81 024
Options exercised		82.60		(2 762	)
Options canceled/forfeited		114.48		(72 239	)
Options expired		109.60		(314 888	)
Balance at December 31, 2004		108.32		1 771 757

     The following table summarizes the status of stock options outstanding and exercisable at December 31, 2004:

			Stock options outstanding				Stock options exercisable
	Weighted average				Weighted average				Weighted average
	exercise price		Number of		remaining		Number of		remaining
	- outstanding/		outstanding		contractual life		outstanding		contractual life
Exercise price range	exercisable		options		(in years)		options		(in years)
82.60 – 111.88		104.77/106.11		1 658 025		3.6		1 066 079		3.2
160.00		160.00/160.00		113 732		3.0		113 732		3.0
				1 771 757				1 179 811

F-34

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

     In connection with the LTIP 2002, the Company granted 85 128 restricted shares of common stock, which are restricted for three years from the date of grant, to 683 participants. The market value of the common stock at date of grant was CHF 112 per share. Compensation expense of approximately CHF 10 million has been recognized in 2002 related to the grant of these shares.

     In connection with the LTIP 2003, the Company granted 186 503 restricted shares of common stock, which are restricted for three years from the date of grant, to 720 participants. The market value of the common stock at date of grant was CHF 85.30 per share. Compensation expense of approximately CHF 16 million has been recognized in 2003 related to the grant of these shares.

     In connection with the LTIP 2004, the Company granted 154 996 restricted shares of common stock, which are restricted for three years from the date of grant, to 705 participants. The market value of the common stock at date of grant was CHF 95.30 per share. Compensation expense of approximately CHF 15 million has been recognized in 2004 related to the grant of these shares.

     ESOP — The Company has an Employee Stock Ownership Plan (ESOP) that enables substantially all employees to purchase annually up to 20 shares of common stock at a price equal to 85 percent of the average market price, defined as the average closing price of the shares on the Swiss Exchange for 10 trading days prior to the purchase date of the shares. These shares are restricted from resale for a period of three years from the date of purchase. During 2004, 1 590 employees (2003: 1 768 employees; 2002: 1 660 employees) purchased 28 715 shares (2003: 32 221 shares; 2002: 29 499 shares) for which approximately CHF 2 million (2003: CHF 2 million; 2002: CHF 3 million) was paid to the Company. In 2002, no compensation expense was recorded under this plan.

     MAB — The Company has a “Mitarbeiterbeteiligungsplan” (Employee Investment Plan) which grants annually to most employees in Switzerland (as an enhancement to their pension plan arrangements) the right to purchase 25 shares (prior to 2003, 20 shares) of common stock at CHF 15 per share (as long as the share price is not greater than CHF 200, at which level the Employee Investment Plan price may be adjusted). The rights vest at the grant date and become exercisable at the date of the employees’ retirement or termination. The following table summarizes rights activity under the MAB during 2004, 2003 and 2002:

	Exercise		Rights
	price		outstanding
Balance at December 31, 2001		15		302 740
Rights granted		15		86 040
Rights exercised		15		(18 500	)
Balance at December 31, 2002		15		370 280
Rights granted		15		105 275
Rights exercised		15		(20 005	)
Balance at December 31, 2003		15		455 550
Rights granted		15		104 200
Rights exercised		15		(22 955	)
Balance at December 31, 2004		15		536 795

     Compensation expense is recorded in the year the rights are granted and, in 2004, CHF 9 million (2003: CHF 9 million; 2002: CHF 8 million) of compensation expense was recorded under this plan.

     PSP — The Company’s Performance Share Plan (PSP) expired in 2004. The PSP in 2001 had granted selected senior and key management and non-executive Board members the right to receive up to an aggregate 346 800 shares of common stock of the Company if certain future conditions were met. As these conditions were not met, no shares were issued under the PSP. In 2003, in accordance with the adoption of SFAS No. 123, as amended, the Company recorded CHF 1 million compensation expense for the fair value of the rights that vested during 2003.

Change in control and reserve of shares

     Upon a change in control of the Company (defined as 30 percent for LEAP and 33.33 percent for LTIP, each such amount being a percentage of total voting rights), the vesting and restriction periods for the plans stated above will cease to apply and a cash or share payment for the value of the outstanding plans and related taxes and duties will be due to the participants.

     At December 31, 2004, the Company had approximately 2.0 million shares (2003: 2.2 million shares; 2002: 2.0 million shares) of treasury stock reserved for issuance under the various stock based compensation plans.

     The Company used the Black-Scholes model to value the stock options granted. The weighted-average assumptions used to estimate the fair value of the options are as follows:

F-35

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

Year ended December 31,	2004		2003		2002
Expected option lives in years		10.00		10.00		6.07
Expected volatility in percentage		25.00		25.00		23.00
Risk-free interest rate in percentage		2.62		2.28		3.23
Expected dividend yield in percentage		2.87		2.79		1.81
Weighted average fair value in CHF		21.85		19.60		24.05

F-36

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

18. Retirement benefits

     The Company sponsors pension and other postretirement benefits in accordance with the applicable laws and customs in the countries in which the Company operates. The Company has both contributory and non-contributory defined contribution and defined benefit pension plans.

Defined contribution pension plans

     In countries in which employees are covered by defined contribution plans, employer contributions charged to income from continuing operations were CHF 11 million in 2004, CHF 14 million in 2003 and CHF 16 million in 2002.

Defined benefit pension plans

     Benefits to participants in the Company’s defined benefit pension plans are generally based on employees’ years of service, levels of compensation or stated amounts for each year of service.

     The majority of the defined benefit pension plans are funded, whereby contributions made by the Company and plan participants are invested, and the resulting assets necessary to fund future benefit obligations are held by independent trustees for the benefit of plan participants. Accordingly, the assets acquired and maintained by these plans are not included in the Company’s consolidated balance sheets. These plans are referred to as funded plans in this note.

     In certain countries in which the Company operates, principally Germany, local practice is that pension plans are not funded. In accordance with this practice, the Company does not fund these plans. The Company charges income from continuing operations for benefits earned in each period with a corresponding increase in pension liability. Benefit payments made each period to retirees are charged against this liability. These plans are referred to as unfunded plans in this note.

     Each year, the projected benefit obligation (PBO), which is the present value of projected future benefits payable to current plan participants allowing for estimated future employee compensation increases, is calculated for each plan. The measurement date for the Company’s pension plans that make up the majority of plan assets and benefit obligations is December 31^st for each year presented.

     The following table provides a reconciliation from beginning of year to end of year of the changes in PBO and the changes in the fair value of plan assets, as well as the PBO funded status of the plans. The PBO funded status consists of the excess (deficit) of the fair value of plan assets over (under) PBO.

	2004									2003
	Funded			Unfunded			All			Funded			Unfunded			All
	plans			plans			plans			plans			plans			plans
Change in benefit obligation (PBO)
PBO, beginning of year		3 110			525			3 635			2 984			473			3 457
Service cost		79			9			88			76			8			84
Interest cost		149			27			176			143			28			171
Participant contributions		24			—			24			22			—			22
Actuarial (gain) loss		191			(8	)		183			62			11			73
Plan amendments		(6	)		—			(6	)		(1	)		—			(1	)
Benefits paid		(133	)		(26	)		(159	)		(149	)		(25	)		(174	)
Foreign currency translation		(41	)		(4	)		(45	)		(76	)		29			(47	)
Other		46			(1	)		45			49			1			50
PBO, end of year		3 419			522			3 941			3 110			525			3 635
Change in plan assets Fair value of plan assets, beginning of year		2 936			—			2 936			2 789			—			2 789
Actual return on plan assets		219			—			219			240			—			240
Employer contributions		99			26			125			46			25			71
Participant contributions		24			—			24			22			—			22
Benefits paid		(133	)		(26	)		(159	)		(149	)		(25	)		(174	)
Foreign currency translation		(30	)		—			(30	)		(58	)		—			(58	)
Other		(6	)		—			(6	)		46			—			46
Fair value of plan assets, end of year		3 109			—			3 109			2 936			—			2 936
PBO funded status		(310	)		(522	)		(832	)		(174	)		(525	)		(699	)

     For both years presented, substantially all of the Company’s funded pension plans had PBO in excess of plan assets.

F-37

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

Accumulated benefit obligation (ABO) status of defined benefit pension plans

     Accumulated benefit obligation (ABO) is less than PBO because ABO excludes assumptions as to future increases in employee compensation when calculating the present value of the future benefit obligation.

   ABO status of funded pension plans

     The table below shows the ABO status at December 31, 2004 and 2003 of the Company’s funded pension plans separated between those having plan assets that are greater than or equal to ABO (fully-funded) and those having plan assets that are less than ABO (under-funded):

	2004							2003
	Fully-		Under-			Total funded		Fully-		Under-			Total funded
Funded plans	funded		funded			plans		funded		funded			plans
Accumulated benefit obligation (ABO)		2 580		458			3 038		2 392		428			2 820
Fair value of plan assets		2 743		366			3 109		2 628		308			2 936
ABO status — fully (under) funded		163		(92	)		71		236		(120	)		116

Minimum pension liability

     For funded plans with ABO in excess of the fair value of plan assets, SFAS No. 87 requires that the Company record on its consolidated balance sheets a minimum pension liability amount such that the Company’s net pension liability is at least equal to the amount of the under-funded ABO. Net pension liability is the excess of pension liabilities over prepaid pension assets on the Company’s balance sheet.

     When recording a minimum pension liability, SFAS No. 87 requires the Company to record a corresponding intangible asset equal to the amount of any unrecognized prior service cost, with the remainder, if any, charged to other comprehensive income in shareholders’ equity. The recording of this additional minimum pension liability has no impact on the Company’s income from operations.

     The following table shows the components of the additional minimum pension liability as of December 31, 2004 and 2003 for those plans where such a liability was required to be recorded, mainly in the United States; together with a reconciliation to the ABO status of all of the Company’s under-funded pensions plans:

	2004			2003
Unrecognized prior service cost recorded as intangible asset		8			10
Recorded as other comprehensive income		127			129
Currency adjustments		(30	)		(22	)
Additional minimum pension liability		(105	)		(117	)
Prepaid pension asset already recorded		19			7
ABO status, plans where additional minimum liability required		(86	)		(110	)
Other under-funded plans, no additional minimum liability required		(6	)		(10	)
ABO status — All under-funded plans		(92	)		(120	)

ABO status of unfunded pension plans

     For the Company’s unfunded plans, the accrued pension liability exceeds the amount of existing unfunded ABO, therefore no additional minimum pension liability is required. The table below shows the ABO and related liabilities recorded at December 31, 2004 and 2003 for the Company’s unfunded defined benefit pension plans:

	2004		2003
Unfunded plans
Accumulated benefit obligation		489		490
Accrued pension liability		505		500
Liability recognized in excess of ABO		16		10

Defined benefit pension related assets and liabilities

     For each of its defined benefit pension plans, the Company records a pension-related asset (liability) initially based upon the excess (deficit) of the fair value of plan assets over (under) PBO. However, as required under SFAS No. 87, differences that result from using expected rather than actual rates of return on plan assets,

F-38

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

as well as differences that result from the evolution assumed to occur from period to period in the calculation of PBO versus actual evolution, represent gains (losses) that are not given immediate recognition in the Company’s consolidated statements of income or consolidated balance sheets. Instead, this accumulated unrecognized gain (loss) amount is amortized if it meets certain criteria; that is, where the unrecognized net gain or loss exceeds 10 percent of the greater of the fair value of plan assets or PBO, the excess is required to be amortized to future income over the average remaining service life of active employee participants.

     In addition, where the Company amends pension plans resulting in changes to future benefits based on participants prior service, any change in PBO resulting there from is not required to be immediately charged to income from continuing operations. Rather, such increases in pension obligations are amortized over the average remaining service life of active employees.

     Accordingly, the following table shows the components of the Company’s net pension asset (liability) and the reconciliation of these amounts to the PBO as of December 31, 2004 and 2003:

	2004									2003
	Funded			Unfunded						Funded			Unfunded
	plans			plans			All plans			plans			Plans			All plans
Prepaid benefit cost(1)		799			—			799			740			—			740
Accrued benefit liability(1)		(108	)		(505	)		(613	)		(132	)		(500	)		(632	)
Minimum pension liability — intangible asset		8			—			8			10			—			10
Accumulated other comprehensive income, pre tax		127			—			127			129			—			129
Currency adjustments(2)		(30	)		—			(30	)		(22	)		—			(22	)
Net pension asset (liability) on consolidated balance sheets		796			(505	)		291			725			(500	)		225
Unrecognized net gain (loss)		(1 097	)		(19	)		(1 116	)		(882	)		(27	)		(909	)
Unrecognized prior service cost		(9	)		2			(7	)		(17	)		2			(15	)
PBO funded status		(310	)		(522	)		(832	)		(174	)		(525	)		(699	)

(1) Current and long-term portion
(2) Currency effect on the prior year additional minimum pension liability

Net defined benefit plan pension expense

     The components of net pension expense for the Company’s defined benefit pension plans during the years ended December 31, 2004, 2003 and 2002 were:

	Funded plans									Unfunded plans						All plans
	2004			2003			2002			2004		2003		2002		2004			2003			2002
Service cost		79			76			88			9		8		7		88			84			95
Interest cost		149			143			155			27		28		27		176			171			182
Expected return on plan assets		(208	)		(211	)		(230	)		—		—		—		(208	)		(211	)		(230	)
Amortization of prior service cost		2			2			1			—		—		—		2			2			1
Other (gains), losses and amortization, net		2			(8	)		(26	)		—		1		1		2			(7	)		(25	)
Total net pension expense (income)		24			2			(12	)		36		37		35		60			39			23

Key assumptions

     The weighted average key actuarial assumptions used to determine the Company’s pension benefit obligations were as follows:

	2004			2003
Discount (interest) rate		4.6	%		4.9	%
Rate of increase in compensation levels		2.3	%		2.3	%

     The weighted average key actuarial assumptions used to determine the Company’s net periodic benefit cost were as follows:

	2004			2003			2002
Discount (interest) rate		4.9	%		5.1	%		5.3	%
Rate of increase in compensation levels		2.3	%		2.4	%		2.9	%
Expected long-term rate of return on plan assets		6.2	%		6.2	%		6.5	%

F-39

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

     The determination of the overall expected long-term rate of return on plan assets for the Company’s funded plans is based on the following parameters: long-term expected inflation rates, long-term inflation-adjusted interest rates, and long-term risk premium of equity investments above risk free rates of return. In addition, long-term historical rates of return adjusted, where appropriate, to reflect more recent developments, are used.

Funded defined benefit pension plan assets

     The investment policies and strategies for plan assets held by funded defined benefit pension plans are directed toward the overriding target of achieving, on a long-term basis, the necessary return on plan assets to meet benefit obligations as they become payable. Factors included in the investment strategy for plan assets include achievement of consistent year-over-year results, effective risk management based on the level of each plan’s funding status, and effective plan cash flow management. Further, the investment policies generally exclude direct investments in the Company’s equity or debt securities.

     For the Company’s funded defined benefit pension plans, the weighted average actual plan asset allocation percentages as of December 31, 2004 and 2003, and the range of weighted average target plan asset allocation percentages in effect as of December 31, 2004, are as follows:

	Actual plan asset						Target plan asset
	allocation percentages at						allocation percentages at
	December 31						December 31,
	2004			2003			2004
Asset category
Equity securities		36	%		34	%		35% - 45	%
Debt securities		48	%		42	%		40% - 50	%
Real estate		12	%		10	%		5% - 15	%
Other		4	%		14	%		0% - 10	%
Total		100	%		100	%

     At December 31, 2004 and 2003, the Company’s pension plans did not own any Company common stock.

     The following table shows the undiscounted benefit amounts expected to be paid for each of the next five successive fiscal years and for the aggregate next five years thereafter:

	Funded		Unfunded
Undiscounted expected benefit payments	plans		plans		All plans
2005		103		26		129
2006		109		27		136
2007		116		27		143
2008		126		28		154
2009		133		29		162
Aggregate for 2010 through 2014		805		158		963

     The amount expected to be contributed by the Company to it’s defined benefit pension plans during 2005 is CHF 129 million.

Other postretirement benefits

     The Company’s net liability for other postretirement benefits at December 31, 2004 was CHF 63 million (December 31, 2003: CHF 69 million) resulting principally from the postretirement healthcare plan in the United States. The Company’s other postretirement plans are not funded by the Company, did not require significant amounts to be recognized in the consolidated statements of income for 2004, 2003 or 2002, and are not expected to require significant future annual benefit payments.

F-40

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

19. Earnings per share

     In 2004, 2003 and 2002, there was no difference between basic and diluted earnings per share for income from continuing operations. In 2004 the basic weighted average number of shares outstanding were 66 059 479 (2003: 68 361 123 and 2002: 68 549 964) and the diluted weighted average number of shares outstanding were 66 059 479 (2003: 68 361 123 and 2002: 68 575 058).

     In 2002, the difference of 25 094 in the weighted average number of shares outstanding was due to the inclusion of the dilutive effect of previously granted stock options with exercise prices between CHF 107.09 and CHF 111.09, as their exercise prices were less than the average market price of the Company’s shares for 2002. In 2004 and 2003, the calculation of diluted earnings per share did not include any stock options as their inclusion would have been antidilutive, that is, diluted earnings per share would be higher than basic earnings per share. For purposes of calculating basic and diluted earnings per share in 2004, 2003 and 2002 there was no required adjustment to the reported income from continuing operations or net income.

     The calculation of diluted earnings per share in 2004 excluded 1 783 225 stock options outstanding with exercise prices between CHF 82.60 and CHF 179.30, in 2003 excluded 2 092 090 stock options outstanding with exercise prices between CHF 82.60 and CHF 179.30, and in 2002 excluded 878 036 stock options outstanding with exercise prices between CHF 112.09 and CHF 181.70, as their inclusion would have been antidilutive. For the years ended December 31, 2003 and 2002, the calculation of diluted earnings per share excluded the convertible bonds issued in July 1998 and repaid in July 2003, as their inclusion would have been antidilutive.

F-41

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

20. Related party transactions

Transactions with associated companies

     Investments in affiliates of CHF 147 million in 2004 and CHF 137 million in 2003 are included in financial investments and are described in Note 9.

     Loans receivable from equity affiliates of CHF 11 million in 2004 and CHF 10 million in 2003 are included in other assets. Included is a loan to Compagnie Industrielle de Monthey SA, of CHF 10 million in 2004 and 2003, which bears interest at 3 percent in 2004 (2003: 1 percent).

     The Company had payables and accrued expenses to equity affiliates of CHF 12 million in 2004 and CHF 9 million in 2003, and short-term debt to equity affiliates of CHF 2 million in 2004 and CHF 1 million in 2003.

F-42

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

21. Commitments and contingencies

Lease commitments

     The Company leases certain facilities under operating leases. The future minimum lease commitments required under fixed term leases are: 2005 CHF 41 million; 2006 CHF 25 million; 2007 CHF 16 million; 2008 CHF 12 million; 2009 CHF 9 million; 2010 and thereafter CHF 25 million. Rental expense amounted to CHF 57 million in 2004, CHF 64 million in 2003 and CHF 67 million in 2002.

Purchase commitments

     The Company has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary course of business. In the aggregate, these commitments are not in excess of current market prices and reflect normal business operations.

Guarantees

     In the normal course of business, the Company has provided certain trade and other guarantees to third parties. The Company estimates that the fair value of these guarantees is not material and does not expect to incur losses as a result of these guarantees. As of December 31, 2004, the Company has provided guarantees to third parties for indebtedness of others of approximately CHF 17 million of which CHF 12 million expire in 2005 and CHF 5 million thereafter.

     In connection with past divestments of businesses, the Company has issued certain indemnifications to the purchasers of those businesses related to the past actions of the Company in the area of compliance with environmental and tax regulations. As of December 31, 2004 the Company had issued CHF 31 million of environmental indemnifications that decrease to CHF 24 million in 2008 and which expire in 2009. In addition, the Company has outstanding environmental indemnifications that were issued to the purchaser of its Performance Polymers business, which was sold in May 2000. These environmental indemnifications are further discussed in the “Environmental Matters” section below. The Company has issued certain tax indemnifications in connection with divestments of businesses and in connection with certain debt financing arrangements of the Company, that are unlimited in amount and, in certain instances, in time. As of December 31, 2004, the Company has recorded a liability related to the environmental indemnifications in the amount of CHF 12 million (2003: CHF 12 million) and for the tax indemnifications a liability has been recorded in the amount of CHF 1 million (2003: CHF 1 million).

Contingencies

     The Company operates in countries where political, economic, social, legal and regulatory developments can have an impact on the operational activities. The effects of such risks on the Company’s results, which arise during the normal course of business, are not foreseeable and are therefore not included in the accompanying financial statements.

     In the ordinary course of business, the Company is involved in lawsuits, claims, investigations and proceedings, including product liability, intellectual property, commercial, environmental, and health and safety matters. Although the outcome of any legal proceedings cannot be predicted with certainty, management is of the opinion that there are no such matters pending which would be likely to have any material adverse effect in relation to its business, financial position or results of operations.

     In connection with the Company’s divestment of the Performance Polymers Business in 2000, Vantico (now owned by the Huntsman Group) initiated arbitration proceedings against the Company as a result of a dispute over an agreement with a third party and a pension-related lawsuit. A court ruling has been issued in favor of the Company’s pension fund, which has been appealed to a superior court. This appeal is pending. The dispute and related arbitration proceedings regarding the agreement with the third party were settled during 2004 resulting in the release of previously established reserves totaling CHF 28 million, net of income taxes of CHF 9 million. Although the outcome of the pension-related litigation cannot be predicted with certainty, management is of the opinion that it will not have any material adverse effect on the financial position or results of operations of the Company.

     In connection with its Toms River, New Jersey site in the United States, the Company’s subsidiary in the United States received a claim from the New Jersey Department of Environmental Protection for alleged natural resource damages (see “Environmental Matters” below). In connection with certain polyacrylamide products, the Company’s subsidiary in the United States has been named as one of the defendants in two class action lawsuits in West Virginia (see “Litigation Matters” below).

Environmental matters

     Operating in the chemical industry, the Company is subject to stringent environmental, health and safety laws and regulations. It is the Company’s policy to continuously develop and improve the environmental performance of key manufacturing processes through an active program to address environmental matters. In addition to process improvements, the Company uses advanced waste treatment and

F-43

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

disposal facilities at all major manufacturing sites that allow the sites to comply with laws and regulations applicable to waste streams. In management’s opinion, the Company substantially complies with all such laws.

     For outstanding environmental matters that are currently known and estimable by the Company, provisions of approximately CHF 509 million as of December 31, 2004 and CHF 557 million as of December 31, 2003 have been recorded in the accompanying Consolidated Balance Sheets. The decrease in the provision of CHF 48 million in 2004 compared to 2003 relates to usage of the provisions of CHF 43 million and a CHF 18 million reduction related mainly to currency effects, offset in 2004 by additional reserves established in connection with the acquisition of Raisio Chemicals. The Company’s environmental protection and improvement cash expenditures were approximately CHF 54 million in 2004 (CHF 31 million in 2003), including investments in construction, operations and maintenance and usage of the provision.

     Under the Company’s agreement with Novartis, Novartis agreed to reimburse the Company 50 percent of United States environmental liabilities arising from past operations of the Company in excess of the agreed reserves. Outside the United States based, environmental liabilities are allocated between Novartis and the Company based on the ownership of the site or, if environmental liabilities do not relate to production sites or these are not owned by either entity, according to the polluter pays principle. If causation between the parties cannot be determined, costs are shared equally. The agreement with Novartis is not subject to any time or amount limits but could terminate for certain liabilities in the United States (i) upon a sale of substantially all of the Company’s assets, (ii) upon a change in control of the Company, or (iii) for individual facilities, upon the sale of the facility (unless the Company retains responsibility for any clean-up at such site).

     The contractual terms of the sale of the Performance Polymers business stipulate that, in general, the Company will retain responsibility for environmental claims relating to the operations of the Performance Polymers business prior to May 31, 2000, whereby damages for remediation in connection with sites outside the United States shall cover only 80 percent of the respective costs. The responsibility with respect to any non-United States sites covers environmental liabilities incurred within fifteen years from May 31, 2000 and is limited to CHF 75 million. With respect to any such environmental liabilities in the United States, the Company’s obligation to indemnify is unlimited in time and/or amount. Novartis’ environmental indemnification obligations to the Company described above are not affected by the sale of the Performance Polymers business.

     The Company continues to participate in environmental assessments and clean-ups at a number of locations, including operating facilities, previously owned facilities and United States Superfund sites. The Company accrues reserves for all known environmental liabilities for remediation costs when a clean-up program becomes probable and costs can be reasonably estimated. Clean-up of the most significant sites has been or is nearly completed, except as described in the following paragraphs.

     At its Toms River, New Jersey remediation site, the Company’s subsidiary in the United States is engaged in a large bio-remediation project that is expected to take up to eight years to complete. Based on management’s current estimates, the Company’s environmental provisions are adequate to cover the expected costs to complete this remediation plan.

     In October 2003, the Company’s subsidiary in the United States received a letter from the New Jersey Department of Environmental Protection (“NJDEP”) seeking to begin discussions on natural resource damage liability issues (“NRDs”) at the Toms River site for alleged injury to groundwater. The subsidiary is engaged in on-going settlement discussions with the State to see if it can reach a mutually beneficial settlement to avoid litigation. If a mutual agreement cannot be reached and NJDEP decides to initiate litigation, the Company believes that it has significant defenses to these potential NRD claims.

     The planning for the total remediation of the waste disposal site in Bonfol, Switzerland, which was closed in 1976, is ongoing. The responsibility for the remediation lies with eight chemical enterprises including among others the Company. The responsible companies cooperate with the governmental authorities to define the necessary measures in view of a final remediation of the site. The planning and remediation effort could require up to fifteen years to complete. In management’s opinion, based on the current remediation plans, the Company’s environmental provisions are adequate to cover the Company’s share of the expected costs to complete the remediation at this site.

     In the Basel region, several landfills (Switzerland, France and Germany) contain chemical waste besides other industrial and household wastes. Presently eleven landfills are the subject of investigations carried out with the authorities by the ‘Interessengemeinschaft Deponiesicherheit Regio Basel’, an association of the involved pharmaceutical and chemical enterprises (including the Company). As of December 31, 2004, no remedial actions have been defined or required in a legally binding form.

     In management’s opinion, the environmental reserves accrued are sufficient to meet all currently known and estimable environmental claims and contingencies. Because of the nature of the Company’s operations, however, there can be no assurance that significant costs and liabilities from ongoing or past operations will not be incurred in the future. In addition, environmental clean-up periods are protracted in length and environmental costs in future periods are subject to changes in environmental remediation regulations.

Litigation Matters

     Two class action lawsuits have been filed against Company’s subsidiary in the United States and other chemical suppliers in two separate state courts in West Virginia relating to the sales of certain products to coal preparation plants. In both cases, plaintiffs claim, on behalf of a class of all workers in coal preparation plants, that these workers are entitled to medical monitoring for exposure to residual acrylamide from the use of polyacrylamide products supplied by the defendants.

F-44

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

     Based on knowledge and use of acrylamide in its own manufacturing operations for several years, the Company does not believe that these claims have merit. However, if any liability were found, there most likely would be a sharing of the liability among many of the defendants, although it is too soon to assess what share any defendant would have of that liability, if any. Finally, the Company has sufficient insurance coverage for these claims to prevent them from having a material adverse effect on its financial position or results of operations.

F-45

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

22. Valuation and qualifying accounts and reserves

Allowance for doubtful accounts
For the year ended December 31,	2004			2003			2002
Balance at beginning of year		85			96			120
Additions charged to cost and expenses		24			22			50
Deductions credited to cost and expenses		(15	)		(13	)		(19	)
Other, net (i)		(10	)		(18	)		(43	)
Currency adjustments		(3	)		(2	)		(12	)
Balance at end of year		81			85			96

Allowance for obsolete and slow moving inventory
For the year ended December 31,	2004			2003			2002
Balance at beginning of year		50			58			66
Additions charged to cost and expenses		17			20			23
Deductions credited to cost and expenses		(16	)		(22	)		(18	)
Other, net (i)		(3	)		(4	)		(9	)
Currency adjustments		(2	)		(2	)		(4	)
Balance at end of year		46			50			58

Deferred income tax valuation allowance
For the year ended December 31,	2004			2003			2002
Balance at beginning of year		121			131			146
Additions charged to cost and expenses		11			22			10
Deductions credited to cost and expenses		(20	)		(19	)		(9	)
Other, net (i)		3			0			0
Currency adjustments		(5	)		(13	)		(16	)
Balance at end of year		110			121			131

(i)   Other, net is primarily additions applicable to acquisitions, amounts written-off and miscellaneous other adjustments, and for allowance for doubtful accounts in 2002, Other, net also included a reclassification to accrued liabilities for provisions that did not relate to accounts receivable.

F-46

Notes to Consolidated Financial Statements

(in millions of Swiss francs, except share and per share data)

23. Restructuring and special charges

     In 2004, the Company implemented the “Shape” program, which is primarily designed to adapt and optimize production and the support organization of the Segment Water & Paper Treatment following the acquisition of Raisio Chemicals and to accelerate the shift of focus in Segment Textile Effects to growth regions in Asia by reducing its European presence. The program involves the closure of manufacturing facilities in the UK and Italy and the rightsizing of plants in Europe and the United States. It is expected that this will result in the reduction of approximately 950 positions. The planned program completion date is 2007.

     The cost of the program is expected to total approximately CHF 174 million before taxes comprised of employee severance costs of CHF 93 million, asset impairment charges of CHF 55 million and other costs of CHF 26 million. During 2004, costs related to the program totaling CHF 80 million have been recognized in operating income in the consolidated statements of income comprised of employee severance costs of CHF 17 million, asset impairment charges of CHF 50 million and other costs of CHF 13 million. The fair values used to determine the asset impairment charges were established by calculating present values of the estimated future cash flows attributable to the affected assets.

     Restructuring and special charges for 2004 also includes CHF 11 million resulting from expensing the fair value of Raisio Chemicals’ in-process research and development activities that were acquired.

F-47

EX-4.1

                                                                  CONFORMED COPY


                                PROGRAM AGREEMENT
                        IN RESPECT OF U.S.$2,000,000,000
                          EURO MEDIUM TERM NOTE PROGRAM
                             (AMENDED AND RESTATED)

                             DATED 27TH MARCH, 2003

                          CIBA SPECIALTY CHEMICALS PLC
                      CIBA SPECIALTY CHEMICALS CORPORATION
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                                   AS ISSUERS

                                       AND

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
                                  AS GUARANTOR

                                       AND

                   CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
                             DEUTSCHE BANK AG LONDON
                           GOLDMAN SACHS INTERNATIONAL
                           J.P. MORGAN SECURITIES LTD.
                                   UBS LIMITED
                                   AS DEALERS


                                  (LETTERHEAD)

                                    CONTENTS



CLAUSE                                                                       PAGE

                                                                          
1.    Definitions and Interpretation......................................     2
2.    Agreements to Issue and Purchase Notes..............................     5
3.    Conditions of Issue; Updating.......................................     6
4.    Representations and Warranties......................................     7
5.    Undertakings of the Issuers and the Guarantor.......................    10
6.    Indemnity...........................................................    13
7.    Authority to Distribute Documents...................................    15
8.    Dealers' Undertakings...............................................    15
9.    Fees, Expenses and Stamp Duties.....................................    16
10.   Termination of Appointment of Dealers...............................    17
11.   Appointment of New Dealers..........................................    17
12.   Increase in the Aggregate Nominal Amount of the Program.............    18
13.   Status of the Arrangers.............................................    18
14.   Counterparts........................................................    18
15.   Communications......................................................    18
16.   Benefit of Agreement................................................    19
17.   Currency Indemnity..................................................    19
18.   Calculation Agent...................................................    19
19.   Stabilisation.......................................................    20
20.   Contracts (Rights of Third Parties) Act 1999........................    20
21.   Governing Law and Jurisdiction......................................    20


APPENDIX

1.    Initial Documentation List..........................................    22
2.    Selling Restrictions................................................    24
3.    Dealer Accession....................................................    28
      Part 1   Form of Dealer Accession Letter - Program..................    28
      Part 2   Form of Confirmation Letter - Program......................    30
      Part 3   Form of Dealer Accession Letter - Note Issue...............    32
4.    Form of Confirmation Letter - Note Issue............................    34
5.    Letter Regarding Increase in the Nominal Amount of the program......    36
6.    Form of Subscription Agreement......................................    38
7.    Form of Deed of Covenant............................................    44



Signatories...............................................................    51


                                PROGRAM AGREEMENT

                                 in respect of a

                          EURO MEDIUM TERM NOTE PROGRAM

THIS AGREEMENT is made on 27th March, 2003

BETWEEN:

(1)   CIBA SPECIALTY CHEMICALS CORPORATION of 560 White Plains Road, Tarrytown,
      New York 10591-9005, United States (CSC US);

(2)   CIBA SPECIALTY CHEMICALS PLC of Hulley Road, Macclesfield, Cheshire SK10
      2NX, England (CSC UK);

(3)   CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH of Chemiestrasse, D-
      68623 Lampertheim, Germany (CSC GERMANY);

(4)   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD. of Cedar House, 41 Cedar Avenue,
      Hamilton HM12 Bermuda (CSC BERMUDA);

(5)   CIBA SPECIALTY CHEMICALS HOLDING INC. of Klybeckstrasse 141, CH-4002
      Basle, Switzerland (the GUARANTOR);

(6)   CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED of One Cabot Square, London
      E14 4QJ;

(7)   DEUTSCHE BANK AG LONDON of Winchester House, 1 Great Winchester Street,
      EC2N 2DB;

(8)   GOLDMAN SACHS INTERNATIONAL of Peterborough Court, 133 Fleet Street,
      London EC4A 2BB;

(9)   J.P. MORGAN SECURITIES LTD. of 125 London Wall, London EC2Y 5AJ; and

(10)  UBS LIMITED, (UBS) of 1 Finsbury Avenue, London EC2M 2PP.

IT IS HEREBY AGREED as follows:

WHEREAS:

(A)   CSC US, CSC UK, CSC Germany, CSC Bermuda, the Guarantor, UBS AG, acting
      through its business group UBS Warburg and the Dealers (except for UBS)
      entered into an amended and restated program agreement dated 27th March,
      2002 (the PRINCIPAL PROGRAM AGREEMENT) in respect of a U.S.$2,000,000,000
      Euro Medium Term Note Program of CSC US, CSC UK, CSC Germany and CSC
      Bermuda unconditionally and irrevocably guaranteed by the Guarantor.

(B)   With effect from 10th March, 2003, UBS AG, acting through its business
      group UBS Warburg has transferred its role as dealer and arranger under
      this Program to UBS (formerly named UBS Warburg Ltd.).


                                       1

(C)   This Agreement amends and restates the Principal Program Agreement. Any
      Notes issued under the Program on or after the date hereof shall be issued
      pursuant to this Agreement. This does not affect any Notes issued under
      the Program prior to the date of this Agreement.

1.    DEFINITIONS AND INTERPRETATION

1.1 For the purposes of this Agreement, except where the context requires
otherwise:

      AGENCY AGREEMENT means the amended and restated agreement of even date
      herewith between the Issuers, the Guarantor, the Agent (as defined below)
      and the other Paying Agents (as defined therein) under which the Agent is
      appointed as issuing agent, principal paying agent and agent bank for the
      purposes of the Program;

      AGENT means JPMorgan Chase Bank as Agent under the Agency Agreement and
      any successor agent appointed by the Issuers and the Guarantor in
      accordance with the Agency Agreement;

      AGREEMENT DATE means, in respect of any Note, the date on which agreement
      is reached for the issue of such Note as contemplated in Clause 2 which,
      in the case of Notes issued on a syndicated basis or otherwise in relation
      to which a Subscription Agreement is entered into, shall be the date upon
      which the relevant Subscription Agreement is signed by or on behalf of all
      the parties;

      ARRANGER means each of UBS and any company appointed to the position of
      arranger for the Program or in respect of a particular issue of Notes
      under the Program and references in this Agreement to the ARRANGERS shall
      be references to the relevant Arranger;

      CLEARSTREAM, LUXEMBOURG means Clearstream Banking, societe anonyme;

      CONFIRMATION LETTER means:

      (a)   in respect of the appointment of a third party as a Dealer for the
            duration of the Program, the Confirmation Letter substantially in
            the form set out in Part 2 of Appendix 3 hereto; and

      (b)   in respect of the appointment of a third party as a Dealer for a
            particular issue of Notes under the Program, the Confirmation Letter
            substantially in the form set out in Appendix 4 hereto;

      DEALER means each of Credit Suisse First Boston (Europe) Limited, Deutsche
      Bank AG London, Goldman Sachs International, J.P. Morgan Securities Ltd.,
      UBS, and any New Dealer and excludes any entity whose appointment has been
      terminated pursuant to Clause 10 and notice of termination of whose
      appointment has been given to the Agent by the Issuers and the Guarantor,
      and references in this Agreement to the RELEVANT DEALER shall, in relation
      to any Note, be references to the Dealer or Dealers with whom the relevant
      Issuer has agreed the issue and purchase of such Note;

      DEALER ACCESSION LETTER means:

      (a)   in respect of the appointment of a third party as a Dealer for the
            duration of the Program, the Dealer Accession Letter substantially
            in the form of Part 1 of Appendix 3 hereto; and


                                       2

      (b)   in respect of the appointment of a third party as a Dealer for one
            or more particular issue(s) of Notes under the Program, the Dealer
            Accession Letter substantially in the form set out in Part 3 of
            Appendix 3 hereto;

      DEED OF COVENANT means the deed poll of even date herewith, substantially
      in the form set out in Appendix 7 hereto, executed as a deed by each
      Issuer in favour of certain accountholders with relevant clearing systems;

      DEED OF GUARANTEE means the deed of guarantee of even date herewith
      executed by the Guarantor under which the Guarantor irrevocably guarantees
      the obligations of the Issuers in relation to the Program;

      EUROCLEAR means Euroclear Bank S.A./N.V. as operator of the Euroclear
      System, or any successor to the business thereof;

      FSMA means the Financial Services and Markets Act 2000;

      INITIAL DOCUMENTATION LIST means the list of documents set out in Appendix
      1 to this Agreement;

      ISSUER means any of CSC US, CSC UK, CSC Germany or CSC Bermuda in its
      capacity as an issuer of Notes, and references in this Agreement to the
      RELEVANT ISSUER shall, in relation to any issue of Notes, be references to
      the Issuer which is, or is intended to be, the issuer of such Notes;

      LEAD MANAGER means, in relation to any Tranche of Notes, the person
      defined as the Lead Manager in the applicable Subscription Agreement or,
      when only one Dealer signs such Subscription Agreement, such Dealer;

      LISTING AGENT means, in relation to Notes which are, or are to be:

      (a)   listed on the Luxembourg Stock Exchange, Dexia Banque Internationale
            a Luxembourg S.A. or such other listing agent as the Issuers and the
            Guarantor may from time to time appoint for the purposes of liaising
            with the Luxembourg Stock Exchange; and

      (b)   listed on a Stock Exchange other than the Luxembourg Stock Exchange,
            such listing agent as the Issuers and the Guarantor may from time to
            time appoint for the purposes of liaising with such Stock Exchange;

      LISTING RULES means, in the case of Notes which are, or are to be, listed
      on a Stock Exchange (including the Luxembourg Stock Exchange), the listing
      rules and regulations for the time being in force for such Stock Exchange;

      MOODY'S means Moody's Investors Service, Inc., or any successor to the
      rating agency business thereof;

      NEW DEALER means any entity appointed as an additional Dealer for the
      duration of the Program or for a particular issue of Notes in accordance
      with Clause 11;

      NOTE means a note issued or to be issued by an Issuer pursuant to this
      Agreement, which Note may be represented by a Global Note or be in
      definitive form;


                                       3

      OFFERING CIRCULAR means, subject to Clause 5.2, the Offering Circular
      relating to the Program as revised, supplemented, amended or updated from
      time to time, including in relation to each Tranche of Notes, the Pricing
      Supplement relating to such Tranche and such other documents as are from
      time to time incorporated therein by reference except that for the purpose
      of Clause 4.2 in respect of the Agreement Date and the Issue Date, the
      Offering Circular means the Offering Circular as at the Agreement Date but
      not including any subsequent revision, supplement or amendment thereto;

      PRICING SUPPLEMENT means the pricing supplement issued in relation to each
      Tranche of Notes (substantially in the form of Annexe C to the Procedures
      Memorandum) as a supplement to the Offering Circular and giving details of
      that Tranche;

      PROCEDURES MEMORANDUM means the Operating and Administrative Procedures
      Memorandum dated 27th March, 2002 as amended or varied from time to time
      (in respect of any Tranche) by agreement between the relevant Issuer, the
      Guarantor and the relevant Dealer with the approval in writing of the
      Agent;

      PROGRAM means the Euro Medium Term Note Program established by this
      Agreement;

      RELEVANT PARTY means the Arranger, each Dealer (and for the purposes of
      Clause 8.3 each Issuer and the Guarantor), each of their respective
      affiliates and each person who controls them (within the meaning of
      section 15 of the Securities Act or section 20 of the Exchange Act) and
      each of their respective directors, officers, employees and agents;

      SECURITIES ACT means the Securities Act of 1933, as amended, of the United
      States of America;

      STANDARD & POOR'S means Standard & Poor's Ratings Service, a division of
      the McGraw-Hill Companies Inc., or any successor to the rating agency
      business thereof;

      STOCK EXCHANGE means the Luxembourg Stock Exchange or any other or further
      stock exchange(s) on which any Notes may from time to time be listed or
      admitted to trading, and references in this Agreement to the RELEVANT
      STOCK EXCHANGE shall, in relation to any Notes, be references to the Stock
      Exchange on which such Notes are from time to time, or are intended to be,
      listed or admitted to trading; and

      SUBSCRIPTION AGREEMENT means an agreement (by whatever name called) in or
      subsequently in the form set out in Appendix 6 hereto or in such other
      form as may be agreed in writing between the relevant Issuer, the
      Guarantor and the Lead Manager which agreement shall be supplemental to
      this Agreement.

1.2   Terms and expressions defined in the Agency Agreement, the Conditions and
      the Pricing Supplement applicable to any Notes and not otherwise defined
      in this Agreement shall have the same meanings in this Agreement, except
      where the context otherwise requires.

1.3   In this Agreement, clause headings are inserted for convenience and ease
      of reference only and shall not affect the interpretation of this
      Agreement.

1.4   All references in this Agreement to the provisions of any statute shall be
      deemed to be references to that statute as from time to time modified,
      extended, amended or re-enacted.

1.5   All references in this Agreement to an agreement, instrument or other
      document (including this Agreement, the Agency Agreement, the Deed of
      Covenant, the Deed of Guarantee, any Series of Notes and any Conditions
      appertaining thereto) shall be construed as a reference to


                                       4

      that agreement, instrument or document as the same may be amended,
      modified, varied, supplemented or novated from time to time including, but
      without prejudice to the generality of the foregoing, this Agreement as
      supplemented by any Subscription Agreement.

1.6   Words denoting the singular number only shall include the plural number
      also and vice versa; words denoting the masculine gender only shall
      include the feminine gender also; and words denoting persons only shall
      include firms and corporations and vice versa.

1.7   Any reference herein to EUROCLEAR and/or CLEARSTREAM, LUXEMBOURG shall,
      wherever the context so permits, be deemed to include reference to any
      additional or alternative clearance system approved by the relevant
      Issuer, the Guarantor and the Agent.

2.    AGREEMENTS TO ISSUE AND PURCHASE NOTES

2.1   Subject to the terms and conditions of this Agreement, any Issuer and the
      Guarantor may from time to time agree with any Dealer to issue, and any
      Dealer may agree to purchase, Notes.

2.2   On each occasion upon which an Issuer, the Guarantor and any Dealer agree
      on the terms of the issue and purchase of one or more Notes by such
      Dealer:

      (a)   the relevant Issuer shall cause such Notes (which shall be initially
            represented by a Temporary Global Note) to be issued and delivered
            to a common depositary for Euroclear and Clearstream, Luxembourg so
            that the securities account(s) of such Dealer with Euroclear and/or
            with Clearstream, Luxembourg (as specified by such Dealer) is/are
            credited with such Notes on the agreed Issue Date, as described in
            the Procedures Memorandum; and

      (b)   the relevant Dealer shall, subject to such Notes being so credited,
            cause the net purchase moneys for such Notes to be paid in the
            relevant currency by transfer of funds to the relevant cash
            account(s) of the Agent with Euroclear and/or Clearstream,
            Luxembourg or (in the case of syndicated issues) the relevant
            account of the relevant Issuer so that such payment is credited to
            such account(s) for value on the agreed Issue Date, as described in
            the Procedures Memorandum.

2.3   Unless otherwise agreed, the procedures which the parties must apply for
      the purposes of subclause 2.2 are set out in the Procedures Memorandum.
      Unless otherwise agreed between the relevant Issuer and the relevant
      Dealers, where more than one Dealer has agreed with the relevant Issuer to
      purchase a particular issue of Notes pursuant to this Clause, the
      obligations of such Dealers so to purchase the Notes shall be joint and
      several.

2.4   Where the relevant Issuer and the Guarantor agree with two or more Dealers
      to issue, and such Dealers agree to purchase, Notes on a syndicated basis,
      the relevant Issuer and the Guarantor shall enter into a Subscription
      Agreement with such Dealers. The Issuer and the Guarantor may also enter
      into a Subscription Agreement with one Dealer only. For the avoidance of
      doubt, the Agreement Date in respect of any such issue shall be the date
      on which the Subscription Agreement is signed by or on behalf of all the
      parties to it.

2.5   Each issue of Notes denominated in a currency in respect of which
      particular laws, guidelines, regulations, restrictions or reporting
      requirements apply will only be issued in circumstances which comply with
      such laws, guidelines, regulations, restrictions or reporting
      requirements.


                                       5

3.    CONDITIONS OF ISSUE; UPDATING

3.1   FIRST ISSUE

      The Arrangers shall circulate to each Dealer all of the documents and
      confirmations described in the Initial Documentation List immediately
      after those documents and confirmations have been given to the Arrangers
      by each Issuer and the Guarantor. Before any Issuer and the Guarantor
      reach their first agreement with any Dealer for the issue and purchase of
      Notes, that Dealer shall have received, and found satisfactory, in its
      reasonable opinion, all of the documents and confirmations described in
      the Initial Documentation List.

3.2   EACH ISSUE

      The obligations of a Dealer under any agreement for the issue and
      purchase of Notes made pursuant to Clause 2 are conditional upon:

      (a)   there having been, as at the proposed Issue Date, no adverse change
            in the condition (financial or otherwise) of the relevant Issuer and
            the Guarantor (as the case may be) which is material in the context
            of the issue and offering of the Notes from that set forth in the
            Offering Circular on the relevant Agreement Date, nor the occurrence
            of any event making untrue or incorrect to an extent which is
            material as aforesaid any of the warranties contained in Clause 4;

      (b)   there being no outstanding breach of any of the obligations of
            either the relevant Issuer or (as the case may be) the Guarantor
            under this Agreement, the Notes, the Agency Agreement, the Deed of
            Covenant or the Deed of Guarantee which has not been waived by the
            relevant Dealer on or prior to the proposed Issue Date;

      (c)   subject to Clause 12, the aggregate nominal amount of the Notes to
            be issued, when added to the aggregate nominal amount of all Notes
            outstanding (as defined in the Agency Agreement) on the proposed
            Issue Date, not exceeding U.S.$2,000,000,000 or its equivalent in
            other currencies as determined pursuant to subclause 3.5;

      (d)   in the case of Notes which are intended to be listed, the relevant
            Stock Exchange having agreed to list such Notes;

      (e)   no meeting of the holders of Notes (or any of them) issued by the
            relevant Issuer (to consider matters which might in the reasonable
            opinion of the relevant Dealer be considered to have a material
            adverse effect on the issue of the Notes) having been duly convened
            but not yet held or, if held but adjourned, the adjourned meeting
            having not been held and neither the relevant Issuer nor the
            Guarantor being aware of any circumstances which are likely to lead
            to the convening of such a meeting;

      (f)   there having been, between the Agreement Date and the Issue Date for
            such Notes, no such change in national or international financial,
            political or economic conditions or currency exchange rates or
            exchange controls as would, in the opinion of the relevant Dealer
            (after consultation with the relevant Issuer and the Guarantor if
            practicable), be likely to prejudice materially the success of the
            offer, sale or distribution by such Dealer of the Notes proposed to
            be issued;

      (g)   the forms of the Pricing Supplement, the Temporary Global Note, the
            Permanent Global Note and/or the Definitive Notes in relation to the
            relevant Tranche and the relevant settlement procedures, having been
            agreed by the relevant Issuer, the Guarantor, the relevant Dealer
            and the Agent;


                                       6

      (h)   the relevant currency being generally accepted for settlement by
            Euroclear and Clearstream, Luxembourg; and

      (i)   any calculations or determinations which are required by the
            relevant Conditions prior to the Issue Date having been duly made.

3.3   WAIVER

      Any Dealer, on behalf of itself only (or, in relation to a syndicated
      issue, the Lead Manager on behalf of itself and the other Managers) may by
      notice in writing to the relevant Issuer and the Guarantor waive any of
      the conditions precedent contained in subclauses 3.1 and 3.2 (save for the
      condition precedent contained in subclause 3.2(c)) in so far as they
      relate to an issue of Notes to that Dealer.

3.4   UPDATING OF LEGAL OPINIONS

      Before the first issue of Notes occurring after the end of each annual
      period commencing on the date hereof and on such other occasions as a
      Dealer so requests in relation either to any Issuer or the Guarantor or
      both (on the basis of reasonable grounds), the Issuers and/or the
      Guarantor will procure that a further legal opinion in such form and with
      such content as the Dealers may reasonably require is delivered, at the
      expense of the Issuers (as to which each of the Issuers shall have joint
      and several responsibility as between itself and the Guarantor to the
      Dealers). If at, or prior to, the time of any agreement to issue and
      purchase Notes under Clause 2 such request is given in writing with
      respect to the Notes to be issued, the receipt of such opinion in a form
      satisfactory to the relevant Dealer shall be a further condition precedent
      to the issue of those Notes to the relevant Dealer.

3.5   DETERMINATION OF AMOUNTS OUTSTANDING

      For the purposes of subclause 3.2(c):

      (a)   the U.S. dollar equivalent of Notes denominated in a currency other
            than U.S. dollars shall be determined, at the discretion of the
            Issuer, either as of the Agreement Date for such Notes or on the
            preceding day on which commercial banks and foreign exchange markets
            are open for general business in London, in each case on the basis
            of the spot rate for the sale of U.S. dollars against the purchase
            of the relevant currency in the London foreign exchange market
            quoted by any leading bank selected by the relevant Issuer or the
            Guarantor on the relevant day of calculation;

      (b)   the U.S. dollar equivalent of Dual Currency Notes and Indexed Notes
            shall be calculated in the manner specified above by reference to
            the original nominal amount of such Notes;

      (c)   the U.S. dollar equivalent of Zero Coupon Notes and other Notes
            issued at a discount or premium shall be calculated in the manner
            specified above by reference to the net proceeds received by the
            relevant Issuer for the particular issue; and

      (d)   the U.S. dollar equivalent of Partly Paid Notes shall be the nominal
            amount regardless of the amount of purchase moneys paid.

4.    REPRESENTATIONS AND WARRANTIES

4.1   As at the date of this Agreement each of the Issuers and the Guarantor
      (each Issuer severally as to itself and the Guarantor jointly and
      severally with the relevant Issuer as to the relevant


                                       7

      Issuer and severally as to itself) warrant to and agree with the Dealers
      and each of them as follows:

      (a)   that the Offering Circular contains all information with regard to
            the Issuers, the Guarantor and the Notes which is material in the
            context of the Program and the issue and offering of Notes
            thereunder, that the information contained in the Offering Circular
            with respect to the Issuers, the Guarantor and the Notes is true and
            accurate in all material respects and is not misleading in any
            material respect, that the opinions and intentions expressed therein
            with respect to the Issuers, the Guarantor and the Notes are
            honestly held, that there are no other facts with respect to the
            Issuers, the Guarantor and the Notes the omission of which would
            make the Offering Circular as a whole or any of such information or
            the expression of any such opinions or intentions misleading in any
            material respect and that each of the Issuers and the Guarantor have
            made all reasonable enquiries to ascertain all facts material for
            the purposes aforesaid, provided that the warranty and agreement in
            this paragraph 4.1(a) shall not extend to information in the
            Offering Circular under the heading "Subscription and Sale";

      (b)   that, except as otherwise indicated in the Offering Circular, there
            has been no adverse change in the financial position or results of
            operations of the Guarantor and its consolidated subsidiaries taken
            as a whole which is material in the context of the issue and
            offering of any Notes to be issued under the Program since the date
            as at which the last published audited consolidated accounts of the
            Guarantor were prepared;

      (c)   that each of the Issuers and the Guarantor is duly incorporated and
            validly existing under the laws of its jurisdiction of incorporation
            and that the creation of Notes under the Program, their offering on
            the terms and subject to the conditions contained herein, the
            execution and issue by the relevant Issuer of, and compliance by the
            relevant Issuer with the terms of, the Notes, the Receipts and the
            Coupons and the execution and delivery by or on behalf of each
            Issuer of, and compliance by each Issuer with the terms of, this
            Agreement, the Deed of Covenant and the Agency Agreement and the
            execution and delivery by or on behalf of the Guarantor, and
            compliance by the Guarantor with the terms of, the Deed of
            Guarantee:

            (i)   are in accordance with the provisions of the laws of the
                  jurisdiction of the relevant company and with the
                  constitutional documents of the relevant company;

            (ii)  do not infringe the terms of, or constitute a default under,
                  any trust deed, agreement or other instrument or obligation to
                  which any of the Issuers or the Guarantor is a party or by
                  which it is bound; and

            (iii) have been duly authorised by each of the Issuers and/or the
                  Guarantor (as the case may be),

            so that Notes issued under the Program, the Receipts, the Coupons
            and the aforesaid agreements constitute, or upon due authentication
            and issue or delivery will constitute, valid and legally binding
            obligations of the relevant Issuer and/or the Guarantor (as the case
            may be) in accordance with their respective terms (subject to
            applicable bankruptcy, reorganisation, insolvency, fraudulent
            transfer, moratorium and other similar laws affecting creditors'
            rights generally from time to time in effect,


                                       8

            and to general principles of equity, regardless of whether
            considered in a proceeding in law or at equity);

      (d)   that no condition, omission, event or act has occurred which would
            (or, with the giving of notice and/or the lapse of time would)
            constitute an Event of Default;

      (e)   that, except as disclosed in the Offering Circular, none of the
            Issuers or the Guarantor is engaged (whether as defendant or
            otherwise) in, nor has any of the Issuers or the Guarantor knowledge
            of the existence of, or any threat of, any legal, arbitration,
            administrative or other proceedings the result of which might have a
            material adverse effect on the financial position or operations of
            any of the Issuers or the Guarantor in the context of the issue of
            Notes under the Program;

      (f)   that all consents, approvals, authorisations, orders and clearances
            of all regulatory authorities required by the Issuers or the
            Guarantor under the laws of Germany, the United States of America,
            Switzerland, the Grand Duchy of Luxembourg and the United Kingdom
            (as the case may be) for or in connection with the creation and
            offering of Notes under the Program, the execution and issue of, and
            compliance by each Issuer and the Guarantor with the terms of, Notes
            issued under the Program (including any Global Note), the Receipts
            and the Coupons and the execution and delivery of, and compliance
            with the terms of, this Agreement, the Agency Agreement, the Deed of
            Covenant and the Deed of Guarantee have been obtained and are in
            full force and effect and that the Issuers and the Guarantor have
            complied with all legal and other requirements necessary to ensure
            that, upon due authentication and issue in the manner aforesaid,
            Notes issued under the Program, the Receipts and the Coupons will
            represent valid and legally binding obligations of the relevant
            Issuer and the Guarantor, payable (as regards the Notes, any Global
            Note, the Receipts and the Coupons) in accordance with their terms,
            that this Agreement, the Agency Agreement, the Deed of Covenant and
            the Deed of Guarantee constitute valid and legally binding
            obligations of the Issuers and/or the Guarantor (as the case may be)
            in accordance with their respective terms (subject to applicable
            bankruptcy, reorganisation, insolvency, fraudulent transfer,
            moratorium and other similar laws affecting creditors' rights
            generally from time to time in effect, and to general principles of
            equity, regardless of whether considered in a proceeding in law or
            at equity) and that on issuance, due payment of the principal and
            interest (including any additional amounts payable under the
            Conditions of the Notes) in respect of Notes issued under the
            Program and compliance by the Issuers and/or the Guarantor with
            their terms and with the terms of this Agreement, the Agency
            Agreement, the Deed of Covenant and the Deed of Guarantee will not
            infringe any existing such laws or the terms of any such consent,
            approval, authorisation, order or clearance;

      (g)   that the net proceeds from the issue of the Notes will be used
            outside Switzerland;

      (h)   that none of the Issuers, the Guarantor nor any affiliate (as
            defined in Rule 405 under the Securities Act) nor any persons (other
            than the Dealers, any of their respective affiliates or any person
            acting on behalf of any of the foregoing) acting on behalf of any of
            them has engaged or will engage in any directed selling efforts (as
            defined in Regulation S under the Securities Act) with respect to
            the Notes, and the Issuers, the Guarantor and any affiliate and all
            persons (other than the Dealers, any of their respective affiliates
            or any person acting on behalf of any of the foregoing) acting on
            behalf of any of them with respect to the Notes have complied and
            will comply with the offering restrictions requirements of
            Regulation S under the Securities Act with respect thereto; and


                                       9

      (i)   that in relation to each Tranche of Notes for which a Dealer is
            named as a Stabilising Manager in the applicable Pricing Supplement,
            it has not issued and will not issue, without the prior written
            consent of that Dealer, any press or other public announcement
            referring to the proposed issue of Notes unless the announcement
            adequately discloses that stabilising action may take place in
            relation to the Notes to be issued.

4.2   With regard to each issue of Notes under the Program, the relevant Issuer
      and the Guarantor shall be deemed to repeat the warranties and agreements
      contained in subclause 4.1 as at the Agreement Date for such Notes (any
      agreement on such Agreement Date being deemed to have been made on the
      basis of, and in reliance on, such warranties and agreements) and as at
      the Issue Date of such Notes.

4.3   The Issuers and the Guarantor shall be deemed to repeat the
      representations and warranties contained in subclause 4.1(a) on each date
      on which the Offering Circular is revised, supplemented or amended. The
      Issuers and the Guarantor shall be deemed to repeat the representations
      and warranties contained in subclause 4.1 on each date on which the
      aggregate nominal amount of the Program is increased in accordance with
      Clause 12.

4.4   The warranties and agreements contained in this Clause 4 shall continue in
      full force and effect notwithstanding any investigation by or on behalf of
      the Dealers or completion of the subscription and issue of any Notes.

5.    UNDERTAKINGS OF THE ISSUERS AND THE GUARANTOR

5.1   NOTIFICATION OF MATERIAL DEVELOPMENTS

      Each Issuer and the Guarantor shall, prior to the time of an agreement
      under Clause 2 (or, if such party becomes aware of the occurrence thereof
      after such time but prior to the completion of the distribution by the
      Dealers of the relevant Notes, promptly upon becoming aware of the
      occurrence thereof), notify each Dealer of:

      (a)   any Event of Default or any condition, event or act in relation to
            itself of which it is aware which, with the giving of notice and/or
            the lapse of time (after the issue of any Notes) would constitute an
            Event of Default or any breach of the representations and warranties
            or undertakings contained in this Agreement, the Agency Agreement,
            the Deed of Covenant, the Deed of Guarantee or any of them; and

      (b)   any development affecting such Issuer or the Guarantor or their
            respective businesses of which it is aware which, in the reasonable
            opinion of such Issuer or the Guarantor (as the case may be), is
            material in the context of the Program or any issue of Notes
            thereunder.

      If, following the time of an agreement under Clause 2 and before the issue
      of the relevant Notes, the relevant Issuer or the Guarantor becomes aware
      that the conditions specified in Clause 3.2 will not be satisfied in
      relation to that issue, the relevant Issuer or the Guarantor (if
      applicable), as the case may be, shall forthwith notify the relevant
      Dealer to that effect giving full details thereof. In such circumstances,
      the relevant Dealer shall be entitled (but not bound) by written notice to
      the relevant Issuer and the Guarantor to be released and discharged from
      its obligations under the agreement reached under Clause 2. Without
      prejudice to the generality of the foregoing, each Issuer and the
      Guarantor shall from time to time promptly furnish to each Dealer such
      information relating to such Issuer and/or the Guarantor (as the case may
      be) as such Dealer may reasonably request, provided that such information
      is relevant in the context of the Program or an issue of Notes thereunder.


                                       10


5.2   UPDATING OF OFFERING CIRCULAR

      Following the publication of the Guarantor's audited financial information
      for the year ended 31st December, 2003, and at the end of each annual
      period thereafter and in the event of a change in the condition of any or
      all of the Issuers or the Guarantor which is material in the context of
      the Program or the issue of the Notes thereunder, the Issuers and the
      Guarantor shall update or amend the Offering Circular (following
      consultation with the Arrangers on behalf of the Dealers) by the
      publication of a supplement thereto, in a form approved by the Dealers, in
      the light of such change in condition. The Offering Circular shall, as
      specified therein, be deemed to incorporate by reference therein the most
      recently published annual accounts (if any) of each Issuer and the
      Guarantor and the most recently published annual report of the Guarantor
      from time to time. Upon any new financial statements being incorporated in
      the Offering Circular as aforesaid or upon the publication of a revised
      Offering Circular or a supplement to the Offering Circular, the Issuers or
      the Guarantor (as the case may be) shall promptly supply to each Dealer
      and the Agent such number of copies of such financial statements, revised
      Offering Circular or supplement as each Dealer or the Agent (as the case
      may be) may reasonably request. Until a Dealer receives such financial
      statements, revised Offering Circular or supplement, the definition of
      OFFERING CIRCULAR in Clause 1.1 shall, in relation to such Dealer, mean
      the Offering Circular prior to the publication of such financial
      statements, revised Offering Circular or supplement.

5.3   LISTING

      The Issuers and the Guarantor shall cause an initial application to be
      made for Notes issued under the Program to be listed on the Luxembourg
      Stock Exchange or on such other Stock Exchange as the Issuers, the
      Guarantor and the Arrangers may agree. In connection with such application
      in respect of any Series of Notes which is intended to be so listed, the
      relevant Issuer and the Guarantor (if applicable) shall endeavour to
      obtain the listing as promptly as reasonably practicable and the relevant
      Issuer and the Guarantor (if applicable) shall make reasonable endeavours
      to furnish any and all documents, instruments, information and
      undertakings that may be necessary or advisable in order to obtain and
      maintain the listing. If, after the preparation of the Offering Circular
      for submission to the relevant Stock Exchange and before whichever is the
      later of the Issue Date of any Notes and the date on which listing becomes
      effective:

      (a)   there is a significant change which is material in the context of
            the Notes affecting any matter contained in the Offering Circular
            whose inclusion was required by the relevant Stock Exchange; or

      (b)   a significant new matter arises which is material in the context of
            the Notes and the inclusion of information in respect of which would
            have been so required if it had arisen when the Offering Circular
            was prepared,

      the relevant Issuer and the Guarantor shall give to the Listing Agent and
      to each Dealer full information about the change or matter and shall
      publish such supplementary listing particulars (in a form approved by the
      Listing Agent) as may be required by the relevant Stock Exchange, and
      shall otherwise comply with the Listing Rules in that regard.

      Each Issuer and the Guarantor shall comply with any undertakings given by
      it from time to time to the relevant Stock Exchange(s) in connection with
      any Notes listed on such Stock Exchange(s) or the listing thereof and,
      without prejudice to the generality of the foregoing, shall furnish or
      procure to be furnished to the relevant Stock Exchange(s) all such
      information


                                       11

      as the relevant Stock Exchange(s) may require in connection with the
      listing on such Stock Exchange(s) of any Notes.

      If any Notes cease to be listed on the relevant Stock Exchange, the
      relevant Issuer and the Guarantor shall endeavour promptly to list such
      Notes on a stock exchange to be agreed between the Issuers, the Guarantor
      and the relevant Dealers.

5.4   AGENCY AGREEMENT, DEED OF COVENANT AND DEED OF GUARANTEE

      Each Issuer and the Guarantor undertakes that it will not:

      (a)   without prior consultation with the Dealers terminate the Agency
            Agreement, the Deed of Covenant or the Deed of Guarantee or effect
            or permit to become effective any amendment to the Agency Agreement,
            the Deed of Covenant or the Deed of Guarantee which, in the case of
            an amendment, would or might adversely affect the interests of any
            Dealer or of any holder of Notes issued before the date of such
            amendment; or

      (b)   without prior consultation with the Dealers appoint a different
            Agent or paying agent(s) under the Agency Agreement,

      and each Issuer and the Guarantor will promptly notify each of the Dealers
      of any termination of, or amendment to, the Agency Agreement, the Deed of
      Covenant or the Deed of Guarantee and of any change in the Agent or paying
      agent(s) under the Agency Agreement.

5.5   LAWFUL COMPLIANCE

      Each Issuer and the Guarantor will at all times ensure that all necessary
      action is taken and all necessary conditions are fulfilled (including,
      without limitation, the obtaining of all necessary consents) so that it
      may lawfully comply with its obligations under the Notes, this Agreement,
      the Agency Agreement, the Deed of Covenant and the Deed of Guarantee and,
      further, so that it may comply with any applicable laws, regulations and
      guidance from time to time promulgated by any governmental and regulatory
      authorities relevant in the context of the issue of Notes under the
      Program.

5.6   AUTHORISED REPRESENTATIVE

      Each Issuer and the Guarantor will notify the Dealers immediately in
      writing if any of the persons named in the list referred to in paragraph 3
      of the Initial Documentation List ceases to be authorised to take action
      on behalf of such Issuer and the Guarantor or if any additional person
      becomes so authorised together, in the case of an additional authorised
      person, with evidence satisfactory to the Dealers that such person has
      been so authorised.

5.7   AUDITORS' COMFORT LETTERS

      Each Issuer and the Guarantor will at the time of the preparation of the
      initial Offering Circular and thereafter upon each occasion when the same
      may be amended or updated, whether by means of information incorporated by
      reference or otherwise (insofar as such amendment or up-dating concerns or
      contains financial information about any of the Issuers or the Guarantor),
      at the expense of the Issuers and the Guarantor (as to which each of the
      Issuers will have joint and several responsibility as between itself and
      the Guarantor) and at other times whenever so requested by the Dealers or
      any of them (on the basis of reasonable grounds) deliver to the relevant
      Dealer a comfort letter or comfort letters from independent


                                       12

      auditors of the Issuers (or any of them) and the Guarantor in such form
      and with such content as the relevant Dealer may reasonably request.

5.8   NO OTHER ISSUES

      During the period commencing on an Agreement Date in respect of any Notes
      and ending on the Issue Date with respect to those Notes, none of the
      Issuers or the Guarantor will, without prior consultation with the
      relevant Dealer, issue or agree to issue any other listed notes, bonds or
      other securities of whatsoever nature (other than Notes to be issued under
      the Program) where such notes, bonds or other securities would have the
      same maturity and currency as the Notes to be issued on the relevant Issue
      Date.

5.9   INFORMATION ON NOTEHOLDERS' MEETINGS

      Each Issuer or the Guarantor will, at the same time as it is despatched,
      furnish the Dealers with a copy of every notice of a meeting of the
      holders of the Notes (or any of them) which is despatched at the
      instigation of the relevant Issuer or the Guarantor (as the case may be)
      and will notify the Dealers immediately after it becomes aware that a
      meeting of the holders of the Notes (or any of them) has been convened by
      holders of the Notes.

5.10  RATING

      Each Issuer (failing whom the Guarantor) undertakes promptly to notify the
      Dealers of any change in the rating given by Standard & Poor's, Moody's or
      such other rating agency as notified to the Dealers for any of the Notes
      to be issued under the Program by it, or upon it becoming aware that such
      rating is listed on "Creditwatch" or other similar publication of formal
      review by the relevant rating agency.

5.11  Commercial Paper

      In respect of any Tranche of Notes which have a maturity of less than one
      year, the Issuer will issue such Notes only if the following conditions
      apply (or the Notes can otherwise be issued without contravention of
      Section 19 of the FSMA):

      (a)   the relevant Dealer covenants in the terms set out in paragraph 2(b)
            of Appendix 2; and

      (b)   the redemption value of each Note is not less than L100,000 (or an
            amount of equivalent value denominated wholly or partly in a
            currency other than sterling), and no part of any Note may be
            transferred unless the redemption value of that part is not less
            than L100,000 (or such an equivalent amount).

6.    INDEMNITY

6.1   Without prejudice to the other rights or remedies of the Dealers, each
      Issuer (severally as to itself) and the Guarantor (jointly and severally
      with the relevant Issuer and severally as to itself) undertakes to the
      Arranger and each Dealer that if that Arranger or Dealer or any Relevant
      Party relating to that Arranger or Dealer incurs any liability, damages,
      cost, loss or expense (including, without limitation, legal fees, costs
      and expenses) (a LOSS) arising out of, in connection with, or based on:

      (a)   any failure by the relevant Issuer to issue on the agreed Issue Date
            any Notes which a Dealer has agreed to purchase (unless such failure
            is as a result of the failure by the relevant Dealer to pay the
            aggregate purchase price for such Notes); or


                                       13

      (b)   any actual or alleged breach of the representations, warranties and
            undertakings contained in, or made or deemed to be made by the
            relevant Issuer and/or the Guarantor under, this Agreement (any such
            allegation being made by a person other than a Relevant Party); or

      (c)   any untrue or misleading (or allegedly untrue or misleading)
            statement, which is material (or allegedly material) in the context
            of the Program and the issue and offering of Notes by such Issuer
            thereunder, in, or any material omission (or alleged omission) from,
            the Offering Circular or any part thereof (any such allegation being
            made by a person other than a Relevant Party).

      the relevant Issuer or, as the case may be, the Guarantor shall (subject
      as provided in subclause 6.2) pay to that Arranger or Dealer on demand an
      amount equal to such Loss. No Arranger or Dealer shall have any duty or
      obligation, whether as fiduciary or trustee for any Relevant Party or
      otherwise, to recover any such payment or to account to any other person
      for any amounts paid to it under this Clause 6.1.

6.2   If any action, proceeding, claim or demand shall be brought or asserted
      against any Relevant Party in respect of which an indemnity is to be
      sought against another party under Clause 6.1 (the INDEMNIFYING PERSON),
      the Relevant Party shall promptly notify the Indemnifying Person in
      writing, and the Indemnifying Person shall have the option in the name of
      the Relevant Party to assume the defence thereof, including the employment
      of legal advisers approved by the Relevant Party (which approval shall not
      be unreasonably withheld or delayed) subject to the payment by the
      Indemnifying Person of all fees and expenses relating thereto provided
      that such legal advisers shall not, save with the consent of the Relevant
      Party (which consent shall not be unreasonably withheld or delayed), also
      be legal advisers to the Indemnifying Person and provided further that if
      the defendants in any such action, proceeding, claim or demand include the
      Relevant Party and the Relevant Party shall have reasonably concluded that
      there may be legal defences available to the Relevant Party which are
      different from or additional to those available to the Indemnifying Person
      and in the event that the Indemnifying Person does not wish to assume, or
      is prevented from assuming, such different or additional legal defences on
      behalf of the Relevant Party, the Relevant Party shall have the right, at
      the expense of the Indemnifying Person, to select separate legal advisers
      to assume such legal defences and otherwise to participate in the defence
      of such action, proceeding, claim or demand on behalf of the Relevant
      Party.

      Upon receipt of notice from the Indemnifying Person of its election so to
      assume the defence of any such action, proceeding, claim or demand and
      approval by the Relevant Party as aforesaid of legal advisers, the
      Indemnifying Person will not be liable to any Relevant Party for any fees
      or expenses subsequently incurred by such Relevant Party in connection
      with the defence thereof unless:

      (a)   the Relevant Party shall have employed legal advisers in connection
            with the assumption of legal defences in accordance with the proviso
            to the preceding paragraph; or

      (b)   the Indemnifying Person shall not have employed legal advisers, or
            taken other measures, approved by or on behalf of the Relevant Party
            to represent such Relevant Party within a reasonable time after
            notice has been received by the Indemnifying Person of commencement
            of the action or proceedings or the making of any claim or demand;
            or


                                       14

      (c)   the Indemnifying Person has authorised the employment of separate
            legal advisers by the Indemnifying Person,

      in which case the Indemnifying Person will reimburse the Relevant Party
      all such reasonable fees and expenses.

      Each Relevant Party undertakes not to compromise or settle any such
      action, proceedings, claim or demand effected without the written consent
      of the Indemnifying Person. Each Indemnifying Person undertakes not to
      compromise or settle any such action, proceedings, claims or demands
      effected without the written consent of the Relevant Party (consent is not
      to be unreasonably withheld or delayed). If any such action, proceeding,
      claim or demand shall be settled with the authority and written consent of
      the Indemnifying Person or if there be a final judgment for the plaintiff
      in relation thereto in respect of which the Relevant Party is entitled to
      indemnification hereunder, the Indemnifying Person agrees to indemnify and
      hold harmless the Relevant Party from and against any loss or liability by
      reason of such settlement or judgment (other than any fees and expenses
      incurred in circumstances where the Indemnifying Person is not to be
      liable therefor under the preceding paragraph).

7.    AUTHORITY TO DISTRIBUTE DOCUMENTS

      Subject to Clause 8 below, each Issuer and the Guarantor hereby authorises
      each of the Dealers on behalf of each Issuer and the Guarantor to provide
      copies of the Offering Circular and such additional written information as
      the relevant Issuer or the Guarantor shall, in writing, provide to and
      authorise the Dealers so to use to actual and potential purchasers of
      Notes.

8.    DEALERS' UNDERTAKINGS

8.1   Each Dealer agrees to comply with the restrictions and agreements set out
      in Appendix 2 hereto.

8.2   Each Dealer acknowledges that:

      (a)   none of the Issuers nor the Guarantor has authorised it to give any
            information or make any representation in connection with any
            offering, issue, subscription or sale of any Notes other than those
            contained in the Offering Circular or the information approved in
            writing and provided by such Issuer or the Guarantor pursuant to
            Clause 7;

      (b)   it will not circulate any version of the Offering Circular other
            than the latest version of the Offering Circular published by such
            Issuer and made available to such Dealer from time to time; and

      (c)   it shall promptly cease use or distribution of the Offering Circular
            or any additional written information provided for in Clause 7 upon
            receipt of notice from any Issuer or the Guarantor that the Offering
            Circular or such information requires updating or correction.

8.3   Each Dealer undertakes with each of the Issuers, the Guarantor and the
      other Dealers to indemnify, defend and hold harmless the Relevant Party
      against any losses, liabilities, claims, charges, actions and demands, and
      any reasonable out-of-pocket costs and expenses which the Relevant Party
      may incur or which may be made against the Relevant Party arising out of,
      or in connection with:


                                       15

      (a)   the making by such Dealer of any unauthorised representation or the
            giving by it of any information which is not contained in the
            Offering Circular or otherwise authorised in accordance with Clause
            7; or

      (b)   any failure by such Dealer to observe any of the restrictions or
            agreements contained in Appendix 2 hereto.

8.4   If any claim, demand or action is brought against any such Relevant Party
      in respect of which indemnity may be sought from a Dealer pursuant to
      Clause 8.3, the provisions of Clause 6.2 shall apply, mutatis mutandis, in
      relation thereto.

9.    FEES, EXPENSES AND STAMP DUTIES

9.1   Each Issuer (severally as to itself and the Notes issued by itself) and
      the Guarantor (jointly and severally with the relevant Issuer and
      severally as to itself) undertake that they shall:

      (a)   pay to each Dealer all commissions from time to time agreed in
            connection with the sale of any Notes to that Dealer (and any value
            added or other similar tax thereon); and

      (b)   pay (together with any value added tax or other similar tax
            thereon):

            (i)   the fees and expenses of their legal advisers and auditors;
                  and

            (ii)  the cost of listing and maintaining the listing of any Notes
                  to be issued by such Issuer under the Program which are to be
                  listed on a Stock Exchange;

9.2   Each Issuer (severally as to itself and the Notes issued by itself) and
      the Guarantor (jointly and severally with the relevant Issuer and
      severally as to itself) undertake that they shall:

      (a)   pay (together with any value added tax or other similar tax
            thereon):

            (i)   the fees and expenses payable to the Agent and any paying
                  agents;

            (ii)  all expenses (other than those of the Agent, any paying agent
                  or the Dealers) in connection with the issue, authentication,
                  packaging and initial delivery of Notes and the preparation of
                  Global Notes, this Agreement, the Agency Agreement, the Deed
                  of Guarantee and the preparation and printing of Notes, the
                  Offering Circular and any amendments or supplements thereto
                  (including the updating of any legal opinions issued pursuant
                  to Clause 3.4 and of any auditors' comfort letters issued
                  pursuant to Clause 5.7); and

            (iii) the cost of any publicity agreed in writing by any Issuer or
                  the Guarantor in connection with the Program or any issue of
                  any Notes of such Issuer;

      (b)   pay to UBS such amount as is separately agreed in relation to the
            fees and disbursements of the legal advisers appointed to represent
            the Dealers (including any value added tax or other similar tax
            thereon) in connection with the negotiation, preparation, execution
            and delivery of this Agreement, the Agency Agreement, the Deed of
            Covenant, the Deed of Guarantee and any documents referred to in any
            of them and any other documents required in connection with the
            creation of the Program; and


                                       16

      (c)   pay promptly, and in any event before any penalty becomes payable,
            any stamp, documentary, registration or similar duty or tax
            (including any stamp duty reserve tax) payable in Germany, the
            United States of America, the United Kingdom, Switzerland or the
            Grand Duchy of Luxembourg in connection with the entry into,
            performance, enforcement or admissibility in evidence of this
            Agreement, any communication pursuant hereto, the Agency Agreement,
            the Deed of Covenant, the Deed of Guarantee or any Note and shall
            indemnify each Dealer against any liability with respect to or
            resulting from any delay in paying or omission to pay any such duty
            or tax.

10.   TERMINATION OF APPOINTMENT OF DEALERS

      The Issuers, the Guarantor or (as to itself) a Dealer may terminate the
      arrangements described in this Agreement by giving not less than 30 days'
      written notice to the other parties hereto. The Issuers or the Guarantor
      may terminate the appointment of a Dealer or Dealers by giving not less
      than 30 days' written notice to such Dealer or Dealers (with a copy
      promptly thereafter to all the other Dealers and the Agent). Termination
      shall not affect any rights or obligations (including but not limited to
      those arising under Clause 6, 8 or 9) which have accrued at the time of
      termination or which accrue thereafter in relation to any act or omission
      or alleged act or omission which occurred prior to such time.

11.   APPOINTMENT OF NEW DEALERS

11.1  Nothing in this Agreement shall prevent the Issuers or the Guarantor from
      appointing one or more New Dealers for the duration of the Program or,
      with regard to a particular issue of Notes, the relevant Issuer and the
      Guarantor (if applicable) from appointing one or more New Dealers for the
      purposes of that issue, in either case upon the terms of this Agreement
      and provided that, unless such appointment is effected pursuant to a
      Subscription Agreement:

      (a)   any New Dealer shall have first delivered to the Issuers and the
            Guarantor a Dealer Accession Letter; and

      (b)   the Issuers and the Guarantor shall have delivered to such New
            Dealer a Confirmation Letter.

      Upon receipt of the relevant Confirmation Letter or execution of the
      relevant Subscription Agreement, as the case may be, each such New Dealer
      shall, subject to the terms of the relevant Dealer Accession Letter and
      the relevant Confirmation Letter or the relevant Subscription Agreement,
      as the case may be, become a party to this Agreement, vested with all
      authority, rights, powers, duties and obligations of a Dealer as if
      originally named as a Dealer hereunder provided that, except in the case
      of the appointment of a New Dealer for the duration of the Program,
      following the issue of the Notes of the relevant Tranche, the relevant New
      Dealer shall have no further such authority, rights, powers, duties or
      obligations except such as may have accrued or been incurred prior to or
      in connection with the issue of such Notes.

11.2  The Issuers and/or the Guarantor shall promptly notify the Agent and the
      other Dealers of any appointment of a New Dealer for the duration of the
      Program by supplying to such parties a copy of any Dealer Accession Letter
      and Confirmation Letter. No such notice shall be required to be given in
      the case of an appointment of a New Dealer for a particular issue of
      Notes.


                                       17

12.   INCREASE IN THE AGGREGATE NOMINAL AMOUNT OF THE PROGRAM

12.1  From time to time the Issuers and the Guarantor may wish to increase the
      aggregate nominal amount of the Notes that may be issued under the
      Program. In such circumstances, the Issuers and the Guarantor may request
      such an increase (subject as set out in subclause 12.2) by delivering to
      the Listing Agent and the Dealers the letter substantially in the form set
      out in Appendix 5 hereto. Unless notice to the contrary is received by the
      Issuers or the Guarantor no later than 10 days after notice was given to
      the Dealers and the Listing Agent, each such Dealer and the Listing Agent
      will be deemed to have given its consent to the increase in the nominal
      amount of the Program, whereupon all references in this Agreement and the
      Procedures Memorandum to a Euro Medium Term Note Program of a certain
      nominal amount, shall be and shall be deemed to be references to a Euro
      Medium Term Note Program of the increased nominal amount.

12.2  Notwithstanding subclause 12.1, the right of the Issuers and the Guarantor
      to increase the aggregate nominal amount of the Program shall be subject
      to each Dealer having received and found satisfactory all the documents
      and confirmations described in the Initial Documentation List (with such
      changes as may be relevant, with reference to the circumstances at the
      time of the proposed increase as are agreed between the Issuers, the
      Guarantor and the Dealers), and the delivery of any further conditions
      precedent that any of the Dealers may reasonably require, including,
      without limitation, the production of a supplementary Offering Circular by
      the Issuers and the Guarantor and any further or other documents required
      by the relevant Stock Exchange(s) for the purpose of listing the Notes to
      be issued under the Program on the relevant Stock Exchange(s). The
      Arrangers shall circulate to the Dealers all the documents and
      confirmations described in the Initial Documentation List and any further
      conditions precedent so required. Any Dealer must notify the Arrangers,
      the Issuers and the Guarantor within 10 business days of receipt if it
      considers, in its reasonable opinion, such documents, confirmations and,
      if applicable, such further conditions precedent to be unsatisfactory.

13.   STATUS OF THE ARRANGERS

13.1  Each of the Dealers agrees that each Arranger has only acted in an
      administrative capacity to facilitate the establishment and/or maintenance
      of the Program and has no responsibility to it for (a) the adequacy,
      accuracy, completeness or reasonableness of any representation, warranty,
      undertaking, agreement, statement or information in the Offering Circular,
      any Pricing Supplement, this Agreement or any information provided in
      connection with the Program or (b) the nature and suitability of it of all
      legal, tax and accounting matters and all documentation in connection with
      the Program or any Tranche.

13.2  The Arrangers shall have only those duties, obligations and
      responsibilities expressly specified in this Agreement.

14.   COUNTERPARTS

      This Agreement may be signed in any number of counterparts, all of which
      taken together shall constitute one and the same instrument.

15.   COMMUNICATIONS

15.1  All communications shall be by fax or letter delivered by hand or (but
      only where specifically provided in the Procedures Memorandum) by
      telephone. Each communication shall be made to the relevant party at the
      fax number or address or telephone number and, in the case of a
      communication by fax or letter, marked for the attention of, or (in the
      case of a communication by telephone) made to, the person(s) from time to
      time specified in writing by


                                       18

      that party to the other for the purpose. The initial telephone number, fax
      number and address of, and person(s) so specified by, each party are set
      out on the signature pages hereof.

15.2  A communication shall be deemed received (if by fax) when an
      acknowledgement of receipt is received, (if by telephone) when made or (if
      by letter) when delivered, in each case in the manner required by this
      clause. Every communication shall be irrevocable save in respect of any
      manifest error therein.

16.   BENEFIT OF AGREEMENT

16.1  This Agreement shall be binding upon and shall inure for the benefit of
      each Issuer, the Guarantor and each Dealer and their respective successors
      and permitted assigns.

16.2  The Dealers may assign or transfer their rights or obligations under this
      Agreement with the prior written consent of the Issuers and the Guarantor
      (except for an assignment and/or transfer of all of a Dealer's rights and
      obligations under this Agreement by operation of law resulting directly
      from a merger by, or sale of all or substantially of all the assets of,
      such Dealer). If the Dealers assign their rights or transfer their
      obligations as provided in this clause, the relevant assignee or
      transferee shall be treated as if it were a party to this Agreement with
      effect from the date on which such assignment or transfer takes effect;
      provided that any transfer shall only become effective when the Issuers
      and the Guarantor have received an undertaking from the transferee to be
      bound by this Agreement and to perform the obligations transferred to it
      (in form and substance reasonably satisfactory to the Issuers and the
      Guarantor).

17.   CURRENCY INDEMNITY

      If, under any applicable law and whether pursuant to a judgment being made
      or registered against any Issuer and/or (as the case may be) the Guarantor
      or in the liquidation, insolvency or analogous process of the relevant
      Issuer and/or (as the case may be) the Guarantor or for any other reason,
      any payment under or in connection with this Agreement is made or falls to
      be satisfied in a currency (the OTHER CURRENCY) other than that in which
      the relevant payment is expressed to be due (the REQUIRED CURRENCY) under
      this Agreement, then, to the extent that the payment (when converted into
      the required currency at the rate of exchange on the date of payment or,
      if it is not practicable for the relevant Dealer to purchase the required
      currency with the other currency on the date of payment, at the rate of
      exchange as soon thereafter as it is practicable for it to do so) actually
      received by the relevant Dealer falls short of the amount each due under
      the terms of this Agreement, the relevant Issuer and the Guarantor each
      undertakes that it shall, as a separate and independent obligation,
      indemnify and hold harmless each Dealer against the amount of such
      shortfall. For the purpose of this clause RATE OF EXCHANGE means the rate
      at which the relevant Dealer is able on the London foreign exchange market
      on the relevant date to purchase the required currency with the other
      currency and shall take into account any premium and other reasonable
      costs of exchange. The Dealers understand and agree that in the event that
      the required currency is replaced by the Euro after the date hereof, the
      Euro will not be considered an "other currency" for the purposes of this
      Clause 17.

18.   CALCULATION AGENT

18.1  In the case of any Series of Notes which require the appointment of a
      Calculation Agent the Agent shall act as Calculation Agent, unless (a) the
      relevant Issuer or the Guarantor appoints another person as Calculation
      Agent with the approval of the relevant Dealer or (in the case of a
      syndicated


                                       19

      issue) the Lead Manager or (b) the relevant Dealer or (in the case of a
      syndicated issue) the Lead Manager requests the relevant Issuer to appoint
      such Dealer or Lead Manager, or a person nominated by such Dealer or Lead
      Manager (a NOMINEE), as Calculation Agent.

18.2  Should such an appointment be made by the relevant Issuer or Guarantor
      (with such approval) or such a request be made to the relevant Issuer and
      agreed to by the relevant Issuer and the Guarantor, the appointment of
      that other person, Dealer, Lead Manager or Nominee shall be automatic upon
      the issue of the relevant Series of Notes, and shall, except as agreed, be
      on the terms set out in the Calculation Agency Agreement attached as
      Appendix 1 to the Agency Agreement, and no further action shall be
      required to effect the appointment of such Dealer, other person, Lead
      Manager or Nominee as Calculation Agent in relation to that Series of
      Notes. The name of the other person, Dealer, Lead Manager or Nominee so
      appointed will be entered in the relevant Pricing Supplement.

19.   STABILISATION

19.1  In connection with the distribution of any Tranche of Notes, the Dealer
      (if any) designated as stabilising manager in the applicable Pricing
      Supplement may over-allot or effect transactions which support the market
      price of Notes of the Series of which such Tranche forms a part at a level
      higher than that which might otherwise prevail, but in doing so such
      Dealer shall act as principal and not as agent of the relevant Issuer or
      the Guarantor. Such stabilising, if commenced, may be discontinued at any
      time. Any loss resulting from over-allotment and stabilisation shall be
      borne, and any net profit arising therefrom shall be retained, by the
      stabilising manager for its own account. Such stabilising shall be done in
      accordance with the applicable laws.

19.2  The Issuer confirms that it has been informed of the existence of the
      informational guidance published by the Financial Services Authority in
      relation to stabilisation.

20.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

      A person who is not a party to this Agreement has no right under the
      Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
      Agreement, but this does not affect any right or remedy of a third party
      which exists or is available apart from that Act.

21.   GOVERNING LAW AND JURISDICTION

21.1  This Agreement and every agreement for the issue and purchase of Notes as
      referred to in Clause 2 shall be governed by, and construed in accordance
      with, the laws of England.

21.2  Each party to this Agreement hereby irrevocably agrees for the exclusive
      benefit of the other parties to this Agreement that the courts of England
      are to have jurisdiction to settle any disputes which may arise out of or
      in connection with this Agreement and that accordingly any suit, action or
      proceedings (together referred to as PROCEEDINGS) arising out of or in
      connection with this Agreement may be brought in such courts. Each party
      to this Agreement hereby irrevocably waives any objection which it may
      have to the laying of the venue of any Proceedings in any such courts and
      any claim that any such Proceedings have been brought in an inconvenient
      forum and hereby further irrevocably agrees that a judgment in any
      Proceedings brought in the English courts shall be conclusive and binding
      upon such party and may be enforced in the courts of any other
      jurisdiction (subject to the laws of the jurisdiction in which enforcement
      is sought). Nothing contained herein shall limit any right to take
      Proceedings against any party to this Agreement in any other court of
      competent jurisdiction (outside the Contracting States as defined in
      Section 1(3) of the Civil Jurisdiction and Judgments Act 1982), nor shall
      the taking of Proceedings in one or more jurisdictions preclude the taking
      of Proceedings in any other jurisdiction, whether concurrently or not


                                       20

      (subject to the laws of the relevant jurisdictions). Each of CSC US, CSC
      Germany, CSC Bermuda and the Guarantor hereby appoints CSC UK as its agent
      for service of process and agrees that, in the event of ceasing so to act
      or ceasing to be registered in England, it will appoint another person as
      its agent for service of process in England in respect of any Proceedings.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above written.


                                       21

                                   APPENDIX 1

                           INITIAL DOCUMENTATION LIST

1.    A certified copy of:

      (a)   the Certificate of Incorporation of CSC US;

      (b)   the Memorandum and Articles of Association of CSC UK;

      (c)   the Articles of Association of CSC Germany;

      (d)   the Memorandum of Association and Bye-Laws of CSC Bermuda; and

      (e)   the Articles of Incorporation of the Guarantor,

      unless these have not changed since the date they were last provided to
      the Dealers.

2.    A certified copy of all resolutions and other authorisations required to
      be passed or given, and evidence of any other action required to be taken,
      on behalf of each Issuer and the Guarantor, as applicable:

      (a)   to approve this Agreement, the Agency Agreement, the Deed of
            Covenant, the creation of the Program, the issue of Notes under the
            Program and the execution of the Deed of Guarantee by the Guarantor;

      (b)   to authorise appropriate persons to execute each of this Agreement,
            the Agency Agreement, the Deed of Covenant, the Deed of Guarantee
            and Notes issued under the Program and to take any other action in
            connection therewith; and

      (c)   to authorise appropriate persons to enter into agreements with any
            Dealer on behalf of each Issuer and the Guarantor to issue Notes in
            accordance with Clause 2 of this Agreement.

3.    A certified list of the names, titles and specimen signatures of the
      persons authorised on behalf of each Issuer and the Guarantor in
      accordance with paragraph 2(c) above unless these have not changed since
      the date they were last provided to the Dealers.

4.    Certified copies of any other governmental or other consents required for
      each Issuer and the Guarantor to issue Notes under the Program, for the
      Guarantor to guarantee Notes issued under the Program, for each Issuer and
      the Guarantor (as the case may be) to execute and deliver this Agreement,
      the Deed of Covenant and the Agency Agreement and for each Issuer and the
      Guarantor to fulfil its respective obligations under this Agreement, the
      Agency Agreement, the Deed of Covenant and the Notes.

5.    Confirmation that master Global Notes (from which copies may be made for
      each Tranche), duly executed by a person or persons authorised to take
      action on behalf of the relevant Issuer as specified in paragraph 2(b)
      above, have been delivered to the Agent.

6.    Legal opinions addressed to each of the Dealers dated on or after the date
      of this Agreement, in such form and with such content as the Dealers may
      reasonably require, from:

      (a)   Freshfields Bruckhaus Deringer, legal advisers to CSC Germany as to
            German law;


                                       22

      (b)   Cravath, Swaine & Moore, legal advisers to CSC US as to U.S. law;

      (c)   Conyers Dill & Pearman, legal advisers to CSC Bermuda as to Bermudan
            law;

      (d)   Homburger, legal advisers to the Guarantor as to Swiss law; and

      (e)   Allen & Overy, legal advisers to the Dealers as to English law.

7.    A conformed copy of the Agency Agreement and the Deed of Guarantee and
      confirmation that an executed copy of each such document has been
      delivered to the Paying Agents and the Common Depositary for Euroclear and
      Clearstream, Luxembourg.

8.    A conformed copy of the Deed of Covenant and confirmation that an executed
      copy of such deed has been delivered to the Agent and the Common
      Depositary for Euroclear and Clearstream, Luxembourg.

9.    A printed final version of the Offering Circular.

10.   Confirmation from the Listing Agent that the Luxembourg Stock Exchange
      will list Notes to be issued under the Program.

11.   A comfort letter from the independent auditors of each Issuer and the
      Guarantor, in such form and with such content as the Dealers may
      reasonably request.

12.   Confirmation that the Program has been rated A by Standard & Poor's and A2
      by Moody's.


                                       23

                                   APPENDIX 2

                              SELLING RESTRICTIONS

1.    UNITED STATES

1.1   The Notes have not been and will not be registered under the Securities
      Act of 1933, as amended (the SECURITIES ACT), and may not be offered or
      sold within the United States or to, or for the account or benefit of,
      U.S. persons except in accordance with Regulation S under the Securities
      Act or pursuant to an exemption from the registration requirements of the
      Securities Act. Each Dealer represents and agrees that it and any of its
      affiliates and any person acting on its or their behalf have offered and
      sold any Notes, and will offer and sell any Notes (i) as part of their
      distribution at any time and (ii) otherwise until 40 days after the
      completion of the distribution of all Notes of the Tranche of which such
      Notes are a part, as determined and notified by the Agent to such Dealer,
      as provided below, only in accordance with Rule 903 of Regulation S under
      the Securities Act. Accordingly, each Dealer, its affiliates and any
      persons acting on its or their behalf have not engaged and will not engage
      in any directed selling efforts with respect to the Notes, and have
      complied and will comply with the offering restrictions requirement of
      Regulation S. Each Dealer who has purchased Notes of a Tranche hereunder
      (or in the case of a sale of a Tranche of Notes issued to or through more
      than one Dealer, each of such Dealers as to the Notes of such Tranche
      purchased by or through it) shall determine and certify to the Agent the
      completion of the distribution of the Notes of such Tranche. On the basis
      of such certification or certifications, the Agent agrees to notify such
      Dealer or Dealers of the end of the distribution compliance period with
      respect to such Tranche. Each Dealer also agrees that, at or prior to
      confirmation of sale of Notes, it will have sent to each distributor,
      dealer or person receiving a selling concession, fee or other remuneration
      that purchases Notes from it or any of its affiliates or any person acting
      on its or their behalf during the distribution compliance period a
      confirmation or notice to substantially the following effect:

            "The Securities covered hereby have not been registered under the
            U.S. Securities Act of 1933 (the "Securities Act") and may not be
            offered or sold within the United States or to, or for the account
            or benefit of, U.S. persons (i) as part of their distribution at any
            time or (ii) otherwise until 40 days after the completion of the
            distribution of the Securities as determined and notified by the
            Agent for the Securities to [name of Dealer(s)], except in either
            case in accordance with Regulation S under the Securities Act. Terms
            used above have the meanings given to them by Regulation S."

      Terms used in this subclause 1.1 have the meanings given to them by
      Regulation S.

1.2   In addition:

      (a)   except to the extent permitted under U.S. Treas. Reg. Section
            1.163-5(c)(2)(i)(D) (the D RULES), each Dealer (a) represents that
            it has not offered or sold, and agrees that during the restricted
            period it will not offer or sell, Notes in bearer form to a person
            who is within the United States or its possessions or to a United
            States person, and (b) represents that it has not delivered and
            agrees that it will not deliver within the United States or its
            possessions definitive Notes in bearer form that are sold during the
            restricted period;

      (b)   each Dealer represents that it has and agrees that throughout the
            restricted period it will have in effect procedures reasonably
            designed to ensure that its employees or agents who are directly
            engaged in selling Notes in bearer form are aware that such


                                       24

            Notes may not be offered or sold during the restricted period to a
            person who is within the United States or its possessions or to a
            United States person, except as permitted by the D Rules;

      (c)   if it is a United States person, each Dealer represents that it is
            acquiring the Notes for purposes of resale in connection with their
            original issuance and if it retains Notes in bearer form for its own
            account, it will only do so in accordance with the requirements of
            U.S. Treas. Reg. Section 1.163-5(c)(2)(i)(D)(6); and

      (d)   with respect to each affiliate that acquires Notes from a Dealer for
            the purpose of offering or selling such Notes during the restricted
            period, such Dealer repeats and confirms the representations and
            agreements contained in subclauses (a), (b) and (c) on such
            affiliate's behalf.

      Terms used in this subclause 1.2 have the meanings given to them by the
      U.S. Internal Revenue Code and regulations thereunder, including the D
      Rules.

1.3   Each Dealer represents that it has not entered and agrees that it will not
      enter into any contractual arrangement with respect to the distribution or
      delivery of Notes, so as to cause any person to become a "distributor"
      within the meaning of Regulation S or the D Rules except with their
      affiliates or with the prior written consent of the relevant Issuer and
      the Guarantor (in which case such Dealer will obtain for the benefit of
      the Issuer and the Guarantor the agreement of such person to the
      representations and agreements contained in subclauses 1.1 and 1.2 above).

1.4   Each issue of Indexed Notes and Dual Currency Notes shall be subject to
      such additional U.S. selling restrictions as the relevant Issuer and the
      relevant Dealer or Dealers shall agree as a term of the issue and purchase
      of such Notes, which additional selling restrictions shall be set out in
      the Pricing Supplement. Each Dealer agrees that it shall offer, sell and
      deliver such Notes only in compliance with such additional U.S. selling
      restrictions.

2.    UNITED KINGDOM

      Each Dealer represents and agrees that:

      (a)   in relation to Notes which have a maturity of one year or more, it
            has not offered or sold and, prior to the expiry of the period of
            six months from the Issue Date of such Notes, will not offer or sell
            to persons in the United Kingdom any Notes except to persons whose
            ordinary activities involve them in acquiring, holding, managing or
            disposing of investments (as principal or agent) for the purposes of
            their businesses or otherwise in circumstances which have not
            resulted and will not result in an offer to the public in the United
            Kingdom within the meaning of the Public Offers of Securities
            Regulations 1995 (as amended);

      (b)   in relation to any Notes which have a maturity of less than one
            year, (a) it is a person whose ordinary activities involve it in
            acquiring, holding, managing or disposing of investments (as
            principal or agent) for the purposes of its business and (b) it has
            not offered or sold and will not offer or sell any Notes other than
            to persons whose ordinary activities involve them in acquiring,
            holding, managing or disposing of investments (as principal or as
            agent) for the purposes of their businesses or who it is reasonable
            to expect will acquire, hold, manage or dispose of investments (as
            principal or agent) for the purposes of their businesses where the
            issue of the Notes would otherwise constitute a contravention of
            Section 19 of the FSMA by the Issuer;


                                       25

      (c)   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 the FSMA) received by it in connection with the issue of any
            Notes in circumstances in which Section 21(1) of the FSMA does not
            apply to the relevant Issuer or the Guarantor; and

      (d)   it has complied and will comply with all applicable provisions of
            the FSMA with respect to anything done by it in relation to any
            Notes in, from or otherwise involving the United Kingdom.

3.    JAPAN

      The Notes have not been and will not be registered under the Securities
      and Exchange Law of Japan (the SECURITIES AND EXCHANGE LAW) and each
      Dealer agrees that it will not offer or sell any Notes, 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 organised 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 and regulations of Japan.

4.    FRANCE

      Each of the Dealers, the Issuer and the Guarantor represents and agrees
      that, in connection with their initial distribution, it has not offered or
      sold and will not offer or sell, directly or indirectly, Notes to the
      public in the Republic of France, and has not distributed or caused to be
      distributed and will not distribute or cause to be distributed to the
      public in the Republic of France, the Offering Circular or any other
      offering material relating to the Notes, and that such offers, sales and
      distributions have been and shall only be made in France to qualified
      investors (investisseurs qualifies) acting for their own account as
      defined in, and in accordance with, Article L.411-1 and L.411-2 of the
      Code Monetaire et Financier and decret no. 98-880 dated 1st October, 1998.

5.    BERMUDA

      Each Dealer represents and agrees that it will not offer or sell Notes
      other than to persons whose ordinary activities involve them in acquiring
      holding, managing or disposing of investments (whether as principal or
      agent) for the purposes of their businesses, or otherwise in circumstances
      which do not constitute an offer to the public, unless a prospectus is
      filed with the Registrar of Companies in Bermuda in accordance with Part
      III of the Companies Act 1981 (as amended) of Bermuda and that it has
      complied and will comply with all applicable provisions of the Companies
      Act, 1981 (as amended) of Bermuda with respect to anything done by it in
      relation to the Notes in, from or otherwise involving Bermuda.

6.    GERMANY

      Each Dealer represents and agrees that Notes have not been and will not be
      offered, sold, promoted or advertised by it in the Federal Republic of
      Germany other than in compliance with the German Securities Selling
      Prospectus Act (Wertpapier-Verkaufsprospektgesetz) of 13th December, 1990,
      as amended, or any other laws applicable in the Federal Republic of
      Germany governing the issue, offering and sale of securities.


                                       26

7.    THE NETHERLANDS

      Each Dealer represents and agrees that it has not, directly or indirectly,
      offered or sold and will not, directly or indirectly, offer to sell in The
      Netherlands any Notes with a denomination of less than E50,000 (or its
      foreign currency equivalent) other than to persons who trade or invest in
      securities in the conduct of a profession or business (which include
      banks, stockbrokers, insurance companies, pension funds, other
      institutional investors and finance companies and treasury departments of
      large enterprises) unless one of the other exemptions from or exceptions
      to the prohibition contained in article 3 of the Dutch Securities
      Transactions Supervision Act 1995 ("Wet toezicht effectenverkeer 1995") is
      applicable and the conditions attached to such exemption or exception are
      complied with.

8.    GENERAL

      Each Dealer will (to the best of its knowledge and belief) comply with all
      applicable laws and regulations in force in any jurisdiction in which it
      purchases, offers, sells or delivers Notes or possesses or distributes the
      Offering Circular and will obtain any consent, approval or permission
      required by it for the purchase, offer, sale or delivery by it of Notes
      under the laws and regulations in force in any jurisdiction to which it is
      subject or in which it makes such purchases, offers, sales or deliveries
      and none of the Issuers, the Guarantor nor any other Dealer shall have
      responsibility therefor.

      None of the Issuers, the Guarantor nor any of the Dealers represents that
      Notes may at any time lawfully be sold in compliance with any applicable
      registration or other requirements in any jurisdiction, or pursuant to any
      exemption available thereunder, or assumes any responsibility for
      facilitating such sale.

      With regard to each Tranche, the relevant Dealer will be required to
      comply with such other additional restrictions as the relevant Issuer, the
      Guarantor and the relevant Dealer shall agree and as shall be set out in
      the applicable Pricing Supplement.


                                       27

                                   APPENDIX 3

                                DEALER ACCESSION

                                     PART 1

                    FORM OF DEALER ACCESSION LETTER - PROGRAM

[Date]

To:   CIBA SPECIALTY CHEMICALS CORPORATION
      CIBA SPECIALTY CHEMICALS PLC
      CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
      CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
      (the "Issuers")

and:  CIBA SPECIALTY CHEMICALS HOLDING INC.
      (the "Guarantor")

Attention:

Dear Sirs,

                      CIBA SPECIALTY CHEMICALS CORPORATION
                          CIBA SPECIALTY CHEMICALS PLC
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                U.S.$2,000,000,000 EURO MEDIUM TERM NOTE PROGRAM

      We refer to the amended and restated Program agreement dated 27th March,
2003 entered into in respect of the above Euro Medium Term Note Program (the
PROGRAM) and made between the Issuers, the Guarantor and the Dealers party
thereto (which agreement, as amended from time to time, is herein referred to as
the PROGRAM AGREEMENT).

      CONDITIONS PRECEDENT

We confirm that we are in receipt of the documents referenced below:

(a)   a copy of the Program Agreement;

(b)   a copy of the current version all documents referred to in Appendix 1 of
      the Program Agreement;

and have found them to our satisfaction or (in the case of documents referred to
in (b) above) have waived production of such documents.

For the purposes of the Program Agreement our Notice Details are as follows:

(insert name, address, telephone, telex (+ answerback) and attention).

In consideration of appointment by the Issuers and the Guarantor of us as a
Dealer under the Program Agreement we hereby undertake, for the benefit of each
of the Issuers, the Guarantor and the other Dealers, that we will perform and
comply with all the duties and obligations expressed to be assumed by a Dealer
under the Program Agreement.


                                       28

This letter is governed by, and shall be construed in accordance with, English
law.

Yours faithfully,





[Name of New Dealer]

cc:   JPMorgan Chase Bank (Agent)
      [names of Dealers at the date of accession]


                                       29

                                     PART 2

                      FORM OF CONFIRMATION LETTER - PROGRAM

[Date]

To:   [Name and address of new Dealer]

Dear Sirs,


                      CIBA SPECIALTY CHEMICALS CORPORATION
                          CIBA SPECIALTY CHEMICALS PLC
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                U.S.$2,000,000,000 EURO MEDIUM TERM NOTE PROGRAM

We refer to the amended and restated Program Agreement dated 27th March, 2003
(such agreement, as amended from time to time, the PROGRAM AGREEMENT) entered
into in respect to the above Euro Medium Term Note Program and hereby
acknowledge receipt of your Dealer Accession Letter to us dated [ ].

We hereby confirm that, with effect from the date hereof, you shall become a
party to the Program Agreement in accordance with Clause 11 of the Program
Agreement.

Yours faithfully,

For and on behalf of
CIBA SPECIALTY CHEMICALS CORPORATION


By:



For and on behalf of
CIBA SPECIALTY CHEMICALS PLC


By:



For and on behalf of
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH


By:



For and on behalf of
CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.


By:


                                       30

For and on behalf of CIBA SPECIALTY CHEMICALS HOLDING INC.


By:                           By:

cc:   JPMorgan Chase Bank (Agent)
      [names of other Dealers at the date of accession]


                                       31

                                     PART 3

                  FORM OF DEALER ACCESSION LETTER - NOTE ISSUE

      [DATE]

To:   CIBA SPECIALTY CHEMICALS CORPORATION
      CIBA SPECIALTY CHEMICALS PLC
      CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
      CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.

(the ISSUERS)

and:  CIBA SPECIALTY CHEMICALS HOLDING INC.
      (the GUARANTOR)

Attention:

Dear Sirs,

                      CIBA SPECIALTY CHEMICALS CORPORATION
                          CIBA SPECIALTY CHEMICALS PLC
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                U.S.$2,000,000,000 EURO MEDIUM TERM NOTE PROGRAM

We refer to the amended and restated Program Agreement dated 27th March, 2003
entered into in respect of the above Euro Medium Term Note Program (the PROGRAM)
and made between the Issuers, the Guarantor and the Dealers party thereto (which
agreement, as amended from time to time, is herein referred to as the PROGRAM
AGREEMENT).

Conditions Precedent

We confirm that we are in receipt of the documents referenced below:

(a)   a copy of the Program Agreement;

(b)   a copy of current versions of all documents referred to in Appendix 1 of
      the Program Agreement;

and have found them to our satisfaction or (in the case of documents referred to
in (b) above) have waived production of such documents.

For the purposes of the Program Agreement our Notice Details are as follows:

(insert name, address, telephone, telex (+ answerback) and attention).

In consideration of appointment by the Issuers and the Guarantor of us as a
Dealer in respect of the issue of [ ] Notes due [ ] (the ISSUE) under the
Program Agreement we hereby undertake, for the benefit of each of the Issuers,
the Guarantor and each of the other Dealers that in relation to the Issue we
will perform and comply with all the duties and obligations expressed to be
assumed by a Dealer under the Program Agreement.


                                       32

This letter is governed by, and shall be construed in accordance with, English
law.

Yours faithfully,

[Name of New Dealer]

By:



cc:   JPMorgan Chase Bank (Agent)
      [names of Dealers at the date of accession]


                                       33

                                   APPENDIX 4

                    FORM OF CONFIRMATION LETTER - NOTE ISSUE

[Date]

To:   [Name and address of new Dealer]

Dear Sirs,

                      CIBA SPECIALTY CHEMICALS CORPORATION
                          CIBA SPECIALTY CHEMICALS PLC
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                U.S.$2,000,000,000 EURO MEDIUM TERM NOTE PROGRAM

We refer to the amended and restated Program Agreement dated 27th March, 2003
(such Agreement, as amended from time to time, the PROGRAM AGREEMENT) entered
into in respect to the above Euro Medium Term Note Program and hereby
acknowledge receipt of your Dealer Accession Letter to us dated [ ].

We hereby confirm that, with effect from the date hereof in respect of the issue
of [ ] Notes due [ ] (the ISSUE), you shall become a party to the Program
Agreement in accordance with Clause 11 of the Program Agreement.

Yours faithfully,

CIBA SPECIALTY CHEMICALS CORPORATION

By:



CIBA SPECIALTY CHEMICALS PLC

By:



CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH

By:



CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.

By:


                                       34

CIBA SPECIALTY CHEMICALS HOLDING INC.

By:                                              By:



cc:   JPMorgan Chase Bank (Agent)
      [names of Dealers at the date of accession]


                                       35

                                   APPENDIX 5

         LETTER REGARDING INCREASE IN THE NOMINAL AMOUNT OF THE PROGRAM

[Date]

To:   The Dealers and the Listing Agent (as those expressions are defined
      in the amended and restated Program Agreement dated 27th March, 2003
      as amended from time to time, (the PROGRAM AGREEMENT))

Dear Sirs,

                      CIBA SPECIALTY CHEMICALS CORPORATION
                          CIBA SPECIALTY CHEMICALS PLC
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                U.S.$2,000,000,000 EURO MEDIUM TERM NOTE PROGRAM

We hereby request, pursuant to Clause 12 of the Program Agreement, that the
aggregate nominal amount of the above Program be increased to U.S.$[ ] on and
from [insert date]. We would like to draw your attention to such Clause 12,
under which, should you fail to object in accordance with the provisions set out
in that clause, this increase shall (subject as set out below) take effect on
and from [insert date], whereupon all references in the Program Agreement, the
Agency Agreement, the Deed of Covenant and the Deed of Guarantee will be deemed
amended accordingly. We understand that this increase is subject to the
satisfaction of the conditions set out in Clause 12 of the Program Agreement.

Terms used in this letter have the meanings given to them in the Program
Agreement.

Yours faithfully,



For and on behalf of
CIBA SPECIALTY CHEMICALS CORPORATION

By:



For and on behalf of
CIBA SPECIALTY CHEMICALS PLC

By:



For and on behalf of
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH


                                       36

By:



For and on behalf of
CIBA SPECIALTY CHEMICALS EUROFINANCE PLC

By:



For and on behalf of CIBA SPECIALTY CHEMICALS HOLDING INC.



By:                                 By:

cc:   UBS
(for distribution to the existing Dealers).

JPMorgan Chase Bank (Agent)


                                       37

                                   APPENDIX 6

                         FORM OF SUBSCRIPTION AGREEMENT

                              [CURRENCY AND AMOUNT]

                     [CIBA SPECIALTY CHEMICALS CORPORATION]
                         [CIBA SPECIALTY CHEMICALS PLC]
               [CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH]
                   [CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

                             [DESCRIPTION OF NOTES]

                  UNCONDITIONALLY AND IRREVOCABLY GUARANTEED BY
                      CIBA SPECIALTY CHEMICALS HOLDING INC.

[DATE]



To:   [                   ]

      (the MANAGERS)

c/o   [                   ]

      (the LEAD MANAGER)

Dear Sirs,

[CIBA SPECIALTY CHEMICALS CORPORATION] [CIBA SPECIALTY CHEMICALS PLC] [CIBA
SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH] [CIBA SPECIALTY CHEMICALS
EUROFINANCE LTD.] (the ISSUER) proposes to issue [CURRENCY AND AMOUNT]
[DESCRIPTION OF NOTES] (the NOTES) unconditionally and irrevocably guaranteed by
CIBA SPECIALTY CHEMICALS HOLDING INC. (the GUARANTOR) pursuant to its
U.S.$2,000,000,000 Euro Medium Term Note Program. The terms of the issue shall
be as set out in the form of Pricing Supplement attached to this Agreement as
Annex 1.

This Agreement is supplemental to the amended and restated Program Agreement
(such agreement, as amended from time to time, the PROGRAM AGREEMENT) dated 27th
March, 2003 made between CIBA SPECIALTY CHEMICALS CORPORATION, CIBA SPECIALTY
CHEMICALS PLC, CIBA SPECIALITY CHEMICALS EUROFINANCE LTD. and CIBA
SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH (together the ISSUERS), the
Guarantor and the Dealers party thereto. All terms with initial capitals used
herein without definition have the meanings given to them in the Program
Agreement.

We wish to record the arrangements agreed between us in relation to the issue:


1.    *[Conditions Precedent

- --------
* Delete this paragraph for a Dealer-only syndicate.


                                       38

      This Agreement appoints each Manager which is not a party to the Program
      Agreement (each a NEW DEALER) as a Dealer under the Program Agreement for
      the purposes of the issue of the Notes. The Lead Manager confirms that it
      is in receipt of the documents referenced below:

      (a)   a copy of the Program Agreement;

      (b)   a copy of all documents referred to in Appendix 1 of the Program
            Agreement; and

      (c)   a copy of the Agency Agreement;

      and has confirmed with (each of) the New Dealer(s) that it/they has/have
      found them to be satisfactory or (in the case of the documents referred to
      in (ii)) has/have waived such production.

      For the purposes of the Program Agreement the details of the Lead Manager
      for service of notices are as follows:

      (insert name, address, telephone, telex (# answerback) and attention).

      In consideration of the Issuer and the Guarantor appointing the New
      Dealer(s) as (a) Dealer(s) in respect of the Notes under the Program
      Agreement, each/the New Dealer hereby undertakes, for the benefit of each
      of the Issuers, the Guarantor and the other Dealers, that, in relation to
      the issue of the Notes, it will perform and comply with all the duties and
      obligations expressed to be assumed by a Dealer under the Program
      Agreement, a copy of which it acknowledges it has received from the Lead
      Manager.]

      The Issuer hereby confirms that [each] [the] New Dealer shall be vested
      with all authority, rights, powers, duties and obligations of a Dealer in
      relation to the issue of Notes as if originally named as a Dealer under
      the Program Agreement provided that following the issue of the Temporary
      Global Note in respect of the Notes [each] [the] New Dealer shall have no
      further such authority, rights, powers, duties and obligations except such
      as may have accrued or been incurred prior to, or in connection with, the
      issue of such Temporary Global Note and the Notes represented thereby.

2.    Subject to the terms and conditions of the Program Agreement and this
      Agreement the Issuer hereby agrees to issue the Notes, the Guarantor
      hereby agrees to guarantee the Notes and the Managers jointly and
      severally agree to purchase the Notes at a subscription price of [ ] per
      cent. of the principal amount of the Notes (the SUBSCRIPTION PRICE), being
      the issue price of [ ] per cent. less a selling commission of [ ] per
      cent. of such principal amount and a management and underwriting fee of [
      ] per cent. of such principal amount.

3.    The net purchase money in respect of the Notes, namely the sum of [ ]
      (representing the Subscription Price, less the amount payable in respect
      of the Managers' expenses specified in Clause 4 hereof) will be paid by
      the Lead Manager on behalf of the Managers to the Issuer at [ ] hours
      (London time) on [ ], or at such other time and/or date as the Issuer and
      the Lead Manager on behalf of the Managers may agree (the CLOSING DATE)
      against delivery to a common depositary for Clearstream, Luxembourg and
      Euroclear Bank S.A./N.V. as operator of the Euroclear System, or any
      successor to the business thereof of a temporary global note representing
      the Notes, in the manner contemplated in the Program Agreement.

4.    The Issuer or, failing the Issuer, the Guarantor shall bear and pay all
      costs and expenses incurred in or in connection with the printing of the
      Notes, this Agreement and the Pricing Supplement prepared in connection
      with the issue of the Notes, the listing of the Notes on the [ ] Stock
      Exchange and making initial delivery of the Notes. In addition, the Issuer
      or,


                                       39

      failing the Issuer, the Guarantor agrees to pay to the Lead Manager [ ] in
      respect of reasonable legal, travelling, telex, facsimile, telephone,
      postage and costs of any publicity agreed in writing by the Issuer or the
      Guarantor incurred and to be incurred by the Managers in connection with
      the preparation and management of the issue and distribution of the Notes
      which sum may be deducted from the Subscription Price as provided in
      Clause 3 hereof.

5.    The obligation of the Managers to purchase the Notes is conditional upon:

      (a)   the conditions set out in subclause 3.2 (other than that set out in
            subclause 3.2(f)) of the Program Agreement being satisfied as of the
            Closing Date and without prejudice to the aforesaid, the Offering
            Circular dated [ ] [, as supplemented by [ ],] containing all
            material information relating to the assets and liabilities,
            financial position and profits and losses of the Issuer [and the
            Guarantor/Parent] and nothing having happened or being expected to
            happen which would require the Offering Circular [, as so
            supplemented,] to be [further] supplemented or updated; and

      (b)   the delivery to the Lead Manager on the Closing Date of:

            (i)   legal opinions addressed to the Managers dated the Closing
                  Date in such form and with such contents as the Lead Manager,
                  on behalf of the Managers, may reasonably require [from
                  Freshfields Bruckhaus Deringer/Cravath, Swaine &
                  Moore/Appleby, Spurling & Kempe], the legal advisers to the
                  Issuer as to [German/United States/Bermudan law,] from
                  Homburger, the legal advisers to the Guarantor as to Swiss
                  law, and from Allen & Overy, the legal advisers to the
                  Managers as to English law;

            (ii)  a certificate dated the Closing Date signed by a duly
                  authorised officer of each of the Issuer and the Guarantor to
                  the effect stated in paragraph (i) of this Clause;

            (iii) a comfort letter dated the Closing Date from the independent
                  auditors of each of the Issuer and the Guarantor, in such form
                  and with such content as the Managers may reasonably request;
                  and

            (iv)  [list such other conditions precedent as may be agreed].

      If any of the foregoing conditions is not satisfied on or before the
      Closing Date, this Agreement shall terminate on such date and the parties
      hereto shall be under no further liability arising out of this Agreement
      (except for the liability of the Issuer and the Guarantor in relation to
      expenses as provided in Clause 4 and except for any liability arising
      before or in relation to such termination), provided that the Lead
      Manager, on behalf of the Managers, may in its discretion waive any of the
      aforesaid conditions (other than the conditions precedent contained in
      subclause 3.2(c) of the Program Agreement) or any part of them.

6.    In connection with the distribution of the Notes, the Lead Manager may
      over-allot or effect transactions in the open market or otherwise with a
      view to stabilising or maintaining the market price of the Notes at levels
      other than those which might otherwise prevail in the open market, but in
      doing so the Lead Manager shall act as principal and not as agent of the
      Issuer. Such stabilising if commenced, may be discontinued at any time.
      Any loss resulting from over-allotment and stabilisation shall be borne,
      and any net profit arising therefrom shall be retained, by the Lead
      Manager for its own account. Such stabilisation shall be done in
      compliance with all applicable laws.


                                       40

7.    (a)   The Lead Manager, on behalf of the Managers, may, after consultation
            with the Issuer and the Guarantor if practicable and by notice to
            the Issuer and the Guarantor, terminate this Agreement at any time
            prior to payment of the net purchase money to the Issuer if in the
            opinion of the Lead Manager there shall have been such a change in
            national or international financial, political or economic
            conditions or currency exchange rates or exchange controls as would
            in the view of the Lead Manager be likely to prejudice materially
            the success of the offering and distribution of the Notes (whether
            in the primary market or in respect of dealings in the Notes in the
            secondary market).

      (b)   Upon such notice being given, this Agreement shall terminate and no
            party shall be under any liability to any other in respect thereof
            except for the liability of the Issuer and the Guarantor for the
            payment of costs and expenses as provided in Clause 4 of this
            Agreement, the obligations of the Managers under Clause 8 of the
            Program Agreement and the respective obligations of the parties
            under Clause 6 of the Program Agreement.

8.    (a)   This Agreement shall be governed by, and construed in accordance
            with, the laws of England.

      (b)   A person who is not a party to this Agreement has no right under the
            Contracts (Rights of Third Parties) Act 1999 to enforce any term of
            this Agreement, but this does not affect any right or remedy of a
            third party which exists or is available apart from that Act.

      (c)   Each party to this Agreement hereby irrevocably agrees for the
            exclusive benefit of the other parties to this Agreement that the
            courts of England are to have jurisdiction to settle any disputes
            which may arise out of or in connection with this Agreement and that
            accordingly any suit, action or proceedings (together referred to as
            PROCEEDINGS) arising out of or in connection with this Agreement may
            be brought in such courts. Each party to this Agreement hereby
            irrevocably waives any objection which it may have to the laying of
            the venue of any Proceedings in any such courts and any claim that
            any such Proceedings have been brought in an inconvenient forum and
            hereby further irrevocably agrees that a judgment in any Proceedings
            brought in the English courts shall be conclusive and binding upon
            such party and may be enforced in the courts of any other
            jurisdiction (subject to the laws of the jurisdiction in which
            enforcement is sought). Nothing contained herein shall limit any
            right to take Proceedings against the Issuer and/or the Guarantor in
            any other court of competent jurisdiction (outside the Contracting
            States, as defined in Section 1(3) of the Civil Jurisdiction and
            Judgments Act 1982), nor shall the taking of Proceedings in one or
            more jurisdictions preclude the taking of Proceedings in any other
            jurisdiction, whether concurrently or not (subject to the laws of
            the relevant jurisdiction). The [Issuer and the] Guarantor hereby
            appoints [the Issuer/Ciba Specialty Chemicals PLC] as its agent for
            service of process and agrees that, in the event of ceasing so to
            act or ceasing to be registered in England, it will appoint another
            person as its agent for service of process in England in respect of
            any Proceedings.

9.    This Agreement may be signed in any number of counterparts, all of which,
      taken together, shall constitute one and the same agreement and any party
      may enter into this Agreement by executing a counterpart.


                                       41

Please confirm that this letter correctly sets out the arrangements agreed
between us.

Yours faithfully,

For: [Issuer]

By:



For: CIBA SPECIALTY CHEMICALS HOLDING INC.

By:                                      By:



We agree to the foregoing.

For: [

                        ]

By:


                                       42

                                     ANNEX 1

                          [FORM OF PRICING SUPPLEMENT]


                                       43

                                   APPENDIX 7

                            FORM OF DEED OF COVENANT

THIS DEED OF COVENANT is made on 27th March, 2003 by each of Ciba Specialty
Chemicals Corporation, Ciba Specialty Chemicals PLC, Ciba Spezialitatenchemie
Holding Deutschland GmbH and Ciba Specialty Chemicals Eurofinance Ltd. (each an
Issuer) in favour of the account holders of Clearstream Banking, societe anonyme
(CLEARSTREAM, LUXEMBOURG) and Euroclear Bank S.A./N.V. as operator of the
Euroclear System (EUROCLEAR), or any successor to the business thereof or any
other additional clearing system or systems as are specified in the Pricing
Supplement relating to any Note (as defined below) (each a CLEARING SYSTEM).

WHEREAS:

(a)   Each Issuer has entered into an amended and restated Program Agreement
      (the PROGRAM AGREEMENT, which expression includes the same as it may be
      amended, supplemented, novated or restated from time to time) dated 27th
      March, 2003 with Ciba Specialty Chemicals Holding Inc. (the GUARANTOR) and
      the Dealers named therein under which the relevant Issuer proposes from
      time to time to issue Euro Medium Term Notes (the NOTES), which amends and
      restates the amended and restated program agreement dated 16th June, 2000
      with Ciba Specialty Chemicals Corporation, Ciba Specialty Chemicals PLC,
      Ciba Spezialitatenchemie Holdings Deutschland GmbH, Ciba Specialty
      Chemicals Eurofinance Ltd., the Guarantor and the Dealers named therein
      (the PRINCIPAL PROGRAM AGREEMENT).

(b)   Each Issuer has also entered into an amended and restated Agency Agreement
      (the AGENCY AGREEMENT, which expression includes the same as it may be
      amended, supplemented, novated or restated from time to time) dated 27th
      March, 2003 between, inter alios, the Issuer and JPMorgan Chase Bank (the
      AGENT).

(c)   The Notes will initially be represented by, and comprised in, Temporary
      Global Notes (the TEMPORARY GLOBAL NOTES) and thereafter may be
      represented by, and comprised in, Permanent Global Notes (the PERMANENT
      GLOBAL NOTES and together with the Temporary Global Notes, the GLOBAL
      NOTES), such Global Notes representing a certain number of underlying
      Notes (the UNDERLYING NOTES).

(d)   Each Global Note will, after issue, be deposited with a common depository
      for one or more Clearing Systems (each such Clearing System or all such
      Clearing Systems together, the RELEVANT CLEARING SYSTEM). Upon such
      deposit of a Global Note the Underlying Notes represented by such Global
      Note will be credited to a securities account or securities accounts with
      the Relevant Clearing System. Any account holder with the Relevant
      Clearing System which has Underlying Notes credited to its securities
      account from time to time (each a RELEVANT ACCOUNT HOLDER) will, subject
      to and in accordance with the terms and conditions and operating
      procedures or management regulations of the Relevant Clearing System, be
      entitled to transfer such Underlying Notes and (subject to and upon
      payment being made by the relevant Issuer to the bearer in accordance with
      the terms of the relevant Global Note) will be entitled to receive
      payments from the Relevant Clearing System calculated by reference to the
      Underlying Notes credited to its securities account.

(e)   In certain circumstances specified in each Global Note, a Global Note will
      become void. The time at which a Global Note becomes void is hereinafter
      referred to as the RELEVANT TIME. In such circumstances each Relevant
      Account Holder will, subject to and in accordance with the terms of this
      Deed, acquire against the relevant Issuer all those rights which such
      Relevant Account Holder would have had if, prior to the Global Note
      becoming void, duly executed


                                       44

      and authenticated Definitive Note(s) (as defined in the Agency Agreement)
      and, if the Notes are repayable in instalments, receipts in respect
      thereof (the RECEIPTS) and interest coupons (the COUPONS) appertaining to
      the Definitive Note(s) (if appropriate) had been issued in respect of its
      Underlying Note(s) and such Definitive Notes(s), Receipts (if appropriate)
      and Coupons (if appropriate) were held and beneficially owned by such
      Relevant Account Holder.

(f)   The obligations of each Issuer under this Deed have been guaranteed by the
      Guarantor pursuant to the amended and restated Deed of Guarantee (the
      GUARANTEE) executed by the Guarantor on 27th March, 2003 and an executed
      copy of the Guarantee has been deposited with and shall be held by the
      Agent for the time being for the Notes. A copy of the Guarantee shall be
      available for inspection at the office of the Agent for the time being
      (being at the date hereof at Trinity Tower, 9 Thomas More Street, London
      E1 9YT).

(g)   This Deed of Covenant amends and restates the amended and restated Deed of
      Covenant entered into by Ciba Specialty Chemicals Corporation, Ciba
      Specialty Chemicals PLC and Ciba Spezialitatenchemie Holding Deutschland
      GmbH dated 27th March, 2002. This Deed of Covenant does not affect any
      Notes issued pursuant to the Principal Program Agreement prior to the date
      hereof.

      NOW THIS DEED WITNESSES AS FOLLOWS:

1.    If any Global Note becomes void in accordance with the terms thereof the
      relevant Issuer hereby undertakes and covenants with each Relevant Account
      Holder (other than when any Relevant Clearing System is an account holder
      of any other Relevant Clearing System) that each Relevant Account Holder
      shall automatically acquire at the Relevant Time, without the need for any
      further action on behalf of any person, against the relevant Issuer all
      those rights which such Relevant Account Holder would have had if at the
      Relevant Time it held and beneficially owned duly executed and
      authenticated Definitive Note(s), Receipts (if appropriate) and Coupons
      (if appropriate) in respect of each Underlying Note represented by such
      Global Note which such Relevant Account Holder has credited to its
      securities account with the Relevant Clearing System at the Relevant Time.
      The relevant Issuer's obligation pursuant to this clause shall be a
      separate and independent obligation by reference to each Underlying Note
      which a Relevant Account Holder has credited to its securities account
      with the Relevant Clearing System and the relevant Issuer agrees that a
      Relevant Account Holder may assign its rights hereunder in whole or in
      part.

2.    The records of the Relevant Clearing System shall be conclusive evidence
      of the identity of the Relevant Account Holders and the number of
      Underlying Notes credited to the securities account of each Relevant
      Account Holder. For the purposes hereof a statement issued by the Relevant
      Clearing System stating:

      (a)   the name of the Relevant Account Holder to which such statement is
            issued; and

      (b)   the aggregate nominal amount of Underlying Notes credited to the
            securities account of such Relevant Account Holder as at the opening
            of business on the first day following the Relevant Time on which
            the Relevant Clearing System is open for business,

      shall be conclusive evidence of the records of the Relevant Clearing
      System at the Relevant Time.

3.    In the event of a dispute, the determination of the Relevant Time by the
      Relevant Clearing System shall be final and conclusive for all purposes in
      connection with the Relevant Account Holders with securities accounts with
      the Relevant Clearing System.


                                       45

4.    (a)   Where the Issuer is Ciba Specialty Chemicals Corporation:

            The Issuer will, subject to the exceptions and limitations set forth
            below, pay as additional interest on an Underlying Note such
            additional amounts as are necessary in order that the net amounts
            receivable pursuant to the terms of the Underlying Note by each
            Relevant Account Holder who is a United States Alien (as such term
            is defined below), after deduction for any present or future tax,
            assessment or governmental charge of the United States (as such term
            is defined below), or a political subdivision or authority thereof
            or therein, imposed by withholding with respect to the payment, will
            not be less than the amounts provided for in such Underlying Note to
            be then due and payable; provided, however, that the foregoing
            obligation to pay additional amounts shall not apply to:

            (i)   any tax, assessment or governmental charge that would not have
                  been so imposed but for the existence of any present or former
                  connection between such Relevant Account Holder (or between a
                  fiduciary, settlor, beneficiary, member or shareholder of, or
                  holder of power over, such holder, if such Relevant Account
                  Holder is an estate, trust, partnership or corporation) and
                  the United States, including, without limitation, such
                  Relevant Account Holder (or fiduciary, settlor, beneficiary,
                  member, shareholder or holder of a power) being considered as:

                  (A)   being or having been present or engaged in a trade or
                        business in the United States or having or having had a
                        permanent establishment therein;

                  (B)   having a current or former relationship with the United
                        States, including a relationship as a citizen or
                        resident or being treated as a resident thereof;

                  (C)   being or having been a personal holding company, a
                        controlled foreign corporation, a passive foreign
                        investment company, a foreign personal holding company
                        with respect to the United States, a corporation that
                        has accumulated earnings to avoid United States Federal
                        income tax or a private foundation or other tax-exempt
                        organisation; or

                  (D)   an actual or a constructive "10-per cent shareholder" of
                        the Issuer as defined in Section 871(h)(3) of the United
                        States Internal Revenue Code of 1986, as amended (the
                        CODE);

            (ii)  any Relevant Account Holder who is a fiduciary or partnership
                  or other than the sole beneficial owner of the Underlying Note
                  or Coupon, but only to the extent that a beneficiary or
                  settlor with respect to such fiduciary or member of such
                  partnership or a beneficial owner of the Underlying Note or
                  Coupon would not have been entitled to the payment of an
                  additional amount had such beneficiary, settlor, member or
                  beneficial owner been the Relevant Account Holder of such
                  Underlying Note or Coupon;

            (iii) any tax, assessment or governmental charge that would not have
                  been imposed or withheld but for the failure of the Relevant
                  Account Holder, if required, to comply with certification,
                  identification or information reporting requirements under
                  United States income tax laws, without regard to any tax
                  treaty, with respect to the payment, concerning the
                  nationality, residence,


                                       46

                  identity or connection with the United States of the Relevant
                  Account Holder or a beneficial owner of such Underlying Note
                  or Coupon, if such compliance is required by United States
                  income tax laws, without regard to any tax treaty, as a
                  precondition to relief or exemption from such tax, assessment
                  or governmental charge;

            (iv)  any tax, assessment or governmental charge that would not have
                  been so imposed or withheld but for the presentation by the
                  holder of such Underlying Note or Coupon for payment on a date
                  more than 30 days after the Relevant Date (as defined in the
                  Terms and Conditions of the Underlying Note) except to the
                  extent that the holder thereof would have been entitled to
                  such additional amounts on presenting the same for payment on
                  the last day of such 30 day period;

            (v)   any estate, inheritance, gift, sales, transfer, excise, wealth
                  or personal property tax or any similar tax, assessment or
                  governmental charge;

            (vi)  any tax, assessment or governmental charge that is payable
                  otherwise than by withholding from the payment of the amounts
                  receivable in respect of such Underlying Note or Coupon;

            (vii) any tax, assessment or governmental charge required to be
                  withheld by any paying agent from such payment of amounts
                  receivable in respect of any Underlying Note, if such payment
                  can be made without such withholding by any other paying
                  agent;

            (viii) any combination of items (i), (ii), (iii), (iv), (v), (vi) or
                  (vii);

            (ix)  any Underlying Note, Receipt or Coupon presented for payment
                  where such withholding or deduction is imposed on a payment to
                  an individual and is required to be made pursuant to any
                  European Union Directive on the taxation of savings
                  implementing the conclusions of the ECOFIN Council Meeting of
                  November 26-27, 2000, or any law implementing or complying
                  with, or introduced in order to conform to, such Directive; or

            (x)   any Underlying Note, Receipt or Coupon presented for payment
                  by or on behalf of a holder who would have been able to avoid
                  such withholding or deduction by presenting the relevant Note,
                  Receipt or Coupon to another Paying Agent in a Member State of
                  the EU.

            As used in this Clause, UNITED STATES means the United States of
            America, the Commonwealth of Puerto Rico and each possession of the
            United States of America and place subject to its jurisdiction and
            UNITED STATES ALIEN means any corporation, partnership, individual
            or fiduciary that, as to the United States, is for United States
            Federal income tax purposes (A) a foreign corporation, (B) a foreign
            partnership one or more of the members of which is, for United
            States Federal income tax purposes, a foreign corporation, a
            non-resident alien individual or a non-resident alien fiduciary of a
            foreign estate or trust, (C) a non-resident alien individual or (D)
            a non-resident alien fiduciary of a foreign estate or trust.

      (b)   Where the Issuer is Ciba Spezialitatenchemie Holding Deutschland
            GmbH:

            All payments in respect of the Underlying Note, Receipt or Coupon by
            the Issuer will be made without withholding or deduction for or on
            account of any present or future


                                       47

            taxes or duties of whatever nature imposed or levied by or on behalf
            of Germany or any state (Bundesland), municipality or other
            political subdivision or any authority thereof or therein having
            power to tax, unless such withholding or deduction is required by
            law. In such event, the Issuer will pay such additional amounts as
            shall be necessary in order that the net amounts received by the
            Relevant Account Holders after such withholding or deduction shall
            equal the amounts which would otherwise have been receivable in
            respect of the Underlying Note, Receipt or Coupon in the absence of
            such withholding or deduction; except that no such additional
            amounts shall be payable with respect to any Underlying Note,
            Receipt or Coupon to or to the order of a Relevant Account Holder
            who is liable for such taxes or duties in respect of such Underlying
            Note, Receipt or Coupon by reason of his having some connection with
            Germany other than the mere holding of such Underlying Note, Receipt
            or Coupon or with respect to any Underlying Note, Receipt or Coupon
            presented for payment to a paying agent which is required to deduct
            or withhold an amount for or on account of such taxes or duties if
            such amount can be paid without any deduction or withholding for or
            on account of any taxes or duties by any other paying agent or in
            respect to any Underlying Note, Receipt or Coupon presented for
            payment to a paying agent more than 30 days after the Relevant Date
            (as defined in the Terms and Conditions of the Underlying Note)
            except to the extent that the holder thereof would have been
            entitled to such additional amounts on presenting the same for
            payment on such thirtieth day or where such withholding or deduction
            is imposed on a payment to an individual and is required to be made
            pursuant to any European Union Directive on the taxation of savings
            implementing the conclusions of the ECOFIN Council meeting of
            November 26-27, 2000 or any law implementing or complying with, or
            introduced in order to conform to, such Directive or with respect to
            any Underlying Note, Receipt or Coupon presented for payment to a
            paying agent by or on behalf of a holder who would have been able to
            avoid such withholding or deduction by presenting the relevant
            Underlying Note, Receipt or Coupon to another paying agent in a
            Member State of the EU. Any advance income tax (Zinsabschlagsteuer)
            levied in Germany as well as the solidarity surcharge
            (Solidaritatszuschlag) imposed thereon do not constitute a
            withholding or deduction within the meaning of this Clause 4(a)(b).

      (c)   Where the Issuer is Ciba Specialty Chemicals PLC:

            All payments by the Issuer in respect of the Underlying Note,
            Receipt or Coupon shall be made without withholding or deduction for
            or on account of any present or future tax, duty or charge of
            whatever nature imposed or levied by or on behalf of the United
            Kingdom, or any authority thereof or therein having power to tax
            unless the withholding or deduction is required by law. In that
            event, the Issuer shall pay such additional amounts as will result
            (after such withholding or deduction) in the receipt by the Relevant
            Account Holders of the sums which would have been receivable (in the
            absence of such withholding or deduction) from the Issuer in respect
            of their Underlying Note, Receipt or Coupon ; except that no such
            additional amounts shall be payable with respect to any Underlying
            Note, Receipt or Coupon to or to the order of a person liable to
            such tax, duty or charge in respect of such Underlying Note, Receipt
            or Coupon by reason of his having some connection with the United
            Kingdom other than the mere holding or ownership of such Underlying
            Note, Receipt or Coupon or with respect to any Underlying Note,
            Receipt or Coupon presented for payment to a paying agent which is
            required to deduct or withhold an amount for or on account of such
            tax, duty or charge if such amount can be paid without any deduction
            or withholding for or on account of any tax, duty or charge by any
            other paying agent or with respect to any Underlying Note, Receipt
            or Coupon presented


                                       48

            for payment to a paying agent more than 30 days after the Relevant
            Date (as defined in the Terms and Conditions of the Underlying Note)
            except to the extent that the holder thereof would have been
            entitled to such additional amounts on presenting the same for
            payment on such thirtieth day or where such withholding or deduction
            is imposed on a payment to an individual and is required to be made
            pursuant to any European Union Directive on the taxation of savings
            implementing the conclusions of the ECOFIN Council meeting of
            November 26-27, 2000 or any law implementing or complying with, or
            introduced in order to conform to, such Directive or with respect to
            any Underlying Note presented for payment to a paying agent by or on
            behalf of a holder who would have been able to avoid such
            withholding or deduction by presenting the relevant Underlying Note,
            Receipt or Coupon to another paying agent in a Member State of the
            EU.

      (d)   Where the Issuer is Ciba Specialty Chemicals Eurofinance Ltd.:

            All payments by the Issuer in respect of the Underlying Note,
            Receipt or Coupon shall be made without withholding or deduction for
            or on account of any present or future tax, duty or charge of
            whatever nature imposed or levied by or on behalf of Bermuda, or any
            authority thereof or therein having power to tax unless the
            withholding or deduction is required by law. In that event, the
            Issuer shall pay such additional amounts as will result (after such
            withholding or deduction) in the receipt by the Relevant Account
            Holders of the sums which would have been receivable (in the absence
            of such withholding or deduction) from the Issuer in respect of
            their Underlying Note, Receipt or Coupon ; except that no such
            additional amounts shall be payable with respect to any Underlying
            Note to or to the order of any person liable to such tax, duty or
            charge in respect of such Underlying Note, Receipt or Coupon by
            reason of his having some connection with Bermuda other than the
            mere holding or ownership of such Underlying Note or with respect to
            any Underlying Note, Receipt or Coupon presented for payment to a
            paying agent more than 30 days after the Relevant Date (as defined
            in the Terms and Conditions of the Underlying Note) except to the
            extent that the holder thereof would have been entitled to such
            additional amounts on presenting the same for payment on such
            thirtieth day or where such withholding or deduction is imposed on a
            payment to an individual and is required to be made pursuant to any
            European Union Directive on the taxation of savings implementing the
            conclusions of the ECOFIN Council meeting of November 26-27, 2000 or
            any law implementing or complying with, or introduced in order to
            conform to, such Directive or with respect to any Underlying Note
            presented for payment to a paying agent by or on behalf of a holder
            who would have been able to avoid such withholding or deduction by
            presenting the relevant Underlying Note, Receipt or Coupon to
            another paying agent in a Member State of the EU.

5.    Each Issuer hereby warrants, represents and covenants with each Relevant
      Account Holder that it has all corporate power, and has taken all
      necessary corporate or other steps, to enable it to execute, deliver and
      perform this Deed, and that this Deed constitutes a legal, valid and
      binding obligation of the relevant Issuer enforceable in accordance with
      its terms subject to the laws of bankruptcy and other laws affecting the
      rights of creditors generally.

6.    This Deed shall take effect as a Deed Poll for the benefit of the Relevant
      Account Holders from time to time and for the time being. This Deed shall
      be deposited with and held by a depository for Clearstream, Luxembourg and
      Euroclear, or any successor to the business thereof and for the time being
      (being at the date hereof JPMorgan Chase Bank at Trinity Tower, 9 Thomas
      More Street, London E1 9YT) until all the obligations of each Issuer
      hereunder have been discharged in full.


                                       49

7.    Each Issuer hereby acknowledges the right of every Relevant Account Holder
      to the production of, and the right of every Relevant Account Holder to
      obtain (upon payment of a reasonable charge) a copy of, this Deed, and
      further acknowledges and covenants that the obligations binding upon it
      contained herein are owed to, and shall be for the account of, each and
      every Relevant Account Holder, and that each Relevant Account Holder shall
      be entitled severally to enforce the said obligations against the relevant
      Issuer.

8.    No rights are conferred on any person under the Contracts (Rights of Third
      Parties) Act 1999 to enforce any term of this Deed, but this does not
      affect any right or remedy of any person which exists or is available
      apart from that Act.

9.    This Deed is governed by, and shall be construed in accordance with, the
      laws of England.

      Each Issuer hereby irrevocably agrees, for the exclusive benefit of the
      Relevant Account Holders, that the courts of England are to have
      jurisdiction to settle any dispute which may arise out of, or in
      connection with, this Deed and that accordingly any suit, action or
      proceedings (together referred to as PROCEEDINGS) arising out of, or in
      connection with, this Deed may be brought in such courts. Each Issuer
      irrevocably waives any objection which it may have now or hereafter to the
      laying of the venue of any Proceedings in any such court and any claim
      that any such Proceedings have been brought in an inconvenient forum and
      further irrevocably agrees that a judgment in any Proceedings brought in
      the English courts shall be conclusive and binding upon the relevant
      Issuer and may be enforced in the courts of any other jurisdiction
      (subject to the laws of the jurisdiction in which enforcement is sought).
      Nothing contained in this Clause shall limit any right to take Proceedings
      against any Issuer in any other court of competent jurisdiction, nor shall
      the taking of Proceedings in one or more jurisdictions preclude the taking
      of Proceedings in any other jurisdiction, whether concurrently or not
      (subject to the laws of the relevant jurisdictions). Ciba Specialty
      Chemicals Corporation, Ciba Spezialitatenchemie Holding Deutschland GmbH
      and Ciba Specialty Chemicals Eurofinance Ltd. each hereby appoints Ciba
      Specialty Chemicals PLC at its registered office for the time being to
      accept service of process on its behalf. If Ciba Specialty Chemicals PLC
      shall cease to be registered under the laws of England and Wales, the
      relevant Issuer shall appoint another person with an office in London to
      accept such service. Nothing herein shall affect the right to serve
      process in any other manner permitted by law.

10.   This Deed may be executed by any one or more of the parties hereto in any
      number of counterparts, each of which shall be deemed to be an original,
      but all such counterparts shall together constitute one and the same
      instrument.

IN WITNESS whereof each Issuer has caused this Deed to be duly executed the day
and year first above mentioned.


                                       50

                                   SIGNATORIES


EXECUTED as a Deed by CIBA                 )
SPECIALTY CHEMICALS                        )
CORPORATION                                )
acting by                                  )
and                                        )
acting under the authority of that company )
in the presence of:                        )

Witness's
Signature       ________________________________

Name            ________________________________

Address         ________________________________

                ________________________________




EXECUTED as a Deed by CIBA                 )
SPECIALTY CHEMICALS                        )
PLC                                        )
acting by its attorney(s)                  )
                                           )
in the presence of:                        )

Witness's
Signature       ________________________________

Name            ________________________________

Address         ________________________________

                ________________________________


                                       51

EXECUTED as a Deed by CIBA                 )
SPEZIALITATENCHEMIE                        )
HOLDING DEUTSCHLAND GMBH                   )
acting by                                  )
and                                        )
acting under the authority of that company )
in the presence of:                        )

Witness's
Signature       ________________________________

Name            ________________________________

Address         ________________________________

                ________________________________





EXECUTED as a Deed under                   )
Seal by CIBA SPECIALTY CHEMICALS           )
EUROFINANCE LTD.                           )
and SIGNED AND DELIVERED as                )
a deed on its behalf by                    )

pursuant to a power of attorney dated 26th )
March, 2002                                )
in the presence of:                        )

Witness's
Signature       ________________________________

Name            ________________________________

Address         ________________________________

                ________________________________


                                       52

THE ISSUERS

CIBA SPECIALTY CHEMICALS CORPORATION
560 White Plains Road
Tarrytown
New York
10591-9005

Telephone:  +1 914 785 2000
Telefax:    +1 914 785 2183
Attention:  Treasurer

By:   KIRK ERSTLING           OLIVER STRUB



CIBA SPECIALTY CHEMICALS PLC
Hulley Road
Macclesfield
Cheshire
SK10 2NX

Telephone:  +44 1 625 421 933
Telefax:    +44 1 625 619 637
Attention:  Treasurer

By:   KIRK ERSTLING           OLIVER STRUB



CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
Chemiestrasse
D-68623 Lampertheim
Germany

Telephone:  +49 620 6150
Telefax:    +49 620 6151368
Attention:  Treasurer

By:   KIRK ERSTLING           OLIVER STRUB


                                       53

CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
c/o Reid Management Limited
4th Floor
Windsor Place
22 Queen Street
PO Box HM1179
Hamilton HMEX
Bermuda

Telephone:  +1 441 296 3695
Telefax:    +1 441 295 3328
Attention:  Tamara Lewis/Adrian Arnold

By:   KIRK ERSTLING           OLIVER STRUB



THE GUARANTOR

CIBA SPECIALTY CHEMICALS HOLDING INC.
Klybeckstrasse 141
CH-4002 Basle
Switzerland

Telephone:  +41 61 636 2740
Telefax:    +41 61 636 6828
Attention:  Group Treasurer

By:   KIRK ERSTLING           OLIVER STRUB



THE DEALERS

CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
One Cabot Square
London E14 4QJ

Telephone:  020 7888 4021
Telefax     020 7905 6128
Attention:  MTN Trading


DEUTSCHE BANK AG LONDON

Winchester House
1 Great Winchester Street
London EC2N 2DB

Telephone:  020 7545 2761
Telefax:    020 7541 2761
Telex:      94015555 DBLN G
Attention:  MTN Desk


                                       54

GOLDMAN SACHS INTERNATIONAL

Peterborough Court
133 Fleet Street
London EC4A 2BB

Telephone:  020 7774 2295
Telex:      94012165 GSHH G
Telefax:    020 7774 5711
Attention:  Euro Medium Term Note Desk


J.P. MORGAN SECURITIES LTD.
125 London Wall
London EC2Y 5AJ

Telephone:  020 7779 3469
Telex:      8954804 MGLTD G
Telefax:    020 7325 8225
Attention:  Euro Medium Term Note Desk


Each by its duly authorised signatory: KARIN FORSTER



UBS LIMITED
100 Liverpool Street
London EC2M 2RH

Telephone: 44 20 7567 2479

Telefax:   44 20 7568 3349
Attention: MTNs and Private Placements


By:   KARIN FORSTER     By:   AKSHATA RAO


                                       55

EX-4.2

                                                                     EXHIBIT 4.2

                                DEED OF COVENANT

THIS DEED OF COVENANT is made on 27th March, 2003 by each of Ciba Specialty
Chemicals Corporation, Ciba Specialty Chemicals PLC, Ciba Spezialitatenchemie
Holding Deutschland GmbH and Ciba Specialty Chemicals Eurofinance Ltd. (each an
ISSUER) in favour of the account holders of Clearstream Banking, societe anonyme
(CLEARSTREAM, LUXEMBOURG) and Euroclear Bank S.A./N.V. as operator of the
Euroclear System (EUROCLEAR), or any successor to the business thereof or any
other additional clearing system or systems as are specified in the Pricing
Supplement relating to any Note (as defined below) (each a CLEARING SYSTEM).

WHEREAS:

(a)   Each Issuer has entered into an amended and restated Program Agreement
      (the PROGRAM AGREEMENT, which expression includes the same as it may be
      amended, supplemented, novated or restated from time to time) dated 27th
      March, 2003 with Ciba Specialty Chemicals Holding Inc. (the GUARANTOR) and
      the Dealers named therein under which the relevant Issuer proposes from
      time to time to issue Euro Medium Term Notes (the NOTES), which amends and
      restates the amended and restated program agreement dated 16th June, 2000
      with Ciba Specialty Chemicals Corporation, Ciba Specialty Chemicals PLC,
      Ciba Spezialitatenchemie Holdings Deutschland GmbH, Ciba Specialty
      Chemicals Eurofinance Ltd., the Guarantor and the Dealers named therein
      (the PRINCIPAL PROGRAM AGREEMENT).

(b)   Each Issuer has also entered into an amended and restated Agency Agreement
      (the AGENCY AGREEMENT, which expression includes the same as it may be
      amended, supplemented, novated or restated from time to time) dated 27th
      March, 2003 between, inter alios, the Issuer and JPMorgan Chase Bank (the
      AGENT).

(c)   The Notes will initially be represented by, and comprised in, Temporary
      Global Notes (the TEMPORARY GLOBAL NOTES) and thereafter may be
      represented by, and comprised in, Permanent Global Notes (the PERMANENT
      GLOBAL NOTES and together with the Temporary Global Notes, the GLOBAL
      NOTES), such Global Notes representing a certain number of underlying
      Notes (the UNDERLYING NOTES).

(d)   Each Global Note will, after issue, be deposited with a common depository
      for one or more Clearing Systems (each such Clearing System or all such
      Clearing Systems together, the RELEVANT CLEARING SYSTEM). Upon such
      deposit of a Global Note the Underlying Notes represented by such Global
      Note will be credited to a securities account or securities accounts with
      the Relevant Clearing System. Any account holder with the Relevant
      Clearing System which has Underlying Notes credited to its securities
      account from time to time (each a RELEVANT ACCOUNT HOLDER) will, subject
      to and in accordance with the terms and conditions and operating
      procedures or management regulations of the Relevant Clearing System, be
      entitled to transfer such Underlying Notes and (subject to and upon
      payment being made by the relevant Issuer to the bearer in accordance with
      the terms of the relevant Global Note) will be entitled to receive
      payments from the Relevant Clearing System calculated by reference to the
      Underlying Notes credited to its securities account.

(e)   In certain circumstances specified in each Global Note, a Global Note will
      become void. The time at which a Global Note becomes void is hereinafter
      referred to as the RELEVANT TIME. In such circumstances each Relevant
      Account Holder will, subject to and in accordance with the terms of this
      Deed, acquire against the relevant Issuer all those rights which such
      Relevant Account Holder would have had if, prior to the Global Note
      becoming void, duly executed and authenticated Definitive Note(s) (as
      defined in the Agency Agreement) and, if the Notes are repayable in
      instalments, receipts in respect thereof (the RECEIPTS) and interest
      coupons


                                       1

      (the COUPONS) appertaining to the Definitive Note(s) (if appropriate) had
      been issued in respect of its Underlying Note(s) and such Definitive
      Notes(s), Receipts (if appropriate) and Coupons (if appropriate) were held
      and beneficially owned by such Relevant Account Holder.

(f)   The obligations of each Issuer under this Deed have been guaranteed by the
      Guarantor pursuant to the amended and restated Deed of Guarantee (the
      GUARANTEE) executed by the Guarantor on 27th March, 2003 and an executed
      copy of the Guarantee has been deposited with and shall be held by the
      Agent for the time being for the Notes. A copy of the Guarantee shall be
      available for inspection at the office of the Agent for the time being
      (being at the date hereof at Trinity Tower, 9 Thomas More Street, London
      E1 9YT).

(g)   This Deed of Covenant amends and restates the amended and restated Deed of
      Covenant entered into by Ciba Specialty Chemicals Corporation, Ciba
      Specialty Chemicals PLC and Ciba Spezialitatenchemie Holding Deutschland
      GmbH dated 27th March, 2002. This Deed of Covenant does not affect any
      Notes issued pursuant to the Principal Program Agreement prior to the date
      hereof.

NOW THIS DEED WITNESSES AS FOLLOWS:

1.    If any Global Note becomes void in accordance with the terms thereof the
      relevant Issuer hereby undertakes and covenants with each Relevant Account
      Holder (other than when any Relevant Clearing System is an account holder
      of any other Relevant Clearing System) that each Relevant Account Holder
      shall automatically acquire at the Relevant Time, without the need for any
      further action on behalf of any person, against the relevant Issuer all
      those rights which such Relevant Account Holder would have had if at the
      Relevant Time it held and beneficially owned duly executed and
      authenticated Definitive Note(s), Receipts (if appropriate) and Coupons
      (if appropriate) in respect of each Underlying Note represented by such
      Global Note which such Relevant Account Holder has credited to its
      securities account with the Relevant Clearing System at the Relevant Time.
      The relevant Issuer's obligation pursuant to this clause shall be a
      separate and independent obligation by reference to each Underlying Note
      which a Relevant Account Holder has credited to its securities account
      with the Relevant Clearing System and the relevant Issuer agrees that a
      Relevant Account Holder may assign its rights hereunder in whole or in
      part.

2.    The records of the Relevant Clearing System shall be conclusive evidence
      of the identity of the Relevant Account Holders and the number of
      Underlying Notes credited to the securities account of each Relevant
      Account Holder. For the purposes hereof a statement issued by the Relevant
      Clearing System stating:

      (a)   the name of the Relevant Account Holder to which such statement is
            issued; and

      (b)   the aggregate nominal amount of Underlying Notes credited to the
            securities account of such Relevant Account Holder as at the opening
            of business on the first day following the Relevant Time on which
            the Relevant Clearing System is open for business,

      shall be conclusive evidence of the records of the Relevant Clearing
      System at the Relevant Time.

3.    In the event of a dispute, the determination of the Relevant Time by the
      Relevant Clearing System shall be final and conclusive for all purposes in
      connection with the Relevant Account Holders with securities accounts with
      the Relevant Clearing System.

4.    (a) Where the Issuer is Ciba Specialty Chemicals Corporation:


                                       2

            The Issuer will, subject to the exceptions and limitations set forth
            below, pay as additional interest on an Underlying Note such
            additional amounts as are necessary in order that the net amounts
            receivable pursuant to the terms of the Underlying Note by each
            Relevant Account Holder who is a United States Alien (as such term
            is defined below), after deduction for any present or future tax,
            assessment or governmental charge of the United States (as such term
            is defined below), or a political subdivision or authority thereof
            or therein, imposed by withholding with respect to the payment, will
            not be less than the amounts provided for in such Underlying Note to
            be then due and payable; provided, however, that the foregoing
            obligation to pay additional amounts shall not apply to:

            (i)   any tax, assessment or governmental charge that would not have
                  been so imposed but for the existence of any present or former
                  connection between such Relevant Account Holder (or between a
                  fiduciary, settlor, beneficiary, member or shareholder of, or
                  holder of power over, such holder, if such Relevant Account
                  Holder is an estate, trust, partnership or corporation) and
                  the United States, including, without limitation, such
                  Relevant Account Holder (or fiduciary, settlor, beneficiary,
                  member, shareholder or holder of a power) being considered as:

                  (A)   being or having been present or engaged in a trade or
                        business in the United States or having or having had a
                        permanent establishment therein;

                  (B)   having a current or former relationship with the United
                        States, including a relationship as a citizen or
                        resident or being treated as a resident thereof;

                  (C)   being or having been a personal holding company, a
                        controlled foreign corporation, a passive foreign
                        investment company, a foreign personal holding company
                        with respect to the United States, a corporation that
                        has accumulated earnings to avoid United States Federal
                        income tax or a private foundation or other tax-exempt
                        organisation; or

                  (D)   an actual or a constructive "10-per cent shareholder" of
                        the Issuer as defined in Section 871(h)(3) of the United
                        States Internal Revenue Code of 1986, as amended (the
                        CODE);

            (ii)  any Relevant Account Holder who is a fiduciary or partnership
                  or other than the sole beneficial owner of the Underlying Note
                  or Coupon, but only to the extent that a beneficiary or
                  settlor with respect to such fiduciary or member of such
                  partnership or a beneficial owner of the Underlying Note or
                  Coupon would not have been entitled to the payment of an
                  additional amount had such beneficiary, settlor, member or
                  beneficial owner been the Relevant Account Holder of such
                  Underlying Note or Coupon;

            (iii) any tax, assessment or governmental charge that would not have
                  been imposed or withheld but for the failure of the Relevant
                  Account Holder, if required, to comply with certification,
                  identification or information reporting requirements under
                  United States income tax laws, without regard to any tax
                  treaty, with respect to the payment, concerning the
                  nationality, residence, identity or connection with the United
                  States of the Relevant Account Holder


                                       3

                  or a beneficial owner of such Underlying Note or Coupon, if
                  such compliance is required by United States income tax laws,
                  without regard to any tax treaty, as a precondition to relief
                  or exemption from such tax, assessment or governmental charge;

            (iv)  any tax, assessment or governmental charge that would not have
                  been so imposed or withheld but for the presentation by the
                  holder of such Underlying Note or Coupon for payment on a date
                  more than 30 days after the Relevant Date (as defined in the
                  Terms and Conditions of the Underlying Note) except to the
                  extent that the holder thereof would have been entitled to
                  such additional amounts on presenting the same for payment on
                  the last day of such 30 day period;

            (v)   any estate, inheritance, gift, sales, transfer, excise, wealth
                  or personal property tax or any similar tax, assessment or
                  governmental charge;

            (vi)  any tax, assessment or governmental charge that is payable
                  otherwise than by withholding from the payment of the amounts
                  receivable in respect of such Underlying Note or Coupon;

            (vii) any tax, assessment or governmental charge required to be
                  withheld by any paying agent from such payment of amounts
                  receivable in respect of any Underlying Note, if such payment
                  can be made without such withholding by any other paying
                  agent;

            (viii) any combination of items (i), (ii), (iii), (iv), (v), (vi) or
                  (vii);

            (ix)  any Underlying Note, Receipt or Coupon presented for payment
                  where such withholding or deduction is imposed on a payment to
                  an individual and is required to be made pursuant to any
                  European Union Directive on the taxation of savings
                  implementing the conclusions of the ECOFIN Council Meeting of
                  November 26-27, 2000, or any law implementing or complying
                  with, or introduced in order to conform to, such Directive; or

            (x)   any Underlying Note, Receipt or Coupon presented for payment
                  by or on behalf of a holder who would have been able to avoid
                  such withholding or deduction by presenting the relevant Note,
                  Receipt or Coupon to another Paying Agent in a Member State of
                  the EU.

            As used in this Clause, UNITED STATES means the United States of
            America, the Commonwealth of Puerto Rico and each possession of the
            United States of America and place subject to its jurisdiction and
            UNITED STATES ALIEN means any corporation, partnership, individual
            or fiduciary that, as to the United States, is for United States
            Federal income tax purposes (A) a foreign corporation, (B) a foreign
            partnership one or more of the members of which is, for United
            States Federal income tax purposes, a foreign corporation, a
            non-resident alien individual or a non-resident alien fiduciary of a
            foreign estate or trust, (C) a non-resident alien individual or (D)
            a non-resident alien fiduciary of a foreign estate or trust.

      (b)   Where the Issuer is Ciba Spezialitatenchemie Holding Deutschland
            GmbH:

            All payments in respect of the Underlying Note, Receipt of Coupon by
            the Issuer will be made without withholding or deduction for or on
            account of any present or future taxes or duties of whatever nature
            imposed or levied by or on behalf of Germany or


                                       4

            any state (Bundesland), municipality or other political subdivision
            or any authority thereof or therein having power to tax, unless such
            withholding or deduction is required by law. In such event, the
            Issuer will pay such additional amounts as shall be necessary in
            order that the net amounts received by the Relevant Account Holders
            after such withholding or deduction shall equal the amounts which
            would otherwise have been receivable in respect of the Underlying
            Note, Receipt of Coupon in the absence of such withholding or
            deduction; except that no such additional amounts shall be payable
            with respect to any Underlying Note, Receipt of Coupon to or to the
            order of a Relevant Account Holder who is liable for such taxes or
            duties in respect of such Underlying Note, Receipt of Coupon by
            reason of his having some connection with Germany other than the
            mere holding of such Underlying Note, Receipt of Coupon or with
            respect to any Underlying Note, Receipt of Coupon presented for
            payment to a paying agent which is required to deduct or withhold an
            amount for or on account of such taxes or duties if such amount can
            be paid without any deduction or withholding for or on account of
            any taxes or duties by any other paying agent or in respect to any
            Underlying Note, Receipt or Coupon presented for payment to a paying
            agent more than 30 days after the Relevant Date (as defined in the
            Terms and Conditions of the Underlying Note) except to the extent
            that the holder thereof would have been entitled to such additional
            amounts on presenting the same for payment on such thirtieth day or
            where such withholding or deduction is imposed on a payment to an
            individual and is required to be made pursuant to any European Union
            Directive on the taxation of savings implementing the conclusions of
            the ECOFIN Council meeting of November 26-27, 2000 or any law
            implementing or complying with, or introduced in order to conform
            to, such Directive or with respect to any Underlying Note, Receipt
            of Coupon presented for payment to a paying agent by or on behalf of
            a holder who would have been able to avoid such withholding or
            deduction by presenting the relevant Underlying Note, Receipt or
            Coupon to another paying agent in a Member State of the EU. Any
            advance income tax (Zinsabschlagsteuer) levied in Germany as well as
            the solidarity surcharge (Solidaritatszuschlag) imposed thereon do
            not constitute a withholding or deduction within the meaning of this
            Clause 4(a)(b).

      (c)   Where the Issuer is Ciba Specialty Chemicals PLC:

            All payments by the Issuer in respect of the Underlying Note,
            Receipt of Coupon shall be made without withholding or deduction for
            or on account of any present or future tax, duty or charge of
            whatever nature imposed or levied by or on behalf of the United
            Kingdom, or any authority thereof or therein having power to tax
            unless the withholding or deduction is required by law. In that
            event, the Issuer shall pay such additional amounts as will result
            (after such withholding or deduction) in the receipt by the Relevant
            Account Holders of the sums which would have been receivable (in the
            absence of such withholding or deduction) from the Issuer in respect
            of their Underlying Note, Receipt of Coupon; except that no such
            additional amounts shall be payable with respect to any Underlying
            Note, Receipt of Coupon to or to the order of a person liable to
            such tax, duty or charge in respect of such Underlying Note, Receipt
            of Coupon by reason of his having some connection with the United
            Kingdom other than the mere holding or ownership of such Underlying
            Note, Receipt of Coupon or with respect to any Underlying Note
            presented for payment to a paying agent which is required to deduct
            or withhold an amount for or on account of such tax, duty or charge
            if such amount can be paid without any deduction or withholding for
            or on account of any tax, duty or charge by any other paying agent
            or with respect to any Underlying Note, Receipt or Coupon presented
            for payment to a paying agent more than 30 days after the Relevant
            Date (as defined in the Terms and Conditions of


                                       5

            the Underlying Note) except to the extent that the holder thereof
            would have been entitled to such additional amounts on presenting
            the same for payment on such thirtieth day or where such withholding
            or deduction is imposed on a payment to an individual and is
            required to be made pursuant to any European Union Directive on the
            taxation of savings implementing the conclusions of the ECOFIN
            Council meeting of November 26-27, 2000 or any law implementing or
            complying with, or introduced in order to conform to, such Directive
            or with respect to any Underlying Note presented for payment to a
            paying agent by or on behalf of a holder who would have been able to
            avoid such withholding or deduction by presenting the relevant
            Underlying Note, Receipt or Coupon to another paying agent in a
            Member State of the EU.

      (d)   Where the Issuer is Ciba Specialty Chemicals Eurofinance Ltd.:

            All payments by the Issuer in respect of the Underlying Note,
            Receipt of Coupon shall be made without withholding or deduction for
            or on account of any present or future tax, duty or charge of
            whatever nature imposed or levied by or on behalf of Bermuda, or any
            authority thereof or therein having power to tax unless the
            withholding or deduction is required by law. In that event, the
            Issuer shall pay such additional amounts as will result (after such
            withholding or deduction) in the receipt by the Relevant Account
            Holders of the sums which would have been receivable (in the absence
            of such withholding or deduction) from the Issuer in respect of
            their Underlying Note, Receipt of Coupon; except that no such
            additional amounts shall be payable with respect to any Underlying
            Note to or to the order of any person liable to such tax, duty or
            charge in respect of such Underlying Note, Receipt of Coupon by
            reason of his having some connection with Bermuda other than the
            mere holding or ownership of such Underlying Note or with respect to
            any Underlying Note, Receipt or Coupon presented for payment to a
            paying agent more than 30 days after the Relevant Date (as defined
            in the Terms and Conditions of the Underlying Note) except to the
            extent that the holder thereof would have been entitled to such
            additional amounts on presenting the same for payment on such
            thirtieth day or where such withholding or deduction is imposed on a
            payment to an individual and is required to be made pursuant to any
            European Union Directive on the taxation of savings implementing the
            conclusions of the ECOFIN Council meeting of November 26-27, 2000 or
            any law implementing or complying with, or introduced in order to
            conform to, such Directive or with respect to any Underlying Note
            presented for payment to a paying agent by or on behalf of a holder
            who would have been able to avoid such withholding or deduction by
            presenting the relevant Underlying Note, Receipt or Coupon to
            another paying agent in a Member State of the EU.

5.    Each Issuer hereby warrants, represents and covenants with each Relevant
      Account Holder that it has all corporate power, and has taken all
      necessary corporate or other steps, to enable it to execute, deliver and
      perform this Deed, and that this Deed constitutes a legal, valid and
      binding obligation of the relevant Issuer enforceable in accordance with
      its terms subject to the laws of bankruptcy and other laws affecting the
      rights of creditors generally.

6.    This Deed shall take effect as a Deed Poll for the benefit of the Relevant
      Account Holders from time to time and for the time being. This Deed shall
      be deposited with and held by a depository for Clearstream, Luxembourg and
      Euroclear, or any successor to the business thereof and for the time being
      (being at the date hereof JPMorgan Chase Bank at Trinity Tower, 9 Thomas
      More Street, London E1 9YT) until all the obligations of each Issuer
      hereunder have been discharged in full.


                                       6

7.    Each Issuer hereby acknowledges the right of every Relevant Account Holder
      to the production of, and the right of every Relevant Account Holder to
      obtain (upon payment of a reasonable charge) a copy of, this Deed, and
      further acknowledges and covenants that the obligations binding upon it
      contained herein are owed to, and shall be for the account of, each and
      every Relevant Account Holder, and that each Relevant Account Holder shall
      be entitled severally to enforce the said obligations against the relevant
      Issuer.

8.    No rights are conferred on any person under the Contracts (Rights of Third
      Parties) Act 1999 to enforce any term of this Deed, but this does not
      affect any right or remedy of any person which exists or is available
      apart from that Act.

9.    This Deed is governed by, and shall be construed in accordance with, the
      laws of England.

      Each Issuer hereby irrevocably agrees, for the exclusive benefit of the
      Relevant Account Holders, that the courts of England are to have
      jurisdiction to settle any dispute which may arise out of, or in
      connection with, this Deed and that accordingly any suit, action or
      proceedings (together referred to as PROCEEDINGS) arising out of, or in
      connection with, this Deed may be brought in such courts. Each Issuer
      irrevocably waives any objection which it may have now or hereafter to the
      laying of the venue of any Proceedings in any such court and any claim
      that any such Proceedings have been brought in an inconvenient forum and
      further irrevocably agrees that a judgment in any Proceedings brought in
      the English courts shall be conclusive and binding upon the relevant
      Issuer and may be enforced in the courts of any other jurisdiction
      (subject to the laws of the jurisdiction in which enforcement is sought).
      Nothing contained in this Clause shall limit any right to take Proceedings
      against any Issuer in any other court of competent jurisdiction, nor shall
      the taking of Proceedings in one or more jurisdictions preclude the taking
      of Proceedings in any other jurisdiction, whether concurrently or not
      (subject to the laws of the relevant jurisdictions). Ciba Specialty
      Chemicals Corporation, Ciba Spezialitatenchemie Holding Deutschland GmbH
      and Ciba Specialty Chemicals Eurofinance Ltd. each hereby appoints Ciba
      Specialty Chemicals PLC at its registered office for the time being to
      accept service of process on its behalf. If Ciba Specialty Chemicals PLC
      shall cease to be registered under the laws of England and Wales, the
      relevant Issuer shall appoint another person with an office in London to
      accept such service. Nothing herein shall affect the right to serve
      process in any other manner permitted by law.

10.   This Deed may be executed by any one or more of the parties hereto in any
      number of counterparts, each of which shall be deemed to be an original,
      but all such counterparts shall together constitute one and the same
      instrument.

IN WITNESS whereof each Issuer has caused this Deed to be duly executed the day
and year first above mentioned.


                                       7

                                   SIGNATORIES

EXECUTED as a Deed by CIBA                      )     KIRK ERSTLING
SPECIALTY CHEMICALS                             )
CORPORATION                                     )     OLIVER STRUB
acting by                                       )
and                                             )
acting under the authority of that company      )
in the presence of:                             )

Witness's
Signature   A.STEINER
            ------------------------------------

Name        A.STEINER
            ------------------------------------

Address     C/o CIBA SPECIALTY CHEMICALS INC.
            ------------------------------------
            CH-4002 BASEL
            ------------------------------------



EXECUTED as a Deed by CIBA                      )     KIRK ERSTLING
SPECIALTY CHEMICALS                             )
PLC                                             )     OLIVER STRUB
acting by its attorney(s)                       )
                                                )
in the presence of:                             )

Witness's
Signature   A. STEINER
            ------------------------------------

Name        A. STEINER
            ------------------------------------

Address     C/O CIBA SPECIALTY CHEMICALS INC.
            ------------------------------------
            CH-4002 BASEL
            ------------------------------------


                                       8

EXECUTED as a Deed by CIBA                      )     KIRK ERSTLING
SPEZIALITATENCHEMIE                             )
HOLDING DEUTSCHLAND GMBH                        )     OLIVER STRUB
acting by                                       )
and                                             )
acting under the authority of that company      )
in the presence of:                             )

Witness's
Signature   A. STEINER
            ------------------------------------

Name        A. STEINER
            ------------------------------------

Address     C/O CIBA SPECIALTY CHEMICALS INC.
            ------------------------------------
            CH-4002 BASEL
            ------------------------------------



EXECUTED as a Deed under                        )
Seal by CIBA SPECIALTY CHEMICALS                )     KIRK ERSTLING
EUROFINANCE LTD.                                )
and SIGNED AND DELIVERED as                     )     OLIVER STRUB
a deed on its behalf by                         )

pursuant to a power of attorney dated 26th      )
March, 2002 in the presence of:                 )

Witness's
Signature   A. STEINER
            ------------------------------------

Name        A. STEINER
            ------------------------------------

Address     C/O CIBA SPECIALTY CHEMICALS INC.
            ------------------------------------
            CH-4002 BASEL
            ------------------------------------


                                       9

                                                                  CONFORMED COPY

                                27TH MARCH, 2003




                          CIBA SPECIALTY CHEMICALS PLC
                      CIBA SPECIALTY CHEMICALS CORPORATION
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                                   AS ISSUERS



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

                                DEED OF COVENANT

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




                              [ALLEN & OVERY LOGO]
                                     LONDON

EX-4.3

                                                                     EXHIBIT 4.3

                                DEED OF GUARANTEE

THIS DEED OF GUARANTEE is made on 27th March, 2003 by CIBA SPECIALTY CHEMICALS
HOLDING INC., (the GUARANTOR) in favour of the Relevant Account Holders (as
defined in the Deed of Covenant referred to below) and the holders for the time
being of the Notes (as defined below) and the interest coupons (if any)
appertaining to the Notes (COUPONS), the Coupons being attached on issue to
Definitive Note(s) (as defined below). Each Relevant Account Holder, each holder
of a Note and each holder of a Coupon is a HOLDER.

WHEREAS:

(A)   CIBA SPECIALTY CHEMICALS CORPORATION, CIBA SPECIALTY CHEMICALS PLC, CIBA
      SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH, CIBA SPECIALTY CHEMICALS
      EUROFINANCE LTD. (the ISSUERS and each an ISSUER) and the Guarantor have
      entered into an amended and restated Program Agreement (the PROGRAM
      AGREEMENT, which expression includes the same as it may be amended or
      supplemented from time to time) dated 27th March, 2003 with the Dealers
      named therein, which amends and restates the amended and restated program
      agreement entered into by, inter alia, Ciba Specialty Chemicals
      Corporation, Ciba Specialty Chemicals PLC and Ciba Spezialitatenchemie
      Holding Deutschland GmbH dated 27th March, 2002 (the PRINCIPAL PROGRAM
      AGREEMENT), under which each Issuer proposes from time to time to issue
      Euro Medium Term Notes (the NOTES, such expression to include each
      Definitive Note issued by an Issuer and each Global Note issued by an
      Issuer (where DEFINITIVE NOTE and GLOBAL NOTE have the meanings ascribed
      thereto in the Agency Agreement defined below) and to include any receipts
      issued in respect of Notes repayable in instalments);

(B)   each Issuer has executed a Deed of Covenant of even date (the DEED OF
      COVENANT) relating to Global Notes issued by that Issuer pursuant to the
      Program Agreement;

(C)   the Issuers and the Guarantor have entered into an amended and restated
      agency agreement (the AGENCY AGREEMENT, which expression includes the same
      as it may be amended or supplemented from time to time) dated 27th March,
      2003 with the Paying Agents named therein; and

(D)   this Deed of Guarantee amends and restates the amended and restated Deed
      of Guarantee made by the Guarantor dated 27th March, 2002, and does not
      affect any Notes issued pursuant to the Principal Program Agreement prior
      to the date hereof.

NOW THIS DEED WITNESSES as follows:

1.    Guarantee: The Guarantor irrevocably and unconditionally undertakes to
      secure by way of deed poll to each Holder the due and punctual payment as
      stipulated in an Issuer's Note or Coupon or under its Deed of Covenant, as
      the case may be. The Guarantor therefore undertakes to pay on first demand
      of such a Holder, irrespective of the validity and the legal effects of
      the above mentioned relationship in respect of a Note or Coupon or Deed of
      Covenant and waiving all rights of objection and defence arising therefrom
      any amount not paid by the relevant Issuer (including any premium or any
      other amounts of whatever nature or additional amounts) upon receipt of
      the written request for payment by such Holder and the confirmation in
      writing by the Agent that the relevant Issuer has not made such payments
      on the dates specified and in the amount called under the Guarantee. The
      Guarantor hereby expressly undertakes and secures that payments under this
      Guarantee will not be less than as

      stipulated in an Issuer's Note or Coupon. In implementation of this
      undertaking and in case Swiss withholding taxes are imposed in respect of
      payments made under this Guarantee, the Guarantor undertakes, as a
      separate and independent obligation, to pay an increased amount on the
      relevant Note or Coupon so that the payment received by the Noteholder or
      Couponholder shall equal the amount actually stipulated in such Note or
      Coupon (assuming no such withholding applies).

2.    Guarantor's Obligations Continuing: The Guarantor's obligations under this
      Guarantee are and will remain in full force and effect by way of
      continuing security until no sum remains payable under any Note, any
      Coupon or the Deed of Covenant. Furthermore, these obligations of the
      Guarantor are additional to, and not instead of, any security or other
      guarantee or indemnity at any time existing in favour of a Holder, whether
      from the Guarantor or otherwise. The Guarantor irrevocably waives all
      notices and demands whatsoever, except as provided herein.

3.    Repayment to the Issuer: If any payment received by a Holder is, on the
      subsequent liquidation or insolvency of the relevant Issuer, avoided under
      any laws relating to liquidation or insolvency, such payment will not be
      considered as having discharged or diminished the liability of the
      Guarantor and this Guarantee will continue to apply as if such payment had
      at all times remained owing by the relevant Issuer.

4.    Status of Guarantee: The payment obligations of the Guarantor under this
      Guarantee constitute direct, unconditional and (subject to clause 5 below)
      unsecured obligations of the Guarantor and (subject as aforesaid) rank and
      will rank pari passu with all other outstanding unsecured and
      unsubordinated indebtedness and monetary obligations of the Guarantor,
      present or future, including those in respect of deposits (other than
      obligations preferred by law).

5.    Negative Pledge of the Guarantor: So long as any of the Notes remains
      outstanding, but not later than the time when payment for the full amount
      of principal and interest in respect of all outstanding Notes has been
      duly provided for, the Guarantor will procure that no Indebtedness of the
      Guarantor which is represented by bonds, notes or other securities which
      in any such case are listed or capable of being listed on any recognised
      Stock Exchange will be secured upon any of the present or future assets or
      revenues of the Guarantor unless all amounts payable under this Guarantee
      are secured equally and rateably with such other security or such other
      security or guarantee is granted to the Notes and Coupons as shall have
      been approved by an Extraordinary Resolution of the Noteholders. Any
      reference to an obligation being guaranteed shall include a reference to
      an indemnity being given in respect of payment thereof.

      As used herein INDEBTEDNESS means all indebtedness for money borrowed that
      is created, assumed, incurred or guaranteed in any manner by the Guarantor
      or for which the Guarantor is otherwise responsible or liable.

6.    Tax Gross-up: All payments in respect of the Notes by the Guarantor shall
      be made without withholding or deduction for, or on account of, any
      present or future taxes, duties, assessments or governmental charges of
      whatever nature (TAXES) imposed or levied by or on behalf of Switzerland,
      or any political sub-division of, or any authority in, or of, Switzerland
      having power to tax, unless the withholding or deduction of the Taxes is
      required by law. In that event, the Guarantor will pay such additional
      amounts as may be necessary in order that the net amounts received by the
      Noteholders and Couponholders after the withholding or deduction shall
      equal the respective amounts which would have been receivable in respect
      of the Notes or, as the case may be, Coupons in the absence of the
      withholding or deduction;


                                                                               2

      except that no additional amount shall be payable in relation to any
      payment in respect of any Note or Coupon:

      (i)   by or on behalf of a person liable to such tax, duty or charge in
            respect of such Note, Receipt or Coupon by reason of his having some
            connection with Switzerland other than the mere holding or ownership
            of such Note, Receipt or Coupon; and/or

      (ii)  presented for payment to the relevant Issuer more than 30 days after
            the Relevant Date (as defined in Condition 7(f) of the Terms and
            Conditions of the relevant Notes) except to the extent that a holder
            would have been entitled to additional amounts on presenting the
            same for payment on the last day of the period of 30 days; and/or

      (iii) to, or to a third party on behalf of, a holder who would be able to
            avoid such withholding or deduction by making a declaration of
            non-residence or similar claim for exemption but fails to do so;
            and/or

      (iv)  where such withholding or deduction is imposed on a payment to an
            individual and is required to be made pursuant to any European Union
            Directive on the taxation of savings implementing the conclusions of
            the ECOFIN Council meeting of 26th-27th November, 2000, or any law
            implementing or complying with, or introduced in order to conform
            to, such Directive; and/or

      (v)   presented for payment by or on behalf of a holder who would have
            been able to avoid such withholding or deduction by presenting the
            relevant Note or Coupon to another Paying Agent in a Member State of
            the EU.

7.    Power to execute: The Guarantor hereby warrants, represents and covenants
      with each Holder that it has all corporate power, and has taken all
      necessary corporate or other steps, to enable it to execute, deliver and
      perform this Guarantee, and that this Guarantee constitutes a legal, valid
      and binding obligation of the Guarantor, enforceable in accordance with
      its terms subject to applicable bankruptcy, reorganisation, insolvency,
      fraudulent transfer, moratorium and other similar laws affecting
      creditor's rights generally from time to time in effect, and to general
      principles of equity, regardless of whether considered in a proceeding in
      law or at equity.

8.    Deposit of Guarantee: This Guarantee shall take effect as a Deed Poll for
      the benefit of the Holders from time to time and for the time being. This
      Guarantee shall be deposited with and held by The Chase Manhattan Bank for
      the benefit of the Holders until all the obligations of the Guarantor
      hereunder have been discharged in full.

9.    Production of Guarantee: The Guarantor hereby acknowledges the right of
      every Holder to the production of, and the right of every Holder to obtain
      (upon payment of a reasonable charge) a copy of, this Guarantee, and
      further acknowledges and covenants that the obligations binding upon it
      contained herein are owed to, and shall be for the account of, each and
      every Holder, and that each Holder shall be entitled severally to enforce
      the said obligations against the Guarantor.

10.   Subrogation: Until all amounts which may be payable under the Notes, the
      Coupons and/or the Deed of Covenant have been irrevocably paid in full,
      the Guarantor shall not exercise any rights of subrogation in respect of
      any rights of any Holder or claim in competition with the Holders against
      the relevant Issuer.


                                                                               3

11.   Governing Law and Jurisdiction: This Guarantee is governed by and shall be
      construed in accordance with English law. The Guarantor irrevocably agrees
      for the benefit of each Holder that the courts of England are to have
      jurisdiction to settle any disputes which may arise out of or in
      connection with this Guarantee and that accordingly any suit, action or
      proceedings arising out of or in connection with this Guarantee (together
      referred to as PROCEEDINGS) may be brought in the courts of England.

      The Guarantor irrevocably waives any objection which it may have now or
      hereafter to the laying of the venue of the Proceedings in the courts of
      England and irrevocably agrees that a final judgment in any Proceedings
      brought in the courts of England shall be conclusive and binding upon the
      Guarantor and may be enforced in the courts of any other jurisdiction.
      Nothing contained in this clause shall limit any right to take Proceedings
      against the Guarantor in any other court of competent jurisdiction, nor
      shall the taking of Proceedings in none or more jurisdictions preclude the
      taking of Proceedings in any other jurisdiction, whether concurrently or
      not.

      No rights are conferred on any person under the Contracts (Rights of Third
      Parties) Act 1999 to enforce any term of this Global Note, but this does
      not affect any right or remedy of any person which exists or is available
      apart from that Act.

      The Guarantor hereby appoints Ciba Specialty Chemicals PLC as its agent
      for service of process in England in respect of any Proceedings and
      undertakes that in the event of it ceasing so to act it will appoint
      another person as its agent for that purpose.

IN WITNESS whereof this Guarantee has been manually executed as a deed poll on
behalf of the Guarantor.

Executed as a deed                   )
by CIBA SPECIALTY CHEMICALS          )           KIRK ERSTLING
HOLDING INC.                         )
acting by                            )           OLIVER STRUB
and                                  )
                                     )
acting under the authority of        )
that Company in the presence of:     )


Witness's   A. STEINER
Signature:  .......................................

            A.STEINER
Name:       .......................................

            C/o CIBA SPECIALTY CHEMICALS INC.
Address:    .......................................
            CH-4002 BASEL
            .......................................


Dated 27th March,  2003


                                                                               4

                                                                  CONFORMED COPY

                                27TH MARCH, 2003



                      CIBA SPECIALTY CHEMICALS HOLDING INC.
                                  AS GUARANTOR




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

                                DEED OF GUARANTEE

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



                              [ALLEN & OVERY LOGO]
                                     LONDON

EX-4.4

                                                                     EXHIBIT 4.4

                                                                  CONFORMED COPY


                                AGENCY AGREEMENT
                       IN RESPECT OF A U.S.$2,000,000,000
                          EURO MEDIUM TERM NOTE PROGRAM
                             (AMENDED AND RESTATED)

                             DATED 27TH MARCH, 2003


                          CIBA SPECIALTY CHEMICALS PLC
                      CIBA SPECIALTY CHEMICALS CORPORATION
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                                   AS ISSUERS

                                       AND

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
                                  AS GUARANTOR

                                       AND

                              JP MORGAN CHASE BANK
                                    AS AGENT

                        J.P. MORGAN BANK LUXEMBOURG S.A.
                                 AS PAYING AGENT



                              [ALLEN & OVERY LOGO]

                                    CONTENTS



CLAUSE                                                                   PAGE
                                                                   
1.    Definitions and Interpretation.......................................2
2.    Appointment of Agent and Paying Agents...............................7
3.    Issue of Temporary Global Notes......................................8
4.    Determination of Exchange Date, Issue of Permanent Global Notes
      and Definitive Notes and Determination of End of Distribution
      Compliance Period....................................................9
5.    Issue of Definitive Notes...........................................10
6.    Terms of Issue......................................................10
7.    Payments............................................................11
8.    Determinations and Notifications in respect of Notes and Interest
      Determination.......................................................13
9.    Notice of any Withholding or Deduction..............................15
10.   Duties of the Agent in Connection with Early Redemption.............15
11.   Receipt and Publication of Notices..................................16
12.   Cancellation of Notes, Receipts, Coupons and Talons.................16
13.   Issue of Replacement Notes, Receipts, Coupons and Talons............17
14.   Copies of Documents available for Inspection........................18
15.   Meetings of Noteholders.............................................19
16.   Commissions and Expenses............................................19
17.   Indemnity...........................................................19
18.   Repayment by the Agent..............................................20
19.   Conditions of Appointment...........................................20
20.   Communication between the Parties...................................21
21.   Changes in Agent and other Paying Agents............................21
22.   Merger and Consolidation............................................23
23.   Notification of Changes to Paying Agents............................23
24.   Change of Specified Office..........................................23
25.   Notices.............................................................23
26.   Taxes and Stamp Duties..............................................24
27.   Currency Indemnity..................................................24
28.   Amendments..........................................................24
29.   Descriptive Headings................................................25
30.   Contracts (Rights of Third Parties) Act 1999........................25
31.   Governing Law and Submission to Jurisdiction........................25
32.   Counterparts........................................................25

APPENDIX

1.    Form of Calculation Agency Agreement................................26




SCHEDULES
                                                               
1.    Terms and Conditions of the Notes...................................35
2.    Forms of Global and Definitive Notes, Receipts, Coupons and Talons..58
Part 1      Form of Temporary Global Note.................................58
Part 2      Form of Permanent Global Note.................................71
Part 3      Form of Definitive Note.......................................80
Part 4      Form of Coupon................................................83
Part 5      Form of Receipt...............................................86
Part 6      Form of Talon.................................................88
3.    Form of Deed of Guarantee...........................................91
4.    Provisions for Meetings of Noteholders..............................95
5.    Form of Put Notice.................................................102
6.    Operating & Administrative  Procedures Memorandum..................104

Signatories..............................................................127


                                AGENCY AGREEMENT

                                 IN RESPECT OF A

                          EURO MEDIUM TERM NOTE PROGRAM

THIS AGREEMENT is made on 27th March, 2003 BETWEEN:

(1)   CIBA SPECIALTY CHEMICALS CORPORATION of 560 White Plains Road, Tarrytown,
      New York 10591-9005, United States (CIBA US);

(2)   CIBA SPECIALTY CHEMICALS PLC of Hulley Road, Macclesfield, Cheshire SK10
      2NX, England (CIBA UK);

(3)   CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH of Chemiestrasse,
      D-68623 Lampertheim, Germany (CIBA GERMANY);

(4)   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD. of Cedar House, 41 Cedar Avenue,
      Hamilton HM12, Bermuda (CIBA BERMUDA);

(5)   CIBA SPECIALTY CHEMICALS HOLDING INC. of Klybeckstrasse 141, CH-4002
      Basle, Switzerland (the GUARANTOR);

(6)   JPMORGAN CHASE BANK of Trinity Tower, 9 Thomas More Street, London E1W 1YT
      (the AGENT, which expression shall include any successor agent appointed
      in accordance with Clause 21); and

(7)   J.P. MORGAN BANK LUXEMBOURG S.A. of 5 Rue Plaetis, L-2338 Luxembourg
      (together with the Agent, the PAYING AGENTS, which expression shall
      include any additional or successor paying agent appointed in accordance
      with Clause 21 and PAYING AGENT shall mean any of the Paying Agents).

WHEREAS:

(A)   CIBA US, CIBA UK, CIBA Germany, CIBA Bermuda (each an ISSUER and together,
      the ISSUERS) and the Guarantor have entered into an amended and restated
      program agreement dated 27th March, 2003 (the PROGRAM AGREEMENT) with the
      Dealers named therein pursuant to which the Issuer may issue Euro Medium
      Term Notes (the NOTES) in an aggregate nominal amount outstanding at any
      time of up to U.S.$2,000,000,000 (or its equivalent in other currencies).
      The Program Agreement amends and restates the amended and restated program
      agreement entered into by CIBA US, CIBA UK, CIBA Germany, CIBA Bermuda and
      the Guarantor dated 27th March, 2002 with the Dealers named therein.

(B)   CIBA US, CIBA UK, CIBA Germany, CIBA Bermuda, the Guarantor, the Agent and
      the Paying Agents entered into an amended and restated Agency Agreement
      (the PRINCIPAL AGENCY AGREEMENT) dated 27th March, 2002 in respect of
      U.S.$2,000,000,000 Euro Medium Term Note Program.

(C)   This Agreement amends and restates the Principal Agency Agreement. Any
      Notes issued on or after the date hereof (other than any such Notes issued
      so as to be consolidated and form a single Series with any Notes issued
      prior to the date hereof) shall be issued pursuant to this Agreement. This
      does not affect any Notes issued prior to the date hereof.


                                       1

(D)   Each issue of Notes will be initially represented by a temporary global
      Note exchangeable in whole or in part for definitive Notes or for a
      permanent global Note which will be exchangeable as described therein for
      definitive Notes.

IT IS HEREBY AGREED as follows:

1.    DEFINITIONS AND INTERPRETATION

1.1   Terms and expressions defined in the Program Agreement or the Notes or
      used in the applicable Pricing Supplement shall have the same meanings in
      this Agreement, except where the context requires otherwise or unless
      otherwise stated.

1.2   Without prejudice to the foregoing:

      CLEARSTREAM, LUXEMBOURG means Clearstream Banking, societe anonyme;

      CONDITIONS means, in relation to the Notes of any Series, the terms and
      conditions endorsed on or incorporated by reference into or attached to
      the Note or Notes constituting such Series, such terms and conditions
      being in or substantially in the form set out in Schedule 1 or in such
      other form, having regard to the terms of the notes of the relevant
      Series, as may be agreed between the relevant Issuer, the Guarantor, the
      Agent and the relevant Dealer as modified and supplemented by the Pricing
      Supplement applicable to the Notes of the relevant Series;

      COUPON means an interest coupon appertaining to a Definitive Note (other
      than a Zero Coupon Note), such coupon being:

      (a)   if appertaining to a Fixed Rate Note, in the form or substantially
            in the form set out in Part 4 A of Schedule 2 or in such other form,
            having regard to the terms of issue of the Notes of the relevant
            Series, as may be agreed between the relevant Issuer, the Guarantor,
            the Agent and the relevant Dealer; or

      (b)   if appertaining to a Floating Rate Note or an Indexed Interest Note,
            in the form or substantially in the form set out in Part 4 B of
            Schedule 2 or in such other form, having regard to the terms of
            issue of the Notes of the relevant Series, as may be agreed between
            the relevant Issuer, the Guarantor, the Agent and the relevant
            Dealer; or

      (c)   if appertaining to a Definitive Note which is neither a Fixed Rate
            Note nor a Floating Rate Note nor an Indexed Interest Note, in such
            form as may be agreed between the relevant Issuer, the Guarantor,
            the Agent and the relevant Dealer,

      and includes, where applicable, the Talon(s) appertaining thereto and any
      replacements for Coupons and Talons issued pursuant to Condition 10;

      COUPONHOLDERS means the several persons who are for the time being holders
      of the Coupons and shall, unless the context otherwise requires, include
      the holders of the Talons;

      DEFINITIVE NOTE means a definitive Note issued or, as the case may
      require, to be issued by the relevant Issuer in accordance with the
      provisions of the Program Agreement or any other agreement between the
      relevant Issuer, the Guarantor and the relevant Dealer in exchange for
      either a Temporary Global Note or a Permanent Global Note (all as
      indicated in the applicable Pricing Supplement), such definitive Note
      being in the form or substantially in the form set out in Part 3 of
      Schedule 2 with such modifications (if any) as may be agreed between the


                                       2

      relevant Issuer, the Guarantor, the Agent and the relevant Dealer and
      having the Conditions endorsed thereon or attached thereto or, if
      permitted by the relevant authority or authorities and agreed by the
      relevant Issuer, the Guarantor and the relevant Dealer, incorporating the
      Conditions by reference and having the applicable Pricing Supplement (or
      the relevant provisions thereof) either endorsed thereon or attached
      thereto and (except in the case of a Zero Coupon Note) having Coupons and,
      where appropriate, Receipts and/or Talons attached thereto on issue;

      DISTRIBUTION COMPLIANCE PERIOD has the meaning given to such term in
      Regulation S under the Securities Act;

      DUAL CURRENCY NOTE means a Note in respect of which payments of principal
      and/or interest are made or to be made in such different currencies, and
      at rates of exchange calculated upon such basis or bases, as the relevant
      Issuer, the Guarantor and the relevant Dealer may agree (as indicated in
      the applicable Pricing Supplement);

      EURIBOR means the Euro-zone inter-bank offered rate;

      EUROCLEAR means Euroclear Bank S.A./N.V. as operator of the Euroclear
      System, or any successor to the business thereof;

      EURO-ZONE means the region composed of Member States of the European Union
      that are participating in the third stage of European economic and
      monetary union;

      FIXED RATE NOTE means a Note on which interest is calculated at a fixed
      rate payable in arrear on a fixed date or dates in each year and on the
      redemption date or on such other dates as may be agreed between the
      relevant Issuer, the Guarantor and the relevant Dealer (as indicated in
      the applicable Pricing Supplement);

      FLOATING RATE NOTE means a Note on which interest is calculated at a
      floating rate payable in respect of such period or on such date(s) as may
      be agreed between the relevant Issuer, the Guarantor and the relevant
      Dealer (as indicated in the applicable Pricing Supplement);

      GLOBAL NOTE means a Temporary Global Note and/or a Permanent Global Note,
      as applicable;

      GUARANTEE means the guarantee dated the date of this Agreement,
      substantially in the form set out in Schedule 3 executed as a deed poll by
      the Guarantor in respect of any Note and in respect of the obligations of
      the Issuers under the Deed of Covenant;

      INDEXED INTEREST NOTE means a Note in respect of which the amount payable
      in respect of interest is calculated by reference to an index and/or a
      formula as the relevant Issuer, the Guarantor and the relevant Dealer may
      agree (as indicated in the applicable Pricing Supplement);

      INDEXED NOTE means an Indexed Interest Note and/or an Indexed Redemption
      Amount Note, as applicable;

      INDEXED REDEMPTION AMOUNT NOTE means a Note in respect of which the amount
      payable in respect of principal is calculated by reference to an index
      and/or a formula as the relevant Issuer, the Guarantor and the relevant
      Dealer may agree (as indicated in the applicable Pricing Supplement);

      INTEREST COMMENCEMENT DATE means, in the case of interest-bearing Notes,
      the date specified in the applicable Pricing Supplement from (and
      including) which such Notes bear


                                       3

      interest, which may or may not be the Issue Date (but if no date is
      specified shall be the Issue Date);

      ISDA DEFINITIONS means the 2000 ISDA Definitions, each as amended and
      updated as at the Issue Date of the first Tranche of Notes of the relevant
      Series and published by the International Swaps and Derivatives
      Association, Inc.;

      ISSUE DATE means the date of issue and purchase of a Note, in each case
      pursuant to and in accordance with the Program Agreement or any other
      agreement between the relevant Issuer, the Guarantor and the relevant
      Dealer, being in the case of any Permanent Global Note or Definitive Note,
      the same date as the date of issue of the Temporary Global Note which
      initially represented such Note;

      ISSUE PRICE means the price, generally expressed as a percentage of the
      nominal amount of the Notes, at which the Notes will be issued;

      LIBOR means the London inter-bank offered rate;

      MATURITY DATE means, in relation to a Note, the date on which it is
      expressed to be redeemable;

      NOTE means a note denominated in Australian dollars, Canadian dollars,
      Czech koruna, Danish kroner, euro, Hong Kong dollars, Japanese Yen, New
      Zealand dollars, Norwegian kroner, South African Rand, Sterling, Swedish
      kronor, Swiss francs, U.S. dollars or such other currency or currencies as
      may be agreed between the relevant Issuer, the Guarantor and the relevant
      Dealer issued or to be issued by the relevant Issuer pursuant to the
      Program Agreement or any other agreement between the relevant Issuer, the
      Guarantor and the relevant Dealer and which shall initially be represented
      by, and comprised in, a Temporary Global Note which may (in accordance
      with the terms of such Temporary Global Note) be exchanged for either
      Definitive Notes or a Permanent Global Note which Permanent Global Note
      may (in accordance with the terms of such Permanent Global Note) in turn
      be exchanged for Definitive Notes (all as indicated in the applicable
      Pricing Supplement) and includes any replacements for a Note issued
      pursuant to Condition 10 and, where applicable, the Receipts relating
      thereto;

      NOTEHOLDERS means the several persons who are for the time being holders
      of the Notes save that, in respect of the Notes of any Series, for so long
      as such Notes or any part thereof are represented by a Global Note held on
      behalf of Euroclear and/or of Clearstream, Luxembourg, each person (other
      than Euroclear or Clearstream, Luxembourg) who is for the time being shown
      in the records of Euroclear or of Clearstream, Luxembourg as the holder of
      a particular nominal amount of the Notes of such Series (in which regard
      any certificate or other document issued by Euroclear or Clearstream,
      Luxembourg as to the nominal amount of such Notes standing to the account
      of any person shall be conclusive and binding for all purposes save in the
      case of manifest error) shall be treated by the Issuer, the Guarantor, the
      Agent and any other Paying Agent as the holder of such nominal amount of
      such Notes for all purposes other than with respect to the payment of
      principal or interest on such Notes, for which purpose the bearer of the
      relevant Global Note shall be treated by the Issuer, the Guarantor, the
      Agent and any other Paying Agent as the holder of such nominal amount of
      such Notes in accordance with and subject to the terms of the relevant
      Global Note and this agreement and the expressions NOTEHOLDER, HOLDER OF
      NOTES and related expressions shall be construed accordingly;

      OUTSTANDING means, in relation to the Notes, all the Notes issued other
      than (a) those which have been redeemed in full in accordance with the
      Conditions, (b) those in respect of which


                                       4

      the date for redemption in accordance with the Conditions has occurred and
      the redemption moneys wherefor (including all interest (if any) accrued
      thereon to the date for such redemption and any interest (if any) payable
      under the Conditions after such date) have been duly paid to the Agent as
      provided herein (and, where appropriate, notice has been given to the
      Noteholders of the relevant Series in accordance with Condition 14) and
      remain available for payment against presentation of Notes, (c) those
      which have become void under Condition 8, (d) those which have been
      purchased and cancelled as provided in Condition 6, (e) those mutilated or
      defaced Notes which have been surrendered in exchange for replacement
      Notes pursuant to Condition 10, (f) (for the purpose only of determining
      the nominal amount of the Notes outstanding and without prejudice to their
      status for any other purpose) those Notes alleged to have been lost,
      stolen or destroyed and in respect of which replacement Notes have been
      issued pursuant to Condition 10, (g) Temporary Global Notes to the extent
      that they shall have been duly exchanged for Permanent Global Notes and/or
      Definitive Notes and Permanent Global Notes to the extent that they shall
      have been duly exchanged for Definitive Notes, in each case pursuant to
      their respective provisions and (h) Temporary Global Notes and Permanent
      Global Notes which have become void in accordance with their terms
      (provided that at the Relevant Time (as defined in the Deed of Covenant)
      the Underlying Notes (as defined in the Deed of Covenant) will be deemed
      to be still outstanding) and,

      PROVIDED THAT for each of the following purposes, namely:

      (a)   the right to attend and vote at any meeting of the Noteholders or
            any of them; and

      (b)   the determination of how many and which Notes are for the time being
            outstanding for the purposes of paragraphs 2, 5 and 6 of Schedule 4
            hereto,

      those Notes (if any) which are for the time being held by any person
      (including but not limited to any Issuer, the Guarantor or any of their
      respective Subsidiaries) for the benefit of any Issuer, the Guarantor or
      any of their respective Subsidiaries shall (unless and until ceasing to be
      so held) be deemed not to be outstanding;

      PERMANENT GLOBAL NOTE means a global note in the form or substantially in
      the form set out in Part II of Schedule 2 together with the copy of the
      applicable Pricing Supplement attached thereto with such modifications (if
      any) as may be agreed between the relevant Issuer, the Guarantor, the
      Agent and the relevant Dealer, comprising some or all of the Notes of the
      same Series, issued by the relevant Issuer pursuant to the Program
      Agreement or any other agreement between the relevant Issuer, the
      Guarantor and the relevant Dealer in exchange for the whole or part of any
      Temporary Global Note issued in respect of such Notes;

      PROCEDURES MEMORANDUM means the operating and administrative procedures
      memorandum set out in Schedule 6 hereto;

      PUT NOTICE means a notice in the form set out in;

      RECEIPT means a receipt attached on issue to a Definitive Note redeemable
      in instalments for the payment of an instalment of principal, such receipt
      being in the form or substantially in the form set out in Part 5 of
      Schedule 2 or in such other form as may be agreed between the relevant
      Issuer, the Guarantor, the Agent and the relevant Dealer and includes any
      replacements for Receipts issued pursuant to Condition 10;

      RECEIPTHOLDERS means the several persons who are for the time being
      holders of the Receipts;

      REFERENCE BANKS means, in the case of subclause 8.2(a)(i) below, those
      banks whose offered rates were used to determine such quotation when such
      quotation last appeared on the


                                       5

      Relevant Screen Page and, in the case of subclause 8.2(a)(ii) below, those
      banks whose offered quotations last appeared on the Relevant Screen Page
      when no fewer than three such offered quotations appeared;

      REPLACEMENT AGENT means the Paying Agent in Luxembourg;

      SECURITIES ACT means the United States Securities Act of 1933, as amended;

      SERIES means a Tranche of the Notes together with any further Tranche or
      Tranches of the Notes which are (i) expressed to be consolidated and form
      a single series and (ii) identical in all respects (including as to
      listing) except for their respective Issue Dates, Interest Commencement
      Dates and/or Issue Prices and the expressions NOTES OF THE RELEVANT SERIES
      and HOLDERS OF NOTES OF THE RELEVANT SERIES and related expressions shall
      be construed accordingly;

      TALONS means the talons (if any) appertaining to, and exchangeable in
      accordance with the provisions therein contained for further Coupons
      appertaining to, a Definitive Note (other than a Zero Coupon Note), such
      talons being in the form or substantially in the form set out in Part 6 of
      Schedule 2 or in such other form as may be agreed between the relevant
      Issuer, the Guarantor, the Agent and the relevant Dealer and includes any
      replacements for Talons issued pursuant to Condition 10;

      TEMPORARY GLOBAL NOTE means a global note in the form or substantially in
      the form set out in Part 1 of Schedule 2 together with the copy of the
      applicable Pricing Supplement attached thereto with such modifications (if
      any) as may be agreed between the relevant Issuer, the Guarantor, the
      Agent and the relevant Dealer, comprising some or all of the Notes of the
      same Series, issued by the relevant Issuer pursuant to the Program
      Agreement or any other agreement between the Issuer and the relevant
      Dealer;

      TRANCHE means all Notes which are identical in all respects (including as
      to listing); and

      ZERO COUPON NOTE means a Note on which no interest is payable.

1.3   Words denoting the singular number only shall include the plural number
      also and vice versa;

      words denoting one gender only shall include the other gender; and

      words denoting persons only shall include firms and corporations and vice
      versa.

1.4   All references in this Agreement to costs or charges or expenses shall
      include any value added tax or similar tax charged or chargeable in
      respect thereof.

1.5   For the purposes of this Agreement, the Notes of each Series shall form a
      separate series of Notes and the provisions of this Agreement shall apply
      mutatis mutandis separately and independently to the Notes of each Series
      and in this Agreement the expressions NOTES, NOTEHOLDERS, RECEIPTS,
      RECEIPTHOLDERS, COUPONS, COUPONHOLDERS and TALONS shall be construed
      accordingly.

1.6   All references in this Agreement to principal and/or interest or both in
      respect of the Notes or to any moneys payable by any Issuer and/or the
      Guarantor under this Agreement shall have the meaning set out in Condition
      5(d).


                                       6

1.7   All references in this Agreement to the RELEVANT CURRENCY shall be
      construed as references to the currency in which the relevant Notes and/or
      Coupons are denominated (or payable in the case of Dual Currency Notes).

1.8   In this Agreement, clause headings are inserted for convenience and ease
      of reference only and shall not affect the interpretation of this
      Agreement. All references in this Agreement to the provisions of any
      statute shall be deemed to be references to that statute as from time to
      time modified, extended, amended or re-enacted or to any statutory
      instrument, order or regulation made thereunder or under such
      re-enactment.

1.9   All references in this Agreement to an agreement, instrument or other
      document (including, without limitation, this Agreement, the Program
      Agreement, the Deed of Covenant, the Guarantee, the Procedures Memorandum,
      the Notes and any Conditions appertaining thereto) shall be construed as a
      reference to that agreement, instrument or document as the same may be
      amended, modified, varied or supplemented from time to time.

1.10  Any references herein to Euroclear and/or Clearstream, Luxembourg shall,
      whenever the context so permits, be deemed to include a reference to any
      additional or alternative clearing system approved by the relevant Issuer,
      the Guarantor and the Agent.

2.    APPOINTMENT OF AGENT AND PAYING AGENTS

2.1   The Agent is hereby appointed, and the Agent hereby agrees to act, as
      agent of the Issuers and the Guarantor, upon the terms and subject to the
      conditions set out below, for the purposes of, inter alia:

      (a)   completing, authenticating and delivering Global Notes and (if
            required) authenticating and delivering Definitive Notes;

      (b)   exchanging Temporary Global Notes for Permanent Global Notes or
            Definitive Notes, as the case may be, in accordance with the terms
            of such Temporary Global Notes;

      (c)   exchanging Permanent Global Notes for Definitive Notes in accordance
            with the terms of such Permanent Global Notes;

      (d)   paying sums due on Global Notes and Definitive Notes, Receipts and
            Coupons;

      (e)   exchanging Talons for Coupons in accordance with the Conditions;

      (f)   determining the end of the Distribution Compliance Period applicable
            to each Tranche;

      (g)   unless otherwise specified in the applicable Pricing Supplement,
            determining the interest and/or other amounts payable in respect of
            the Notes in accordance with the Conditions;

      (h)   arranging on behalf of any Issuer and/or the Guarantor for notices
            to be communicated to the Noteholders;

      (i)   preparing and sending monthly reports to the Bank of England and
            ensuring that, as directed by the relevant Issuer, all necessary
            action is taken to comply with any reporting requirements of any
            competent authority in respect of any relevant currency


                                       7

            as may be in force from time to time with respect to the Notes to be
            issued under the Program;

      (j)   subject to the Procedures Memorandum, submitting to the relevant
            authority or authorities such number of copies of each Pricing
            Supplement which relates to Notes which are to be listed as the
            relevant authority or authorities may reasonably require;

      (k)   acting as Calculation Agent in respect of Notes where named as such
            in the relevant Pricing Supplement; and

      (l)   performing all other obligations and duties imposed upon it by the
            Conditions, this Agreement and the Procedures Memorandum.

2.2   Each Paying Agent is hereby appointed as paying agent of the Issuers and
      the Guarantor, upon the terms and subject to the conditions set out below,
      for the purposes of paying sums due on Notes, Receipts and Coupons and of
      performing all other obligations and duties imposed upon it by the
      Conditions and this Agreement.

2.3   Each of the Issuer and the Guarantor undertakes that, if the conclusions
      of the ECOFIN Council meeting of 26th-27th November, 2000 are implemented,
      it will ensure that it maintains a paying agent in an EU member state that
      will not be obliged to withhold or deduct tax pursuant to the Directive.

3.    ISSUE OF TEMPORARY GLOBAL NOTES

3.1   Subject to subclause 3.2 below, following receipt of a faxed copy of the
      Pricing Supplement signed by any Issuer and the Guarantor, the relevant
      Issuer and the Guarantor hereby authorise the Agent and the Agent hereby
      agrees to take the steps required of the Agent in the Procedures
      Memorandum. For this purpose the Agent will, inter alia, on behalf of the
      relevant Issuer:

      (a)   prepare a Temporary Global Note by attaching a copy of the
            applicable Pricing Supplement to a copy of the applicable master
            Temporary Global Note;

      (b)   authenticate such Temporary Global Note;

      (c)   deliver such Temporary Global Note to the specified common
            depositary for Euroclear and/or Clearstream, Luxembourg against
            receipt from the common depositary of confirmation that such common
            depositary is holding the Temporary Global Note in safe custody for
            the account of Euroclear and/or Clearstream, Luxembourg and to
            instruct Euroclear or Clearstream, Luxembourg or both of them (as
            the case may be) unless otherwise agreed in writing between the
            Agent and the relevant Issuer (i) in the case of an issue of Notes
            not subscribed pursuant to a Subscription Agreement, to credit the
            Notes represented by such Temporary Global Note to the Agent's
            distribution account, and (ii) in the case of Notes subscribed
            pursuant to a Subscription Agreement, to hold the Notes represented
            by such Temporary Global Note to the Issuer's order; and

      (d)   ensure that the Notes of each Tranche are assigned a common code and
            ISIN by Euroclear and Clearstream, Luxembourg which are different
            from the common code and ISIN assigned to Notes of any other Tranche
            of the same Series until not earlier than 40 days after the
            completion of the distribution of the Notes of such Tranche as
            notified by the Agent to the relevant Dealer.


                                       8

3.2   The Agent shall only be required to perform its obligations under
      subclause 3.1 above if it holds:

      (a)   a master Temporary Global Note duly executed by a person or persons
            authorised to execute the same on behalf of the relevant Issuer,
            which may be used by the Agent for the purpose of preparing a
            Temporary Global Note in accordance with subclause 3.1(a) above; and

      (b)   a master Permanent Global Note duly executed by a person or persons
            authorised to execute the same on behalf of the relevant Issuer,
            which may be used by the Agent for the purpose of preparing a
            Permanent Global Note in accordance with Clause 4 below.

4.    DETERMINATION OF EXCHANGE DATE, ISSUE OF PERMANENT GLOBAL NOTES AND
      DEFINITIVE NOTES AND DETERMINATION OF END OF DISTRIBUTION COMPLIANCE
      PERIOD

4.1   (a)   The Agent shall determine the Exchange Date for each Temporary
            Global Note in accordance with the terms thereof. Forthwith upon
            determining the Exchange Date in respect of any Tranche, the Agent
            shall notify such determination to the relevant Issuer, the
            Guarantor, the other Paying Agents, the relevant Dealer, Euroclear
            and Clearstream, Luxembourg.

      (b)   The Agent shall deliver, upon notice from Euroclear or Clearstream,
            Luxembourg, a Permanent Global Note or Definitive Notes, as the case
            may be, in accordance with the terms of the Temporary Global Note.
            Where a Temporary Global Note is to be exchanged for a Permanent
            Global Note, the Agent is hereby authorised on behalf of the
            relevant Issuer:

            (i)   in the case of the first Tranche of any Series of Notes, to
                  prepare and complete a Permanent Global Note in accordance
                  with the terms of the Temporary Global Note applicable to such
                  Tranche by attaching a copy of the applicable Pricing
                  Supplement to a copy of the applicable master Permanent Global
                  Note;

            (ii)  in the case of the first Tranche of any Series of Notes, to
                  authenticate such Permanent Global Note;

            (iii) in the case of the first Tranche of any Series of Notes, to
                  deliver such Permanent Global Note to the common depositary
                  which is holding the Temporary Global Note applicable to such
                  Tranche for the time being on behalf of Euroclear and/or
                  Clearstream, Luxembourg either in exchange for such Temporary
                  Global Note or, in the case of a partial exchange, on entering
                  details of such partial exchange of the Temporary Global Note
                  in the relevant spaces in Schedule 2 of both the Temporary
                  Global Note and the Permanent Global Note; and

            (iv)  in any other case, by attaching a copy of the applicable
                  Pricing Supplement to the Permanent Global Note applicable to
                  the relevant Series and entering details of any exchange in
                  whole or part as aforesaid.

4.2   (a)   In the case of a Tranche in respect of which there is only one
            Dealer, the Agent will determine the end of the Distribution
            Compliance Period in respect of such Tranche as being the fortieth
            day (or such later day as may be specified in the applicable


                                       9

            Pricing Supplement) following the date certified by the relevant
            Dealer to the Agent as being the date as of which distribution of
            the Notes of that Tranche was completed.

      (b)   In the case of a Tranche in respect of which there is more than one
            Dealer but is not issued on a syndicated basis, the Agent will
            determine the end of the Distribution Compliance Period in respect
            of such Tranche as being the fortieth day (or such later day as may
            be specified in the applicable Pricing Supplement) following the
            latest of the dates certified by all the relevant Dealers to the
            Agent as being the respective dates as of which distribution of the
            Notes of that Tranche purchased by each such Dealer was completed.

      (c)   In the case of a Tranche issued on a syndicated basis, the Agent
            will determine the end of the Distribution Compliance Period in
            respect of such Tranche as being the fortieth day (or such later day
            as may be specified in the applicable Pricing Supplement) following
            the date certified by the Lead Manager to the Agent as being the
            date as of which distribution of the Notes of that Tranche was
            completed.

      (d)   Forthwith upon determining the end of the Distribution Compliance
            Period in respect of any Tranche, the Agent shall notify such
            determination to the relevant Issuer, the Guarantor, Euroclear,
            Clearstream, Luxembourg, the relevant Dealer(s) (in the case of a
            non-syndicated issue) and the Lead Manager (in the case of a
            syndicated issue).

5.    ISSUE OF DEFINITIVE NOTES

5.1   Upon notice from Euroclear or Clearstream, Luxembourg pursuant to the
      terms of a Temporary Global Note or a Permanent Global Note, as the case
      may be, the Agent shall deliver the relevant Definitive Note(s) in
      accordance with the terms of the relevant Global Note. For this purpose
      the Agent is hereby authorised on behalf of the relevant Issuer:

      (a)   to authenticate such Definitive Note(s) in accordance with the
            provisions of this Agreement; and

      (b)   to deliver such Definitive Note(s) to or to the order of Euroclear
            and/or Clearstream, Luxembourg either in exchange for such Global
            Note or, in the case of a partial exchange of a Temporary Global
            Note, on entering details of any partial exchange of the Temporary
            Global Note in the relevant space in Schedule 2 of such Temporary
            Global Note.

      The Agent shall notify the relevant Issuer forthwith upon receipt of a
      request for issue of Definitive Note(s) in accordance with the provisions
      of a Temporary Global Note or Permanent Global Note, as the case may be,
      (and the aggregate nominal amount of such Temporary Global Note or
      Permanent Global Note, as the case may be, to be exchanged in connection
      therewith).

5.2   Each Issuer undertakes to deliver to the Agent sufficient numbers of
      executed Definitive Notes with, if applicable, Receipts, Coupons and
      Talons attached to enable the Agent to comply with its obligations under
      this clause.

6.    TERMS OF ISSUE

6.1   The Agent shall cause all Temporary Global Notes, Permanent Global Notes
      and Definitive Notes delivered to and held by it under this Agreement to
      be maintained in safe custody and shall ensure that such Notes are issued
      only in accordance with the provisions of this Agreement and the relevant
      Global Note and Conditions.


                                       10

6.2   Subject to the procedures set out in the Procedures Memorandum, for the
      purposes of subclause 3.1 the Agent is entitled to treat a telephone or
      facsimile communication from a person purporting to be (and who the Agent
      believes in good faith to be) the authorised representative of any Issuer
      and/or the Guarantor named in the lists referred to in, or notified
      pursuant to, subclause 19.7 as sufficient instructions and authority of
      such Issuer and/or the Guarantor for the Agent to act in accordance with
      subclause 3.1.

6.3   In the event that a person who has signed on behalf of any Issuer any Note
      not yet issued but held by the Agent in accordance with subclause 3.1
      ceases to be authorised as described in subclause 19.7, the Agent shall
      (unless the relevant Issuer gives notice to the Agent that Notes signed by
      that person do not constitute valid and binding obligations of the
      relevant Issuer or otherwise until replacements have been provided to the
      Agent) continue to have authority to issue any such Notes, and the
      relevant Issuer hereby warrants to the Agent that such Notes shall, unless
      notified as aforesaid, be valid and binding obligations of such Issuer.
      Promptly upon such person ceasing to be authorised, the relevant Issuer
      shall provide the Agent with replacement Notes and upon receipt of such
      replacement Notes the Agent shall cancel and destroy the Notes held by it
      which are signed by such person and shall provide to the relevant Issuer a
      confirmation of destruction in respect thereof specifying the Notes so
      cancelled and destroyed.

6.4   If the Agent pays an amount (the ADVANCE) to the Issuer on the basis that
      a payment (the PAYMENT) has been, or will be, received from a Dealer and
      if the Payment is not received by the Agent on the date the Agent pays the
      relevant Issuer, the relevant Issuer (failing which the Guarantor) shall
      repay to the Agent the Advance and shall pay interest on the Advance (or
      the unreimbursed portion thereof) from (and including) the date such
      Advance is made to (but excluding) the earlier of repayment of the Advance
      and receipt by the Agent of the Payment (at a rate quoted at that time by
      the Agent as its cost of funding the Advance provided that evidence of the
      basis of such rate is given to the relevant Issuer and the Guarantor).

6.5   Except in the case of issues where the Agent does not act as receiving
      bank for the relevant Issuer in respect of the purchase price of the Notes
      being issued, if on the relevant Issue Date a Dealer does not pay the full
      purchase price due from it in respect of any Note (the DEFAULTED NOTE)
      and, as a result, the Defaulted Note remains in the Agent's distribution
      account with Euroclear and/or Clearstream, Luxembourg after such Issue
      Date, the Agent will continue to hold the Defaulted Note to the order of
      the relevant Issuer. The Agent shall notify the relevant Issuer forthwith
      of the failure of the Dealer to pay the full purchase price due from it in
      respect of any Defaulted Note and, subsequently, shall notify the relevant
      Issuer forthwith upon receipt from the Dealer of the full purchase price
      in respect of such Defaulted Note.

7.    PAYMENTS

7.1   The Issuer (failing which the Guarantor) will, before 10.00 a.m. (local
      time in the relevant financial centre of the payment), on each date on
      which any payment in respect of any Note becomes due, transfer to an
      account specified by the Agent such amount in the relevant currency as
      shall be sufficient for the purposes of such payment in funds settled
      through such payment system as the Agent and the relevant Issuer or, as
      the case may be, the Guarantor may agree.

7.2   The Issuer (failing which the Guarantor) will ensure that no later than
      10.00 a.m. (London time) on the second Business Day (as defined below)
      immediately preceding the date on which any payment is to be made to the
      Agent pursuant to subclause 7.1, the Agent shall


                                       11

      receive from the paying bank of the Issuer or, as the case may be, the
      Guarantor a payment confirmation in the form of a SWIFT message.

      For the purposes of this clause BUSINESS DAY means a day which is both:

      (a)   day on which commercial banks and foreign exchange markets settle
            payments in London and any other place specified in the applicable
            Pricing Supplement as an Additional Business Centre; and

      (b)   either (i) in relation to a payment to be made in a Specified
            Currency other than euro, a day on which commercial banks and
            foreign exchange markets settle payments in the principal financial
            centre of the country of the relevant Specified Currency (if other
            than London and any Additional Business Centre) and which, if the
            Specified Currency is New Zealand Dollars, shall be Auckland or (ii)
            in relation to a payment to be made in euro, a day on which the
            TARGET System is open, where TARGET SYSTEM means the Trans-European
            Automated Real-Time Gross Settlement Express Transfer (TARGET)
            System. Unless otherwise provided in the applicable Pricing
            Supplement, the principal financial centre for any currency shall be
            as provided in the ISDA Definitions.

7.3   The Agent shall ensure that payments of both principal and interest in
      respect of a Temporary Global Note will be made only to the extent that
      certification of non-U.S. beneficial ownership as required by U.S.
      securities laws and U.S. Treasury regulations (in the form set out in the
      Temporary Global Note) has been received from Euroclear and/or
      Clearstream, Luxembourg in accordance with the terms thereof.

7.4   The Agent or the relevant Paying Agent shall pay or cause to be paid all
      amounts due in respect of the Notes on behalf of each Issuer and the
      Guarantor in the manner provided in the Conditions. If any payment
      provided for in subclause 7.1 is made late but otherwise in accordance
      with the provisions of this Agreement, the Agent and each Paying Agent
      shall nevertheless make payments in respect of the Notes as aforesaid
      following receipt by it of such payment.

7.5   If for any reason the Agent considers in its sole discretion that the
      amounts to be received by the Agent pursuant to subclause 7.1 will be, or
      the amounts actually received by it pursuant thereto are, insufficient to
      satisfy all claims in respect of all payments then falling due in respect
      of the Notes, neither the Agent nor any Paying Agent shall be obliged to
      pay any such claims until the Agent has received the full amount of all
      such payments.

7.6   Without prejudice to subclauses 7.4 and 7.5, if the Agent pays any amounts
      to the holders of Notes, Receipts or Coupons or to any Paying Agent at a
      time when it has not received payment in full in respect of the relevant
      Notes in accordance with subclause 7.1 (the excess of the amounts so paid
      over the amounts so received being the SHORTFALL), the relevant Issuer
      (failing which the Guarantor) will, in addition to paying amounts due
      under subclause 7.1, pay to the Agent on demand interest (at a rate which
      represents the Agent's cost of funding the Shortfall as evidenced to the
      relevant Issuer and the Guarantor by the provision of details of the
      calculation of the cost of funding) on the Shortfall (or the unreimbursed
      portion thereof) until the receipt in full by the Agent of the Shortfall.

7.7   The Agent shall on demand promptly reimburse each Paying Agent for
      payments in respect of Notes properly made by such Paying Agent in
      accordance with this Agreement and the Conditions unless the Agent has
      notified the Paying Agent, prior to the opening of business in the
      location of the office of the Paying Agent through which payment in
      respect of the Notes can be made on the due date of a payment in respect
      of the Notes, that the Agent does not


                                       12

      expect to receive sufficient funds to make payment of all amounts falling
      due in respect of such Notes.

7.8   Whilst any Notes are represented by Global Notes, all payments due in
      respect of such Notes shall be made to, or to the order of, the holder of
      the Global Notes, subject to and in accordance with the provisions of the
      Global Notes. On the occasion of any such payment the Paying Agent to
      which the Global Note was presented for the purpose of making such payment
      shall cause the appropriate Schedule to the relevant Global Note to be
      annotated so as to evidence the amounts and dates of such payments of
      principal and/or interest as applicable.

7.9   If the amount of principal and/or interest then due for payment is not
      paid in full (otherwise than by reason of a deduction required by law to
      be made therefrom), the Paying Agent to which a Note is presented for the
      purpose of making such payment shall make a record of such Shortfall on
      the Note and such record shall, in the absence of manifest error, be prima
      facie evidence that the payment in question has not to that extent been
      made.

7.10  The obligations of the Guarantor as set forth in this Clause 7 shall be
      based on the Guarantee only and not be deemed to be primary obligations of
      the Guarantor.

8.    DETERMINATIONS AND NOTIFICATIONS IN RESPECT OF NOTES AND INTEREST
      DETERMINATION

8.1   DETERMINATIONS AND NOTIFICATIONS

(a)   The Agent shall make all such determinations and calculations (howsoever
      described) as it is required to do under the Conditions, all subject to
      and in accordance with the Conditions.

(b)   The Agent shall not be responsible to any Issuer, the Guarantor or to any
      third party (except in the event of negligence, default or bad faith of
      the Agent, as the case may be) as a result of the Agent having acted on
      any quotation given by any Reference Bank which subsequently may be found
      to be incorrect.

(c)   The Agent shall promptly notify (and confirm in writing to) the relevant
      Issuer, the Guarantor, the other Paying Agents and (in respect of a Series
      of Notes listed on a Stock Exchange) the relevant Stock Exchange and
      Listing Agent of, inter alia, each Rate of Interest, Interest Amount and
      Interest Payment Date and all other amounts, rates and dates which it is
      obliged to determine or calculate under the Conditions as soon as
      practicable after the determination thereof and of any subsequent
      amendment thereto pursuant to the Conditions.

(d)   The Agent shall use its best endeavours to cause each Rate of Interest,
      Interest Amount and Interest Payment Date and all other amounts, rates and
      dates which it is obliged to determine or calculate under the Conditions
      to be published as required in accordance with the Conditions as soon as
      possible after their determination or calculation.

(e)   If the Agent does not at any material time for any reason determine and/or
      calculate and/or publish the Rate of Interest, Interest Amount and/or
      Interest Payment Date in respect of any Interest Period or any other
      amount, rate or date as provided in this clause, it shall forthwith notify
      the relevant Issuer, the Guarantor and the other Paying Agents of such
      fact.

(f)   Determinations with regard to Notes (including, without limitation,
      Indexed Notes and Dual Currency Notes) shall be made by the
      Calculation Agent specified in the applicable Pricing Supplement in
      the manner specified in the applicable Pricing Supplement.  Unless
      otherwise agreed between the relevant Issuer, the Guarantor and the
      relevant Dealer or unless the Agent


                                       13

      is the Calculation Agent (in which case the provisions of this Agreement
      shall apply), such determinations shall be made on the basis of a
      Calculation Agency Agreement substantially in the form of Appendix A to
      this Agreement.

8.2   INTEREST DETERMINATION, SCREEN RATE DETERMINATION INCLUDING FALLBACK
      PROVISIONS

(a)   Where Screen Rate Determination is specified in the applicable Pricing
      Supplement as the manner in which the Rate of Interest is to be
      determined, the Rate of Interest for each Interest Period will, subject as
      provided below, be either:

      (i)   the offered quotation; or

      (ii)  the arithmetic mean (rounded if necessary to the fifth decimal
            place, with 0.000005 being rounded upwards) of the offered
            quotations,

      expressed as a percentage rate per annum), for the Reference Rate for
      deposits in the Specified Currency for that Interest Period which appears
      or appear, as the case may be, on the Relevant Screen Page as at 11.00
      a.m. (London time, in the case of LIBOR, or Brussels time, in the case of
      EURIBOR) on the Interest Determination Date in question plus or minus (as
      indicated in the applicable Pricing Supplement) the Margin (if any), all
      as determined by the Agent. If five or more such offered quotations are
      available on the Relevant Screen Page, the highest (or, if there is more
      than one such highest quotation, one only of such quotations) and the
      lowest (or, if there is more than one such lowest quotation, one only of
      such quotations) shall be disregarded by the Agent for the purpose of
      determining the arithmetic mean (rounded as provided above) of such
      offered quotations.

(b)   If the Relevant Screen Page is not available or, if in the case of
      subclause 8.2(a)(i) above, no such offered quotation appears or, in the
      case of subclause 8.2(a)(ii) above, fewer than three such offered
      quotations appear, in each case as at the time specified in the preceding
      paragraph the Agent shall request the principal London office (in the case
      of LIBOR) or Euro-zone office (in the case of EURIBOR) of each of the
      Reference Banks to provide the Agent with its offered quotation (expressed
      as a percentage rate per annum) for the Reference Rate at approximately
      11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the
      case of EURIBOR) on the Interest Determination Date in question. If two or
      more of the Reference Banks provide the Agent with such offered
      quotations, the Rate of Interest for such Interest Period shall be the
      arithmetic mean (rounded if necessary to the fifth decimal place with
      0.000005 being rounded upwards) of such offered quotations plus or minus
      (as appropriate) the Margin (if any), all as determined by the Agent.

(c)   If on any Interest Determination Date one only or none of the Reference
      Banks provides the Agent with such offered quotations as provided in the
      preceding paragraph, the Rate of Interest for the relevant Interest Period
      shall be the rate per annum which the Agent determines as being the
      arithmetic mean (rounded if necessary to the fifth decimal place, with
      0.000005 being rounded upwards) of the rates, as communicated to (and at
      the request of) the Agent by the Reference Banks or any two or more of
      them, at which such banks were offered, at approximately 11.00 a.m.
      (London time, in the case of LIBOR, or Brussels time, in the case of
      EURIBOR) on the relevant Interest Determination Date, deposits in the
      Specified Currency for a period equal to that which would have been used
      for the Reference Rate by leading banks in the London inter-bank market
      (in the case of LIBOR) or the Euro-zone inter-bank market (in the case of
      EURIBOR) plus or minus (as appropriate) the Margin (if any) or, if fewer
      than two of the Reference Banks provide the Agent with such offered rates,
      the offered rate for deposits in the Specified Currency for a period equal
      to that which would have been used for the Reference Rate, or the
      arithmetic mean (rounded as provided above) of the


                                       14

      offered rates for deposits in the Specified Currency for a period equal to
      that which would have been used for the Reference Rate, at which, at
      approximately 11.00 a.m. (London time, in the case of LIBOR, or Brussels
      time, in the case of EURIBOR) on the relevant Interest Determination Date,
      any one or more banks (which bank or banks is or are in the opinion of the
      relevant Issuer suitable for such purpose) informs the Agent it is quoting
      to leading banks in the London inter-bank market (in the case of LIBOR) or
      the Euro-zone inter-bank market (in the case of EURIBOR) plus or minus (as
      appropriate) the Margin (if any), provided that, if the Rate of Interest
      cannot be determined in accordance with the foregoing provisions of this
      paragraph, the Rate of Interest shall be determined as at the last
      preceding Interest Determination Date (though substituting, where a
      different Margin is to be applied to the relevant Interest Period from
      that which applied to the last preceding Interest Period, the Margin
      relating to the relevant Interest Period, in place of the Margin relating
      to that last preceding Interest Period).

(d)   If the Reference Rate from time to time in respect of Floating Rate Notes
      is specified in the applicable Pricing Supplement as being other than
      LIBOR or, as the case may be, EURIBOR, the Rate of Interest in respect of
      such Notes will be determined as provided in the applicable Pricing
      Supplement.

9.    NOTICE OF ANY WITHHOLDING OR DEDUCTION

      If any Issuer and/or the Guarantor is, in respect of any payment,
      compelled to withhold or deduct any amount for or on account of taxes,
      duties, assessments or governmental charges as specifically contemplated
      under the Conditions, such Issuer and/or the Guarantor shall give notice
      thereof to the Agent as soon as it becomes aware of the requirement to
      make such withholding or deduction and shall give to the Agent such
      information as it shall require to enable it to comply with such
      requirement.

10.   DUTIES OF THE AGENT IN CONNECTION WITH EARLY REDEMPTION

10.1  If any Issuer decides to redeem any Notes for the time being
      outstanding prior to their Maturity Date in accordance with the
      Conditions, such Issuer shall give notice of such decision to the Agent
      not less than 15 days before the date on which the relevant Issuer will
      give notice to the Noteholders in accordance with the Conditions of such
      redemption in order to enable the Agent to undertake its obligations
      herein and in the Conditions.

10.2  If some only of the Notes are to be redeemed on such date, the Agent
      shall, in the case of Definitive Notes, make the required drawing in
      accordance with the Conditions but shall give the relevant Issuer
      reasonable notice of the time and place proposed for such drawing and the
      relevant Issuer shall be entitled to send representatives to attend such
      drawing and shall, in the case of Notes in global form, co-ordinate the
      selection of Notes to be redeemed with Euroclear and Clearstream,
      Luxembourg, all in accordance with the Conditions.

10.3  The Agent shall publish the notice required in connection with any such
      redemption and shall at the same time also publish a separate list of the
      serial numbers of any Notes in definitive form previously drawn and not
      presented for redemption. Such notice shall specify the date fixed for
      redemption, the redemption amount, the manner in which redemption will be
      effected and, in the case of a partial redemption of Definitive Notes, the
      serial numbers of the Notes to be redeemed. Such notice will be published
      in accordance with the Conditions. The Agent will also notify the other
      Paying Agents of any date fixed for redemption of any Notes.

10.4  Each Paying Agent will keep a stock of Put Notices and will make such
      notices available on demand to holders of Definitive Notes, the Conditions
      of which provide for redemption at the option of Noteholders. Upon receipt
      of any Note deposited in the exercise of such option in


                                       15

      accordance with the Conditions, the Paying Agent with which such Note is
      deposited shall hold such Note (together with any Receipts, Coupons and
      Talons relating to it deposited with it) on behalf of the depositing
      Noteholder (but shall not, save as provided below, release it) until the
      due date for redemption of the relevant Note consequent upon the exercise
      of such option, when, subject as provided below, it shall present such
      Note (and any such Receipts, Coupons and Talons) to itself for payment of
      the amount due thereon together with any interest due on such date in
      accordance with the Conditions and shall pay such moneys in accordance
      with the directions of the Noteholder contained in the relevant Put
      Notice. If, prior to such due date for its redemption, such Note becomes
      immediately due and repayable or if upon due presentation payment of such
      redemption moneys is improperly withheld or refused, the Paying Agent
      concerned shall post such Note (together with any such Receipts, Coupons
      and Talons) by uninsured post to, and at the risk of, the relevant
      Noteholder unless the Noteholder has otherwise requested and paid the
      costs of such insurance to the relevant Paying Agent at the time of
      depositing the Notes at such address as may have been given by the
      Noteholder in the relevant Put Notice. At the end of each period for the
      exercise of such option, each Paying Agent shall promptly notify the Agent
      of the principal amount of the Notes in respect of which such option has
      been exercised with it together with their serial numbers and the Agent
      shall promptly notify such details to the relevant Issuer.

11.   RECEIPT AND PUBLICATION OF NOTICES

11.1  Forthwith upon the receipt by the Agent of a demand or notice from any
      Noteholder in accordance with the Conditions the Agent shall forward a
      copy thereof to the relevant Issuer and the Guarantor.

11.2  On behalf of and at the request and expense of each Issuer (failing which
      the Guarantor), the Agent shall cause to be published all notices required
      to be given by any Issuer or the Guarantor to the Noteholders in
      accordance with the Conditions.

12.   CANCELLATION OF NOTES, RECEIPTS, COUPONS AND TALONS

12.1  All Notes which are redeemed, all Receipts or Coupons which are paid
      and all Talons which are exchanged shall be cancelled by the Agent or
      Paying Agent by which they are redeemed, paid or exchanged. In addition,
      all Notes which are purchased by or on behalf of any Issuer, the Guarantor
      or any of their respective subsidiaries and are surrendered to a Paying
      Agent for cancellation, together (in the case of Definitive Notes) with
      all unmatured Receipts, Coupons or Talons (if any) attached thereto or
      surrendered therewith, shall be cancelled by the Paying Agent to which
      they are surrendered. Each of the other Paying Agents shall give to the
      Agent details of all payments made by it and shall deliver all cancelled
      Notes, Receipts, Coupons and Talons to the Agent.

12.2  A certificate stating:

      (a)   the aggregate nominal amount of Notes which have been redeemed and
            the aggregate amount paid in respect thereof;

      (b)   the number of Notes cancelled together (in the case of Notes in
            definitive form) with details of all unmatured Receipts, Coupons or
            Talons (if any) attached thereto or delivered therewith;

      (c)   the aggregate amount paid in respect of interest on the Notes;

      (d)   the total number by maturity date of Receipts, Coupons and Talons so
            cancelled; and


                                       16

      (e)   (in the case of Definitive Notes) the serial numbers of such Notes,

      shall be given to the relevant Issuer and the Guarantor by the Agent as
      soon as reasonably practicable and in any event within three months after
      the date of such repayment, payment, cancellation or replacement, as the
      case may be.

12.3  The Agent shall destroy all cancelled Notes, Receipts, Coupons and Talons
      and, forthwith upon destruction, furnish the Issuer with a certificate of
      the serial numbers of the Notes (in the case of Notes in definitive form)
      and the number by maturity date of Receipts, Coupons and Talons so
      destroyed.

12.4  Without prejudice to the obligations of the Agent pursuant to subclause
      12.2, the Agent shall keep a full and complete record of all Notes,
      Receipts, Coupons and Talons (other than serial numbers of Coupons, except
      those which have been replaced pursuant to Condition 10) and of their
      redemption, purchase by or on behalf of any Issuer or the Guarantor or any
      of their respective subsidiaries and cancellation, payment or replacement
      (as the case may be) and of all replacement Notes, Receipts, Coupons or
      Talons issued in substitution for mutilated, defaced, destroyed, lost or
      stolen Notes, Receipts, Coupons or Talons. The Agent shall in respect of
      the Coupons of each maturity retain (in the case of Coupons other than
      Talons) until the expiry of ten years from the Relevant Date in respect of
      such Coupons and (in the case of Talons) indefinitely either all paid or
      exchanged Coupons of that maturity or a list of the serial numbers of
      Coupons of that maturity still remaining unpaid or unexchanged. The Agent
      shall at all reasonable times make such record available to the relevant
      Issuer, the Guarantor and any persons authorised by either of them for
      inspection and for the taking of copies thereof or extracts therefrom.

12.5  All records and certificates made or given pursuant to this clause and
      Clause 13 shall make a distinction between Notes, Receipts, Coupons and
      Talons of each Series.

13.   ISSUE OF REPLACEMENT NOTES, RECEIPTS, COUPONS AND TALONS

13.1  Each Issuer will cause a sufficient quantity of additional forms of
      Notes, Receipts, Coupons and Talons to be available, upon request, to the
      Replacement Agent at its specified office for the purpose of issuing
      replacement Notes, Receipts, Coupons and Talons as provided below.

13.2  The Replacement Agent will, subject to and in accordance with the
      Conditions and the following provisions of this clause, cause to be
      delivered any replacement Notes, Receipts, Coupons and Talons which any
      Issuer may determine to issue in place of Notes, Receipts, Coupons and
      Talons which have been lost, stolen, mutilated, defaced or destroyed.

13.3  In the case of a mutilated or defaced Note, the Replacement Agent shall
      ensure that (unless otherwise covered by such indemnity as the relevant
      Issuer may reasonably require) any replacement Note will only have
      attached to it Receipts, Coupons and Talons corresponding to those (if
      any) attached to the mutilated or defaced Note which is presented for
      replacement.

13.4  The Replacement Agent shall obtain verification in the case of an
      allegedly lost, stolen or destroyed Note, Receipt, Coupon or Talon in
      respect of which the serial number is known, that the Note, Receipt,
      Coupon or Talon has not previously been redeemed, paid or exchanged, as
      the case may be. The Replacement Agent shall not issue any replacement
      Note, Receipt, Coupon or Talon unless and until the claimant therefor
      shall have:

      (a)   paid such reasonable costs and expenses as may be incurred in
            connection therewith;


                                       17

      (b)   furnished it with such evidence (including evidence as to the serial
            number of such Note, Receipt, Coupon or Talon) and indemnity (which
            may include a bank guarantee) as the relevant Issuer, the Guarantor
            and the Agent may reasonably require;

      (c)   in the case of any mutilated or defaced Note, Receipt, Coupon or
            Talon, surrendered it to the Replacement Agent.

13.5  The Replacement Agent shall cancel any mutilated or defaced Notes,
      Receipts, Coupons and Talons in respect of which replacement Notes,
      Receipts, Coupons and Talons have been issued pursuant to this clause and
      shall furnish the relevant Issuer and the Guarantor with a certificate
      stating the serial numbers of the Notes, Receipts, Coupons and Talons so
      cancelled and, unless otherwise instructed by the relevant Issuer in
      writing, shall destroy such cancelled Notes, Receipts, Coupons and Talons
      and furnish the relevant Issuer and the Guarantor with a destruction
      certificate containing the information specified in subclause 12.3.

13.6  The Replacement Agent shall, on issuing any replacement Note, Receipt,
      Coupon or Talon, forthwith inform the relevant Issuer, the Guarantor, the
      Agent and the other Paying Agents of the serial number of such replacement
      Note, Receipt, Coupon or Talon issued and (if known) of the serial number
      of the Note, Receipt, Coupon or Talon in place of which such replacement
      Note, Receipt, Coupon or Talon has been issued. Whenever replacement
      Receipts, Coupons or Talons are issued pursuant to the provisions of this
      clause, the Replacement Agent shall also notify the Agent and any other
      Paying Agents of the maturity dates of the lost, stolen, mutilated,
      defaced or destroyed Receipts, Coupons or Talons and of the replacement
      Receipts, Coupons or Talons issued.

13.7  The Agent shall keep a full and complete record of all replacement Notes,
      Receipts, Coupons and Talons issued and shall make such record available
      at all reasonable times to the Issuers, the Guarantor and any persons
      authorised by either of them for inspection and for the taking of copies
      thereof or extracts therefrom.

13.8  Whenever any Note, Receipt, Coupon or Talon for which a replacement Note,
      Receipt, Coupon or Talon has been issued and in respect of which the
      serial number is known is presented to the Agent or any of the other
      Paying Agents for payment, the Agent or, as the case may be, the relevant
      other Paying Agent shall immediately send notice thereof to the relevant
      Issuer, the Guarantor and the other Paying Agents.

13.9  The Paying Agents shall issue further Coupon sheets against surrender of
      Talons. A Talon so surrendered shall be cancelled by the relevant Paying
      Agent who (except where the Paying Agent is the Agent) shall inform the
      Agent of its serial number. Further Coupon sheets issued on surrender of
      Talons shall carry the same serial number as the surrendered Talon.

14.   COPIES OF DOCUMENTS AVAILABLE FOR INSPECTION

14.1  The executed Guarantee shall be deposited with the Agent and shall be held
      in safe custody by it on behalf of the Noteholders, the Receiptholders and
      the Couponholders at its specified office for the time being.

14.2  Each Paying Agent shall hold available for inspection at its specified
      office during normal business hours copies of all documents required to be
      so available by the Conditions of any Notes or the rules of any relevant
      Stock Exchange (or any other relevant authority). For these above
      purposes, each Issuer and the Guarantor shall furnish the Paying Agents
      with sufficient copies of each of the relevant documents.


                                       18

15.   MEETINGS OF NOTEHOLDERS

15.1  The provisions of Schedule 4 hereto shall apply to meetings of the
      Noteholders and shall have effect in the same manner as if set out in this
      Agreement.

15.2  Without prejudice to subclause 15.1, each of the Agent and the other
      Paying Agents on the request of any Noteholder shall issue voting
      certificates and block voting instructions in accordance with Schedule 4
      and shall forthwith give notice to the relevant Issuer and the Guarantor
      in writing of any revocation or amendment of a block voting instruction.
      Each of the Agent and the other Paying Agents will keep a full and
      complete record of all voting certificates and block voting instructions
      issued by it and will, not less than 24 hours before the time appointed
      for holding a meeting or adjourned meeting, deposit at such place as the
      Agent shall designate or approve, full particulars of all voting
      certificates and block voting instructions issued by it in respect of such
      meeting or adjourned meeting.

16.   COMMISSIONS AND EXPENSES

16.1  The Issuers and the Guarantor agree to pay to the Agent such reasonable
      fees and commissions as the Issuers and the Guarantor and the Agent shall
      separately agree in respect of the services of the Agent and the Paying
      Agents hereunder and to reimburse any reasonable out-of-pocket expenses
      (including reasonable legal, printing, postage tax and cable) incurred by
      the Agent and the Paying Agents in connection with their said services
      including the expense of making such notifications and publications to
      Noteholders as are required by the Terms and Conditions of any Notes or as
      may be required by any Issuer.

16.2  In addition, the Issuers and the Guarantor jointly and severally agree
      with the Agent to reimburse its reasonable out-of-pocket expenses
      (including legal fees) incurred by the Agent in connection with the
      preparation, execution and delivery of this Agreement.

16.3  The Agent will make payment of the fees and commissions due hereunder to
      the Paying Agents and will reimburse their expenses promptly after the
      receipt of the relevant moneys from an Issuer or the Guarantor, as the
      case may be. None of the Issuers or the Guarantor shall be responsible for
      any such payment or reimbursement by the Agent to the Paying Agents.

17.   INDEMNITY

17.1  Each Issuer will, severally as to itself, and the Guarantor will, jointly
      with the relevant Issuer and severally as to itself, indemnify the Agent
      and each of the Paying Agents and each of their directors, officers,
      employees and agents against any losses, liabilities, claims, actions or
      demands and any reasonable out-of-pocket costs and expenses (including,
      but not limited to, all reasonable costs, charges and expenses paid or
      incurred in disputing or defending any of the foregoing) which it may
      incur or which may be made against the Agent or any Paying Agent as a
      result of or in connection with its appointment or the exercise of its
      powers and duties hereunder except such as may result from its own
      default, negligence or bad faith or that of its officers, directors,
      employees or agents or the breach by it of the terms of this Agreement.

17.2  Each of the Agent and the Paying Agents will severally indemnify each of
      the Issuers and the Guarantor and each of their directors, officers,
      employees and agents against any loss, liability, claim, action or demand
      and any reasonable out-of-pocket costs and expenses (including, but not
      limited to, all reasonable costs, legal fees, charges and expenses paid or
      incurred in disputing or defending any of the foregoing) which the
      relevant company may incur or which may be made against the relevant
      company as a result of the breach by the


                                       19

      Agent or such Paying Agents of the terms of this Agreement or its default,
      negligence or bad faith or that of its officers, directors, employees or
      agents.

18.   REPAYMENT BY THE AGENT

      Upon any Issuer or the Guarantor, as the case may be, being discharged
      from its obligation to make payments in respect of any Notes pursuant to
      the relevant Conditions, and provided that there is no outstanding, bona
      fide and proper claim in respect of any such payments, the Agent shall
      forthwith on demand pay to the relevant Issuer sums equivalent to any
      amounts paid to it by the relevant Issuer or the Guarantor, as the case
      may be, for the purposes of such payments.

19.   CONDITIONS OF APPOINTMENT

19.1  The Agent shall be entitled to deal with money paid to it by any Issuer or
      the Guarantor for the purpose of this Agreement in the same manner as
      other money paid to a banker by its customers except:

      (a)   that it shall not exercise any right of set-off, lien or similar
            claim in respect thereof;

      (b)   as provided in subclause 19.2 below; and

      (c)   that it shall not be liable to account to any Issuer or the
            Guarantor for any interest thereon.

19.2  In acting hereunder and in connection with the Notes, the Agent and the
      other Paying Agents shall act solely as agents of the Issuers and the
      Guarantor and will not thereby assume any obligations towards or
      relationship of agency or trust for or with any of the owners or holders
      of the Notes, Receipts, Coupons or Talons.

19.3  The Agent and the other Paying Agents hereby undertake to the Issuers and
      the Guarantor to perform such obligations and duties, and shall be obliged
      to perform such duties and only such duties, as are herein, in the
      Conditions and in the Procedures Memorandum specifically set forth, and no
      implied duties or obligations shall be read into this Agreement or the
      Notes against the Agent and the other Paying Agents, other than the duty
      to act honestly and in good faith and to exercise the diligence of a
      reasonably prudent agent in comparable circumstances.

19.4  The Agent may consult with legal and other professional advisers and the
      written opinion of such advisers shall be full and complete protection in
      respect of any action taken, omitted or suffered hereunder in good faith
      and in accordance with the opinion of such advisers.

19.5  Each of the Agent and the other Paying Agents shall be protected and shall
      incur no liability for or in respect of any action taken, omitted or
      suffered in reliance upon any instruction, request or order from any
      Issuer or the Guarantor or any notice, resolution, direction, consent,
      certificate, affidavit, statement, cable, telex or other paper or document
      which it reasonably believes to be genuine and to have been delivered,
      signed or sent by the proper party or parties or upon written instructions
      from the Issuer or the Guarantor.

19.6  Any of the Agent and the other Paying Agents and their officers, directors
      and employees may become the owner of, or acquire any interest in, any
      Notes, Receipts, Coupons or Talons with the same rights that it or he
      would have if the Agent or the relevant other Paying Agent, as the case
      may be, concerned were not appointed hereunder, and may engage or be
      interested in any financial or other transaction with any Issuer or the
      Guarantor and may act on, or as depositary, trustee or agent for, any
      committee or body of holders of Notes or Coupons or in


                                       20

      connection with any other obligations of any Issuer or the Guarantor as
      freely as if the Agent or the relevant other Paying Agent, as the case may
      be, were not appointed hereunder.

19.7  Each Issuer and the Guarantor shall provide the Agent with a certified
      copy of the list of persons authorised to execute documents and take
      action on its behalf in connection with this Agreement and shall notify
      the Agent immediately in writing if any of such persons ceases to be so
      authorised or if any additional person becomes so authorised together, in
      the case of an additional authorised person, with evidence satisfactory to
      the Agent that such person has been so authorised.

20.   COMMUNICATION BETWEEN THE PARTIES

      A copy of all communications relating to the subject matter of this
      Agreement between any Issuer or the Guarantor and the Noteholders,
      Receiptholders or Couponholders and any of the Paying Agents (other than
      the Agent) shall be sent to the Agent by the other relevant Paying Agent.

21.   CHANGES IN AGENT AND OTHER PAYING AGENTS

21.1  Each Issuer and the Guarantor agree that, for so long as any Note is
      outstanding, or until moneys for the payment of all amounts in respect of
      all outstanding Notes have been made available to the Agent and have been
      returned to the relevant Issuer or the Guarantor, as the case may be, as
      provided herein (whichever is the later):

      (a)   so long as any Notes are listed on any Stock Exchange or admitted to
            listing by any other relevant authority, there will at all times be
            a Paying Agent (which may be the Agent) with a specified office in
            such place as may be required by the rules and regulations of such
            Stock Exchange or other relevant authority; and

      (b)   there will at all times be a Paying Agent (which may be the Agent)
            with its specified office in a country outside the tax jurisdiction
            of the Issuer; and

      (c)   there will at all times be an Agent; and

      (d)   if the conclusions of the ECOFIN Council meeting of 26th-27th
            November, 2000 are implemented, it will ensure that it maintains a
            Paying Agent in an EU member state that will not be obliged to
            withhold or deduct tax pursuant to the relevant Directive.

      In addition, each Issuer and the Guarantor shall forthwith appoint a
      Paying Agent having a specified office in New York City in the
      circumstances described in the final paragraph of Condition 5(b). Any
      termination, appointment or change in the Agent or Paying Agent shall only
      take effect (other than in the case of insolvency, when it shall be of
      immediate effect) after not less than 30 nor more than 45 days' prior
      notice thereof shall have been given to the Noteholders in accordance with
      Condition 14.

21.2  The Agent may (subject as provided in subclause 21.4 below) at any time
      resign as Agent by giving at least 90 days' written notice to the Issuers
      and the Guarantor of such intention on its part, specifying the date on
      which its desired resignation shall become effective.

21.3  The Agent may (subject as provided in subclause 21.4 below) be removed at
      any time by the Issuers and the Guarantor on at least 45 days' notice by
      the filing with it of an instrument in writing signed on behalf of the
      Issuers and the Guarantor specifying such removal and the date when it
      shall become effective.


                                       21

21.4  Any resignation under subclause 21.2 or removal under subclauses 21.3 or
      21.5 shall only take effect upon the appointment by the Issuers and the
      Guarantor as hereinafter provided, of a successor Agent and (other than in
      cases of insolvency of the Agent, when such resignation or removal shall
      become effective immediately) on the expiry of the notice to be given
      under Clause 23. The Issuers and the Guarantor agree with the Agent that
      if, by the day falling ten days before the expiry of any notice under
      subclause 21.2, the Issuers and the Guarantor have not appointed a
      successor Agent, then the Agent shall be entitled, on behalf of the
      Issuers and the Guarantor, to appoint as a successor Agent in its place a
      reputable financial institution of good standing which the Issuer and the
      Guarantor shall approve (such approval not to be unreasonably withheld or
      delayed).

21.5  In case at any time the Agent resigns, or is removed, or becomes incapable
      of acting or is adjudged bankrupt or insolvent, or files a voluntary
      petition in bankruptcy or makes an assignment for the benefit of its
      creditors or consents to the appointment of an administrator, liquidator
      or administrative or other receiver of all or a substantial part of its
      property, or admits in writing its inability to pay or meet its debts as
      they mature or suspends payment thereof, or if any order of any court is
      entered approving any petition filed by or against it under the provisions
      of any applicable bankruptcy or insolvency law or if a receiver of it or
      of all or a substantial part of its property is appointed or if any
      officer takes charge or control of it or of its property or affairs for
      the purpose of rehabilitation, conservation or liquidation, a successor
      Agent, which shall be a reputable financial institution of good standing
      may be appointed by the Issuers and the Guarantor by an instrument in
      writing filed with the successor Agent. Upon the appointment as aforesaid
      of a successor Agent and acceptance by the latter of such appointment and
      (other than in case of insolvency of the Agent when it shall be of
      immediate effect) upon expiry of the notice to be given under Clause 23
      the Agent so superseded shall cease to be the Agent hereunder.

21.6  Subject to subclause 21.1, the Issuers and the Guarantor may, after prior
      consultation with the Agent, terminate the appointment of any of the other
      Paying Agents at any time and/or appoint one or more further other Paying
      Agents by giving to the Agent, and to the relevant other Paying Agent at
      least 45 days' notice in writing to that effect (other than in the case of
      insolvency of the other Paying Agent).

21.7  Subject to subclause 21.1, all or any of the Paying Agents may resign
      their respective appointments hereunder at any time by giving the Issuers,
      the Guarantor and the Agent at least 45 days' written notice to that
      effect.

21.8  Upon its resignation or removal becoming effective, the Agent or the
      relevant Paying Agent:

      (a)   shall forthwith transfer all moneys held by it hereunder and, if
            applicable, the records referred to in clauses 12.4 and 13.7 to the
            successor Agent hereunder; and

      (b)   shall be entitled to the payment by the Issuers or the Guarantor of
            its commissions, fees and expenses for the services therefore
            rendered hereunder in accordance with the terms of Clause 16.

21.9  Upon its appointment becoming effective, a successor Agent and any new
      Paying Agent shall, without further act, deed or conveyance, become vested
      with all the authority, rights, powers, trusts, immunities, duties and
      obligations of its predecessor or, as the case may be, a Paying Agent with
      like effect as if originally named as Agent or (as the case may be) a
      Paying Agent hereunder.


                                       22

22.   MERGER AND CONSOLIDATION

      Any corporation into which the Agent or any other Paying Agent may be
      merged or converted, or any corporation with which the Agent or any of the
      other Paying Agents may be consolidated, or any corporation resulting from
      any merger, conversion or consolidation to which the Agent or any of the
      other Paying Agents shall be a party, or any corporation to which the
      Agent or any of the other Paying Agents shall sell or otherwise transfer
      all or substantially all the assets of the Agent or any other Paying Agent
      shall, on the date when such merger, conversion, consolidation or transfer
      becomes effective and to the extent permitted by any applicable laws,
      become the successor Agent or, as the case may be, other Paying Agent
      under this Agreement without the execution or filing of any paper or any
      further act on the part of the parties hereto, unless otherwise required
      by the Issuers and the Guarantor, and after the said effective date all
      references in this Agreement to the Agent or, as the case may be, such
      other Paying Agent shall be deemed to be references to such corporation.
      Written notice of any such merger, conversion, consolidation or transfer
      shall forthwith be given to each Issuer and the Guarantor by the relevant
      Agent or other Paying Agent.

23.   NOTIFICATION OF CHANGES TO PAYING AGENTS

      Following receipt of notice of resignation from the Agent or any other
      Paying Agent and forthwith upon appointing a successor Agent or, as the
      case may be, further or other Paying Agents or on giving notice to
      terminate the appointment of any Agent or, as the case may be, other
      Paying Agent, the Agent (on behalf of and at the expense of the Issuers
      and the Guarantor) shall give or cause to be given not more than 45 days'
      nor less than 30 days' notice thereof to the Noteholders in accordance
      with the Conditions.

24.   CHANGE OF SPECIFIED OFFICE

      If the Agent or any other Paying Agent determines to change its specified
      office it shall give to the Issuers, the Guarantor and (if applicable) the
      Agent written notice of such determination giving the address of the new
      specified office which shall be in the same city and stating the date on
      which such change is to take effect, which shall not be less than 45 days
      thereafter. The Agent (on behalf and at the expense of the Issuers and the
      Guarantor) shall within 15 days of receipt of such notice (unless the
      appointment of the Agent or the other relevant Paying Agent, as the case
      may be, is to terminate pursuant to Clause 21 on or prior to the date of
      such change) give or cause to be given not more than 45 days' nor less
      than 30 days' notice thereof to the Noteholders in accordance with the
      Conditions.

25.   NOTICES

25.1  Any notice or communication given hereunder shall be sufficiently given or
      served:

      (a)   if delivered in person to the relevant address specified on the
            signature pages hereof or such other address as may be notified by
            the recipient in accordance with this clause and, if so delivered,
            shall be deemed to have been delivered at time of receipt; or

      (b)   if sent by facsimile to the relevant number specified on the
            signature pages hereof or such other number as may be notified by
            the recipient in accordance with this clause and, if so sent, shall
            be deemed to have been delivered when an acknowledgement of receipt
            is received.


                                       23

      Where a communication is received after 5 p.m. local time in the place to
      which the communication is addressed it shall be deemed to be received and
      become effective on the next business day.

25.2  A copy of any notice served in accordance with subclause 25.1 above on an
      Issuer shall be given to the Guarantor at:

      Klybeckstrasse 141
      CH-4002 Basle
      Switzerland

      Telephone:  41 61 636 2740
      Telefax:    41 61 636 6828
      Attention:  Group Treasurer

26.   TAXES AND STAMP DUTIES

      The Issuers and the Guarantor jointly and severally agree to pay any and
      all stamp and other documentary taxes or duties which may be payable in
      Germany, the United States of America, the United Kingdom, the Grand Duchy
      of Luxembourg, Belgium or Switzerland in connection with the execution,
      delivery, performance and enforcement of this Agreement, the Deed of
      Covenant or the Deed of Guarantee.

27.   CURRENCY INDEMNITY

      If, under any applicable law and whether pursuant to a judgment being made
      or registered against any Issuers and/or the Guarantor or in the
      liquidation, insolvency or analogous process of any Issuer and/or the
      Guarantor or for any other reason, any payment under or in connection with
      this Agreement is made or falls to be satisfied in a currency (the OTHER
      CURRENCY) other than that in which the relevant payment is expressed to be
      due (the REQUIRED CURRENCY) under this Agreement, then, to the extent that
      the payment (when converted into the required currency at the rate of
      exchange on the date of payment or, if it is not practicable for the Agent
      or the relevant other Paying Agent to purchase the required currency with
      the other currency on the date of payment, at the rate of exchange as soon
      thereafter as it is practicable for it to do so or, in the case of a
      liquidation, insolvency or analogous process at the rate of exchange on
      the latest date permitted by applicable law for the determination of
      liabilities in such liquidation, insolvency or analogous process) actually
      received by the Agent or the relevant other Paying Agent falls short of
      the amount due under the terms of this Agreement, the relevant Issuer and
      the Guarantor each undertakes that it shall, as a separate and independent
      obligation, indemnify and hold harmless the Agent and each other Paying
      Agent against the amount of such shortfall. For the purpose of this
      clause, RATE OF EXCHANGE means the rate at which the Agent or the relevant
      other Paying Agent is able on the relevant date to purchase the required
      currency with the other currency and shall take into account any premium
      and other costs of exchange. The parties hereto understand and agree that
      in the event that the required currency is replaced by the Euro after the
      date hereof, the Euro will not be considered an OTHER CURRENCY for the
      purposes of this Clause 27.

28.   AMENDMENTS

      This Agreement may be amended in writing by agreement between the Issuers,
      the Guarantor, the Agent and the other Paying Agents, but without the
      consent of any Noteholder, Receiptholder or Couponholder, (i) for the
      purpose of curing any ambiguity or of curing, correcting or supplementing
      any defective provision contained herein or complying with mandatory
      provisions of the law of the jurisdiction in which the Issuer or Guarantor
      is


                                       24

      incorporated or (ii) in any manner which the parties may mutually deem
      necessary or desirable and which shall not be materially prejudicial to
      the interests of the Noteholders. The Issuers, the Guarantor and the Agent
      may also agree any modification pursuant to Condition 15.

29.   DESCRIPTIVE HEADINGS

      The descriptive headings in this Agreement are for convenience of
      reference only and shall not define or limit the provisions hereof.

30.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

      A person who is not a party to this Agreement has no right under the
      Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
      Agreement, but this does not affect any right or remedy of a third party
      which exists or is available apart from that Act.

31.   GOVERNING LAW AND SUBMISSION TO JURISDICTION

31.1  This Agreement is governed by, and shall be construed in accordance with,
      the laws of England.

31.2  Each party hereto hereby irrevocably agrees, for the exclusive benefit of
      the other parties hereto, that the courts of England are to have
      jurisdiction to settle any disputes which may arise out of or in
      connection with this Agreement and that accordingly any suit, action or
      proceedings (together referred to as PROCEEDINGS) arising out of or in
      connection with this Agreement may be brought in such courts. Each party
      hereto hereby irrevocably waives any objection which it may have now or
      hereafter to the laying of the venue of any such Proceedings in any such
      court and any claim that any such Proceedings have been brought in an
      inconvenient forum and hereby further irrevocably agrees that a judgment
      in any such Proceedings brought in the English courts shall be conclusive
      and binding upon it and may be enforced in the courts of any other
      jurisdiction (subject to the laws of the jurisdiction in which enforcement
      is sought). Nothing contained in this clause shall limit any right to take
      Proceedings against any party hereto in any other court of competent
      jurisdiction (outside the Contracting States as defined in section 1(3) of
      the Civil Jurisdiction and Judgments Act 1982), nor shall the taking of
      Proceedings in one or more jurisdictions preclude the taking of
      Proceedings in any other jurisdiction, whether concurrently or not
      (subject to the laws of the relevant jurisdictions). Each of CIBA US, CIBA
      Germany, CIBA Bermuda and the Guarantor each hereby appoints CIBA UK as
      its agent for service of process, and undertakes that, in the event of
      CIBA UK ceasing so to act or ceasing to be registered in England, it will
      appoint another person, as the Agent may approve, as its agent for service
      of process in England in respect of any Proceedings. The Replacement Agent
      hereby appoints the Agent as its agent for service of process, and
      undertakes that, in the event of the Agent ceasing so to act or ceasing to
      be registered in England, it will appoint another person, as the Guarantor
      may approve, as its agent for service of process in England in respect of
      any Proceedings. Nothing herein shall affect the right to serve process in
      any other manner permitted by law.

32.   COUNTERPARTS

      This Agreement may be executed by any one or more of the parties hereto in
      any number of counterparts, each of which shall be deemed to be an
      original, but all such counterparts shall together constitute one and the
      same instrument.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above written.


                                       25

                                   APPENDIX 1

                      FORM OF CALCULATION AGENCY AGREEMENT

                          CALCULATION AGENCY AGREEMENT

                               DATED [      ], 2[ ]




                         [CIBA SPECIALTY CHEMICALS PLC/
                      CIBA SPECIALTY CHEMICALS CORPORATION/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]
                                    AS ISSUER

                                     - AND -

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
                                  AS GUARANTOR

                               U.S. $2,000,000,000
                          EURO MEDIUM TERM NOTE PROGRAM

                              [ALLEN & OVERY LOGO]
                                     LONDON


                                       26

                          CALCULATION AGENCY AGREEMENT

                                 IN RESPECT OF A

                          EURO MEDIUM TERM NOTE PROGRAM

THIS AGREEMENT is made on [        ], 2[ ] BETWEEN:

(1)   [CIBA SPECIALTY CHEMICALS CORPORATION of 560 White Plains Road,
      Tarrytown, New York 10591-9005, United States/CIBA SPECIALTY CHEMICALS PLC
      of Hulley Road, Macclesfield, Cheshire SK10 2NX/CIBA SPEZIALITATENCHEMIE
      HOLDING DEUTSCHLAND GMBH of Chemiestrasse D-68623 Lampertheim,
      Germany/CIBA SPECIALTY CHEMICALS EUROFINANCE LTD. of Cedar House, 41 Cedar
      Avenue, Hamilton HM12, Bermuda] (the ISSUER);

(2)   CIBA SPECIALTY CHEMICALS HOLDING INC. of Klybeckstrase 141, CH-4002
      Basle, Switzerland (the GUARANTOR); and

(3)   [           ] of [                        ] (the CALCULATION AGENT,
      which expression shall include its successor or       successors for
      the time being as calculation agent hereunder).

WHEREAS:

(A)   The Issuer, the Guarantor and certain other subsidiaries of the Guarantor
      have entered into an amended and restated program agreement with the
      Dealers named therein dated 27th March, 2003 under which the Issuer and
      such other subsidiaries may issue Euro Medium Term Notes (NOTES).

(B)   The Notes will be issued subject to and with the benefit of an amended and
      restated agency agreement (the AGENCY AGREEMENT) dated 27th March, 2003
      and entered into between the Issuer, the Guarantor, such other
      subsidiaries, JPMorgan Chase Bank as Agent (the AGENT which expression
      shall include its successor or successors for the time being under the
      Agency Agreement) and the other parties named therein.

NOW IT IS HEREBY AGREED that:

1.    APPOINTMENT OF THE CALCULATION AGENT

      The Issuer and the Guarantor hereby appoint [ ] as Calculation Agent in
      respect of each Series of Notes described in the Schedule hereto (the
      RELEVANT NOTES) for the purposes set out in Clause 2 below, all upon the
      provisions hereinafter set out. The agreement of the parties hereto that
      this Agreement is to apply to each Series of Relevant Notes shall be
      evidenced by the manuscript annotation and signature in counterpart of the
      Schedule hereto.

2.    DUTIES OF CALCULATION AGENT

      The Calculation Agent shall in relation to each Series of Relevant Notes
      perform all the functions and duties imposed on the Calculation Agent by
      the terms and conditions of the Relevant Notes (the CONDITIONS) including
      endorsing the Schedule hereto appropriately in relation to each Series of
      Relevant Notes.


                                       27

3.    EXPENSES

      Save as provided in Clause 4 below, the Calculation Agent shall bear all
      expenses incurred by it in connection with its said services.

4.    INDEMNITY

4.1   The Issuer and the Guarantor shall jointly and severally indemnify and
      keep indemnified the Calculation Agent, its directors, officers, employees
      and agents against any losses, liabilities, claims, actions or demands and
      any reasonable out-of-pocket costs and expenses which it may incur or
      which may be made against it by third parties as a result of or in
      connection with its appointment or the exercise of its powers and duties
      under this Agreement except such as may result from its own default,
      negligence or bad faith or that of its officers, directors, employees or
      agents or the breach by it of the terms of this Agreement. The Issuer and
      the Guarantor must be notified immediately of such claims, actions or
      demands and be invited and permitted to participate in the defence
      thereof.

4.2   The Calculation Agent shall indemnify each of the Issuer and the Guarantor
      and each of their officers, directors, employees and agents against any
      losses, liabilities, claims, actions or demands and any reasonable
      out-of-pocket costs and expenses which it may incur or which may be made
      against it as a direct result of the breach by the Calculation Agent of
      the terms of this Agreement or its default, negligence or bad faith or
      that its agents, officers, directors or employees. The Calculation Agent
      must be notified immediately of such claims, actions or demands and be
      invited and permitted to participate in the defence thereof.

5.    CONDITIONS OF APPOINTMENT

5.1   In acting hereunder and in connection with the Relevant Notes the
      Calculation Agent shall act as agent of the Issuer and the Guarantor and
      shall not thereby assume any obligations towards or relationship of agency
      or trust for or with any of the owners or holders of the Relevant Notes or
      the receipts or coupons (if any) appertaining thereto (the RECEIPTS and
      the COUPONS, respectively).

5.2   In relation to each issue of Relevant Notes the Calculation Agent shall be
      obliged to perform such duties and only such duties as are herein and in
      the Conditions specifically set forth and no implied duties or obligations
      shall be read into this Agreement or the Conditions against the
      Calculation Agent, other than the duty to act honestly and in good faith
      and to exercise the diligence of a reasonably prudent agent in comparable
      circumstances.

5.3   The Calculation Agent may consult with legal and other professional
      advisers and the written opinion of such advisers shall be full and
      complete protection in respect of any action taken, omitted or suffered
      hereunder in good faith and in accordance with the opinion of such
      advisers.

5.4   The Calculation Agent shall be protected and shall incur no liability for
      or in respect of any action taken, omitted or suffered in reliance upon
      any instruction, request or order from the Issuer or the Guarantor or any
      notice, resolution, direction, consent, certificate, affidavit, statement,
      cable, telex or other paper or document which it reasonably believes to be
      genuine and to have been delivered, signed or sent by the proper party or
      parties or upon written instructions from the Issuer or the Guarantor.

5.5   The Calculation Agent and any of its officers, directors and employees may
      become the owner of, or acquire any interest in, any Notes, Receipts or
      Coupons (if any) with the same rights that it or he would have if the
      Calculation Agent were not appointed hereunder, and


                                       28

      may engage or be interested in any financial or other transaction with the
      Issuer or the Guarantor and may act on, or as depositary, trustee or agent
      for, any committee or body of holders of Notes or Coupons (if any) or in
      connection with any other obligations of the Issuer or the Guarantor as
      freely as if the Calculation Agent were not appointed hereunder.

6.    TERMINATION OF APPOINTMENT

6.1   The Issuer and the Guarantor may terminate the appointment of the
      Calculation Agent at any time by giving to the Calculation Agent at least
      45 days' prior written notice to that effect, provided that, so long as
      any of the Relevant Notes is outstanding:

      (a)   such notice shall not expire less than 45 days before any date upon
            which any payment is due in respect of any Relevant Notes; and

      (b)   notice shall be given in accordance with the Conditions to the
            holders of the Relevant Notes at least 30 days prior to any removal
            of the Calculation Agent.

6.2   Notwithstanding the provisions of subclause 6.1 above, if at any
      time:

      (a)   the Calculation Agent becomes incapable of acting, or is adjudged
            bankrupt or insolvent, or files a voluntary petition in bankruptcy
            or makes an assignment for the benefit of its creditors or consents
            to the appointment of an administrator, liquidator or administrative
            or other receiver of all or any substantial part of its property, or
            it admits in writing its inability to pay or meet its debts as they
            may mature or suspends payment thereof, or if any order of any court
            is entered approving any petition filed by or against it under the
            provisions of any applicable bankruptcy or insolvency law or if a
            receiver of it or of all or a substantial part of its property is
            appointed or if any officer takes charge or control of the
            Calculation Agent or of its property or affairs for the purpose of
            rehabilitation, conservation or liquidation; or

      (b)   the Calculation Agent fails duly to perform any function or duty
            imposed upon it by the Conditions and this Agreement,

      the Issuer and the Guarantor may forthwith without notice terminate the
      appointment of the Calculation Agent, in which event notice thereof shall
      be given to the holders of the Relevant Notes in accordance with the
      Conditions as soon as practicable thereafter.

6.3   The termination of the appointment pursuant to subclause 6.1 or 6.2 above
      of the Calculation Agent hereunder shall not entitle the Calculation Agent
      to any amount by way of compensation but shall be without prejudice to any
      amount then accrued due.

6.4   The Calculation Agent may resign its appointment hereunder at any time by
      giving to the Issuer and the Guarantor at least 90 days' prior written
      notice to that effect. Following receipt of a notice of resignation from
      the Calculation Agent, the Issuer or the Guarantor shall promptly give
      notice thereof to the holders of the Relevant Notes in accordance with the
      Conditions.

6.5   Notwithstanding the provisions of subclauses 6.1, 6.2 and 6.4 above, so
      long as any of the Relevant Notes is outstanding, the termination of the
      appointment of the Calculation Agent (whether by the Issuer, the Guarantor
      or by the resignation of the Calculation Agent) shall not be effective
      unless upon the expiry of the relevant notice a successor Calculation
      Agent has been appointed.


                                       29

6.6   Any successor Calculation Agent appointed hereunder shall execute and
      deliver to its predecessor, the Issuer and the Guarantor an instrument
      accepting such appointment hereunder, and thereupon such a successor
      Calculation Agent, without further act, deed or conveyance, shall become
      vested with all the authority, rights, powers, trusts, immunities, duties
      and obligations of such predecessor with like effect as if originally
      named as the Calculation Agent hereunder.

6.7   If the appointment of the Calculation Agent hereunder is terminated
      (whether by the Issuer and the Guarantor or by the resignation of the
      Calculation Agent), the Calculation Agent shall on the date on which such
      termination takes effect deliver to the successor Calculation Agent any
      records concerning the Relevant Notes maintained by it (and copies of such
      documents and records as it is obliged by law or regulation to retain but
      except such documents it is required by law not to release), but shall
      have no other duties or responsibilities hereunder.

6.8   Any corporation into which the Calculation Agent may be merged or
      converted, or any corporation with which the Calculation Agent may be
      consolidated, or any corporation resulting from any merger, conversion or
      consolidation to which the Calculation Agent shall be a party, or any
      corporation to which the Calculation Agent shall sell or otherwise
      transfer all or substantially all of its assets shall, on the date when
      such merger, consolidation or transfer becomes effective and to the extent
      permitted by any applicable laws, become the successor Calculation Agent
      under this Agreement without the execution or filing of any paper or any
      further act on the part of any of the parties hereto, unless otherwise
      required by the Issuer and the Guarantor, and after the said effective
      date all references in this Agreement to the Calculation Agent shall be
      deemed to be references to such corporation. Written notice of any such
      merger, conversion, consolidation or transfer shall forthwith be given to
      the Issuer, the Guarantor and the Agent.

6.9   Upon giving notice of the intended termination of the appointment of the
      Calculation Agent, the Issuer and the Guarantor shall use all reasonable
      endeavours to appoint a further financial institution of good standing as
      successor Calculation Agent.

7.    NOTICES

      Any notice or communication given hereunder shall be sufficiently given or
      served:

      (a)   if delivered in person to the relevant address specified on the
            signature pages hereof or such other address as may be notified by
            the recipient in accordance with this clause and, if so delivered,
            shall be deemed to have been delivered at time of receipt; or

      (b)   if sent by facsimile to the relevant number specified on the
            signature pages hereof or such other number as may be notified by
            the recipient in accordance with this clause and, if so sent, shall
            be deemed to have been delivered when an acknowledgement of receipt
            is received (in the case of facsimile).

      Where a communication is received after 5 p.m. local time in the place to
      which the communication is addressed it shall be deemed to be received and
      become effective on the next business day.

8.    DESCRIPTIVE HEADINGS AND COUNTERPARTS

8.1   The descriptive headings in this Agreement are for convenience of
      reference only and shall not define or limit the provisions hereof.


                                       30

8.2   This Agreement may be executed in any number of counterparts, all of
      which, taken together, shall constitute one and the same agreement and any
      party may enter into this Agreement by executing a counterpart.

9.    CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

      A person who is not a party to this Agreement has no right under the
      Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
      Agreement, but this does not affect any right or remedy of a third party
      which exists or is available apart from that Act.

10.   GOVERNING LAW AND SUBMISSION TO JURISDICTION

10.1  This Agreement is governed by, and shall be construed in accordance with,
      the laws of England.

10.2  Each party hereto hereby irrevocably agrees, for the exclusive benefit of
      the other parties hereto, that the courts of England are to have
      jurisdiction to settle any disputes which may arise out of or in
      connection with this Agreement and that accordingly any suit, action or
      proceedings (together referred to as PROCEEDINGS) arising out of or in
      connection with this Agreement may be brought in such courts. Each party
      hereto hereby irrevocably waives any objection which it may have now or
      hereafter to the laying of the venue of any such Proceedings in any such
      court and any claim that any such Proceedings have been brought in an
      inconvenient forum and hereby further irrevocably agrees that a judgment
      in any such Proceedings brought in the English courts shall be conclusive
      and binding upon it and may be enforced in the courts of any other
      jurisdiction (subject to the laws of the jurisdiction in which enforcement
      is sought). Nothing contained in this clause shall limit any right to take
      Proceedings against any party in any other court of competent jurisdiction
      (outside the Contracting States, as defined in section 1(3) of the Civil
      Jurisdiction and Judgments Act 1982), nor shall the taking of Proceedings
      in one or more jurisdictions preclude the taking of Proceedings in any
      other jurisdiction, whether concurrently or not (subject to the laws of
      the relevant jurisdictions). The [Issuer and the] Guarantor [each] hereby
      appoints the [Issuer/CIBA Specialty Chemicals PLC] as its agent for
      service of process, and undertakes that, in the event of [the Issuer/CIBA
      Specialty Chemicals PLC] ceasing so to act or ceasing to be registered in
      England, it will appoint another person, as the Calculation Agent may
      approve, as its agent for the service of process in England in respect of
      any Proceedings. [The Calculation Agent hereby appoints [ ] as its agent
      for service of process, and undertakes that, in the event of [ ] ceasing
      so to act or ceasing to be registered in England, it will appoint another
      person, as the relevant Issuer or the Guarantor may approve, as its agent
      for service of process in England in respect of any Proceedings]. Nothing
      herein shall affect the right to serve process in any manner permitted by
      law.

IN WITNESS whereof this Agreement has been entered into the day and year first
above written.


                                       31

                SCHEDULE TO THE CALCULATION AGENCY AGREEMENT




                                            TITLE AND      ANNOTATION BY
                   ISSUE      MATURITY      NOMINAL        CALCULATION
SERIES NUMBER      DATE       DATE          AMOUNT         AGENT/ISSUER
- -------------      ----       ----          ------         ------------
                                               





                                       32

ISSUER



[CIBA SPECIALTY CHEMICALS CORPORATION
560 White Plains Road
PO Box 2005
Tarrytown, New York
10591-9005

Telephone:  001 914 785 2000
Telefax:    001 914 785 2650
Attention:  Treasurer]/



[CIBA SPECIALTY CHEMICALS PLC
Hulley Road
Macclesfield
Cheshire
SK10 2NX

Telephone:  44 1 625 888 220
Telefax:    44 1 625 888 380
Attention:  Treasurer]/



[CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
Chemiestrasse
D-68623 Lampertheim
Germany

Telephone:  00 49 6206 152 810
Telefax:    00 49 6206 152 816
Attention:  Treasurer]



[CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
c/o Reid Management Limited
4th Floor
Windsor Place
22 Queen Street
PO Box HM1179
Hamilton HMEX
Bermuda

Telephone:  +441 296 3695
Telefax:    +441 295 3328
Attention:  Tamara Lewis/Adrian Arnold]

By:


                                       33

GUARANTOR


CIBA SPECIALTY CHEMICALS HOLDING INC.
Klybeckstrasse 141
CH-4002 Basle
Switzerland

Telephone:  00 41 61 636 2740
Telefax No: 00 41 61 636 6828
Attention:  Group Treasurer

By:                           By:



      CALCULATION AGENT

[

                  ]

Telephone:  [           ]
Telefax No: [           ]
Attention:  [           ]


                                       34

                                   SCHEDULE 1

                        TERMS AND CONDITIONS OF THE NOTES

                  (TO BE INCLUDED FROM FINAL OFFERING CIRCULAR)


                                       35




                                      AGENT

                               JPMORGAN CHASE BANK
                                  TRINITY TOWER
                              9 THOMAS MORE STREET
                                 LONDON E1W 1YT

                                  PAYING AGENT

                        J.P. MORGAN BANK LUXEMBOURG S.A.
                                  5 RUE PLAETIS
                                L-2338 LUXEMBOURG

and/or such other or further Agent and other or further Paying Agents and/or
specified offices as may from time to time be duly appointed by the Issuer and
the Guarantor and notice of which has been given to the Noteholders.


                                       57

                                   SCHEDULE 2

       FORMS OF GLOBAL AND DEFINITIVE NOTES, RECEIPTS, COUPONS AND TALONS

                                     PART 1

                          FORM OF TEMPORARY GLOBAL NOTE

THIS GLOBAL NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY NOT BE OFFERED,
SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE BENEFIT OF U.S.
PERSONS OTHER THAN PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS USED
HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN REGULATION S UNDER THE
SECURITIES ACT.

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(B)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON
(OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(B)(4) OF THE INTERNAL
REVENUE CODE AND THE REGULATIONS THEREUNDER).](1)

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](2)

                      [CIBA SPECIALTY CHEMICALS CORPORATION
   (a company incorporated under the laws of the State of Delaware, U.S.A.)/

                          CIBA SPECIALTY CHEMICALS PLC
           (a company incorporated with limited liability in England)/

                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
           (a company incorporated with limited liability in Germany)/

                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
           (a company incorporated with limited liability in Bermuda)]

                  unconditionally and irrevocably guaranteed by

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
         (a company incorporated with limited liability in Switzerland)


- --------
1     This legend to appear on Notes issued by Ciba Specialty Chemicals
      Corporation with a maturity of 183 days or less.

2     This legend to appear on all Notes with a maturity of more than 183 days.


                                       58

                              TEMPORARY GLOBAL NOTE

This Global Note is a Temporary Global Note in respect of a duly authorised
issue of Euro Medium Term Notes (the NOTES) of [Ciba Specialty Chemicals
Corporation/Ciba Specialty Chemicals PLC/Ciba Spezialitatenchemie Holding
Deutschland GmbH/Ciba Specialty Chemicals Eurofinance Ltd.] (the ISSUER)
described, and having the provisions specified, in the Pricing Supplement
attached hereto (the PRICING SUPPLEMENT). Payments in respect of the Notes have
been unconditionally and irrevocably guaranteed by Ciba Specialty Chemicals
Holding Inc. (the GUARANTOR). References herein to the Conditions shall be to
the Terms and Conditions of the Notes as set out in Schedule 1 to the Agency
Agreement (as defined below) as modified and supplemented by the information set
out in the Pricing Supplement, but in the event of any conflict between the
provisions of that Schedule and the information set out in the Pricing
Supplement, the Pricing Supplement will prevail.

Words and expressions defined or set out in the Conditions and/or the Pricing
Supplement shall bear the same meaning when used herein.

This Global Note is issued subject to, and with the benefit of, the Conditions
and an amended and restated Agency Agreement (the AGENCY AGREEMENT, which
expression shall be construed as a reference to that agreement as the same may
be amended, supplemented or restated from time to time) dated 27th March, 2003
and made between, inter alia, the Issuer, the Guarantor, JPMorgan Chase Bank
(the AGENT) and the other agents named therein.

For value received the Issuer, subject to and in accordance with the Conditions,
promises to pay to the bearer hereof on each Instalment Date (if the Notes are
repayable in instalments) and on the Maturity Date and/or on such earlier
date(s) as all or any of the Notes represented by this Global Note may become
due and repayable in accordance with the Conditions, the amount payable under
the Conditions in respect of such Notes on each such date and to pay interest
(if any) on the nominal amount of the Notes from time to time represented by
this Global Note calculated and payable as provided in the Conditions together
with any other sums payable under the Conditions, upon presentation and, at
maturity, surrender of this Global Note at the office of the Agent at Trinity
Tower, 9 Thomas More Street, London E1W 1YT or at the specified office of any of
the other paying agents located outside the United States (except as provided in
the Conditions) from time to time appointed by the Issuer and the Guarantor in
respect of the Notes, but in each case subject to the requirements as to
certification provided herein. On any redemption or payment of an instalment or
interest being made in respect of, or purchase and cancellation of, any of the
Notes represented by this Global Note details of such redemption, payment or
purchase and cancellation (as the case may be) shall be entered by or on behalf
of the Issuer in Schedule 1 hereto and the relevant space in Schedule 1 hereto
recording any such redemption, payment or purchase and cancellation (as the case
may be) shall be signed by or on behalf of the Issuer.

Upon any such redemption, payment of an instalment or purchase and cancellation,
as aforesaid, the nominal amount of the Notes represented by this Global Note
shall be reduced by the nominal amount of such Notes so redeemed or purchased
and cancelled or the amount of such instalment. The nominal amount of the Notes
represented by this Global Note following any such redemption, payment of an
instalment or purchase and cancellation as aforesaid or any exchange as referred
to below shall be the nominal amount most recently entered by or on behalf of
the Issuer in the relevant column in Part 2, 3 or 4 of Schedule 1 or Schedule 2
hereto.

Prior to the Exchange Date (as defined below), all payments (if any) on this
Global Note will only be made to the bearer hereof to the extent that there is
presented to the Agent by Clearstream, Luxembourg or Euroclear a certificate,
substantially in the form set out in Schedule 3 hereto, to the effect that it
has received from or in respect of a person entitled to a particular nominal
amount of the


                                       59

Notes (as shown by its records) a certificate in or substantially in the form of
Certificate "A" as set out in Schedule 3 hereto. The bearer of this Global Note
will not be entitled to receive any payment of interest hereon due on or after
the Exchange Date unless upon due certification exchange of this Global Note is
improperly withheld or refused.

On or after the date (the EXCHANGE DATE) which is 40 days after the later of the
Issue Date and completion of the distribution of the Tranche of Notes
represented by this Global Note or such later date specified in the Pricing
Supplement, this Global Note may be exchanged in whole or in part (free of
charge) for, as specified in the Pricing Supplement, either security printed
Definitive Notes and (if applicable) Coupons, Receipts and Talons in the form
set out in Parts 3, 4, 5 and 6 respectively of Schedule 2 to the Agency
Agreement (on the basis that all the appropriate details have been included on
the face of such Definitive Notes and (if applicable) Coupons, Receipts and
Talons and the Pricing Supplement (or the relevant provisions of the Pricing
Supplement) have been either endorsed on or attached to such Definitive Notes)
or a Permanent Global Note in or substantially in the form set out in Part 2 of
Schedule 2 to the Agency Agreement (together with the Pricing Supplement
attached thereto) upon notice being given by Euroclear and/or Clearstream,
Luxembourg acting on the instructions of any holder of an interest in this
Global Note and subject, in the case of Definitive Notes, to such notice period
as is specified in the Pricing Supplement.

If Definitive Notes and (if applicable) Coupons, Receipts and/or Talons have
already been issued in exchange for all the Notes represented for the time being
by the Permanent Global Note, then this Global Note may only thereafter be
exchanged for Definitive Notes and (if applicable) Coupons, Receipts and/or
Talons pursuant to the terms hereof.

Presentation of this Global Note for exchange shall be made by the bearer hereof
on any day (other than a Saturday or Sunday) on which banks are open for
business in London at the office of the Agent specified above. The Issuer shall
procure that the Definitive Notes or (as the case may be) the Permanent Global
Note shall be so issued and delivered in exchange for only that portion of this
Global Note in respect of which there shall have been presented to the Agent by
Euroclear or Clearstream, Luxembourg a certificate, substantially in the form
set out in Schedule 3 hereto, to the effect that it has received from or in
respect of a person entitled to a beneficial interest in a particular nominal
amount of the Notes (as shown by its records) a certificate from such person in
or substantially in the form of Certificate "A" as set out in Schedule 3 hereto.

On an exchange of the whole of this Global Note, this Global Note shall be
surrendered to the Agent. On an exchange of part only of this Global Note,
details of such exchange shall be entered by or on behalf of the Issuer in
Schedule 2 hereto and the relevant space in Schedule 2 hereto recording such
exchange shall be signed by or on behalf of the Issuer, whereupon the nominal
amount of this Global Note and the Notes represented by this Global Note shall
be reduced by the nominal amount so exchanged. On any exchange of this Global
Note for a Permanent Global Note, details of such exchange shall be entered by
or on behalf of the Issuer in Schedule 2 to the Permanent Global Note and the
relevant space in Schedule 2 thereto recording such exchange shall be signed by
or on behalf of the Issuer.

Until the exchange of the whole of this Global Note as aforesaid, the bearer
hereof shall in all respects (except as otherwise provided herein) be entitled
to the same benefits as if he were the bearer of Definitive Notes and the
relative Coupons, Receipts and/or Talons (if any) in the forms set out in Parts
3, Part 4, Part 5 and Part 6, respectively, of Schedule 2 to the Agency
Agreement.

In the event that this Global Note (or any part hereof) has become due and
repayable in accordance with the Conditions or that the Maturity Date has
occurred and, in either case, payment in full of the amount due has not been
made to the bearer in accordance with the foregoing then, unless within the
period of fifteen days commencing on the relevant due date payment in full of
the amount due in


                                       60

respect of this Global Note is received by the bearer in accordance with the
foregoing, this Global Note will become void at 8.00 p.m. (London time) on such
fifteenth day and the bearer will have no further rights under this Global Note
(but without prejudice to the rights which the bearer or any other person may
have under the amended and restated Deed of Covenant executed, inter alia, by
the Issuer on 27th March, 2003 in respect of the Euro Medium Term Notes issued
under the Program Agreement pursuant to which this Global Note is issued).

No rights are conferred on any person under the Contracts (Rights of Third
Parties) Act 1999 to enforce any term of this Global Note, but this does not
affect any right or remedy of any person which exists or is available apart from
that Act.

This Global Note is governed by, and shall be construed in accordance with,
English law.

This Global Note shall not be valid unless authenticated by the Agent.

IN WITNESS whereof the Issuer has caused this Global Note to be duly executed on
its behalf.

[CIBA SPECIALTY CHEMICALS CORPORATION/
CIBA SPECIALTY CHEMICALS PLC/
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]
By: .............................
Authorised Signatory

Authenticated without recourse,
warranty or liability by

JPMORGAN CHASE BANK

By: ..........................
Authorised Signatory


                                       61

                    SCHEDULE ONE TO THE TEMPORARY GLOBAL NOTE

                                     PART I

                                INTEREST PAYMENTS



              Total amount of      Amount of         Confirmation of payment on
Date made     interest payable     interest paid     behalf of the Issuer
- ---------     ----------------     -------------     --------------------------
                                            

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



                                       62

                                     PART II

                          PAYMENT OF INSTALMENT AMOUNTS



                                                           Remaining nominal
                                                           amount of this
              Total amount of                              Global Note           Confirmation of
              Instalment          Amount of Instalment     following such        payment on behalf
Date made     Amounts payable     Amounts paid             payment*              of the Issuer
- ---------     ---------------     --------------------     -----------------     ---------------
                                                                     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------

*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       63

                                    PART III

                                   REDEMPTIONS



                                                       Remaining nominal
                                                       amount of this        Confirmation
                                                       Global Note           of redemption
              Total amount of       Amount of          following such        on behalf of
Date made     principal payable     Principal paid     redemption*           the Issuer
- ---------     -----------------     --------------     -----------------     -------------
                                                                 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------
*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       64

                                     PART IV

                           PURCHASES AND CANCELLATIONS



                                        Remaining nominal
                 Part of nominal        amount of this          Confirmation of
                 amount of this         Global Note             purchase and
                 Global Note            following such          cancellation on
                 purchased and          purchase and            behalf of the
Date made        cancelled              cancellation*           Issuer
- ---------        ---------------        -----------------       ---------------
                                                       

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------

*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       65

                    SCHEDULE TWO TO THE TEMPORARY GLOBAL NOTE

                                    EXCHANGES
                  FOR DEFINITIVE NOTES OR PERMANENT GLOBAL NOTE

The following exchanges of a part of this Global Note for Definitive Notes or a
Permanent Global Note have been made:




                Nominal amount of
                this Global Note        Remaining nominal
                exchanged for           amount of this
                Definitive Notes        Global Note             Notation made on
                or a Permanent          following such          behalf of the
Date made       Global Note             exchange *              Issuer
- ---------       -----------------       -----------------       ----------------
                                                       

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------

*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       66

                   SCHEDULE THREE TO THE TEMPORARY GLOBAL NOTE

                     FORM OF CERTIFICATE TO BE PRESENTED BY
                      EUROCLEAR OR CLEARSTREAM, LUXEMBOURG

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]


                              [Title of Securities]

                                (the SECURITIES)

This is to certify that, based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organisations
appearing in our records as persons being entitled to a beneficial interest in a
portion of the principal amount set forth below (our MEMBER ORGANISATIONS)
substantially to the effect set forth in the Agency Agreement, as of the date
hereof, [ ] principal amount of the above-captioned Securities (i) is owned by
persons that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
(UNITED STATES PERSONS), (ii) is owned by United States persons that (a) are
foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Sections 1.165-12(c)(1)(iv)) (FINANCIAL INSTITUTIONS)
purchasing for their own account or for resale, or (b) acquired the Securities
through foreign branches of United States financial institutions and who hold
the Securities through such United States financial institutions on the date
hereof (and in either case (a) or (b), each such United States financial
institution has agreed, on its own behalf or through its agent, that we may
advise the Issuer or the Issuer's agent that it will comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder), or (iii) is owned by United
States or foreign financial institutions for purposes of resale during the
restricted period (as defined in U.S. Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign
financial institutions described in clause (iii) above (whether or not also
described in clause (i) or (ii)) have certified that they have not acquired the
Securities for purposes of resale directly or indirectly to a United States
person or to a person within the United States or its possessions.

As used herein, UNITED STATES means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction; and its POSSESSIONS include Puerto Rico, the
U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.

If the Securities are of the category contemplated in Section 230.903(c)(3) of
Regulation S under the Securities Act of 1933, as amended (the ACT) then this is
also to certify with respect to such principal amount of Securities set forth
above that, except as set forth below, we have received in writing, by tested
telex or by electronic transmission, from our Member Organisations entitled to a
portion of such principal amount, certifications with respect to such portion,
substantially to the effect that the Securities are beneficially owned by (a)
non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in
transactions which did not require registration under the Act.

We further certify (i) that we are not making available herewith for exchange
(or, if relevant, exercise of any rights or collection of any interest) any
portion of the temporary global Security excepted in


                                       67

such certifications and (ii) that as of the date hereof we have not received any
notification from any of our Member Organisations to the effect that the
statements made by such Member Organisations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, exercise of any rights or
collection of any interest) are no longer true and cannot be relied upon as the
date hereof.

We understand that this certification is required in connection with certain tax
laws and, if applicable, certain securities laws of the United States. In
connection therewith, if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or would be relevant,
we irrevocably authorise you to produce this certification to any interested
party in such proceedings.

Dated:  [           ], 2[  ]*
                                          Yours faithfully,

                                          [Euroclear Bank S.A./N.V.
                                          as operator of the Euroclear
                                          System]

                                          or

                                          [Clearstream Banking, societe anonyme]

                                          By:


- ----------
*     To be dated no earlier than the Exchange Date.


                                       68

                                 CERTIFICATE "A"

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]


                              [Title of Securities]

                                (the SECURITIES)

This is to certify that as of the date hereof, and except as set forth below,
the above-captioned Securities held by you for our account (i) are owned by
person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
(UNITED STATES PERSON(S)), (ii) are owned by United States person(s) that (a)
are foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(iv)) (FINANCIAL INSTITUTIONS)
purchasing for their own account or for resale, or (b) acquired the Securities
through foreign branches of United States financial institutions and who hold
the Securities through such United States financial institutions on the date
hereof (and in either case (a) or (b), each such United States financial
institution hereby agrees, on its own behalf or through its agent, that you may
advise the Issuer or the Issuer's agent that it will comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder), or (iii) are owned by United
States or foreign financial institution(s) for purposes of resale during the
restricted period (as defined in U.S. Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a
United States or foreign financial institution described in clause (iii) above
(whether or not also described in clause (i) or (ii)) this is to further certify
that such financial institution has not acquired the Securities for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.

If the Securities are of the category contemplated in Section 230.903(c)(3) of
Regulation S under the Securities Act of 1933, as amended (the ACT) then this is
also to certify with respect to such principal amount of Securities set forth
above that, except as set forth below, the Securities are beneficially owned by
(a) a non-U.S. person(s) or (b) a U.S. person(s) who purchased the Securities in
transactions which did not require registration under the Act. As used in this
paragraph, the term U.S. PERSON has the meaning given to it by Regulation S
under the Act.

As used herein, UNITED STATES means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction; and its POSSESSIONS include Puerto Rico, the
U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.

We undertake to advise you promptly by tested telex on or prior to the date on
which you intend to submit your certification relating to the Securities held by
you for our account in accordance with your documented procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.

This certification excepts and does not relate to [ ] of such interest in the
above Securities in respect of which we are not able to certify and as to which
we understand exchange and delivery of definitive Securities (or, if relevant,
exercise of any right or collection of any interest) cannot be made until we do
so certify.


                                       69

We understand that this certification is required in connection with certain tax
laws and, if applicable, certain securities laws of the United States. In
connection therewith, if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or would be relevant,
we irrevocably authorise you to produce this certification to any interested
party in such proceedings.

Dated: [         ], [  ]*

Name of Person Making Certification

By:


- ----------
*     To be dated no earlier than the fifteenth day prior to the Exchange Date.


                                       70

                                     PART 2

                          FORM OF PERMANENT GLOBAL NOTE

THE GLOBAL NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY NOT BE OFFERED,
SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE BENEFIT OF U.S.
PERSONS OTHER THAN PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS USED
HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN REGULATION S UNDER THE
SECURITIES ACT.

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(B)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON
(OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(B)(4) OF THE INTERNAL
REVENUE CODE AND THE REGULATIONS THEREUNDER).](1)

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](2)

                     [CIBA SPECIALTY CHEMICALS CORPORATION.]
    (a company incorporated under the laws of the State of Delaware, U.S.A.)/

                          CIBA SPECIALTY CHEMICALS PLC
           (a company incorporated with limited liability in England)/

                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
           (a company incorporated with limited liability in Germany)/

                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
           (a company incorporated with limited liability in Bermuda)]

                  unconditionally and irrevocably guaranteed by

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
         (a company incorporated with limited liability in Switzerland)

                              PERMANENT GLOBAL NOTE

This Global Note is a Permanent Global Note in respect of a duly authorised
issue of Euro Medium Term Notes (the NOTES) of [Ciba Specialty Chemicals
Corporation/Ciba Specialty Chemicals PLC/Ciba Spezialitatenchemie Holding
Deutschland GmbH/Ciba Specialty Chemicals Eurofinance Ltd.] (the ISSUER)
described, and having the provisions specified, in the Pricing Supplement or
Pricing Supplements attached hereto (together the PRICING SUPPLEMENT). Payments
in respect of the Notes

- ----------
1     This legend to appear on Notes issued by Ciba Specialty Chemicals
      Corporation with a maturity of 183 days or less.

2     This legend to appear on all Notes with a maturity of more than 183 days.


                                       71

have been unconditionally and irrevocably guaranteed by Ciba Specialty Chemicals
Holding Inc. (the GUARANTOR). References herein to the Conditions shall be to
the Terms and Conditions of the Notes as set out in Schedule 1 to the Agency
Agreement (as defined below) as modified and supplemented by the information set
out in the Pricing Supplement, but in the event of any conflict between the
provisions of that Schedule and the information set out in the Pricing
Supplement, the Pricing Supplement will prevail.

Words and expressions defined or set out in the Conditions and/or the Pricing
Supplement shall bear the same meaning when used herein.

This Global Note is issued subject to, and with the benefit of, the Conditions
and an amended and restated Agency Agreement (the AGENCY AGREEMENT, which
expression shall be construed as a reference to that agreement as the same may
be amended, supplemented or restated from time to time) dated 27th March, 2003
and made between, inter alia, the Issuer, the Guarantor, JPMorgan Chase Bank
(the AGENT) and the other agents named therein.

For value received the Issuer, subject to and in accordance with the Conditions,
promises to pay to the bearer hereof on each Instalment Date (if the Notes are
repayable in instalments) and on the Maturity Date and/or on such earlier
date(s) as all or any of the Notes represented by this Global Note may become
due and repayable in accordance with the Conditions, the amount payable under
the Conditions in respect of such Notes on each such date and to pay interest
(if any) on the nominal amount of the Notes from time to time represented by
this Global Note calculated and payable as provided in the Conditions together
with any other sums payable under the Conditions, upon presentation and, at
maturity, surrender of this Global Note at the office of the Agent at Trinity
Tower, 9 Thomas More Street, London E1W 1YT or at the specified office of any of
the other paying agents located outside the United States (except as provided in
the Conditions) from time to time appointed by the Issuer and the Guarantor in
respect of the Notes. On any redemption or payment of an instalment or interest
being made in respect of, or purchase and cancellation of, any of the Notes
represented by this Global Note details of such redemption, payment or purchase
and cancellation (as the case may be) shall be entered by or on behalf of the
Issuer in Schedule 1 hereto and the relevant space in Schedule 1 hereto
recording any such redemption, payment or purchase and cancellation (as the case
may be) shall be signed by or on behalf of the Issuer.

Upon any such redemption, payment of an instalment or purchase and cancellation
as aforesaid, the nominal amount of the Notes represented by this Global Note
shall be reduced by the nominal amount of such Notes so redeemed or purchased
and cancelled or the amount of such instalment. The nominal amount of the Notes
represented by this Global Note following any such redemption, payment of an
instalment or purchase and cancellation as aforesaid, or any exchange as
referred to below shall be the nominal amount most recently entered by or on
behalf of the Issuer in the relevant column in Part 2, 3 or 4 of Schedule 1 or
Schedule 2 hereto.

On any exchange of the Temporary Global Note issued in respect of the Notes for
this Global Note or any part hereof, details of such exchange shall be entered
by or on behalf of the Issuer in Schedule 2 hereto and the relevant space in
Schedule 2 hereto recording such exchange shall be signed by or on behalf of the
Issuer, whereupon the nominal amount of the Notes represented by this Global
Note shall be increased by the nominal amount of the Temporary Global Note so
exchanged.

This Global Note may be exchanged in whole but not in part (free of charge), for
Definitive Notes and (if applicable) Coupons, Receipts and/or Talons in the form
set out in Part 3, Part 4, Part 5 and Part 6 respectively, of Schedule 2 to the
Agency Agreement (on the basis that all the appropriate details have been
included on the face of such Definitive Notes and (if applicable) Coupons,
Receipts and Talons and the Pricing Supplement (or the relevant provisions of
the Pricing Supplement) have been


                                       72

endorsed on or attached to such Definitive Notes) either, as specified in the
applicable Pricing Supplement:

(a)   upon not less than 60 days' written notice being given to the Agent by
      Euroclear and/or Clearstream, Luxembourg acting on the instructions of any
      holder of an interest in this Global Note; or

(b)   only upon the occurrence of any Exchange Event.

An EXCHANGE EVENT means an Event of Default has occurred and is continuing;

the Issuer has been notified that either Euroclear or Clearstream, Luxembourg
has been closed for business for a continuous period of 14 days (other than by
reason of holiday, statutory or otherwise) or has announced an intention
permanently to cease business or has in fact done so and no alternative clearing
system is available; or

the Issuer has or will become obliged to pay additional amounts as provided for
or referred to in Condition 7 which would not be required were the Notes
represented by this Global Note in definitive form.

If this Global Note is only exchangeable following the occurrence of an Exchange
Event:

The first notice requesting exchange in accordance with the above provisions
shall give rise to the issue of Definitive Notes for the total amount of Notes
represented by this Global Note.

Any such exchange as aforesaid will be made upon presentation of this Global
Note at the office of the Agent specified above by the bearer hereof on any day
(other than a Saturday or Sunday) on which banks are open for business in
London. The aggregate nominal amount of Definitive Notes issued upon an exchange
of this Global Note will be equal to the aggregate nominal amount of this Global
Note.

On an exchange of this Global Note, this Global Note shall be surrendered to the
Agent.

Until the exchange of this Global Note as aforesaid, the bearer hereof shall in
all respects (except as otherwise provided herein) be entitled to the same
benefits as if he were the bearer of Definitive Notes and the relative Coupons,
Receipts and/or Talons (if any) in the forms set out in Part 3, Part 4, Part 5
and Part 6, respectively, of Schedule 2 to the Agency Agreement.

In the event that this Global Note (or any part hereof) has become due and
repayable in accordance with the Conditions or that the Maturity Date has
occurred and, in either case, payment in full of the amount due has not been
made to the bearer in accordance with the foregoing then, unless within the
period of fifteen days commencing on the relevant due date payment in full of
the amount due in respect of this Global Note is received by the bearer in
accordance with the foregoing, this Global Note will become void at 8.00 p.m.
(London time) on such fifteenth day and the bearer will have no further rights
under this Global Note (but without prejudice to the rights which the bearer or
any other person may have under the amended and restated Deed of Covenant
executed by the Issuer on 27th March, 2003 in respect of the Euro Medium Term
Notes issued under the Program Agreement pursuant to which this Global Note is
issued).

No rights are conferred on any person under the Contracts (Rights of Third
Parties) Act 1999 to enforce any term of this Global Note, but this does not
affect any right or remedy of any person which exists or is available apart from
that Act.

This Global Note is governed by, and shall be construed in accordance with,
English law.


                                       73

This Global Note shall not be valid unless authenticated by the Agent.

IN WITNESS whereof the Issuer has caused this Global Note to be duly executed on
its behalf.

[CIBA SPECIALTY CHEMICALS CORPORATION/
CIBA SPECIALTY CHEMICALS PLC/
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

By: .........................
   Authorised Signatory

Authenticated without recourse,
warranty or liability by

JPMORGAN CHASE BANK

By: ..........................
Authorised Signatory


                                       74

                    SCHEDULE ONE TO THE TEMPORARY GLOBAL NOTE

                                     PART I

                                INTEREST PAYMENTS



              Total amount of      Amount of         Confirmation of payment on
Date made     interest payable     interest paid     behalf of the Issuer
- ---------     ----------------     -------------     --------------------------
                                            

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



                                       75

                                     PART II

                          PAYMENT OF INSTALMENT AMOUNTS



                                                           Remaining nominal
                                                           amount of this
              Total amount of                              Global Note           Confirmation of
              Instalment          Amount of Instalment     following such        payment on behalf
Date made     Amounts payable     Amounts paid             payment*              of the Issuer
- ---------     ---------------     --------------------     -----------------     -----------------
                                                                     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------

*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       76

                                    PART III

                                   REDEMPTIONS



                                                       Remaining nominal
                                                       amount of this        Confirmation
                                                       Global Note           of redemption
              Total amount of       Amount of          following such        on behalf of
Date made     principal payable     Principal paid     redemption*           the Issuer
- ---------     -----------------     --------------     -----------------     -------------
                                                                 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------
*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       77

                                     PART IV

                           PURCHASES AND CANCELLATIONS



                                        Remaining nominal
                 Part of nominal        amount of this          Confirmation of
                 amount of this         Global Note             purchase and
                 Global Note            following such          cancellation on
                 purchased and          purchase and            behalf of the
Date made        cancelled              cancellation*           Issuer
- ---------        ---------------        -----------------       ---------------
                                                       

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------

*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       78

                   SCHEDULE TWO TO THE PERMANENT GLOBAL NOTE

                             SCHEDULE OF EXCHANGES

The following exchanges affecting the nominal amount of this Global Note have
been made:






                Nominal amount of
                Temporary Global        Nominal amount of       Notation made on
                Note exchanged for      this Global Note        behalf of the
Date made       this Global Note        following exchange *    Issuer
- ---------       -----------------       --------------------    ----------------
                                                       

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



- --------

*     See most recent entry in Part 2, 3 or 4 of Schedule One or Schedule Two in
      order to determine this amount.


                                       79

                                     PART 3

                            FORM OF DEFINITIVE NOTE

[Face of Note]
     -----------------------------------------------------------------------

     00             000000            [ISIN]           00            000000

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

THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY NOT BE OFFERED,
SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE BENEFIT OF U.S.
PERSONS OTHER THAN PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS USED
HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN REGULATION S UNDER THE
SECURITIES ACT.

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(B)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON
(OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(B)(4) OF THE INTERNAL
REVENUE CODE AND THE REGULATIONS THEREUNDER).](1)

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](2)

                [CIBA SPECIALTY CHEMICALS CORPORATION] (a company
         incorporated under the laws of the State of Delaware, U.S.A.)/

                          CIBA SPECIALTY CHEMICALS PLC
           (a company incorporated with limited liability in England)/

                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
           (a company incorporated with limited liability in Germany)/

                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
           (a company incorporated with limited liability in Bermuda)]

                  unconditionally and irrevocably guaranteed by

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
         (a company incorporated with limited liability in Switzerland)

       [Specified Currency and Nominal Amount of Tranche]


- --------
1     This legend to appear on Notes issued by Ciba Specialty Chemicals
      Corporation with a maturity of 183 days or less.

2     This legend to appear on all Notes with a maturity of more than 183 days.


                                       80

                  EURO MEDIUM TERM NOTES DUE [Year of Maturity]

This Note is one of a duly authorised issue of Euro Medium Term Notes
denominated in the Specified Currency maturing on the Maturity Date (the NOTES)
of [Ciba Specialty Chemicals Corporation/Ciba Specialty Chemicals PLC/Ciba
Spezialitatenchemie Holding Deutschland GmbH/Ciba Specialty Chemicals
Eurofinance Ltd.] (the ISSUER). Payments in respect of the Notes have been
unconditionally and irrevocably guaranteed by Ciba Specialty Chemicals Holding
Inc. (the GUARANTOR). References herein to the Conditions shall be to the Terms
and Conditions [endorsed hereon/attached hereto/set out in Schedule 1 to the
Agency Agreement (as defined below) which shall be incorporated by reference
herein and have effect as if set out herein] as modified and supplemented by the
Pricing Supplement (the PRICING SUPPLEMENT) (or the relevant provisions of the
Pricing Supplement) endorsed hereon, but in the event of any conflict between
the provisions of the Conditions and the information in the Pricing Supplement,
the Pricing Supplement will prevail.

This Note is issued subject to, and with the benefit of, the Conditions and an
amended and restated Agency Agreement (the AGENCY AGREEMENT, which expression
shall be construed as a reference to that agreement as the same may be amended,
supplemented or restated from time to time) dated 27th March, 2003 and made
between, inter alia, the Issuer, the Guarantor, JPMorgan Chase Bank (the AGENT)
and the other agents named therein.

For value received, the Issuer, subject to and in accordance with the
Conditions, promises to pay to the bearer hereof [on each Instalment Date and]
on the Maturity Date and/or on such earlier date(s) as this Note may become due
and repayable in accordance with the Conditions, the amount payable under the
Conditions in respect of this Note on each such date and to pay interest (if
any) on this Note calculated and payable as provided in the Conditions together
with any other sums payable under the Conditions.

These Notes shall be governed by, and construed in accordance with, English law.

This Note shall not be validly issued unless authenticated by the Agent.

IN WITNESS whereof the Issuer has caused this Note to be duly executed on its
behalf.

[CIBA SPECIALTY CHEMICALS CORPORATION/
CIBA SPECIALTY CHEMICALS PLC/
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

By: .............................
Authorised Signatory

Authenticated without recourse,
warranty or liability by

JPMORGAN CHASE BANK

By: ..........................
Authorised Signatory


                                       81

                              TERMS AND CONDITIONS

                    [Terms and Conditions to be as set out in
                       Schedule 1 to the Agency Agreement]


                               PRICING SUPPLEMENT

                 [Here to be set out text of Pricing Supplement
                             relating to the Notes]


                                       82

                                     PART 4

                                 FORM OF COUPON

(Face of Coupon)

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

                 [Specified Currency and Nominal Amount Tranche]
                          NOTES DUE [Year of Maturity]
                                 Series No. [ ]

PART A

[FOR FIXED RATE NOTES:-

This Coupon is payable to bearer, separately          Coupon for
negotiable and subject to the Terms and               [    ]
Conditions of the said Notes.                         due on
                                                      [    ]

PART B

[FOR FLOATING RATE NOTES OR INDEXED INTEREST NOTES:-

Coupon for the amount due in accordance with          Coupon due
the Terms and Conditions on the said Notes on         in [     ]
the Interest Payment Date falling in
[     ]].

This Coupon is payable to bearer,
separately negotiable and subject to such
Terms and Conditions, under which it may
become void before its due date.]

THE NOTE PERTAINING HERETO HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY
NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE
BENEFIT OF U.S. PERSONS OTHER THAN PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
TERMS USED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN REGULATION S UNDER
THE SECURITIES ACT.

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(B)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED


                                       83

STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON
BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN
SECTION 6049(B)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS
THEREUNDER).](1)

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND
1287(a) OF THE INTERNAL REVENUE CODE.](2)

- ------------------------------------------------------------------------
00      000000        [ISIN]    00         000000
- ------------------------------------------------------------------------


- ----------
1     This legend to appear on Coupons attaching to Notes issued by Ciba
      Specialty Chemicals Corporation with a maturity of 183 days or less.

2     This legend to appear on Coupons attaching to Notes issued by Ciba
      Specialty Chemicals Corporation with a maturity of more than 183 days and
      all other Coupons.


                                       84

(Reverse of Coupon)

                                      AGENT

                               JPMORGAN CHASE BANK
                                  TRINITY TOWER
                              9 THOMAS MORE STREET
                                 LONDON E1W 1YT

                                  PAYING AGENT

                        J.P. MORGAN BANK LUXEMBOURG S.A.
                                  5 RUE PLAETIS
                                L-2338 LUXEMBOURG

and/or such other or further Agent and other or further Paying Agents and/or
specified offices as may from time to time be duly appointed by the Issuer and
the Guarantor and notice of which has been given to the Noteholders.


                                       85

(On the front)

                                     PART 5

                                 FORM OF RECEIPT

THE NOTE PERTAINING HERETO HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY
NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE
BENEFIT OF U.S. PERSONS OTHER THAN PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
TERMS USED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN REGULATION S UNDER
THE SECURITIES ACT.

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(B)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON
(OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(B)(4) OF THE INTERNAL
REVENUE CODE AND THE REGULATIONS THEREUNDER).](1)

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](2)

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/

               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

               [Specified Currency and Nominal Amount of Tranche]
                 EURO MEDIUM TERM NOTES DUE [Year of Maturity]

                                 Series No. [ ]

Receipt for the sum of [ ] being the instalment of principal payable in
accordance with the Terms and Conditions endorsed on the Note to which this
Receipt appertains (the CONDITIONS) on [ ].

This Receipt is issued subject to and in accordance with the Conditions which
shall be binding upon the holder of this Receipt (whether or not it is for the
time being attached to such Note) and is payable at the specified office of the
Agent or any of the Paying Agents set out on the reverse of the Note to which
this Receipt appertains (and/or any other or further Paying Agents and/or
specified offices as may from time to time be duly appointed and notified to the
Noteholders).

- ----------
1     This legend to appear on Receipts pertaining to Notes issued by Ciba
      Specialty Chemicals Corporation with a maturity of 183 days or less.

2     This legend to appear on Receipts pertaining to Notes issued by Ciba
      Specialty Chemicals Corporation with a maturity of more than 183 days and
      on all other Receipts.


                                       86

This Receipt must be presented for payment together with the Note to which it
appertains. The Issuer shall have no obligation in respect of any Receipt
presented without the Note to which it appertains or any unmatured Receipts.

[CIBA SPECIALTY CHEMICALS CORPORATION/
CIBA SPECIALTY CHEMICALS PLC/
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

By:...........................
Authorised Signatory


                                       87

                                     PART 6

                                  FORM OF TALON

THE NOTE PERTAINING HERETO HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY
NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE
BENEFIT OF U.S. PERSONS OTHER THAN PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
TERMS USED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN REGULATION S UNDER
THE SECURITIES ACT.

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT
A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION
6049(B)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS
THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON
(OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(B)(4) OF THE INTERNAL
REVENUE CODE AND THE REGULATIONS THEREUNDER).](1)

[ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](2)

(On the front)

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/

               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

               [Specified Currency and Nominal Amount of Tranche]
                  EURO MEDIUM TERM NOTES DUE [Year of Maturity]

                                 Series No. [ ]

On and after [ ] further Coupons [and a further Talon] appertaining to the Note
to which this Talon appertains will be issued at the specified office of the
Agent or any of the Paying Agents set out on the reverse hereof (and/or any
other or further Paying Agents and/or specified offices as may from time to time
be duly appointed and notified to the Noteholders) upon production and surrender
of this Talon.

This Talon may, in certain circumstances, become void under the Terms and
Conditions endorsed on the Notes to which this Talon appertains.

- ----------
1     This legend to appear on Talons pertaining to Notes issued by Ciba
      Specialty Chemicals Corporation with a maturity of 183 days or less.

2     This legend to appear on Talons pertaining to Notes issued by Ciba
      Specialty Chemicals Corporation with a maturity of 183 days and on all
      other Talons.


                                       88

[CIBA SPECIALTY CHEMICALS CORPORATION/
CIBA SPECIALTY CHEMICALS PLC/
CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

By: ...........................
Authorised Signatory


                                       89

(Reverse of Receipt and Talon)

                                      AGENT

                               JPMORGAN CHASE BANK
                                  TRINITY TOWER
                              9 THOMAS MORE STREET
                                 LONDON E1W 1YT

                                  PAYING AGENT

                        J.P. MORGAN BANK LUXEMBOURG S.A.
                                  5 RUE PLAETIS
                                L-2338 LUXEMBOURG

and/or such other or further Agent and other or further Paying Agents and/or
specified offices as may from time to time be duly appointed by the Issuer and
the Guarantor and notice of which has been given to the Noteholders.


                                       90

                                   SCHEDULE 3

                            FORM OF DEED OF GUARANTEE

THIS DEED OF GUARANTEE is made on 27th March, 2003 by CIBA SPECIALTY CHEMICALS
HOLDING INC., (the GUARANTOR) in favour of the Relevant Account Holders (as
defined in the Deed of Covenant referred to below) and the holders for the time
being of the Notes (as defined below) and the interest coupons (if any)
appertaining to the Notes (COUPONS), the Coupons being attached on issue to
Definitive Note(s) (as defined below). Each Relevant Account Holder, each holder
of a Note and each holder of a Coupon is a HOLDER.

WHEREAS:

(A)   CIBA SPECIALTY CHEMICALS CORPORATION, CIBA SPECIALTY CHEMICALS PLC, CIBA
      SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH, CIBA SPECIALTY CHEMICALS
      EUROFINANCE LTD. (the ISSUERS and each an ISSUER) and the Guarantor have
      entered into an amended and restated Program Agreement (the PROGRAM
      AGREEMENT, which expression includes the same as it may be amended or
      supplemented from time to time) dated 27th March, 2003 with the Dealers
      named therein, which amends and restates the amended and restated program
      agreement entered into by, inter alia, Ciba Specialty Chemicals
      Corporation, Ciba Specialty Chemicals PLC and Ciba Spezialitatenchemie
      Holding Deutschland GmbH dated 30th March, 2001 (the PRINCIPAL PROGRAM
      AGREEMENT), under which each Issuer proposes from time to time to issue
      Euro Medium Term Notes (the NOTES, such expression to include each
      Definitive Note issued by an Issuer and each Global Note issued by an
      Issuer (where DEFINITIVE NOTE and GLOBAL NOTE have the meanings ascribed
      thereto in the Agency Agreement defined below) and to include any receipts
      issued in respect of Notes repayable in instalments);

(B)   each Issuer has executed a Deed of Covenant of even date (the DEED OF
      COVENANT) relating to Global Notes issued by that Issuer pursuant to the
      Program Agreement;

(C)   the Issuers and the Guarantor have entered into an amended and restated
      agency agreement (the AGENCY AGREEMENT, which expression includes the same
      as it may be amended or supplemented from time to time) dated 27th March,
      2003 with the Paying Agents named therein; and

(D)   this Deed of Guarantee amends and restates the amended and restated Deed
      of Guarantee made by the Guarantor dated 27th March, 2002, and does not
      affect any Notes issued pursuant to the Principal Program Agreement prior
      to the date hereof.

NOW THIS DEED WITNESSES as follows:

1.    Guarantee: The Guarantor irrevocably and unconditionally undertakes to
      secure by way of deed poll to each Holder the due and punctual payment as
      stipulated in an Issuer's Note or Coupon or under its Deed of Covenant, as
      the case may be. The Guarantor therefore undertakes to pay on first demand
      of such a Holder, irrespective of the validity and the legal effects of
      the above mentioned relationship in respect of a Note or Coupon or Deed of
      Covenant and waiving all rights of objection and defence arising therefrom
      any amount not paid by the relevant Issuer (including any premium or any
      other amounts of whatever nature or additional amounts) upon receipt of
      the written request for payment by such Holder and the confirmation in
      writing by the Agent that the relevant Issuer has not made such payments
      on the dates specified and in the amount called under the Guarantee. The
      Guarantor hereby expressly undertakes and secures that payments under this
      Guarantee will not be less than as


                                       91

      stipulated in an Issuer's Note or Coupon. In implementation of this
      undertaking and in case Swiss withholding taxes are imposed in respect of
      payments made under this Guarantee, the Guarantor undertakes, as a
      separate and independent obligation, to pay an increased amount on the
      relevant Note or Coupon so that the payment received by the Noteholder or
      Couponholder shall equal the amount actually stipulated in such Note or
      Coupon (assuming no such withholding applies).

2.    Guarantor's Obligations Continuing: The Guarantor's obligations under this
      Guarantee are and will remain in full force and effect by way of
      continuing security until no sum remains payable under any Note, any
      Coupon or the Deed of Covenant. Furthermore, these obligations of the
      Guarantor are additional to, and not instead of, any security or other
      guarantee or indemnity at any time existing in favour of a Holder, whether
      from the Guarantor or otherwise. The Guarantor irrevocably waives all
      notices and demands whatsoever, except as provided herein.

3.    Repayment to the Issuer: If any payment received by a Holder is, on the
      subsequent liquidation or insolvency of the relevant Issuer, avoided under
      any laws relating to liquidation or insolvency, such payment will not be
      considered as having discharged or diminished the liability of the
      Guarantor and this Guarantee will continue to apply as if such payment had
      at all times remained owing by the relevant Issuer.

4.    Status of Guarantee: The payment obligations of the Guarantor under this
      Guarantee constitute direct, unconditional and (subject to Clause 5 below)
      unsecured obligations of the Guarantor and (subject as aforesaid) rank and
      will rank pari passu with all other outstanding unsecured and
      unsubordinated indebtedness and monetary obligations of the Guarantor,
      present or future, including those in respect of deposits (other than
      obligations preferred by law).

5.    Negative Pledge of the Guarantor: So long as any of the Notes remains
      outstanding, but not later than the time when payment for the full amount
      of principal and interest in respect of all outstanding Notes has been
      duly provided for, the Guarantor will procure that no Indebtedness of the
      Guarantor which is represented by bonds, notes or other securities which
      in any such case are listed or capable of being listed on any recognised
      Stock Exchange will be secured upon any of the present or future assets or
      revenues of the Guarantor unless all amounts payable under this Guarantee
      are secured equally and rateably with such other security or such other
      security or guarantee is granted to the Notes and Coupons as shall have
      been approved by an Extraordinary Resolution of the Noteholders. Any
      reference to an obligation being guaranteed shall include a reference to
      an indemnity being given in respect of payment thereof.

      As used herein INDEBTEDNESS means all indebtedness for money borrowed that
      is created, assumed, incurred or guaranteed in any manner by the Guarantor
      or for which the Guarantor is otherwise responsible or liable.

6.    Tax Gross-up: All payments in respect of the Notes by the Guarantor shall
      be made without withholding or deduction for, or on account of, any
      present or future taxes, duties, assessments or governmental charges of
      whatever nature (TAXES) imposed or levied by or on behalf of Switzerland,
      or any political sub-division of, or any authority in, or of, Switzerland
      having power to tax, unless the withholding or deduction of the Taxes is
      required by law. In that event, the Guarantor will pay such additional
      amounts as may be necessary in order that the net amounts received by the
      Noteholders and Couponholders after the withholding or deduction shall
      equal the respective amounts which would have been receivable in respect
      of the Notes or, as the case may be, Coupons in the absence of the
      withholding or deduction;


                                       92

      except that no additional amount shall be payable in relation to any
      payment in respect of any Note or Coupon:

      (a)   by or on behalf of a person liable to such tax, duty or charge in
            respect of such Note, Receipt or Coupon by reason of his having some
            connection with Switzerland other than the mere holding or ownership
            of such Note, Receipt or Coupon; and/or

      (b)   presented for payment to the relevant Issuer more than 30 days after
            the Relevant Date (as defined in Condition 7(f) of the Terms and
            Conditions of the relevant Notes) except to the extent that a holder
            would have been entitled to additional amounts on presenting the
            same for payment on the last day of the period of 30 days; and/or

      (c)   to, or to a third party on behalf of, a holder who would be able to
            avoid such withholding or deduction by making a declaration of
            non-residence or similar claim for exemption but fails to do so;
            and/or

      (d)   where such withholding or deduction is imposed on a payment to an
            individual and is required to be made pursuant to any European Union
            Directive on the taxation of savings implementing the conclusions of
            the ECOFIN Council meeting of 26th-27th November, 2000, or any law
            implementing or complying with, or introduced in order to conform
            to, such Directive; and/or

      (e)   presented for payment by or on behalf of a holder who would have
            been able to avoid such withholding or deduction by presenting the
            relevant Note or Coupon to another Paying Agent in a Member State of
            the EU.

7.    Power to execute: The Guarantor hereby warrants, represents and covenants
      with each Holder that it has all corporate power, and has taken all
      necessary corporate or other steps, to enable it to execute, deliver and
      perform this Guarantee, and that this Guarantee constitutes a legal, valid
      and binding obligation of the Guarantor, enforceable in accordance with
      its terms subject to applicable bankruptcy, reorganisation, insolvency,
      fraudulent transfer, moratorium and other similar laws affecting
      creditor's rights generally from time to time in effect, and to general
      principles of equity, regardless of whether considered in a proceeding in
      law or at equity.

8.    Deposit of Guarantee: This Guarantee shall take effect as a Deed Poll for
      the benefit of the Holders from time to time and for the time being. This
      Guarantee shall be deposited with and held by The Chase Manhattan Bank for
      the benefit of the Holders until all the obligations of the Guarantor
      hereunder have been discharged in full.

9.    Production of Guarantee: The Guarantor hereby acknowledges the right of
      every Holder to the production of, and the right of every Holder to obtain
      (upon payment of a reasonable charge) a copy of, this Guarantee, and
      further acknowledges and covenants that the obligations binding upon it
      contained herein are owed to, and shall be for the account of, each and
      every Holder, and that each Holder shall be entitled severally to enforce
      the said obligations against the Guarantor.

10.   Subrogation: Until all amounts which may be payable under the Notes, the
      Coupons and/or the Deed of Covenant have been irrevocably paid in full,
      the Guarantor shall not exercise any rights of subrogation in respect of
      any rights of any Holder or claim in competition with the Holders against
      the relevant Issuer.

11.   Governing Law and Jurisdiction: This Guarantee is governed by and shall be
      construed in accordance with English law. The Guarantor irrevocably agrees
      for the benefit of each


                                       93

      Holder that the courts of England are to have jurisdiction to settle any
      disputes which may arise out of or in connection with this Guarantee and
      that accordingly any suit, action or proceedings arising out of or in
      connection with this Guarantee (together referred to as PROCEEDINGS) may
      be brought in the courts of England.

      The Guarantor irrevocably waives any objection which it may have now or
      hereafter to the laying of the venue of the Proceedings in the courts of
      England and irrevocably agrees that a final judgment in any Proceedings
      brought in the courts of England shall be conclusive and binding upon the
      Guarantor and may be enforced in the courts of any other jurisdiction.
      Nothing contained in this clause shall limit any right to take Proceedings
      against the Guarantor in any other court of competent jurisdiction, nor
      shall the taking of Proceedings in none or more jurisdictions preclude the
      taking of Proceedings in any other jurisdiction, whether concurrently or
      not.

      No rights are conferred on any person under the Contracts (Rights of Third
      Parties) Act 1999 to enforce any term of this Global Note, but this does
      not affect any right or remedy of any person which exists or is available
      apart from that Act.

      The Guarantor hereby appoints Ciba Specialty Chemicals PLC as its agent
      for service of process in England in respect of any Proceedings and
      undertakes that in the event of it ceasing so to act it will appoint
      another person as its agent for that purpose.

IN WITNESS whereof this Guarantee has been manually executed as a deed poll on
behalf of the Guarantor.

Executed as a deed                  )
by CIBA SPECIALTY CHEMICALS         )
HOLDING INC.                        )
acting by                           )
and                                 )
                                    )
acting under the authority of       )
that Company in the presence of:    )


Witness's
Signature:.........................................

Name: .............................................

Address:...........................................

      .............................................


Dated 27th March, 2003


                                       94

                                   SCHEDULE 4

                     PROVISIONS FOR MEETINGS OF NOTEHOLDERS

1.    As used in this Schedule the following expressions shall have the
      following meanings unless the context otherwise requires:

      (A)   VOTING CERTIFICATE shall mean an English language certificate issued
            by a Paying Agent and dated in which it is stated:

            (i)   that on the date thereof Notes (not being Notes in respect of
                  which a block voting instruction has been issued and is
                  outstanding in respect of the meeting specified in such voting
                  certificate and any adjourned such meeting) bearing specified
                  serial numbers were deposited with such Paying Agent or (to
                  the satisfaction of such Paying Agent) were held to its order
                  or under its control and that no such Notes will cease to be
                  so deposited or held until the first to occur of:

                  (A)   the conclusion of the meeting specified in such
                        certificate or, if applicable, any adjourned such
                        meeting; and

                  (B)   the surrender of the certificate to the Paying Agent who
                        issued the same; and

            (ii)  that the bearer thereof is entitled to attend and vote at such
                  meeting and any adjourned such meeting in respect of the Notes
                  represented by such certificate;

      (B)   BLOCK VOTING INSTRUCTION shall mean an English language document
            issued by a Paying Agent and dated in which:

            (i)   it is certified that Notes (not being Notes in respect of
                  which a voting certificate has been issued and is outstanding
                  in respect of the meeting specified in such block voting
                  instruction and any adjourned such meeting) have been
                  deposited with such Paying Agent or (to the satisfaction of
                  such Paying Agent) were held to its order or under its control
                  and that no such Notes will cease to be so deposited or held
                  until the first to occur of:

                  (A)   the conclusion of the meeting specified in such document
                        or, if applicable, any adjourned such meeting; and

                  (B)   the surrender to the Paying Agent not less than 48 hours
                        before the time for which such meeting or any adjourned
                        such meeting is convened of the receipt issued by such
                        Paying Agent in respect of each such deposited Note
                        which is to be released or (as the case may require) the
                        Note or Notes ceasing with the agreement of the Paying
                        Agent to be held to its order or under its control and
                        the giving of notice by the Paying Agent to the Issuer
                        in accordance with paragraph 17 hereof of the necessary
                        amendment to the block voting instruction;

            (ii)  it is certified that each holder of such Notes has instructed
                  such Paying Agent that the vote(s) attributable to the Note or
                  Notes so deposited or held should


                                       95

                  be cast in a particular way in relation to the resolution or
                  resolutions to be put to such meeting or any adjourned such
                  meeting and that all such instructions are during the period
                  commencing 48 hours prior to the time for which such meeting
                  or any adjourned such meeting is convened and ending at the
                  conclusion or adjournment thereof neither revocable nor
                  capable of amendment;

            (iii) the total number and the serial numbers of the Notes so
                  deposited or held are listed distinguishing with regard to
                  each such resolution between those in respect of which
                  instructions have been given as aforesaid that the votes
                  attributable thereto should be cast in favour of the
                  resolution and those in respect of which instructions have
                  been so given that the votes attributable thereto should be
                  cast against the resolution; and

            (iv)  one or more persons named in such document (each hereinafter
                  called a PROXY) is or are authorised and instructed by such
                  Paying Agent to cast the votes attributable to the Notes so
                  listed in accordance with the instructions referred to in
                  paragraph (iii) above as set out in such document.

            The holder of any voting certificate or the proxies named in any
            block voting instruction shall for all purposes in connection with
            the relevant meeting or adjourned meeting of Noteholders be deemed
            to be the holder of the Notes to which such voting certificate or
            block voting instruction relates and the Paying Agent with which
            such Notes have been deposited or the person holding the same to the
            order or under the control of such Paying Agent shall be deemed for
            such purposes not to be the holder of those Notes.

      (c)   References herein to the NOTES are to the Notes in respect of which
            the relevant meeting is convened.

2.    The relevant Issuer or the Guarantor may at any time and, upon a
      requisition in writing of Noteholders holding not less than five per cent.
      in nominal amount of the Notes for the time being outstanding, shall
      convene a meeting of the Noteholders and if the relevant Issuer makes
      default for a period of seven days in convening such a meeting the same
      may be convened by the requisitionists. Whenever the relevant Issuer or
      the Guarantor is about to convene any such meeting it shall forthwith give
      notice in writing to the Agent and the Dealers of the day, time and place
      thereof and of the nature of the business to be transacted thereat. Every
      such meeting shall be held at such time and place as the Agent may
      approve.

3.    At least 21 days' notice (exclusive of the day on which the notice is
      given and the day on which the meeting is held) specifying the place, day
      and hour of meeting shall be given to the Noteholders prior to any meeting
      of the Noteholders in the manner provided by Condition 14. Such notice
      shall state generally the nature of the business to be transacted at the
      meeting thereby convened but (except for an Extraordinary Resolution) it
      shall not be necessary to specify in such notice the terms of any
      resolution to be proposed. Such notice shall include a statement to the
      effect that Notes may be deposited with Paying Agents for the purpose of
      obtaining voting certificates or appointing proxies not less than 24 hours
      before the time fixed for the meeting or that, in the case of
      corporations, they may appoint representatives by resolution of their
      directors or other governing body. A copy of the notice shall be sent by
      post to the Issuer (unless the meeting is convened by the relevant Issuer)
      and to the Guarantor (unless the meeting is convened by the Guarantor).


                                       96

4.    Some person (who may but need not be a Noteholder) nominated in writing by
      the relevant Issuer shall be entitled to take the chair at every such
      meeting but if no such nomination is made or if at any meeting the person
      nominated shall not be present within fifteen minutes after the time
      appointed for holding the meeting the Noteholders present shall choose one
      of their number to be Chairman.

5.    At any such meeting one or more persons present holding Notes or voting
      certificates or being proxies and holding or representing in the aggregate
      not less than twenty per cent. in nominal amount of the Notes for the time
      being outstanding shall (except for the purpose of passing an
      Extraordinary Resolution (as defined in paragraph 20 below)) form a quorum
      for the transaction of business and no business (other than the choosing
      of a Chairman) shall be transacted at any meeting unless the requisite
      quorum be present at the commencement of business. The quorum at any such
      meeting for passing an Extraordinary Resolution shall (subject as provided
      below) be one or more persons present holding Notes or voting certificates
      or being proxies and holding or representing in the aggregate not less
      than 50 per cent. in nominal amount of the Notes for the time being
      outstanding PROVIDED THAT at any meeting the business of which includes
      any of the following matters (each of which shall only be capable of being
      effected after having been approved by Extraordinary Resolution) namely:

      (a)   modification of the Maturity Date of the Notes or reduction or
            cancellation of the nominal amount payable upon maturity; or

      (b)   reduction or cancellation of the amount payable or modification of
            the payment date in respect of any interest in respect of the Notes
            or variation of the method of calculating the rate of interest in
            respect of the Notes; or

      (c)   reduction of any Minimum Interest Rate and/or Maximum Interest Rate
            specified in the applicable Pricing Supplement of any Note; or

      (d)   modification of the currency in which payments under the Notes
            and/or the Receipts and/or Coupons appertaining thereto are to be
            made; or

      (e)   modification of the majority required to pass an Extraordinary
            Resolution; or

      (f)   the sanctioning of any such scheme or proposal as is described in
            paragraph (f) below; or

      (g)   alteration of this proviso or the proviso to paragraph 6 below;

      the quorum shall be one or more persons present holding Notes or voting
      certificates or being proxies and holding or representing in the aggregate
      not less than 75 per cent. in nominal amount of the Notes for the time
      being outstanding. An Extraordinary Resolution passed at any meeting of
      the holders of Notes will be binding on all holders of Notes, whether or
      not they are present at the meeting, and on all holders of Coupons
      appertaining to such Notes.

6.    If within fifteen minutes after the time appointed for any such meeting a
      quorum is not present the meeting shall if convened upon the requisition
      of Noteholders be dissolved. In any other case it shall stand adjourned to
      the same day in the next week (or if such day is a public holiday the next
      succeeding business day) at the same time and place (except in the case of
      a meeting at which an Extraordinary Resolution is to be proposed in which
      case it shall stand adjourned for such period being not less than 14 days
      nor more than 42 days, and at such place as may be appointed by the
      Chairman and approved by the Agent) and at such adjourned meeting one or
      more persons present holding Notes or voting certificates or being


                                       97

      proxies (whatever the nominal amount of the Notes so held or represented
      by them) shall (subject as provided below) form a quorum and shall
      (subject as provided below) have power to pass any Extraordinary
      Resolution or other resolution and to decide upon all matters which could
      properly have been dealt with at the meeting from which the adjournment
      took place had the requisite quorum been present PROVIDED THAT at any
      adjourned meeting the business of which includes any of the matters
      specified in the proviso to paragraph 5 above the quorum shall be one or
      more persons present holding Notes or voting certificates or being proxies
      and holding or representing in the aggregate not less than a clear
      majority in nominal amount of the Notes for the time being outstanding.

7.    Notice of any adjourned meeting at which an Extraordinary Resolution is to
      be submitted shall be given in the same manner as notice of an original
      meeting but as if 10 were substituted for 21 in paragraph 3 above and such
      notice shall (except in cases where the proviso to paragraph 6 above shall
      apply when it shall state the relevant quorum) state that one or more
      persons present holding Notes or voting certificates or being proxies at
      the adjourned meeting whatever the nominal amount of the Notes held or
      represented by them will form a quorum. Subject as aforesaid it shall not
      be necessary to give any notice of an adjourned meeting.

8.    Every question submitted to a meeting shall be decided in the first
      instance by a show of hands and in case of equality of votes the Chairman
      shall both on a show of hands and on a poll have a casting vote in
      addition to the vote or votes (if any) to which he may be entitled as a
      Noteholder or as a holder of a voting certificate or as a proxy.

9.    At any meeting, unless a poll is (before or on the declaration of the
      result of the show of hands) demanded by the Chairman or the relevant
      Issuer or by one or more persons present holding Notes or voting
      certificates or being proxies (whatever the nominal amount of the Notes so
      held by them), a declaration by the Chairman that a resolution has been
      carried or carried by a particular majority or lost or not carried by a
      particular majority shall be conclusive evidence of the fact without proof
      of the number or proportion of the votes recorded in favour of or against
      such resolution.

10.   Subject to paragraph 12 below, if at any such meeting a poll is so
      demanded it shall be taken in such manner and subject as hereinafter
      provided either at once or after an adjournment as the Chairman directs
      and the result of such poll shall be deemed to be the resolution of the
      meeting at which the poll was demanded as at the date of the taking of the
      poll. The demand for a poll shall not prevent the continuance of the
      meeting for the transaction of any business other than the motion on which
      the poll has been demanded.

11.   The Chairman may with the consent of (and shall if directed by) any such
      meeting adjourn the same from time to time and from place to place but no
      business shall be transacted at any adjourned meeting except business
      which might lawfully (but for lack of required quorum) have been
      transacted at the meeting from which the adjournment took place.

12.   Any poll demanded at any such meeting on the election of a Chairman or on
      any question of adjournment shall be taken at the meeting without
      adjournment.

13.   Any director or officer of the Issuer or the Guarantor and their
      respective lawyers may attend and speak at any meeting. Save as aforesaid,
      but without prejudice to the proviso to the definition of OUTSTANDING in
      clause 1.2 of this Agreement, no person shall be entitled to attend and
      speak nor shall any person be entitled to vote at any meeting of the
      Noteholders or join with others in requisitioning the convening of such a
      meeting unless he either produces the Note or Notes of which he is the
      holder or a voting certificate or is a proxy. None of the


                                       98

      Issuers, the Guarantor nor any of their respective subsidiaries shall be
      entitled to vote at any meeting in respect of Notes held by it for the
      benefit of any such company and no other person shall be entitled to vote
      at any meeting in respect of Notes held by it for the benefit of any such
      company. Nothing herein contained shall prevent any of the proxies named
      in any block voting instruction from being a director, officer or
      representative of or otherwise connected with the Issuer or the Guarantor.

14.   Subject as provided in paragraph 13 hereof at any meeting:

      (a)   on a show of hands every person who is present in person and
            produces a Note or voting certificate or is a proxy shall have one
            vote; and

      (b)   on a poll every person who is so present shall have one vote in
            respect of:

            (i)   in the case of a meeting of the holders of Notes all of which
                  are denominated in a single currency, each minimum integral
                  amount of such currency; and

            (ii)  in the case of a meeting of the holders of Notes denominated
                  in more than one currency, each U.S.$1.00 or, in the case of a
                  Note denominated in a currency other than U.S. dollars, the
                  equivalent of U.S.$1.00 in such currency at the Agent's spot
                  buying rate for the relevant currency against U.S. dollars at
                  or about 11.00 a.m. (London time) on the date of publication
                  of the notice of the relevant meeting (or of the original
                  meeting of which such meeting is an adjournment),

            or such other amount as the Agent shall in its absolute discretion
            stipulate in nominal amount of Notes so produced or represented by
            the voting certificate so produced or in respect of which he is a
            proxy.

      Without prejudice to the obligations of the proxies named in any block
      voting instruction any person entitled to more than one vote need not use
      all his votes or cast all the votes to which he is entitled in the same
      way.

15.   The proxies named in any block voting instruction need not be Noteholders.

16.   Each block voting instruction together (if so requested by the relevant
      Issuer) with proof satisfactory to the relevant Issuer of its due
      execution on behalf of the relevant Paying Agent shall be deposited at
      such place as the Agent shall approve not less than 24 hours before the
      time appointed for holding the meeting or adjourned meeting at which the
      proxies named in the block voting instruction propose to vote and in
      default the block voting instruction shall not be treated as valid unless
      the Chairman of the meeting decides otherwise before such meeting or
      adjourned meeting proceeds to business. A certified copy of each block
      voting instruction shall be deposited with the Agent before the
      commencement of the meeting or adjourned meeting but the Agent shall not
      thereby be obliged to investigate or be concerned with the validity of or
      the authority of the proxies named in any such block voting instruction.

17.   Any vote given in accordance with the terms of a block voting instruction
      shall be valid notwithstanding the previous revocation or amendment of the
      block voting instruction or of any of the Noteholders' instructions
      pursuant to which it was executed PROVIDED THAT no intimation in writing
      of such revocation or amendment shall have been received from the relevant
      Paying Agent by the relevant Issuer at its registered office (or such
      other place as may have been approved by the Agent for the purpose) by the
      time being 24 hours before the time appointed for holding the meeting or
      adjourned meeting at which the block voting instruction is to be used.


                                       99

18.   A meeting of the Noteholders shall in addition to the powers hereinbefore
      given have the following powers exercisable by Extraordinary Resolution
      (subject to the provisions relating to quorum contained in paragraphs 5
      and 6 above) only, namely:

      (a)   power to sanction any compromise or arrangement proposed to be made
            between the Issuer and the Guarantor and the Noteholders and
            Couponholders or any of them;

      (b)   power to sanction any abrogation, modification, compromise or
            arrangement in respect of the rights of the Noteholders and
            Couponholders against the relevant Issuer and the Guarantor or
            against any of its property whether such rights shall arise under
            this Agreement, the Notes or the Coupons or otherwise;

      (c)   power to assent to any modification of the provisions contained in
            this Agreement or the Conditions, the Notes, the Coupons, the
            Guarantee or the Deed of Covenant which shall be proposed by the
            Issuer or the Guarantor;

      (d)   power to give any authority or sanction which under the provisions
            of this Agreement or the Notes is required to be given by
            Extraordinary Resolution;

      (e)   power to appoint any persons (whether Noteholders or not) as a
            committee or committees to represent the interests of the
            Noteholders and to confer upon such committee or committees any
            powers or discretions which the Noteholders could themselves
            exercise by Extraordinary Resolution;

      (f)   power to sanction any scheme or proposal for the exchange or sale of
            the Notes for, or the conversion of the Notes into or the
            cancellation of the Notes in consideration of, shares, stock, notes,
            bonds, debentures, debenture stock and/or other obligations and/or
            securities of the Issuer or any other company formed or to be
            formed, or for or into or in consideration of cash, or partly for or
            into or in consideration of such shares, stock, notes, bonds,
            debentures, debenture stock and/or other obligations and/or
            securities as aforesaid and partly for or into or in consideration
            of cash; and

      (g)   power to approve the substitution of any entity in place of (i) the
            Issuer (or any previous substitute) as the principal debtor in
            respect of the Notes and the Coupons or (ii) the Guarantor (or any
            previous substitute) as guarantor under the Guarantee.

19.   Any resolution passed at a meeting of the Noteholders duly convened and
      held in accordance with the provision hereof shall be binding upon all the
      Noteholders whether present or not present at such meeting and whether or
      not voting and upon all Couponholders and Receiptholders and each of them
      shall be bound to give effect thereto accordingly and the passing of any
      such resolution shall be conclusive evidence that the circumstances
      justify the passing thereof. Notice of the result of the voting on any
      resolution duly considered by the Noteholders shall be published in
      accordance with Condition 14 by the relevant Issuer within 14 days of such
      result being known PROVIDED THAT the non-publication of such notice shall
      not invalidate such resolution.

20.   The expression EXTRAORDINARY RESOLUTION when used in this Agreement or the
      Conditions means a resolution passed at a meeting of the Noteholders duly
      convened and held in accordance with the provisions herein contained by a
      majority consisting of not less than 75 per cent. of the persons voting
      thereat upon a show of hands or if a poll be duly demanded then by a
      majority consisting of not less than 75 per cent. of the votes given on
      such poll.

21.   Minutes of all resolutions and proceedings at every such meeting as
      aforesaid shall be made and duly entered in books to be from time to time
      provided for that purpose by the relevant


                                      100

      Issuer and any such Minutes as aforesaid if purporting to be signed by the
      Chairman of the meeting at which such resolutions were passed or
      proceedings had shall be conclusive evidence of the matters therein
      contained and until the contrary is proved every such meeting in respect
      of the proceedings of which Minutes have been made shall be deemed to have
      been duly held and convened and all resolutions passed or proceedings had
      thereat to have been duly passed or had.

22.   Subject to all other provisions contained herein the Agent may without the
      consent of the relevant Issuer, the Guarantor, the Noteholders or the
      Couponholders prescribe such further regulations regarding the
      requisitioning and/or the holding of meetings of Noteholders and
      attendance and voting thereat as the Agent may in its sole discretion
      think fit.


                                      101

                                   SCHEDULE 5

                               FORM OF PUT NOTICE

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

                       [TITLE OF RELEVANT SERIES OF NOTES]

By depositing this duly completed Notice with any Paying Agent for the above
Series of Notes (the NOTES) the undersigned holder of such Notes surrendered
with this Notice and referred to below irrevocably exercises its option to have
such Notes redeemed in accordance with Condition 6(e) on [redemption date].

This Notice relates to Notes in the aggregate nominal amount of ..........

bearing the following serial numbers:


..........................................................................


..........................................................................


..........................................................................

If the Notes referred to above are to be returned (1) to the undersigned under
clause 10.4 of the Agency Agreement, they should be returned by post to the
following address outside the United States:

.............................

.............................

.............................

PAYMENT INSTRUCTIONS

Please make payment in respect of the above-mentioned Notes by [cheque posted to
the above address/transfer to the following bank account] (2):

Bank:.................................

Branch Address outside
the United States:      ................................

Branch Code: ................................

Account Number: ................................

Signature of holder: ................................


                                      102

                          Duly authorised on behalf of
                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]


[To be completed by recipient Paying Agent]

Details of missing unmatured Coupons ...............................(3)

Received by: ................................

[Signature and stamp of Paying Agent]

At its office at: .................................

On:....................................

NOTES

1.    The Agency Agreement provides that Notes so returned will be sent by post,
      uninsured and at the risk of the Noteholder, unless the Noteholder
      otherwise requests and pays the costs of such insurance to the relevant
      Paying Agent at the time of depositing the Note referred to above.

2.    Delete as applicable.

3.    Only relevant for Fixed Rate Notes (which are not also Indexed Redemption
      Amount Notes) in definitive form.

N.B.  The Paying Agent with whom the above-mentioned Notes are deposited will
      not in any circumstances be liable to the depositing Noteholder or any
      other person for any loss or damage arising from any act, default or
      omission of such Paying Agent in relation to the said Notes or any of them
      unless such loss or damage was caused by the fraud or gross negligence of
      such Paying Agent or its directors, officers or employees.

      This Put Notice is not valid unless all of the paragraphs requiring
      completion are duly completed. Once validly given this Put Notice is
      irrevocable except in the circumstances set out in clause 10.4 of the
      Agency Agreement.


                                      103

                                   SCHEDULE 6

                                       [ ]



                             DATED 27TH MARCH, 2003

                          CIBA SPECIALTY CHEMICALS PLC
                      CIBA SPECIALTY CHEMICALS CORPORATION
                CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
                    CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
                                   AS ISSUERS

                                     - AND -

                      CIBA SPECIALTY CHEMICALS HOLDING INC.
                                  AS GUARANTOR



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

                           OPERATING & ADMINISTRATIVE
                              PROCEDURES MEMORANDUM
                                 IN RESPECT OF A
                               U.S.$2,000,000,000
                          EURO MEDIUM TERM NOTE PROGRAM
                             (AMENDED AND RESTATED)

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




                              [ALLEN & OVERY LOGO]
                                     LONDON


                                      104

The aggregate nominal amount of all Notes outstanding at any time will not,
subject as provided below, exceed U.S.$2,000,000,000 or its equivalent in other
currencies at the time of agreement to issue, subject to increase as provided in
the Program Agreement. The Program Agreement provides for the increase in the
nominal amount of Notes that may be issued under the Program. In that event,
this Procedures Memorandum shall apply to the Program as increased.

The documentation of the Program provides for the issue of Notes denominated in
any currency or currencies as may be agreed between the relevant Issuer, the
Guarantor and the relevant Dealer (subject to certain restrictions as to minimum
and/or maximum maturities as set out in the Offering Circular describing the
Program) and being any of:

      o     Fixed Rate Notes

      o     Floating Rate Notes

      o     Zero Coupon Notes

      o     Dual Currency Notes

      o     Indexed Interest Notes

      o     Indexed Redemption Amount Notes

      o     Instalment Notes

      o     Partly Paid Notes

      o     other forms of Notes agreed between the relevant Dealer or Lead
            Manager, the relevant Issuer and the Guarantor

All terms with initial capitals used herein without definition shall have the
meanings given to them in the Offering Circular dated 27th March, 2003 (the
OFFERING CIRCULAR as supplemented), or, as the case may be, the amended and
restated Program Agreement dated 27th March, 2003 (the PROGRAM AGREEMENT as
amended, supplemented or restated) between the Issuers, the Guarantor and the
Dealers named therein pursuant to which the Issuer may issue Euro Medium Term
Notes.

OPERATING PROCEDURES

Dealers must confirm all trades directly with the Issuer, the Guarantor and the
Agent.

1.    RESPONSIBILITIES OF THE AGENT

      The Agent will, in addition to the responsibilities in relation to
      settlement described in Annexe A, be responsible for the following:

      (a)   in the case of Notes which are to be listed on a Stock Exchange,
            distributing, or procuring the distribution, to the Stock Exchange
            and any other relevant authority such number of copies of the
            Pricing Supplement required by the Stock Exchange and such other
            relevant authority;

      (b)   in the case of Notes which are to be listed on a Stock Exchange,
            immediately notifying the relevant Issuer and the relevant Dealer if
            at any time the Agent is notified by the Listing Agent or the Stock
            Exchange that the listing of a Tranche of Notes has been refused or
            otherwise will not take place; and

      (c)   determining the end of the Distribution Compliance Period in respect
            of a Tranche in accordance with Clause 4 of the Agency Agreement.
            The Agent shall upon determining the end of the Distribution
            Compliance Period in respect of any Tranche notify the relevant
            Issuer, the Guarantor, Euroclear, Clearstream, Luxembourg and the
            relevant Dealer or Lead Manager, as the case may be.


                                      105

2.    RESPONSIBILITIES OF DEALER/LEAD MANAGER

(a)   Each Dealer/Lead Manager will be responsible for preparing and agreeing
      with the relevant Issuer and the Guarantor a Pricing Supplement
      (substantially in the form of Annexe C hereto) giving details of each
      Tranche of Notes to be issued.

(b)   In the case of an issue not to be subscribed pursuant to a Subscription
      Agreement, each Dealer which agrees to purchase Notes from the relevant
      Issuer will be responsible for notifying the Agent upon completion of the
      distribution of the Notes of each Tranche purchased by that Dealer. In the
      case of an issue of Notes to be subscribed pursuant to a Subscription
      Agreement, the Lead Manager will be responsible for notifying the Agent
      upon completion of the distribution of the Notes of such issue.

3.    SETTLEMENT

      The settlement procedures set out in Annexe A shall apply to each issue of
      Notes (Part 1 in the case of issues not to be subscribed pursuant to a
      Subscription Agreement, Part 2 in the case of issues to be subscribed
      pursuant to a Subscription Agreement), unless otherwise agreed between the
      relevant Issuer, the Guarantor, the Agent and the relevant Dealer or the
      Lead Manager, as the case may be. With issues of Notes to be listed on a
      Stock Exchange other than the Luxembourg Stock Exchange more time may be
      required to comply with the relevant Stock Exchange's listing requirements
      and with issues of Dual Currency or Indexed Notes more time may be
      required to settle documentation.

      A Trading Desk and Administrative Contact List is set out in Annexe D.

      N.B.: ALL COMMUNICATIONS WITH ANY ISSUER MUST BE COPIED TO THE GUARANTOR.


                                      106

                                    ANNEX 1

                                    [      ]

                                     PART 1

       SETTLEMENT PROCEDURES FOR ISSUES NOT TO BE SUBSCRIBED PURSUANT TO A
                             SUBSCRIPTION AGREEMENT

References below to the ISSUER is to the RELEVANT ISSUER.



Day                   Latest         Action
- ---                   ------         ------
                      London time
                      -----------
                               
No later              2.00 p.m.      The Issuer and the Guarantor may agree
than issue                           terms with one or more of the Dealers
Date minus 5                         for the issue and purchase of Notes
                                     (whether pursuant to an unsolicited bid
                                     from a Dealer or pursuant to an enquiry by
                                     the Issuer). The Dealer instructs the Agent
                                     to obtain a common code and ISIN from
                                     Euroclear or Clearstream, Luxembourg. In
                                     the case of the first Tranche of Notes of a
                                     Series, the Agent telephones Euroclear or
                                     Clearstream, Luxembourg with a request for
                                     a common code and ISIN for such Series and
                                     in the case of a subsequent Tranche of
                                     Notes of that Series the Agent telephones
                                     Euroclear or Clearstream, Luxembourg with a
                                     request for a temporary common code and
                                     ISIN for such Tranche. Each common code and
                                     ISIN is notified by the Agent to the Issuer
                                     and each Dealer which has reached agreement
                                     with the Issuer.

                      3.00 p.m.      If a Dealer has reached agreement with
                                     the Issuer and the Guarantor by telephone,
                                     such Dealer confirms the terms of the
                                     agreement to the Issuer and the Guarantor
                                     by fax (substantially in the form set out
                                     in Annexe B) attaching a copy of the
                                     Pricing Supplement (substantially in the
                                     form set out in Annexe C). The Dealer sends
                                     a copy of that fax to the Agent for
                                     information.

                      5.00 p.m.      The Issuer and the Guarantor confirm
                                     their agreement to the terms on which the
                                     issue of Notes is to be made (including the
                                     form of the Pricing Supplement) by each
                                     signing and returning a copy of the Pricing
                                     Supplement to the relevant Dealer. The
                                     Issuer also confirms its instructions to
                                     the Agent (including, in the case of
                                     Floating Rate Notes, for the purposes of
                                     rate fixing) to carry out the duties to be
                                     carried out by the Agent under these
                                     Settlement Procedures and the Agency
                                     Agreement including preparing,



                                      107



Day                   Latest         Action
- ---                   ------         ------
                      London time
                      -----------
                               
                                     authenticating and issuing a Temporary
                                     Global Note for the Tranche of Notes which
                                     is to be purchased and in the case of the
                                     first Tranche of a Series, where the
                                     Pricing Supplement for such Tranche does
                                     not specify that such Temporary Global Note
                                     is to be exchangeable only for Notes in
                                     definitive form, a Permanent Global Note
                                     for such Series, giving details of such
                                     Notes. The Issuer confirms such
                                     instructions by sending a copy by fax of
                                     the signed Pricing Supplement to the Agent.
                                     The details set out in the signed Pricing
                                     Supplement shall be conclusive evidence of
                                     the agreement (save in the case of manifest
                                     error) and shall be binding on the parties
                                     accordingly.

No later than                        In the case of Notes which are to be
Issue Date                           listed on a Stock Exchange, the Agent
Minus 3                              also notifies, or the notification to,
                                     the relevant Stock Exchange and any other
                                     relevant authority by fax or by hand of the
                                     details of the Notes to be issued by
                                     sending the Pricing Supplement to the
                                     relevant Stock Exchange and any other
                                     relevant authority.

Issue Date            3.00 p.m.      The relevant Dealer instructs Euroclear
Minus 2                              and/or Clearstream, Luxembourg to debit its
                                     account and pay the purchase price, against
                                     delivery of the Notes, to the Agent's
                                     account with Euroclear and/or Clearstream,
                                     Luxembourg on the Issue Date and the Agent
                                     receives details of such instructions
                                     through the records of Euroclear and/or
                                     Clearstream, Luxembourg.

                                     In the case of Floating Rate Notes, the
                                     Agent notifies Euroclear, Clearstream,
                                     Luxembourg , the Issuer, the Guarantor (if
                                     applicable) the relevant Stock Exchange and
                                     the relevant Dealer by telex or fax of the
                                     Rate of Interest for the first Interest
                                     Period (if already determined). Where the
                                     Rate of Interest has not yet been
                                     determined, this will be notified in
                                     accordance with this paragraph as soon as
                                     it has been determined.

Issue Date minus 1    3.00 p.m.      The Agent prepares and authenticates a
                                     Temporary Global Note for each Tranche of
                                     Notes which is to be purchased and, where
                                     required as specified above, a Permanent
                                     Global Note in respect of the relevant
                                     Series. The conditions precedent in the
                                     Program agreement are satisfied and/or
                                     waived. The Temporary Global Note and any
                                     such Permanent Global Note are then
                                     delivered by the Agent to a common
                                     depositary for Euroclear and Clearstream,
                                     Luxembourg and instructions are given by
                                     the Agent to Euroclear or, as the case may
                                     be, Clearstream, Luxembourg to credit the
                                     Notes represented by such



                                      108



Day                   Latest         Action
- ---                   ------         ------
                      London time
                      -----------
                               
                                     Temporary Global Note to the Agent's
                                     distribution account. The Agent further
                                     instructs Euroclear or, as the case may be,
                                     Clearstream, Luxembourg to debit from the
                                     distribution account the nominal amount of
                                     the relevant Tranche of Notes and to credit
                                     such nominal amount to the account of such
                                     Dealer with Euroclear or Clearstream,
                                     Luxembourg against payment to the account
                                     of the Agent of the purchase price for the
                                     relevant Tranche of Notes for value on the
                                     Issue Date. The relevant Dealer gives
                                     corresponding instructions to Euroclear or
                                     Clearstream, Luxembourg. The parties (which
                                     for this purpose shall include the Agent)
                                     may agree to arrange for FREE DELIVERY to
                                     be made through the relevant clearing
                                     system if specified in the applicable
                                     Pricing Supplement, in which case these
                                     Settlement Procedures will be amended
                                     accordingly.

Issue Date                           Euroclear and Clearstream, Luxembourg
                                     debit and credit accounts in accordance
                                     with instructions received by them.

                                     The Agent pays to the Issuer for value on
                                     the Issue Date the aggregate purchase
                                     moneys received by it to such account of
                                     the Issuer as shall have been notified to
                                     the Agent for the purpose.

On or subsequent                     The Agent notifies the Issuer and
to the Issue Date                    Guarantor forthwith in the event that a
                                     Dealer does not pay the purchase price due
                                     from it in respect of a Note.

                                     The Agent notifies the Issuer of the issue
                                     of Notes giving details of the Global
                                     Note(s) and the nominal amount represented
                                     thereby.

                                     The Agent confirms the issue of Notes to
                                     the relevant Stock Exchange and any other
                                     relevant authority.

                                     The relevant Dealer promptly notifies the
                                     Agent that the distribution of the Notes
                                     purchased by it has been completed. The
                                     Agent promptly notifies the Issuer, the
                                     Guarantor, the relevant Dealers, Euroclear
                                     and Clearstream, Luxembourg of the date of
                                     the end of the Distribution Compliance
                                     Period with respect to the relevant Tranche
                                     of Notes.



                                      109

                                    ANNEXE 1

                                     PART 2

           SETTLEMENT PROCEDURES FOR ISSUES SUBSCRIBED PURSUANT TO A
                             SUBSCRIPTION AGREEMENT

References below to the ISSUER is to the RELEVANT ISSUER.



Day                   Latest time    Action
- ---                   -----------    ------
                               
No later than                        The Issuer and the Guarantor may,
Issue Date                           subject to the execution of the
minus 10 (or                         Subscription Agreement referred to
such other number                    below, agree terms with a Dealer (which
of days agreed                       expression in this Part 2 includes any
between the                          entity to be appointed as a dealer
Issuer, the                          under the Subscription Agreement
Guarantor,                           referred to below) (the  LEAD MANAGER)
the Lead Manager and                 for the issue and purchase of Notes to
the Agent)                           be subscribed pursuant to a
                                     Subscription Agreement (whether pursuant to
                                     an unsolicited bid by such Lead Manager or
                                     pursuant to an enquiry by the Issuer). The
                                     Lead Manager may invite other Dealers (new
                                     or additional) approved by the Issuer and
                                     the Guarantor to join an underwriting
                                     syndicate either on the basis of an
                                     invitation telex agreed between the Issuer,
                                     the Guarantor and the Lead Manager or on
                                     the terms of the Pricing Supplement
                                     referred to below and the Subscription
                                     Agreement. The Lead Manager and any such
                                     Dealers are together referred to as the
                                     MANAGERS.

                                     The Lead Manager instructs the Agent to
                                     obtain a common code and ISIN from
                                     Euroclear or Clearstream, Luxembourg. In
                                     the case of the first Tranche of Notes of a
                                     Series, the Agent telephones Euroclear or
                                     Clearstream, Luxembourg with a request for
                                     a common code and ISIN for such Series and
                                     in the case of a subsequent Tranche of
                                     Notes of that Series the Agent telephones
                                     Euroclear or Clearstream, Luxembourg with a
                                     request for a temporary common code and
                                     ISIN for such Tranche. Each Common Code and
                                     ISIN is notified by the Agent to the Issuer
                                     and the Lead Manager.

                                     The Issuer, the Guarantor and the Lead
                                     Manager agree a form of Pricing Supplement
                                     prepared by or on behalf of the Lead
                                     Manager (in substantially the form of
                                     Annexe C) which is submitted to the lawyers
                                     rendering a legal opinion in connection
                                     with the relevant issue for approval. A
                                     draft Subscription Agreement (in
                                     substantially the form of Appendix E to the
                                     Program Agreement or such other form as may
                                     be agreed between the Issuer, the Guarantor
                                     and the



                                      110



Day                   Latest time    Action
- ---                   -----------    ------
                               
                                     Lead Manager) is also prepared. The
                                     Subscription Agreement may, if so agreed,
                                     be called by another name. The Lead Manager
                                     sends a copy of the draft Subscription
                                     Agreement to any other Manager at least two
                                     full days (as defined in the Explanatory
                                     Notes to this Annexe A) before the
                                     Subscription Agreement is intended to be
                                     signed. At the same time the Lead Manager
                                     sends a copy of the Offering Circular and
                                     Program Agreement (together with such other
                                     items from the Initial Documentation List
                                     as the Lead Manager deems appropriate) to
                                     any other Manager which has not previously
                                     received such documents. The Subscription
                                     Agreement and Pricing Supplement are agreed
                                     and executed and a copy of the Pricing
                                     Supplement is sent by fax to the Agent
                                     which shall act as the Agent's
                                     authorisation (including, in the case of
                                     Floating Rate Notes, for the purposes of
                                     rate fixing) to carry out the duties to be
                                     carried out by it under these Settlement
                                     Procedures and the Agency Agreement
                                     including preparing, authenticating and
                                     issuing a Temporary Global Note for the
                                     Tranche of Notes which is to be purchased
                                     and in the case of the first Tranche of a
                                     Series, where the Pricing Supplement does
                                     not specify that such Temporary Global Note
                                     is to be exchangeable only for Notes in
                                     definitive form, a Permanent Global Note
                                     for such Series, giving details of such
                                     Notes.

No later than                        In the case of Notes to be listed on a
Issue Date                           Stock Exchange, the Agent notifies or
minus 3                              procure the notification to, the
                                     relevant Stock Exchange by fax or by hand
                                     of the details of the Notes to be issued by
                                     sending the Pricing Supplement to the
                                     relevant Stock Exchange and any other
                                     relevant authority.

No later than                        The Lead Manager instructs Euroclear
Issue Date                           and/or Clearstream, Luxembourg to debit
minus 2                              its account and pay the purchase price,
                                     against delivery of the Notes as
                                     instructed by the Lead Manager to the
                                     account specified by the Issuer.

Issue Date            3.00 p.m.      In the case of Floating Rate Notes, the
minus 2                              Agent notifies Euroclear, Clearstream,
                                     Luxembourg, the Issuer, the Guarantor, the
                                     relevant Stock Exchange (if applicable) and
                                     the Lead Manager by telex or fax of the
                                     Rate of Interest for the first Interest
                                     Period (if already determined). Where the
                                     Rate of Interest has not yet been
                                     determined, this will be notified in
                                     accordance with this paragraph as soon as
                                     it has been determined.



                                      111



Day                   Latest time    Action
- ---                   -----------    ------
                               
Issue Date            agreed time    The Agent prepares and authenticates a
minus 1 (in the                      Temporary Global Note for each Tranche
case of pre-closed                   of Notes which is to be purchased, and
issues) or Issue                     where required as specified above, a
Date (in any other                   Permanent Global Note in respect of the
case) (the PAYMENT                   relevant Series. The conditions
INSTRUCTION DATE)                    precedent in the Subscription Agreement
                                     and the Program Agreement are satisfied
                                     and/or waived. The Temporary Global Note
                                     and any such Permanent Global Note are then
                                     delivered by the Agent to a common
                                     depositary for Euroclear and Clearstream,
                                     Luxembourg and instructions are given by
                                     the Agent (on behalf of the Issuer) to the
                                     common depositary to hold the Notes
                                     represented by such Temporary Global Note
                                     to the Issuer's order.

                                     The Lead Manager instructs the common
                                     depositary to request Euroclear and/or
                                     Clearstream, Luxembourg to credit such
                                     nominal amount of the relevant Tranche of
                                     Notes to the accounts of the persons
                                     entitled thereto with Euroclear or
                                     Clearstream, Luxembourg against payment to
                                     the specified account of the Issuer of the
                                     purchase price for the relevant Tranche of
                                     Notes for value on the Issue Date. The
                                     common depositary issues a payment
                                     confirmation in respect of this payment.

Issue Date                           Payment is effected and Euroclear and/or
                                     Clearstream, Luxembourg debit and credit
                                     accounts in accordance with instructions
                                     received by them.

                                     The Agent notifies the Issuer of the issue
                                     of Notes giving details of the Global
                                     Note(s) and the nominal amount represented
                                     thereby.

                                     The Agent confirms the issue of Notes to
                                     the relevant Stock Exchange and any other
                                     relevant authority.

On or subsequent to                  Each other Manager (if any) promptly
the Issue Date                       notifies the Lead Manager when the
                                     distribution of the Notes purchased by it
                                     has been completed. The Lead Manager
                                     promptly notifies the Agent upon completion
                                     of the distribution of the Notes of the
                                     relevant Tranche. The Agent promptly
                                     notifies the Issuer, the Guarantor, the
                                     Lead Manager, Euroclear and Clearstream,
                                     Luxembourg of the date of the end of the
                                     Distribution Compliance Period with respect
                                     to the relevant Tranche of Notes.


Explanatory Notes to Annexe 1

(a)   Each DAY is a day on which banks and foreign exchange markets are open for
      business in London, counted in reverse order from the proposed Issue Date.

(b)   The Issue Date must be a Business Day. For the purposes of this
      Memorandum, BUSINESS DAY means a day which is:


                                      112

      (i)   a day on which commercial banks and foreign exchange markets settle
            payments in London and any other place as is specified in the
            applicable Pricing Supplement (each an ADDITIONAL BUSINESS CENTRE);

      (ii)  either (1) in relation to Notes denominated or payable in a
            Specified Currency other than euro, a day on which commercial banks
            and foreign exchange markets settle payments in the principal
            financial centre of the country of the relevant Specified Currency
            (if other than London or any Additional Business Centre) and which,
            if the Specified Currency is New Zealand Dollars, shall be Auckland)
            or (2) in relation to Notes denominated or payable in euro, a day on
            which the TARGET System is open. TARGET SYSTEM means the
            Trans-European Automated Real-Time Gross Settlement Express Transfer
            (TARGET) System. Unless otherwise provided in the applicable Pricing
            Supplement, the principal financial centre for any currency shall be
            as provided in the 2000 ISDA Definitions, each as amended and
            updated as at the Issue Date of the first Tranche of Notes of the
            relevant Series and published by the International Swaps and
            Derivatives Association, Inc.; and

      (iii) a day on which Euroclear, Clearstream, Luxembourg and any other
            relevant clearing system is open for general business.

(c)   Times given are the approximate times for the taking of the action in
      question and are references to London time.


                                      113

                                    ANNEX 2

         FORM OF DEALER'S CONFIRMATION FOR ISSUES WITH NO SUBSCRIPTION
                                   AGREEMENT

[Date]

To:   [CIBA SPECIALTY CHEMICALS CORPORATION/
      CIBA SPECIALTY CHEMICALS PLC/
      CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
      CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

and:  CIBA SPECIALTY CHEMICALS HOLDING INC.

c.c.  JPMorgan Chase Bank

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]
         [Title of relevant Tranche of Notes (specifying type of Notes)]
     issued pursuant to the U.S.$2,000,000,000 Euro Medium Term Note Program

We hereby confirm the agreement for the issue to us of [describe issue] Notes
due [ ] (the NOTES) under the above Program pursuant to the terms of issue set
out in the Pricing Supplement which we are faxing herewith.

[The selling commission in respect of the Notes will be [ ] per cent. of the
nominal amount of the Notes and will be deductible from the net proceeds of the
issue.]

The Notes are to be credited to [Euroclear/Clearstream, Luxembourg] account
number [ ] in the name of [Name of Dealer].

Please confirm your agreement to the terms of issue by signing and faxing to us
a copy of the following Pricing Supplement. Please also fax a copy of the
Pricing Supplement to the Agent.

For and on behalf of [Name of Dealer]

By:   ...............................
      Authorised signatory


                                      114

                                    ANNEX 3

                           FORM OF PRICING SUPPLEMENT

[Date]

                     [CIBA SPECIALTY CHEMICALS CORPORATION/
                          CIBA SPECIALTY CHEMICALS PLC/
               CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH/
                   CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.]

         ISSUE OF [AGGREGATE NOMINAL AMOUNT OF TRANCHE] [TITLE OF NOTES]
               GUARANTEED BY CIBA SPECIALTY CHEMICALS HOLDING INC.
                           UNDER THE USD 2,000,000,000
                          EURO MEDIUM TERM NOTE PROGRAM

This document constitutes the Pricing Supplement relating to the issue of Notes
described herein. Terms used herein shall be deemed to be defined as such for
the purposes of the Conditions set forth in the Offering Circular dated [ ].
This Pricing Supplement must be read in conjunction with such Offering Circular.

[Include whichever of the following apply or specify as NOT APPLICABLE (N/A).
Note that the numbering should remain as set out below, even if NOT APPLICABLE
is indicated for individual paragraphs or subparagraphs. Italics denote
directions for completing the Pricing Supplement.]

[If Notes issued by Ciba Specialty Chemicals PLC have a maturity of less than
one year from the date of their issue, the minimum redemption amount must be
L100,000 or its equivalent in any other currency.

If Notes issued by any other Issuer (including Notes denominated in sterling),
in respect of which the issue proceeds are to be accepted in the United Kingdom
or whose issue otherwise constitutes a contravention of section 19 of the
Financial Services and Markets Act 2000, have a maturity of less than one year
from the date of their issue, the minimum redemption amount must be L100,000 or
its equivalent in any other currency.]

                                  
1.      (i)   Issuer:                   [             ]

        (ii)  Guarantor:                Ciba Specialty Chemicals Holding Inc.

2.      (i)]  Series Number:            [             ]

        [(ii) Tranche number:           [             ]
                                        (If fungible with an existing Series,
                                        details of that Series, including the
                                        date on which the Notes become
                                        fungible)]

3.      Specified Currency or           [             ]
        Currencies:
4.      Aggregate Nominal Amount:       [             ]

        -  Tranche:                     [             ]




                                      115

                                  
        -  Series:                      [             ]

5.      Issue Price of Tranche:         [             ] per cent

        [Net proceeds]                  (required only for listed issues)

6.      Specified Denominations:        [In the case of Notes with a
                                        maturity of 183 days or less issued
                                        by (i) Ciba Specialty Chemicals
                                        Corporation or (ii) where proceeds
                                        of the issuance are on-lent to a
                                        U.S. entity, the minimum
                                        denomination for such Notes shall be
                                        USD 500,000 (or the equivalent
                                        thereof at exchange rates applicable
                                        on the relevant date of calculation)]

                                        [In the case of Notes that are issued by
                                        Ciba Specialty Chemicals Eurofinance
                                        Ltd. the minimum denomination for such
                                        Notes shall be USD 500,000 (or the
                                        equivalent thereof at exchange rates
                                        applicable on the Issue Date of such
                                        Note), unless a prospectus is filed with
                                        the Registrar of Companies in Bermuda in
                                        accordance with Part III of the
                                        Companies Act 1981 (as amended) of
                                        Bermuda.]

7.      [(i)] Issue Date:               [              ]

        (ii)  Interest Commencement
              Date (if different from
              the Issue Date):          [               ]]

8.      Maturity Date:                  [Fixed rate - specify date/
                                        Floating rate - Interest Payment
                                        Date falling in [specify month and
                                        year]]

9.      Interest Basis:                 [[   ] percent Fixed Rate]
                                        [[LIBOR/EURIBOR] +/- [ ] percent
                                        Floating Rate]
                                        [Zero Coupon]
                                        [Indexed Interest]
                                        [specify other]
                                        (further particulars specified below)

10.     Redemption/Payment Basis:       [Redemption at par]
                                        [Indexed Redemption]
                                        [Dual Currency]
                                        [Partly Paid]
                                        [Instalment]
                                        [specify other]

11.     Change of Interest Basis or
        Redemption/Payment Basis:       [Specify details of any provision
                                        for change of Notes into another
                                        Interest




                                      116

                                  
                                        Basis or Redemption/Payment Basis]

12.     Put/Call Options:               [Investor Put]
                                        [Issuer Call]
                                        [(further particulars specified
                                        below)]

13.     Listing:                        [Luxembourg/specify other/None]

14.     Method of distribution:         [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

15.     FIXED RATE NOTE PROVISIONS      [Applicable/Not Applicable]
                                        (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)   Rate[(s)] of Interest:    [       ] percent per annum [payable
                                        [annually/semi-annually/quarterly/monthly]
                                        in arrears]

        (ii) Interest Payment Date(s):  [         ] in each year

        (iii) Fixed Coupon Amount(s):   [         ] per [             ] in
                                        nominal amount

        (iv)  Broken Amount(s):         [Insert particulars of any initial
                                        or final broken interest amounts
                                        which do not correspond with the
                                        Fixed Coupon Amounts]

        (v) Fixed Day Count Fraction:   [30/360 or Actual/Actual (ISMA) or
                                        specify other] (Note that if
                                        interest is not payable on a regular
                                        basis (for example, if there are
                                        Broken Amounts specified)
                                        Actual/Actual (ISMA) will not be a
                                        suitable Fixed Day Count Fraction)

        (vi)  Interest Determination    [       ] in each year
        Date(s):                        [Insert interest payment dates
                                        except where there are long or short
                                        periods.  In these cases, insert
                                        regular interest payment dates]
                                        (NB: Only relevant where Day Count
                                        Fraction is Actual/Actual (ISMA))
        (vii)  Other terms relating to
               the method of
               calculating interest     [None/Give details]
               for Fixed Rate Notes:

16.     FLOATING RATE NOTE PROVISIONS   [Applicable/Not Applicable]
                                        (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)    Specified
               Period(s)/Specified      [                 ]
               Interest Payment Dates:

        (ii)  Business Day Convention:  [Floating Rate Convention/Following
                                        Business Day Convention/Modified
                                        Following Business




                                      117

                                  
                                        Day Convention/Preceding Business Day
                                        Convention/[specify other]]

        (iii) Additional Business       [                 ]
              Centre(s):

        (iv)  Manner in which the
              Rate of Interest and
              Interest Amount is to     [Screen Rate Determination/ISDA
              be determined:            Determination/specify other]

        (v)   Party responsible for
              calculating the Rate of
              Interest and Interest
              Amount (if not the        [                 ]
              Principal Paying Agent):

        (vi)  Screen Rate
              Determination:

              -     Reference Rate:     [       ]
                                        (Either LIBOR, EURIBOR or other,
                                        although additional information is
                                        required if other - including fallback
                                        provisions in the Agency Agreement)

               -    Interest
                    Determination       [       ]
                    Date(s):            (Second day on which commercial
                                        banks are open for general business
                                        (including dealings in foreign
                                        exchange and foreign currency
                                        deposits) in London prior to the
                                        start of each Interest Period if
                                        LIBOR and second TARGET day prior to
                                        the start of each Interest Period if
                                        EURIBOR)

              -     Relevant Screen     [       ]
                    Page:               (in the case of EURIBOR, if not
                                        Telerate 248 ensure it is a page
                                        which shows a composite rate)

        (vii) ISDA Determination:

              -     Floating Rate       [        ]
                    Option:

              -     Designated          [        ]
                    Maturity:

              -     Reset Date(s):      [        ]

        (viii)      Margin(s):          [+/ - ] [       ] per cent per annum

        (ix) Minimum Rate of Interest:  [       ] per cent per annum

        (x)  Maximum Rate of Interest:  [       ] per cent per annum

        (xi)  Floating Day Count        [         ]
              Fraction:




                                      118

                                  
        (xii)  Fall back provisions,
               rounding provisions and
               any other terms
               relating to the method
               of calculating interest
               on Floating Rate Notes,  [          ]
               if different from those
               set out in the
               Conditions:

17.     ZERO COUPON NOTE PROVISIONS     [Applicable/Not Applicable]
                                        (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)   Accrual Yield:            [          ] per cent per annum

        (ii)  Reference Price:          [          ]

        (iii) Any other formula/basis
              of determining amount     [       ]
              payable:                  (Consider applicable day count
                                        fraction if euro denominated)

18.     INDEXED INTEREST NOTE           [Applicable/Not Applicable]
        PROVISIONS                      (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)   Index/Formula:            [give or annex details]

        (ii)  Calculation Agent
              responsible for
              calculating the           [         ]
              principal and/or
              interest due:

        (iii) Provisions for
              determining coupon
              where calculation by
              reference to Index
              and/or Formula is         [          ]
              impossible or
              impracticable:

        (iv)  Specified
              Period(s)/Specified       [          ]
              Interest Payment Dates:

        (v)   Business Day Convention:  [Floating Rate Convention/Following
                                        Business Day Convention/Modified
                                        Following Business Day
                                        Convention/Preceding Business Day
                                        Convention/specify other]

        (vi)  Additional Business       [          ]
              Centre(s):

        (vii) Minimum Rate of           [          ] per cent per annum
              Interest:

        (viii) Maximum Rate of          [          ] per cent per annum
               Interest:

        (ix)  Floating Day Count        [          ]
              Fraction:




                                      119

                                  
19.     DUAL CURRENCY NOTE PROVISIONS   [Applicable/Not Applicable]
                                        (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)    Rate of Exchange/method
               of calculating Rate of   [give details]
               Exchange:

        (ii)   Calculation Agent, if
               any, responsible for
               calculating the          [           ]
               principal and/or
               interest due:

        (iii)  Provisions applicable
               where calculation by
               reference to Rate of
               Exchange is impossible   [           ]
               or impracticable:

        (iv)   Person at whose option
               Specified Currency(ies)
               is/are payable:          [           ]

PROVISIONS RELATING TO REDEMPTION

20.     Issuer Call:                    [Applicable/Not Applicable]
                                        (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)    Optional Redemption
               Date(s):                 [              ]

        (ii)   Optional Redemption
               Amount(s) and method,
               if any, of
               calculation of such      [              ]
               amount(s):

        (iii) If redeemable in part:

              (a)   Minimum             [              ]
                    Redemption Amount

              (b)   Higher
                    Redemption          [              ]
                    Amount

        (iv)   Notice period (if
               other than as set out    [              ]
               in the Conditions):

21.     Investor Put:                   [Applicable/Not Applicable]
                                        (If not applicable, delete the
                                        remaining sub-paragraphs of this
                                        paragraph)

        (i)    Optional Redemption
               Date(s):                 [              ]




                                      120

                                  
        (ii)   Optional Redemption
               Amount(s) and method,
               if any, of
               calculation of such      [              ]
               amount(s):

        (iii)  Notice period (if
               other than as set in     [               ]
               the Conditions):

22.     Final Redemption Amount:        [Par/specify other/see Appendix]

23.     Early Redemption Amount(s)
        payable on redemption for
        taxation reasons or on event
        of default and/or the method
        of calculating the same (if
        required or if different        [            ]
        from that set out in
        Condition 6(f)):

GENERAL PROVISIONS APPLICABLE TO THE NOTES

24.     Form of Notes:                  Temporary Global Note exchangeable for
                                        a Permanent Global Note which is
                                        exchangeable for Definitive Notes [on
                                        60 days notice given at any time/only
                                        upon an Exchange Event] [n.b. the
                                        latter option is not available to Ciba
                                        Specialty Chemicals Corporation or
                                        where proceeds are to be on-lent to a
                                        United States entity].

                                        [Temporary Global Note exchangeable for
                                        Definitive Notes on and after the
                                        Exchange Date.]

25.     Additional Financial
        Centre(s) or other special      [Not Applicable/give details]
        provisions relating to          (Note that this item relates to the
        Payment Dates:                  place of payment and not Interest
                                        Period end dates to which item 16(iii)
                                        relates)

26.     Talons for future Coupons or
        Receipts to be attached to
        Definitive Notes (and dates
        on which such Talons mature):   [Yes/No. If yes, give details]

27.     Details relating to Partly
        Paid Notes: amount of each
        payment comprising the Issue
        Price and date on which each
        payment is to be made and,
        if different from those
        specified in the Temporary
        Global Note, consequences of
        failure to pay, including
        any right of the Issuer to      [Not Applicable/give details]
        forfeit the Notes and interest
        due on late payment:

28.     Details relating to
        Instalment Notes:




                                      121

                                  
        amount of
        each instalment, date on        [Not Applicable/give details]
        which each payment is to be
        made:

29.     Redenomination applicable:      Redenomination [not] applicable
                                        (If Redenomination is applicable,
                                        specify either the applicable Fixed
                                        Day Count Fraction or any provisions
                                        necessary to deal with floating rate
                                        interest calculation (including
                                        alternative reference rates))

30.     Details relating to
        Instalment Notes: Specify
        Instalment Amounts and          [Not Applicable/give details]
        Instalment Dates:

31.     Other terms or special          [Not Applicable/give details]
        conditions:

DISTRIBUTION

32.     (i)   If syndicated, names
              of Managers:              [Not Applicable/give names]

        (ii)  Stabilising Manager       [Not Applicable/give names]
              (if any):

33.     If non-syndicated, name of
        relevant Dealer:                [Not Applicable/give names]

34.     Whether TEFRA D rules
        applicable or TEFRA rules       [TEFRA D/TEFRA not applicable]
        not applicable:

35.     Additional selling              [Not Applicable/give details]
        restrictions:

OPERATIONAL INFORMATION

36.     Any clearing system(s) other
        than Euroclear and
        Clearstream, Luxembourg and
        the relevant identification     [Not Applicable/give names(s) and
        number(s):                      number(s)]

37.     Delivery:                       Delivery [against/free of] payment

38.     Additional Paying Agent(s)      [          ]
        (if any):




ISIN: [     ]

Common Code: [      ]


                                      122

[LISTING APPLICATION

This Pricing Supplement comprises the details required to list the issue of
Notes described herein pursuant to the listing of the USD 2,000,000,000 Euro
Medium Term Note Program of Ciba Specialty Chemicals Corporation/Ciba Specialty
Chemicals PLC/Ciba Spezialitatenchemie Holding Deutschland GmbH/Ciba Speciality
Chemicals Eurofinance Ltd.]

RESPONSIBILITY

The Issuer and the Guarantor accept responsibility for the information contained
in this Pricing Supplement.

Signed on behalf of the Issuer:          Signed on behalf of the Guarantor:

By:...................................   By:...................................
   Duly authorised                          Duly authorised


                                         By:...................................
                                            Duly authorised


                                      123

                                    ANNEX 4

                   TRADING DESK AND ADMINISTRATIVE INFORMATION

THE ISSUERS


CIBA SPECIALTY CHEMICALS CORPORATION
560 White Plains Road
PO Box 2005
Tarrytown, New York
10591-9005

Telephone:  +1 914 785 2000
Telefax:    +1 914 785 2650
Attention:  Treasurer


CIBA SPECIALTY CHEMICALS PLC
Hulley Road
Macclesfield
Cheshire
SK10 2NX

Telephone:  +44 1625 888 220
Telefax:    +44 1625 888 380
Attention:  Treasurer


CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
Chemiestrasse
D-68623 Lampertheim
Germany

Telephone:  +49 6206 152810
Telefax:    +49 6206 152816
Attention:  Treasurer


CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.
c/o Reid Management Limited
4th Floor
Windsor Place
22 Queen Street
PO Box HM1179
Hamilton HMEX
Bermuda

Telephone:  +1 441 296 3695
Telefax:    +1 441 295 3328
Attention:  Tamara Lewis/Adrian Arnold


                                      124

THE GUARANTOR

CIBA SPECIALTY CHEMICALS HOLDING INC.
Klybeckstrasse 141
CH-4002 Basle
Switzerland

Telephone:  +41 61 636 2740
Telefax:    +41 61 636 6828
Attention:  Group Treasurer


THE DEALERS

CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
One Cabot Square
London E14 4QJ

Telephone:  +44 20 7888 4021
Telefax     +44 20 7905 6128
Attention:  MTN Trading


DEUTSCHE BANK AG LONDON
Winchester House
1 Great Winchester Street
London EC2N 2DB

Telephone:  +44 20 7545 2761
Telex:      94 01 5555 DBLN G
Telefax:    +44 20 7541 2761
Attention:  MTN Desk


GOLDMAN SACHS INTERNATIONAL
Peterborough Court
133 Fleet Street
London EC4A 2BB

Telephone:  +44 20 7774 2295
Telex:      94012165 GSHH G
Telefax:    +44 20 7774 5711
Attention:  Euro Medium Term Note Desk


J.P. MORGAN SECURITIES LTD.
125 London Wall
London EC2Y 5AJ

Telephone:  +44 20 7779 3469
Telex:      8954804 MGLTD G
Telefax:    +44 20 7325 8225
Attention:  Euro Medium Term Note Desk


                                      125

UBS LIMITED
1 Finsbury Avenue
London EC2M 2PP

Telephone:  +44 20 7567 2324
Telex:      887434 UBSW G
Telefax:    +44 20 7568 3349
Attention:  MTNs and Private Placements


THE AGENT

JPMorgan Chase Bank
Trinity Tower
9 Thomas More Street
London E1W 1YT

Telephone:  +44 1202 347430
Telex:      8954681 CMB G
Telefax:    +44 1202 347438
Attention:  Manager, Institutional Trust Services


                                      126

                                  SIGNATORIES

THE ISSUERS

CIBA SPECIALTY CHEMICALS CORPORATION
560 White Plains Road
PO Box 2005
Tarrytown, New York
10591-9005

Telephone:  +1 914 785 2000
Telefax:    +1 914 785 2650
Attention:  Treasurer

By:   KIRK ERSTLING                 OLIVER STRUB



CIBA SPECIALTY CHEMICALS PLC
Hulley Road
Macclesfield
Cheshire
SK10 2NX

Telephone:  +44 1625 888 220
Telefax:    +44 1625 888 380
Attention:  Treasurer

By:   KIRK ERSTLING                 OLIVER STRUB



CIBA SPEZIALITATENCHEMIE HOLDING DEUTSCHLAND GMBH
Chemiestrasse
D-68623 Lampertheim
Germany

Telephone:  +49 6206 152 810
Telefax:    +49 6206 152 816
Attention:  Treasurer

By:   KIRK ERSTLING                 OLIVER STRUB



CIBA SPECIALTY CHEMICALS EUROFINANCE LTD.

c/o Reid Management Limited
4th Floor
Windsor Place
22 Queen Street
PO Box HM1179
Hamilton HMEX
Bermuda

Telephone:  +1 441 296 3695
Telefax:    +1 441 295 3328
Attention:  Tamara Lewis/Adrian Arnold


                                      127

By:   KIRK ERSTLING                 OLIVER STRUB


THE GUARANTOR


CIBA SPECIALTY CHEMICALS HOLDING INC.
Klybeckstrasse 141
CH-4002 Basle
Switzerland

Telephone:  +41 61 636 2740
Telefax:    +41 61 636 6828
Attention:  Group Treasurer

By:   KIRK ERSTLING                 OLIVER STRUB



THE AGENT

JPMORGAN CHASE BANK, LONDON BRANCH
Trinity Tower
9 Thomas More Street
London E1W 1YT

Telephone:  +44 1202 347430
Telex No:   8954681 CMB G
Telefax No: +44 1202 347438
Attention:  Manager, Institutional Trust Services

By:   PHILIP TOWNSEND



THE LUXEMBOURG PAYING AGENT

J.P. MORGAN BANK LUXEMBOURG S.A.
5 rue Plaetis
L-2338
Luxembourg

All communications should be sent care of the Agent

By:   PHILIP TOWNSEND


                                      128

EX-8.1

Exhibit 8.1.

MAJOR CONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES

	GROUP								SERVICES,
AMERICAS	HOLDING %		SELLING		MANUFACTURING		RESEARCH		FINANCE
ARGENTINA
Ciba Especialidades Químicas S.A., Buenos Aires		100		•
BERMUDA
Chemical Insurance Company Ltd., Hamilton		100								•
Ciba Specialty Chemicals Eurofinance Ltd., Hamilton		100								•
Ciba Specialty Chemicals International Finance Ltd., Hamilton		100								•
Ciba Specialty Chemicals Investment Ltd., Hamilton		100								•
BRAZIL
Ciba Especialidades Químicas Ltda., São Paulo		100		•		•
Latexia Brazil Ltda., São Paulo		100		•		•
CANADA
Ciba Specialty Chemicals Canada Inc., Mississauga		100		•
CHILE
Ciba Especialidades Químicas Ltda., Santiago de Chile		100		•		•
COLOMBIA
Ciba Especialidades Químicas S.A., Bogotà		100		•		•
Raisio Química Andina S.A., Medellin		96		•		•
GUATEMALA
Ciba Especialidades Químicas, S.A. (ACC), Guatemala		100		•		•
MEXICO
Ciba Especialidades Químicas Mexico S.A. de C.V., Mexico		100		•		•
PANAMA
Ciba Especialidades Químicas Colon S.A., Colon		100		•
UNITED STATES OF AMERICA
Ciba Specialty Chemicals Corporation, Tarrytown, NY		100		•		•		•
ASIA PACIFIC
AUSTRALIA
Ciba Specialty Chemicals Pty. Ltd., Thomastown		100		•		•
BAHRAIN
Ciba Specialty Chemicals Middle East W.L.L., Manama (Al Seef District)		100		•
CHINA
Ciba Specialty Chemicals (China) Ltd., Shanghai		100		•						•
Ciba Specialty Chemicals (Hong Kong) Ltd., Hong Kong		100		•
Ciba Specialty Chemicals (Shanghai) Ltd., Shanghai		100		•
Guangdong Ciba Specialty Chemicals Co. Ltd., Panyu, Guangdong		95		•		•
Guangzhou Ciba Specialty Chemicals Co. Ltd., Guangzhou		80		•		•
Qingdao Ciba Dyes Co. Ltd., Qingdao		94		•		•
Qingdao Ciba Pigments Co. Ltd., Qingdao		91		•		•
Raisio Chemicals (Shanghai) Co. Ltd., Shanghai		100		•
Raisio Tianma Chemicals (Suzhou) Co. Ltd., Suzhou, Jiangsu		100		•
Shanghai Ciba Gao-Qiao Chemical Co. Ltd., Shanghai		75		•		•
Shenzhen Ciba Specialty Chemicals Co. Ltd., Shenzhen		85		•		•
Xiangtan Chemicals & Pigments Co. Ltd., Xiangtan		49		•		•
INDIA
Ciba India Private Ltd., Mumbai		100						•		•
Ciba Specialty Chemicals (India) Ltd., Mumbai (1)		69		•		•
Diamond Dye-Chem Ltd., Mumbai (2)		69		•		•
INDONESIA
P.T. Ciba Specialty Chemicals Indonesia, Jakarta		80		•		•
PT Intercipta Kimia Pratama, Jakarta		60		•		•
PT Latexia Indonesia, Jakarta		100		•		•
JAPAN
Chemipro Fine Chemical Kaisha Ltd., Kobe		51		•		•
Ciba Specialty Chemicals K.K., Osaka		100		•				•
Musashino-Geigy Company Ltd., Kitaibaraki (Ibaraki)		60		•		•
Nippon Alkyl Phenol Co. Ltd., Tokyo		46		•		•
REPUBLIC OF KOREA (SOUTH KOREA)
Ciba Specialty Chemicals Korea Ltd., Seoul		100		•
Daihan Swiss Chemical Corporation, Seoul		100		•		•		•
Doobon Fine Chemical Co., Ltd., Chongwon-kun		63		•		•
Raisio Chemicals Korea Inc., Chonan		51		•		•
MALAYSIA
Ciba Specialty Chemicals (Malaysia) SDN BHD, Klang		70		•		•
NEW ZEALAND
Ciba Specialty Chemicals N.Z. Ltd., Auckland		100		•		•
SINGAPORE
Ciba Specialty Chemicals (Singapore) Pte. Ltd., Singapore		100		•
SOUTH AFRICA
Ciba Specialty Chemicals (Pty) Ltd., Spartan		100		•
TAIWAN
Ciba Specialty Chemicals (Taiwan) Ltd., Kaohsiung		100		•		•
THAILAND
Ciba Specialty Chemicals (Thailand) Ltd., Bangkok		100		•		•

	GROUP								SERVICES,
EUROPE	HOLDING %		SELLING		MANUFACTURING		RESEARCH		FINANCE
AUSTRIA
Ciba Spezialitätenchemie GmbH, Hard		100		•
Latexia Österreich GmbH, Pischelsdorf/Zwentendorf		100		•		•
BELGIUM
Ciba Specialty Chemicals N.V., Groot-Bijgaarden		100		•
Latexia S.A., Veurne		100									•
Raisio Belgium N.V., Veurne		100		•		•
FINLAND
Ciba Specialty Chemicals Finland OY, Helsinki		100		•
Ciba Specialty Chemicals Oy, Raisio		100		•		•		•		•
Finnamyl Oy, Raisio		100		•		•
Latexia SB Oy, Raisio		100		•		•
Latexia Suomi Oy, Raisio		100		•		•		•
Oy Kationi Ab, Raisio		100		•		•
FRANCE
Ciba Spécialités Chimiques SA, Saint Fons		100		•		•
Ciba Specialty Chemicals Masterbatch SA, Saint Jeoire en Faucigny		100		•		•		•
GERMANY
Ciba Spezialitätenchemie Grenzach GmbH, Grenzach-Wyhlen		100				•		•
Ciba Spezialitätenchemie Holding Deutschland GmbH, Lampertheim		100								•
Ciba Spezialitätenchemie Lampertheim GmbH, Lampertheim		100		•		•		•
Ciba Spezialitätenchemie Pfersee GmbH, Langweid/Lech		100		•		•		•
GREECE
Ciba Specialty Chemicals Hellas ABEE, Thessaloniki		100		•
HUNGARY
Ciba Specialty Chemicals Magyarorszag Kft., Budapest		100		•
ITALY
Ciba Specialty Chemicals S.p.A., Sasso Marconi (Bologna)		100		•		•		•
Magenta Master Fibers S.r.l., Milano		60		•		•		•
LUXEMBOURG
Ciba Specialty Chemicals Finance Luxembourg S.A., Luxembourg		100								•
NETHERLANDS
Ciba Specialty Chemicals International Nederland B.V., Maastricht		100								•
Ciba Specialty Chemicals (Maastricht) B.V., Maastricht		100		•		•		•
EFKA Additives B.V., Heerenveen		100		•		•		•
PORTUGAL
Ciba Especialidades Químicas Lda., Porto		100		•
Raisio Portugal-Produtos Químicos, Lda., Nogueira Maia		51		•
SPAIN
Ciba Especialidades Químicas S.L., Barcelona		100		•
Latexia Iberia, S.L., Madrid		100		•		•
Raisio Echeveste, S.A., Tolosa		51		•		•
SWEDEN
Ciba Specialty Chemicals Sweden AB, Göteborg		100		•
AB CDM, Västra Frölunda		100		•
Raisio Svenska AB, Gothenburg		100		•
SWITZERLAND
Ciba Specialty Chemicals Holding Inc., Basel (3)										•
Ciba Spécialités Chimiques Monthey SA, Monthey		100				•
Ciba Spezialitätenchemie AG, Basel		100		•		•		•
Ciba Spezialitätenchemie Finanz AG, Basel		100									•
Ciba Spezialitätenchemie International AG, Basel		100									•
Ciba Spezialitätenchemie Kaisten AG, Kaisten		100				•
Ciba Spezialitätenchemie Schweizerhalle AG, Muttenz		100				•
Ciba Spezialitätenchemie Services AG, Basel		100									•
CIMO Compagnie Industrielle de Monthey SA, Monthey		50									•
TURKEY
Ciba Özel Kimyevi Ürünler Sanayi ve Ticaret Ltd., Istanbul		100		•
UNITED KINGDOM
Ciba Specialty Chemicals PLC, Macclesfield		100		•		•		•
Ciba Specialty Chemicals Investment PLC, Macclesfield		100								•
Ciba Specialty Chemicals Water Treatments Ltd., Bradford		100		•		•		•
Pira International Limited, Leatherhead		100		•
Raisio Chemicals UK Limited, Blackburn		100		•		•

To enhance the readability of this report and because of being less relevant, the share or quota capitals of Ciba group companies are not indicated herein, with the exception of Ciba Specialty Chemicals Holding Inc. and of Ciba Specialty Chemicals (India) Ltd., two publicly listed companies.

(1)	The shares of Ciba Specialty Chemicals (India) Ltd., Mumbai, (“CSCIL”) are listed on the Mumbai Stock Exchange (www.bseindia.com) under the scrip name “CIBA SPE CH”; the scrip code is 532184. The total market value of the 13 280 819 outstanding shares of CSCIL as of December 31, 2004 was approximately CHF 107 million (INR 4 060 million). As of December 31, 2004 the Company held 9 200 887 Equity Shares, representing 69.28 percent of the paid-up share capital of CSCIL.
(2)	Diamond Dye-Chem Limited is a wholly owned subsidiary of CSCIL.
(3)	Ciba Specialty Chemicals Holding Inc. is the ultimate holding company of Ciba Specialty Chemicals Group. Its Shares are listed on the Swiss Exchange and, since August 2, 2000, the Company’s American Depository Shares (“ADSs”) are listed on the New York Stock Exchange. Two ADSs represent one Share of the Company’s common stock.

2

EX-10.1

EXHIBIT 10.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-82698 and 333-56040 pertaining to employee benefit plans of Ciba Specialty Chemicals Holding Inc.) of our report dated January 21, 2005 with respect to the consolidated financial statements of Ciba Specialty Chemicals Holding Inc. included in the Annual Report (Form 20-F) for the year ended December 31, 2004.

Ernst & Young Ltd

/s/ Cherrie Chiomento
Cherrie Chiomento /s/ Martin Mattes
Martin Mattes

Zürich, Switzerland, February 1, 2005

EX-12.1

                                                                    EXHIBIT 12.1

                           SECTION 302 CERTIFICATION



CERTIFICATIONS

I, ARMIN MEYER, CERTIFY THAT:

1.   I have reviewed this annual report on Form 20-F of Ciba Specialty Chemicals
     Holding Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the company as of, and for, the periods presented in this report;

4.   The company's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

     (a)  Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          company, including its consolidated subsidiaries, is made known to us
          by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the effectiveness of the company's disclosure controls and
          procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed in this report any change in the company's internal control
          over financial reporting that occurred during the period covered by
          the annual report that has materially affected, or is reasonably
          likely to materially affect, the company's internal control over
          financial reporting; and

5.   The company's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the company's auditors and the audit committee of the company's board of
     directors (or persons performing the equivalent functions):

     (a)  All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely



          affect the company's ability to record, process, summarize and report
          financial information; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the company's internal
          control over financial reporting.

Date: February 1, 2005

                                        /s/ Armin Meyer
                                        ---------------------------
                                        Armin Meyer
                                        Chairman of the Board and
                                        Chief Executive Officer

EX-12.2

                                                                    EXHIBIT 12.2

                            SECTION 302 CERTIFICATION


CERTIFICATIONS

I, MICHAEL JACOBI, CERTIFY THAT:

1.   I have reviewed this annual report on Form 20-F of Ciba Specialty Chemicals
     Holding Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the company as of, and for, the periods presented in this report;

4.   The company's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

     (a)  Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          company, including its consolidated subsidiaries, is made known to us
          by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the effectiveness of the company's disclosure controls and
          procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed in this report any change in the company's internal control
          over financial reporting that occurred during the period covered by
          the annual report that has materially affected, or is reasonably
          likely to materially affect, the company's internal control over
          financial reporting; and

5.   The company's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the company's auditors and the audit committee of the company's board of
     directors (or persons performing the equivalent functions):

     (a)  All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely




          affect the company's ability to record, process, summarize and report
          financial information; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the company's internal
          control over financial reporting.

Date: February 1, 2005

                                        /s/ Michael Jacobi
                                        ------------------------------
                                        Michael Jacobi
                                        Chief Financial Officer

EX-13.1

                                                                    EXHIBIT 13.1

                            Certification Pursuant to

                             18 U.S.C. Section 1350

      As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


     In connection with the Annual Report on Form 20-F of Ciba Specialty
Chemicals Holding Inc., a corporation organized under the laws of Switzerland
(the "Company") for the period ending December 31, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each of
the undersigned officers of the Company certify pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

     1.)    the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     2.)    the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

Date: February 1, 2005

                                        /s/ Armin Meyer
                                        -------------------------------
                                        Armin Meyer
                                        Chairman of the Board and
                                        Chief Executive Officer


Date: February 1, 2005

                                        /s/ Michael Jacobi
                                        -------------------------------
                                        Michael Jacobi
                                        Chief Financial Officer