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

A. SELECTED FINANCIAL DATA

The table below sets forth selected historical consolidated financial information for Lucite International as of and for each of the periods indicated. Our financial statements are prepared in accordance with UK GAAP, which differs in certain significant respects from US GAAP. For a discussion of the significant differences between UK GAAP and US GAAP, you should refer to Note 25 to the audited financial statements. You should read the data below in conjunction with the “Operating and Financial Review and Prospects” (Item 5).

	Year ended December 31,
In Millions	2001				2002				2003				2004				2005
					as restated				as restated				as restated
Profit and Loss Account Information:
Amounts in accordance with UK GAAP:
Group turnover		£	577			£	582			£	694			£	707			£	780
Cost of sales		(458		)		(456		)		(530		)		(538		)		(606		)
Gross profit		119				126				164				169				174
Net operating costs (a)		(101		)		(98		)		(93		)		(102		)		(110		)
Share of operating profit from joint venture		2				—				—				—				—
Group operating profit (b)		20				28				71				67				64
Net interest payable and similar charges		(28		)		(30		)		(38		)		(28		)		(31		)
Profit/(loss) on ordinary activities after taxation		(2		)		—				27				39				26
Equity minority interests		(1		)		(3		)		(4		)		(4		)		(6		)
Profit/(loss) for the financial year		(3		)		(3		)		23				35				20
Amounts in accordance with US GAAP:
Profit/(loss) for the financial year		(1		)		1				15				22				14
Balance Sheet Information (at end of period)
Amounts in accordance with UK GAAP:
Current assets		185				182				212				248				294
Total assets		663				623				622				644				736
Creditors due after more than one year		(336		)		(330		)		(332		)		(306		)		(313		)
Total debt (net of debt issuance costs)		344				343				340				321				329
Net assets (excluding pension liability) (c)		n/a				166				170				193				243
Net assets (including pension liability) (c)		168				95				91				110				149
Pension liability (c)		n/a				(71		)		(79		)		(83		)		(94		)
Called up equity share capital		175				175				175				175				175
Amounts in accordance with US GAAP:
Shareholders’ funds		170				145				137				158				202
Other Financial Information:
Amounts in accordance with UK GAAP:
Depreciation and amortisation		39				45				44				44				48
Capital expenditure and financial investment		(26		)		(28		)		(32		)		(38		)		(62		)

NOTES TO SELECTED FINANCIAL DATA

(a) Included in net operating costs under UK GAAP are exceptional operating expenses. These expenses consist of restructuring, severance and relocation costs as follows; £4 million for the year ended December 31, 2001, and £nil for the years ended December 31, 2002, December 31, 2003, December 31, 2004, and December 31, 2005. The £4 million of costs charged to the UK GAAP profit and loss account for the year ended December 31, 2001, represented a program to reduce fixed costs in the UK manufacturing area, as part of a long term manufacturing productivity plan.

(b) Group operating profit for 2001 includes £2 million relating to the KMC joint venture.

(c) The Group adopted FRS17 during 2005. It is a requirement of this UK GAAP standard that net assets be disclosed both including and excluding pension liability, on the face of the balance sheet. As a result the comparative information for 2004, 2003 and 2002 were restated. The comparable amounts for 2001 were not restated since the information was not obtained at the time. (See “Presentation of Information” above for further details on profit and loss account impact).

Exchange Rate Information

Our reporting currency is the pound sterling. The following table sets forth, for the periods and dates indicated, information regarding the average daily rate for pounds sterling, expressed in dollars per £1.00. These rates were not used to prepare the financial statements included in this annual report.

Month	High		Low
March 2006		1.76	1.73
February 2006		1.78	1.73
January 2006		1.79	1.74
December 2005		1.77	1.72
November 2005		1.78	1.71
October 2005		1.79	1.75
September 2005		1.84	1.76

Year ended December 31,	Period End		Average		High		Low
2005		1.72		1.82		1.93	1.71
2004		1.92		1.83		1.95	1.76
2003		1.79		1.63		1.79	1.55
2002		1.61		1.50		1.61	1.41
2001		1.46		1.44		1.51	1.37

On April 7, 2006 the exchange rate for pounds sterling, expressed in dollars per £1.00, was 1.74 per £1.00.

B. CAPITALISATION AND INDEBTEDNESS

NOT APPLICABLE

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

NOT APPLICABLE

D. RISK FACTORS

Risks Relating to Our Capital Structure

Substantial leverage — our substantial debt could adversely affect our financial health and prevent us from fulfilling our obligations under the notes.

We have a significant amount of debt following the completion of the acquisition of ICI Acrylics and related transactions. The following chart shows total debt and shareholders’ funds as of December 31, 2005.

	As of December 31, 2005

Total debt (net of debt issuance costs)	£	329 million
Debt excluding notes (net of senior debt issuance costs)	£	159 million
Shareholders’ funds	£	131 million

Our substantial debt could have important consequences to holders of the notes. For example, it could, amongst other things:

· limit our ability to take advantage of significant business opportunities;

· make it more difficult for us to satisfy our obligations with respect to the notes;

· increase our vulnerability to general adverse economic and industry conditions;

· limit our ability to fund future working capital, capital expenditures, any future acquisitions, research, development and technology process costs and other general business requirements;

· limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

· place us at a competitive disadvantage compared to our competitors that have less debt.

Control of funds managed by Charterhouse Capital Partners LLP (“Charterhouse”) — our principal investors may have interests that conflict with the interests of holders of the notes and can take actions that prevent or hinder us from making payments on the notes.

In the event of a conflict of interest between holders of our notes and our principal investors, the actions of our principal investors could affect our ability to meet our payment obligations. Charterhouse have invested in the equity of Lucite International Limited, the holding company that owns Lucite International, and ultimately control the voting stock of all the companies that together conduct our business.

Charterhouse owns 78% of our common stock. This ownership gives Charterhouse significant elective control over our operations. Furthermore, Charterhouse has the power to elect all of the directors of our companies, to change their management, to approve any changes to their documents and to approve any mergers.

Goodwill — a change in the estimated useful life or a write-off of goodwill could negatively affect operating results and net worth.

A change in the estimated useful life of goodwill or the write-off of a portion of goodwill could negatively affect operating results and net worth. At December 31, 2005, goodwill totalled £68 million in accordance with UK GAAP, compared to UK GAAP net assets (including pension liability) of £149 million. We have estimated the useful life associated with positive goodwill to be 20 years. However, subsequent changes in the acrylics industry, including competition and advances in technology, may in the future shorten the estimated useful life of goodwill or result in the write-off of a portion of goodwill. A shortening of the useful life or a write-off of a portion of goodwill could further decrease our earnings or increase our net losses in future periods.

Risks Relating to Business Operations

The chemicals industry is variable — changing market demands and prices may negatively affect our operating margins and impair our cash flow, which in turn could affect our ability to make payments due under the notes.

Volatility in the chemical industry, market supply and demand and prices for raw materials may negatively impact our operating margins and cash flow. This, in turn, may impair our ability to make payments due under the notes.

Substantially all of our revenue is attributable to sales of methyl methacrylate (“MMA”) and MMA-related products, the prices of which have been historically variable and sensitive to relative changes in supply and demand, the availability and price of feedstocks and general economic conditions. Historically, the markets for some of our products have experienced alternating periods of tight supply, causing prices and margins to increase, followed by periods of capacity additions, resulting in oversupply and declining prices and margins. We do not know if prices will remain at current levels. In addition, we do not know if future growth in demand for MMA and MMA-related products will be sufficient to alleviate any existing or future conditions of excess industry capacity or that these conditions will not be sustained or further aggravated by anticipated or unanticipated capacity additions or other events. See the risk described under the caption “The significant competition in the chemicals industry, whether through efforts of new and current competitors, or through consolidation of existing customers, may adversely affect our competitive position, sales and overall operations.”

Further, the prices for a large portion of our raw materials are similarly variable. Our ability to pass on increases in the cost of raw materials to our customers is, to a large extent, dependent upon market conditions. There may be periods of time in which we are not able to recover increases in the cost of raw materials due to weakness in demand or an oversupply of our products.

Our relationship with DuPont is critical to our business and if this relationship were to cease, our cash flow, margins and competitive position could be materially and adversely affected.

DuPont is our largest supplier and one of our largest customers and we rely on DuPont for various manufacturing services. If DuPont were to cease to be our supplier or were to cease sharing site services with us, our cash flow, margins and competitive position could be materially and adversely affected.

DuPont is our only supplier of hydrocyanic acid (“HCN”) in the United States, specifically at our Beaumont, Texas and Memphis, Tennessee facilities. We have recently entered into an agreement with DuPont at our Beaumont, Texas facility, whereby we operate DuPont’s Acrylonitrile (“AN”) assets, and the by-product HCN from this process is supplied to us. At Memphis, DuPont produces HCN for its own internal use and we are the only unaffiliated purchaser of the rest of its production. Our current HCN supply contract with DuPont at our Memphis facility expires in June 2013 with an evergreen clause thereafter, unless terminated by either party.

DuPont is also one of our largest customers. Several of our US facilities are located within DuPont chemicals complexes and, in some cases, are operated by DuPont under our direction; we share supplies and services at those sites with DuPont and other site tenants.

International operations — we are exposed to economic downturns and local business risks in several different countries, particularly in the United States, and they could adversely affect our profitability.

We derive substantial revenues from international operations, particularly the United States. If there is an economic downturn in the United States and/or other countries in which we operate, our profitability may be adversely affected. Further, our subsidiaries have interests in substantial physical assets in several countries, including France, Japan, Mexico, The Netherlands, South Africa, Taiwan, Thailand, the United Kingdom, the United States and our recently completed MMA facility in China. Accordingly, our business is subject to risks inherent in international operations and we may experience reduced profitability from these operations. These risks include:

· political and economic conditions;

· differences and unexpected changes in regulatory environments;

· varying taxation regimes;

· exposure to different legal standards, including insolvency regimes; and

· difficulties in staffing and managing operations.

Currency fluctuations — our exposure to currency fluctuation risks in many countries may adversely affect our turnover and operating margins.

Because we generate a significant percentage of our revenues and a substantially lower percentage of our operating expenses in currencies other than the pound sterling (including the US dollar), fluctuations in the value of the pound sterling against other currencies have had in the past, and may have in the future, a material effect on our turnover and operating margins. Our products are sold world-wide. The results of operations and the financial position of these subsidiaries are reported in the relevant foreign currencies and then translated into pounds sterling at the applicable exchange rates for inclusion in our consolidated financial statements. The exchange rates between these currencies and the pound sterling in recent years have fluctuated significantly and may in the future fluctuate substantially.

In addition, because our financial statements are stated in pounds sterling, the translation effect of these fluctuations has had in the past, and may have in the future, a material effect on our business, financial condition or results of operations and may significantly affect the comparability of our results between financial periods. For additional related disclosure, see Item 11 under the caption “Quantitative and Qualitative Disclosures about Market Risk.”

Key suppliers — if we are unable to retain or replace our key suppliers, especially our external HCN suppliers, each of which is exclusive in a given country, our results of operations may be negatively affected.

We rely on DuPont in the Americas, BASF in Europe, China Petrochemical Development Corporation in Taiwan and SECCO in China, our main suppliers of HCN, for all of the HCN that we obtain from external sources. HCN is crucial to our MMA manufacturing process; there is only one external HCN supplier for each of our plants, with no ready alternative supplier. If any of these suppliers is unable to meet its obligations under present supply agreements, we may not be able to find alternative suppliers. In addition, some of the raw materials we use may become unavailable within the geographic area from which we now source our raw materials and there can be no assurance that we will be able to obtain suitable and cost effective substitutes. Any interruption of supply or any price increase of HCN or other raw materials could disrupt production or reduce our operating margins and thus have a material adverse effect on our business, financial condition or results of operations.

The significant competition in the chemicals industry, whether through efforts of new and current competitors, or through consolidation of existing customers, may adversely affect our competitive position, sales and overall operations.

The markets for some of our products are highly competitive. We are exposed to the competitive characteristics of several different geographic markets and industries. Because we have business operations in the upstream and downstream markets, we compete and have competed in the downstream market with many of the customers who purchase from us. Although this has not been a problem in the past, this relationship creates the potential for conflicting interests and our competitive relationship with some of our customers may adversely affect our sales to those customers.

In addition, consolidation in the methacrylate industry may result in a loss of customers if our customers merge with competing producers and no longer require our output. If such customers were large enough, our sales may be materially and adversely affected.

Our principal competitors vary from business to business and range from large international companies, such as Rohm & Haas, Degussa-Hüls AG (including Rohm GmbH), Arkema and Mitsubishi Rayon Co. Ltd., to a large number of smaller regional companies of varying sizes.

Continued technological innovation and the successful commercial introduction of products are important for our future growth and our failure in these areas could negatively impact our profit margins and competitive position.

We will have to continue to identify, develop and market innovative products on a timely basis to replace existing products in order to maintain our profit margins and our competitive position. All of our businesses experience periodic technological change, ongoing product improvements and obsolescence of existing products. Manufacturers periodically introduce new generations of products or require new technological capacity to develop customised products. Our future growth will depend on our ability to gauge the direction of the commercial and technological progress in all key markets and upon our ability to successfully develop, manufacture and market products in these changing markets.

Our future growth will depend on our ability to meet the technological and production requirements involved in producing large quantities of high-purity chemicals and complex chemical intermediates. For example, we currently use the acetone cyanohydrin (“ACH”) process to produce MMA, which may or may not be more cost-effective than competing processes, such as the isobutylene/tertiary butyl alcohol process, depending on raw material costs. We may fail in developing new products and/or technology or in gaining acceptance of these products by our customers. If we fail to keep pace with the evolving technological innovations in our markets, then our business, financial condition and results of operations may be materially and adversely affected.

The failure of our trademarks, patents and confidentiality agreements to protect our intellectual property could adversely affect our business.

The failure of our patents, trademarks or confidentiality agreements to protect our processes, apparatuses, technology, trade secrets or proprietary know-how could lead to increased competition and thus have a material adverse effect on our business, financial condition or results of operations. Proprietary protection of our processes, apparatuses and other technology is important to our business. We rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. While it is our policy to enter into confidentiality agreements with our employees and third parties to protect our intellectual property, there can be no assurances that our confidentiality agreements will not be breached, that they will provide meaningful protection for our trade secrets or proprietary know-how or that adequate remedies will be available in the event of an unauthorised use or disclosure of these trade secrets and know-how. In addition, there can be no assurance that others will not obtain knowledge of these trade secrets through independent development or other access by legal means.

Our actions to protect our proprietary rights may be insufficient to prevent others from developing similar products to ours. In addition, the laws of many foreign countries do not protect our intellectual property rights to the same extent as the laws of the United States or United Kingdom.

Environmental matters — we will have ongoing costs and may have additional costs, lawsuits, obligations and liabilities.

The chemicals business is highly regulated in many countries. Increasingly stringent regulations govern our manufacturing processes, wastes and emissions in all of the jurisdictions in which we do business and will continue to require material ongoing costs. Given the nature of our business, violations of environmental laws may result in substantial fines, penalties, damages or other costs, lawsuits, restrictions or civil or criminal sanctions imposed on our operating activities. In addition, potentially significant expenditures could be necessary in order to comply with existing or future environmental laws. For additional related disclosure, see Item 4 under the caption “Information on the Company — Business Overview” and Item 5 under the caption “Operating and Financial Review and Prospects.”

Under some environmental laws, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our properties or at off-site locations where, for example, we disposed of or arranged for the disposal or treatment of hazardous wastes. We are aware that there is or may be soil or groundwater contamination at some of our facilities resulting from past operations at these or neighbouring facilities. We may need to remediate soil and groundwater contaminated with hazardous substances to ensure that they do not pose an unacceptable risk to human health and the environment. The acquisition agreement relating to the acquisition of ICI Acrylics provides for indemnification of Lucite International Investment Limited by ICI and specified affiliated companies for some of these environmental liabilities, costs, and other matters, provided that various requirements and procedures specified in the acquisition agreement are satisfied. Our costs for any environmental liabilities may be material and our indemnity from ICI might not sufficiently cover those liabilities. For additional related disclosure, including a discussion of our indemnity from ICI, see Item 4 under the caption “Information on the Company — Business Overview — Environmental Regulations.”

Our operations are subject to hazards, which could result in significant liability to us.

We are not fully insured against all potential hazards incident to our business and the occurrence of any of these events could result in significant liability to us. Our operations are subject to the usual hazards associated with chemical manufacturing and the related storage and transportation of feedstocks, products and wastes. These hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil and criminal liabilities. These hazards include:

· explosions;

· fires;

· inclement weather;

· natural disasters including earthquakes;

· mechanical failure;

· unscheduled downtime;

· transportation interruptions;

· remediation; and

· chemical spills, discharges or releases of toxic or hazardous substances or gases and other environmental risks.

We may face capacity constraints that would make us unable to meet increased product demands resulting from our growth and, consequently, our revenues and profits may suffer.

Our future growth and financial performance are dependent, in part, on our ability to increase our production capacity. In 2005, we announced the selection of Jurong Island, Singapore, as the location of a new world scale MMA facility using our newly developed Alpha Technology. Our plan is to have the unit built and operational during 2008, although there can be no assurance that we will meet this schedule. In addition we also have ongoing plans to expand the total production capacity of our existing plants through de-bottlenecking and modernising production technology but some of these capacity increases will not be in place in the near term. We may not be able to complete our planned capacity expansion at that time or at all, which could cause our revenues and profits to suffer.

Insurance cover — changes in the insurance market have resulted in the risk borne by the Group increasing.

We insure our plant, equipment and other assets for property damage in the amount of approximately €1.5 billion with an insurance policy, which we believe to be in accordance with customary industry practices. We also carry a business interruption policy in the amount of €736 million for specified events for up to 18 months (24 months for Beaumont and Memphis). In addition, we carry third party liability insurance. There can be no assurance, however, that our insurance coverage will be adequate to cover potential risks to our plant, equipment and other assets. Moreover, we remain subject to significant increased coverage excesses (deductibles) and additional exclusions for risks such as terrorism and earthquake loss.

ITEM 4 INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

Lucite International Group Holdings Limited, known commercially as Lucite International, was incorporated and registered in England and Wales on August 23, 1999, as a private limited company. Lucite International Finance plc, the issuer of the notes, is a public limited company incorporated and registered in England and Wales on August 24, 1999.

During 2005, the Lucite International (China) Chemical Industry Company Limited (LICC) commissioned the newly completed China MMA facility. This investment was funded by a £5 million equity investment from Lucite International Limited, and a further £11 million equity investment (net of £6 million licence fees) from Lucite International Holdings Limited, a guarantor subsidiary of Lucite International Group Holdings Limited, which was funded from part of the proceeds of an issue of €50 million 10¼% senior notes due in 2010 under an indenture dated June 25, 2003. The balance of the funding for the project was obtained from loans issued by a leading Chinese bank, which are fully drawn.

The registered offices of both companies are located at Queens Gate, 15-17 Queens Terrace, Southampton S014 3BP, United Kingdom and our telephone number is +44-23-8024-8150. Our agent in the United States is Lucite International, Inc., which is located at The Lucite Centre, 7275 Goodlett Farms Parkway, Cordova, Tennessee, 38018, USA.

B. BUSINESS OVERVIEW

We are the leading global producer and seller of methacrylate monomers, the most significant of which is MMA, the principal building block of Acrylic materials, with approximately 25% of the world acrylic monomer market, by volume. We classify this market as our “upstream” business. We also have leading positions in producing and selling acrylic-based sheet materials, polymers, resins and composites with leading brands such as Perspex® and Lucite®. We classify these markets as our “downstream” businesses. We are the only company in the methacrylates business to have production, research, marketing and selling facilities in the three principal acrylic markets: the Americas, Europe and Asia.

A network of 17 manufacturing facilities (including the recently completed MMA facility constructed in China), which are located in 10 countries support our upstream and downstream businesses. In 2005, our upstream business had £488 million in external sales (2004: £425 million) and our downstream business had £292 million in external sales (2004: £282 million), representing 63% and 37% of our total sales, respectively (2004: 60% and 40%). For additional disclosure regarding our sales, including a description of revenues in each of our main geographic markets, please see Note 3 to the financial statements of Lucite International Group Holdings Limited accompanying this report.

Products

Upstream Business

The principal products of our upstream business are methyl methacrylates, or MMA, and speciality methacrylates (“SpMAs”). Approximately 81% of external sales by our upstream business were attributable to MMA during 2005 (2004: 78%). We also produce a limited range of high-value SpMAs, which impart specific high performance properties to its end products, such as gloss and adhesion. We also sell liquid sodium cyanide mainly in the United Kingdom, which is used to produce detergents and as an ingredient in pharmaceuticals and agrochemicals.

· MMA: We are the largest producer of MMA in the world. MMA is produced in liquid form and is the main building block of acrylic materials. Its commercial value derives from its ability to form resins and polymers with excellent transparency, colourability, strength, weatherability and recyclability. MMA in liquid form is used in a wide range of applications from paints and coatings to lubricants and textiles. We sell MMA to third party manufacturers and we also utilise it in our own downstream business. During 2005, we used approximately 22% of our MMA produced in our own downstream production.

· SpMA: We have a leading position in the SpMAs market in the sectors in which we operate. SpMAs are usually manufactured by chemically modifying MMA to achieve specific desirable performance characteristics in their end uses. The majority of our SpMA production is used in the surface coating and automotive industries with the balance being used in the lubricants, inks and adhesives industries.

Downstream Business

Our downstream business uses the MMA we manufacture to produce and sell methacrylate-based polymers, resins, sheet and composites in thousands of variations.

Our production knowledge and expertise allows us to manufacture products with a large variety of aesthetic effects and functional properties for different customers, markets and applications.

Our main downstream product categories are the following:

· Polymers: Polymers consist principally of MMA and are used to provide clarity, transparency, colourability, impact resistance and recyclability in end products. Although we focus on higher margin applications, such as architectural applications, films and optics, we also supply most of the key application segments, including automotive, construction, lighting, extrusion and housewares.

· Resins: Resins are composed of MMA, SpMAs and other additives to provide weatherability, formability, gloss, adhesion and toughness in end uses. Resins are produced in a variety of liquid and solid formats, including beads. We manufacture only bead resins. We supply most of the key product areas, including marine and container coatings, inks, adhesives and electronics.

· Acrylic Sheet: Acrylic sheet’s characteristics of optical transparency, colour, impact strength and resistance to weathering make it suitable for a wide range of applications including glazing, do-it-yourself, transportation, acoustics and lighting. The main variants for customising acrylic sheet are size, thickness, colour and surface effects. In baths, kitchens, and spas, we have a leading global position, with high-quality customers and premier brands in this market. We invented the acrylic bath concept in the early 1950s and continue to be the leading designer and innovator of new effects and functions.

· Composites: Composites are manufactured from a selection of MMA, polymers, aluminium trihydride, quartz and silica. We sell composites in the form of a liquid dispersion which can then be moulded and cured at high temperatures for durability and desired aesthetic effects. We have also developed and taken to market a new cold cure process which allows us to cure at much lower temperatures, enabling us to compete with other materials as customers find the process of curing to be easier and less costly. We have a leading position in the kitchen sink market in Europe, and in the bath and vanity basin market in Japan.

Many of our downstream products are sold under brand names and trademarks that are well known globally. Our best-known brands and trademarks include:

· Lucite®, used especially in the bath and spa market. Lucite® was established more than 50 years ago by DuPont and enjoys particularly high brand recognition in the United States.

· Perspex®, a long-established European brand used for signs and corporate imaging.

· Lucite® TufCoat® used in architectural capping applications such as sidings for house construction, windows and doors.

· Diakon®, a polymer primarily used in Europe in the automotive and appliance industries.

· UltraQuartz®, a new brand that we believe has growth potential in the composites-based kitchen sink market.

· Elvacite®, a well-recognised brand in the bead resins industry.

· Colacryl™, used in dental prostheses and bone cement, including bone cement used in hip replacement surgery.

Customers, Sales, Marketing and Distribution

Some of our major customers typically purchase MMA from us under multi-year contracts, with prices reset periodically based on general market conditions including raw material prices. Furthermore, most of these contracts grant us the right to sell a minimum percentage of the customer’s MMA requirements. Pricing for MMA is generally related to supply & demand, as well as the market price for major raw materials. Customers generally negotiate on the basis of volume discounts, contract length and service.

Lucite International has long-standing relationships with many customers across a wide variety of acrylic end markets. Customers purchase downstream products from us with individual customer specifications. Pricing for downstream products is generally related to demand for the end-use applications, quality, service innovation and brand needs.

For major markets and key product lines, we sell through our global network of sales and marketing personnel. For our general-purpose sheet, polymer and resin products, including sales into developing markets and regions, we often use independent distributors. Distributors typically manage a range of sheet products and provide a service, such as selling our products in smaller quantities and cutting acrylic sheet, to the customers’ particular requirements. Our sales force is organised along upstream and downstream product categories.

Manufacturing Process

We currently produce MMA using the acetone cyanohydrin process, commonly referred to in the chemicals industry as the “ACH” process, which is used for most of the production in the Americas and Europe and some production in Asia. The primary alternative for methacrylate production is the C4 process, favoured by Japanese producers. In 2005, we produced approximately 580 kilotonnes of MMA, which is a decrease of 5% on last year.

We have found that our process of producing MMA is cost-effective, relative to other processes, especially when low-cost acetone and hydrocyanic acid are available locally in sufficient quantities. Our method has advantages over the C4 method in that it achieves higher yields and greater economies of scale.

We have patents to produce MMA using methods other than our three-step process:

· We have developed a two-stage process to synthesise MMA from methanol, ethylene and carbon monoxide, which we refer to as our “Alpha” technology. We believe our Alpha technology will enable us to produce MMA at attractive cost levels and without scale limitation. We began piloting this technology in 2001, achieving successful results by the end of 2002. We continue to pilot our Alpha technology in order to optimise and support the design of a commercial Alpha plant. The design for the first commercial unit is now in progress. The plant will be constructed on Jurong Island, Singapore. We intend to build and have the unit operational during 2008.

· We purchased patents for an MMA process, which we refer to as our “Beta” technology, from Shell in 1997. Applying this process, we have the ability to convert methyl acetylene propadiene into MMA in a one-step process. With this technology, we could produce MMA in quantities from 40 to 50 kilotonnes per year at attractive cost levels.

We use the continuous and batch processes to manufacture polymers, the batch process to manufacture resins and continuous cast, cell cast and extruded processes to manufacture acrylic and other sheet.

Raw Materials and Suppliers

We purchase goods and services from a wide range of suppliers. In 2005, the top ten suppliers accounted for approximately 51% of cost of goods sold by value (2004: 55%). Prices of each of our raw materials depend on different factors. The pricing of methanol is competitive because it is available from a number of suppliers. The price of HCN is affected by natural gas prices in the US and UK which have been more volatile over the last few years. The price of acetone is closely linked to the demand for phenol, as acetone is a co-product of phenol production, and propylene raw material costs.

Intellectual Property Rights

Proprietary protection of our processes, apparatuses and other technology and inventions is important to our business. We own approximately 80 patent families and we have approximately 1,100 individual granted or pending patent applications. We also rely upon un-patented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position.

We believe that branding in the downstream businesses is important and we currently own a range of active brands. Lucite® is our leading, globally recognised brand. Our other key brands and trademarks in distinct product markets include: Perspex®, Elvacite®, Colacryl®, Diakon®, Asterite®, Prismex® (which we market under licence) and ModenGlas®, for which we have extensive geographical trademark rights.

Competition

The MMA business is characterised by a small number of major competitors, most of whose MMA production is for internal use. We believe that we have the largest market share and none of our competitors presently has a comparable MMA production capacity or geographic spread. Our competitors include Rohm & Haas, Degussa-Hüls AG, Atofina, Mitsubishi Rayon Co. Ltd., Sumitomo and Asahi Kasei. Moreover, there are only a few volume SpMAs producers, including Rohm & Haas, Degussa-Hüls AG and Mitsubishi Rayon Co. Ltd. The primary factors for competition in the MMA and SpMAs markets are price, quality, service and reliability of supply.

C. ORGANISATIONAL STRUCTURE

Corporate Structure

The following chart sets forth the corporate structure of our Group.

(a) Charterhouse owns 78% of the common stock and 97% of the preferred stock of Lucite International Limited. Directors of Ineos Capital and related parties own 11% of the common stock and none of the preferred stock of Lucite International Limited.

(b) Guarantor of the senior notes. Lucite International Group Holdings Limited and Lucite International Investment Limited guaranteed the notes on a senior basis and the other guarantors guaranteed the notes on a subordinated basis. The subordinated guarantees are subject to important conditions, including a standstill period of up to 179 days following an event of default. In addition, the subordinated guarantors are subsidiaries of the senior guarantors. As a result, the senior guarantees are effectively subordinated to all existing and future obligations of the subordinated guarantors.

(d) Security to lenders under senior credit facility.

(e) Revolving credit facility may be borrowed by operating companies.

(f) Some of these entities are guarantors of, and have pledged security under, the senior credit facility.

(g) £6.25 million drawn on Deep Discounted Bond by Lucite International Limited for investment in MMA facility in China. This bond matured in December 2004 and the arrangement has been continued as a loan.

(h) An unrestricted subsidiary, which is 77% owned by Lucite International Holdings Limited and 23% owned by Lucite International Limited.

(i) A wholly-owned foreign enterprise established to construct and operate a facility producing MMA for the Chinese market.

A full listing of significant subsidiaries is provided in Note 26 to the financial statements.

D. PROPERTY, PLANTS AND EQUIPMENT

Properties and Manufacturing Facilities

We produce our upstream and downstream products at 17 plants in 10 countries. The following chart provides information regarding the production capacities of our plants (assuming no shutdowns during the year) and, unless otherwise noted, we own the plant site and facilities.

*Site*	*Products*	Nominal Upstream Capacity		Nominal Downstream Capacity
		(in kilotonnes per year)		(in kilotonnes per year)
Beaumont TX (US)	MMA		156		—
Belle WV (US) (a)	SpMA		57		—
Billingham (UK)	MMA		211		—
	SpMA		41		—
	Liquid sodium cyanide		30		—
	Polymer		—		3
Caojing (China PRC)	MMA		93		—
Clairvaux (France)	Cast acrylic sheet		—		2
Darwen (UK)	Cast acrylic sheet		—		31
	Composites		—		6
Ibaraki (Japan)	Composites		—		6
Kaohsiung (Taiwan) (b)	MMA		100		—
Memphis TN (US)	MMA		168		—
	Cast acrylic sheet		—		21
Monterrey (Mexico) (d)	Extruded acrylic sheet		—		6
Newton Aycliffe (UK)	Polymers and resins		—		3
Olive Branch MS (US)	Extruded acrylic sheet		—		45
	Polymers and resins		—		45
Parkersburg WV (US) (a)	Polymers and resins		—		12
Presidents Island, Memphis, TN (US)	Polymers and resins		—		18
Umbogintwini (South Africa)	Cast acrylic sheet		—		5
	Extruded acrylic sheet		—		1
Rozenburg (Netherlands)	Polymers and resins		—		21
Bangkok (Thailand) (c)	Cast acrylic sheet		—		9
	Extruded acrylic sheet		—		10
Total			853		244

(a) DuPont currently operates these facilities on our behalf pursuant to a service agreement.

(b) We own approximately 60% and CPDC owns the remaining 40% of this facility.

(d) Plant site and facilities leased by Lucite International.

In late 2003 we invested in a newly formed subsidiary in China. This subsidiary is a joint venture between Lucite International Limited and Lucite International Holdings Limited to construct and operate a facility producing MMA for the Chinese market. Construction of the facility commenced in October 2003; the facility was commissioned in the first half of 2005 and successfully passed its performance tests on July 1, 2005. The facility’s initial capacity is approximately 93 kilotonnes per year, compared to our global MMA capacity of approximately 635 kilotonnes (excluding China) as of December 31, 2005.

ITEM 4A UNRESOLVED STAFF COMMENTS

NOT APPLICABLE

ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

We have two core operating segments: our upstream segment and our downstream segment.

Upstream

The upstream segment produces both MMA and SpMAs (monomers), which are the chemical building blocks for the production of acrylics. These products are currently manufactured at facilities located in the Americas, Europe and Asia.

Approximately 20–25% of our upstream production is used internally in our downstream business while approximately 75–80% is sold into the merchant market to manufacturers of paints, coatings, adhesives, sealants, inks and other acrylic products.

The key drivers of the upstream segment include the following:

· the purchase prices of the key raw materials;

· ability to pass on raw material price increases;

· downstream demand for monomers from both our own downstream operations and our external customer base;

· industry supply and demand; and

· the relative cost-competitiveness of our manufacturing facilities.

Raw materials have, during the past five years, accounted for approximately 78–86% of the cost of monomer production. Acetone constitutes the principal raw material used in the production of MMA and has been an important factor in setting our MMA selling prices. Natural gas and ammonia are also important feedstocks to the production of the intermediate HCN.

An increase to key raw material prices such as acetone, natural gas, ammonia and to a lesser extent methanol can have a large impact on our profitability. During the year ended December 31, 2005, these raw materials’ prices continued to increase significantly (see Item 5A, Operating Results, for further comments). Historically, we have been able to pass on to our customers most of the changes in monomer raw material prices although typically there has been a three to six month lag.

Downstream demand for monomers from both our own downstream operations and our external customer base is driven by consumer demand for end-use products and linked to improvements in living standards. This demand will vary reflecting the different economic conditions within regions.

Barriers to entry into the market include technology, lead time to construct a cost-effective manufacturing facility and availability of feedstock. During the year ended December 31, 2005, supply remained relatively balanced. Volumes were slightly down while revenue and margin performance was better than during the year ended December 31, 2004, as prices recovered the high cost of key feedstocks.

Following the introduction of our new China MMA facility in the second half of 2005, supply is likely to start easing somewhat going forward, while utilisation rates should remain high. This facility will produce around 93 kilotonnes of MMA a year. One of our competitors, MRC, is currently constructing a 90 kilotonne plant in China that is expected to be commissioned by mid-2006. We are also aware of other potential capacity increases by competitors amounting to approximately 170 kilotonnes of additional capacity due to come on-stream between 2006 and 2008. Other potential or speculative capacity has also been announced. With year-on-year demand growth, we expect the supply and demand position will be sustainable with some year-on-year variations.

We have found that our process of producing MMA using the ACH process is cost-effective relative to other processes and achieves greater economies of scale than the C4 method favoured by Japanese producers. We have also developed a new patented two-stage process to synthesise MMA from ethylene, methanol and carbon monoxide which we refer to as our ‘Alpha’ technology and which will enable us to produce MMA at attractive cost levels and without scale limitation. The first commercial Alpha plant will be located on Jurong Island, Singapore.

Downstream

The downstream segment produces methacrylate materials in various forms, which include acrylic sheet in a variety of forms, polymers, resins and composites. These products are manufactured at facilities located in the Americas, Europe and Asia and are sold worldwide.

During 2005, downstream product prices increased compared to 2004. Competitive price pressures within the sector resulted in continued margin pressure from raw material prices.

Key drivers for the downstream business include:

· economic growth rates because changes in demand for our downstream products generally follow changes in gross domestic product and improving living standards. End uses for methacrylate materials span a wide range of industry sectors including transportation and automotive, architecture, surface coatings and household appliances and fittings;

· demand and margins may vary due to the different economic conditions in different geographic regions;

· the selling price of upstream materials;

· branding and product mix; and

· the competitive nature of the different market sectors as this will determine the ability to pass on higher raw material costs within the selling price.

An increase to the selling price of methacrylate monomers can be passed on to customers depending upon the relative competitiveness of the different market sectors. Some margin deterioration may therefore occur when raw material prices are increasing significantly.

Product mix is also a key driver of profitability due to the diversity of the end uses for our product range from medical applications and kitchens, bathrooms and spa products to retail signage and LCD screens. Each market sector can vary significantly in its profitability depending upon the end use of the product. As demand follows changes in gross domestic product and living standards, the relative mix of products sold will also change to meet this demand. In times when living standards are improving, the mix will reflect more of the higher margin products such as kitchen, bathroom and spa products arising from new house building and home improvement or acrylic resin used in dental and medical sectors or acrylic polymer used in the architectural capstock market. This change in product mix will improve the profitability of the downstream sector.

Our active research and development activities support our innovation and keep branding a strong feature of our downstream business. Rapid and timely market-led innovation is vital to sustaining and growing existing branded market positions as well as developing new brands in new markets. New business development is important in order to extend the reach of acrylic material into new markets and applications and thus increase further growth opportunities.

Ongoing cost savings and margin enhancing projects:

We have a number of ongoing cost saving and margin enhancing projects including;

· volume discounts on raw material purchases;

· continued focus on higher margin and high value-added specialty products;

· efforts to optimise purchased services;

· Perspex Distribution Limited, established to promote the Perspex™ brand and increase customer choice in the United Kingdom;

· more efficient overhaul programmes; and

· other manufacturing and safety excellence improvement programmes combined with continued process development.

Currency Impacts

Our operations are conducted in a large number of countries. The results of operations and the financial position of these operations are reported in the relevant foreign currencies and then translated into pounds sterling at the applicable exchange rates for inclusion in our financial statements. The exchange rates between these currencies and the pound sterling in recent years have fluctuated significantly, in particular the US dollar, and may in the future fluctuate substantially; we generate a significant percentage of our revenues and a substantially lower percentage of our operating expenses in currencies other than the pound sterling and so fluctuations in the value of the pound sterling against other currencies have had in the past, and may have in the future, a material effect on our turnover and operating margins as reported in pounds sterling. (See Item 5A, Operating Results, for details of the currency impact on the year ended December 31, 2005.)

Critical accounting policies and use of accounting estimates

The accounting policies that have been applied are detailed within Note 1 to the financial statements. These policies comply with generally accepted accounting principles applicable in the UK but require some degree of judgement regarding the estimates and assumptions used to apply them.

The application of these assumptions and judgements affects the reported amounts of profit during the year and the assets and liabilities at the balance sheet date. Actual results may differ from the estimates calculated using these assumptions and judgements. Management believes that the following accounting policies are the critical policies where the assumptions and judgements made could have a significant impact on the consolidated financial statements. These critical accounting policies have been discussed and agreed with the Company’s Audit Committee.

Depreciation of tangible fixed assets

It is our policy to depreciate tangible fixed assets, except land, on a straight-line basis over the life of the asset. A key assumption in this policy is the life applied to each class of fixed asset, which will in turn determine the annual depreciation charge. In deciding the appropriate lives to be applied to the assets, management takes into account various factors including, amongst other things, the accumulated experience of the effective asset lives from historical business operations. Variations in the asset lives used could impact the earnings of the business through an increase or decrease in depreciation charge.

Depreciation charged on plant and machinery represents the majority of the annual depreciation charge. The current policy for plant and machinery is to capitalise it over 10 to 20 years. Based on current plans and usage we do not envisage any scenario where we would be required to reduce asset lives and hence increase our depreciation charge.

This policy is considered to be a critical accounting policy since the depreciation charges are a significant component of net profit and so variation in these charges would have a significant impact on net profit.

Pension liabilities

The amounts recognised in the financial statements relating to principal pension and other post-retirement benefits are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could be settled at December 31, 2005, rate of increase in future compensation levels and health care cost trend rates. These assumptions are updated annually and are disclosed in Note 21 to the financial statements. The Group fully adopted FRS17 in 2005. For each of the key schemes a valuation under FRS17 was prepared by independent actuaries as at December 31, 2005, and all these schemes have been accounted for under FRS17.

The expected long-term rate of return on assets is developed with input from independent, professionally qualified actuaries who base these assumptions on broad equity and bond indices. The long-term rate of return assumption used for determining net periodic pension expense for 2005 was 8.25% for the US Scheme and 7.2% for the UK scheme. These rates have been discussed with the actuaries and we believe that based on our mix of equities and bonds and the inflation assumptions used the rates applied are appropriate. Future actuarial pension expense will depend on future investment performance, changes in future discount rates and various other factors related to the population of participants in the pension plans.

The discount rates used for determining future pension obligations are based on long-term high quality corporate bonds. The discount rate used to value the US liabilities reduced from 5.75% at December 31, 2004, to 5.5% at December 31, 2005. The discount rate used to value the UK liabilities reduced from 5.3% at December 31, 2004, to 4.85% at December 31, 2005. The assumption for the long-term rate of increase in compensation levels was 4.5% for the US scheme and 3.9% for the UK scheme at December 31, 2005. According to the independent actuaries, a change of 0.1% in the discount rate applied could result in a change of approximately £0.9 million and £3.5 million in the pension liabilities of the US and UK pension schemes, respectively, as at December 31, 2005.

The fair value of the US scheme assets increased from £35 million at December 31, 2004, to £44 million at December 31, 2005, including favourable exchange movements of £2 million and improved return on investment of £3 million. The fair value of the UK scheme assets increased from £72 million at December 31, 2004, to £93 million at December 31, 2005, reflecting improved return on investment of £16 million as well as additional funding provided during the year ended December 31, 2005. For the UK scheme these are used to determine the charge under US GAAP but are not relevant for the charge under UK GAAP.

The fair value of the US scheme liabilities increased from £59 million at December 31, 2004, to £78 million at December 31, 2005, including adverse exchange movements of £5 million as well as the impact of additional employees taken on at the Beaumont site from DuPont. The fair value of the UK scheme liabilities increased from £118 million at December 31, 2004, to £138 million at December 31, 2005. The increase in the scheme liabilities reflects the impact of changes in financial assumptions used during the year ended December 31, 2005. For the UK scheme these are used to determine the charge under US GAAP but are not relevant for the charge under UK GAAP.

This policy is considered to be critical since changes in pension assumptions could have a significant impact on the Company’s reported net profit.

Deferred tax

Deferred tax assets arise from short-term timing differences between the financial statements and the tax base of the Group’s assets and liabilities. The extent to which we recognise deferred tax on losses is dependent on the assumptions concerning the future taxable profits of the business against which the losses can be relieved. We have not recognised losses where we do not believe that we will relieve them within the foreseeable future.

Net deferred tax assets under UK GAAP amounted to £12 million at December 31, 2005, relating to the excess of losses and short-term timing differences over accelerated capital allowances.

During the year ended December 31, 2005, we recognised a debit of £4 million under UK GAAP relating to short-term timing differences utilised in the US. A net deferred tax credit of £3 million has been recognised in respect of tax losses in the period. This net credit was recognised due to increased certainty that we will be able to relieve losses generated in prior years against suitable profits in the relevant jurisdictions within the foreseeable future.

Following our adoption of FRS17 during 2005, we have potential deferred tax assets relating to our increased pension liability. We have not recognised these due to the high level of uncertainty surrounding the possible reversion of these assets in the foreseeable future.

Environmental Liabilities

Liabilities for environmental matters are accrued for when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based upon current law and existing technologies. These estimates take into account current law, existing technologies and management’s judgment about future changes in regulation.

Environmental compliance costs include ongoing maintenance, monitoring and similar costs. Environmental costs are accrued when environmental assessments or remedial efforts are probable and the cost can be reasonably estimated. Such accruals are adjusted as further information develops or circumstances change. Costs of future obligations are discounted to their present values using the Company’s weighted average cost of capital.

Environmental costs are capitalised if the costs extend the life of the property, increase its capacity, and/or mitigate or prevent contamination from future operations. Environmental costs are also capitalised in recognition of legal asset retirement obligations resulting from the acquisition, construction and/or normal operation of a long-lived asset. Costs related to environmental contamination treatment and clean-up are charged to expense. Estimated future incremental operations, maintenance and management costs directly related to remediation are accrued when such costs are probable and estimable.

As of December 31, 2005, the Company adopted Financial Accounting Standards Board Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN47”), which addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. During the current year, we have undertaken to assess the asset retirement and site clearance liabilities. However, realistically the situation is unclear at almost every site, either because the cost cannot be established with any certainty or it is not possible to determine when the Group will vacate the site. Management has therefore concluded that it is impossible to determine at this time, with reasonable accuracy, the potential liability for asset retirement and site clearance, and as a result no liability has been recorded in the Group’s balance sheet as of December 31, 2005.

See the Environmental and Legal Matters sections of this Management’s Discussion and Analysis for further discussion on environmental and legal liabilities.

Impairment of goodwill

The calculation for impairment of goodwill according to US GAAP uses a discounted cash-flow approach to value the net assets of the Company. We have calculated this at the lowest level required, namely on a regional upstream and downstream basis.

Within the calculation of the value of net assets, we have made estimates to allow us to split any non product-specific cash flows back to upstream and downstream products.

The calculation requires us to make estimates concerning future cash flow of the business based on future expected sales prices and future expected feedstock prices. These estimates are made using long-term forecast information for the business and are based on our best view of future market conditions. The chemical industry is however variable and changing market demands and prices may impact on these future projections of cash flow. Substantially all of our revenue is attributable to sales of MMA and MMA-related products, the prices of which have been historically sensitive to relative changes in supply and demand and the availability and price of feedstocks. Our ability to pass on higher feedstock prices is to a large extent dependent upon market conditions and thus impacts on our future cash forecasts.

The calculation discounts future cash flow at an appropriate discount rate for the Company based on the financial structure that we have in place. We have used an average discount rate of 9% based on the weighted average cost of capital of a number of companies of similar structure within our industry. We have conducted a sensitivity review on the numbers calculated and found that a 1% to 2% increase in the discount factor or a 10% reduction in our cash flows as anticipated in the calculation would give rise to a potential impairment of between £1 million and £9 million in one of the segments considered.

This policy is considered to be a critical accounting policy, as impairment charges recorded in the profit and loss account would have a significant impact on net profit.

A. OPERATING RESULTS

The following table shows historical turnover and operating profit for our principal businesses for the three years ended December 31, 2005.

	Year ended
	December 31,
	£ million
	2003			2004			2005
	as restated			as restated
Turnover:
Upstream		511			536			611
Downstream		276			282			292
		787			818			903
Interclass eliminations		(93	)		(111	)		(123	)
Total turnover		694			707			780
Operating profit:
Upstream		56			56			60
Downstream		15			11			4
Total operating profit		71			67			64

Year ended December 31, 2005 compared to the year ended December 31, 2004

Turnover

	Year ended December 31, 2004		Exchange			Volume/Mix			Price			Year ended December 31, 2005
	£m		£m			£m			£m			£m
Total turnover		707		10			(29	)		92			780
Percentage increase/(decrease)				1	%		(4	%)		13	%		10	%
Upstream turnover (i)		536		8			(23	)		90			611
Percentage increase/(decrease)				1	%		(4	%)		17	%		14	%
Downstream turnover		282		3			(16	)		23			292
Percentage increase/(decrease)				1	%		(6	%)		8	%		3	%

(i) Upstream amounts include intra-company sales

Turnover for the year ended December 31, 2005 increased by 10% compared to the same period last year.

Turnover for the year ended December 31, 2005 was favourably affected by the translation impact of the marginally stronger dollar during the period. The average rate for the year ended December 31, 2005 was $1.82 to £1.00 compared to an average rate for the year ended December 31, 2004 of $1.83 to £1.00. Just under half of our sales are generated from US operations with another approximately 20% generated within Asia where exchange rates are strongly linked to the dollar.

Demand for methacrylate products decreased during the year ended December 31, 2005, with higher selling and raw materials prices. Upstream sales decreased by 4% during the year ended December 31, 2005, compared to the year ended December 31, 2004, on volume and mix effects.

Downstream sales decreased by 6% compared to the year ended December 31, 2004, on volume and mix effects. Management believes this is related to de-stocking.

Raw material prices increased significantly during the year ended December 31, 2005. The higher raw material prices are reflected in selling prices subject to lags of between three and six months. Selling prices recovered the increase in raw material prices during the period, resulting in an increase in upstream prices of 17% for the year ended December 31, 2005, compared to the year ended December 31, 2004.

Higher feedstock costs are also reflected in downstream prices where possible. The ability to pass on these higher feedstock prices to downstream products is a function of the relative competitiveness of each downstream market and time. Downstream prices increased 8% for the year ended December 31, 2005, compared to the year ended December 31, 2004.

Cost of sales

	Year ended December 31, 2004		Exchange			Volume/Mix			Raw material prices net of fixed cost movements			Year ended December 31, 2005
	£m		£m			£m			£m			£m
Total cost of sales		538		8			(15	)		75			606
Percentage increase/(decrease)				2	%		(3	%)		14	%		13	%
Upstream cost of sales		425		5			(12	)		74			492
Percentage increase/(decrease)				1	%		(3	%)		17	%		15	%
Downstream cost of sales		224		3			(11	)		21			237
Percentage increase/(decrease)				2	%		(5	%)		9	%		6	%

Cost of sales for the year ended December 31, 2005, increased by 13% compared to the year ended December 31, 2004.

Cost of sales for the year ended December 31, 2005, was adversely affected by the translation impact of the marginally stronger dollar during the period. The average rate for the year ended December 31, 2005, was $1.82 to £1.00 compared to an average rate for the year ended December 31, 2004, of $1.83 to £1.00. Just under half of our production is generated from US operations with another approximately 20% generated within Asia where exchange rates are strongly linked to the dollar.

Raw material prices increased significantly during the year ended December 31, 2005, in light of hurricanes Katrina and Rita in the US and high gas prices in the UK during Q4 2005. These increases, net of fixed cost movements, resulted in a 17% adverse variance within cost of sales for the upstream business, and a 9% adverse variance within cost of sales for the downstream business during the year ended December 31, 2005, compared to the year ended December 31, 2004. Incorporated in the fixed cost movements there was also a reclassification of administration costs to Net Operating costs of approximately £5 million for the year ended December 31, 2005. This reclassification had no effect on total costs for the period.

There was a 3% decrease in upstream cost of sales during the year ended December 31, 2005, compared to the year ended December 31, 2004, on volume and mix effects. Downstream cost of sales decreased by 5% during the year ended December 31, 2005, compared to the year ended December 31, 2004, on volume and mix effects.

Net operating costs

	Year ended December 31, 2004		Exchange			Spend			Year ended December 31, 2005
	£m		£m			£m			£m
Total operating costs		102		—			8			110
Percentage increase/(decrease)				—	%		8	%		8	%
Upstream operating costs		55		—			4			59
Percentage increase/(decrease)				—	%		7	%		7	%
Downstream operating costs		47		—			4			51
Percentage increase/(decrease)				—	%		9	%		9	%

Net operating costs increased by approximately £3 million for the year ended December 31, 2005, for work undertaken to support a review of re-financing or potential sale of the business.

There has also been a reclassification of administration costs from cost of sales of approximately £5 million for the year ended December 31, 2005. This reclassification had no effect on total costs for the period.

Net interest payable and other charges

	£m
Interest charged for the year ended December 31, 2004 — as restated		28
Increase in pension fund finance charge		1
Interest on new loans raised — China debt		2
Interest charged for the year ended December 31, 2005		31

Movements for the year ended December 31, 2005, comprise the increase in pension fund finance charge (£1 million) and interest on external loan raised in China as part of financing the new MMA facility (£2 million).

As a result of these movements, net interest payable and other charges increased £3 million during the year ended December 31, 2005, compared to the year ended December 31, 2004.

Taxation on Profit on Ordinary Activities

The taxation charge on the profit on ordinary activities increased from a taxation charge of £nil million for the year ended December 31, 2004, to a taxation charge of £7 million for the year ended December 31, 2005. Underlying current taxes increased by £1 million principally as a result of Kaohsiung Monomer Company (KMC) profits during the period. Deferred tax credits reduced to £nil million, net of reversal of short-term timing differences and the re-assessment of the potential utilisation of tax losses.

Equity Minority Interests

Equity minority interests increased to £6 million for the year ended December 31, 2005, compared to £4 million for the year ended December 31, 2004, due to an increase in KMC profits.

Year ended December 31, 2004 compared to the year ended December 31, 2003

Turnover

	Year ended December 31, 2003		Exchange			Volume/Mix			Price			Year ended December 31, 2004
	£m		£m			£m			£m			£m
Total turnover		694		(63	)		34			42			707
Percentage increase/(decrease)				(9	%)		5	%		6	%		2	%
Upstream turnover (i)		511		(43	)		20			48			536
Percentage increase/(decrease)				(8	%)		4	%		9	%		5	%
Downstream turnover		276		(20	)		25			1			282
Percentage increase/(decrease)				(7	%)		9	%		—	%		2	%

(i) Upstream amounts include intra-company sales

Turnover for the year ended December 31, 2004, was adversely affected by the translation impact of the weaker dollar during the period. The average rate for the year ended December 31, 2004, was $1.83 to £1.00 compared to an average rate for the year ended December 31, 2003, of $1.63 to £1.00. Just under half of our sales are generated from US operations with another approximately 20% generated within Asia where exchange rates are strongly linked to the dollar.

Demand for methacrylate products remained strong during the year ended December 31, 2004, led by strong consumer demand in all regions combined with a general shortage of product. Upstream volumes during the year ended December 31, 2004, increased 3% compared to volumes during the year ended December 31, 2003, resulting in a favourable effect on turnover of 4% when combined with favourable mix variances.

Downstream volumes increased 8% compared to volumes during the year ended December 31, 2003, resulting in a favourable effect on turnover of 9% when combined with favourable mix variances.

Raw material prices increased considerably during the year ended December 31, 2004. The higher raw material prices are reflected in selling prices subject to lags of between three and six months. This has resulted in upstream prices being 9% higher for the year ended December 31, 2004, compared to the year ended December 31, 2003.

Higher feedstock costs are reflected in downstream prices where possible. The ability to pass on these higher feedstock prices to downstream products is a function of the relative competitiveness of each downstream market and time. Downstream prices have increased for some product areas but in aggregate downstream prices remain stable compared to the same period last year.

Cost of sales

	Year ended December 31, 2003 as restated		Exchange			Volume/Mix			Fixed Cost Spend as restated			Raw material prices (net of fixed cost savings)			Year ended December 31, 2004
	£m		£m			£m			£m			£m			£m
Total cost of sales		530		(51	)		13			(1	)		47			538
Percentage increase/(decrease)				(10	%)		2	%		—	%		9	%		1	%
Upstream cost of sales		407		(34	)		12			1			39			425
Percentage increase/(decrease)				(8	%)		3	%		—	%		9	%		4	%
Downstream cost of sales		216		(16	)		13			(1	)		12			224
Percentage increase/(decrease)				(7	%)		6	%		(1	%)		5	%		3	%

Cost of sales for the year ended December 31, 2004, was favourably affected by the translation impact of the weaker dollar during the period. The average rate for the year ended December 31, 2004, was $1.83 to £1.00 compared to an average rate for the year ended December 31, 2003, of $1.63 to £1.00. Approximately half of our production is generated from US operations with another approximately 15% generated within Asia where exchange rates are strongly linked to the dollar.

Raw material costs increased substantially during the year ended December 31, 2004, resulting in a 9% price variance within cost of sales for the upstream business.

There was a 3% increase in upstream volumes during the year ended December 31, 2004, compared to the year ended December 31, 2003.

An 8% volume increase in downstream products during the year ended December 31, 2004, compared to the year ended December 31, 2003, resulted in an adverse cost of sales variance of 6% when combined with unfavourable mix effects and non-variable elements within cost of sales.

Cost of sales for the year ended December 31, 2004, was favourably affected by lower employee costs of approximately £3 million in the UK as a result of reduction in performance-based bonus accrual. Offsetting charges were incurred as part of administrative costs (see Net operating costs below).

Net operating costs

	Year ended December 31, 2003		Exchange			Spend			Year ended December 31, 2004
	£m		£m			£m			£m
Total operating costs		93		(3	)		12			102
Percentage increase/(decrease)				(3	%)		13	%		10	%
Upstream operating costs		48		(1	)		8			55
Percentage increase/(decrease)				(2	%)		17	%		15	%
Downstream operating costs		45		(2	)		4			47
Percentage increase/(decrease)				(5	%)		9	%		4	%

Net operating costs were favourably affected by the translation impact of the weaker dollar during the year ended December 31, 2004.

Net operating costs were impacted during the year ended December 31, 2004, by additional distribution costs of approximately £2 million arising from higher sales volumes and mix effects during the period compared to year ended December 31, 2003.

The construction of the new MMA facility in China has increased upstream net operating costs by £2 million for the year ended December 31, 2004, compared to the year ended December 31, 2003. Downstream net operating costs were £1 million higher for the year ended December 31, 2004, compared to the year ended December 31, 2003, due to the additional costs of setting up a dedicated distribution facility in the UK.

There were additional employee costs of approximately £4 million during the year ended December 31, 2004, compared to the year ended December 31, 2003, including £3 million for performance-based bonuses. This was offset by a reduction in employee costs charged to cost of goods sold (refer Cost of Sales above).

Net interest payable and other charges

	as restated
	£m
Interest charged for the year ended December 31, 2003		38
Exchange movements		(7	)
Additional interest on senior notes		1
Fees on debt facility with parent company		(1	)
Lower interest on senior debt		(3	)
Interest charged for the year ended December 31, 2004		28

Only a portion of external debt denominated in non-UK currency is hedged against the assets of the Group. A portion of exchange movements is taken to reserves based on the specific currencies hedged and the balance is charged to the profit and loss account. This resulted in a positive exchange movement of £7 million for the year ended December 31, 2004, compared to a negative movement of £7 million for year ended December 31, 2003. Other movements comprise the reduction in interest payable on senior debt. This reduction has arisen as a result of the full repayment of the revolving credit facility and a lower rate of interest applied to the senior debt.

Taxation on Profit on Ordinary Activities

The taxation charge on the profit on ordinary activities decreased from a taxation charge of £6 million for the year ended December 31, 2003, to a taxation charge of £nil for the year ended December 31, 2004. Underlying current taxes remained consistent with 2003, but were reduced by deferred tax credits related to the reversal of unutilised capital allowances from the prior year and re-assessment of the potential utilisation of tax losses.

Equity Minority Interests

Equity minority interests remained at £4 million for the year ended December 31, 2004, compared to the year ended December 31, 2003.

New US Financial Accounting Standards and pronouncements not yet effective

In November 2004, the FASB issued Financial Accounting Standard No. 151, Inventory Costs — an amendment of ARB No. 43, Chapter 4 (revised ) (FAS151). FAS151 amends the guidance in ARB No. 43, Chapter 4, ‘Inventory Pricing,’ to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). FAS151 requires that those items be recognised as current-period charges. In addition, FAS151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. FAS151 is effective for the Group for the year ending December 31, 2006. We do not currently anticipate this pronouncement to have a material impact on the Group’s results.

In December 2004, the FASB issued Financial Accounting Standard No. 123R, Share-Based Payment (FAS123R). FAS123R requires that companies expense the value of employee stock options and other awards. FAS123R allows companies to choose an option pricing model that appropriately reflects their specific circumstances and the economics of their transactions, and allows companies to select from three transition methods for adoption of the provisions of the standard. FAS123R is effective for the Group for the year ending December 31, 2006. We do not currently anticipate this pronouncement to have a material impact on the Group’s results.

In December 2004, the FASB issued Financial Accounting Standard No. 153, Exchanges of Non-monetary Assets (FAS153). FAS153 amends APB Opinion No. 29, Accounting for Non-monetary Transactions, to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. FAS153 is effective for the Group for the year ending December 31, 2006. We do not currently anticipate this pronouncement to have a material impact on the Group’s results.

Recent UK accounting pronouncements

In April 2004, the ASB issued Financial Reporting Standard 20, Share-based Payment (FRS20). FRS20 specifies the financial reporting of share-based payment transactions. In particular, the standard requires that the profit or loss and the financial position of an entity include expenses associated with the grant of share options to employees. FRS20 is effective for the Group for the year ending December 31, 2006. We do not currently anticipate this pronouncement to have a material impact on the Group’s results.

In December 2004 the ASB issued accounting standards FRS23, FRS24, FRS25 and FRS26. The application of FRS’s 23, 24 and 26, together with the disclosure requirements of FRS25 is determined by reference to an entity’s implementation of FRS26. The Group does not currently fall into the scope of mandatory adoption of FRS26. Based on a current exposure draft, the standard would be effective for the Group from the year ending December 31, 2007.

International Financial Reporting Standards (“IFRS”)

We are not subject to recently enacted legal requirements mandating the adoption of IFRS, and believe it is in the best interest of the Company to continue reporting on a UK GAAP basis. We believe our continued use of UK GAAP provides greater historical comparability.

B. LIQUIDITY AND CAPITAL RESOURCES

Sources and uses of liquidity

Our main sources are cash from operating activities and from financing activities. This liquidity is then used to service our debt by way of interest payments and principal repayments and to support our capital assets by means of capital expenditure. Up to fifty percent of any additional cash generated over and above these requirements must be applied to repay amounts payable under our senior credit facilities (limited to twenty-five percent based on a leverage ratio below 2.5). We expect to make such a cash payment based on the Group’s performance for the year ended December 31, 2005, subject to the issue of the report on covenant performance for 2005. The relevant covenant ratios are the leverage ratio, cash-flow to debt service ratio and interest cover ratio. All financial covenants were achieved for the year ended December 31, 2005.

Operating activities

Cash flow provided by operating activities was £109 million for the year ended December 31, 2005, £92 million for the year ended December 31, 2004, and £94 million for the year ended December 31, 2003. Working capital balances resulted in an inflow of £2 million for the year ended December 31, 2005, versus an outflow of £15 million for the year ended December 31, 2004, reflecting a combination of increased stock values being more than offset by an increase in creditors balances as a result of higher raw material prices, and debtors’ balances (supported by days sales outstanding) remaining fairly consistent with the year ended December 31, 2004. Management believes that our working capital position for the year ended December 31, 2005, is adequate to meet our present requirements.

Cash generated in our subsidiaries in Taiwan (KMC) and Thailand (Thai Polymer Company or TPA) is only available to the Group by means of dividends which are subject to local legal restrictions.

Financing activities and servicing of debt

We continue to have significant cash requirements for debt service. As of December 31, 2005, we had £122 million (2004: £133 million) outstanding in term loans and revolving facilities borrowed under our senior credit facilities and €250 million or £173 million (2004: €250 million or £178 million) aggregate principal amount of notes outstanding including the un-amortised premium on senior notes. During 2005, our revolving credit facility remained fully unutilised. We also repaid £18 million of the senior debt balance outstanding as scheduled during 2005.

The construction of our plant in China was funded by total equity of £22 million (including £5 million invested by Lucite International Limited) and loans taken out with a leading Chinese Bank for approximately £38 million in total, including construction and funding of working capital. As of December 31, 2005, we had an outstanding balance of £38 million on the loan with the Chinese Bank. Debt incurred in the new Chinese subsidiary is ring-fenced from the remainder of the Group and secured solely on the assets of the Chinese subsidiary. Our investment in the new China facility is summarised in the table below.

Summary of the investment in our new MMA facility in China:

	Year ended December 31, 2005
	£m
Lucite International Limited		5
Lucite International Holdings Limited (net of technology licence fees — £6 million)		11
Debt with a leading Chinese Bank		38
Total investment		54

Based on predicted economic and market conditions we believe that our future operating performance will be sufficient to service amounts outstanding under our senior credit facilities, as well as the amounts due under the notes but will be subject to changes in economic conditions, financial, business and other factors, many of which are beyond our control. We currently have additional borrowing facilities up to $85 million (£50 million less $1 million of guarantees) under our $85 million revolving credit facility.

Borrowings under our senior credit facilities bear interest at LIBOR-based floating rates for varying interest periods. Our senior credit facilities consist of three term loan facilities for an aggregate of £122 million ($209 million) as at December 31, 2005, and a revolving working capital facility with a maximum commitment of up to £50 million ($85 million) which was fully unutilised at December 31, 2005. The senior credit facilities impose restrictions on our ability to make capital expenditures and limit our ability to incur additional indebtedness. Similarly, the terms of the notes also impose restrictions on the incurrence of additional debt. The notes are scheduled to be repaid in one instalment on May 15, 2010 of €250 million. However, we may be required to purchase the notes before that date in the event of a change of control or a material asset sale.

Capital Expenditures

During the current and prior years our capital expenditure was as follows:

	Year ended December 31, 2003		Year ended December 31, 2004		Year ended December 31, 2005
	£m		£m		£m
Safety, health and environment		4		4		9
Maintaining asset capacity		14		13		25
Growth projects		14		21		28
Total capital expenditure		32		38		62

The capital expenditure on growth projects includes approximately £13 million relating to the construction of our newly completed MMA facility in China. The capital expenditure on maintaining asset capacity includes the cost of two planned tri-annual plant overhauls. We currently anticipate that our capital expenditures will be approximately £40 million through 2006 in respect of our existing facilities which includes approximately £11 million to be spent on safety, health and the environment. In addition, approximately £7 million will be spent on the scheduled overhaul at our Fite Road, Memphis MMA facility, approximately £12 million on the new Alpha MMA facility in Singapore, and approximately £28 million on AN/HCN facilities at our Beaumont, Texas facility. Capital expenditure will be funded with a combination of internally generated and external funding.

Commitments for capital expenditure are £19 million, representing amounts that we have contracted to purchase but have not yet purchased and £39 million representing expenditure that we have authorised but not yet contracted for in respect of our existing facilities.

Treasury Policies

Our policy is to utilise excess cash within the Group by paying down against the revolving credit facility. Any cash that is held locally on a short-term basis is invested in overnight money markets, where appropriate to do so. We hold cash mainly in US dollars, Euros, Sterling and Taiwan dollars and wherever possible we manage the Group cash position to satisfy our US dollar, Euro, Sterling and Taiwan dollar financial commitments.

We hedge a small portion of our accounts receivable in Europe in order to offset the potential currency exposure of selected receivables. As of December 31, 2005, the total amount of currency hedges was £6 million. We also structured our original debt obligations in currencies that naturally hedge against movements in our trading cash flows.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Our Research, Technology and Engineering Group constitute our research and development core. Since 1999 we have enhanced our management and focus of research and development expenditures. Our investment in 2005 was £9 million on new product and process technologies (2004: £9 million, 2003: £9 million).

We principally conduct our research and development at our research facilities located in Wilton (United Kingdom), Darwen (United Kingdom), Memphis (USA), and Ibaraki (Japan). Over 70 scientists and engineers are engaged at these research facilities in strategic projects to lower costs of production and to develop new products, processes and product enhancements. Lucite International’s proprietary new monomer technology “Alpha” is now fully operational in a continuous pilot plant, and design of the first commercial plant is underway.

Increasing the market for acrylic products

We constantly strive toward increasing the market for acrylics through the development of new product applications, either through our own downstream operations or in conjunction with strategic partners. During 2005, we spent approximately £4 million on research and development to expand and create downstream applications for acrylic products. In 2005 sales of new products developed in the past three years constituted approximately 19% of our downstream sales and 22% of our gross margin.

The unique optical properties of acrylic polymer, its colourability and weatherability, and the ability to manipulate light through it, are foundation blocks for developing future application opportunities. The following new product applications are significant areas of focus for the Company:

· Lucite® TufCoat® and Elvakon®

Lucite® TufCoat® products are targeted toward architectural capping applications such as sidings for house construction, windows and doors. Due to their weathering characteristics, flexibility and ability to provide a wide range of colour and sheen types, TufCoat® products allow manufacturers of these house-building products to offer much longer consumer guarantees than conventional paints, wood-finishes or other thermoplastic materials. From this technology, we are developing base capping products under the Elvakon® name to meet the needs of a wide range of automotive, appliance and lighting applications which exploit our capability to manipulate both the material properties and processing characteristics of acrylic materials and alloys.

· Colacryl®

Since the acquisition of Bonar Polymers in 2000, the high value polymers platform has been a prominent part of Specialty Polymer and Resins business. Our research efforts in this area are focused on working with customers to understand long term application needs and develop acrylic material solutions, whilst ensuring a competitive range of current products.

· Elvacite®

Elvacite® embraces a family of advanced polymer systems with many performance-enhancing characteristics for marine and container coatings, electronics, inks and adhesives. Our flexibility to produce materials of novel architecture and incorporate reactive functionality, have allowed us to develop leading edge solutions for our customers in their drive to low VOC (Volatile Organic Compounds) products.

· Acrylic Alloys and Additives

We have a carefully selected and application-targeted range of exploratory programs aimed at exploiting the beneficial properties of acrylic in combination with other materials. Emerging new acrylic product opportunities are anticipated to be in alloys (blends) with other thermoplastics, as additives for modification of bulk polymers, and composite (filled) systems.

D. TREND INFORMATION

During 2003, the recovery in demand for methacrylates continued in all markets, with strong consumer demand in particular from Japan and China during the year ended December 31, 2003. Selling prices continued to recover strongly during the first half of the year and were maintained during the second half of 2003. Raw material prices continued to increase to unprecedented levels during the year ended December 31, 2003, particularly acetone and natural gas in the United States.

During 2004, the methacrylates market continued to experience strong demand across all regions. Raw material costs continued to rise achieving unprecedented levels. We also experienced some limitations on our supply. The higher input costs were progressively reflected in higher selling prices of upstream products. Competitive price pressures and price lags within the sector meant that most of the increase in upstream raw material prices could not be fully passed on resulting in continued downstream margin pressures in the year ended December 31, 2004.

During 2005, the methacrylates market continued to experience unprecedented increases in the prices of key raw materials, such as oil, natural gas, acetone and methanol; these increases were exacerbated by hurricanes Katrina and Rita in the US. The higher input costs were reflected in higher selling prices of upstream products. Demand growth slowed as higher prices stimulated some de-stocking in the supply chain.

E. OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Our total committed contracts that will impact on our cash position over the next five years and thereafter are as follows:

	Payments due by period £m
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Long-term debt obligations (a)(b)		332		23		67		227		15
Capital (finance) lease obligations		6		—		2		1		3
Purchase obligations (c)		694		156		225		111		202
Total		1,032		179		294		339		220

(a) Consist of our senior credit facilities and senior notes

(b) Includes China bank loan (outstanding balance as of December 31, 2005 was £38 million)

(c) Non-cancellable purchase contracts represent long term contracts to purchase raw materials, most notably acetone, HCN, methanol and some utilities. These contracts represent minimum volume commitments for purchase volumes expected to be used within the normal course of business.

Interest is paid on the senior notes at 10.25%. The current rates applicable to our senior credit facilities are 2.42% plus a margin for the euro-denominated debt and 4.39% plus a margin for the US dollar-denominated debt. The margin ranges from 1.25% to 3.00% depending upon the maturity date of the tranche of debt.

We may be required to purchase the senior notes before the maturity date in the event of a change of control or a material asset sale. The payment profile of the senior credit facilities may change if we generate excess cash as defined under the senior credit facilities agreement in any financial year until maturity. In the event of generating such excess cash we would be required to pay up to fifty percent of any additional cash generated as a prepayment against our senior credit facilities (limited to twenty five percent based on a leverage ratio below 2.5).

G. SAFE HARBOUR

The safe harbour provided in Section 21E of the Securities Exchange Act applies to forward-looking information provided pursuant to item 5 F above.

ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

Directors and Executive officers of Lucite International Group Holdings Limited

The following table sets forth the name, age and principal position of each of the persons that are directors and executive officers of Lucite International Group Holdings Limited:

Name	Age		Position
Ian R. Lambert		50	Chief Executive Officer and Director
Annie S. Veerman		44	Chief Financial Officer, Secretary and Director
J. Jefferson Davis		62	President of Lucite International Inc. and VP — Americas
A. Paul Henderson		50	VP — Europe, Middle East and Africa and Director
Gregory Liou		56	VP — Asia Pacific and General Manager, KMC
Neil L. Sayers		52	VP — Technology and Manufacturing and Director

Ian R. Lambert joined ICI in 1985, working for the first two years in the Agrochemicals business. In 1989, he became controller, ICI Engineering Plastics in the US. From 1991, he spent three years as Director of Finance and IT at ICI Fiberite in Arizona, US, before becoming finance manager, ICI Materials, based in Belgium. Mr. Lambert became financial controller of ICI Acrylics in 1995 and Chief Financial Officer in 1997. On March 25, 2003, he was appointed Chief Executive Officer. Mr Lambert is a chartered accountant and has an MA and MPhil from Cambridge University.

Annie S. Veerman joined ICI in 1980, and worked in Australia in the fertiliser and agrochemical business of Incitec. She then became the International Accountant for the Films business in the UK before moving to Belgium to work on the acquisition of the DuPont Acrylics business and the sale of the ICI Fibres business. In 1994, Ms. Veerman became a Finance Manager in ICI’s Acquisitions and Planning Department. She then spent two years based in Memphis as Finance and IT Director of ICI Acrylics Inc before becoming Finance Director of Uniqema in the Netherlands in 1998. In 1999, she was appointed Procurement Director of Uniqema. Ms. Veerman was appointed Executive Director and Chief Financial Officer of Lucite International on June 1, 2003. Ms. Veerman is a Certified Practicing Accountant (Australia) with a degree in Business Studies and an MBA from Cranfield University.

J. Jefferson Davis joined ICI Acrylics in 1993 from DuPont. Mr Davis has spent much of his career in the acrylics industry and has wide experience in both commercial and operational roles. He was Managing Director of the Lucite Acrylic Sheet Business before it was transferred to ICI Acrylics’ ownership in 1994. From 1994 to 1996, Mr. Davis was Manufacturing Director, ICI Acrylics Inc. before taking on responsibility for worldwide Manufacturing and Technology. In 2001, Mr Davis was appointed to his current role as President, Lucite International Inc., and Executive Director, Americas. Mr Davis has a BSc from Georgia Institute of Technology.

A. Paul Henderson joined ICI Petrochemicals in 1978. He spent time in the UK, South Africa and the US in a number of marketing roles within the Fibre Intermediate and Aromatics businesses before joining ICI Fibres in 1990. From 1990 to 1993, Mr Henderson managed the global sales of Nylon Textile Filament yarns from Oestrigen in Germany. Following the 1993 sale of the ICI Nylon business to DuPont, he transferred to DuPont in Geneva as Sales and Marketing Manager for Nylon textiles in Europe. In 1998, Mr Henderson joined Burmah Castrol as European (Managing) Director for the speciality wax blending subsidiary, Dussek Campbell. Mr. Henderson joined Lucite International in March 2001 in his current role as Executive Director, Europe, Middle East and Africa. Mr. Henderson has a BA (Hons) in Modern Languages (French and Spanish) from Manchester University.

Gregory Liou joined ICI China in Taiwan in 1975 and has experience in a number of commercial roles, as Sales Manager, Dulux Paints Taiwan from 1982 to 1984, General Manager of Savlon Pharmaceuticals from 1984 to 1985; and Business Development Manager for ICI Taiwan from 1985 to 1990. Mr. Liou was Deputy General Manager of ICI Far East from 1990 to 1994 and then joined ICI Acrylics in 1995 as General Manager, Kaohsiung Monomer Company (KMC). In his current role, Mr Liou is Executive Director, Asia Pacific and combines this with his responsibilities as General Manager, KMC. Mr. Liou is also responsible for our liaison with Joint Venture partners in APAC. Mr. Liou has an MSc (Agriculture) from National Taiwan University.

Neil L. Sayers joined ICI in 1974 and worked in a number of manufacturing and technical roles in the Nylon, Aromatics and Oil Refinery businesses before joining ICI Acrylics in 1988 as Cassel Site Technical Manager, becoming Site Manager in 1992. In 1998, Mr Sayers assumed responsibility for Global R&D. On July 1, 2001, Mr. Sayers was appointed Executive Director responsible for Manufacturing Excellence, Technology, Safety, Health and Environment on a global basis. Mr. Sayers has a BSc in Chemical Engineering from the University of Manchester Institute of Science and Technology.

B. COMPENSATION

For the year ended December 31, 2005, aggregate compensation of executive officers and directors for Lucite International was £1.4 million (2004: £1.3 million). This includes £0.1 million (2004: £0.1 million) that we have paid into schemes for retirement and similar benefits for our directors and executive officers for the year ended December 31, 2005.

C. BOARD PRACTICES

Lucite International Group Holdings Limited is a subsidiary of Lucite International Limited. Certain of the directors of Lucite International Limited constitute the Board of Lucite International Group Holdings Limited. The Board’s duty of corporate governance is discharged in conjunction with the Board of Lucite International Limited. The Board meets on a regular basis to review performance and business plans of the Group. The Board has established policies for the conduct of the business within the Group, including delegations of Board authority to directors and members of senior management. In addition, the Board appoints committees to ensure appropriate oversight of the Group companies’ operations.

Board Committees

Our audit committee and remuneration committee have been appointed by the Board of Lucite International Limited and are remitted to cover the entire Company including all subsidiaries of Lucite International Group Holdings Limited. Each committee has operated throughout the year.

The audit committee comprises Mr GJ Arbuthnott (Non-executive Chairman), Mr GR Hunt and Mr PR Shaw. The committee is responsible for the appointment of auditors and reviews the suitability and effectiveness of internal control systems and the application of corporate policies throughout the Company.

Geoffrey J. Arbuthnott is a Director of Charterhouse Capital Partners LLP and Non-executive Chairman of Lucite International Limited. An honours graduate in Law from Edinburgh University and a Chartered Accountant, he joined Charterhouse in 1984 where he has been responsible for the successful investments in Medway Ports, British Bus and Porterbrook. Mr. Arbuthnott led the investment in Lucite International for Charterhouse.

Peter R. Shaw was appointed a Non-Executive Director of Lucite International Limited on April 1, 2001. Mr Shaw is a graduate in chemistry with significant experience in the chemical industry and worked for ICI for 34 years in a number of senior international positions in Europe and Asia. From 1995 to 2000 Mr Shaw was ICI’s Group Vice President and Head of Mergers and Acquisitions.

Graham R. Hunt was appointed a Non-Executive Director of Lucite International on July 27, 2004. Mr Hunt has thirty five years experience of the chemical industry, the majority with BP. His most recent role was as Business Leader and Chairman of BP China, in which he led the development of their $2.7 billion joint venture with Sinopec-Shanghai Petrochemicals Company in Caojing near Shanghai. This complex will produce one million tons per year of ethylene, plus major investment in polyethylene, polypropylene, polystyrene and acrylonitrile units. Prior to this he was Business Leader for the global and strategic businesses of Acetyls and acrylonitrile in BP Chemicals. He also held a number of senior commercial and manufacturing roles in BP, including Vice President of BP Chemicals in the US, and Works Manager at Grangemouth, Scotland. On retirement from BP in June 2004, he became Chairman of the Supervisory Board of Verdugt bv in the Netherlands, and is also Vice Chairman of Red Lion Cement, in addition to the Lucite role. Mr. Hunt is 59 years of age, and graduated in Chemical Engineering from Gonville & Caius College, Cambridge University in 1968.

Our remuneration committee at December 31, 2005, consisted of Mr PR Shaw (Chairman), Mr GJ Arbuthnott, Mr GR Hunt and Mr IR Lambert.

The primary function of the remuneration committee is to determine remuneration and other terms of employment for the directors and senior employees of the Company having due regard for performance.

In setting the remuneration policy the committee considers a number of factors including:

· the salaries and benefits available to senior management in comparable companies; and

· the need to ensure senior management commitment to the continued success of the business by means of incentive schemes.

Directors

The directors serve for an indefinite term from appointment, subject to removal by a resolution of shareholders. No director is employed on terms and conditions other than those applicable to other salaried employees.

D. EMPLOYEES

The average number of persons employed (including executive directors but excluding temporary and contract staff) is as follows:

	Year ended December 31, 2003		Year ended December 31, 2004		Year ended December 31, 2005
Upstream		676		774		758
Downstream		1,306		1,317		1,341
		1,982		2,091		2,099
Europe		811		828		855
Americas		515		493		494
Asia		462		583		566
Rest of World		194		187		184
		1,982		2,091		2,099

	December 31, 2003		December 31, 2004		December 31, 2005
Number of employees at period end		1,995		2,098		2,211

Movement in employee numbers during the twelve months ended December 31, 2005 is analysed as follows:

	Upstream			Downstream		Total
Employees as at December 31, 2004		769			1,329		2,098
Movement due to new operations (1)		116			—		116
Net starters/(leavers)		(20	)		17		(3	)
Employees as at December 31, 2005		865			1,346		2,211

(1) This movement is related to the taking on of 116 new employees as part of the agreement with DuPont to operate its AN and Site Services facilities in Beaumont, Texas (upstream).

Employees are represented locally by a number of labour unions. Management believes that its relationship with these unions is generally constructive.

E. SHARE OWNERSHIP

All of the issued share capital of Lucite International Group Holdings Limited is held directly by Lucite International Limited. Lucite International Finance plc and the guarantors other than Lucite International Group Holdings Limited are direct or indirect subsidiaries of Lucite International Group Holdings Limited.

The issued share capital of Lucite International Limited consists of 7,799,999 A Ordinary Shares, 1,300,001 B Ordinary Shares, 350,000 C Ordinary Shares, 360,309 D Shares and 979,060 E Shares. In addition, the issued share capital of Lucite International Limited also includes 174,910,999 A Preference Shares. These preference shares are not convertible into ordinary shares. The preference shares do not entitle their holders to vote for the election of directors of, or on any matters relating to, Lucite International Limited.

Under the Articles of Association of Lucite International Limited, A Ordinary Shares generally have the same voting rights as B Ordinary Shares. However, some holders of A Ordinary Shares and B Ordinary Shares and Lucite International Limited have entered into a Subscription and Shareholder Agreement that imposes limitations on the voting of these shares. Refer to “Subscription and Shareholder Agreement.” C Ordinary shares are ‘management shares’ and have the same voting rights as B Ordinary shares subject to any limitations contained in the subscription and shareholder agreement.

The following table sets forth information regarding the ownership of the Ordinary Shares of Lucite International Limited as at March 31, 2006, by the following:

· Each person or group known by us to be the owner of more than 5% of the outstanding shares of the Ordinary Shares of Lucite International Limited; and

· All of the directors and officers of Lucite International Limited and Lucite International as a Group.

Name	Number of Ordinary Shares		Percent of Ordinary Shares
Charterhouse Investors (a)		7,794,091		78%
B shares or equivalent in favour of employees of Lucite International which will be created from D and E shares on the occurrence of a liquidity event (b)		550,000		5%
Directors of Lucite International Limited (c)		350,000		4%
Directors of Ineos Investors (d) & related parties		1,100,000		11%
Other		205,909		2%

(a) Charterhouse Investors means each of Charterhouse, any of its affiliates or subsidiaries, any person or fund managed or advised by any person in respect of its interest in Charterhouse and any investor in a Charterhouse fund (either in its capacity as investor or as direct co-investors).

(b) Represents B Shares or equivalents that will be created on the occurrence of a liquidity event. These are currently held as D and E shares by Lucite International Employees in the Lucite International Share Plan.

(c) Represents C Ordinary Shares that are held by the directors and senior management of Lucite International Limited. All directors hold less than 1% of the ordinary share capital of the Company.

(d) Represents B Ordinary Shares that are held by the directors of Ineos Capital and related parties.

The D and E shares referred to in (b) above consist of 360,309 restricted D shares and 979,060 restricted E shares which have been issued to employees under the terms of the employee share scheme. These shares have no voting rights.

A liquidity event is effectively a sale, listing or liquidation of Lucite International e.g. in the event of Charterhouse selling all or a substantial portion of its remaining investment in the ordinary shares of Lucite International Limited.

The Company has issued restricted E shares to non-US employees. A proportion of these E shares will be redeemed by the Company and a proportion will become unrestricted with equivalent rights to the B ordinary shares in the Company on the occurrence of a liquidity event. The Company has also issued restricted D shares to US employees. A proportion of these D shares will be redeemed by the Company and a proportion will be converted into ordinary B shares on the occurrence of a liquidity event.

The number of E shares that become unrestricted ordinary shares, when added to the number of D shares that convert into B ordinary shares, will equal 550,000.

Lucite International Employee Share Plan

Our philosophy is that our employees should have the opportunity to participate in the creation of value for the parts of the business that they can directly influence. Our principal investors have allocated ordinary shares of Lucite International Limited as noted in footnotes (b) and (d) to the table above, the parent company of Lucite International, to management and employees. We and our principal investors have ensured that all of the management and employees of Lucite International have had the opportunity to acquire interests in these shares through the creation of an employee share plan.

Under the Lucite International Employee Share Plan, Charterhouse made available 550,000 ordinary one pence shares in the Company to employees. Shares will be allocated between employees based on business performance criteria at a future date when Charterhouse sells all or a substantial portion of its remaining investment in the ordinary shares in Lucite International Limited. The Employee Share Plan has been implemented by the issue of E shares and D shares in the Company to employees.

The Company has issued restricted E shares to non-US employees. A proportion of these E shares will be redeemed by the Company and a proportion will become unrestricted with equivalent rights to the B ordinary shares in the Company in the event of Charterhouse selling all or a substantial portion of its investment in the ordinary shares of Lucite International Limited.

The Company has also issued restricted D shares to US employees. A proportion of these D shares will be redeemed by the Company and a proportion will be converted into ordinary B shares in the event of Charterhouse selling all or a substantial portion of its remaining investment in the ordinary shares of Lucite International Limited.

The number of E shares that become unrestricted ordinary shares, when added to the number of D shares that convert into B ordinary shares, will equal 550,000.

The scheme is closed to new members.

Subscription and Shareholder Agreement

In October 1999, Lucite International Limited entered into a Subscription and Shareholder Agreement with its shareholders, including Charterhouse funds (the “Charterhouse Investors”) and directors of Ineos Capital Limited (the “Ineos Investors”). Charterhouse Investors and Ineos Investors have pre-emptive rights allowing them to acquire, in proportion to their respective shareholdings, any shares proposed to be issued by Lucite International Limited. Ineos Investors cannot transfer, grant, create or dispose of any right or interest in any shares of Lucite International Limited without the prior written consent of the Charterhouse Investors, subject to various exceptions. The exceptions include permitted transfers to family members or, if the Ineos Investor is a company, to a wholly-owned subsidiary. Ineos Investors, however, receive tag-along rights in cases of transfer of shares by Charterhouse Investors.

Charterhouse Investors and Ineos Investors have agreed not to make, and not to allow Lucite International to make mergers and acquisitions, share issuances and other strategic decisions involving Lucite International, without the consent of a majority of the Charterhouse Investors.

The agreement will terminate upon the earliest of (1) the closing of an initial public offering by Lucite International Limited; (2) all of the Charterhouse Investors and the Ineos Investors ceasing to hold any shares in Lucite International Limited; and (3) the sale of the entire issued share capital of Lucite International Limited to a third party purchaser.

The Articles of Association of Lucite International Limited and the Subscription and Shareholders’ Agreement provide that the Charterhouse funds, as the holder of the A Ordinary Shares, are entitled to appoint two directors of Lucite International Limited. Under the Articles, the presence of at least one Charterhouse director is required for the transaction of business by the Board, any committee of the Board must always include at least one Charterhouse director and any resolution passed by the committee will not be effective unless at least one Charterhouse director votes in favour of the decision. The Articles also provide that the Charterhouse funds have a right to appoint the Chairman of the Board.

ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The parties who are beneficial owners of 5% or more of the ordinary share capital of Lucite International Limited, which owns 100% of the ordinary share capital of Lucite International Group Holdings Limited, are set out in item 6E Share Ownership.

B. RELATED PARTY TRANSACTIONS

Trading Transactions with Shareholders of the Group

For the twelve months ended December 31, 2003, Lucite International purchased management services from Charterhouse Capital Partners LLP for the amount of £27,000 plus related travel expenses.

Lucite International also purchased certain third party goods and services, mainly raw materials, from Ineos companies controlled by the Directors of Ineos Capital, in an aggregate amount of £29 million. We also sold some goods and services to Ineos companies in an aggregate amount of £2 million.

As at December 31, 2003, amounts payable to these companies totaled £2 million.

For the twelve months ended December 31, 2004, Lucite International purchased management services from Charterhouse Capital Partners LLP for the amount of £28,000 plus related travel expenses.

Lucite International also purchased certain third party goods and services from Ineos associated companies controlled by the Directors of Ineos Capital, to the value of £42 million. We also sold some goods and services to Ineos associated companies to the value of £1 million.

As at December 31, 2004, amounts payable to these companies totaled £6 million.

For the twelve months ended December 31, 2005, Lucite International purchased management services from Charterhouse for the amount of £29,000 plus related travel expenses.

Lucite International also purchased certain third party goods and services, mainly raw materials, from Ineos companies controlled by the Directors of Ineos Capital, to the value of £47 million.

As at December 31, 2005, amounts payable to these related companies totaled £7 million.

The directors consider that all transactions carried out with Ineos Companies are on an arms length basis.

There have been no related party activities with Charterhouse since the end of 2005.

C. INTERESTS OF EXPERTS AND COUNSEL

NOT APPLICABLE

ITEM 8 FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

See Item 18 of this Annual Report.

Legal proceedings

On March 25, 2003, the Group received notification that the European Commission is investigating Lucite International Limited and Lucite International UK Limited with regard to possible participation in anti-competitive practices contrary to Article 81 of the Treaty of Rome. In August 2005, the Commission addressed a Statement of Objections to both companies formally alleging their participation in infringements of Article 81 relating to the supply of methacrylates. If it is found that Article 81 has been infringed, the Commission may impose fines and there could be civil liability in the event of any related claims for damages. It is not possible to give any reliable indication of the likely level of any fines or the prospect of such other liabilities arising. Moreover, there is no strict deadline to complete anti-competitive inquiries and their duration is determined by the complexity of each case, the exercise of the rights of defense and by the Commission’s procedures. Lucite International Limited continues to co-operate fully with the Commission for itself and on behalf of its subsidiary.

Following an audit by the US Environmental Protection Agency (“EPA”) of the Fite Road facility in Memphis, Tennessee in December 2002, the EPA advised Lucite International Inc., our chief operating subsidiary in the US, on September 23, 2004, that it considers the Fite Road facility to be in violation of various provisions of the US Federal Clean Air Act (the “Act”) and other federal laws. Lucite International Inc. believes the Fite Road facility has always operated in accordance with permits issued by the Memphis Shelby County Health Department, which is authorised to issue such permits by the EPA. After continuing discussions with the EPA, a settlement agreement has been reached and the EPA and Lucite International Inc. have signed a Consent Decree with a cost of less than $2 million along with expenditures for required plant modifications within an agreed period to comply with the provisions of the Act. The Consent Decree was submitted to the Court on December 23, 2005, and signed by the judge, being entered into the court docket on February 28, 2006. The settlement has been reflected in our financial reporting.

Eight lawsuits were commenced in 2006 in several US jurisdictions against certain US and European chemical companies including Lucite International Limited and Lucite International Inc. The plaintiffs allege that they are direct or indirect purchasers of MMA and purport to bring these actions on behalf of themselves and other similarly situated purchasers of MMA. These lawsuits make allegations of anti-competitive conduct by the defendants similar to those alleged by the European Commission in the proceeding described above. The plaintiffs seek injunctive and monetary relief in unspecified amounts. On February 14, 2006, certain plaintiffs moved before the Judicial Panel on Multidistrict Litigation for transfer and consolidation of all of these related antitrust lawsuits to the Eastern District of Pennsylvania. Plaintiffs and certain defendants filed a brief in support of the motion for consolidation, though we did not file a brief supporting or opposing the motion. We anticipate that the lawsuits will be consolidated. We believe that all of these lawsuits are entirely without merit and we intend to defend them vigorously.

We are from time to time involved in various other legal proceedings of a nature considered normal to our business. In the event of adverse outcomes of these proceedings, we believe that resulting liabilities are either covered by insurance, guarantee, and established provisions or would not have a material adverse effect on our financial condition or our results of operations.

Dividend distribution policy

No dividends have been paid other than payments to minority interests in our Thai subsidiary, Thai Poly Acrylic plc and to minority interests in our subsidiary Kaohsiung Monomer Company Ltd.

There are no retained earnings available for payment of dividends under UK GAAP as at December 31, 2005.

B. SIGNIFICANT CHANGES

There have been no significant changes since December 31, 2005.

ITEM 9 THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

All of the share capital of Lucite International Group Holdings Limited is privately held as described elsewhere in this annual report. There is no public market for the shares of Lucite International Group Holdings Limited.

B. PLAN OF DISTRIBUTION

NOT APPLICABLE

C. MARKETS

The senior notes are listed on the Luxembourg Stock Exchange.

D. SELLING SHAREHOLDERS

NOT APPLICABLE

E. DILUTION

NOT APPLICABLE

F. EXPENSES OF THE ISSUE

NOT APPLICABLE

ITEM 10 ADDITIONAL INFORMATION

A. SHARE CAPITAL

NOT APPLICABLE

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

Our Memorandum and Articles of Association are on file with the Registrar of Companies for England and Wales under Company Number 3829877. As set forth in Section 3.1 of our Memorandum of Association, Lucite International Group Holdings Limited was established to carry on business as a general commercial company.

Directors

A director of our Company need not be a shareholder. A director is permitted to vote at any meeting of the directors or of a committee of the directors on any resolution concerning a transaction or arrangement to which we may enter and in which the director has a material interest, provided that the director has disclosed to the directors the nature and extent of his interest. Each member of the board of directors is appointed at the annual shareholder meeting.

Share Capital

Our share capital consists of a single class of 175,029,700 ordinary shares, par value £1 each, the entirety of which is owned by our parent company, Lucite International Limited. The holders of the ordinary shares are entitled to receive notice of and to attend all meetings of the shareholders and have one vote for each ordinary share held at all meetings of the shareholders. The holders of the ordinary shares are entitled to receive dividends as and when declared from time to time by the directors and to be paid in equal amounts per share on all ordinary shares at the time outstanding. In the event of the dissolution, liquidation or winding-up of our Company, the holders of the ordinary shares are entitled to receive the remaining assets of our Company as determined by the liquidator.

For further information relating to our share capital, see item 6E above.

C. MATERIAL CONTRACTS

Indenture dated as of May 4, 2000, among Lucite International Finance plc. as issuer, Lucite International Group Holdings Limited, Lucite International Investment Limited, Lucite International Holdings Limited, and Lucite International Holdco Limited, each as a guarantor, and The Bank of New York, as trustee. Pursuant to the terms and conditions of the agreement, Lucite International Finance issued €200,000,000 of our 10¼% senior notes due 2010, and we, along with the other guarantors, agreed to guarantee the notes. In June 2003, a further €50,000,000 of 10¼% senior notes due 2010 were issued under an indenture dated June 25, 2003, and we along with the other guarantors agreed to guarantee the notes. In October 2003, we issued an additional €200,000,000 of 10¼% senior notes due 2010 under this indenture in exchange for the €200,000,000 10¼% senior notes issued under the indenture dated May 4, 2000, so that such exchanged notes are fully fungible with the €50,000,000 of 10¼% senior notes due 2010 issued June, 2003.

D. EXCHANGE CONTROLS

There are no UK foreign exchange controls currently in force that restrict the export or import of capital or that affect the remittance of interest, dividends or other payments to non-UK resident holders of the Company’s securities (except as otherwise detailed under Item 10E “Taxation”). There are no limitations imposed by UK law that restrict the right of non-UK resident or non-UK citizen owners to hold or vote the securities of the Company.

E. TAXATION

United States Federal Income Taxation

The following summary describes the material United States federal income tax consequences of the ownership of notes by US holders (as defined below) as of the date hereof. The discussion set forth below is applicable to US holders (1) who are residents of the United States for purposes of the current United Kingdom/United States Income Tax Convention (the “Treaty”), (2) whose notes are not, for purposes of the Treaty, effectively connected with a permanent establishment in the UK and (3) who otherwise qualify for the full benefits of the Treaty. Except where noted, it deals only with notes held as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, tax-exempt entities, insurance companies, real estate investment trusts, regulated investment companies, partnerships or other pass-through entities for United States federal income tax purposes, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons liable for alternative minimum tax, persons holding notes as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle, certain US expatriates, US holders of notes whose “functional currency” is not the US dollar or any state, local or foreign tax consequences. If a partnership holds the notes, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partner of a partnership holding the notes should consult tax advisors. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions hereunder as of the date hereof, and such authorities may be repealed, revoked or modified, perhaps retroactively, so as to result in federal income tax consequences different from those discussed below.

As used in this annual report, a US holder means a beneficial owner of a note that is (1) a citizen or individual resident of the United States, (2) a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organised in or under the laws of the United States or any political subdivision, (3) an estate, the income of which is subject to United States federal income taxation regardless of its source, or (4) a trust (X) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as described in section 7701(a)(30) of the Code or (Y) that has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

Payments of Interest

Interest on a note will generally be taxable to a US holder as ordinary income at the time it is paid or accrued in accordance with the US holder’s method of accounting for United States federal income tax purposes. Interest income on a note generally will constitute foreign source income and generally will be considered passive income, which is treated separately from other types of income in computing the foreign tax credit allowable to US holders under United States federal income tax laws. US holders will generally be denied a foreign tax credit for foreign taxes imposed with respect to a note where a US holder does not meet a minimum holding period requirement during which the holder is not protected from risk of loss.

Because interest payments are made in euro, the following rules will apply. Cash basis US holders are required to include in income the US dollar value of the amount received, determined by translating such amount into US dollars at the spot rate in effect on the date of receipt, regardless of whether the payment is in fact converted into US dollars. No exchange gain or loss will be recognised with respect to the receipt of such payment.

Accrual basis US holders may determine the amount of income recognised with respect to such interest payment in accordance with either of two methods. Under the first method, the US holder will be required to include in income for each taxable year the US dollar value of the interest that has accrued during such year, determined by translating such interest at the average rate of exchange for the period or periods during which such interest accrued. Under the second method, an accrual basis holder may elect to translate interest income at the spot rate on the last day of the accrual period (or last day of the taxable year in the case of an accrual period that straddles the holder’s taxable year) or on the date the interest payment is received if such date is within five days of the end of the accrual period. This election must be applied consistently to all debt instruments from year to year and may not be revoked without the consent of the US Internal Revenue Service (“IRS”). Upon receipt of an interest payment on such note (including amounts received upon the disposition of a note attributable to accrued but unpaid interest), such US holder will recognise ordinary income or loss in an amount equal to the difference between the US dollar value of such payment (determined by translating the euro received at the spot rate for the euro in effect on the date received) and the US dollar value of the interest income that such US holder has previously included in income with respect to such payment.

Sale, Exchange and Retirement of Notes

Upon the sale, exchange, retirement or other taxable disposition of a note, a US holder will recognise gain or loss equal to the difference between the amount realised upon the sale, exchange, retirement or other disposition (other than amounts attributable to accrued and unpaid interest, which will be treated as a payment of interest for federal income tax purposes) and the US Holder’s tax basis in the note. If a US holder receives euros on the sale, exchange, retirement or other disposition of the note, the amount realised generally will be based on the spot rate of the euro on the date of the sale, exchange, retirement or other disposition. If the notes are traded on an established securities market, a cash basis US holder will determine the US dollar amount realised by translating the euros received at the spot rate of exchange on the settlement date of the sale, exchange, retirement or other disposition. An accrual method taxpayer may elect the same treatment with respect to the purchase and sale of notes traded on an established securities market, provided that the election is applied consistently. This election cannot be changed without the consent of the IRS.

A US holder’s tax basis in a note generally will be the US holder’s cost of obtaining the note which, in the case of a US holder that purchased such note with euros will be the US dollar value of the euros paid for such note determined at the time of such purchase. Gain or loss recognised by a US holder on the sale, exchange, retirement or other disposition of a note will generally be treated as United States source gain or loss. Subject to the foreign currency rules discussed below, gain or loss recognised in the exchange will be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange, retirement or other disposition, the note has been held for more than one year. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

If a US holder purchased a note with previously owned euros, the US holder will recognise ordinary exchange gain or loss at the time of purchase attributable to the difference at the time of purchase, if any, between the US holder’s tax basis in such euros and the fair market value of the note in US dollars on the date of purchase. If the notes are traded on an established securities market by a cash method taxpayer, euros paid or received are translated into US dollars at the spot rate on the settlement date of the purchase or sale. An accrual method taxpayer may elect the same treatment with respect to the purchase and sale of notes traded on an established securities market, provided that the election is applied consistently. This election cannot be changed without the consent of the IRS.

Upon the sale, exchange or retirement of a note, a US holder will recognise exchange gain or loss with respect to the principal amount of such note. For these purposes, the principal amount of the note is the US holder’s purchase price for the note calculated in euros on the date of purchase, and the amount of exchange gain or loss recognised is equal to the difference between (i) the US dollar value of the principal amount determined on the date of the sale, exchange, retirement or other disposition of the note and (ii) the US dollar value of the principal amount determined on the date such US holder purchased the note. As discussed above, if the notes are sold on an established securities market by a cash method taxpayer (or, upon election, an accrual basis US holder), euros received are translated into US dollars at the spot rate on the settlement date of the sale. Such gain or loss will be treated as ordinary income or loss (and will not be treated as interest income or expense, except to the extent provided in Treasury regulations or administrative pronouncements of the IRS) and generally will be United States source gain or loss. The realisation of such gain or loss will be limited to the amount of overall gain or loss realised on the disposition of a note.

Exchange Gain or Loss with Respect to Foreign Currency

A US holder’s tax basis in euros received as interest on a note will be the US dollar value thereof at the spot rate in effect on the date the euros are includible in income. A US holder’s tax basis in euros received on the sale, exchange or retirement of a note will be equal to the US dollar value of the euros, determined at the time of the sale, exchange or retirement. As discussed above, if the notes are traded on an established securities market, a cash basis US holder (or, upon election, an accrual basis US holder) will determine the US dollar value of the euros by translating the euros received at the spot rate of exchange on the settlement date of the sale, exchange or retirement.

Any gain or loss recognised by a US holder on a sale, exchange or other disposition of the euros will be ordinary income or loss (and will not be treated as interest income or expense, except to the extent provided in Treasury regulations or administrative pronouncements of the Internal Revenue Service) and generally will be United States source gain or loss.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to some payments of principal and interest on a note and to the proceeds of the sale of a note made to US holders other than exempt recipients (such as corporations). Backup withholding will apply to such payments if the US holder fails to provide its taxpayer identification number or, in the case of interest payments, fails either to report in full dividend and interest income or to make certain certifications of exempt status.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the US holder’s United States federal income tax liability provided the required information is furnished to the IRS.

United Kingdom Taxation

The following summary describes the material UK tax consequences of the ownership of the notes as of the date hereof. Except where noted, it relates only to the position of persons who are the absolute beneficial owners of notes as capital assets and may not apply to persons in special situations, such as dealers in securities or persons who are or become connected with the Issuer other than through their holding of notes, and (other than in relation to withholding tax) it deals only with persons who are resident or, in the case of individuals, resident or ordinarily resident in the UK. Furthermore, the discussion below is based upon the Issuer’s understanding of UK tax laws and UK Inland Revenue practice as of the date hereof; such laws may be repealed, revoked or modified and such practice may change so as to result in UK tax consequences different from those discussed below. Persons considering the purchase, ownership or disposition of notes should consult their own tax advisers concerning the UK tax consequences in the light of their particular situations as well as any consequences arising under the law of any other relevant tax jurisdiction. No representations with respect to the tax consequences to any particular holder of book-entry interests are made in this section.

Payments on the Notes

No withholding or deduction on account of UK income tax will be required from payments of principal or, for so long as the notes continue to be in bearer form and are listed on the Luxembourg Stock Exchange or some other stock exchange recognised by the UK Inland Revenue from payments of interest:

(a) where payment is made through a paying agent who is not in the UK; or

(b) where payment is made through a paying agent in the UK and either:

(1) the beneficial owner of the notes is beneficially entitled to the interest and is not resident in the UK, or

(2) the notes are held in a “recognised clearing system” within the meaning of section 841A of the Income and Corporation Taxes Act 1988,

and, in the case of (b), either any other administrative conditions imposed by regulations made under the Income and Corporation Taxes Act 1988, as amended from time to time, have been satisfied or the Inland Revenue has notified the paying agent in the UK that at least one of the conditions in (b) has been satisfied. In all other cases, and in particular where paid in respect of the definitive notes in registered form, interest will (subject to what is said below) be paid after deduction of income tax at the lower rate (currently 20%) subject to any direction to the contrary by the UK Inland Revenue under an applicable double taxation treaty. A holder who is entitled to the protection of an applicable double taxation treaty may be eligible to recover all or part of any UK tax withheld from payments of interest to which such holder is beneficially entitled by making a claim under the treaty on the appropriate form. Alternatively, a claim may be made to the UK Inland Revenue in advance of a payment of interest. If the claim is accepted by the UK Inland Revenue, they may authorise subsequent payments to that holder to be made without withholding of UK tax or subject to the withholding of tax at a rate that is less than the lower rate.

Where any person in the UK, acting in the course of a trade or profession:

(a) acts as custodian of the notes, in respect of which he receives any interest or interest is paid at his direction or with his consent;

(b) collects or secures payment of or receives interest on the notes for another person, including the holder; or

(except in any case by means only of clearing a cheque or arranging for the clearing of a cheque) that person (a “collecting agent”) is liable to account for UK income tax at the lower rate (currently 20%) on such interest and is entitled to deduct an amount from interest or other sums due from him to the holder unless:

(a) the note is held in a “recognised clearing system” and the collecting agent either:

(1) pays or accounts for the interest directly or indirectly to the “recognised clearing system”; or

(2) is acting as depository for the “recognised clearing system” in respect of the Eurobond Note:

(b) the person beneficially entitled to the interest is either not resident in the UK and beneficially owns the note or is of a description prescribed by regulations;

(c) the interest arises to non-UK resident trustees of specified discretionary or accumulation trusts (where, among other things, none of the beneficiaries of the trust is resident in the UK);

(d) the person beneficially entitled to the interest is eligible for specified reliefs from tax in respect of the interest;

(e) the interest falls to be treated as the income of, or of the government of, a sovereign power or of an international organisation; or

(f) the note and the interest are beneficially owned by a person falling into specified categories, or one of other specified circumstances applies, in each case as prescribed by regulations made under the Income and Corporation Taxes Act 1988, which would apply, for example, to notes held under a personal equity plan or individual savings account, in a pension funds pooling scheme or by an Inland Revenue-approved superannuation fund.

In the case of each of the above exceptions (except (a) (2)), further administrative conditions imposed by regulations (for instance, as to the making of a declaration in the required form) may have to be satisfied for the relevant exception to be available.

Interest on the notes constitutes UK source income for tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding. However, except for any income tax deducted as described above, a holder who is not resident for tax purposes in the UK (other than some trustees) will not be liable to UK tax on interest on the notes unless that holder is chargeable to income tax or corporation tax on a branch or agency in the UK through which it carries on a trade, profession or vocation and in connection with which the interest is received or to which the notes are attributable. There are exemptions for interest received by specified categories of agent (such as some brokers and investment managers).

The provision relating to additional amounts would not apply if the Inland Revenue sought to assess directly to UK tax a person entitled to the relevant interest.

Depending on the correct legal analysis of payments made by the guarantor as a matter of UK tax law, it is possible that payments by the guarantor would be subject to withholding on account of UK tax, subject to any claim that could be made under applicable double taxation treaties.

Proposed EU Withholding Tax Directive

In May 1998, the European Commission presented to the Council of Ministers of the European Union a proposal to oblige member states to adopt either a “withholding tax system” or an “information reporting system” in relation to interest, discounts and premiums. Negotiation over the precise form of this and related proposals are ongoing. It remains unclear whether this proposal will be adopted and, if it is adopted, whether it will be adopted in its current form. The “withholding tax system” would require a paying agent established in a member state to withhold tax, at a minimum rate of 20%, from any interest, discount or premium paid to an individual resident in another member state unless such an individual presents a certificate obtained from the tax authorities of the member state in which he is resident confirming that those authorities are aware of the payment due to that individual. The “information reporting system” would require a member state to supply to other member states details of any payment of interest, discount or premium made by paying agents within its jurisdiction to an individual resident in another member state. For these purposes, the term “paying agent” is widely defined and includes an agent who collects interest, discounts or premiums on behalf of an individual beneficially entitled thereto. If this proposal is adopted, it will not apply to payments of interest, discounts and premiums made before January 1, 2003.

UK Corporation Tax Payers

In general, holders that are within the charge to UK corporation tax will be charged to tax as income on all profits and gains arising from returns on and fluctuations in value of the notes broadly in accordance with their authorised accounting treatment. Such a holder will generally be charged to tax in each accounting period by reference to interest and any profits and gains (or relief for any loss) that, in accordance with the holder’s authorised accounting method, is applicable to that period.

Any gains or losses held by UK resident corporate holders or other specified holders who are within the charge to UK corporation tax which are attributable to fluctuations in the value of the US dollar, relative to, in most cases, sterling, will, subject to reliefs and exclusions contained in the relevant legislation, be included in the calculation of such holders’ taxable income on an accruals basis for each accounting period during which the notes are held.

Other UK Tax Payers — Taxation of Chargeable Gains

The notes will not be treated by the Inland Revenue as “qualifying corporate bonds” within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a disposal by a holder who is UK resident for tax purposes but who is not within the charge to UK corporation tax may give rise to a chargeable gain or an allowable loss for purposes of the UK taxation of chargeable gains.

It should be noted that to calculate any chargeable gain arising on a transfer of a note, sterling values are compared at acquisition and disposal. Accordingly a chargeable gain may arise on disposal even where the foreign currency amount obtained is less than, or equal to, the foreign currency paid to acquire the note.

Other UK Tax Payers — Accrued Income Scheme

On a transfer of notes by a holder, any interest which has accrued since the last interest payment date may be chargeable to tax as income of that holder.

Stamp Duty and Stamp Duty Reserve Tax

No UK stamp duty or stamp duty reserve tax is payable on the issue of the global notes.

F. DIVIDENDS AND PAYING AGENTS

NOT APPLICABLE

G. STATEMENT BY EXPERTS

NOT APPLICABLE

H. DOCUMENTS ON DISPLAY

We have filed this Annual Report on Form 20-F with the US Securities and Exchange Commission under the US Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements made in this annual report as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to this annual report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the Exchange Act and file reports and other information with the US Securities and Exchange Commission. Reports and other information which we file with the US Securities and Exchange Commission, including this Annual Report on Form 20-F, may be inspected and copied, at prescribed rates, at the public reference facilities of the US Securities and Exchange Commission at:

450 Fifth Street N.W.
Room 1024
Washington D.C. 20549

Copies of this material may also be obtained from the US Securities and Exchange Commission’s Internet site at http://www.sec.gov. The US Securities and Exchange Commission’s telephone number is 1-800-SEC-0330.

I. SUBSIDIARY INFORMATION

NOT APPLICABLE

ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which we are exposed are: interest rates on debt, foreign exchange rates and fluctuations in raw material prices. We are also exposed to rapid increases in raw material prices that may not be reflected in our selling prices under the terms of a number of our major customer contracts.

The following risk management discussion and the estimated amounts generated from analytical techniques are forward-looking statements of market risk assuming certain market conditions occur. Our actual results in the future may differ materially from those projected results due to actual developments in the market.

Interest rates

Based on variable rate debt levels of £159 million at December 31, 2005, a one percent change in interest rates would impact net interest expense by approximately £2 million per annum.

Interest rate risk profile of financial liabilities

As at December 31, 2004 and 2005 the Company had the following interest rate profile for financial liabilities, after taking into account the rolling over of interest rates under current credit agreements used to manage the interest profile:

	At December 31, 2004
	Floating rate financial liabilities £’m			Fixed rate financial liabilities £’m			Total £’m
Currency
Euro		59			178			237
US Dollars		81			3			84
Chinese Renminbi		9			—			9
		149			181			330
Unamortised issue costs		(2	)		(4	)		(6	)
Bank and other borrowings		147			177			324

	At December 31, 2005
	Floating rate financial liabilities £’m			Fixed rate financial liabilities £’m			Total £’m
Currency
Euro		47			173			220
US Dollars		93			4			97
Chinese Renminbi		20			—			20
		160			177			337
Unamortised issue costs		(1	)		(3	)		(4	)
Bank and other borrowings		159			174			333

All the Group’s creditors falling due within one year (other than bank and other borrowings) are excluded from the above tables either due to the exclusion of short-term items or because they do not meet the definition of a financial liability.

Risk Management

The following table provides information about the Group’s financial instruments that are sensitive to changes in interest rates as of December 31, 2005. For the Company’s fixed rate and variable rate debt, the table below presents principal amounts at December 31, 2005, and weighted average interest rates by expected maturity date. Variable rates are based on implied forward rates as of December 31 derived from the zero coupon yield curve as of December 31, 2005.

	Interest Rate Risk Management Principal Amount by expected maturity
	2006	2007	2008	2009	2010	Thereafter		Total 12/31 2005		Total 12/31 2004 as restated		Fair value 12/31 2005		Fair value 12/31 2004 as restated
Fixed rate (Euro)	—	—	—	—	172		—		172		177		181		190
Interest rate (fixed)					10.25%
Variable rate (USD)	10	27	45	2	1		8		93		81		93		81
Interest rate (variable)	7.73%	7.99%	8.15%	8.28%	8.46%		8.68%
Variable rate (Euro)	8	39	—	—	—		—		47		59		47		59
Interest rate (variable)	5.33%	5.66%	5.40%	5.49%	5.56%		5.61%
Variable rate (Renminbi)	2	3	3	2	3		7		20		9		20		9
Interest rate (variable)	6.43%	6.43%	6.43%	7.33%	7.69%		8.50%

We do not hedge our interest rate exposure in a manner that would entirely eliminate the effects of changes in market interest rates on our cash flow and earnings.

Foreign exchange risk management

A substantial portion of our revenues is generated in currencies other than our reporting currency of pounds sterling; in particular, we have net positive cash inflows in US dollars and euros or euro-determined currencies.

As of December 31, 2005, we did not have any interest rate hedges in place.

Raw materials risk management

During 2005, we entered into contractual arrangements to hedge a portion of our raw material prices against spikes in natural gas prices. These contracts are in the form of forward purchases and caps. The fair value of the arrangement as at December 31, 2005 equates to an asset of £nil when the price of the forward contracts and caps are compared to the market price of natural gas. At December 31, 2005 a volume of 752,500mm Btu was covered by the forward purchase arrangement covering the period to end March 2006.

ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

NOT APPLICABLE

PART II

ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

NONE

ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

NONE

ITEM 15 CONTROLS AND PROCEDURES

Internal controls and procedures are evaluated by our Chief Executive Officer and Chief Financial Officer by means of a cascade process throughout the Group. The cascade process requires all key managers to evaluate the effectiveness of the internal control framework within their own particular areas of responsibility and report any weaknesses or breakdown in controls back through the cascade process.

Based on an evaluation as at December 31, 2005, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the US Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed in the reports we file or submit under the US Securities Exchange Act of 1934 is recorded, processed, summarised and reported on a timely basis.

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15(e) or 15d-15(e) or in other factors that have materially affected these controls during the year ended December 31, 2005, or subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

ITEM 16 {RESERVED}

ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT

Lucite International’s audit committee does not include a “financial expert” as that term is defined in applicable regulations. The members of the Lucite International audit committee have substantial experience in assessing the performance of companies and in understanding financial statements, accounting issues, financial reporting and audit committee functions. However, the board of directors does not consider any of them to be a “financial expert” as that term is defined in applicable regulations. Nevertheless, the board of directors believes that the members of the Lucite International audit committee have the necessary expertise and experience to perform the functions required of the audit committee and, given their respective backgrounds, it would not be in the best interests of the Company to replace any of them with another person to qualify a member of the audit committee as a “financial expert.”

ITEM 16B CODE OF ETHICS

We currently operate a code of business conduct and ethics (the “Code of Conduct”) for all personnel. The Code of Conduct has been updated to be consistent with guidelines issued by the US Securities and Exchange Commission. The Board, including the CEO and CFO, adopted the code in 2004 and the business cascaded the updated Code to the organisation through 2005. The Code is available, free of charge, by contacting the registered office of Lucite International Limited at Queens Gate, 15-17 Queens Terrace, Southampton, SO14 3BP, United Kingdom.

ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES

	Year ended December 31, 2004 £’000		Year ended December 31, 2005 £’000
Audit fees		375		438
Audit-related fees (a)		8		8
Tax fees (b)		195		233
All other fees (c)		157		92
Total fees paid to principal accountants		735		771

(a) Audit-related fees are in relation to pensions’ audit.

(b) Tax fees are fees in respect of tax return preparation, consultation on tax matters and general tax advice relating to specific transactions and other tax planning.

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Profit for the financial year		23			35			20
Currency translation differences on foreign currency net investments net of translation on foreign currency borrowings		(17	)		(7	)		21
Actuarial losses recognised in the pension schemes		(13	)		(9	)		(5	)
Total recognised gain/(loss) relating to the year		(7	)		19			36
Prior year adjustment for pension liability								(66	)
Total gains and losses recognised since last annual report								(30	)

The accompanying notes are an integral part of these financial statements

F-4

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2005 AND 2004

			2004 £m			2005 £m
	Notes		as restated
Fixed assets
Intangible assets		9		78			81
Negative goodwill		9		(5	)		(5	)
Tangible assets		10		323			366
				396			442
Current assets
Stocks		11		95			119
Debtors		12		120			126
Cash at bank and in hand				33			49
				248			294
Total assets				644			736
Creditors: amounts falling due within one year		13		(141	)		(177	)
Net current assets				107			117
Total assets less current liabilities				503			559
Creditors: amounts falling due after more than one year		14		(306	)		(313	)
Provisions for liabilities and charges		17		(4	)		(3	)
Net assets excluding pension liability				193			243
Pension liability		21		(83	)		(94	)
Net assets including pension liability				110			149
Shareholders’ equity
Called up equity share capital		18		175			175
Profit and loss account				(80	)		(44	)
Total equity shareholders’ funds				95			131
Equity minority interests				15			18
Capital employed				110			149

The accompanying notes are an integral part of these financial statements

F-5

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements included herein do not comprise the Company’s statutory accounts within the meaning of section 240 of the Companies Act 1985 of Great Britain. Statutory accounts for the year ended December 31, 2005 have not yet been delivered to the Registrar of Companies for England and Wales.

1 Accounting Policies

The financial statements have been prepared under the historical cost convention in accordance with applicable accounting standards in the United Kingdom.

Accounting policies conform to UK Generally Accepted Accounting Principles (“UK GAAP”). The principal accounting policies, which have been applied consistently, are set out below.

Changes in accounting policies

The Company has adopted FRS17 “Retirement benefits” in these financial statements. The adoption of this standard represents a change in accounting policy and the comparative figures have been restated accordingly. The impact of this change in accounting policy is to increase the pension liability and decrease reserves as at December 31, 2004 by £66 million (from a liability of £17 million to a liability of £83 million at December 31, 2004), due to the recognition of the deficit in the Company’s pension schemes.

The liability has been reclassified in accordance with FRS17 and is disclosed separately on the balance sheet. The profit and loss of the periods ended December 31, 2004 and December 31, 2003 have been restated in accordance with FRS17. There has been a reduction in operating costs of approximately £2 million in the period ended December 31, 2003 and an increase in interest and similar charges of approximately £1 million during the periods ended December 31, 2003 and 2004. The effect on the results for the periods ended December 31, 2004 and 2003 is disclosed within the statements of total recognised gains and losses.

Basis of consolidation

The consolidated financial statements comprise the financial statements of Lucite International Group Holdings Limited and its subsidiaries. All inter-company transactions are eliminated, as are any inter-company profits included in a subsidiary company’s profit and loss account, which were not realised at the balance sheet date.

Acquisitions are accounted for using the purchase method of accounting. The purchase consideration of an investment is allocated to the assets and liabilities acquired on the basis of fair value at the date of acquisition.

Turnover

Turnover represents the invoiced value of goods sold to third parties net of sales discounts and value added taxes. Turnover excludes sales between entities within the Group. Turnover is recognised when the goods are shipped, when prices are determinable and when collectivity is considered probable.

For arrangements where we ship goods to our customers it is our business practice to organise the shipping and arrange the insurance for the products on behalf of our customer. Our terms of business are such that title to the goods passes to our customers at the port of loading once the goods have passed the ship’s rail. It is at this point that we recognise revenue on those goods as it is at this point that both title and the risks and rewards of ownership transfer to our customers.

The pricing for products sold is determined by prevailing market prices (market contracts and arrangements) or is linked by a formula to published raw material prices.

Shipping and handling costs

Shipping and handling costs are recognised as they are incurred. These costs are reported within distribution costs in the profit and loss account.

F-8

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Goodwill and intangible fixed assets

On the acquisition of a business, fair values are attributed to the net assets acquired. Goodwill arises where the fair value of the consideration given for a business exceeds such net assets. Goodwill arising on acquisition is capitalised as an intangible asset and is amortised through the profit and loss account over a period of 20 years unless it is considered that it has a materially different useful economic life.

Negative goodwill arising in acquisitions is included within intangible fixed assets and released to the profit and loss in the period in which the fair values of the non-monetary assets purchased on the same acquisition are recovered, whether through depreciation or sale.

Other intangible fixed assets are stated at cost less accumulated amortisation. The book value of each intangible fixed asset is written off over its estimated useful economic life. The estimated useful economic lives of intangible fixed assets range from 7 to 15 years.

Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation. The book value of each tangible fixed asset is written off to its residual value over its estimated remaining useful economic life. Reviews are made annually of the estimated remaining lives of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear. Estimated useful economic lives of tangible fixed assets are as follows:

Buildings		15-40 years
Plant and equipment
- plant and machinery		10-20 years
- computer hardware and software		3-4 years

Freehold land and assets in the course of construction are not depreciated.

Some manufacturing facilities need to be partially or completely overhauled approximately every two to three years. At the time of the overhaul, the Company assesses the overhaul’s impact on the manufacturing facility considering such factors as the facility’s estimated useful life, capacity and efficiency. Only costs for major overhauls, which enhance capacity and efficiency of facilities and/or extend their useful life are capitalised and amortised over the estimated period until the next major overhaul. Normal maintenance and repairs of all other plant and equipment are expensed as incurred.

Leased assets

Where assets are financed by leasing agreements that give rights approximating to ownership (‘finance leases’) the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable during the lease term. The corresponding leasing commitments are shown as amounts payable to the lessor. Depreciation on the relevant assets is calculated over the shorter of the lease term or the life of the asset and is charged to the profit and loss account.

Lease payments are analysed between capital and interest components so that the interest element of the payment is charged to the profit and loss account over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding.

All other leases are treated as operating leases. Their annual rentals are charged to the profit and loss account on a straight-line basis over the term of the lease.

F-9

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pension and post retirement benefits

The costs and liabilities of the Company’s defined benefit pension schemes are accounted for in accordance with the advice of independent qualified actuaries under FRS17 “Retirement benefits”. Full actuarial valuations are obtained at least every three years. Interim updated valuations are obtained at the end of each financial year. Scheme assets are valued at market values. Scheme liabilities are measured using a projected unit method and discounted. The discount rate used by the schemes’ actuaries is based upon yields available on AA or equivalent corporate bonds at the accounting date with a term that matches the schemes’ liabilities. Current service costs are calculated by the actuaries and represent the increase in the present value of the schemes’ liabilities expected to arise from employee service during the financial period and are charged to the profit and loss account as operating costs. The interest cost on accrued pension liabilities, net of expected return on pension scheme assets is charged to other finance income. Actuarial gains and losses are taken to reserves through the statement of total recognised gains and losses.

Research and development

Research and development expenditure is charged to the profit and loss account in the year in which it is incurred. The principal components of this expenditure are: salaries; legal costs relating to patents and trademarks; administrative costs; contractor fees; and IT-related costs.

Stocks

Stocks are stated at the lower of cost and net realisable value. The first in, first out or an average method of valuation is used. In determining cost for stock valuation purposes, a proportion of labour and overhead expense that relates to production has been absorbed.

Debtors

Debtors are recorded at net realisable value, an allowance having been made for bad and doubtful debts. This allowance is made by assessing for impairment individual receivables or groups of receivables with similar credit risk characteristics. Movements in the provision for bad and doubtful debts are charged/credited to the profit and loss account.

Foreign currencies

Profit and loss accounts of subsidiary undertakings, which are denominated in foreign currencies, are translated into Sterling at average exchange rates for the relevant accounting periods. Assets and liabilities are translated at exchange rates ruling at the balance sheet date. Exchange differences arising on the re-translation of the results and net investment in subsidiary undertakings are taken directly to reserves.

Exchange differences on relevant foreign currency loans which are taken out as a currency hedge against investments in foreign subsidiaries are recorded in reserves in the consolidated balance sheet to the extent that they are matched by exchange differences arising on translation of foreign currency net investment.

Exchange differences on all other transactions are included in the determination of profit or loss for the year.

Environmental liabilities

The Company is exposed to environmental liabilities relating to its past operations principally in respect of soil and groundwater remediation costs. Provisions for these costs are made when expenditure on remedial work is probable and the cost can be estimated within a reasonable range of possible outcomes.

Taxation

The charge for taxation is based on the profit/(loss) for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and for accounting purposes.

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that in the foreseeable future there will be suitable taxable surpluses from which the future reversal of the underlying timing differences can be deducted. Deferred tax balances are not discounted.

F-10

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair value of financial instruments

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Significant differences can arise between the fair value and carrying amount of financial instruments that are recognised at historical cost amounts.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

· Cash and cash equivalents, trade debtors, certain other current assets, short-term borrowings, and current maturities of long-term debt: The book values reported in the consolidated balance sheets are assumed to approximate to their fair values; and

· Loans: The amounts reported for fixed rate debt are calculated by reference to market values at the balance sheet date. Other debt is held at variable rates and fair values approximate to book values.

Derivative financial instruments

From time to time the Company has entered into interest rate caps to hedge its variable rate debt. The Company does not hold or issue derivative financial instruments for trading purposes. The interest rate swap and cap agreements are designated as hedges and effectiveness is determined by matching the principal balance and terms with that specific obligation. Amounts due to or from interest rate swap counterparties are recorded in interest rate expense in the period in which they accrue. The premiums paid to purchase interest rate caps are included in net debt and amortised to interest expense over the shorter of the original term of the agreements or the life of the financial instruments to which they are matched.

From time to time the Company has entered into forward purchase contracts and caps to hedge its exposure to changes in natural gas prices. Premiums paid to purchase caps are included at the lower of cost and net realisable value within debtors and are charged to the profit and loss account over the period in which they are utilised.

Restructuring costs

Estimated costs to be incurred in connection with restructuring measures are provided for when the Company has a constructive obligation, which is generally the announcement date. The announcement date is the date at which the plan is announced officially to employees with sufficient detailed information to enable the employees to estimate the redundancy indemnities to which they are entitled.

Borrowings

Borrowings are initially stated at the fair value of the consideration received after deduction of issue costs. Issue costs, together with finance charges are charged to the profit and loss account over the term of the borrowings and represent a constant proportion of the balance of capital repayments outstanding. Unamortised issue costs are deducted from the carrying value of related borrowings.

2 Business description

Lucite International Group Holdings Limited is a wholly-owned subsidiary of Lucite International Limited. Lucite International Limited does not trade and in addition to its investment in Lucite International Group Holdings Limited, it has also invested $8 million (£5 million) into Lucite International China Holdings Limited, an entity established in the UK to invest in the construction and operation of an MMA facility in China. The principal shareholder and ultimate controlling party of Lucite International Limited is Charterhouse Capital Partners LLP. Lucite International Group Holdings Limited is a non-trading holding company for the remainder of the subsidiary companies included in the Lucite International Group. These subsidiary companies are listed in Note 26 to these financial statements. Lucite International Group Holdings Limited and subsidiary companies (together referred to as “Lucite” or “the Company”) are engaged in the production and distribution of methacrylate monomers, the principal building block of acrylic, and the production and distribution of acrylic based polymers, resins, sheet and composites. These products are manufactured at facilities located in the Americas, Europe and Asia and are sold throughout the world.

F-11

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3 Segmental reporting

Class of business

The Company’s business comprises the production and distribution of upstream products, being methyl methacrylate monomers and speciality methacrylates (methacrylic acid and higher monomers) and Downstream products, being acrylic sheet, speciality polymers, resins and composites.

Turnover, operating profit, depreciation, amortisation, total assets less current liabilities and capital expenditure attributable to each different class of business are as follows:

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Turnover
Upstream		511			536			611
Downstream		276			282			292
		787			818			903
Inter-class eliminations		(93	)		(111	)		(123	)
		694			707			780
Operating profit
Upstream		56			56			60
Downstream		15			11			4
Operating profit		71			67			64
Depreciation
Upstream		31			31			35
Downstream		8			8			8
		39			39			43
Amortisation of intangible fixed assets
Upstream		3			3			3
Downstream		2			2			2
		5			5			5
External turnover by product
Upstream		418			425			488
Polymers and Resins		91			91			87
Sheet		185			191			205
		694			707			780

The upstream business sells to third parties and within the Group. The intra-group transactions are eliminated within the inter-class eliminations shown above.

F-12

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2004 £’m			2005 £’m
Total assets less current liabilities
Upstream		326			356
Downstream		148			160
Net operating assets		474			516
Assets and liabilities that are not attributable to types of business:
- cash at bank and in hand		33			49
- deferred taxation asset		14			14
- bank and other borrowings (note 13)		(18	)		(20	)
		503			559
Capital expenditure — cash flow
Upstream		32			57
Downstream		6			5
		38			62

Geographical analysis

The Company’s products are manufactured at facilities located in the Americas, Europe and Asia and are sold throughout the world. Sales between Group companies are recorded at management’s estimate of external market prices. Turnover according to geographical location of the operating unit and the geographical location of the customer together with an analysis of the net book amount of tangible fixed assets according to the geographical location of these assets, are presented on the following page.

The Directors of the Company are of the opinion that disclosure of profitability and trading assets by geographical location would be seriously prejudicial to the interests of the Company. Accordingly, they have elected to exercise the exemption from such disclosure permitted by Statement of Standard Accounting Practice No. 25, “Segmental Reporting”.

F-13

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Turnover by geographical location of operating unit
*Europe*
External		241			243			242
Intra-group		14			18			19
		255			261			261
*Americas*
External		319			318			348
Intra-group		5			21			21
		324			339			369
*Asia*
External		119			132			172
Intra-group		—			—			—
		119			132			172
*Rest of world*
External		15			14			18
Intra-group		—			—			—
		15			14			18
		713			746			820
Intra-group eliminations		(19	)		(39	)		(40	)
		694			707			780

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
Turnover by geographical location of customer
Europe		201		201		203
Americas		308		304		334
Asia		146		163		197
Rest of world		39		39		46
		694		707		780

	2004 £’m		2005 £’m
Tangible fixed assets by geographical location of operating unit
Europe		136		137
Americas		139		170
Asia		45		56
Rest of world		3		3
		323		366

F-14

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4 Cost of sales, gross profit, distribution costs and administrative costs

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Group turnover		694			707			780
Cost of sales		(530	)		(538	)		(606	)
Gross profit		164			169			174
Distribution costs		(42	)		(44	)		(43	)
Administrative costs before amortisation of goodwill and research and development costs		(37	)		(44	)		(53	)
- amortisation of goodwill and other intangible fixed assets (note 9)		(5	)		(5	)		(5	)
- research and development costs		(9	)		(9	)		(9	)
Total administrative costs		(51	)		(58	)		(67	)
Total net operating costs		(623	)		(640	)		(716	)
Group operating profit		71			67			64

5 Staff costs

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
	as restated		as restated
Staff costs
Salaries		61		59		63
Social security costs		5		5		6
Pension and post-retirement benefit costs		9		8		10
Other employment costs		3		4		2
Employee costs charged in arriving at profit before taxation		78		76		81

F-15

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee numbers

Average number of people employed, by class of business and geographical location of operating unit.

	Year ended December 31, 2003 Number		Year ended December 31, 2004 Number		Year ended December 31, 2005 Number
Upstream		676		774		758
Downstream		1,306		1,317		1,341
		1,982		2,091		2,099
Europe		811		828		855
Americas		515		493		494
Asia		462		583		566
Rest of World		194		187		184
		1,982		2,091		2,099

	December 31, 2003 Number		December 31, 2004 Number		December 31, 2005 Number
Number of employees at period end		1,995		2,098		2,211

6 Profit on ordinary activities before taxation

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
Profit on ordinary activities before taxation is stated after charging:
Depreciation of tangible fixed assets:
- owned assets		36		34		39
- capitalised plant shut-down costs		3		5		4
Amortisation of goodwill		5		5		5
Hire of machinery and equipment		2		1		2
Other operating lease rentals		—		2		3

F-16

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7 Net interest payable and similar charges

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
	as restated		as restated
Interest payable on senior credit facilities		10		7		7
Interest payable on senior notes		16		17		17
Interest payable on China bank debt		—		—		2
Fees on debt facility with parent company		2		1		1
Amortisation of issue costs on senior credit facilities		1		1		2
Pension fund net charge		1		1		2
Foreign exchange loss arising on cash balances		—		1		—
Foreign exchange loss arising on external debt		8		—		—
Net interest payable		38		28		31

8 Taxation on profit on ordinary activities

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
United Kingdom taxation
Corporation tax at prevailing rates		—		—			—
Amounts in respect of prior periods		—		—			—
		—		—			—
Overseas taxation
Current taxation		6		5			7
Amounts in respect of prior periods		—		1			—
Total overseas taxation		6		6			7
Deferred taxation		—		(6	)		—
Taxation charge for the year		6		—			7

F-17

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Factors effecting tax charge for the year

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Profit on ordinary activities before taxation		33			39			33
Standard rate of corporation tax in the UK		30	%		30	%		30	%
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK		10			12			10
Effects of:
Other non taxable/deductible income and charges		(10	)		(3	)		—
Adjustment in respect of foreign taxes		—			2			1
Capital allowances in excess of depreciation		—			5			1
Short-term timing differences		3			(4	)		(5	)
Tax losses created not utilised		3			(7	)		—
Adjustments in respect of prior periods		—			1			—
Current tax charge for the year		6			6			7

Factors that may affect future tax charges

The Group has approximately £192 million (2004: £177 million) of losses available to carry forward to future years. On the basis of all available evidence the directors estimate that the Company will utilise approximately £72 million (2004: £57 million) against future profits in the United States. A deferred tax asset of £27 million (2004: £21 million) has therefore been provided in respect of this amount. No deferred tax has been provided in respect of the remaining losses as on the basis of all available information there is not sufficient certainty that they will be used in the foreseeable future.

F-18

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9 Intangible fixed assets

	Other intangible fixed assets £’m		Goodwill £’m		Negative Goodwill £’m			Total £’m
Cost
At December 31, 2003, and 2004		1		105		(6	)		100
Additions at cost		8		—		—			8
At December 31, 2005		9		105		(6	)		108
Accumulated amortisation
At December 31, 2003		—		23		(1	)		22
Charge for year		1		4		—			5
At December 31, 2004		1		27		(1	)		27
Charge for year		—		5		—			5
At December 31, 2005		1		32		(1	)		32
Net book amounts at
December 31, 2003		1		82		(5	)		78
December 31, 2004		—		78		(5	)		73
December 31, 2005		8		73		(5	)		76

Other intangible fixed assets include licences.

F-19

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10 Tangible fixed assets

	Land and buildings £’m			Plant and equipment £’m			Payments on account and assets in the course of construction £’m			Total £’m
Cost
At December 31, 2003		42			698			38			778
Additions		—			—			42			42
Transfers of assets into use		—			14			(14	)		—
Exchange adjustments		(1	)		(12	)		(2	)		(15	)
Disposals		(2	)		(21	)		—			(23	)
At December 31, 2004		39			679			64			782
Additions		—			—			64			64
Transfers of assets into use		1			71			(72	)		—
Exchange adjustments		2			29			3			34
Disposals		—			(6	)		—			(6	)
At December 31, 2005		42			773			59			874
Accumulated depreciation
At December 31, 2003		15			431			—			446
Charge for year		1			38			—			39
Exchange movement		—			(3	)		—			(3	)
Disposals		(2	)		(21	)		—			(23	)
At December 31, 2004		14			445			—			459
Charge for year		1			42			—			43
Exchange movement		—			12			—			12
Disposals		—			(6	)		—			(6	)
At December 31, 2005		15			493			—			508
Net book amounts at
December 31, 2003		27			267			38			332
December 31, 2004		25			234			64			323
December 31, 2005		27			280			59			366

Included in land and buildings is £9 million (2004: £8 million) in respect of the cost of land which is not subject to depreciation.

The net book value of tangible fixed assets includes capitalised finance leases of £3 million (2004: £3 million) comprising cost of £6 million (2004: £5 million) less accumulated depreciation of £3 million (2004: £2 million). The depreciation charge for the year in respect of capitalised finance leases was £0.3 million (2004: £0.4 million).

We recently entered into an agreement with DuPont (effective December 1, 2005), whereby we have an option to acquire DuPont’s Acrylonitrile (“AN”) and HCN producing assets at Beaumont, Texas. We have concluded that the option is almost certainly going to be exercised; accordingly we have included these assets in payments on account and assets in the course of construction as at December 31, 2005.

	2004 £’m		2005 £’m
Analysis of net book amount of land and buildings
Freehold		21		22
Long leasehold (over 50 years unexpired)		4		5
		25		27

F-20

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11 Stocks

	2004 £’m		2005 £’m
Raw materials and consumables		31		43
Finished goods and goods for resale		64		76
		95		119

12 Debtors

	2004 £’m		2005 £’m
Trade debtors (net of provision for bad and doubtful debts)		94		101
Other prepayments and accrued income		4		4
Deferred taxation asset		14		14
Other debtors		8		7
		120		126

The deferred tax asset is due in more than one year.

Provision for bad and doubtful debts:

	2004 £’m		2005 £’m
At the beginning of the year		2		3
Charge for the period		1		1
Amount utilised		—		(1	)
At the end of the year		3		3

13 Creditors — Amounts falling due within one year

	2004 £’m		2005 £’m
Bank and other borrowings (note 15)		18		20
Trade creditors		76		91
Other creditors		28		28
Accruals		19		38
		141		177

F-21

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14 Creditors — Amounts falling due after more than one year

	2004 £’m		2005 £’m
Bank and other borrowings (note 15)		303		309
Finance leases (note 16)		3		4
		306		313

15 Bank and other borrowings

	2004 £’m			2005 £’m
Senior Credit Facilities:
Term Loan A		24			12
Term Loan B		68			66
Term Loan C		41			44
Senior notes		177			172
Unamortised senior notes premium		1			1
Unamortised issue costs		(6	)		(4	)
Total excluding China bank loans		305			291
China bank loans		16			38
		321			329

Senior Credit Facilities

On October 3, 1999, the Company entered into a Bank Credit Agreement with Deutsche Bank AG London Branch and Merrill Lynch Capital Corporation related to senior credit facilities. These facilities consisted of (i) a seven-year $85 million revolving credit facility (the “Revolving Credit Facility”), and (ii) a seven-year £95 million aggregate principal amount Term Loan A, an eight-year £70 million aggregate principal amount Term Loan B and a nine-year £50 million aggregate principal amount Term Loan C (the “Term Loan A”, the “Term Loan B” and the “Term Loan C” are referred to collectively as the “Senior Term Loans”). The Term Loan A and Term Loan B were drawn down in a combination of Euros and US Dollars. The Term Loan C was drawn down in US Dollars. The balances outstanding at the year end have been retranslated into pounds sterling at exchange rates prevailing at that date. The Revolving Credit Facility is available to be drawn down in US Dollars and other Optional Currencies, by way of Revolving Advances, issue of Letters of Credit or Bank Guarantees. At December 31, 2005, the unused proportion of this facility was $85 million (2004: $85 million) less $1 million of guarantees issued (2004: $1 million).

The senior credit facilities bear interest at a rate equal to the aggregate of the cost of LIBOR funds for one, two, three, six, nine or twelve months as the Company may elect, plus costs to the Lender of compliance with all reserve assets, liquidity or cash margin or other like requirements of the Bank of England, the Financial Services Authority, the European Central Bank or in relation to Regulation D in the United States of America as specified in the Bank Credit Agreement, plus a margin. This margin for the Revolving Credit Facility and the Term Loan A ranges from 1.25% to 2% per annum, determined by the Company’s most recent financial ratios and is fixed at 2.5% and 3% for the Term Loan B and the Term Loan C, respectively.

F-22

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Term Loan A is repayable in six-monthly installments commencing June 30, 2000. All installments to date have been paid on the due dates. Repayment amounts are calculated with reference to a percentage of the total loan balance, the percentages being specified in the Bank Credit Agreement. The final two installments are due June 30, 2006 and September 30, 2006.

The Term Loan B and the Term Loan C are repayable by way of two equal installments, modified for voluntary and excess cash repayments, commencing June 30, 2007 and June 30, 2008 respectively. Any balance outstanding on the Revolving Credit Facility is repayable in full on the last day of each interest period over which any of the facility is drawn down and may be rolled forward until September 2006.

The obligations of the Company under the senior credit facilities are secured by a first-priority interest in substantially all of the assets of the Company and its subsidiary undertakings.

The senior credit facilities contain restrictive covenants that, among other things and under certain conditions, restrict the Company’s indebtedness, liens, leasing arrangements, transactions with affiliates, asset sales, capital expenditures, acquisitions, investments, dividend and other restricted payments. Additionally, these covenants require that certain financial ratios be maintained. The senior credit facilities are secured on the assets of the Group’s major operating subsidiaries and by guarantee from Lucite International Holdings Limited, Lucite International Investment Limited and a number of other subsidiaries.

The debt issuance costs for the Senior Term Loans were approximately £5.5 million and are being amortised to the profit and loss account over the terms of the Senior Term Loans.

10.25% senior notes

In June 2003 with senior bank consent the Company undertook a refinancing in order to fund future investment into China by issuing €50 million of 10.25% senior notes at a premium of €2 million under an indenture dated June 25, 2003. The €2 million premium is being amortised to the profit and loss account over the term of the senior notes.

The 10.25% senior notes mature in full on May 15, 2010. The senior notes are denominated in euros and amount to €250 million in aggregate. The senior notes are guaranteed by Lucite International Investment Limited and Lucite International Holdings Limited on a subordinated basis.

China bank loans

The Company has entered into a Bank Credit Agreement with the Industrial and Commercial Bank of China (“ICBC”), to fund a proportion of the total costs relating to the construction and working capital requirements of our MMA plant in China. The loan consists of US dollar denominated and Chinese Renminbi (“RMB”) denominated tranches. The balances outstanding at the year end have been retranslated into pounds sterling at exchange rates prevailing at that date.

The US Dollar denominated loan bears interest at a rate equal to the aggregate of the cost of US LIBOR funds for six months, plus a margin ranging between 1% and 1.5%. The RMB denominated loan bears interest ranging between 95% and 105% on the effective RMB base lending rate.

The debt drawn to fund construction is repayable in six-monthly installments commencing in April 2006. The debt drawn to fund working capital is due to be repaid in 2008.

The debt is secured on the assets of Lucite International (China) Chemical Industry Company Limited.

F-23

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Maturity analysis of bank and other borrowings

The maturity analysis of the Company’s bank and other borrowings is as follows:

	2004 £’m			2005 £’m
Within 1 year or on demand		18			20
Between 1 and 2 years		13			69
Between 2 and 5 years		109			228
Over 5 years		186			15
		326			332
Unamortised senior notes premium		1			1
Unamortised issue costs		(6	)		(4	)
		321			329

16 Finance leases

	2004 £’m			2005 £’m
Obligations under finance leases comprise:
Rentals due after more than 1 year:
- from 1 to 2 years		—			1
- from 2 to 5 years		2			2
- after 5 years from the balance sheet date		3			3
		5			6
Less: amounts representing interest relating to future periods		(2	)		(2	)
Present value of net minimum lease payments		3			4
Less: current lease obligations		—			—
Non-current obligations		3			4

17 Provisions for liabilities and charges

	Restructuring £’m			Deferred taxation £’m			Total £’m
At December 31, 2003		2			3			5
Utilised in the year		(1	)		—			(1	)
At December 31, 2004		1			3			4
Exchange/other		—			(1	)		(1	)
At December 31, 2005		1			2			3

No provision has been released or applied for any purpose other than that for which it was established.

The restructuring provision is expected to be utilised during the next year.

F-24

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred taxation

The amounts of deferred taxation accounted for as at the balance sheet date and the potential amounts of deferred taxation are disclosed below:

	2004 £’m			2005 £’m
Accounted for at the balance sheet date
Timing differences on capital allowances and depreciation		25			27
Miscellaneous timing differences		(15	)		(12	)
Tax losses		(21	)		(27	)
		(11	)		(12	)
Not accounted for at the balance sheet date
Miscellaneous timing differences		(3	)		(17	)
Tax losses		(37	)		(38	)
		(40	)		(55	)

The movement of the deferred taxation balance is as follows:

	Net asset £’m			Net liability £’m			Total £’m
At December 31, 2003		(9	)		3			(6	)
Charge/(credit) to the profit and loss account in the period		(6	)		—			(6	)
Exchange movement		1			—			1
At December 31, 2004		(14	)		3			(11	)
Charge/(credit) to the profit and loss account in the period		—			—			—
Exchange movement		—			(1	)		(1	)
At December 31, 2005		(14	)		2			(12	)

F-25

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18 Called up equity share capital

	Number	£’m
Authorised, allotted and fully paid At December 31, 2005 and at December 31, 2004
Ordinary shares of £1 each	175,029,700		175

The ordinary shares above were issued to Lucite International Limited on October 1, 1999.

19 Financial Instruments

Foreign exchange and interest rate disclosure

From time to time, the Company holds and issues financial instruments in order to manage interest and foreign currency risks arising from its operations. The Company’s major financial risks relate to movements in exchange rates and interest rates. The Company borrows in US Dollars, Euros and pounds sterling at variable rates and is subject to fluctuations in interest rates on its borrowings and surplus cash. The Company’s policy is to hedge on specific borrowings against future movements in interest rates, which is effected by using derivatives, such as interest rate swaps and caps where appropriate. During the year ended December 31, 2005 the Company did not enter into any interest rate swap or cap arrangements.

Short-term debtors and creditors have been excluded from the following disclosures, other than the currency risk disclosures.

F-26

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest rate risk profile of financial liabilities

As at December 31, 2004 and 2005 the Company had the following interest rate profile for financial liabilities, after taking into account the interest rate swaps used to manage the interest profile:

	At December 31, 2004
	Floating rate financial liabilities £’m			Fixed rate financial liabilities £’m			Total £’m
Currency
Euro		59			178			237
US Dollars		81			3			84
Chinese Renminbi		9			—			9
		149			181			330
Unamortised issue costs		(2	)		(4	)		(6	)
At December 31, 2004		147			177			324

	At December 31, 2005
	Floating rate financial liabilities £’m			Fixed rate financial liabilities £’m			Total £’m
Currency
Euro		47			173			220
US Dollars		93			4			97
Chinese Renminbi		20			—			20
		160			177			337
Unamortised issue costs		(1	)		(3	)		(4	)
At December 31, 2005		159			174			333

F-27

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	At December 31, 2004
	Fixed rate financial liabilities
Currency	Weighted average interest rate %		Weighted average period for which rate is fixed Years
Sterling		—		—
US dollars		7.50		12.0
Euro		10.25		5.3
At December, 31 2004		10.20		5.4

	At December 31, 2005
	Fixed rate financial liabilities
Currency	Weighted average interest rate %		Weighted average period for which rate is fixed Years
Sterling		—		—
US dollars		7.50		11.0
Euro		10.25		4.3
At December, 31 2005		10.20		4.4

Floating rate financial liabilities bear interest at rates, based on relevant national LIBOR equivalents, which are fixed in advance for periods of between one month and six months.

Interest rate risk profile of financial assets

Currency	2004 Cash at bank and in hand £’m		2005 Cash at bank and in hand £’m
Sterling		2		1
US Dollars		7		6
Euro		4		5
Other currencies		20		37
At December, 31		33		49
Floating rate		21		21
Fixed rate		12		28
At December, 31		33		49

The floating rate cash earns interest based on relevant national LIBOR equivalents. The fixed rate cash held by our subsidiaries in Thailand, Taiwan, Singapore and Japan earns interest at approximately 1-2%.

F-28

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Maturity of financial liabilities

The maturity profile of the financial liabilities of the Company, other than short-term operating creditors and accruals at December 31, 2004 and 2005 were:

	December 31, 2004
	Debt £’m			Finance leases £’m			Total £’m
In one year or less or on demand		18			—			18
In more than one year but not more than two years		13			—			13
In more than two years but not more than five years		109			2			111
In more than five years		186			3			189
		326			5			331
Less: amounts representing interest relating to future periods		—			(2	)		(2	)
Unamortised senior notes premium		1			—			1
Unamortised issue costs		(6	)		—			(6	)
		321			3			324

	December 31, 2005
	Debt £’m			Finance leases £’m			Total £’m
In one year or less or on demand		20			—			20
In more than one year but not more than two years		69			1			70
In more than two years but not more than five years		228			2			230
In more than five years		15			3			18
		332			6			338
Less: amounts representing interest relating to future periods		—			(2	)		(2	)
Unamortised senior notes premium		1			—			1
Unamortised issue costs		(4	)		—			(4	)
		329			4			333

Borrowing facilities

The Group has the following undrawn committed borrowing facilities available at December 31, 2005 in respect of which all conditions had been met at that date:

	Floating rate £’m		Fixed rate £’m		December 31, 2005 £’m		December 31, 2004 £’m
Expiring within one year		50		—		50		—
Expiring between 1 and 2 years		—		—		—		44
Expiring after more than 2 years		—		—		—		—
		50		—		50		44

F-29

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair values of financial assets and financial liabilities

Set out below is a comparison, by category, of book values (before debt issue costs) and fair values of all the Company’s financial liabilities as at December 31, 2005.

	December 31, 2004				December 31, 2005
	Book value £’m		Fair value £’m		Book value £’m		Fair value £’m
Primary financial instruments held or issued to finance the Group’s operations:
Short-term borrowings and current portion of long-term borrowings		18		18		20		20
Long-term borrowings		312		325		317		326

The fair value of fixed rate debt instruments is determined by reference to market prices of those instruments.

Foreign currency exposures

The Company has significant operations in the US as well as other countries outside of the UK and consequently movements in Pounds Sterling exchange rates can significantly affect the balance sheet. In addition currency exposures can arise from sales and purchase transactions in foreign currencies. The Company’s policy is to use foreign currency loans to hedge foreign currency assets and liabilities.

The table below shows the extent to which Group companies have monetary assets and liabilities in currencies other than their own local currency. Foreign exchange differences on re-translation of these assets and liabilities are taken to the profit and loss account.

	Net foreign currency monetary assets/(liabilities) at December 31, 2004
	Sterling £’m			US dollars £’m			Euros £’m			Other Currencies £’m		Total £’m
Functional currency of operation:
Sterling		—			(85	)		(232	)		—		(317	)
US dollars		—			—			—			3		3
Euro		2			(1	)		(2	)		—		(1	)
Other currencies		(1	)		(1	)		—			—		(2	)
Total		1			(87	)		(234	)		3		(317	)

	Net foreign currency monetary assets/(liabilities) at December 31, 2005
	Sterling £’m		US dollars £’m			Euros £’m			Other Currencies £’m			Total £’m
Functional currency of operation:
Sterling		—		(79	)		(245	)		(1	)		(325	)
US dollars		—		—			—			2			2
Euro		2		(1	)		—			—			1
Other currencies		—		(4	)		(2	)		—			(6	)
Total		2		(84	)		(247	)		1			(328	)

Financial instruments held for trading purposes

The Company does not trade in financial instruments.

F-30

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

20 Notes to the cash flow statements

(a) Net cash inflow from operating activities

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Operating profit		71			67			64
Depreciation and amortisation		44			44			48
Stocks increase		(2	)		(23	)		(17	)
Debtors (increase)/ decrease		(18	)		(10	)		2
Creditors increase		2			18			17
Other movements		(3	)		(4	)		(5	)
Cash inflow from operating activities		94			92			109

(b) Returns on investments and servicing of finance

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Interest paid		(25	)		(25	)		(27	)
New issue High Yield Bond fees		(2	)		—			—
Dividends paid by subsidiary undertakings to minority shareholders		(3	)		(4	)		(3	)
Distribution paid by subsidiary undertakings to minority shareholders		(3	)		—			—
		(33	)		(29	)		(30	)

(c) Capital expenditure and financial investment

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Purchase of tangible fixed assets		(32	)		(38	)		(56	)
Purchase of intangible fixed assets		—			—			(6	)
		(32	)		(38	)		(62	)

F-31

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(d) Financing

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Movement in debt due within one year		(14	)		(12	)		(18	)
Movement in debt due after one year		(33	)		(19	)		—
Issue of debt due within one year		—			—			2
Issue of debt due after more than one year		37			16			16
Equity received from minority		5			—			—
Cash (outflow)/inflow from financing		(5	)		(15	)		—

(e) Analysis of net debt

	Cash at bank and in hand £’m			Debt due after one year £’m			Debt due within one year £’m			Finance leases £’m			Net debt £’m
At January 1, 2004		30			(328	)		(12	)		(4	)		(314	)
Cash flow		4			3			12			—			19
Other non-cash changes		—			17			(18	)		—			(1	)
Exchange movement		(1	)		5			—			1			5
At December 31, 2004		33			(303	)		(18	)		(3	)		(291	)
Cash flow		13			(16	)		16			—			13
Other non-cash changes		—			16			(18	)		—			(2	)
Exchange movement		3			(6	)		—			(1	)		(4	)
At December 31, 2005		49			(309	)		(20	)		(4	)		(284	)

Cash at bank and in hand held by our subsidiaries Kaohsiung Monomer Company (KMC) and Thai Poly Acrylic PLC (TPA) are not readily available to the Group except by means of dividends which are subject to local legal restrictions.

(f) Reconciliation of net cash flow to movement in net debt

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Increase in cash in the year		20			4			13
Cash flows from movements in debt and lease financing		10			15			—
Exchange movement		(9	)		5			(4	)
Other non-cash changes		1			(1	)		(2	)
Movement in net debt		22			23			7
Opening net debt		(336	)		(314	)		(291	)
Closing net debt		(314	)		(291	)		(284	)

F-32

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

21 Pensions and other post-retirement benefits

Lucite International Limited has established a number of pension schemes around the world covering many of its employees. The principal funds are the UK pension scheme, which is a funded defined benefit scheme, the US pension schemes, which are defined benefit schemes, the main US scheme being a funded scheme, and the US post-retirement medical benefit plan which is an unfunded defined benefit plan. There are also two much smaller funds within KMC and the Netherlands. The assets of the KMC scheme are held by the Central Trust of China. All of the schemes are accounted for under FRS17.

The most recent actuarial valuations of the US pension schemes and the US post-retirement medical benefit plan were at December 31, 2005 and the most recent full actuarial valuation of the UK pension scheme was at December 31, 2003. The valuations were carried out using the projected unit method and were carried out by the Prudential Retirement Insurance and Annuity Company for the US schemes and Watson Wyatt for the UK scheme, both independent professionally qualified actuaries.

The valuation of the UK scheme was at December 31, 2003. The main assumptions were a long-term investment return of 7.3% for existing assets and 6.8% for future contributions, increases in salaries of 4.2%, inflation of 2.7% and increases in pensions of 2.7%. The market value of the UK scheme’s assets was £62 million and the actuarial value of those assets represented 91% of the benefits accrued to members after allowing for expected future increases in earnings.

The valuations of the US schemes were in accordance with FAS87 and the main assumptions at December 31, 2005 were a long-term investment return of 8.25%, increases in salaries of 4.5%, a discount rate of 5.5% and increases in pensions of 3%. The market value of the US scheme’s assets was $77 million.

The main assumptions used for the valuation of the US post-retirement medical benefit plan at December 31, 2005, in accordance with FAS87 were long-term medical claim inflation rate starting at 9% for 2006 and ultimately reducing to 4.5% and a discount rate of 5.5%.

The main assumptions used for the valuation of the KMC fund were a long-term investment return of 3%, increases in salaries of 3% and a discount rate of 2.5%. There is no assumption required regarding increases to pension costs as all amounts are paid as lump sums.

The main assumptions used for the valuation of the Dutch fund were a long-term investment return of 5.5%, increases in salaries of 2.5%, a discount rate of 4% and increases in pensions of 2%. The market value of the Dutch scheme’s assets was €12.5 million.

For each of these schemes a valuation under FRS17 has been prepared by actuaries at December 31, 2005. The assumptions used for each of these valuations are given in the table below:

The total pension and post-retirement benefit costs charged to operating profit for the period ended December 31, 2005 was £10 million (2004: £8 million — as restated, 2003: £9 million — as restated). This includes costs relating to a defined contribution scheme in the US of approximately £1 million for each of the periods ended December 31, 2005, 2004 and 2003. The net return charged to other finance income for the period ended December 31, 2005 was £2 million (2004: £1 million — as restated, 2003: £1 million — as restated). Provisions for funded and unfunded pensions and employee benefits across the Group at December 31, 2005 were £87 million (2004: £76 million — as restated) and £7 million (2004: £7 million — as restated) respectively.

F-33

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

FRS17 Retirement Benefits

The most recent actuarial valuations of the Company’s major retirement benefit schemes have been updated to December 31, 2005 to take account of the requirements of FRS17. The actuarial valuations have been carried out using the projected unit method of valuation.

Financial assumptions to calculate the scheme liabilities under FRS17 are:

	December 31, 2003
	UK Pension Fund % p.a.			US Pension Plan % p.a.			US Healthcare Plan % p.a.			KMC Pension Fund % p.a.
Discount rate		5.40	%		6.25	%		6.25	%		3.25	%
Salary increases		4.10	%		4.50	%		—			2.50	%
Pension increases		2.60	%		3.00	%		—			—
Social security increases		2.60	%		3.00	%		—			—
Ultimate health care trend rate		—			—			4.50	%		—
Inflation rate		2.60	%		3.00	%		—			-0.31	%
Percentage funding level		62	%		58	%		—			—

	December 31, 2004
	UK Pension Fund % p.a.			US Pension Plan % p.a.			US Healthcare Plan % p.a.			KMC Pension Fund % p.a.
Discount rate		5.30	%		5.75	%		5.75	%		3.25	%
Salary increases		4.20	%		4.50	%		—			3.00	%
Pension increases		2.70	%		3.00	%		—			—
Social security increases		2.70	%		3.00	%		—			—
Ultimate health care trend rate		—			—			4.50	%		—
Inflation rate		2.70	%		3.00	%		3.00	%		1.60	%
Percentage funding level		61	%		64	%		—			—

	December 31, 2005
	UK Pension Fund % p.a.			US Pension Plan % p.a.			US Healthcare Plan % p.a.			KMC Pension Fund % p.a.			Dutch Pension Fund % p.a.
Discount rate		4.85	%		5.50	%		5.50	%		2.50	%		4.00	%
Salary increases		3.90	%		4.50	%		—			3.00	%		2.50	%
Pension increases		2.65	%		3.00	%		—			—			2.00	%
Social security increases		2.65	%		3.00	%		—			—			—
Ultimate health care trend rate		—			—			4.50	%		—			—
Inflation rate		2.65	%		3.00	%		3.00	%		—			2.00	%
Percentage funding level		67	%		60	%		—			—			78	%

F-34

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The assets in the schemes and the expected rate of return were:

	December 31, 2003
	UK Pension Fund						US Pension Plan						US Healthcare Plan				KMC Pension Fund
	Value at December 31, 2003			Long-term rate of return expected			Value at December 31, 2003			Long term rate of return expected				Value at December 31, 2003				Value at December 31, 2003			Long term rate of return expected
	£’m			% p.a.			£’m			% p.a.				£’m				£’m%			% p.a.
Bonds		6			5.0	%		10			7.0	%			—				—			—
Equities		51			8.0	%		19			8.7	%			—				—			—
Others		5			3.5	%		2			8.5	%			—				1			3.25	%
Total market value of assets		62			7.4	%		31			8.2	%			—				1			3.25	%
Present value of scheme liabilities		(100	)					(58	)						(8	)			(4	)
Deficit in the scheme		(38	)					(27	)						(8	)			(3	)
Net pension liability		(38	)					(27	)						(8	)			(3	)

	December 31, 2004
	UK Pension Fund						US Pension Plan						US Healthcare Plan			KMC Pension Fund
	Value at December 31, 2004			Long-term rate of return expected			Value at December 31, 2004			Long term rate of return expected			Value at December 31, 2004			Value at December 31, 2004			Long term rate of return expected
	£’m			% p.a.			£’m			% p.a.			£’m			£’m			% p.a.
Bonds		4			5.0	%		11			7.0	%		—			—			—
Equities		63			8.0	%		19			9.0	%		—			—			—
Others		5			3.5	%		5			8.5	%		—			2			3.25	%
Total market value of assets		72			7.6	%		35			8.25	%		—			2			3.25	%
Present value of scheme liabilities		(118	)					(59	)					(7	)		(5	)
Deficit in the scheme		(46	)					(24	)					(7	)		(3	)
Net pension liability		(46	)					(24	)					(7	)		(3	)

F-35

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31, 2005
	UK Pension Fund					US Pension Plan					US Healthcare Plan			KMC Pension Fund					Dutch Pension Fund
	Value at December 31, 2005			Long-term rate of return expected		Value at December 31, 2005			Long term rate of return expected		Value at December 31, 2005			Value at December 31, 2005			Long term rate of return expected		Value at December 31, 2005			Long term rate of return expected
	£’m			% p.a.		£’m			% p.a.		£’m			£’m			% p.a.		£’m			% p.a.
Bonds		16			4.4%		15			7.0%		—			—			—		5			4.0%
Equities		77			7.8%		24			9.0%		—			—			—		4			7.0%
Others		—			4.2%		5			8.5%		—			2			3.0%		—			—
Total market value of assets		93			7.2%		44			8.25%		—			2			3.0%		9			5.5%
Present value of scheme liabilities		(138	)				(78	)				(7	)		(6	)				(11	)
Deficit in the scheme		(45	)				(34	)				(7	)		(4	)				(2	)
Net pension liability		(45	)				(34	)				(7	)		(4	)				(2	)

In addition, the Company has some small defined contribution and defined benefit pension schemes in Asia. The total liability for these schemes as at December 31, 2005 was approximately £2 million.

No material deferred tax assets in relation to pension liabilities have been recognised as they would not be recoverable in the foreseeable future. The potential deferred tax asset relating to pension liabilities is included within miscellaneous timing differences in note 17.

Analysis of the amount charged to operating profit

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Current service cost		7		8			9
Past service cost		1		(1	)		—
Total operating charge		8		7			9

Analysis of the amount charged to other finance income

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Expected return on pension scheme assets		7			8			8
Interest on pension scheme liabilities		(8	)		(9	)		(10	)
Net charge		(1	)		(1	)		(2	)

F-36

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Analysis of amount recognised in the statement of total recognised gains and losses (STRGL)

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Actual return less expected return on pension scheme assets		8			1			10
Experience gains and losses arising on scheme liabilities		(2	)		1			(2	)
Changes in assumptions underlying the present value of the scheme liabilities		(19	)		(11	)		(13	)
Actuarial loss recognised in STRGL		(13	)		(9	)		(5	)

Movement in deficit during the year

	Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated
Deficit in scheme at beginning of the year		(79	)		(83	)
Movement in the year
Current service cost		(8	)		(9	)
Contributions		10			14
Past service costs		1			—
Transfer of employees *		—			(5	)
Other finance costs		(1	)		(2	)
Exchange gain/(loss)		3			(4	)
Actuarial loss recognised in STRGL		(9	)		(5	)
Deficit in scheme at end of the year		(83	)		(94	)

The deficit as at the beginning of 2004 has been restated to include the Dutch pension scheme.

* During 2005, the Company entered into an agreement to take over the operation of Acrylonitrile (“AN”) and Site Services assets at Beaumont, Texas from DuPont. At the same time, the Company has assumed pension and payroll liabilities relating to the workforce transferred as part of the agreement.

History of experience gains and losses

	Year ended December 31, 2002			Year ended December 31, 2003			Year ended December 31, 2004			Year ended December 31, 2005
Difference between the actual and expected return on scheme assets:
Amount (£ million)		(20	)		8			1			10
Percentage of scheme assets		26	%		9	%		1	%		7	%
Experience gains and losses on scheme liabilities:
Amount (£ million)		(3	)		(2	)		1			(2	)
Percentage of present value of scheme liabilities		2	%		1	%		—			1	%
Total amount recognised in statement of total recognised gains and losses:
Amount (£ million)		(28	)		(13	)		(9	)		(5	)
Percentage of present value of scheme liabilities		19	%		8	%		5	%		2	%

F-37

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

22 Related party transactions

The following information is provided in accordance with Financial Reporting Standard No. 8, “Related Party Transactions” (“FRS8”).

Trading transactions with shareholders of the Group

For the twelve months ended December 31, 2003: The Company purchased management services from Charterhouse Capital Partners LLP for the amount of £27,000 plus related travel expenses.

The Company also purchased certain third party goods and services from Ineos associated companies controlled by the Directors of Ineos Capital, to the value of £29 million. We also sold some goods and services to Ineos associated companies to the value of £2 million.

As at December 31, 2003 amounts payable to these companies totalled £2 million.

For the twelve months ended December 31, 2004: The Company purchased management services from Charterhouse Capital Partners LLP for the amount of £28,000 plus related travel expenses.

The Company also purchased certain third party goods and services from Ineos associated companies controlled by the Directors of Ineos Capital, to the value of £42 million. We also sold some goods and services to Ineos associated companies to the value of £1 million.

As at December 31, 2004 amounts payable to these companies totalled £6 million.

For the twelve months ended December 31, 2005: The Company purchased management services from Charterhouse Capital Partners LLP for the amount of £29,000 plus related travel expenses.

The Company also purchased certain third party goods and services, mainly raw materials, from Ineos associated companies controlled by the Directors of Ineos Capital, to the value of £47 million.

As at December 31, 2005 amounts payable to these companies totalled £7 million.

The directors consider that all transactions carried out with Ineos Companies are on an arms-length basis.

23 Contingent liabilities and commitments

	2004 £’m		2005 £’m
Commitments for capital expenditure not provided for:
Contracts placed for future expenditure		12		19
Expenditure authorised but not yet contracted		50		39
		62		58

F-38

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On March 25, 2003, the Group received notification that the European Commission is investigating Lucite International Limited and Lucite International UK Limited with regard to possible participation in anti-competitive practices contrary to Article 81 of the Treaty of Rome. In August 2005 the Commission addressed a Statement of Objections to both companies formally alleging their participation in infringements of Article 81 relating to the supply of methacrylates. If it is found that Article 81 has been infringed, the Commission may impose fines and there could be civil liability in the event of any related claims for damages. It is not possible to give any reliable indication of the likely level of any fines or the prospect of such other liabilities arising. Moreover, there is no strict deadline to complete anti-competitive inquiries and their duration is determined by the complexity of each case, the exercise of the rights of defense and by the Commission’s procedures. Lucite International Limited continues to co-operate fully with the Commission for itself and on behalf of its subsidiary.

Following an audit by the US Environmental Protection Agency (“EPA”) of the Fite Road facility in Memphis, Tennessee in December 2002, the EPA advised Lucite International Inc., our chief operating subsidiary in the US, on September 23, 2004 that it considers the Fite Road facility to be in violation of various provisions of the US Federal Clean Air Act (the “Act”) and other federal laws. Lucite International Inc. believes the Fite Road facility has always operated in accordance with permits issued by the Memphis Shelby County Health Department, which is authorised to issue such permits by the EPA. After continuing discussions with the EPA, a settlement agreement has been reached and the EPA and Lucite International Inc. have signed a Consent Decree with a cost of less than $2 million along with expenditures for required plant modifications within an agreed period to comply with the provisions of the Act. The Consent Decree was submitted to the Court on December 23, 2005 and signed by the judge, being entered into the court docket on February 28, 2006. The settlement has been reflected in our financial reporting.

The Company is involved in various other legal proceedings arising out of the normal course of business. It is not believed that the outcome of these proceedings will have a material effect on the Company’s financial position.

The Company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require it to take action to correct the effects on the environment of prior disposal or release of chemical substances by the Company or other parties. The ultimate requirement for such actions and their cost is inherently difficult to estimate, if required provisions are established in accordance with the Group’s accounting policy. No provisions for environmental obligations have been made at December 31, 2004 or 2005 and management believes that any cost of addressing currently identified environmental obligations will not have a material impact on the Company’s financial position or results of operations.

F-39

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

24 Operating lease commitments

At December 31, 2005 the Group had commitments to make payments under operating leases as follows:

	2004				2005
	Land and Buildings £’m		Other Operating Leases £’m		Land and Buildings £’m		Other Operating Leases £’m
Annual commitments under non-cancellable operating leases expiring:
Within one year		—		1		—		1
Within two to five years		1		1		1		1
After five years		—		2		—		1
		1		4		1		3

25 Summary of significant differences between UK and US accounting principles

The financial statements are prepared and presented in accordance with UK GAAP, which differs in certain significant respects from US GAAP. The following is a summary of the effect on net income and shareholders’ equity of the differences between UK GAAP and US GAAP.

(a) Effect on the profit for the financial year of differences between UK GAAP and US GAAP

			Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	Notes		as restated			as restated
Profit for the financial year under UK GAAP				23			35			20
*Adjustments to conform with US GAAP*
- depreciation of fixed assets		(ia)		6			6			5
- amortisation of other intangibles		(ib)		(12	)		(10	)		(6	)
- amortisation of goodwill		(ic)		5			5			5
Pensions		(ii)		(3	)		(4	)		(3	)
Capitalisation of interest less amortisation		(iii)		2			3			3
Capitalisation of loan issue fees less amortisation		(iv)		(1	)		—			—
Foreign exchange (loss)/gain on debt		(v)		(9	)		(1	)		(1	)
Fair value of derivative financial instruments		(vi)		1			(1	)		—
Deferred taxation
- arising on UK GAAP results		(vii)		3			(14	)		(5	)
- arising on other US GAAP adjustments		(vii)		—			3			(4	)
Net profit for the financial year under US GAAP				15			22			14

F-40

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(b) Effect on Consolidated shareholders’ funds of differences between UK GAAP and US GAAP

			2004 £’m			2005 £’m
	Notes		as restated
Consolidated shareholders’ funds under UK GAAP				95			131
Business combinations		(ia,b,c)		(20	)		(16	)
Exchange translation differences on goodwill and intangible assets		(ib)		(4	)		—
Pensions		(ii)		56			62
Capitalisation of interest less amortisation		(iii)		12			15
Fair value of derivative financial instruments		(vi)		—			—
Deferred taxation		(vii)		19			10
Consolidated shareholders’ funds under US GAAP				158			202

The cumulative exchange differences posted to reserves as at December 31, 2005 was a £8 million gain (2004: £18 million loss).

The cumulative effect of the minimum pension liability posted to reserves as at December 31, 2005 was a £6m million loss (2004: £10 million loss).

(c) Notes to the income statement and net asset reconciliation

(i) Business combinations

Differences exist between US GAAP and UK GAAP in the determination of acquisition price and valuation of assets and liabilities at the acquisition date. The adjustments referred to above for purchase accounting arise as a result of these differences, as described below.

(a) Depreciation of fixed assets

Under US GAAP negative goodwill arising on acquisitions should be deducted from the non-monetary fixed assets acquired as part of the acquisition. The effect of this treatment is to reduce the fair value under US GAAP of the tangible fixed assets acquired below the value recognised under UK GAAP. Accordingly, the annual depreciation charge related to those assets is lower under US GAAP than under UK GAAP.

(b) Amortisation of other intangibles

An intangible asset should be recognised as an asset apart from goodwill if it arises from contractual or other legal rights (regardless of whether those rights are transferable or separable from the acquired entity or from other rights and obligations). If an intangible asset does not arise from contractual or other legal rights, it should be recognised as an asset apart from goodwill only if it is separable, that is, it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged (regardless of whether there is an intent to do so). An intangible asset that cannot be sold, transferred, licensed, rented, or exchanged individually is considered separable if it can be sold, transferred, licensed, rented, or exchanged in combination with a related contract, asset, or liability. An assembled workforce should not be recognised as an intangible asset apart from goodwill.

F-41

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accordingly, the Company has recognised $195 million of definite-lived intangible assets under US GAAP that have been included in goodwill for UK GAAP purposes. On adoption of FAS142 the Company reclassified $19 million related to the assembled workforce previously regarded as an intangible asset into goodwill as it did not meet one of the criteria of FAS141 for recognition apart from goodwill. As such, the annual amortisation charge related to these intangible assets is higher under US GAAP than the goodwill amortisation charge under UK GAAP. In addition, a number of these intangible assets have been pushed down to the business units to which they relate for US GAAP purposes. Many of these business units are based in the United States. These assets are retranslated at the prevailing exchange rate at each balance sheet date into the Company’s reporting currency, giving rise to translation differences. These translation differences have been included above in shareholders’ funds.

As a result of differences in the recognition of intangible assets, the goodwill balance recognised under US GAAP is lower than that recognised under UK GAAP. In 2002, the Company adopted FAS142 and ceased amortisation of goodwill under US GAAP. As such, the adjustment for 2003, 2004 and 2005 is the reversal of the goodwill amortisation recognised under UK GAAP for that year.

(ii) Accounting for pensions

There are three significant differences between UK GAAP (FRS17) and US GAAP (FAS87) in accounting for pensions:

(a) FRS17 “Retirement Benefits” requires that all actuarial gains and losses are recognised immediately through the Statement of Total Recognised Gains and Losses. Under FAS87, “Employers’ Accounting for Pensions” a “corridor” is set. This is equal to 10% of the greater of the defined benefit obligation or the fair value of plan assets at the beginning of the year. Actuarial gains and losses within this “corridor” need not be recognised.

(b) FAS87 requires the recognition of a minimum pension liability. This is required when the accumulated benefit obligation exceeds the fair value of the plan assets and the amount of the accrued liability. There is no such requirement under UK GAAP.

(c) Under UK GAAP past service cost is recognised over the remaining vesting period. If the benefits have already vested, then the cost is recognised immediately in full. Under US GAAP, prior service cost is recognised over the remaining service lives of active employees.

F-42

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The principal pension plans within the Company are the UK pension fund, the US pension plan and the US Healthcare plan. Provision has been made (Note 21) for the benefit obligations of all pension schemes of the Group. The Company uses a December 31 date for its plans. The disclosures required by FAS132(R) “Employers’ Disclosures about Pensions and Other Retirement Benefits” in respect of the Company’s three principal pension plans are set out below:

The net pension cost, in accordance with FAS87, for the Company’s principal pension plans is summarised as follows:

	For the year ended December 31, 2003
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m		Total £’m
Components of pension/post-retirement expense:
Service cost		4			2			—		6
Prior service cost		1			—			—		1
Interest cost		4			3			1		8
Expected return on plan assets		(4	)		(3	)		—		(7	)
Other: amortisation		2			—			—		2
Net periodic pension cost		7			2			1		10

	For the year ended December 31, 2004
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m		Total £’m
Components of pension/post-retirement expense:
Service cost		6			2			—		8
Interest cost		5			3			—		8
Expected return on plan assets		(5	)		(3	)		—		(8	)
Other: amortisation		3			—			—		3
Net periodic pension cost		9			2			—		11

	For the year ended December 31, 2005
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m		Total £’m
Components of pension/post-retirement expense:
Service cost		6			2			—		8
Interest cost		6			3			—		9
Expected return on plan assets		(6	)		(3	)		—		(9	)
Other: amortisation		3			1			—		4
Net periodic pension cost		9			3			—		12

F-43

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the funded status of the principal plans at December 31, 2004:

	At December 31, 2004
		UK Pension Fund £’m		US Pension Plan £’m		US Healthcare Plan £’m		Total £’m
Fair value of plan assets		72		35		—		107
Accumulated post retirement benefit obligations (APBO)		—		—		(7	)	(7	)
Projected benefit obligation (PBO)		(121	)	(59	)	—		(180	)
Funded status and accrued benefit cost		(49	)	(24	)	(7	)	(80	)
Unrecognised net actuarial loss		48		18		1		67
Exchange gain		—		(1	)	—		(1	)
Balance sheet accrued pension costs		(1	)	(7	)	(6	)	(14	)

Accumulated benefit obligations (ABO)		76		49				125
Minimum liability		4		14				18
Intangible assets		—		—				—
Accumulated other comprehensive income		3		7				10

The following table sets forth the funded status of the principal plans at December 31, 2005:

	At December 31, 2005
		UK Pension Fund £’m		US Pension Plan £’m		US Healthcare Plan £’m		Total £’m
Fair value of plan assets		93		44		—		137
Accumulated post retirement benefit obligations (APBO)		—		—		(7	)	(7	)
Projected benefit obligation (PBO)		(142	)	(78	)	—		(220	)
Funded status and accrued benefit cost		(49	)	(34	)	(7	)	(90	)
Unrecognised net actuarial loss		45		23		1		69
Balance sheet accrued pension costs		(4	)	(11	)	(6	)	(21	)

Accumulated benefit obligations (ABO)		92		61				153
Minimum liability		—		17				17
Intangible assets		—		—				—
Accumulated other comprehensive income		—		6				6

F-44

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The change in benefit obligation during the year to December 31, 2004 was as follows:

	At December 31, 2004
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m			Total £’m
PBO/APBO at December 31, 2003		103			58			8			169
Service cost		6			2			—			8
Employee contributions		1			—			—			1
Plan amendments		—			(1	)		—			(1	)
Interest cost		5			3			—			8
Benefit payments		(1	)		(2	)		(1	)		(4	)
Net actuarial loss		7			3			—			10
Exchange (gain)		—			(4	)		—			(4	)
PBO/APBO at December 31, 2004		121			59			7			187

The change in benefit obligation during the year to December 31, 2005 was as follows:

	At December 31, 2005
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m			Total £’m
PBO/APBO at December 31, 2004		121			59			7			187
Service cost		6			2			—			8
Employee contributions		1			—			—			1
Plan amendments		—			—			—			—
Transfer of employees*		—			5			—			5
Interest cost		6			3			—			9
Benefit payments		(2	)		(2	)		(1	)		(5	)
Net actuarial (gain)/loss		10			4			—			14
Exchange (gain)		—			7			1			8
PBO/APBO at December 31, 2005		142			78			7			227

F-45

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The change in plan assets during the year to December 31, 2004 was as follows:

	At December 31, 2004
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m			Total £’m
Fair value of plan assets at December 31, 2003		62			31			—			93
Employer contributions		4			5			1			10
Employee contributions		1			—			—			1
Benefit payments		(1	)		(2	)		(1	)		(4	)
Investment returns		6			3			—			9
Exchange (gain)		—			(2	)		—			(2	)
Fair value of plan assets at December 31, 2004		72			35			—			107

The change in plan assets during the year to December 31, 2005 was as follows:

	At December 31, 2005
	UK Pension Fund £’m			US Pension Plan £’m			US Healthcare Plan £’m			Total £’m
Fair value of plan assets at December 31, 2004		72			35			—			107
Employer contributions		7			5			1			13
Employee contributions		1			—			—			1
Benefit payments		(2	)		(2	)		(1	)		(5	)
Investment returns		15			2			—			17
Exchange gain		—			4			—			4
Fair value of plan assets at December 31, 2005		93			44			—			137

During the year ended December 31, 2005, the Company adopted the requirements of FASB FSP No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” As a result of the Improvement and Modernization Act of 2003 the Company is eligible for a federal subsidy relating to the cost of the underlying post-retirement prescription drug coverage. With effect from the year ended December 31, 2005, the liabilities and charges relating to the US Healthcare plan are stated net of this subsidy. The adoption of FSP No. 106-2 has reduced the accumulated benefit obligation of the plan by approximately £3 million. This decrease has been offset by an actuarial loss due to changes in assumptions relating to discount rates and healthcare trend rates. There has been no material impact on the net periodic benefit cost.

The assumptions used to determine the projected benefit obligation for the principal plans for the year to December 31, 2004 were:

	UK Pension Fund %		US Pension Plan %		US Healthcare Plan %
Interest rate for discounting liabilities		5.30		5.75		5.75
Rate of compensation increase		4.20		4.50		—

F-46

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The assumptions used to determine the projected benefit obligation for the principal plans for the year to December 31, 2005 were:

	UK Pension Fund %		US Pension Plan %		US Healthcare Plan %
Interest rate for discounting liabilities		4.85		5.50		5.50
Rate of compensation increase		3.90		4.50		—

The assumptions used to determine the net periodic benefit cost for the principal plans for the year to December 31, 2004 were:

	UK Pension Fund %		US Pension Plan %		US Healthcare Plan %
Interest rate for discounting liabilities		5.40		6.25		6.25
Expected rate of return on assets		7.40		8.25		—
Rate of compensation increase		4.10		4.50		—

The assumptions used to determine the net periodic benefit cost for the principal plans for the year to December 31, 2005 were:

	UK Pension Fund %		US Pension Plan %		US Healthcare Plan %
Interest rate for discounting liabilities		5.30		5.75		5.75
Expected rate of return on assets		7.60		8.25		—
Rate of compensation increase		4.20		4.50		—

Estimated future benefit payments are:

	UK Pension Fund £’ m		US Pension Plan £’ m		US Healthcare Plan £’ m		Total £’m
Financial year ending December 31, 2006		1		3		1		5
Financial year ending December 31, 2007		1		3		1		5
Financial year ending December 31, 2008		2		3		1		6
Financial year ending December 31, 2009		3		3		1		7
Financial year ending December 31, 2010		3		3		1		7
Financial years ending December 31, 2011 to December 31, 2015 in aggregate		17		22		3		42

The Company expects to contribute the following amounts to its principal pension plans:

	UK Pension Fund £’ m		US Pension Plan £’ m		US Healthcare Plan £’ m		Total £’m
Financial year ending December 31, 2006		6		6		—		12

F-47

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Sensitivity disclosures for the US Healthcare plan are as follows:

A 1% increase in the health cost trend rates would increase the service and interest cost components of the net periodic post-retirement benefit cost by a total of approximately £21,000. It would increase the accumulated post-retirement benefit obligation by approximately £312,000.

A 1% decrease in the health cost trend rates would decrease the service and interest cost components of the net periodic post-retirement benefit cost by a total of approximately £17,000. It would decrease the accumulated post-retirement benefit obligation by approximately £273,000.

	At December 31, 2004
	UK Pension Fund						US Pension Plan
	Actual allocation %			Target allocation %			Actual allocation %			Target allocation %
Equity securities		88	%		40-100	%		65	%		65	%
Debt securities		5	%		0-40	%		35	%		35	%
Real Estate		—			0-15	%		—			—
Other		7	%		0	%		—			—
Total		100	%		100	%		100	%		100	%

The actual allocation of assets by category for the UK and US funds is as follows:

	At December 31, 2005
	UK Pension Fund						US Pension Plan
	Actual allocation %			Target allocation %			Actual allocation %			Target allocation %
Equity securities		82	%		80	%		65	%		65	%
Debt securities		18	%		20	%		35	%		35	%
Real Estate		—			—			—			—
Other		—			—			—			—
Total		100	%		100	%		100	%		100	%

The investment objectives of the UK fund are:

· The acquisition of suitable assets of appropriate liquidity which will generate income and capital growth to meet, together with new contributions from members and the employer, the cost of current and future benefits from the Fund.

· To limit the risk of the assets failing to meet the liabilities over the long term, in particular in relation to the statutory Minimum Funding Requirement.

· To minimise the long term costs of the Fund by maximising the return on the assets in keeping with the objective shown above.

The expected rate of return on assets has been determined by weighted averages of actual holdings in equities, bonds and other assets as at December 31, 2005. We have assumed the expected return on equities, bonds and other classes to be 7.8% pa, 4.4% pa and 4.2% pa respectively for each asset class as at December 31, 2005.

F-48

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The investment strategy of the US pension plan is predicated on its investment objectives and the risk and return expectation of asset classes appropriate for the plan. Investment objectives have been established by considering the plan’s liquidity needs and time horizon and the fiduciary standards under ERISA. The asset allocation strategy is developed to meet the plan’s long term needs in a manner designed to control volatility and to reflect the plan sponsor’s risk tolerance.

The expected rate of return on assets has been determined by weighted averages of actual holdings in equities, bonds and other assets as at December 31, 2005. We have assumed the expected return on equities, bonds and other classes to be 9% pa, 7% pa and 8.5% pa respectively for each asset class as at December 31, 2005.

The plan’s asset allocation is designed using modern portfolio theory which quantifies the impact of the diversification among various asset classes.

In determining the long-term rate of return on pension plan assets, the target allocation is first reviewed. An expected long-term real rate of return is assumed for each asset class and an underlying inflation rate assumption is also made. The effects of asset diversification and periodic fund rebalancing are also considered.

(iii) Capitalisation of interest

Under UK GAAP the Company does not capitalise interest in its financial statements. Under US GAAP, FAS34 “Capitalisation of Interest Cost”, interest incurred as part of the cost of constructing fixed assets is required to be capitalised and amortised over the life of the asset.

(iv) Capitalisation of loan issue fees less amortisation

Under UK GAAP issue costs on the arrangement of new debt facilities which have not been drawn down are written off to the profit and loss account in the period in which the fees were incurred. Under US GAAP such debt issue costs are capitalised as an asset and reported in deferred charges in the balance sheet and are amortised over the life of the facilities.

Under UK GAAP issued debt is stated on the balance sheet net of the associated unamortised issue costs. Under US GAAP such debt issue costs are capitalised as an asset and reported as deferred charges in the balance sheet. Therefore an adjustment to gross up the debt liability and to show the £4 million asset as at December 31, 2005 (2004: £6 million) separately in debtors would have to be made.

(v) Foreign exchange loss on debt

Under UK GAAP the Company treats loans, including the Euro denominated loans, as an effective hedge of net investment in foreign subsidiaries which are primarily US$ denominated. The currency translation loss on loans is offset to the extent of the currency translation gain on net investments. Under US GAAP hedging of a net investment in a foreign subsidiary with a currency other than the currency of the subsidiary is generally not permitted.

For US GAAP purposes, the Company has included gains and losses on loans within net income.

(vi) Fair value of derivative financial instruments

Under US GAAP FAS133 a hedging relationship can only qualify for hedge accounting treatment if it is designated as such and is formally documented and tested for its hedge effectiveness. If a hedging relationship exists, only the portion of the movement in fair value that is deemed to be ineffective is taken to the profit and loss account in the period. If there is no hedging relationship, the fair value of the derivative instrument is recognised as an asset or liability on the balance sheet with movements in fair value taken directly to the profit and loss account. The Company does not currently apply hedge accounting for US GAAP. The movements in the fair value of the hedge instruments are recognised directly in the income statement.

At December 31, 2005 there were contractual arrangements to hedge raw material prices in place. The fair value of these arrangements was approximately £0.2 million.

F-49

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(vii) Income taxes

Under UK GAAP deferred tax assets are accounted for only to the extent that it is more likely than not that there will be suitable sustainable taxable surpluses from which the future reversal of the underlying temporary timing differences can be deducted. Under US GAAP, in accordance with FAS109 “Accounting for Income Taxes”, deferred taxes are accounted for on all temporary timing differences, including those arising from US GAAP adjustments to UK GAAP; a valuation allowance is established in respect of those deferred tax assets where it is more likely than not on the basis of all available evidence that some portion will not be realised.

The US GAAP provision for income taxes differs from the amount of income taxes determined by applying the applicable UK statutory income tax rate to pre-tax increases, as a result of the following differences:

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
UK statutory income tax rate		30	%		30	%		30	%
Income tax (expenses)/benefit at UK rate		7			11			11
Local taxes		—			2			1
Movement in deferred tax		3			(1	)		3
Prior year tax		(2	)		1			—
Permanent differences		(8	)		(2	)		1
Other		3			—			—
Tax on income before income taxes under US GAAP		3			11			16

To the extent that dividends remitted from overseas subsidiaries are expected to result in additional taxes, appropriate amounts have been provided. No taxes have been provided for un-remitted earnings of subsidiaries when such amounts are considered permanently re-invested.

	2004 £’m			2005 £’m
Deferred tax assets:
Pensions		1			1
Inventories		1			1
Fixed assets		23			25
Losses		26			27
Other		15			10
		66			64
Deferred tax liabilities:
Accelerated depreciation and amortisation:
UK fixed assets		—			—
Non-UK fixed assets		(36	)		(42	)
Net deferred tax asset		30			22

Total gross deferred tax assets available to the Company amount to £118 million at December 31, 2005 (2004: £100 million). Valuation allowance of £54 million at December 31, 2005 (2004: £34 million) has been provided against losses and short-term timing differences and consequently the total deferred tax asset amounts to £64 million at December 31, 2005 (2004: £66 million).

F-50

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(d) US GAAP cash flow information

The definition of “cash flows” differs between UK and US GAAP. Cash flow under UK GAAP represents increases or decreases in “cash”, which is comprised of cash in hand and repayable on demand less overdrafts. Under US GAAP cash flow represents increases or decreases in “cash and cash equivalents”, which include short-term, highly liquid investments with remaining maturities of less than 90 days when acquired, and excludes overdrafts. As at all of the balance sheet dates included in these financial statements there is no difference in the definition of cash between UK GAAP and US GAAP.

There are also certain differences in classification of items within the cash flow statement between UK and US GAAP. Under UK GAAP, cash flows are presented in the following categories; (i) operating activities; (ii) returns on investments and servicing of finance; (iii) taxation; (iv) capital expenditure; (v) acquisitions and disposals; (vi) management of liquid resources; and (vii) financing activities. Under US GAAP cash flows are presented as either (i) operating activities (ii) investing or (iii) financing activities.

Cash flows from taxation, returns on investments, and servicing of finance net of capitalised interest would be included as operating activities under US GAAP. Capitalised interest would be included under investing activities for US GAAP. Additionally, under US GAAP cash flows from the purchase and sale of tangible fixed assets and the sale of debt and equity investments would be shown within investing activities.

Under US GAAP, the following amounts would have been reported:

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Net cash provided by operating activities
Under UK GAAP		94			92			109
Taxation paid		(4	)		(6	)		(4	)
Returns from investments and servicing of finance (excluding interest paid and capitalised)		(31	)		(26	)		(27	)
Under US GAAP		59			60			78
Net cash used in investing activities
Capitalised interest		2			3			3
Capital expenditure and financial investment		32			38			62
Under US GAAP		34			41			65

F-51

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(e) Lucite International Employee Share Plan

Under the Lucite International Employee Share Plan, as described elsewhere in this document, Charterhouse resolved to make available 550,000 ordinary one pence shares in the Company to employees. Shares will be allocated between employees based on business performance criteria at a future date when Charterhouse sells all or a substantial portion of its remaining investment in the ordinary shares in Lucite International Limited. The Employee Share Plan has been implemented by the issue of E shares and D shares to employees.

The Company has issued restricted E shares to non-US employees. A proportion of these E shares will be redeemed by the Company and a proportion will become unrestricted with equivalent rights to the B ordinary shares in the Company in the event of Charterhouse selling all or a substantial portion of its investment in the ordinary shares of Lucite International Limited.

The number of E shares that become unrestricted ordinary shares, when added to the number of D shares that convert into B ordinary shares, will equal 550,000.

The scheme is closed to new members.

(f) Additional US GAAP disclosures

Goodwill and Intangible Assets

The annual review of impairment required under FAS142 was carried out as at June 2005 and the results indicated that no impairment was deemed to exist.

Intangible asset carrying values and accumulated amortisation in total and by each major class of intangible asset:

	Gross Carrying value as at December 31, 2005 £’m		Accumulated amortisation as at December 31, 2005 £’m		Weighted average amortisation period Years
Amortised intangible assets
Core and patented technology		59		33		11
Trade names		7		2		20
Customer relationships		20		6		20
Non-compete agreements		24		24		5
Total amortised intangible assets		110		65
Unamortised intangible assets
Goodwill		45		—
Total intangible assets under US GAAP		155		65

Amortisation expense for the year ended December 31, 2005 and estimated aggregate amortisation expense for each of the five succeeding years:

	£’m
Aggregate amortisation expense:
For the year ended December 31, 2005		6
Estimated aggregate amortisation expense:
For the year ended December 31, 2006		6
For the year ended December 31, 2007		7
For the year ended December 31, 2008		7
For the year ended December 31, 2009		6
For the year ended December 31, 2010		2

There were no changes to the carrying value of goodwill during the year ended December 31, 2005.

F-52

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

26 List of principal subsidiary companies included in the Lucite International Group Holdings Limited consolidated financial statements at December 31, 2005

Company	Country of incorporation or registration		Percentage holding
Lucite International Investment Limited		UK		100
Lucite International Holdings Limited		UK		100
Lucite International Finance plc		UK		100
Lucite International Dutch Overseas Holdco BV		Netherlands		100
Thai Poly Acrylic PLC		Thailand		59
Lucite International Japan Limited		Japan		100
Lucite International Finco Limited		UK		100
Lucite International France SAS		France		100
Lucite International Netherlands BV		Netherlands		100
Lucite International Holland BV		Netherlands		100
Lucite International UK Limited		UK		100
Lucite International Inc.		USA		100
Lucite International Mexico Sa de C.V.		Mexico		100
Lucite International Holdco Limited		UK		100
Lucite International Canada Inc.		Canada		100
Lucite International Trading Limited		UK		100
Lucite International UK Overseas Holdco1 Limited		UK		100
Lucite International Partnership Holdings Inc.		USA		100
Lucite International Holdco Inc.		USA		100
Lucite International Partnerco1 Limited		UK		100
Lucite International Partnerco2 Limited		UK		100
Lucite International Speciality Polymers and Resins Limited		UK		100
Lucite International South Africa (Pty) Limited		South Africa		100
Lucite International Asia Pacific Pte Limited		Singapore		100
Kaohsiung Monomer Company		Taiwan		60
Lucite International Alpha BV		Netherlands		100
Perspex Distribution Limited		UK		100
Lucite International China Holdings Limited		UK		77
Lucite International (China) Chemical Industry Company Limited		China		77
Lucite International US Delaware Holdings LLC		USA		100
Lucite International US Group Holdings LLC		USA		100
Lucite International US Investment Holdings LLC		USA		100
Lucite International (Shanghai) Trading Co Limited		China		100
Lucite International US Investment Limited		UK		100
Lucite International Euro Finco Limited		UK		100
Lucite International Dollar Finco Limited		UK		100
Lucite International Singapore Pte Limited		Singapore		100

F-56

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

27 Controlling parties

The intermediate holding company of Lucite International Group Holdings Limited is Lucite International Limited, a company registered in England. The ultimate controlling party of Lucite International Group Holdings Limited is funds managed by Charterhouse Capital Partners LLP (formerly funds managed by Charterhouse Development Capital Limited), 7th Floor, Warwick Court, Paternoster Square, London, EC4M 7DX.

28 Supplemental consolidated financial statements

Lucite International Group Holdings and the wholly-owned guarantor subsidiary of Lucite International Group Holdings, Lucite International Investment Limited jointly and severally, fully and unconditionally guarantee Lucite International Finance plc’s debt securities. Lucite International Holdings Limited and Lucite International Holdco Limited have also guaranteed Lucite International Finance plc’s debt securities on a subordinated basis.

Presented below is consolidating information for Lucite International Finance plc, the issuer of debt securities, its parent guarantor, Lucite International Group Holdings Limited (carrying investments in subsidiaries at equity), Lucite International Investment Limited, the wholly-owned guarantor subsidiary of Group Holdings Limited, Lucite International Holdings Limited and Lucite International Holdco Limited, the wholly-owned subsidiaries of Lucite International Investment Limited which have guaranteed the debt securities of Lucite International Finance plc on a conditional basis.

The Company has not provided a reconciliation from UK GAAP for the columns relating to the guarantor entities as such a reconciliation would not materially affect an investor’s understanding of the nature of the guarantee. The majority of the reconciling items between UK GAAP and US GAAP relate to the operating activities of the non-guarantor subsidiaries and these amounts would only affect the guarantors’ investment in subsidiaries and equity earnings of subsidiaries.

F-57

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating balance sheets as at December 31, 2004 as restated

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m			Subordinated guarantor subsidiaries (2) £’m			Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Fixed assets
Intangible assets		—		—			—			73			—			73
Tangible assets		—		—			—			323			—			323
Investments		207		210			409			—			(826	)		—
		207		210			409			396			(826	)		396
Current assets
Stocks		—		—			—			95			—			95
Debtors		—		251			54			347			(532	)		120
Cash at bank and in hand		—		—			—			33			—			33
		—		251			54			475			(532	)		248
Total assets		207		461			463			871			(1,358	)		644
Creditors: amounts falling due within one year		—		(87	)		(269	)		(141	)		356			(141	)
Net current assets/ (liabilities)		—		164			(215	)		334			(176	)		107
Total assets less current liabilities		207		374			194			730			(1,002	)		503
Creditors: amounts falling due after more than one year		—		(174	)		—			(309	)		177			(306	)
Provisions for liabilities and charges		—		—			—			(4	)		—			(4	)
Net assets excluding pension liability		207		200			194			417			(825	)		193
Pension liability		—		—			—			(83	)		—			(83	)
Net assets including pension liability		207		200			194			334			(825	)		110
Shareholders’ equity
Called up equity share capital		175		175			175			367			(717	)		175
Reserves		32		25			19			(48	)		(108	)		(80	)
Total equity shareholders’ funds		207		200			194			319			(825	)		95
Equity minority interests		—		—			—			15			—			15
Capital employed		207		200			194			334			(825	)		110

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-58

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating balance sheets as at December 31, 2005

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m			Subordinated guarantor subsidiaries (2) £’m			Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Fixed assets
Intangible assets		—		—			—			76			—			76
Tangible assets		—		—			—			366			—			366
Investments		227		230			463			—			(920	)		—
		227		230			463			442			(920	)		442
Current assets
Stocks		—		—			—			119			—			119
Debtors		—		266			59			410			(609	)		126
Cash at bank and in hand		—		—			—			49			—			49
		—		266			59			578			(609	)		294
Total assets		227		496			522			1,020			(1,529	)		736
Creditors: amounts falling due within one year		—		(106	)		(331	)		(177	)		437			(177	)
Net current assets/ (liabilities)		—		160			(272	)		401			(172	)		117
Total assets less current liabilities		227		390			191			843			(1,092	)		559
Creditors: amounts falling due after more than one year		—		(169	)		—			(316	)		172			(313	)
Provisions for liabilities and charges		—		—			—			(3	)		—			(3	)
Net assets excluding pension liability		227		221			191			524			(920	)		243
Pension liability		—		—			—			(94	)		—			(94	)
Net assets including pension liability		227		221			191			430			(920	)		149
Shareholders’ equity
Called up equity share capital		175		175			175			414			(764	)		175
Reserves		52		46			16			(2	)		(156	)		(44	)
Total equity shareholders’ funds		227		221			191			412			(920	)		131
Equity minority interests		—		—			—			18			—			18
Capital employed		227		221			191			430			(920	)		149

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-59

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating profit and loss accounts for the year to December 31, 2003 as restated

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m			Subordinated guarantor subsidiaries (2) £’m		Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Turnover		—		—			—		694			—			694
Operating costs before amortisation of intangible fixed assets		—		—			—		(618	)		—			(618	)
Amortisation of goodwill and other intangible fixed assets		—		—			—		(5	)		—			(5	)
Total operating costs		—		—			—		(623	)		—			(623	)
Group operating profit		—		—			—		71			—			71
Share of operating profit from investments		22		22			22		—			(66	)		—
Operating profit including joint venture		22		22			22		71			(66	)		71
Net interest payable		—		(2	)		—		(36	)		—			(38	)
Profit on ordinary activities before taxation		22		20			22		35			(66	)		33
Taxation on profit on ordinary activities		—		—			—		(6	)		—			(6	)
Profit on ordinary activities after taxation		22		20			22		29			(66	)		27
Equity minority interests		—		—			—		(4	)		—			(4	)
Profit for the financial period		22		20			22		25			(66	)		23

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-60

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating profit and loss accounts for the year to December 31, 2004 as restated

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m		Subordinated guarantor subsidiaries (2) £’m			Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Turnover		—		—		—			707			—			707
Operating costs before amortisation of intangible fixed assets		—		—		—			(635	)		—			(635	)
Amortisation of goodwill and other intangible fixed assets		—		—		—			(5	)		—			(5	)
Total operating costs		—		—		—			(640	)		—			(640	)
Group operating profit		—		—		—			67			—			67
Share of operating profit from investments		36		36		36			—			(108	)		—
Operating profit		36		36		36			67			(108	)		67
Net interest receivable/(payable)		—		1		(14	)		(15	)		—			(28	)
Profit on ordinary activities before taxation		36		37		22			52			(108	)		39
Taxation on profit on ordinary activities		—		—		—			—			—			—
Profit on ordinary activities after taxation		36		37		22			52			(108	)		39
Equity minority interests		—		—		—			(4	)		—			(4	)
Profit for the financial period		36		37		22			48			(108	)		35

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-61

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating profit and loss accounts for the year to December 31, 2005

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m		Subordinated guarantor subsidiaries (2) £’m			Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Turnover		—		—		—			780			—			780
Operating costs before amortisation of intangible fixed assets		—		—		—			(711	)		—			(711	)
Amortisation of goodwill and other intangible fixed assets		—		—		—			(5	)		—			(5	)
Total operating costs		—		—		—			(716	)		—			(716	)
Group operating profit		—		—		—			64			—			64
Share of operating profit from investments		20		20		20			—			(60	)		—
Operating profit including joint venture		20		20		20			64			(60	)		64
Net interest receivable/(payable)		—		1		(20	)		(12	)		—			(31	)
Profit on ordinary activities before taxation		20		21		—			52			(60	)		33
Taxation on profit on ordinary activities		—		—		—			(7	)		—			(7	)
Profit on ordinary activities after taxation		20		21		—			45			(60	)		26
Equity minority interests		—		—		—			(6	)		—			(6	)
Profit for the financial period		20		21		—			39			(60	)		20

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-62

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating cash flow statements for the year to December 31, 2003

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m			Subordinated guarantor subsidiaries (2) £’m		Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Cash flow from operating activities		—		—			—		94			—			94
Returns on investment and servicing of finance		—		(16	)		—		(33	)		16			(33	)
Taxation		—		—			—		(4	)		—			(4	)
		—		(16	)		—		57			16			57
Capital expenditure and financial investment		—		—			—		(32	)		—			(32	)
Net cash inflow/ (outflow) before use of liquid resources and financing		—		(16	)		—		25			16			25
Financing		—		16			—		(5	)		(16	)		(5	)
Increase in cash		—		—			—		20			—			20

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-63

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating cash flow statements for the year to December 31, 2004

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m			Subordinated guarantor subsidiaries (2) £’m		Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Cash flow from operating activities		—		—			—		92			—			92
Returns on investment and servicing of finance		—		(18	)		—		(29	)		18			(29	)
Taxation		—		—			—		(6	)		—			(6	)
		—		(18	)		—		57			18			57
Capital expenditure and financial investment		—		—			—		(38	)		—			(38	)
Net cash inflow/(outflow) before use of liquid resources and financing		—		(18	)		—		19			18			19
Financing		—		18			—		(15	)		(18	)		(15	)
Increase in cash		—		—			—		4			—			4

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-64

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental consolidating cash flow statements for the year to December 31, 2005

	Lucite International Group Holdings Limited £’m		Issuer and unconditional guarantor subsidiaries (1) £’m			Subordinated guarantor subsidiaries (2) £’m		Non- guarantor subsidiaries £’m			Eliminations £’m			Consolidated totals £’m
Cash flow from operating activities		—		—			—		109			—			109
Returns on investment and servicing of finance		—		(18	)		—		(30	)		18			(30	)
Taxation		—		—			—		(4	)		—			(4	)
		—		(18	)		—		75			18			75
Capital expenditure and financial investment		—		—			—		(62	)		—			(62	)
Net cash inflow/ (outflow) before use of liquid resources and financing		—		(18	)		—		13			18			13
Financing		—		18			—		—			(18	)		—
Increase in cash		—		—			—		13			—			13

(1) Unconditional Guarantor subsidiaries consist of the Issuer and Lucite International Investment Limited.

(2) Subordinated Guarantors consist of Lucite International Holdings Limited and Lucite International Holdco Limited.

F-65

LUCITE INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

			Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	Notes		as restated			as restated
Group turnover		3, 4		694			707			780
Net operating costs before amortisation of intangible fixed assets				(618	)		(635	)		(711	)
Amortisation of goodwill and other intangible fixed assets		9		(5	)		(5	)		(5	)
Total net operating costs		4		(623	)		(640	)		(716	)
Group operating profit		3, 4		71			67			64
Net interest payable and similar charges		7		(38	)		(28	)		(31	)
Profit on ordinary activities before taxation		6		33			39			33
Taxation on profit on ordinary activities		8		(6	)		—			(7	)
Profit on ordinary activities after taxation				27			39			26
Equity minority interests				(4	)		(4	)		(6	)
Profit for the financial year				23			35			20

Group turnover and Group operating profit relate entirely to continuing operations.

There is no difference between the results stated above and their historical cost equivalents.

The accompanying notes are an integral part of these financial statements.

F-67

LUCITE INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Profit for the financial year		23			35			20
Currency translation differences on foreign currency net investments net of translation on foreign currency borrowings		(17	)		(7	)		21
Actuarial losses recognised in the pension schemes		(13	)		(9	)		(5	)
Total recognised gain/(loss) relating to the year		(7	)		19			36
Prior year adjustment for pension liability								(66	)
Total gains and losses recognised since last annual report								(30	)

The accompanying notes are an integral part of these financial statements.

F-68

LUCITE INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2005 AND 2004

		2004 £m			2005 £m
	Notes	as restated
Fixed assets
Intangible assets	9		78			81
Negative goodwill	9		(5	)		(5	)
Tangible assets	10		323			366
			396			442
Current assets
Stocks	11		95			119
Debtors	12		120			126
Cash at bank and in hand			33			49
			248			294
Total assets			644			736
Creditors: amounts falling due within one year	13		(141	)		(177	)
Net current assets			107			117
Total assets less current liabilities			503			559
Creditors: amounts falling due after more than one year	14		(306	)		(313	)
Provisions for liabilities and charges	17		(4	)		(3	)
Net assets excluding pension liability			193			243
Pension liability	21		(83	)		(94	)
Net assets including pension liability			110			149
Shareholders’ equity
Called up equity share capital	18		175			175
Profit and loss account			(80	)		(44	)
Total equity shareholders’ funds			95			131
Equity minority interests			15			18
Capital employed			110			149

The accompanying notes are an integral part of these financial statements.

F-69

LUCITE INTERNATIONAL HOLDINGS LIMITED

CONSOLIDATED CASH FLOW STATEMENTS

	Notes	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Net cash inflow from operating activities	20(a)		94			92			109
Returns on investments and servicing of finance	20(b)		(33	)		(29	)		(30	)
Taxation			(4	)		(6	)		(4	)
			57			57			75
Capital expenditure and financial investment	20(c)		(32	)		(38	)		(62	)
Net cash inflow before use of liquid resources and financing			25			19			13
Financing	20(d)		(5	)		(15	)		—
Increase in cash	20(e)		20			4			13

The accompanying notes are an integral part of these financial statements.

F-70

LUCITE INTERNATIONAL HOLDINGS LIMITED

RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS

	Share capital £’m		Profit and loss account £’m			Total £’m
Balance at December 31, 2002		175		(45	)		130
Prior year adjustment for FRS17 “Retirement benefits”		—		(47	)		(47	)
Balance at December 31, 2002 as restated		175		(92	)		83
Profit for the financial year		—		23			23
Actuarial losses recognised in the pension schemes		—		(13	)		(13	)
Currency translation adjustment		—		(17	)		(17	)
Balance at December 31, 2003 as restated		175		(99	)		76
Profit for the financial year		—		35			35
Actuarial losses recognised in the pension schemes		—		(9	)		(9	)
Currency translation adjustment		—		(7	)		(7	)
Balance at December 31, 2004 as restated		175		(80	)		95
Profit for the financial year		—		20			20
Actuarial losses recognised in the pension schemes		—		(5	)		(5	)
Currency translation adjustment		—		21			21
Balance at December 31, 2005		175		(44	)		131

The dividends payable by our subsidiaries in Taiwan (Kaohsiung Monomer Company) and Thailand (Thai Poly Acrylic Public Company Limited) are subject to local legal restrictions. Undistributed profits are, in the main, employed in the business of our subsidiaries. The undistributed income of the businesses overseas may be liable to overseas taxes and/or United Kingdom taxation, after allowing for double taxation relief, if they were to be distributed as dividends.

The cumulative exchange gains and losses on the translation of foreign currency financial statements into pounds sterling are taken into account in the above reconciliation of movements in combined net investment and consolidated shareholders’ funds.

The accompanying notes are an integral part of these financial statements.

F-71

LUCITE INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 BUSINESS DESCRIPTION

Lucite International Holdings Limited (the “Company”) is a wholly-owned subsidiary of Lucite International Investment Limited and Lucite International Investment Limited is a wholly-owned subsidiary of Lucite International Group Holdings Limited. The separate consolidated financial statements of the Company have been included since the Company has guaranteed the 10.25% senior notes of its parent companies on a subordinated basis. The consolidated financial statements of Lucite International Group Holdings Limited are included on pages F-2 to F-65. The parent companies of the Company, Lucite International Investment Limited and Lucite International Group Holdings Limited have no operations, assets, or liabilities of their own other than investments in subsidiaries. As a result, the financial statement footnotes 1 and 3 through 25 and 27 of Lucite International Group Holdings Limited as presented on pages F-8 through F-57 are equally applicable to the Company as are references to “Lucite International Group Holdings Limited” in those footnotes.

Lucite International Holdings Limited and subsidiary companies are engaged in the production and distribution of methacrylate monomers, the principal building block of acrylic, and the production and distribution of acrylic based polymers, resins, sheet and composites. These products are manufactured at facilities located in the Americas, Europe and Asia and are sold throughout the world.

As discussed above, for all financial statement footnotes listed below, please refer to the respective footnote contained in the financial statements of Lucite International Group Holdings Limited which are contained on pages F-2 to F-57.

1 ACCOUNTING POLICIES

3 SEGMENTAL REPORTING

4 COST OF SALES, GROSS PROFIT, DISTRIBUTION COSTS AND ADMINISTRATIVE COSTS

5 STAFF COSTS

6 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

7 NET INTEREST PAYABLE AND SIMILAR CHARGES

8 TAXATION ON PROFIT ON ORDINARY ACTIVITIES

9 INTANGIBLE FIXED ASSETS

10 TANGIBLE FIXED ASSETS

11 STOCKS

12 DEBTORS

13 CREDITORS-AMOUNTS FALLING DUE WITHIN ONE YEAR

14 CREDITORS-AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

15 BANK AND OTHER BORROWINGS

16 FINANCE LEASES

17 PROVISIONS FOR LIABILITIES AND CHARGES

18 CALLED UP EQUITY SHARE CAPITAL

19 FINANCIAL INSTRUMENTS

20 NOTES TO THE CASH FLOW STATEMENTS

21 PENSIONS AND OTHER POST RETIREMENT BENEFITS

22 RELATED PARTY TRANSACTIONS

23 CONTINGENT LIABILITIES AND COMMITMENTS

24 OPERATING LEASE COMMITMENTS

25 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US ACCOUNTING PRINCIPLES

F-72

LUCITE INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

26 LIST OF PRINCIPAL SUBSIDIARY COMPANIES INCLUDED IN THE LUCITE INTERNATIONAL HOLDINGS LIMITED CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2005

Company	Country of incorporation or registration	Percentage holding
Lucite International Finance plc	UK	100
Lucite International Dutch Overseas Holdco BV	Netherlands	100
Thai Poly Acrylic PLC	Thailand	59
Lucite International Japan Limited	Japan	100
Lucite International Finco Limited	UK	100
Lucite International France SAS	France	100
Lucite International Netherlands BV	Netherlands	100
Lucite International Holland BV	Netherlands	100
Lucite International UK Limited	UK	100
Lucite International Inc.	USA	100
Lucite International Mexico SA de C.V.	Mexico	100
Lucite International Holdco Limited	UK	100
Lucite International Canada Inc.	Canada	100
Lucite International Trading Limited	UK	100
Lucite International UK Overseas Holdco1 Limited	UK	100
Lucite International Partnership Holdings Inc.	USA	100
Lucite International Holdco Inc.	USA	100
Lucite International Partnerco1 Limited	UK	100
Lucite International Partnerco2 Limited	UK	100
Lucite International Speciality Polymers and Resins Limited	UK	100
Lucite International South Africa (Pty) Limited	South Africa	100
Lucite International Asia Pacific Pte Limited	Singapore	100
Kaohsiung Monomer Company	Taiwan	60
Lucite International Alpha BV	Netherlands	100
Perspex Distribution Limited	UK	100
Lucite International China Holdings Limited	UK	77
Lucite International (China) Chemical Industry Company Limited	China	77
Lucite International US Delaware Holdings LLC	USA	100
Lucite International US Group Holdings LLC	USA	100
Lucite International US Investment Holdings LLC	USA	100
Lucite International (Shanghai) Trading Co Limited	China	100
Lucite International US Investment Limited	UK	100
Lucite International Euro Finco Limited	UK	100
Lucite International Dollar Finco Limited	UK	100
Lucite International Singapore Pte Limited	Singapore	100

27 CONTROLLING PARTIES

Refer to footnote 27 of the financial statements of Lucite International Group Holdings Limited.

F-73

LUCITE INTERNATIONAL HOLDCO LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

			Year ended December 31,			Year ended December 31,			Year ended December 31,
			2003			2004			2005
			£’m			£’m			£’m
	Notes		as restated			as restated
Group turnover		3, 4		694			707			751
Net operating costs before amortisation of intangible fixed assets				(618	)		(630	)		(681	)
Amortisation of goodwill and other intangible fixed assets		9		(5	)		(5	)		(5	)
Total net operating costs		4		(623	)		(635	)		(686	)
Group operating profit		3, 4		71			72			65
Net interest payable and similar charges		7		(38	)		(28	)		(29	)
Profit on ordinary activities before taxation		6		33			44			36
Taxation on profit on ordinary activities		8		(6	)		—			(7	)
Profit on ordinary activities after taxation				27			44			29
Equity minority interests				(4	)		(4	)		(6	)
Profit for the financial year				23			40			23

Group turnover and Group operating profit relate entirely to continuing operations.

There is no difference between the results stated above and their historical cost equivalents.

The accompanying notes are an integral part of these financial statements.

F-75

LUCITE INTERNATIONAL HOLDCO LIMITED

CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Profit for the financial year		23			40			23
Currency translation differences on foreign currency net investments net of translation on foreign currency borrowings		(16	)		(6	)		19
Actuarial losses recognised in the pension schemes		(13	)		(9	)		(5	)
Total recognised gain/(loss) relating to the year		(6	)		25			37
Prior year adjustment for pension liability								(66	)
Total gains and losses recognised since last annual report								(29	)

The accompanying notes are an integral part of these financial statements.

F-76

LUCITE INTERNATIONAL HOLDCO LIMITED

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2005 AND 2004

			2004			2005
			£’m			£’m
	Notes		as restated
Fixed assets
Intangible assets		9		78			81
Negative goodwill		9		(5	)		(5	)
Tangible assets		10		295			326
				368			402
Current assets
Stocks		11		95			113
Debtors		12		120			122
Cash at bank and in hand				26			34
				241			269
Total assets				609			671
Creditors: amounts falling due within one year		13		(153	)		(174	)
Net current assets				88			95
Total assets less current liabilities				456			497
Creditors: amounts falling due after more than one year		14		(290	)		(281	)
Provisions for liabilities and charges		17		(4	)		(3	)
Net assets excluding pension liability				162			213
Pension liability		21		(83	)		(94	)
Net assets including pension liability				79			119
Shareholders’ equity
Called up equity share capital		18		115			115
Share premium		18		27			27
Profit and loss account				(73	)		(36	)
Total equity shareholders’ funds				69			106
Equity minority interests				10			13
Capital employed				79			119

The accompanying notes are an integral part of these financial statements.

F-77

LUCITE INTERNATIONAL HOLDCO LIMITED

CONSOLIDATED CASH FLOW STATEMENTS

		Year ended December 31, 2003			Year ended December 31, 2004			Year ended December 31, 2005
	Notes	£’m			£’m			£’m
Net cash inflow from operating activities	20(a)		94			97			112
Return on investments and servicing of Finance	20(b)		(33	)		(29	)		(28	)
Taxation			(4	)		(6	)		(4	)
			57			62			80
Capital expenditure and financial investment	20(c)		(28	)		(18	)		(48	)
Net cash inflow before use of liquid resources and financing			29			44			32
Financing	20(d)		(15	)		(37	)		(25	)
Increase in cash	20(e)		14			7			7

The accompanying notes are an integral part of these financial statements.

F-78

LUCITE INTERNATIONAL HOLDCO LIMITED

RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS

	Share capital £’m		Profit and loss account £’m			Total £’m
Balance as at December 31, 2002		142		(45	)		97
Prior year adjustment for FRS17 “Retirement benefits”		—		(47	)		(47	)
Balance at December 31, 2002 as restated		142		(92	)		50
Retained profit for the financial year		—		23			23
Actuarial losses recognised in the pension schemes		—		(13	)		(13	)
Currency translation adjustment		—		(16	)		(16	)
Balance as at December 31, 2003 as restated		142		(98	)		44
Retained profit for the financial year		—		40			40
Actuarial losses recognised in the pension schemes		—		(9	)		(9	)
Currency translation adjustment		—		(6	)		(6	)
Balance as at December 31, 2004 as restated		142		(73	)		69
Retained profit for the financial year		—		23			23
Actuarial losses recognised in the pension schemes		—		(5	)		(5	)
Currency translation adjustment		—		19			19
Balance as at December 31, 2005		142		(36	)		106

The accompanying notes are an integral part of these financial statements.

F-79

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 BUSINESS DESCRIPTION

Lucite International Holdco Limited (the ‘‘Company’’) is a wholly-owned subsidiary of Lucite International Holdings Limited. Lucite International Holdings Limited is indirectly 100% owned by Lucite International Group Holdings Limited, the consolidated financial statements of which are located on pages F-2 through F-65. The parent companies of the Company have no operations, assets or liabilities of their own other than cash of £6 million, investments in subsidiaries, and liabilities which are reflected on a ‘‘pushdown’’ basis in the financial statements of the Company as discussed in Note 15. During 2005 Lucite International Holdings Limited invested £7 million (2004: £4 million) into Lucite International China Holdings Limited, a company registered in the UK. Lucite International China Holdings Limited has invested these proceeds into a wholly-owned foreign entity established in China for the purposes of constructing and operating an MMA facility in China. The assets and liabilities of Lucite International (China) Chemical Industry Company Limited have been fully consolidated into the results of Lucite International Group Holdings Limited as presented on pages F-2 to F-65. As a result some of the financial statement footnotes of Lucite International Group Holdings Limited are equally applicable to the Company but where they are not a separate footnote has been shown in the financial statements of Lucite International Holdco Limited.

Lucite International Holdco Limited and subsidiary companies (together referred to as “Lucite” or ‘‘the Company’’) are engaged in the production and distribution of methacrylate monomers, the principal building block of acrylic, and the production and distribution of acrylic based polymers, resins, sheet and composites. These products are manufactured at facilities located in the Americas, Europe and Asia and are sold throughout the world.

2 PRINCIPAL ACCOUNTING POLICIES

Refer to footnote 1 of the Financial Statements of Lucite International Group Holdings Limited.

3 SEGMENTAL REPORTING

For a description of the Company’s business refer to footnote 3 of the financial statements of Lucite International Group Holdings Limited.

Turnover, operating profit, depreciation, amortisation, total assets less current liabilities and capital expenditure attributable to each different class of business are as follows:

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Turnover
Upstream		511			536			582
Downstream		276			282			292
		787			818			874
Inter-class eliminations		(93	)		(111	)		(123	)
		694			707			751

F-80

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
	as restated		as restated
Operating profit
Upstream		56		61		61
Downstream		15		11		4
Operating profit		71		72		65
Depreciation
Upstream		31		31		33
Downstream		8		8		8
		39		39		41
Amortisation of intangible fixed assets
Upstream		3		3		3
Downstream		2		2		2
		5		5		5
External Turnover by product
Upstream		418		425		459
Polymers and Resins		91		91		87
Sheet		185		191		205
		694		707		751

	2004 £’m			2005 £’m
Total assets less current liabilities
Upstream		304			314
Downstream		148			160
Net operating assets		452			474
Elimination of assets and liabilities that are not attributable to types of business:
Cash at bank and in hand		26			34
Deferred taxation asset		14			14
Bank and other borrowings (Note 13)		(36	)		(25	)
		456			497
Capital expenditure — cash flow
Upstream		12			43
Downstream		6			5
		18			48

F-81

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Geographical analysis

The tangible fixed assets by geographical location of operating unit are as follows:

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Turnover by geographical location of operating unit
*Europe*
External		241			243			242
Intra-group		14			18			19
		255			261			261
*Americas*
External		319			318			348
Intra-group		5			21			21
		324			339			369
*Asia*
External		119			132			143
Intra-group		—			—			—
		119			132			143
*Rest of world*
External		15			14			18
Intra-group		—			—			—
		15			14			18
		713			746			791
Intra-group eliminations		(19	)		(39	)		(40	)
		694			707			751

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
Turnover by geographical location of customer
Europe		201		201		203
Americas		308		304		334
Asia		146		163		168
Rest of world		39		39		46
		694		707		751

F-82

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	2004 £’m		2005 £’m
Tangible fixed assets by geographical location of operating unit
Europe		136		137
Americas		139		170
Asia		17		16
Rest of world		3		3
		295		326

4 COST OF SALES, GROSS PROFIT, DISTRIBUTION COSTS AND ADMINISTRATIVE EXPENSES

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Group turnover		694			707			751
Cost of sales		(530	)		(534	)		(577	)
Gross profit		164			173			174
Distribution costs		(42	)		(44	)		(43	)
Administrative costs, amortisation of goodwill and research and development costs		(37	)		(43	)		(52	)
- amortisation of goodwill and other intangible fixed assets (note 9)		(5	)		(5	)		(5	)
- research and development costs		(9	)		(9	)		(9	)
Total administrative expenses		(51	)		(57	)		(66	)
Net operating costs		(93	)		(101	)		(109	)
Total operating costs		(623	)		(635	)		(686	)

5 STAFF COSTS

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
	as restated		as restated
Staff costs
Salaries		61		58		62
Social security costs		5		5		6
Pension and post retirement benefit costs		9		8		10
Other employment costs		3		4		2
Employee costs charged in arriving at profit before taxation		78		75		80

F-83

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Employee numbers

Average number of people employed by class of business and geographical location of operating unit:

	Year ended December 31, 2003 Number		Year ended December 31, 2004 Number		Year ended December 31, 2005 Number
Upstream		676		700		721
Downstream		1,306		1,317		1,341
		1,982		2,017		2,062
Europe		811		828		855
Americas		515		493		494
Asia		462		509		529
Rest of World		194		187		184
		1,982		2,017		2,062

	December 31, 2003 Number		December 31, 2004 Number		December 31, 2005 Number
Number of employees at period end		1,995		2,024		2,172

6 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
Profit on ordinary activities before taxation is stated after charging:
Depreciation of tangible fixed assets:
- owned assets		36		34		37
- capitalised plant shut-down costs		3		5		4
Amortisation of goodwill		5		5		5
Hire of machinery and equipment		2		1		2
Other operating lease rentals		—		2		2

F-84

LUCITE INTERNATIONAL HOLDCO LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7 NET INTEREST PAYABLE

	Year ended December 31, 2003 £’m		Year ended December 31, 2004 £’m		Year ended December 31, 2005 £’m
	as restated		as restated
Interest payable on senior credit facilities		10		7		7
Interest payable on senior notes		16		17		17
Fees on debt facility with parent company		2		1		1
Amortisation of issue costs on senior credit facilities		1		1		2
Pension fund net charge		1		1		2
Foreign exchange loss arising on cash balances		—		1		—
Foreign exchange loss arising on external debt		8		—		—
Net interest payable		38		28		29

8 TAXATION ON PROFIT ON ORDINARY ACTIVITIES

Refer to footnote 8 of the financial statements of Lucite International Group Holdings Limited.

F-85

LUCITE INTERNATIONAL HOLDCO LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9 INTANGIBLE FIXED ASSETS

Refer to footnote 9 of the financial statements of Lucite International Group Holdings Limited.

10 TANGIBLE FIXED ASSETS

	Land and buildings £’m			Plant and equipment £’m			Payments on account and assets in the course of construction £’m			Total £’m
Cost
At December 31, 2003		40			698			35			773
Additions		—			—			18			18
Transfers of assets into use		—			14			(14	)		—
Exchange adjustments		(1	)		(12	)		(1	)		(14	)
Disposals		(2	)		(21	)		—			(23	)
At December 31, 2004		37			679			38			754
Additions		—			—			55			55
Transfers of assets into use		1			35			(36	)		—
Exchange adjustments		2			25			2			29
Disposals		—			(6	)		—			(6	)
At December 31, 2005		40			733			59			832
Accumulated depreciation
At December 31, 2003		15			431			—			446
Charge for year		1			38			—			39
Exchange movement		—			(3	)		—			(3	)
Disposals		(2	)		(21	)		—			(23	)
At December 31, 2004		14			445			—			459
Charge for year		1			40			—			41
Exchange movement		—			12			—			12
Disposals		—			(6	)		—			(6	)
At December 31, 2005		15			491			—			506
Net book amounts at
December 31, 2003		25			267			35			327
December 31, 2004		23			234			38			295
December 31, 2005		25			242			59			326

Included in land and buildings is £7 million (2004: £6 million) in respect of the cost of land which is not subject to depreciation.

	2004 £’m		2005 £’m
Analysis of net book amount of land and buildings
Freehold		21		22
Long leasehold (over 50 years unexpired)		2		3
		23		25

F-86

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11 STOCKS

	2004 £’m		2005 £’m
Raw materials and consumables		31		39
Finished goods and goods for resale		64		74
		95		113

12 DEBTORS

	2004 £’m		2005 £’m
Trade debtors (net of provision for bad and doubtful debts)		94		97
Other prepayments and accrued income		4		4
Deferred taxation asset		14		14
Other debtors		8		7
		120		122

The deferred tax asset is due in more than one year.

Provision for bad and doubtful debts:

	2004 £’m		2005 £’m
At the beginning of the year		2		3
Charge for the period		1		1
Amount utilised		—		(1	)
At the end of the year		3		3

13 CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR

	2004 £’m		2005 £’m
Bank and other borrowings (note 15)		18		14
Trade creditors		76		86
Intra-group creditors		—		2
Intra-group financing		18		11
Other creditors		22		26
Accruals		19		35
		153		174

F-87

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14 CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

	2004 £’m		2005 £’m
Bank and other borrowings (note 15)		287		277
Finance leases (note 16)		3		4
		290		281

15 BANK AND OTHER BORROWINGS

The senior credit facilities as described in footnote 15 of the financial statements of Lucite International Group Holdings Limited are obligations of the parent companies of the Company. These credit facilities are reflected in the financial statements of the Company on a ‘‘push down’’ basis as the Company’s assets are pledged as security against the senior credit facilities. The remaining obligations apart from the China bank loan as described in footnote 15 to the financial statements of Lucite International Group Holdings Limited are obligations of the Company. Refer to footnote 15 of the financial statements of Lucite International Group Holdings Limited for a complete description of the senior credit facilities and senior notes.

	2004 £’m			2005 £’m
Senior Credit Facilities:
Term Loan A		24			12
Term Loan B		68			66
Term Loan C		41			44
Senior notes		177			172
Unamortised senior notes premium		1			1
Unamortised issue costs		(6	)		(4	)
		305			291

Maturity analysis of bank and other borrowings

The maturity analysis of the Company’s bank and other borrowings is as follows:

	2004 £’m			2005 £’m
Within 1 year or on demand		18			14
Between 1 and 2 years		11			65
Between 2 and 5 years		104			215
Over 5 years		177			—
		310			294
Unamortised senior notes premium		1			1
Unamortised issue costs		(6	)		(4	)
		305			291

F-88

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16 FINANCE LEASES

Refer to footnote 16 of the financial statements of Lucite International Group Holdings Limited.

17 PROVISIONS FOR LIABILITIES AND CHARGES

Refer to footnote 17 of the financial statements of Lucite International Group Holdings Limited.

18 CALLED UP EQUITY SHARE CAPITAL

19 FOREIGN EXCHANGE AND INTEREST RATE DISCLOSURE

Refer to footnote 19 of the financial statements of Lucite International Group Holdings Limited for information relating to foreign exchange disclosure, borrowing facilities, and additional disclosure relating to fixed rate financial liabilities.

As at December 31, 2004 and 2005 the Company had the following interest rate profile for financial liabilities, after taking into account the interest rate swaps used to manage the interest profile:

	At December 31, 2004
	Floating rate financial liabilities £’m			Fixed rate financial liabilities £’m			Total £’m
Currency
Euro		59			178			237
US Dollars		74			3			77
		133			181			314
Unamortised issue costs		(2	)		(4	)		(6	)
At December 31, 2004		131			177			308

	At December 31, 2005
	Floating rate financial liabilities £’m			Fixed rate financial liabilities £’m			Total £’m
Currency
Euro		47			173			220
US Dollars		75			4			79
		122			177			299
Unamortised issue costs		(1	)		(3	)		(4	)
At December 31, 2005		121			174			295

F-89

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest rate risk of financial assets

	2004		2005
Currency	Cash at bank and in hand £’m		Cash at bank and in hand £’m
Sterling		—		(2	)
US Dollars		6		4
Euro		1		1
Other currencies		19		31
At December, 31		26		34
Floating rate		14		6
Fixed rate		12		28
At December, 31		26		34

Maturity of financial liabilities

The maturity profile of the financial liabilities of the Company, other than short-term operating creditors and accruals at December 31, 2004 and 2005 were:

	December 31, 2004
	Debt £’m			Finance leases £’m			Total £’m
In one year or less or on demand		18			—			18
In more than one year but not more than two years		11			—			11
In more than two years but not more than five years		104			2			106
In more than five years		177			3			180
		310			5			315
Less: amounts representing interest relating to future periods		—			(2	)		(2	)
Unamortised senior notes premium		1			—			1
Unamortised issue costs		(6	)		—			(6	)
		305			3			308

	December 31, 2005
	Debt £’m			Finance leases £’m			Total £’m
In one year or less or on demand		14			—			14
In more than one year but not more than two years		65			1			66
In more than two years but not more than five years		215			2			217
In more than five years		—			3			3
		294			6			300
Less: amounts representing interest relating to future periods		—			(2	)		(2	)
Unamortised senior notes premium		1			—			1
Unamortised issue costs		(4	)		—			(4	)
		291			4			295

F-90

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair values of financial assets and financial liabilities

Set out below is a comparison, by category, of book values (before debt issue costs) and fair values of all the Company’s financial liabilities as at December 31, 2005.

	December 31, 2004				December 31, 2005
	Book value £’m		Fair value £’m		Book value £’m		Fair value £’m
Primary financial instruments held or issued to finance the Group’s operations:
Short-term borrowings and current portion of long-term borrowings		18		18		14		14
Long-term borrowings		296		309		285		294

The fair value of fixed rate debt instruments is determined by reference to market prices of those instruments.

The Company has significant operations in the US as well as other countries outside of the UK and consequently movements in pounds sterling exchange rates can significantly affect the balance sheet. In addition currency exposures can arise from sales and purchase transactions in foreign currencies. The Company’s policy is to use foreign currency loans to hedge foreign currency assets and liabilities.

	Net foreign currency monetary assets/(liabilities) at December, 31 2004
	Sterling £’m		US dollars £’m			Euros £’m			Other Currencies £’m		Total £’m
Functional currency of operation:
Sterling		—		(85	)		(236	)		—		(321	)
US dollars		—		—			—			3		3
Euro		1		(1	)		(2	)		—		(2	)
Other currencies		—		8			—			—		8
Total		1		(78	)		(238	)		3		(312	)

	Net foreign currency monetary assets/(liabilities) at December, 31 2005
	Sterling £’m		US dollars £’m			Euros £’m			Other Currencies £’m			Total £’m
Functional currency of operation:
Sterling		—		(76	)		(250	)		(1	)		(327	)
US dollars		—		—			—			2			2
Euro		2		(1	)		—			—			1
Other currencies		—		9			(2	)		—			7
Total		2		(68	)		(252	)		1			(317	)

F-91

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

20 NOTES TO THE CASH FLOW STATEMENT

(a) Net cash inflow from operating activities

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	as restated			as restated
Operating profit		71			72			65
Depreciation and amortisation		44			44			46
Stocks increase		(2	)		(23	)		(12	)
Debtors (increase)/decrease		(18	)		(10	)		6
Creditors increase		2			18			12
Other movements		(3	)		(4	)		(5	)
Cash inflow from operating activities		94			97			112

(b) Returns on investments and servicing of finance

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Interest paid		(25	)		(25	)		(25	)
New issue High Yield Bond fees		(2	)		—			—
Dividends paid by subsidiary undertakings to minority shareholders		(3	)		(4	)		(3	)
Distribution paid by subsidiary undertakings to minority shareholders		(3	)		—			—
		(33	)		(29	)		(28	)

(c) Capital expenditure and financial investment

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Purchase of tangible fixed assets		(28	)		(18	)		(42	)
Purchase of intangible fixed assets		—			—			(6	)
		(28	)		(18	)		(48	)

F-92

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(d) Financing

	Year ended December 31, 2003			Year ended December 31, 2004			Year ended December 31, 2005
	£’m			£’m			£’m
Movement in debt due within one year		(19	)		(18	)		(25	)
Movement in debt due after one year		(33	)		(19	)		—
Issue of debt due after more than one year		37			—			—
Cash outflow from financing		(15	)		(37	)		(25	)

(e) Analysis of net debt

	Cash at bank and in hand			Debt due after 1 year			Debt due within 1 year			Finance Leases			Net Debt
	£’m			£’m			£’m			£’m			£’m
At January 1, 2004		20			(328	)		(36	)		(4	)		(348	)
Cash flow		7			19			18			—			44
Other non-cash changes		—			17			(18	)		—			(1	)
Exchange movement		(1	)		5			—			1			5
At 1 January 2005		26			(287	)		(36	)		(3	)		(300	)
Cash flow		7			—			25			—			32
Other non-cash changes		—			12			(14	)		—			(2	)
Exchange movement		1			(2	)		—			(1	)		(2	)
At December 31, 2005		34			(277	)		(25	)		(4	)		(272	)

(f) Reconciliation of net cash flow to movement in net debt

	Year ended December 31,			Year ended December 31,			Year ended December 31,
	2003			2004			2005
	£’m			£’m			£’m
Increase in cash in the year		14			7			7
Cash flows from movements in debt and lease financing		10			31			18
Cash flows from inter-group financing		5			6			7
Exchange movement		(9	)		5			(2	)
Other non-cash changes		1			(1	)		(2	)
Movement in net debt		21			48			28
Opening net debt		(369	)		(348	)		(300	)
Closing net debt		(348	)		(300	)		(272	)

21 PENSIONS AND OTHER POST RETIREMENT BENEFITS

Refer to footnote 21 of the financial statements of Lucite International Group Holdings Limited.

F-93

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22 RELATED PARTY TRANSACTIONS

Refer to footnote 22 of the financial statements of Lucite International Group Holdings Limited.

23 CONTINGENT LIABILITIES AND COMMITMENTS

	2004 £’m		2005 £’m
Commitments for capital expenditure not provided for:
Contracts placed for future expenditure		8		19
Expenditure authorised but not yet contracted		32		39
		40		58

Refer to footnote 23 of the financial statements of Lucite International Group Holdings Limited for further disclosures regarding legal proceedings.

24 OPERATING LEASE COMMITMENTS

At December 31, 2005 the Group had commitments to make payments under operating leases as follows:

	2004				2005
	Land and Buildings £’m		Other Operating Leases £’m		Land and Buildings £’m		Other Operating Leases £’m
Annual commitments under non-cancellable operating leases expiring:
Within one year		—		1		—		1
Within two to five years		1		1		1		1
After five years		—		—		—		—
		1		2		1		2

F-94

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

25 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US ACCOUNTING PRINCIPLES

(a) Effect on the profit for the financial year of differences between UK GAAP and US GAAP

			Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
	Notes		as restated			as restated
Profit for the financial year under UK GAAP				23			40			23
*Adjustments to conform with US GAAP*
- depreciation of fixed assets		(ia)		6			6			5
- amortisation of other intangibles		(ib)		(12	)		(10	)		(6	)
- amortisation of goodwill		(ic)		5			5			5
Pensions		(ii)		(3	)		(4	)		(3	)
Capitalisation of interest less amortisation		(iii)		2			3			3
Capitalisation of loan issue fees less amortisation		(iv)		(1	)		—			—
Foreign exchange (loss)/gain on debt		(v)		(9	)		(1	)		(1	)
Fair value of derivative financial instruments		(vi)		1			(1	)		—
Deferred taxation
- arising on UK GAAP results		(vii)		3			(14	)		(5	)
- arising on other US GAAP adjustments		(vii)		—			3			(4	)
Net profit for the financial year under US GAAP				15			27			17

(b) Approximate effect on and consolidated shareholders’ funds of differences between UK GAAP and US GAAP

		2004 £’m			2005 £’m
	Notes	as restated
Consolidated shareholders’ funds under UK GAAP			69			106
Business combinations	(ia, b, c)		(20	)		(16	)
Exchange translation differences on goodwill and intangible assets	(ib)		(4	)		—
Pensions	(ii)		56			62
Capitalisation of interest less amortisation	(iii)		12			15
Fair value of derivative financial instruments	(vi)		—			—
Deferred taxation	(viii)		19			10
Consolidated Shareholders’ funds under US GAAP			132			177

F-95

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(c) Notes to the income statement and net asset reconciliation

Refer to footnote 25(c) of the financial statements of Lucite International Group Holdings Limited.

(d) US GAAP cash flow information

Under US GAAP, the following amounts would have been reported:

	Year ended December 31, 2003 £’m			Year ended December 31, 2004 £’m			Year ended December 31, 2005 £’m
Net cash provided by operating activities
Under UK GAAP		94			97			112
Taxation paid		(4	)		(6	)		(4	)
Returns from investments and servicing of finance (excluding interest paid and capitalised)		(31	)		(26	)		(25	)
Under US GAAP		59			65			83
Net cash used in investing activities
Capitalised interest		2			3			3
Capital expenditure and financial investment		32			18			48
Under US GAAP		34			21			51

(e) Lucite International Employee Share Plan

Refer to footnote 25(e) of the financial statements of Lucite International Group Holdings Limited.

(f) Additional US GAAP disclosures

Refer to footnote 25(f) of the financial statements of Lucite International Group Holdings Limited.

F-96

LUCITE INTERNATIONAL HOLDCO LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

26 LIST OF PRINCIPAL SUBSIDIARY COMPANIES INCLUDED IN THE LUCITE INTERNATIONAL HOLDCO LIMITED CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2005

Company	Country of incorporation or registration	Percentage holding
Lucite International Dutch Overseas Holdco BV	Netherlands		100
Thai Poly Acrylic PLC	Thailand		59
Lucite International Japan Limited	Japan		100
Lucite International France SAS	France		100
Lucite International Netherlands BV	Netherlands		100
Lucite International Holland BV	Netherlands		100
Lucite International UK Limited	UK		100
Lucite International Speciality Polymers and Resins Limited	UK		100
Lucite International Inc.	USA		100
Lucite International Mexico SA de C.V.	Mexico		100
Lucite International Canada Inc.	Canada		100
Lucite International Trading Limited	UK		100
Lucite International UK Overseas Holdco1 Limited	UK		100
Lucite International Partnership Holdings Inc.	USA		100
Lucite International Holdco Inc.	USA		100
Lucite International Partnerco1 Limited	UK		100
Lucite International Partnerco2 Limited	UK		100
Lucite International South Africa (Pty) Limited	South Africa		100
Lucite International Asia Pacific Pte Limited	Singapore		100
Kaohsiung Monomer Company	Taiwan		60
Lucite International Alpha BV	Netherlands		100
Perspex Distribution Limited	UK		100
Lucite International US Delaware Holdings LLC	USA		100
Lucite International US Group Holdings LLC	USA		100
Lucite International US Investment Holdings LLC	USA		100
Lucite International US Investment Limited	UK		100
Lucite International (Shanghai) Trading Co Limited	China		100
Lucite International Singapore Pte Limited	Singapore		100

27 CONTROLLING PARTIES

Refer to footnote 27 of the financial statements of Lucite International Group Holdings Limited.

F-97

{ }		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
{X}		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
OR
{ }		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
{ }		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Title of each class	Name of exchange on which registered
NONE	N/A

Exhibit No.		Description of Exhibit

1.1		Memorandum and Articles of Association of Lucite International Group Holdings Limited. (1)
2.1		Indenture, dated May 4, 2000, among Lucite International Finance plc, the Company, Lucite International Investment Limited, Lucite International Holdings Limited and Lucite International Holdco Limited (collectively, the “Registrants”) and The Bank of New York, as trustee. (2)
2.2		Credit Facilities, dated October 3, 1999, as amended at December 13, 2002, among Lucite International Limited, Deutsche Bank AG London and Merrill Lynch International. (3)
2.3		Inter-creditor Deed, dated November 2, 1999, among Lucite International Limited, Lucite International Finance plc, Lucite International Finco Limited, Deutsche Bank AG, Merrill Lynch International, the Original Bridge Lenders and the High Yield Trustee. (4)
2.4		Loan Agreement, dated October 21, 1999, between Lucite International Finco Limited and Lucite International Finance plc. (5)
2.5		Amendment Agreement, dated April 28, 2000, to Loan Agreement dated October 21, 1999, between Lucite International Finco Limited and Lucite International Finance plc. (6)
2.6		Indenture, dated June 25, 2003 among Lucite International Finance plc, Lucite International Group Holdings Limited, Lucite International Investment Limited, Lucite International Holdings Limited, Lucite International Holdco Limited and The Bank of New York. (7)
8.1		List of subsidiaries of Lucite International Group Holdings Limited. (8)
12.1		Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a). (9)
12.2		Certification by the Chief Financial Officer pursuant to Rule 13a -14(a) or Rule 15d-14(a). (9)

LUCITE INTERNATIONAL GROUP HOLDINGS LIMITED
Report of independent registered public accounting firm		F-2
Consolidated profit and loss accounts for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-3
Consolidated statements of total recognised gains and losses for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-4
Consolidated balance sheets as at December 31, 2005 and 2004.		F-5
Consolidated cash flow statements for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-6
Reconciliation of movements in equity shareholders’ funds for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-7
Notes to the consolidated financial statements.		F-8
LUCITE INTERNATIONAL HOLDINGS LIMITED
Report of independent registered public accounting firm.		F-66
Consolidated profit and loss accounts for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-67
Consolidated statements of total recognised gains and losses for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-68
Consolidated balance sheets as at December 31, 2005 and 2004.		F-69
Consolidated cash flow statements for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-70
Reconciliation of movements in equity shareholders’ funds for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-71
Notes to the consolidated financial statements.		F-72
LUCITE INTERNATIONAL HOLDCO LIMITED
Report of independent registered public accounting firm.		F-74
Consolidated profit and loss accounts for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-75
Consolidated statements of total recognised gains and losses for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-76
Consolidated balance sheets as at December 31, 2005 and 2004.		F-77
Consolidated cash flow statements for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-78
Reconciliation of movements in equity shareholders’ funds for the year ended December 31, 2005, the year ended December 31, 2004, and the year ended December 31, 2003.		F-79
Notes to the consolidated financial statements.		F-80

		PAGE
PRESENTATION OF INFORMATION		4
PART I
ITEM 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	6
ITEM 2	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3	KEY INFORMATION	6
A.	SELECTED FINANCIAL DATA	6
B.	CAPITALISATION AND INDEBTEDNESS	7
C.	REASONS FOR THE OFFER AND USE OF PROCEEDS	7
D.	RISK FACTORS	8
ITEM 4	INFORMATION ON THE COMPANY	12
A.	HISTORY AND DEVELOPMENT OF THE COMPANY	12
B.	BUSINESS OVERVIEW	13
C.	ORGANISATIONAL STRUCTURE	19
D.	PROPERTY, PLANTS AND EQUIPMENT	20
ITEM 4A	UNRESOLVED STAFF COMMENTS	20
ITEM 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	21
A.	OPERATING RESULTS	26
B.	LIQUIDITY AND CAPITAL RESOURCES	31
C.	RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.	33
D.	TREND INFORMATION	34
E.	OFF-BALANCE SHEET ARRANGEMENTS	34
F.	TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS	35
G.	SAFE HARBOUR	35
ITEM 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	35
A.	DIRECTORS AND SENIOR MANAGEMENT	35
B.	COMPENSATION	36
C.	BOARD PRACTICES	36
D.	EMPLOYEES	38
E.	SHARE OWNERSHIP	38
ITEM 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	40
A.	MAJOR SHAREHOLDERS	40
B.	RELATED PARTY TRANSACTIONS	40
C.	INTERESTS OF EXPERTS AND COUNSEL	41

		PAGE
ITEM 8	FINANCIAL INFORMATION	41
A.	CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION	41
B.	SIGNIFICANT CHANGES	42
ITEM 9	THE OFFER AND LISTING	42
A.	OFFER AND LISTING DETAILS	42
B.	PLAN OF DISTRIBUTION	42
C.	MARKETS	42
D.	SELLING SHAREHOLDERS	42
E.	DILUTION	42
F.	EXPENSES OF THE ISSUE	42
ITEM 10	ADDITIONAL INFORMATION	42
A.	SHARE CAPITAL	42
B.	MEMORANDUM AND ARTICLES OF ASSOCIATION	42
C.	MATERIAL CONTRACTS	43
D.	EXCHANGE CONTROLS	43
E.	TAXATION	43
F.	DIVIDENDS AND PAYING AGENTS	48
G.	STATEMENT BY EXPERTS	48
H.	DOCUMENTS ON DISPLAY	48
I.	SUBSIDIARY INFORMATION	48
ITEM 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	49
ITEM 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	50
PART II
ITEM 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	50
ITEM 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	50
ITEM 15	CONTROLS AND PROCEDURES	51
ITEM 16	{RESERVED}	51
ITEM 16A	AUDIT COMMITTEE FINANCIAL EXPERT	51
ITEM 16B	CODE OF ETHICS	51
ITEM 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES	51
ITEM 16D	EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES	52
ITEM 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	52
PART III
ITEM 17	FINANCIAL STATEMENTS	52
ITEM 18	FINANCIAL STATEMENTS	52
ITEM 19	EXHIBITS	52

	Share capital		Profit and loss account			Total
	£’m		£’m			£’m
			as restated
Balance at December 31, 2002		175		(45	)		130
Prior year adjustment for FRS17 “Retirement benefits”		—		(47	)		(47	)
Balance at December 31, 2002 as restated		175		(92	)		83
Profit for the financial year		—		23			23
Actuarial losses recognised in the pension schemes		—		(13	)		(13	)
Currency translation adjustment		—		(17	)		(17	)
Balance at December 31, 2003 as restated		175		(99	)		76
Profit for the financial year		—		35			35
Actuarial losses recognised in the pension schemes		—		(9	)		(9	)
Currency translation adjustment		—		(7	)		(7	)
Balance at December 31, 2004 as restated		175		(80	)		95
Profit for the financial year		—		20			20
Actuarial losses recognised in the pension schemes		—		(5	)		(5	)
Currency translation adjustment		—		21			21
Balance at December 31, 2005		175		(44	)		131

Number

Ordinary shares of £1 each

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