Edgar Filing: LUBRIZOL CORP

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-115662

PROSPECTUS SUPPLEMENT

(TO PROSPECTUS DATED AUGUST 27, 2004)

[LUBRIZOL LOGO]

THE LUBRIZOL CORPORATION

13,400,000 COMMON SHARES

$33.25 PER SHARE
------------------
We are selling 13,400,000 of our common shares. We have granted the
underwriter an option to purchase up to an additional 2,010,000 of our common
shares to cover over-allotments.

Our common shares are listed for trading on the New York Stock Exchange
under the symbol "LZ." The last reported sale price of our common shares on the
NYSE on September 22, 2004 was $33.71 per share.

Concurrently with this offering, we are also conducting a separate public
offering of $1,150 million aggregate principal amount of senior unsecured notes
and debentures with various maturities. Neither the completion of the debt
offering nor the completion of this common share offering is contingent upon the
other.
------------------

INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-10.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
------------------

PER SHARE TOTAL
--------- ------------

Public offering price $33.25 $445,550,000
Underwriting discount $ 1.33 $ 17,822,000
Proceeds to us (before expenses) $31.92 $427,728,000

The underwriters expect to deliver the common shares to purchasers on or
about September 28, 2004.
------------------
CITIGROUP

KEYBANC CAPITAL MARKETS
ABN AMRO ROTHSCHILD LLC DEUTSCHE BANK SECURITIES
September 22, 2004

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT
INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE UNDERWRITERS ARE
NOT, MAKING AN OFFER OF OUR COMMON SHARES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT COVER PAGE OF THOSE DOCUMENTS.

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

About this Prospectus Supplement and the Accompanying
Prospectus................................................ S-ii
Non-GAAP Financial Measures................................. S-ii
Pro Forma Financial Information............................. S-ii
Summary..................................................... S-1
Risk Factors................................................ S-10
Use of Proceeds............................................. S-18
Market Price of Common Shares and Dividend Policy........... S-19
Capitalization.............................................. S-20
Selected Historical Consolidated Financial Data of
Lubrizol.................................................. S-22
Selected Historical Consolidated Financial Data of Noveon
International............................................. S-24
Unaudited Pro Forma Consolidated Financial Information...... S-26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-33
Business.................................................... S-67
Management.................................................. S-89
Description of Common Shares................................ S-92
Material United States Federal Tax Consequences for Non-U.S.
Holders of Our Common Shares.............................. S-93
Underwriting................................................ S-96

PROSPECTUS

About this Prospectus....................................... 1
About The Lubrizol Corporation.............................. 1
Where You Can Find More Information......................... 1
Forward-Looking Statements.................................. 2
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Common Shares................................ 4
Description of Debt Securities.............................. 6
Plan of Distribution........................................ 22
Legal Matters............................................... 25
Experts..................................................... 25

S-i

ABOUT THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS

Our disclosure document consists of two parts. The first part is this
prospectus supplement, which describes this offering and certain other matters
relating to us and our business. The second part, the accompanying prospectus,
gives more general information about securities we may offer from time to time,
some of which may not apply to the common shares being offered in this offering.

If the description of the common shares varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.

NON-GAAP FINANCIAL MEASURES

EBITDA presented in this prospectus supplement is a supplemental measure of
performance that is not required by, or presented in accordance with, accounting
principles generally accepted in the United States of America, or GAAP. See
footnote 5 in the section of this prospectus supplement titled "Summary
Historical and Pro Forma Consolidated Financial and Other Data" for the
definition of EBITDA and related disclosure.

EBITDA has limitations as an analytical tool, and you should not consider
it in isolation, or as a substitute for analysis of our financial results
prepared in accordance with GAAP. Some of these limitations are:

- EBITDA does not reflect our cash expenditures, future requirements for
capital expenditures or contractual commitments;

- EBITDA does not reflect changes in, or cash requirements for, our working
capital needs;

- EBITDA does not reflect the significant interest expense, or the cash
requirements necessary to make interest or principal payments, on our
debts;

- although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the
future, and EBITDA does not reflect any cash requirements for such
replacements;

- EBITDA does not reflect the impact of earnings or charges resulting from
matters we consider not to be indicative of our ongoing operations; and

- other companies in our industry may calculate EBITDA differently than we
do, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure
of discretionary cash available to us to invest in the growth of our business.
We compensate for these limitations by relying primarily on our GAAP results and
using EBITDA only supplementally.

PRO FORMA FINANCIAL INFORMATION

This prospectus supplement contains various references to pro forma
financial information. This pro forma financial information is included in, or
is derived from, the "Unaudited Pro Forma Consolidated Financial Information"
that has been prepared in conformity with Regulation S-X beginning on page S-26.
This unaudited pro forma financial information gives effect to the June 3, 2004
acquisition of Noveon International, Inc. (see page S-70 for a further
discussion of the acquisition) and the long-term financing thereof as if the
acquisition had occurred on January 1, 2003. Our second quarter 2004 Report on
Form 10-Q, incorporated by reference in the accompanying prospectus, also
includes pro forma financial information for the six months ended June 30, 2003
and 2004. The pro forma financial information in the Report on Form 10-Q,
prepared in accordance with GAAP, reflects the acquisition of Noveon
International as if the acquisition occurred at the beginning of each of the
six-month periods ended June 30, 2003 and 2004, which differs in presentation
from what is required under Regulation S-X in the preparation of the "Unaudited
Pro Forma Consolidated Financial Information" included herein. As a result of
these differences in pro forma basis of presentation, some acquisition-related
costs and financing costs, such as the write-off of in-process research and
development costs and the costs associated with the inventory purchase
accounting adjustment that is being charged to cost of sales, are recognized as
expense in the Report on Form 10-Q pro forma consolidated statements of income
for the six months ended June 30, 2003 and 2004. However, these costs are not
reflected in the pro forma consolidated statement of income for the six months
ended June 30, 2004 included in the "Unaudited Pro Forma Consolidated Financial
Information" herein, and instead are reflected only in the pro forma
consolidated statements of income for the 2003 periods presented in the
"Unaudited Pro Forma Consolidated Financial Information" herein.

S-ii

SUMMARY

This summary highlights certain information appearing elsewhere in this
prospectus supplement. This summary is not complete and does not contain all of
the information that you should consider before purchasing our common shares. We
encourage you to read the entire prospectus supplement and the accompanying
prospectus carefully, including the "Risk Factors" section, and the documents
incorporated by reference before making an investment decision. Unless the
context requires otherwise, references to "Lubrizol," "we," "us" and "our" refer
collectively to The Lubrizol Corporation and its consolidated subsidiaries,
including Noveon International, Inc., which we acquired on June 3, 2004.

ABOUT LUBRIZOL

OVERVIEW

We are a leading global producer and marketer of technologically advanced
chemicals and specialty materials for the transportation, consumer and
industrial markets. Our business is founded on technological leadership.
Innovation provides opportunities for us in growth markets as well as advantages
over our competitors. From a base of approximately 3,000 patents, we use our
product development and formulation expertise to sustain our leading market
positions and fuel our future growth. We create additives, ingredients, resins
and compounds that enhance the performance, quality and value of our customers'
products, while minimizing their environmental impact. Our products are used in
a broad range of applications, and are sold into stable markets such as those
for engine oils, specialty driveline lubricants and metalworking fluids, as well
as higher growth markets such as personal care and pharmaceutical products and
performance coatings and inks. Our specialty materials products are also used in
a variety of industries, including the telecommunications, construction,
footwear and automotive industries.

We are an industry leader in many of the markets in which our product lines
compete. We hold the #1 global position in the lubricant additives market. We
also produce products with well recognized brand names, such as Anglamol(R)
(gear oil additives), Carbopol(R) (acrylic thickeners for personal care
products), Estane(R) (thermoplastic polyurethane, or TPU), Hycar(R) (water-borne
acrylic emulsions for performance coatings) and TempRite(R) (chlorinated
polyvinyl chloride (CPVC) resins and compounds used in plumbing systems).

Our pro forma consolidated results for the year ended December 31, 2003
included net revenues of $3,182.2 million, net income of $52.5 million and
EBITDA of $433.6 million. Our pro forma consolidated results for the six months
ended June 30, 2004 included net revenues of $1,837.8 million, net income of
$79.9 million and EBITDA of $292.7 million, compared with net revenues of
$1,596.4 million, net income of $29.0 million and EBITDA of $234.8 million for
the six months ended June 30, 2003. See the section of this prospectus
supplement titled "Pro Forma Financial Information." We have generated
consistently strong cash flow from our diverse product lines, leading market
positions, disciplined capital expenditure programs and working capital
management. We believe our strong cash flow will enable us to maintain our
leading market positions and to invest in targeted growth strategies while
continuing to reduce indebtedness.

THE NOVEON INTERNATIONAL ACQUISITION

On June 3, 2004, we acquired Noveon International, a leading global
producer and marketer of technologically advanced specialty materials and
chemicals used in the industrial and consumer markets, for net cash of $794.8
million and assumed debt of $1,103.1 million. With the acquisition of Noveon
International, we have accelerated our program to attain a substantial presence
in the personal care and

S-1

coatings markets by adding a number of higher growth, industry-leading products
under highly recognizable brand names, including Carbopol(R) and Hycar(R), to
our already strong portfolio of lubricant and fuel additive products and
consumer product ingredients. Additionally, Noveon International has a number of
industry-leading specialty materials businesses, including TempRite(R) CPVC and
Estane(R) TPU, that generate strong cash flow. We believe that the Noveon
International acquisition meets the core tenets of our stated strategy to:

- maintain technology leadership;

- apply our formulation expertise to extend applications into new markets;
and

- expand the global breadth of our businesses.

OUR BUSINESS

LUBRICANT ADDITIVES. The lubricant additives segment is the leading global
supplier of additives for transportation and industrial lubricants. We pioneered
the development of lubricant additives over 75 years ago and continue to
maintain leadership in this $5.0 billion industry today. Our customers rely on
our products to reduce environmental impact and improve the performance and
lifespan of critical components, such as engines, transmissions and gear drives
for cars, trucks, buses, off-highway equipment, marine engines and industrial
applications. Our products serve to increase cost-effectiveness by reducing
friction and heat, resisting oxidation, minimizing deposit formation, and
preventing corrosion and wear. Through our in-house research, development and
testing programs, we have the capability to invent and develop a broad range of
proprietary chemical components, including antioxidants, anti-wear agents,
corrosion inhibitors, detergents, dispersants, friction modifiers and viscosity
modifiers. We have three primary product lines within the Lubrizol Additives
segment: Engine Additives, Specialty Driveline and Industrial Oil Additives, and
Services and Equipment.

In 2003, the Lubrizol Additives segment generated pro forma net revenues of
$1,796.7 million and pro forma segment operating income of $201.5 million. For
the six months ended June 30, 2004, the Lubrizol Additives segment generated pro
forma net revenues of $1,013.3 million and pro forma segment operating income of
$135.5 million, and for the six months ended June 30, 2003, the Lubrizol
Additives segment generated pro forma net revenues of $903.2 million and pro
forma segment operating income of $114.2 million. See the section of this
prospectus supplement titled "Pro Forma Financial Information."

SPECIALTY CHEMICALS. The specialty chemicals segment represents a diverse
portfolio of performance chemicals. We have three primary product lines within
our Noveon segment:

- Consumer Specialties. We are a global producer of specialty chemicals
targeting the personal care, pharmaceutical and food and beverage
industries and we are a provider of engineered adhesives, polymer
additives and specialty emulsifiers. Key products in this product line
include Carbopol(R) acrylic thickeners, film formers, fixatives,
emollients, silicones, botanicals, active pharmaceutical ingredients and
intermediates, benzoate preservatives, fragrances, synthetic food dyes,
natural

S-2

colorants, Hycar(R) reactive liquid polymers, rubber and lubricant
antioxidants, rubber accelerators and ADEX(TM) emulsifiers for mining
explosives.

- Performance Coatings. We are a leading supplier of specialty resins and
additives for the coatings and inks markets worldwide. We offer a wide
range of products for formulating paints, coatings and inks, such as
water-based polymer emulsions and dispersions, acrylic emulsions and
polyurethane dispersions, non-aqueous acrylic resins, high-performance
hyperdispersants, surface modifiers, rheology control additives, foam
control additives and other proprietary products.

- Specialty Materials. We are the largest global supplier of CPVC resins
and compounds, sold under the trademark TempRite(R). We are also a
leading producer of cross-linked polyethylene compounds (PEX) sold under
the trademark TempRite(R). Applications for TempRite(R) resins and
compounds include piping for residential and commercial plumbing and fire
sprinkler systems. In addition, we are a leading producer of TPU, sold
under the trademark Estane(R). Applications for Estane(R) TPU include
plastic film and sheet for various coatings processes.

In 2003, the Noveon segment generated pro forma net revenues of $1,385.5
million and pro forma segment operating income of $86.9 million. For the six
months ended June 30, 2004, the Noveon segment generated pro forma net revenues
of $824.5 million and pro forma segment operating income of $80.0 million, and
for the six months ended June 30, 2003, the Noveon segment generated pro forma
net revenues of $693.2 million and pro forma segment operating income of $45.7
million.

COMPETITIVE STRENGTHS

TECHNOLOGY LEADERSHIP. We pioneered the development of lubricant additives
over 75 years ago and continue to maintain technology leadership in the industry
today. Our extensive knowledge of surface-active chemistry is the primary
technology platform from which we drive innovation and new product development
in lubricant and fuel additives, as well as additives for coatings and
ingredients for personal care products. We believe that our expertise is
critical to meeting our customers' needs, sustaining our competitive advantages
and capitalizing on growth opportunities. Excluding acquisitions, in each of the
past five years, approximately 40% of sales were from products introduced within
the previous five years. The acquisition of Noveon International has further
complemented and enhanced our technological capabilities. We both share a strong
foundation in polymer chemistry. All our dispersants, which are our highest
volume class of additives, are polymers, as are most of our rheology control
agents. Our dispersant technology protects the surfaces of equipment by
suspending contaminant particles in fluids, and our rheology chemistry modifies
the viscosity, or flow characteristics, of a fluid. Noveon International's
expertise in polymer chemistry led to the invention of Carbopol(R), the world's
leading acrylic thickener. We employ more than 100 PhDs in our state-of-the-art
laboratories in North America, Europe and Asia, helping us to enhance our
leadership in our markets. Our commitment to technology is also demonstrated by
continued investment in research and development. For the year ended December
31, 2003, on a pro forma basis, we invested $211.7 million, or 6.7% of net
sales, in research, testing and development activities.

LEADING MARKET POSITIONS. We hold the #1 global position in the lubricant
additives market, which includes engine oils, specialty driveline lubricants and
industrial oil additives. Approximately 56% of our pro forma consolidated net
sales for the year ended December 31, 2003 were generated from sales into that
market. Additionally, other of our products that hold #1 or #2 global positions
include Carbopol(R) acrylic thickener, Estane(R) TPU, Lanco(R) coatings surface
modifiers, Solsperse(R) hyperdispersants, TempRite(R) CPVC and Hycar(R) reactive
liquid polymers. These other leading products represented approximately 17% of
our pro forma consolidated net sales for the year ended December 31, 2003. In
each of these product lines, we have developed formulation and production
advantages that have allowed us to sustain our market leadership.

S-3

meet their specific needs, often resulting in long-standing and loyal customer
relationships. For decades we have worked with many of our lubricant additive
customers on various joint technology development projects, such as customized
formulations for their premium product lines. In addition, many of our products
are specified in the formulations of original equipment manufacturers (OEMs) and
other of our customers, resulting in significant barriers to changing suppliers.
In our lubricant additives business, we work with OEMs to design
customer-specific additives for use with the manufacturers' equipment. For
example, we formulate complex additive packages for automatic transmission
fluids with automotive and transmission OEMs to optimize the performance of the
transmission. We also work with coatings producers to develop paints with unique
properties. Finally, our carbomer thickeners are specified for use in personal
care and pharmaceutical applications, and our FDA-approved polymers are
specified for use in food-packaging applications.

GLOBAL INFRASTRUCTURE. We develop, manufacture and sell our products
around the world. Our global infrastructure enables us to fulfill promptly the
procurement demands of our customers, who are increasingly demanding a
comprehensive supply solution to match their global operations. Over the last 75
years, we have made significant investments in our global operations that have
contributed to our market leadership position. Recently, we made investments in
emerging markets such as China and India that we expect will lead to further
growth opportunities in these markets. We believe our global presence moderates
the effects of a single region's economic cycles and gives us an advantage over
many competitors. For the six months ended June 30, 2004, 51% of our pro forma
consolidated net sales were originated in North America, 27% in Europe, 17% in
the Asia/Pacific region and the Middle East and 5% in Latin America.

EXPERIENCED MANAGEMENT TEAM. Our senior management team consists of
professionals with extensive experience in the specialty chemicals industry.
These managers have successfully operated our business during various industry
conditions and cycles and are continually focused on improving productivity,
maximizing operating efficiency and optimizing the use of our capital resources.
Management has demonstrated its ability to improve operating performance, reduce
the cost structure and maximize long-term profitability of acquired companies.

CORPORATE STRATEGY

Our corporate strategy is balanced between sustaining our market leadership
in mature markets, such as lubricant additives, and expanding our leadership in
higher growth markets, such as ingredients for personal care products. At the
core of our corporate strategy is our intention to continue to invest in
technology focused on identified market needs to create product differentiation
and sustainable competitive advantages.

STRENGTHEN TECHNOLOGY LEADERSHIP. We are committed to our internal
research and development as a means to strengthen our technology leadership and
to sustain and expand our product offerings. We believe technology leadership is
essential to sustaining our market leadership and profitability. We believe our
customers highly value our responsiveness to their needs, such as formulating
products that adhere to regulatory requirements and developing customized and
specialized products. For example, well in advance of its required introduction,
we met a significant technical challenge in formulating our products to meet the
North American passenger car motor oil standards for the 2005 model year. These
standards require improved control of emissions and greater fuel economy, and we
are achieving higher prices with our new formulations. We have also developed a
new resin with unique adhesion properties for difficult-to-coat surfaces. This
resin is the key component in a paint formulation that has been successfully
commercialized by a major global coating producer.

APPLY OUR FORMULATION EXPERTISE TO EXTEND OUR TECHNOLOGY INTO NEW
APPLICATIONS. We intend to utilize our technological expertise to modify
existing products continuously to broaden their usage. For example, we modified
a dispersant originally used to lighten the color and improve the clarity in
motor oils for use as an emulsifier providing stability in the formulation of
skin creams and sunscreens. We modified another of our products, which was
originally used as a motor oil detergent in the 1960s, for use in the automotive
rustproofing market. Then, as the rustproofing market declined in the 1980s, we
developed a modified component of this automotive undercoating for use as a
"no-drip" thickener for industrial coatings. More recently, we developed a clear
version of this thickener to be used for architectural coatings.

S-4

EXPAND THE GLOBAL BREADTH OF OUR BUSINESS. We will continue to serve our
existing multinational customers as they penetrate emerging markets, and will
also pursue new customers in those regions. We selectively add sales, marketing
and research and development personnel in targeted regions and follow with
further infrastructure expansion as the markets for our customers' products
develop. We are focused specifically on expanding our business in the
Asia/Pacific region, in particular China. For example, in our lubricant
additives business, we have a joint venture with PetroChina to serve the local
market for engine oils. Additionally, we have begun to build our commercial and
technical sales presence in China for our products outside of the joint venture,
such as our industrial lubricant additives, coating additives, personal care
ingredients and specialty materials products. Our focus on the region has
generated higher sales. In the first half of 2004, our total pro forma
consolidated net sales in the Asia/Pacific region increased 21% over the first
half of 2003.

PURSUE PRODUCTIVITY EFFICIENCIES. We continually seek ways to increase our
productivity by pursuing operational efficiencies, reducing our fixed cost
structure, rationalizing capacity and efficiently managing capital spending. For
example, in lubricant additives, we implemented a program in 2003 to achieve a
more competitive cost structure that resulted in annual savings of approximately
$20.0 million. Excluding acquisitions, since 1996 we have reduced the number of
production units by 23%, formulating components by 37% and manufacturing
headcount by 29%, while shipment volume has increased by 18%. For the businesses
we acquire, we look to eliminate duplicative costs and realize synergies. Within
a month following the Noveon International acquisition, we announced workforce
reductions that are estimated to achieve $16.0 million in annual cost savings.

OPTIMIZE OUR BUSINESS PORTFOLIO. We will continue to make decisions on
capital allocation, acquisitions and divestitures based on growth and
profitability targets. Since 2000, we have completed nine acquisitions,
including our acquisition of Noveon International, which expanded our business
portfolio into higher growth markets. We expect to continue to improve our
portfolio mix by allocating more resources to higher growth product lines and
seeking to make selective, accretive acquisitions of assets and technology that
focus on value-added applications and complement our current product offerings
and capabilities. At the same time, we will continue to support our lubricant
additives business by emphasizing market leadership, a competitive cost
structure and free cash flow generation. Finally, we will divest underperforming
or non-strategic businesses in order to optimize our portfolio and improve our
profitability and financial flexibility. We have identified possible divestiture
candidates with aggregate annual revenues of $300.0 to $500.0 million.

RECENT DEVELOPMENTS

In a press release dated August 30, 2004, we, among other things, affirmed
our prior 2004 consolidated after-tax net income guidance originally given in
July 2004. We also announced that we now believe, due to recent raw material
price increases, that the contribution to net income from our specialty
chemicals segment will be less than previously expected, offset by a higher than
expected contribution from our lubricant additives segment.

S-5

THE OFFERING

Common shares offered......... 13,400,000 shares

Common shares to be
outstanding after the
offering...................... 65,370,580 shares

NYSE symbol................... "LZ"

Use of proceeds............... We expect to use the net proceeds of this
offering and the concurrent debt securities
offering to retire approximately $2.0 billion
of the indebtedness incurred by us under a
temporary bridge facility in connection with
our acquisition of Noveon International, to pay
fees and expenses of the offerings and for
general corporate purposes. Neither the
completion of this offering nor the completion
of the debt securities offering is contingent
upon the other. See the section of this
prospectus supplement titled "Use of Proceeds."

Dividend policy............... We have paid a quarterly dividend of $0.26 per
common share for each of the last 27 quarters.
We expect to maintain a quarterly dividend of
$0.26 per common share. However, our board of
directors may decide to change our dividend in
the future.

Risk factors.................. See the section of this prospectus supplement
titled "Risk Factors" beginning on page S-10
and the other information included or
incorporated by reference in this prospectus
supplement and the accompanying prospectus for
a discussion of factors that you should
consider carefully before deciding to invest in
our common shares.

The information set forth above is based on the number of our common shares
outstanding as of September 22, 2004. This information excludes 2,010,000 of our
common shares to be sold by us if the underwriters exercise their over-allotment
option in full. This information also excludes 5,231,965 of our common shares
that are issuable upon the exercise of currently outstanding options with
exercise prices ranging from $21.34 to $38.25, of which 4,319,530 are currently
exercisable as of August 31, 2004.

Unless otherwise indicated, all information in this prospectus supplement
assumes that the underwriters do not exercise their over-allotment option to
purchase up to 2,010,000 additional common shares from us.

S-6

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA

The following table presents summary financial and other data of Lubrizol
and its subsidiaries as of the dates and for the periods indicated. The data as
of and for the years ended December 31, 1999, 2000, 2001, 2002 and 2003 have
been derived from the audited consolidated financial statements of Lubrizol and
its subsidiaries as of and for the fiscal years ended December 31, 1999, 2000,
2001, 2002 and 2003. The data as of and for the six months ended June 30, 2003
and 2004 have been derived from the unaudited interim consolidated financial
statements of Lubrizol and its subsidiaries as of and for the six months ended
June 30, 2003 and 2004. In the opinion of management, the unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations, financial position and cash flows. The results for the six months
ended June 30, 2004 are not necessarily indicative of the results that may be
expected for the entire year.

The following table also sets forth summary pro forma consolidated data for
Lubrizol for the year ended December 31, 2003 and the six months ended June 30,
2003 and 2004. The pro forma statement of operations data give effect to the
acquisition of Noveon International that occurred on June 3, 2004 and related
financing activities as if such transactions had been consummated on January 1,
2003 and the acquisition was accounted for as a purchase. The pro forma
financial information is not necessarily indicative of either future results of
operations or the results that might have occurred if the foregoing transactions
had been consummated on the dates indicated above. We cannot assure you that
assumptions used in the preparation of the pro forma financial data will prove
to be correct.

You should read the summary financial and other data set forth below along
with the sections in this prospectus supplement titled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Selected
Historical Consolidated Financial Data of Lubrizol," "Unaudited Pro Forma
Consolidated Financial Information" and the consolidated financial statements of
Lubrizol and Noveon International and related notes incorporated by reference in
the accompanying prospectus.

HISTORICAL
------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -----------------------
1999 2000 2001 2002 2003 2003 2004
-------- -------- -------- -------- -------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

OPERATING RESULTS:
Revenues.................... $1,780.3 $1,775.8 $1,844.6 $1,983.9 $2,052.1 $1,022.9 $ 1,300.2
Cost of sales............... 1,227.3 1,278.2 1,335.5 1,416.3 1,507.8 740.9 955.8
Selling and administrative
expenses................... 181.2 168.0 177.4 196.9 202.9 101.0 122.0
Research, testing and
development expenses....... 145.9 150.8 158.5 168.3 166.9 82.2 86.3
Amortization expense........ 11.4 12.8 14.1 4.2 4.9 2.3 6.4
Write-off of acquired
in-process research and
development................ - - - - - - 35.0
Restructuring charges
(credits).................. 19.6 (4.5) - - 22.5 7.0 8.0
Gain on litigation
settlements................ 17.6 19.4 - - - - -
Interest expense............ 29.7 26.9 25.0 23.3 25.1 12.1 24.3
Other income, net........... 12.6 7.3 5.8 5.5 7.1 4.1 4.3
Provision for income
taxes...................... 72.4 52.3 45.8 54.1 38.3 26.1 25.2
Income before cumulative
effect of change in
accounting principle(1).... 123.0 118.0 94.1 126.3 90.8 55.4 41.5
Cumulative effect of change
in accounting
principle(2)............... - - - (7.8) - - -
Net income.................. 123.0 118.0 94.1 118.5 90.8 55.4 41.5
NET INCOME PER SHARE(2):
Net income per share........ $ 2.25 $ 2.22 $ 1.84 $ 2.30 $ 1.76 $ 1.07 $ 0.80
Net income per share,
diluted.................... $ 2.25 $ 2.22 $ 1.83 $ 2.29 $ 1.75 $ 1.07 $ 0.80

PRO FORMA
--------------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------------
2003 2003 2004
------------ ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

OPERATING RESULTS:
Revenues.................... $3,182.2 $1,596.4 $ 1,837.8
Cost of sales............... 2,343.3 1,167.8 1,335.5
Selling and administrative
expenses................... 338.1 167.4 184.1
Research, testing and
development expenses....... 211.7 103.7 107.0
Amortization expense........ 33.6 16.7 18.3
Write-off of acquired
in-process research and
development................ 35.0 35.0 -
Restructuring charges
(credits).................. 35.7 10.0 11.3
Gain on litigation
settlements................ - - -
Interest expense............ 115.9 57.4 59.0
Other income, net........... 8.5 4.7 5.3
Provision for income
taxes...................... 24.4 13.6 48.0
Income before cumulative
effect of change in
accounting principle(1).... 53.0 29.5 79.9
Cumulative effect of change
in accounting
principle(2)............... (0.5) (0.5) -
Net income.................. 52.5 29.0 79.9
NET INCOME PER SHARE(2):
Net income per share........ $ 0.81 $ 0.45 $ 1.23
Net income per share,
diluted.................... $ 0.80 $ 0.44 $ 1.22

S-7

BALANCE SHEET DATA (AT YEAR
END/QUARTER END):
Total assets................ $1,682.4 $1,659.5 $1,662.3 $1,860.1 $1,942.3 $1,908.1 $ 4,427.3
Total debt.................. 403.0 395.9 397.2 401.9 389.6 396.2 2,380.3(3)
Total shareholders'
equity..................... 790.1 752.3 773.2 869.3 953.3 933.1 974.1(3)
OTHER DATA:
Net cash provided (used) by:
Operating activities....... $ 289.0 $ 226.2 $ 195.8 $ 244.9 $ 194.8 $ 44.5 $ 96.2
Investing activities....... (64.5) (125.2) (81.6) (148.5) (155.9) (36.5) (1,002.9)
Financing activities....... (87.2) (136.9) (68.7) (30.4) (59.5) (29.0) 868.9
Capital expenditures........ 64.9 85.8 66.3 65.3 88.5 36.8 42.2
Depreciation expense........ 88.3 88.0 84.7 91.6 95.5 46.5 54.5
Amortization expense........ 11.4 12.8 14.1 4.2 4.9 2.3 6.4
Write-off of acquired
in-process research and
development................ - - - - - - 35.0
Ratio of earnings to fixed
charges(4)................. 7.71x 7.66x 6.97x 9.29x 6.19x 7.73x 3.73x
EBITDA(5)................... $ 324.8 $ 298.0 $ 263.7 $ 291.7 $ 254.6 $ 142.4 $ 186.9

BALANCE SHEET DATA (AT YEAR
END/QUARTER END):
Total assets................ n/a n/a n/a
Total debt.................. n/a n/a n/a
Total shareholders'
equity..................... n/a n/a n/a
OTHER DATA:
Net cash provided (used) by:
Operating activities....... n/a n/a n/a
Investing activities....... n/a n/a n/a
Financing activities....... n/a n/a n/a
Capital expenditures........ 145.1 66.4 65.2
Depreciation expense........ 172.2 83.1 87.5
Amortization expense........ 33.6 16.7 18.3
Write-off of acquired
in-process research and
development................ 35.0 35.0 -
Ratio of earnings to fixed
charges(4)................. 1.68x 1.75x 3.15x
EBITDA(5)................... $ 433.6 $ 234.8 $ 292.7

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

(1) The following table summarizes key data that reconciles segment operating
income to income before cumulative effect of change in accounting principle.
See the section of this prospectus supplement titled "Pro Forma Financial
Information."

HISTORICAL PRO FORMA
---------------------------------------------- --------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED JUNE 30,
-------------------------- ---------------- DECEMBER 31, ----------------
2001 2002 2003 2003 2004 2003 2003 2004
------ ------ ------ ------ ------ ------------ ------ ------
(DOLLARS IN MILLIONS)

Lubricant additives segment
operating income.............. $205.1 $235.2 $201.5 $114.2 $135.5 $201.5 $114.2 $135.5
Specialty chemicals segment
operating income (loss)....... (11.3) 0.4 0.9 1.4 16.4 86.9 45.7 80.0
Corporate expenses.............. (32.2) (36.4) (33.7) (20.4) (21.6) (33.7) (20.4) (21.6)
Corporate other income
(expense)..................... (3.4) (2.2) 4.2 3.3 1.8 4.2 3.3 1.8
Write-off of acquired in-process
research and development...... - - - - (35.0) (35.0) (35.0) -
Restructuring charges........... - - (22.5) (7.0) (8.0) (35.7) (10.0) (11.3)
Interest expense -- net......... (18.3) (16.6) (21.3) (10.0) (22.4) (110.8) (54.7) (56.5)
Provision for income taxes...... (45.8) (54.1) (38.3) (26.1) (25.2) (24.4) (13.6) (48.0)
------ ------ ------ ------ ------ ------ ------ ------
Income before cumulative effect
of change in accounting
principle..................... $ 94.1 $126.3 $ 90.8 $ 55.4 $ 41.5 $ 53.0 $ 29.5 $ 79.9
====== ====== ====== ====== ====== ====== ====== ======

(2) For the year ended December 31, 2002, Lubrizol changed its method of
accounting for goodwill and other intangible assets to conform to Statement
of Financial Accounting Standards ("SFAS") No. 142. A charge of $7.8
million, or $0.15 per share, was recognized as the cumulative effect of the
change in accounting principle. Effective January 1, 2003, Noveon
International changed its method of accounting for asset retirement
obligations to conform to SFAS No. 143. A charge of $0.5 million was
recognized as the cumulative effect of the change in accounting principle in
the pro forma results of operations.

(3) The following sets forth the June 30, 2004 consolidated balance sheet data
of Lubrizol, as adjusted to give effect to the proposed long-term financing
related to Lubrizol's June 3, 2004 acquisition of Noveon International as if
the long-term financing had occurred on June 30, 2004 (in millions).

Total debt, as adjusted..................................... $2,046.9
Total shareholders' equity, as adjusted..................... 1,386.1

For more information regarding our historical and as adjusted capitalization
following this offering and the concurrent debt securities offering, see
"Capitalization" beginning on page S-20.

S-8

(4) The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes (including distributed income of equity
investees) plus fixed charges (excluding capitalized interest expense) by
fixed charges. Fixed charges consist of interest expense on debt (including
amortization of debt issuance expense and capitalized interest).

(5) The following table sets forth the calculation of EBITDA, which represents
earnings before interest, taxes, depreciation and amortization. The
write-off of acquired in-process research and development is included in
amortization expense. We present EBITDA because it is a basis upon which our
management assesses financial performance and we consider it an important
supplemental measure of our performance and believe it is frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in our industry, many of which present EBITDA when
reporting their results. EBITDA is not a measurement of financial
performance under GAAP and should not be considered as an alternative to (1)
net income determined in accordance with GAAP or (2) operating cash flows
determined in accordance with GAAP. Our calculation of EBITDA may not be
comparable to the calculation of similarly titled measures reported by other
companies. See the section of this prospectus supplement titled "Non-GAAP
Financial Measures."

HISTORICAL PRO FORMA
-------------------------------------------------------------------- ------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED
------------------------------------------ ----------------------- DECEMBER 31,
1999 2000 2001 2002 2003 2003 2004 2003
------ ------ ------ ------ ------ ---------- ---------- ------------
(DOLLARS IN MILLIONS)

Net income........... $123.0 $118.0 $ 94.1 $118.5 $ 90.8 $ 55.4 $ 41.5 $ 52.5
Add:
Depreciation and
amortization..... 99.7 100.8 98.8 95.8 100.4 48.8 95.9 240.8
Interest expense... 29.7 26.9 25.0 23.3 25.1 12.1 24.3 115.9
Provision for
income taxes..... 72.4 52.3 45.8 54.1 38.3 26.1 25.2 24.4
------ ------ ------ ------ ------ ------ ------ ------
EBITDA............... $324.8 $298.0 $263.7 $291.7 $254.6 $142.4 $186.9 $433.6
====== ====== ====== ====== ====== ====== ====== ======

PRO FORMA
--------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------------
2003 2004
------------- ----------
(DOLLARS IN MILLIONS)

Net income........... $ 29.0 $ 79.9
Add:
Depreciation and
amortization..... 134.8 105.8
Interest expense... 57.4 59.0
Provision for
income taxes..... 13.6 48.0
------ ------
EBITDA............... $234.8 $292.7
====== ======

S-9

RISK FACTORS

You should carefully consider the risks described below and the other
information included in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference in the accompanying prospectus
before investing in our common shares. If any of the events contemplated by the
following discussion of risks should occur, our business, results of operations
and financial condition could suffer significantly. The risks described below
are not the only risks that we face. Additional risks not currently known to us
or that we currently deem immaterial may also impair our business.

FINANCIAL RISKS

AS A RESULT OF OUR ACQUISITION OF NOVEON INTERNATIONAL, WE HAVE A SIGNIFICANT
AMOUNT OF INDEBTEDNESS, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
AND LIMIT OUR ABILITY TO GROW AND COMPETE SUCCESSFULLY IN OUR MARKETS.

As a result of our acquisition of Noveon International, we have a
significant amount of indebtedness. On an as-adjusted basis, as of June 30,
2004, after giving effect to this offering, the concurrent offering of debt
securities and our expected use of the net proceeds from the offerings as
described in "Use of Proceeds," we will have $2,046.9 million of outstanding
indebtedness. In addition, we and our subsidiaries could incur substantial
additional indebtedness in the future. Our level of indebtedness could have
important consequences for our shareholders. For example, it:

- will require us to dedicate a significant portion of our cash flow to
make interest and principal payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital,
capital expenditures, acquisitions or other general corporate purposes;

- may reduce our cash flow due to increased interest expense in times of
rising interest rates;

- may limit our ability to borrow additional funds due to the restrictive
covenants contained in our credit facilities;

- may limit our flexibility to adjust to changing business and market
conditions and make us more vulnerable to a downturn in general economic
conditions;

- may make us less attractive to potential acquirors; and

- may put us at a competitive disadvantage relative to competitors that
have less debt.

Any of the foregoing consequences could have a material adverse effect on
our future results of operations.

A PORTION OF OUR INDEBTEDNESS CONSISTS OF BRIDGE FINANCING THAT IS DUE AND
PAYABLE ON MAY 27, 2005. IF WE ARE UNABLE TO REFINANCE THIS INDEBTEDNESS, IT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION.

Of our total indebtedness outstanding on June 30, 2004, $1,797.0 million
consists of bridge financing that is due and payable on May 27, 2005. Our
ability to pay the principal of and interest on our bridge financing when it
comes due will depend on our ability to successfully complete this offering and
the concurrent offering of debt securities on terms that are satisfactory to us.
If, however, we do not complete these equity and debt offerings on a timely
basis, we may be required to seek additional financing or sell equity or debt
securities on terms that may not be favorable to us. No assurance can be given
that any refinancing, additional borrowing or sale of equity or debt securities
will be possible when needed or that we will be able to negotiate acceptable
terms. In addition, our access to capital is affected by prevailing conditions
in the financial and capital markets and other factors beyond our control. There
can be no assurance that market conditions will be favorable at the times that
we require new or additional financing.

S-10

THE LIMITS IMPOSED ON US BY THE RESTRICTIVE COVENANTS CONTAINED IN OUR CREDIT
FACILITY COULD PREVENT US FROM MAKING ACQUISITIONS OR CAPITAL IMPROVEMENTS OR
CAUSE US TO LOSE ACCESS TO THAT FACILITY.

Our existing credit facility contains restrictive covenants that limit our
ability to, among other things:

- borrow money or guarantee the debts of others;

- use assets as security in other transactions;

- make investments or other restricted payments or distributions;

- change our business or enter into new lines of business; or

- sell or acquire assets or merge with or into other companies.

In addition, our credit facility requires us to meet financial ratios,
including debt to consolidated EBITDA (as defined in the credit facility) and
consolidated EBITDA (as defined in the credit facility) to interest expense.
These restrictions could limit our ability to plan for or react to market
conditions or meet extraordinary capital needs and could otherwise restrict our
financing activities.

Our ability to comply with the covenants and other terms of our credit
facility will depend on our future operating performance. If we fail to comply
with such covenants and terms, we will be in default and the maturity of the
related debt could be accelerated and become immediately due and payable. We may
be required to obtain waivers from our lenders in order to maintain compliance
under our credit facility, including waivers with respect to our compliance with
certain financial covenants. If we are unable to obtain any necessary waivers
and the debt under our credit facility is accelerated, our financial condition
would be adversely affected.

WE MAY NOT HAVE ACCESS TO CAPITAL IN THE FUTURE.

We may need new or additional financing in the future to expand our
business or refinance existing indebtedness. If we are unable to access capital
on satisfactory terms and conditions, we may not be able to expand our business
or meet our payment requirements under our credit facilities. Our ability to
obtain new or additional financing will depend on a variety of factors, many of
which are beyond our control. We may not be able to obtain new or additional
financing because we have substantial debt or because we may not have sufficient
cash flow to service or repay our existing or future debt. In addition,
depending on market conditions and our financial performance, equity financing
may not be available to us on satisfactory terms or at all.

WE COULD BE ADVERSELY AFFECTED IF OUR DEBT IS DOWNGRADED.

We expect to issue debt securities in a concurrent offering to refinance a
portion of our outstanding indebtedness. Our ability to complete an offering of
debt securities on satisfactory terms will depend on the status of our credit
rating following the completion of this offering. The current rating of our
senior unsecured long-term indebtedness is BB+ by Standard & Poor's Ratings
Group ("S&P") and Baa3 by Moody's Investors Service, Inc. ("Moody's"). Either
S&P or Moody's or both may downgrade our credit rating at any time, which would
make it more difficult to complete the concurrent offering of debt securities on
satisfactory terms and would generally result in increased future borrowing
costs and adversely affect our access to capital.

RISKS RELATING TO OUR BUSINESS

WE MAY ENCOUNTER DIFFICULTIES IN THE INTEGRATION OF NOVEON INTERNATIONAL AND
THE OTHER BUSINESSES THAT WE AND NOVEON INTERNATIONAL HAVE RECENTLY ACQUIRED,
WHICH COULD DECREASE OUR FINANCIAL PERFORMANCE OR OUR ABILITY TO COMPETE
SUCCESSFULLY IN OUR MARKETS.

Integrating acquired businesses, and achieving the full benefit and
potential efficiencies from such acquisitions, requires substantial management,
financial and other resources and may pose several risks, some

S-11

or all of which could have a material adverse effect on our business, financial
condition or results of operations. These risks include:

- difficulties in assimilation of acquired personnel, operations and
technologies;

- the need to manage a significantly larger business with operations in
different locations around the world;

- diversion of management's attention from the ongoing development of our
existing businesses or other business concerns;

- potential loss of customers;

- failure to retain key personnel of the acquired business; and

- unforeseen operating difficulties and expenditures.

If we experience any of these difficulties in our integration of Noveon
International or any of the other businesses that we or Noveon International
have recently acquired, our financial performance and ability to compete
successfully in any of our markets could be adversely affected.

INCREASES IN RAW MATERIAL PRICES COULD REDUCE OUR PROFITABILITY AND REDUCTIONS
IN THE AVAILABILITY OF RAW MATERIAL SUPPLIES COULD DISRUPT OUR OPERATIONS.

Some of the raw materials that we use are derived from petrochemical-based
feedstocks, such as crude oil and natural gas, which have been subject to
historical periods of rapid and significant movements in price. For example, our
average unit raw material costs increased 2% in 2001, decreased 6% in 2002,
increased 9% in 2003 and increased 8% in the first half of 2004, excluding the
impact of acquisitions. These fluctuations in price could be aggravated by
political instability, terrorist attacks or other hostilities in oil-producing
countries or elsewhere in the world and supply and demand factors, including
OPEC production quotas and increased global demand for petroleum-based products.
We also use natural gas as fuel at our facilities, and increases in the price of
natural gas may reduce our profitability. Any significant variations in the cost
and availability of specialty and commodity materials or energy may negatively
affect our business, financial condition or results of operations. We typically
do not enter into hedging arrangements with respect to raw materials or energy,
other than for natural gas and electricity. We may pass changes in the prices of
raw materials to our customers from time to time. However, we cannot always do
so, and any limitation on our ability to pass through any price increases could
affect our financial performance.

We use significant quantities of a variety of specialty and commodity
chemicals in our manufacturing processes, such as lubricant base oils (a
derivative of crude oil); C4 feedstreams; acrylates; toluene; PVC; inorganic
acids, bases and oxides; alcohols, glycols and polyols; olefins and esters;
sulfonates; phenates; alkylates; sulfonic acids; and amines. These raw materials
are generally available from numerous independent suppliers. However, some of
our raw material needs are met by a sole supplier or only a few suppliers. If
any supplier that we rely on for raw materials ceases or limits production, we
may incur significant additional costs, including capital costs, in order to
find alternate, reliable raw material suppliers. We may also experience
significant production delays while locating new supply sources.

WE FACE COMPETITION FROM OTHER CHEMICAL COMPANIES, WHICH COULD ADVERSELY
AFFECT OUR REVENUE AND FINANCIAL CONDITION.

We actively compete with companies producing the same or similar products
and, in some instances, with companies producing different products designed for
the same uses. We encounter competition in price, delivery, service,
performance, product innovation and product recognition and quality, depending
on the product involved. For some of our products, our competitors are larger
and have greater financial resources and less debt than we do. As a result,
these competitors may be better able to withstand a change in conditions within
the industries in which we operate, a change in the prices of raw materials or a
change in the economy as a whole.

S-12

Our competitors can be expected to continue to develop and introduce new
and enhanced products, which could cause a decline in market acceptance of our
products. Current and future consolidation among our competitors and customers
may also cause a loss of market share as well as put downward pressure on
pricing. Additionally, a number of our niche product applications are customized
or sold for highly specialized uses. Our competitors could cause a reduction in
the prices for some of our products as a result of intensified price
competition. Competitive pressures can also result in the loss of major
customers. If we cannot compete successfully, our business, financial condition
and results of operations could be adversely affected.

FAILURE TO MAKE CONTINUED IMPROVEMENTS IN OUR TECHNOLOGY AND PRODUCTIVITY
COULD HURT OUR COMPETITIVE POSITION.

We believe that we must continue to enhance our existing products and
develop and manufacture new products with improved capabilities in order to
continue to be a market leader. We also believe that we must continue to make
improvements in our productivity in order to maintain our competitive position.
When we invest in new technologies, processes or production facilities, we face
risks related to construction delays, cost overruns and unanticipated technical
difficulties. Our inability to anticipate, respond to or utilize changing
technologies could have a material adverse effect on our business and our
results of operations.

SOME OF OUR CUSTOMERS' BUSINESSES ARE CYCLICAL AND DEMAND BY OUR CUSTOMERS FOR
OUR PRODUCTS WEAKENS DURING ECONOMIC DOWNTURNS.

A portion of our product sales is attributable to industries and markets,
such as the construction and metalworking industries, that historically have
been cyclical and sensitive to relative changes in supply and demand and general
economic conditions. The demand for our products depends, in part, on the
general economic conditions of the industries or national economies of our
customers. Downward economic cycles in our customers' industries or countries
may reduce sales of some of our products. It is not possible to predict
accurately the factors that will affect demand for our products in the future.
Any significant downturn in the health of the general economy, either globally
or regionally, or of the markets in which we sell products could have an adverse
effect on our revenues and financial performance.

WE FACE NUMEROUS RISKS RELATING TO OUR FOREIGN OPERATIONS, INCLUDING FOREIGN
CURRENCY EXCHANGE RATE FLUCTUATIONS, EXCHANGE CONTROLS AND CURRENCY
DEVALUATIONS THAT MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Approximately 37% of our pro forma consolidated revenues in 2003 was
generated in currencies other than the U.S. dollar, which is our reporting
currency. We recognize foreign currency transaction gains and losses arising
from our operations in the period incurred. As a result, currency fluctuations
between the U.S. dollar and the currencies in which we do business have caused
and will continue to cause foreign currency transaction gains and losses, which
have historically been material and could continue to be material. We cannot
predict the effects of exchange rate fluctuations upon our future operating
results because of the number of currencies involved, the variability of
currency exposures and the potential volatility of currency exchange rates. We
take actions to manage our foreign currency exposure, such as entering into
hedging transactions, where available, but we cannot assure you that our
strategies will adequately protect our consolidated operating results from the
effects of exchange rate fluctuations.

We also face risks arising from the imposition of exchange controls and
currency devaluations. Exchange controls may limit our ability to convert
foreign currencies into U.S. dollars or to remit dividends and other payments by
our foreign subsidiaries or businesses located in or conducted within a country
imposing controls. Currency devaluations result in a diminished value of funds
denominated in the currency of the country instituting the devaluation and, if
they occur or continue for significant periods, could adversely affect our
earnings or cash flow.

Certain of our non-U.S. subsidiaries and joint ventures may manufacture
goods destined for, or render services to, countries that are currently subject
to trade restrictions and economic embargoes that prohibit

S-13

U.S. incorporated entities, U.S. citizens and residents from engaging in
commercial, financial or trade transactions with such countries, unless
authorized by the Office of Foreign Assets Control or exempted by statute. If we
are not in compliance with such laws and regulations, we may be subject to
criminal and civil penalties, which may have an adverse effect on our business,
financial condition and results of operations.

INTERNATIONAL SOCIAL, POLITICAL AND ECONOMIC CONDITIONS MAY ADVERSELY AFFECT
OUR OPERATING PERFORMANCE.

Our international operations are subject to the risks of labor unrest,
regional economic uncertainty, political instability, terrorism, expropriation
of property, restrictions on the transfer of funds into or out of a country,
trade restrictions, export duties, taxes and quotas, domestic and foreign
customs and tariffs, and current and changing regulatory environments. Any of
these events could have an adverse effect on our international operations in the
future by reducing the demand for our products, increasing the prices at which
we can sell our products or otherwise having an adverse effect on our operating
performance.

OUR AND OUR SUPPLIERS' PRODUCTION FACILITIES ARE SUBJECT TO OPERATING RISKS
THAT MAY ADVERSELY AFFECT OUR OPERATIONS.

We are dependent upon the continued safe operation of our and our
suppliers' production facilities. These production facilities are subject to
hazards associated with the manufacture, handling, storage and transportation of
chemical materials and products, including leaks and ruptures, explosions,
fires, inclement weather and natural disasters, unscheduled downtime and
environmental hazards. Incidents at our or our suppliers' production facilities
could temporarily shut down or otherwise disrupt our manufacturing operations,
causing production delays and, with respect to our facilities, resulting in
liability for workplace injuries and fatalities. In addition, some of our and
our suppliers' production facilities are highly specialized, which limits our
ability to shift production to other facilities in the event of an incident at a
particular facility. If a production facility, or a critical portion of a
production facility, were temporarily shut down, we would likely incur higher
costs for alternate sources of supply for our products. Some of our products
involve the manufacture and/or handling of a variety of reactive, explosive and
flammable materials. Use of these products by our customers could also result in
liability if an explosion, fire, spill or other accident were to occur. We
cannot assure you that we will not experience these types of incidents in the
future or that these incidents will not result in production delays or otherwise
have a material adverse effect on our business, financial condition or results
of operations.

OUR PRODUCTION FACILITIES ARE OF THE TYPE THAT MAY ATTRACT TERRORIST ATTACKS,
AND ANY ATTACK MAY DISRUPT OUR OPERATIONS AND CAUSE US TO INCUR SIGNIFICANT
COSTS AND LIABILITIES.

Uncertainty surrounding the possibility and scope of terrorist attacks may
affect our operations in unpredictable ways, including the possibility that our
chemical production facilities may become direct targets, or indirect
casualties, of terrorist attacks. Although our production facilities are under a
heightened level of security, this level of security may be insufficient to
prevent a terrorist attack. The resulting damage may be severe and could include
loss of life and property damage. In addition, some of our production and other
facilities are located at sites near to other chemical plants that may be
potential targets of terrorist attacks. The resulting collateral damage may be
significant and substantial. Available insurance coverage may not be sufficient
to cover all of the damage incurred or may be prohibitively expensive.

CERTAIN OF OUR EMPLOYEES ARE COVERED BY COLLECTIVE BARGAINING AGREEMENTS, AND
THE FAILURE TO RENEW THESE AGREEMENTS COULD RESULT IN LABOR DISRUPTIONS AND
INCREASED LABOR COSTS.

Employees at seven of our U.S. sites, who constitute approximately 11% of
our domestic employees, are organized by labor unions that have collective
bargaining agreements with us that are subject to renegotiation. Four of the
agreements expire in 2004 and 2005. Although we believe that our present labor
relations are satisfactory, our failure to renew these agreements on reasonable
terms as the current agreements expire could result in labor disruptions and
increased labor costs, which could adversely affect our financial performance.

S-14

THE APPLICABILITY OF NUMEROUS ENVIRONMENTAL LAWS TO OUR MANUFACTURING
FACILITIES COULD CAUSE US TO INCUR MATERIAL COSTS AND LIABILITIES.

We are subject to extensive federal, state, local and foreign
environmental, safety and health laws and regulations concerning, among other
things, emissions to the air, discharges to land and water and the generation,
handling, treatment and disposal of hazardous waste and other materials. Under
certain environmental laws, we can be held strictly liable for hazardous
substance contamination of any real property we have ever owned, operated or
used as a disposal site or for natural resource damages associated with such
contamination. We are also required to maintain various environmental permits
and licenses, many of which require periodic modification and renewal. Our
operations entail the risk of violations of those laws and regulations, many of
which provide for substantial fines and criminal sanctions for violations. We
cannot assure you that we have been or will be at all times in compliance with
all of these requirements.

In addition, these requirements and their enforcement may become more
stringent in the future. Although we cannot predict the ultimate cost of
compliance with any such requirements, the costs could be material.
Non-compliance could subject us to material liabilities, such as government
fines, third-party lawsuits or the suspension of non-compliant operations. We
may also be required to make significant site or operational modifications at
substantial cost. Future developments could also restrict or eliminate the use
of or require us to make modifications to our products, which could have a
significant negative impact on our results of operations and cash flows.

At any given time, we are involved in claims, litigation, administrative
proceedings and investigations of various types in a number of jurisdictions
involving potential environmental liabilities, including clean-up costs
associated with hazardous waste disposal sites, natural resource damages,
property damages and personal injury. We cannot assure you that the resolution
of these environmental matters will not have a material adverse effect on our
results of operations or cash flows.

The ultimate costs and timing of environmental liabilities are difficult to
predict. Liability under environmental laws relating to contaminated sites can
be imposed retroactively and on a joint and several basis. One liable party
could be held responsible for all costs at a site, regardless of fault,
percentage of contribution to the site or the legality of the original disposal.
We may also face liability with respect to acquired businesses for violations
under environmental laws occurring prior to the date of our acquisition, and
some or all of these liabilities may not be covered by indemnification from the
sellers from which we acquired these businesses. We could incur significant
costs, including cleanup costs, natural resources damages, civil or criminal
fines and sanctions and third-party claims, as a result of past or future
violations of, or liabilities under, environmental laws.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR PRODUCT
SALES AND FINANCIAL PERFORMANCE COULD BE ADVERSELY AFFECTED.

We rely on a combination of patent, trade secret, copyright and trademark
law, nondisclosure agreements and technical security measures to protect our
intellectual property rights in our various lines of business. Our performance
may depend in part on our ability to establish, protect and enforce intellectual
property rights with respect to our patented technologies and proprietary rights
and to defend against any claims of infringement, which involves complex legal,
scientific and factual questions and uncertainties.

In the future, we may have to rely on litigation to enforce our
intellectual property rights and contractual rights. In addition, we may face
claims of infringement that could interfere with our ability to use technology
or other intellectual property rights that are material to our business
operations. If litigation that we initiate is unsuccessful, we may not be able
to protect the value of some of our intellectual property. In the event a claim
of infringement against us is successful, we may be required to pay royalties or
license fees to continue to use technology or other intellectual property rights
that we have been using or we may be unable to obtain necessary licenses from
third parties at a reasonable cost or within a reasonable time. If we are unable
to obtain licenses on reasonable terms, we may be forced to cease selling or
using any of our products that incorporate the challenged intellectual property,
or to redesign or, in the case of trademark claims, rename our products to avoid
infringing the intellectual property rights of third parties, which may not be
possible

S-15

and may be time-consuming if possible. Any litigation of this type, whether
successful or unsuccessful, could result in substantial costs to us and
diversions of some of our resources. Our intellectual property rights may not
have the value we believe them to have, which could result in a competitive
disadvantage or adversely affect our business and financial performance.

OUR HISTORICAL FINANCIAL INFORMATION MAY BE OF LIMITED RELEVANCE.

The historical financial information included or incorporated by reference
in this prospectus supplement or the accompanying prospectus does not give
effect to our acquisition of Noveon International and, therefore, will be of
limited relevance to an understanding of our future financial performance.

GOODWILL IMPAIRMENT MAY UNPREDICTABLY AFFECT OUR RESULTS OF OPERATIONS IN THE
FUTURE.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the rules, goodwill (and intangible
assets deemed to have indefinite lives) may no longer be amortized and is
subject to annual impairment tests in accordance with SFAS No. 142. Other
intangible assets continue to be amortized over their remaining useful lives. We
adopted SFAS No. 142 on January 1, 2002. During the second quarter of 2002, we
performed the required impairment tests of goodwill as of January 1, 2002 and
determined that we had goodwill impairment in the amount of $7.8 million. During
the fourth quarters of 2002 and 2003, we performed our annual impairment tests
of goodwill and determined that no additional goodwill impairment had occurred.

In connection with the acquisition of Noveon International, we recorded
goodwill in the amount of $738.7 million based on a preliminary allocation of
the purchase price. Future events could cause the impairment of the goodwill
associated with Noveon International or any other of our reporting units. Any
resulting impairment loss may have a material adverse impact on our results of
operations in any future period in which we record a charge.

RISKS RELATING TO THE OFFERING

THE PRICE OF OUR COMMON SHARES IS SUBJECT TO FLUCTUATION, SO YOU COULD LOSE A
SIGNIFICANT PART OR ALL OF YOUR INVESTMENT.

The trading price of our common shares has fluctuated in the past and will
fluctuate in the future. The stock market in general and the market for
companies with significant sales to clients in cyclical industries, such as the
chemical industry, have experienced volatility. Many factors contribute to this
volatility, including, but not limited to:

- variations in revenues and financial performance;

- perceptions about market conditions in the chemical industry; and

- market and general economic conditions.

This volatility may have a significant impact on the market price of our
common shares. Moreover, the possibility exists that the stock market could
experience price and volume fluctuations unrelated to our operating performance.
These fluctuations makes it difficult to ascribe a stable valuation to a
shareholder's holdings of our common shares, and may result in the loss of a
significant part or all of your investment.

THE MARKET PRICE OF OUR COMMON SHARES MAY BE ADVERSELY AFFECTED BY THE
ISSUANCE OF COMMON SHARES IN THIS OFFERING OR ANY FUTURE OFFERING THAT WE MAY
MAKE.

Our issuance of common shares in this offering or in connection with future
sales of substantial amounts of our common shares could adversely affect the
prevailing market prices of our common shares and could impair our ability to
raise capital through future equity sales. Upon completion of this offering, we
will have 65,370,580 common shares issued and outstanding (67,380,580 common
shares, if the underwriters exercise
S-16

their over-allotment option in full). All of the common shares sold in this
offering, and any shares issued upon exercise of the underwriters'
over-allotment option, will be freely tradeable without restriction under the
Securities Act of 1933, unless purchased by our affiliates.

OUR GOVERNING DOCUMENTS AND OHIO LAW CONTAIN PROVISIONS THAT COULD HINDER A
TAKEOVER OF US THAT IS NOT SUPPORTED BY OUR BOARD OF DIRECTORS.

Our governing documents and Ohio law contain a number of provisions that
may delay, deter or prevent a takeover attempt that shareholders might consider
desirable. For example, our Code of Regulations provides that our directors are
to be divided into three classes and elected to serve staggered three-year
terms. Under the Ohio General Corporation Law, if a corporation's board of
directors is divided into classes, then directors may be removed by the
shareholders only for cause. This structure could make it more difficult for
shareholders to replace our entire board in a single proxy contest. In addition,
our Amended Articles of Incorporation include provisions that require prior
shareholder approval for certain related-party transactions and for any
acquisition of shares in which a person or group acquires certain levels of our
voting power. We also have adopted a shareholder rights plan that will dilute
the stock ownership any person or group that acquires 20% or more of our
outstanding common shares. Some or all of these and other provisions of our
governing documents, Ohio law and our shareholder rights plan may have the
effect of delaying, hindering or preventing a change in control of us that is
not supported by our board of directors, including a change in control that
might result in the receipt by shareholders of a purchase price in excess of
then current market prices.

S-17

USE OF PROCEEDS

We estimate that the net proceeds of this offering will be approximately
$426.2 million ($490.4 million if the underwriters exercise their over-allotment
option in full), after deducting the underwriting discount and other expenses.
We expect to use the aggregate net proceeds of this offering and the concurrent
debt securities offering to retire a portion of the indebtedness incurred by us
under a temporary bridge facility in connection with our acquisition of Noveon
International, to pay related fees and expenses of the offerings and for general
corporate purposes. The following table illustrates how we intend to refinance
our outstanding indebtedness under the temporary bridge facility and our current
revolving credit facility.

SOURCES OF FUNDS
---------------------------------------------
USES OF FUNDS
---------------------------------------------

(DOLLARS IN MILLIONS)

Common shares offering(1).......... $ 445.6
Concurrent debt offering(2)........ 1,150.0
Bank term loan financing(3)........ 575.0
--------
Total.............................. $2,170.6
========
Temporary bridge facility(4)....... $1,972.0
Paydown revolving credit
facility(5)...................... 75.0
Fees and expenses(6)............... 48.0
Cash to Lubrizol(7)................ 75.6
--------
Total.............................. $2,170.6
========

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

(1) Assumes an offering price to the public of $33.25 per share. If the
underwriters exercise their over-allotment option in full, we estimate that
we will receive gross proceeds of approximately $512.4 million.

(2) Assumes $1,150.0 million aggregate principal amount of senior unsecured
notes and debentures are issued at par in the concurrent debt securities
offering.

(3) Represents the amount expected to be drawn on a $575.0 million term loan
facility bearing interest at LIBOR plus 1.25%. The loan is expected to be
due in quarterly installments through 2009.

(4) Includes outstanding amounts incurred under the temporary bridge facility to
finance initially our acquisition of Noveon International. As of September
22, 2004, the temporary bridge facility is outstanding in the amount of
$1,972.0 million and bears interest at LIBOR plus 1.25% (currently
approximately 3.08%). In July 2004, we repaid $186.4 million outstanding
principal amount, plus accrued interest of $8.7 million, under a note
payable assumed in connection with the Noveon International acquisition
using borrowings on the temporary bridge facility of $175.0 million and cash
of $20.1 million.

(5) Our current $350.0 million revolving credit facility is expected to be
replaced with a $500.0 million revolving credit facility in connection with
the receipt of long-term financing for the Noveon International acquisition.
All amounts outstanding under the current revolving credit facility are
expected to be repaid from the proceeds of the concurrent debt securities
offering.

(6) Includes anticipated fees and expenses related to this offering and the
concurrent debt securities offering.

(7) The cash to Lubrizol received in the offerings will be sufficient to satisfy
the liability associated with Treasury rate lock agreements. In June 2004,
we entered into several Treasury rate lock agreements with an aggregate
notional principal amount of $900.0 million, all maturing September 30,
2004, whereby we locked in Treasury rates relating to a portion of our
anticipated $1,150.0 million debt securities issuance. Our liability under
these contracts had a fair value of $12.2 million ($8.0 million net of tax)
as of June 30, 2004, and increased in fair value by $61.7 million ($40.1
million net of tax) through the date hereof as interest rates decreased.

S-18

MARKET PRICE OF COMMON SHARES AND DIVIDEND POLICY

Our common shares are listed for trading on the NYSE under the symbol "LZ."
The following table sets forth for the periods indicated the high and low sales
prices per common share as reported on the NYSE, as well as the dividends paid
per common share during each period.

HIGH LOW DIVIDEND
------ ------ --------

2002
First Quarter.......................................... $36.18 $31.75 $0.26
Second Quarter......................................... 36.36 32.26 0.26
Third Quarter.......................................... 33.55 27.01 0.26
Fourth Quarter......................................... 31.60 26.20 0.26
2003
First Quarter.......................................... $32.06 $26.54 $0.26
Second Quarter......................................... 32.46 29.50 0.26
Third Quarter.......................................... 34.40 30.50 0.26
Fourth Quarter......................................... 34.31 29.23 0.26
2004
First Quarter.......................................... $33.55 $29.44 $0.26
Second Quarter......................................... 36.81 30.67 0.26
Third Quarter (through September 22, 2004)............. 37.37 33.00 0.26

The closing sale price per common share on the NYSE on September 22, 2004
was $33.71. As of September 22, 2004, we have 51,970,580 common shares issued
and outstanding and 3,751 shareholders of record. This number excludes
beneficial owners of common shares held in street name. Based on requests from
brokers and other nominees, we estimate there are approximately 22,800
beneficial owners of our common shares.

We expect to maintain a quarterly dividend of $0.26 per common share. The
declaration and payment of future dividends by us will be at the discretion of
our board of directors and will depend on, among other things, general economic
and business conditions, our strategic plans, our financial results and
condition, contractual, legal and other restrictions on the payment of dividends
by us and our subsidiaries, and such other factors as our board of directors
considers to be relevant.

S-19

CAPITALIZATION

The following table sets forth our cash and short-term investments, total
debt and stockholders' equity as of June 30, 2004 on an historical basis and on
an as adjusted basis to give effect to:

- The repayment of a note in July 2004 that was assumed in the acquisition
of Noveon International from additional borrowings obtained under the
temporary bridge facility utilized to finance initially the acquisition.

- This offering and the use of the net proceeds to repay a portion of the
amount outstanding under the temporary bridge facility.

- The issuance of debt securities and borrowings under a term loan facility
that are expected to be used to repay the remaining amount outstanding
under the temporary bridge facility (including related accrued interest)
as well as the related costs of those transactions.

There can be no assurance that this offering, the concurrent debt
securities offering and the receipt of additional financing through the term
loan discussed above will be successful, or will occur in the amounts and under
the terms assumed in the following capitalization table, in which case our
actual capitalization may differ from the as adjusted amounts presented herein.
The information set forth below should be read in conjunction with the sections
of this prospectus supplement titled "Selected Historical Consolidated Financial
Data of Lubrizol," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Use of Proceeds," "Unaudited Pro Forma Consolidated
Financial Information" and our consolidated financial statements and related
notes incorporated by reference in the accompanying prospectus.

JUNE 30, 2004
----------------------------------------------------------------
AS ADJUSTED FOR
REPAYMENT OF AS ADJUSTED FOR
NOVEON NOTE AS ADJUSTED FOR EQUITY AND
HISTORICAL PAYABLE(1) EQUITY OFFERING DEBT OFFERINGS
---------- --------------- --------------- ---------------
(DOLLARS IN MILLIONS)

Cash and short-term
investments.................... $ 227.3 $ 207.2 $ 207.2 $ 282.8(7)
======== ======== ======== ========
Debt:
Short-term debt:
Temporary bridge facility...... $1,797.0 $1,972.0 $1,545.8 $ -
Noveon note payable............ 186.4 - - -
Term loan(2)................... - - - 57.5
Term loans -- yen
denominated................. 4.7 4.7 4.7 4.7
-------- -------- -------- --------
Total short-term debt....... 1,988.1 1,976.7 1,550.5 62.2
Long-term debt:
Revolver(3).................... 75.0 75.0 75.0 -
5.875% Notes due 2008.......... 200.0 200.0 200.0 200.0
Term loan(2)................... - - - 517.5
Notes due 2009(4).............. - - - 400.0
Notes due 2014(4).............. - - - 450.0
Debentures due 2034(4)......... - - - 300.0
7.25% Debentures due 2025...... 100.0 100.0 100.0 100.0
Other.......................... 17.2 17.2 17.2 17.2
-------- -------- -------- --------
Total long-term debt........ 392.2 392.2 392.2 1,984.7
-------- -------- -------- --------
Total debt....................... 2,380.3 2,368.9 1,942.7 2,046.9
Shareholders' equity:
Shareholders' equity(5)........ 974.1 974.1 1,400.3 1,400.3
Cost of temporary bridge
facility, net of the effect
of income taxes(6).......... - - (14.2) (14.2)
-------- -------- -------- --------
Total shareholders' equity....... 974.1 974.1 1,386.1 1,386.1
-------- -------- -------- --------
Total capitalization............. $3,354.4 $3,343.0 $3,328.8 $3,433.0
======== ======== ======== ========

S-20

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

(1) In July 2004, we repaid a Noveon International note payable in full for
$195.1 million (including accrued interest) by borrowing $175.0 million
under our temporary bridge facility and by using $20.1 million of cash on
hand.

(2) Represents the amount expected to be drawn on a $575.0 million term loan
facility. The loan is expected to be repaid in quarterly installments
through 2009.

(3) Our current $350.0 million revolving credit facility is expected to be
replaced with a $500.0 million revolving credit facility in connection with
the receipt of long-term financing for the Noveon International acquisition.
All amounts outstanding under the current revolving credit facility are
expected to be repaid from the proceeds of the concurrent debt securities
offering.

(4) Represents the anticipated issuance of senior unsecured notes and debentures
pursuant to the concurrent debt securities offering.

(5) The as adjusted amounts for the equity offering include the net proceeds
(net of approximately $19.3 million of estimated issuance costs) expected to
be received from the issuance of additional common shares of Lubrizol
pursuant to this offering.

(6) Represents the cost, net of income taxes, of a $2,450.0 million 364-day
temporary bridge facility bearing interest at LIBOR plus 1.25%. The
temporary bridge facility is expected to be replaced with the long-term
financing described previously.

S-21

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF LUBRIZOL

The following table presents selected historical financial and other data
of Lubrizol and its subsidiaries as of the dates and for the periods indicated.
The data as of and for the years ended December 31, 1999, 2000, 2001, 2002 and
2003 have been derived from the audited consolidated financial statements of
Lubrizol and its subsidiaries as of and for the fiscal years ended December 31,
1999, 2000, 2001, 2002 and 2003. The data as of and for the six months ended
June 30, 2003 and 2004 have been derived from the unaudited interim consolidated
financial statements of Lubrizol and its subsidiaries as of and for the six
months ended June 30, 2003 and 2004. In the opinion of management, the unaudited
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of operations, financial position and cash flows. The results for the six months
ended June 30, 2004 are not necessarily indicative of the results that may be
expected for the entire year.

You should read the summary financial and other data set forth below along
with the section in this prospectus supplement titled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements of Lubrizol and related notes incorporated by
reference in the accompanying prospectus.

HISTORICAL
---------------------------------------------------------------------------
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- --------------------
1999 2000 2001 2002 2003 2003 2004
-------- -------- -------- -------- -------- -------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

OPERATING RESULTS:
Revenues............................... $1,780.3 $1,775.8 $1,844.6 $1,983.9 $2,052.1 $1,022.9 $ 1,300.2
Cost of sales.......................... 1,227.3 1,278.2 1,335.5 1,416.3 1,507.8 740.9 955.8
Selling and administrative expenses.... 181.2 168.0 177.4 196.9 202.9 101.0 122.0
Research, testing and development
expenses............................. 145.9 150.8 158.5 168.3 166.9 82.2 86.3
Amortization expense................... 11.4 12.8 14.1 4.2 4.9 2.3 6.4
Write-off of acquired in-process
research and development............. - - - - - - 35.0
Restructuring charges (credits)........ 19.6 (4.5) - - 22.5 7.0 8.0
Gain on litigation settlements......... 17.6 19.4 - - - - -
Interest expense....................... 29.7 26.9 25.0 23.3 25.1 12.1 24.3
Other income, net...................... 12.6 7.3 5.8 5.5 7.1 4.1 4.3
Provision for income taxes............. 72.4 52.3 45.8 54.1 38.3 26.1 25.2
Income before cumulative effect of
change in accounting principle....... 123.0 118.0 94.1 126.3 90.8 55.4 41.5
Cumulative effect of change in
accounting principle................. - - - (7.8) - - -
Net income............................. 123.0 118.0 94.1 118.5 90.8 55.4 41.5
NET INCOME PER SHARE:
Income before cumulative effect of
change in accounting principle....... $ 2.25 $ 2.22 $ 1.84 $ 2.45 $ 1.76 $ 1.07 $ 0.80
Cumulative effect of change in
accounting principle................. - - - (0.15) - - -
Net income per share................... $ 2.25 $ 2.22 $ 1.84 $ 2.30 $ 1.76 $ 1.07 $ 0.80
DILUTED NET INCOME PER SHARE:
Income before cumulative effect of
change in accounting principle....... $ 2.25 $ 2.22 $ 1.83 $ 2.44 $ 1.75 $ 1.07 $ 0.80
Cumulative effect of change in
accounting principle................. - - - (0.15) - - -
Net income per share, diluted.......... $ 2.25 $ 2.22 $ 1.83 $ 2.29 $ 1.75 $ 1.07 $ 0.80

S-22

BALANCE SHEET DATA (AT YEAR END/
QUARTER END):
Total assets........................... $1,682.4 $1,659.5 $1,662.3 $1,860.1 $1,942.3 $1,908.1 $ 4,427.3
Total debt............................. 403.0 395.9 397.2 401.9 389.6 396.2 2,380.3
Total shareholders' equity............. 790.1 752.3 773.2 869.3 953.3 933.1 974.1
OTHER DATA:
Net cash provided (used) by:
Operating activities................. $ 289.0 $ 226.2 $ 195.8 $ 244.9 $ 194.8 $ 44.5 $ 96.2
Investing activities................. (64.5) (125.2) (81.6) (148.5) (155.9) (36.5) (1,002.9)
Financing activities................. (87.2) (136.9) (68.7) (30.4) (59.5) (29.0) 868.9
Capital expenditures................... 64.9 85.8 66.3 65.3 88.5 36.8 42.2
Depreciation expense................... 88.3 88.0 84.7 91.6 95.5 46.5 54.5
Amortization expense................... 11.4 12.8 14.1 4.2 4.9 2.3 6.4
Write-off of acquired in-process
research and development............. - - - - - - 35.0
Ratio of earnings to fixed
charges(1)........................... 7.71x 7.66x 6.97x 9.29x 6.19x 7.73x 3.73x
EBITDA(2).............................. $ 324.8 $ 298.0 $ 263.7 $ 291.7 $ 254.6 $ 142.4 $ 186.9

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

(1) The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes (including distributed income of equity
investees) plus fixed charges (excluding capitalized interest expense) by
fixed charges. Fixed charges consist of interest expense on debt (including
amortization of debt issuance expense and capitalized interest).

(2) The following table sets forth the calculation of EBITDA, which represents
earnings before interest, taxes, depreciation and amortization. The
write-off of acquired in-process research and development is included in
amortization expense. We present EBITDA because it is a basis upon which our
management assesses financial performance and we consider it an important
supplemental measure of our performance and believe it is frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in our industry, many of which present EBITDA when
reporting their results. EBITDA is not a measurement of financial
performance under GAAP and should not be considered as an alternative to (1)
net income determined in accordance with GAAP or (2) operating cash flows
determined in accordance with GAAP. Our calculation of EBITDA may not be
comparable to the calculation of similarly titled measures reported by other
companies. See the section of this prospectus supplement titled "Non-GAAP
Financial Measures."

HISTORICAL
-------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- -----------------------
1999 2000 2001 2002 2003 2003 2004
------ ------ ------ ------ ------ ---------- ----------
(DOLLARS IN MILLIONS)

Net income................................ $123.0 $118.0 $ 94.1 $118.5 $ 90.8 $ 55.4 $ 41.5
Add:
Depreciation and amortization........... 99.7 100.8 98.8 95.8 100.4 48.8 95.9
Interest expense........................ 29.7 26.9 25.0 23.3 25.1 12.1 24.3
Provision for income taxes.............. 72.4 52.3 45.8 54.1 38.3 26.1 25.2
------ ------ ------ ------ ------ ------ ------
EBITDA.................................... $324.8 $298.0 $263.7 $291.7 $254.6 $142.4 $186.9
====== ====== ====== ====== ====== ====== ======

S-23

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NOVEON INTERNATIONAL

The following table presents selected historical financial data of Noveon
International as of the dates and for the periods indicated. The data as of and
for the years ended December 31, 1999 and 2000 and the two months ended February
28, 2001 are derived from the audited consolidated historical financial
statements of the Performance Materials Segment of Goodrich Corporation (the
predecessor of Noveon International). The data as of and for the ten months
ended December 31, 2001 and the years ended December 31, 2002 and 2003 are
derived from the audited consolidated financial statements of Noveon
International. The information set forth below should be read in conjunction
with the consolidated financial statements of Noveon International and related
notes incorporated by reference in the accompanying prospectus.

PERFORMANCE MATERIALS SEGMENT OF GOODRICH NOVEON INTERNATIONAL
----------------------------------------- --------------------------------------
YEARS ENDED YEARS ENDED
DECEMBER 31, TWO MONTHS ENDED TEN MONTHS ENDED DECEMBER 31,
--------------------- FEBRUARY 28, DECEMBER 31, -------------------
1999 2000 2001 2001 2002 2003
--------- --------- ----------------- ---------------- -------- --------
(DOLLARS IN MILLIONS)

OPERATING RESULTS:
Revenues................. $1,217.7 $1,167.7 $187.0 $ 876.4 $1,069.3 $1,135.9
Cost of sales............ 832.2 819.5 137.3 628.1 726.8 809.4
Selling and
administrative
expenses............... 171.9 160.9 28.0 130.6 165.5 160.0
Research, testing and
development expense.... 46.3 40.2 7.2 29.9 37.3 44.8
Amortization expense..... 24.6 24.4 4.0 26.5 13.9 14.7
Restructuring and
severance costs........ 37.3 40.5 - 3.1 6.1 13.2
Interest expense......... 13.3 5.2 0.7 93.8 101.9 92.2
Other income (expense),
net.................... 12.3 9.2 (0.2) 0.5 12.3 0.2
Provision for income
taxes.................. 42.3 35.9 4.0 4.6 6.4 9.2
Income (loss) before
cumulative effect of
change in accounting
principle.............. 62.1 50.3 5.6 (39.7) 23.7 (7.4)
Cumulative effect of
change in accounting
principle.............. - - - - - (0.5)
Net income (loss)........ 62.1 50.3 5.6 (39.7) 23.7 (7.9)
BALANCE SHEET DATA (AT
YEAR END):
Total assets............. $1,430.6 $1,359.2 n/a $1,664.8 $1,634.5 $1,757.6
Total debt............... 42.7 30.0 n/a 1,083.9 992.7 1,030.3
Total stockholders'
equity/ Goodrich
investment............. 950.9 910.4 n/a 309.1 346.5 412.3
OTHER DATA:
Net cash provided (used)
by:
Operating activities... $ 156.1 $ 180.9 $(31.6) $ 153.9 $ 143.7 $ 118.0
Investing activities... (97.3) (75.3) (7.6) (1,218.7) (79.7) (88.7)
Financing activities... (54.4) (100.2) 37.5 1,188.4 (112.3) (1.2)
Capital expenditures..... 79.6 64.0 7.6 28.5 52.3 56.6
Depreciation expense..... 62.3 62.3 10.4 56.5 70.8 76.7
Amortization expense..... 24.6 24.4 4.0 26.5 13.9 14.7
EBITDA(1)................ 204.6 178.1 24.7 141.7 216.7 184.9

S-24

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

(1) The following table sets forth the calculation of EBITDA, which represents
earnings before interest, taxes, depreciation and amortization. We present
EBITDA because it is a basis upon which our management assesses financial
performance and we consider it an important supplemental measure of our
performance and believe it is frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in our
industry, many of which present EBITDA when reporting their results. EBITDA
is not a measurement of financial performance under GAAP and should not be
considered as an alternative to (1) net income determined in accordance with
GAAP or (2) operating cash flows determined in accordance with GAAP. Our
calculation of EBITDA may not be comparable to the calculation of similarly
titled measures reported by other companies. See the section of this
prospectus supplement titled "Non-GAAP Financial Measures."

PERFORMANCE MATERIALS
SEGMENT OF GOODRICH NOVEON INTERNATIONAL
------------------------------ ------------------------------
YEARS ENDED TWO MONTHS TEN MONTHS YEARS ENDED
DECEMBER 31, ENDED ENDED DECEMBER 31,
--------------- FEBRUARY 28, DECEMBER 31, ---------------
1999 2000 2001 2001 2002 2003
------ ------ ------------ ------------ ------ ------
(DOLLARS IN MILLIONS)

Net income (loss)............................... $ 62.1 $ 50.3 $ 5.6 $(39.7) $ 23.7 $ (7.9)
Add:
Depreciation and amortization................. 86.9 86.7 14.4 83.0 84.7 91.4
Interest expense.............................. 13.3 5.2 0.7 93.8 101.9 92.2
Provision for income taxes.................... 42.3 35.9 4.0 4.6 6.4 9.2
------ ------ ----- ------ ------ ------
EBITDA.......................................... $204.6 $178.1 $24.7 $141.7 $216.7 $184.9
====== ====== ===== ====== ====== ======

S-25

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following pro forma consolidated financial information has been derived
by the application of pro forma adjustments to the historical consolidated
financial statements of Lubrizol and Noveon International for the six-month
periods ended June 30, 2004 and 2003, and the year ended December 31, 2003. The
unaudited pro forma consolidated statements of income give effect to the June 3,
2004 acquisition of Noveon International and long-term financing thereof as if
they had occurred on January 1, 2003. The long-term financing is expected to
replace the temporary bridge facility used to finance initially the acquisition,
which is only expected to be outstanding approximately four months. Accordingly,
the costs of the long-term financing, rather than the temporary bridge facility,
are reflected in the accompanying pro forma consolidated financial information.

Assumptions underlying the pro forma adjustments necessary to present
fairly this pro forma information are described in the accompanying notes, which
should be read in conjunction with this pro forma consolidated financial
information. The pro forma adjustments described in the accompanying notes have
been made based on available information and, in the opinion of management, are
reasonable. The pro forma consolidated financial information should not be
considered indicative of actual results that would have been achieved had the
transactions occurred on the respective dates indicated and do not purport to
indicate results of operations as of any future date or for any future period.
Lubrizol cannot assure you that the assumptions used in the preparation of the
pro forma consolidated financial information will prove to be correct.

The acquisition of Noveon International by Lubrizol on June 3, 2004 was
accounted for as a purchase in conformity with Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations," with intangible assets
recorded in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets," and the operations of the acquired business have been included in
Lubrizol's historical financial statements from the effective date of the
acquisition. The purchase price consideration of $920.2 million in cash plus
transaction costs of $10.5 million less certain seller expenses of $32.9 million
was financed principally by borrowings under a temporary bridge facility.
Lubrizol also assumed approximately $1,103.1 million of Noveon International's
existing long-term indebtedness in conjunction with the acquisition and acquired
$103.0 million of cash. The total cost of the acquisition has been allocated to
the assets acquired and liabilities assumed on a preliminary basis based on
their respective fair values as of the date of the acquisition. The excess of
the purchase price over the preliminary fair values of the net assets acquired
has been allocated to goodwill. The allocation of the purchase price will be
subject to adjustment until it is finalized, which is expected to occur no later
than the second quarter of 2005. Accordingly, the final purchase price
allocation and the resulting effect on income from operations may differ from
the pro forma amounts reported herein. In addition, in accordance with the
provisions of SFAS No. 142, no amortization of indefinite-lived intangible
assets or goodwill is recorded.

The unaudited pro forma consolidated statements of income do not include
the cumulative effect of the change in accounting resulting from Noveon
International's adoption, in 2003, of SFAS No. 143, "Accounting for Asset
Retirement Obligations," but include the costs of the long-term financing,
rather than the temporary bridge facility, for the acquisition from the closing
through the date the temporary bridge facility is replaced with long-term
financing. In addition, the unaudited pro forma consolidated statements of
income do not include any cost reduction opportunities expected to result from
commercial and technical synergies between Lubrizol and Noveon International.

S-26

THE LUBRIZOL CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
SIX-MONTH PERIOD ENDED JUNE 30, 2004
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

NOVEON NOVEON PRO FORMA
LUBRIZOL INTERNATIONAL INTERNATIONAL TRANSACTION LUBRIZOL
HISTORICAL(1) HISTORICAL(2) RECLASSIFICATIONS(3) ADJUSTMENTS(4) PRO FORMA(5)
------------- ------------- -------------------- -------------- ------------

Total revenues........... $ 1,300.2 $540.2 $ (2.6) $ - $ 1,837.8
Cost of sales............ 955.8 377.2 7.2 (4.9)(a) 1,335.5
0.2
Selling and
administrative
expenses............... 122.0 73.9 (2.6) (1.7)(b) 184.1
(7.2)
(0.3)
Research, testing and
development expenses... 86.3 20.7 - - 107.0
Amortization of
intangible assets...... 6.4 6.2 - 5.7(c) 18.3
Write-off of acquired in-
process research and
development............ 35.0 - - (35.0)(e) -
Merger charges........... - 73.4 - (73.4)(f) -
Restructuring and
severance charges...... 8.0 3.3 - - 11.3
----------- ------ ------ ----------- -----------
Total costs and
expenses.......... 1,213.5 554.7 (2.7) (109.3) 1,656.2
Other income (expense) --
net.................... 2.4 0.5 0.2 - 2.8
(0.3)
Interest income.......... 1.9 0.6 - - 2.5
Interest expense......... (24.3) (39.3) - 4.6(g) (59.0)
----------- ------ ------ ----------- -----------
Income (loss) before
income taxes........... 66.7 (52.7) - 113.9 127.9
Provision for income
taxes.................. 25.2 4.9 - 17.9(h) 48.0
----------- ------ ------ ----------- -----------
Net income (loss)........ $ 41.5 $(57.6) $ - $ 96.0 $ 79.9
=========== ====== ====== =========== ===========
Earnings per common
share:
Basic.................. $ 0.80 $ 1.23
Diluted................ $ 0.80 $ 1.22
Average shares
outstanding:
Basic.................. 51,829,522 13,400,000(i) 65,229,522
Diluted................ 52,080,577 13,400,000(i) 65,480,577

S-27

THE LUBRIZOL CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2003
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

Total revenues............. $ 2,052.1 $1,135.9 $ (5.8) $ - $ 3,182.2
Cost of sales.............. 1,507.8 809.4 16.3 9.8(a) 2,343.3
Selling and administrative
expenses................. 202.9 160.0 (5.8) (4.0)(b) 338.1
(16.3)
1.4
0.1
(0.2)
Research, testing and
development expenses..... 166.9 44.8 - - 211.7
Amortization of intangible
assets................... - 14.7 (0.1) 14.1(c) 33.6
4.9(d)
Write-off of acquired
in-process research and
development.............. - - - 35.0(e) 35.0
Restructuring and severance
charges.................. 22.5 13.2 - - 35.7
----------- -------- -------- ----------- -----------
Total costs and
expenses............ 1,900.1 1,042.1 (4.6) 59.8 2,997.4
Other income
(expense) - net.......... (1.6) (1.1) 1.4 4.9(d) 3.4
(0.2)
Interest income............ 3.8 1.3 - - 5.1
Interest expense........... (25.1) (92.2) - 1.4(g) (115.9)
----------- -------- -------- ----------- -----------
Income before income taxes
and cumulative effect of
change in accounting
principle................ 129.1 1.8 - (53.5) 77.4
Provision for income
taxes.................... 38.3 9.2 - (23.1)(h) 24.4
----------- -------- -------- ----------- -----------
Income (loss) before
cumulative effect of
change in accounting
principle................ $ 90.8 $ (7.4) $ - $ (30.4) $ 53.0
=========== ======== ======== =========== ===========
Earnings per common share
before cumulative effect
of change in accounting
principle:
Basic.................... $ 1.76 $ 0.81
Diluted.................. $ 1.75 $ 0.81
Average shares outstanding:
Basic.................... 51,702,394 13,400,000(i) 65,102,394
Diluted.................. 51,884,385 13,400,000(i) 65,284,385

S-28

THE LUBRIZOL CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
SIX-MONTH PERIOD ENDED JUNE 30, 2003
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

Total revenues........... $ 1,022.9 $576.2 $ (2.7) $ - $ 1,596.4
Cost of sales............ 740.9 408.7 8.4 9.8(a) 1,167.8
Selling and
administrative
expenses............... 101.0 79.3 (2.7) (2.0)(b) 167.4
(8.4)
(0.2)
0.4
Research, testing and
development expenses... 82.2 21.5 - - 103.7
Amortization of
intangible assets...... 2.3 7.3 - 7.1(c) 16.7
Write-off of acquired in-
process research and
development............ - - - 35.0(e) 35.0
Restructuring and
severance charges...... 7.0 3.0 - - 10.0
----------- ------ ------ ----------- -----------
Total costs and
expenses.......... 933.4 519.8 (2.5) 49.9 1,500.6
Other income (expense) -
net.................... 2.0 (0.2) (0.2) - 2.0
0.4
Interest income.......... 2.1 0.6 - - 2.7
Interest expense......... (12.1) (46.6) - 1.3(g) (57.4)
----------- ------ ------ ----------- -----------
Income before income
taxes and cumulative
effect of change in
accounting principle... 81.5 10.2 - (48.6) 43.1
Provision for income
taxes.................. 26.1 3.3 - (15.8)(h) 13.6
----------- ------ ------ ----------- -----------
Income before cumulative
effect of change in
accounting principle... $ 55.4 $ 6.9 $ - $ (32.8) $ 29.5
=========== ====== ====== =========== ===========
Earnings per common share
before cumulative
effect of change in
accounting principle:
Basic.................. $ 1.07 $ 0.45
Diluted................ $ 1.07 $ 0.45
Average shares
outstanding:
Basic.................. 51,661,725 13,400,000(i) 65,061,725
Diluted................ 51,796,138 13,400,000(i) 65,196,138

S-29

THE LUBRIZOL CORPORATION

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

(1) The amounts in this column represent the reported results for Lubrizol
for the applicable period.

(2) The amounts in this column for 2004 represent the historical results of
Noveon International through the acquisition date of June 3, 2004. The
historical results for the year ended December 31, 2003 and the six
months ended June 30, 2003 do not include the cumulative effect of
Noveon International's change in the method used to account for asset
retirement obligations in 2003 pursuant to its implementation of SFAS
No. 143. Results for Noveon International after the acquisition date
are included in the Lubrizol Historical column.

(3) The reclassifications in this column reflect the income statement
reclassifications necessary to conform the historical Noveon
International amounts to the Lubrizol income statement classification
presentation. Reclassifications include the inclusion of sales
commissions as a reduction of revenues rather than as selling and
administrative expenses; the inclusion of distribution expenses as cost
of sales rather than selling and administrative expenses; and several
other smaller reclassifications.

(4) The amounts in this column represent the adjustments necessary to give
pro forma effect to the acquisition of Noveon International and
long-term financing thereof. Adjustments (a), (b), (c) and (e) are
based on a preliminary allocation of the purchase price, which is
expected to be finalized within one year of the acquisition date.

(a) This adjustment represents the inventory purchase accounting
adjustment that is being charged to cost of sales as the inventory
on hand when the Noveon International acquisition was consummated
is sold. The adjustment for the period ended June 30, 2004
reflects the reversal of the inventory purchase accounting
adjustment recorded in the historical financial statements to
reflect the pro forma assumption as if the Noveon International
acquisition occurred on January 1, 2003.

(b) Represents the amount of management fees charged to Noveon
International by related parties that ceased as a result of the
acquisition.

(c) This adjustment represents the change in amortization expense
resulting from the amortization of the additional intangible
assets recorded in connection with the acquisition using the
straight-line method based on the following (in millions):

ESTIMATED ADDITIONAL AMORTIZATION EXPENSE
-------------------------------------------------
SIX-MONTH SIX-MONTH
ESTIMATED ESTIMATED PERIOD ENDED YEAR ENDED PERIOD ENDED
AMORTIZABLE INTANGIBLES USEFUL LIFE FAIR VALUE JUNE 30, 2004 DECEMBER 31, 2003 JUNE 30, 2003
----------------------- ----------- ---------- ------------- ----------------- -------------

Distributors and
customers...... 20 years $230.0 $5.8 $11.5 $ 5.8
Technology....... 13 years 140.0 5.4 10.8 5.4
Trademarks and
tradenames..... 15 years 85.0 2.8 5.7 2.8
Non-compete
agreements..... 3 years 2.5 0.4 0.8 0.4
---- ----- -----
14.4 28.8 14.4
Historical amortization recorded.......... 8.7 14.7 7.3
---- ----- -----
Net adjustment............................ $5.7 $14.1 $ 7.1
==== ===== =====

(d) Represents reclassification of Lubrizol's historical amortization
expense recognized on intangible assets to conform to the income
statement classification used subsequent to the acquisition.

S-30

THE LUBRIZOL CORPORATION

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

(e) This adjustment represents the one-time, non-cash charge
pertaining to acquired in-process research and development
("IPR&D") projects of Noveon International that was recognized
immediately following the acquisition. These acquired projects
have no alternative future use and had not reached technological
feasibility at the date of the acquisition. Accordingly, the
portion of the purchase price preliminarily allocated to the IPR&D
projects was expensed as research and development costs
immediately after the acquisition in accordance with GAAP. The
adjustment for the period ended June 30, 2004 reflects the
reversal of the IPR&D write-off recorded in the historical
financial statements to reflect the pro forma assumption as if the
Noveon International acquisition occurred on January 1, 2003.

(f) This adjustment eliminates certain one-time, nonrecurring costs
and charges directly related to the acquisition that were incurred
by Noveon International, primarily consisting of compensation
costs for stock options that were cancelled in conjunction with
the acquisition, management bonuses, the write-off of deferred
financing costs and professional, advisory and financing fees.

(g) The adjustment to interest expense reflects the following (in
millions):

SIX-MONTH SIX-MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 2004 DECEMBER 31, 2003 JUNE 30, 2003
------------- ----------------- -------------

Interest expense on Noveon
International indebtedness
retired in connection with the
acquisition or to be retired upon
receipt of long-term financing... $(42.6) $(92.4) $(46.6)
Interest expense on temporary
bridge facility to be repaid upon
receipt of the long-term
financing........................ (6.6) - -
Estimated interest expense on new
term loan facility to be obtained
(at 3.25%)....................... 7.9 17.7 8.7
Estimated interest expense on the
new debt securities to be issued:
$400.0 million of 5-year
securities (at 4.625%)........ 9.3 18.5 9.3
$450.0 million of 10-year
securities (at 5.5%).......... 12.4 24.8 12.4
$300.0 million of 30-year
securities (at 6.5%).......... 9.8 19.5 9.8
Accretion expense for treasury rate
locks............................ 3.0 5.9 3.0
Amortization of estimated debt
issuance costs on the new debt:
Revolving credit facilities...... - 0.1 -
Term loan facility............... 0.3 0.7 0.3
Debt securities.................. 1.5 3.1 1.5
Additional commitment fees on new
revolving credit and term loan
facilities expected to be
obtained(1)...................... 0.4 0.7 0.3
------ ------ ------
Total adjustment................... $ (4.6) $ (1.4) $ (1.3)
====== ====== ======

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

(1) Reflects commitment fees of 0.20% on the estimated $500.0 million
of average undrawn balance under the revolving credit facility
less the commitment fees included in the historical results of
operations.

S-31

THE LUBRIZOL CORPORATION

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

A 0.25% increase or decrease in the weighted average interest rate
applicable to Lubrizol's indebtedness outstanding under the
anticipated new term loan facility and the debt securities would
change the pro forma interest expense by $2.2 million, $4.3 million
and $2.2 million for the six-month period ended June 30, 2004, year
ended December 31, 2003 and the six-month period ended June 30, 2003,
respectively.

(h) This adjustment represents the tax effect of pro forma adjustments
to income before income taxes and is based on the estimated
applicable statutory tax rates. The adjustment also includes the
effects of the estimated reduction in Lubrizol's historical U.S.
tax benefits associated with extraterritorial income and foreign
tax credits resulting from the acquisition of Noveon
International. Furthermore, the adjustment includes the
elimination of the charge/credit included in Noveon
International's historical provision for income taxes resulting
from the change in Noveon International's deferred tax asset
valuation allowance pertaining to its domestic, federal income
taxes that was reversed in connection with the acquisition,
reflecting the fact that Noveon International's inclusion within
the Lubrizol U.S. consolidated group for income tax purposes
subsequent to the acquisition will result in deferred tax assets
being realized to offset the taxable income of the consolidated
group.

(i) The number of pro forma shares is based on the common shares to be
issued pursuant to this offering.

(5) The amounts in this column represent the pro forma results for Lubrizol
after giving effect to the acquisition of Noveon International and the
long-term financing thereof as if the transactions had been consummated
on January 1, 2003, the first day of Lubrizol's most recently completed
fiscal year.

S-32

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those discussed in
such forward-looking statements as a result of various factors, including those
described under the section of this prospectus supplement titled "Risk Factors"
and included elsewhere in this prospectus supplement and the accompanying
prospectus.

OVERVIEW

GENERAL

On June 3, 2004, we acquired Noveon International, a leading global
producer and marketer of technologically advanced specialty materials and
chemicals used in the industrial and consumer markets. With the acquisition of
Noveon International, we have accelerated our program to attain a substantial
presence in the personal care and coatings markets by adding a number of higher
growth, industry-leading products under highly recognizable brand names,
including Carbopol(R) and Hycar(R), to our already strong portfolio of lubricant
and fuel additive products and consumer product ingredients. Additionally,
Noveon International has a number of industry-leading specialty materials
businesses, including TempRite(R) CPVC and Estane(R) TPU, that generate strong
cash flow.

Noveon International was acquired for cash of $920.2 million plus
transaction costs of $10.5 million less certain seller expenses of $32.9 million
and cash acquired of $103.0 million. In addition, we assumed $1,103.1 million of
long-term indebtedness from Noveon International. Noveon International had 2003
revenues of $1,135.9 million.

Beginning in the second quarter of 2004, we reorganized our business as a
result of the Noveon International acquisition into two business units and
reporting segments: the lubricant additives segment, also referred to as
Lubrizol Additives, and the specialty chemicals segment, also referred to as
Noveon. The lubricant additives segment represents approximately 56% of pro
forma consolidated revenues for the year ended December 31, 2003 and is
comprised of our previous business in fluid technologies for transportation
(FTT), advanced fluid systems, emulsified products and the former industrial
additives product group of fluid technologies for industry (FTI). The specialty
chemicals segment represents approximately 44% of pro forma consolidated
revenues for the year ended December 31, 2003 and is comprised of the businesses
of the acquired Noveon International and the former performance chemicals group
of FTI. Note 13 to our

S-33

consolidated financial statements for the year ended December 31, 2003 contains
a further description of the nature of our operations, the product lines within
each of the reporting segments, segment profitability and related financial
disclosures for the reportable segments.

LUBRICANT ADDITIVES SEGMENT

A variety of industry market forces and conditions continue to influence
the lubricant additives business. A key factor is the low global growth rate for
this business, which we believe is in the range of approximately 0% to 1% per
year. Additional characteristics of this market are:

- Consolidation of the customer base in recent years, which has increased
the competitiveness of the transportation lubricant additives market. Our
volume for 2003 and, to a lesser extent, the first six months of 2004,
was impacted by the loss of a large piece of business as a result of a
major oil company merger.

- Frequent product specification changes driven primarily by OEMs and the
impact of environmental and fuel economy regulations on the OEMs. The
specification changes require us to incur product development and testing
costs, but also enable us to apply our technological know-how to create
products and solve problems. We believe our technology, and our expertise
in applying it, are key strengths.

- Improved engine design, which can result in longer lubricant drain
intervals. Longer drain intervals lessen demand for lubricants.

- New vehicle production levels, which affect our specialty driveline
fluids in particular because the initial factory fill is an important
market factor in that product line.

We believe we are the market leader in lubricant additives and intend to
remain the leader by continuing to invest in this business.

SPECIALTY CHEMICALS SEGMENT

Our specialty chemicals segment's growth strategy involves a combination of
internal growth and acquisitions. Since 2000 and prior to the acquisition of
Noveon International, we made eight acquisitions with aggregate annual revenues
of approximately $200.0 million. In 2002, we completed four acquisitions having
aggregate annual revenues of approximately $85.0 million, including Chemron
Corporation, a supplier of specialty surfactants principally for the personal
care market. In 2003, we acquired a personal care ingredients business from
Amerchol Corporation, a subsidiary of The Dow Chemical Company. Also in 2003, we
expanded our foam control additives business with the acquisition of silicone
product lines, which expanded our foam control additives to approximately $40.0
million in annual revenues. In late January 2004, we acquired the additives
business of Avecia, with annual revenues of approximately $50.0 million. This
business develops, manufactures and markets high-value additives used in
coatings and inks. With the acquisition of Noveon International, our specialty
chemicals segment now represents nearly half of pro forma consolidated revenues.

We have a strategy to continue to achieve internal growth in the Noveon
segment by using our strengths, including our technology, formulating skills and
broad geographic infrastructure, to develop and invest in new fluid technology
applications in higher-growth industrial and consumer markets. Key factors to
our success continue to be the introduction of new products, development of new
applications for existing products, cross-selling of products and geographic
expansion.

PRIMARY FACTORS AFFECTING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2004

In addition to higher shipment volume in the lubricant additives segment,
particularly in the second quarter, along with the contribution from Noveon
International and other acquisitions and ongoing organic

S-34

business growth in the specialty chemicals segment, the factors that most
affected our six-month 2004 results were:

- increased raw material costs;

- cost control initiatives, including restructuring programs; and

- currency effects.

Raw material costs are significantly influenced by the price of crude oil
and natural gas, which have been subject to periods of rapid and significant
movements in price. Our results are affected by how quickly and the extent to
which we are able to change our product selling prices in reaction to raw
material cost and operating cost changes. Our average raw material cost,
excluding the impact of acquisitions, increased 8% in the first half of 2004
compared to the first half of 2003. The lubricant additives segment has
initiated two price increases in 2004 in order to attempt to recover these
costs.

Our operating cost structure has been pressured by higher energy,
insurance, pension and health care expenses. Additionally, a large portion of
our manufacturing expenses are fixed in the short term. As a result of these
cost pressures and to achieve a more competitive cost structure, primarily in
the lubricant additives segment, we implemented several restructuring programs
in 2003. Additionally, on June 30, 2004, following our acquisition of Noveon
International, we announced a reduction of 95 employees, primarily affecting
technical and commercial employees located at our Wickliffe, Ohio headquarters.

We conduct a significant amount of our business outside the United States
and are subject to business risks inherent in non-United States activities,
including currency exchange rate fluctuations. As the United States dollar
strengthens or weakens against other international currencies in which we
transact business, our financial results will be affected. Currency had an
overall favorable effect on our operating results in both 2003 and the six
months ended June 30, 2004.

FINANCIAL POSITION

We had $2,380.3 million of debt outstanding at June 30, 2004, most of which
we incurred in connection with our acquisition of Noveon International,
including bridge loan financing of $1,797.0 million, which is due May 2005. As a
result, our total debt as a percent of capitalization has increased from 29% at
December 31, 2003 to 71% at June 30, 2004. We will also incur increased interest
expense. We intend to implement a permanent capital structure in the near-term
that will replace the temporary bridge facility and reduce our interest cost.
The permanent capital structure is expected to include approximately $426.2
million in new common equity. Our debt level will require us to dedicate a
significant portion of our cash flow to make interest and principal payments,
thereby reducing the availability of our cash flow for acquisitions or other
purposes. Nevertheless, we believe our future operating cash flows will be
sufficient to cover our debt repayments and other obligations, and that we have
untapped borrowing capacity that can provide us with additional financial
resources.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2004 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2003

Our revenues increased in the second quarter of 2004 as compared with the
second quarter of 2003, primarily due to acquisitions. Excluding acquisitions,
revenues increased primarily due to higher ongoing shipment volume and favorable
currency effect. The increased revenues partially were offset by higher raw
material costs, manufacturing expenses and selling and administrative expenses.
The 2004 second quarter also included significant purchase accounting charges
associated with the acquisition of Noveon International and incremental
acquisition-related financing costs. Primarily as a result of these factors, net
income decreased 87% in the second quarter of 2004, compared with the same
period in 2003.

As a result of the June 3, 2004 acquisition of Noveon International, we
reorganized into two operating and reporting segments: lubricant additives and
specialty chemicals. Lubricant additives comprised approximately 78% of our
consolidated revenues and 89% of our segment operating income for the first six
S-35

months of 2004. See Note 13 to the consolidated financial statements for the
year ended December 31, 2003 and the "Segment Analysis" section for further
financial disclosures by reporting segment.

Analysis of Revenues
----------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2003 2004 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Three-Month Period Ended June 30:
Net sales............................ $ 514.3 $ 720.2 $205.9 40% $ 74.5 14%
Royalties and other revenues......... 0.4 1.3 0.9 239% 1.0 232%
-------- -------- ------ ------
Total revenues....................... $ 514.7 $ 721.5 $206.8 40% $ 75.5 15%
======== ======== ====== ======
Six-Month Period Ended June 30:
Net sales............................ $1,021.3 $1,298.1 $276.8 27% $126.6 12%
Royalties and other revenues......... 1.6 2.1 0.5 33% 0.5 31%
-------- -------- ------ ------
Total revenues....................... $1,022.9 $1,300.2 $277.3 27% $127.1 12%
======== ======== ====== ======

Consolidated revenues increased 40% in the second quarter of 2004 and 27%
in the first six months of 2004 compared to the same periods in 2003, primarily
due to acquisitions and higher ongoing shipment volume. Acquisitions in 2004
included Noveon International and the hyperdispersants business purchased from
Avecia. Acquisitions in 2003 included the personal care specialty ingredients
business purchased from Amerchol Corporation, a subsidiary of The Dow Chemical
Company, and the silicone product lines purchased from BASF. The Noveon
International acquisition contributed $109.9 million towards the increase in
revenues in both the second quarter of 2004 and the first six months of 2004
compared with the same periods in 2003.

Excluding acquisitions, ongoing shipment volume increased 11% in the second
quarter and 7% in the first six months of 2004 compared to the same periods in
2003. Sequentially, excluding acquisitions, consolidated second quarter 2004
shipment volume was 6% higher than the first quarter of 2004.

The following table shows our shipment volume by geographic zone in the
second quarter and the first half of 2004.

THREE-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 2004 JUNE 30, 2004
VOLUME VOLUME
------------- -------------

North America............................................... 48% 47%
Europe...................................................... 27% 27%
Asia-Pacific/Middle East.................................... 20% 20%
Latin America............................................... 5% 6%
--- ---
Total....................................................... 100% 100%
=== ===

S-36

Shipment volume patterns vary in different geographic zones. The following
table shows the changes in shipment volume by geographic zone in the second
quarter and the first six months of 2004, compared with the corresponding
periods in 2003.

EXCLUDING
ACQUISITIONS
-------------
2004 VS. 2003 2004 VS. 2003
% CHANGE % CHANGE
------------- -------------

Three-Month Period Ended June 30:
North America............................................. 30% 8%
Europe.................................................... 22% 12%
Asia-Pacific/Middle East.................................. 30% 23%
Latin America............................................. 4% 0%
Total..................................................... 26% 11%
Six-Month Period Ended June 30:
North America............................................. 18% 6%
Europe.................................................... 9% 4%
Asia-Pacific/Middle East.................................. 20% 16%
Latin America............................................. 1% (1%)
Total..................................................... 15% 7%

Segment shipment volume variances by geographic zone as well as the factors
explaining the changes in segment revenues for the second quarter of 2004 and
the first six months of 2004 compared with the respective periods of 2003 are
contained under the "Segment Analysis" section below.

Analysis of Costs and Expenses
--------------------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2003 2004 CHANGE CHANGE CHANGE CHANGE
------ -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Three-Month Period Ended June 30:
Cost of sales........................... $372.6 $ 529.5 $156.9 42% $ 57.9 16%
Selling and administrative expenses..... 50.2 70.2 20.0 40% 6.5 13%
Research, testing and development
expenses............................. 40.6 45.5 4.9 12% (0.4) (1%)
Amortization of intangible assets....... 1.2 4.5 3.3 * 0.0 *
Write-off of acquired in-process
research and development............. - 35.0 35.0 * 0.0 *
Restructuring charge.................... 3.5 8.0 4.5 * 0.0 *
------ -------- ------ ------
Total costs and expenses................ $468.1 $ 692.7 $224.6 48% $ 64.0 14%
====== ======== ====== ======
Six-Month Period Ended June 30:
Cost of sales........................... $740.9 $ 955.8 $214.9 29% $103.8 14%
Selling and administrative expenses..... 101.0 122.0 21.0 21% 6.0 6%
Research, testing and development
expenses............................. 82.2 86.3 4.1 5% (2.0) (2%)
Amortization of intangible assets....... 2.3 6.4 4.1 * 0.5 *
Write-off of acquired in-process
research and development............. - 35.0 35.0 * 0.0 *
Restructuring charge.................... 7.0 8.0 1.0 * 0.0 *
------ -------- ------ ------
Total costs and expenses................ $933.4 $1,213.5 $280.1 30% $108.3 12%
====== ======== ====== ======

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

* Calculation not meaningful

S-37

Cost of sales increased 42% in the second quarter of 2004 and 29% in the
first six months of 2004 compared with the same periods in 2003, due to
acquisitions, higher average raw material cost and higher manufacturing
expenses. Excluding acquisitions, average raw material cost increased 8% in both
the second quarter and the first six months of 2004 compared with the same
periods in 2003, primarily due to an increase in the combination of raw material
prices and product mix along with unfavorable currency effects. Material cost
included purchase adjustments associated with the increased valuation of
inventory of $5.8 million in the second quarter of 2004 and $6.7 million in the
first six months of 2004 for the Noveon International and hyperdispersants
acquisitions. The Noveon International purchase adjustment for the increased
valuation of inventory was $4.9 million, or $0.06 per share, in the second
quarter of 2004. Looking forward, we expect continued increases in raw material
prices, which may lead to higher cost of sales.

Total manufacturing expenses, which are included in cost of sales,
increased 32% in the second quarter of 2004 and 24% in the first six months of
2004 compared with the same periods in 2003, primarily due to acquisitions.
Excluding acquisitions, total manufacturing expenses increased 6% in the second
quarter of 2004 and 9% in the first six months of 2004 compared with the same
periods in 2003, primarily due to unfavorable currency effect and higher
incentive compensation expense. The first six months of manufacturing expense
also included $2.0 million for an environmental accrual relating to remediation
at our Texas manufacturing facility. Excluding acquisitions, currency and the
environmental accrual adjustment, manufacturing expenses increased 3% in the
second quarter of 2004 and 4% in the first six months of 2004 compared with the
same periods in 2003.

Gross profit (net sales less cost of sales) increased $49.0 million, or 35%
($16.7 million, or 12%, excluding acquisitions), in the second quarter of 2004
and $61.9 million, or 22% ($22.8 million, or 8%, excluding acquisitions), in the
first six months of 2004 compared with the same periods in 2003. Excluding
acquisitions, the increase primarily was due to higher shipment volume and
favorable currency effect, partially offset by higher average raw material cost
and higher manufacturing costs. Our gross profit percentage (gross profit
divided by net sales) decreased to 26.5% in the second quarter of 2004 and 26.4%
in the first six months of 2004, compared to 27.5% in both the second quarter
and first half of 2003. The decrease for both periods primarily was due to
higher raw material costs. Sequentially, the gross profit percentage increased
in the second quarter of 2004 compared with 26.2% in the first quarter of 2004
and 24.9% in the fourth quarter of 2003.

Excluding acquisitions, selling and administrative expenses increased 13%
in the second quarter and 6% in the first six months of 2004 compared with the
same periods in 2003, primarily due to higher incentive compensation expense and
unfavorable currency effect.

Research, testing and development expenses (technology expenses), excluding
acquisitions, decreased 1% in the second quarter of 2004 and 2% in the first six
months of 2004 compared with the same periods in 2003, primarily due to lower
testing activity at outside laboratories, partially offset by unfavorable
currency effects and higher incentive compensation expense.

Beginning in 2004, we have reclassified amortization of intangible assets
as a separate line item of expense. The prior year interim results for the three
and six months ended June 30, 2003 have been reclassified to conform with the
current year presentation. Previously this item had been included within other
income (expense). The increased amortization expense in the second quarter and
the first six months of 2004 compared with the same periods in 2003 primarily
was due to the Noveon International and hyperdispersants acquisitions in 2004
and the personal care specialty ingredients business acquisition in 2003.

We included a one-time, non-cash charge of $35.0 million, or $0.42 per
share, in total costs and expenses for the second quarter of 2004 and the first
six months of 2004 to write-off the estimated fair value of acquired in-process
research and development, or IPR&D, projects associated with the Noveon
International acquisition. Costs to acquire IPR&D projects that have no
alternative future use and that have not reached technological feasibility at
the date of acquisition are expensed upon acquisition. We based the estimated
value of IPR&D projects on third-party valuations of the fair values of IPR&D
costs.

S-38

In the second quarter of 2004, we recorded a restructuring charge of $8.0
million, or $0.10 per share, consisting of workforce reductions of $6.4 million
and a write-off of $1.6 million of impaired assets related to PuriNOx(TM)
technology. We eliminated 95 positions, primarily at our Wickliffe, Ohio
headquarters. We expect these reductions will be completed by the end of the
third quarter in 2004. The second-half 2004 pre-tax restructuring charge will
include an estimated $6.0 million non-cash pension benefit settlement charge and
the remainder of the employee severance costs associated with the workforce
reductions, approximating $3.0 million.

In the second quarter of 2003, we recorded a restructuring charge of $3.5
million, or $0.05 per share, primarily related to our Bromborough, England
intermediate production and blending facility. The charge was comprised of $2.8
million for asset write-offs and employee severance at our Bromborough facility
and $0.7 million for a voluntary separation program at our joint venture in
India. In the first half of 2003, the total restructuring charge was $7.0
million, or $0.09 per share, which included $6.3 million for Bromborough and
$0.7 million for India. The Bromborough charge primarily consisted of $2.8
million in employee separation benefits and $3.3 million in asset impairment
charges for production units taken out of service.

Analysis of Other Items and Net Income
------------------------------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2003 2004 CHANGE CHANGE CHANGE CHANGE
------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Three-Month Period Ended June 30:
Other income (expense)................... $ 1.1 $ (1.9) $(3.0) * $(3.5) *
Interest expense -- net.................. (5.1) (17.1) (12.0) * 0.8 *
Income before income taxes............... 42.6 9.8 (32.8) (77)% 4.2 10%
Provision for income taxes............... 13.2 5.9 (7.3) (56)% 14.8 112%
Net income............................... $ 29.4 $ 3.9 $(25.5) (87)% $(10.5) (36)%
Six-Month Period Ended June 30:
Other income (expense)................... $ 2.0 $ 2.4 $ 0.4 * $ 0.1 *
Interest expense -- net.................. (10.0) (22.4) (12.4) * 0.3 *
Income before income taxes............... 81.5 66.7 (14.8) (18)% 18.2 22%
Provision for income taxes............... 26.1 25.2 (0.9) (3)% 11.6 44%
Net income............................... $ 55.4 $ 41.5 $(13.9) (25)% $ 6.6 12%

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

* Calculation not meaningful

The decrease in other income (expense) in the second quarter of 2004,
compared to the same period in 2003, was due to currency translation losses.
Other income for the first six months of 2004 included a gain of $6.4 million
($.08 per share) on a currency forward contract to purchase pound sterling
related to the acquisition of the hyperdispersants business. We secured the
forward contract in December 2003 and completed the acquisition at the end of
January 2004. This gain partially was offset by other currency translation
losses.

The increase in net interest expense for both the second quarter and first
six months of 2004, compared to the same periods in 2003, primarily was due to
the Noveon International acquisition-related financing costs of $12.2 million,
or $0.14 per share, comprised of the temporary bridge facility and Noveon
International accrued interest of $6.5 million, amortization of temporary bridge
facility fees of $2.8 million and termination of an interest rate swap of $2.9
million.

We had an effective tax rate of 59.8% in the second quarter of 2004 and
37.8% in the first six months of 2004, compared with 31.1% in the second quarter
of 2003 and 32.0% in the first six months of 2003. The increase in the effective
tax rate for both periods in 2004 primarily was due to significant non-taxable

S-39

currency gains that occurred in 2003 but did not repeat in 2004, and the
unfavorable impact of the Noveon International acquisition on our U.S. tax rate.
Noveon International's U.S. tax loss carryforwards, combined with the interest
expense associated with the acquisition financing, will reduce our ability to
claim U.S. foreign tax credits and to obtain U.S. tax benefits on exports. The
second quarter tax provision was unusually high because it reflected the
cumulative year-to-date impact of these items on our effective tax rate. We
estimate our 2004 effective tax rate will be 37.5%, excluding the tax effect of
the restructuring charge, which had a 35% tax rate.

Primarily as a result of the above factors, our net income per share was
$0.08 for the second quarter of 2004 compared with $0.57 for the second quarter
of 2003, and $0.80 for the first six months of 2004 compared with $1.07 for the
first six months of 2003. Earnings in both the second quarter and first six
months of 2004 included a one-time write-off for IPR&D projects from the Noveon
International acquisition of $0.42 per share, a purchase adjustment associated
with the increased valuation of Noveon International-acquired inventory of $0.06
per share, a restructuring charge of $0.10 per share, incremental acquisition-
related financing costs of $0.14 per share and an increase in the effective tax
rate compared to the first quarter 2004 rate equivalent to $0.08 per share.
Earnings in 2004 benefited from Noveon International's June 2004 operating
income of $10.7 million, or $0.13 per share, before financing costs and purchase
accounting adjustments. Earnings in the first six months of 2004 also included a
gain on a currency forward contract of $0.08 per share. The 2003 restructuring
charge reduced earnings $0.05 per share in the second quarter of 2003 and $0.09
per share in the first half of 2003.

SEGMENT ANALYSIS

We primarily evaluate performance and allocate resources based on segment
operating income, defined as revenues less expenses identifiable to the product
lines included within each segment, as well as projected future returns. As part
of reorganizing our business into two reporting segments, we have reclassified
certain administrative expenses that previously were deducted in arriving at
segment operating income and are now classified as unallocated corporate
expenses. Segment operating income will reconcile to consolidated income before
tax by deducting the write-off of acquired IPR&D projects, restructuring
charges, net interest expense, corporate expenses and corporate other income
that we do not attribute to either reporting segment.

We have restated current year and prior year amounts to reflect the new
reporting classifications of products between the two reporting segments and the
new definition of segment operating income.

Operating Results by Segment
-------------------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2003 2004 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

REVENUES
Three-Month Period Ended June 30:
Lubricant additives.................... $ 453.3 $ 522.1 $ 68.8 15% $ 68.8 15%
Specialty chemicals.................... 61.4 199.4 138.0 225% 6.7 11%
-------- -------- ------ ------
Total................................ $ 514.7 $ 721.5 $206.8 40% $ 75.5 15%
======== ======== ====== ======
Six-Month Period Ended June 30:
Lubricant additives.................... $ 903.2 $1,013.3 $110.1 12% $110.1 12%
Specialty chemicals.................... 119.7 286.9 167.2 140% 17.0 14%
-------- -------- ------ ------
Total................................ $1,022.9 $1,300.2 $277.3 27% $127.1 12%
======== ======== ====== ======

S-40

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2003 2004 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

GROSS PROFIT
Three-Month Period Ended June 30:
Lubricant additives.................... $ 127.2 $ 143.6 $ 16.4 13% $ 16.4 13%
Specialty chemicals.................... 14.5 47.1 32.6 225% 0.3 2%
-------- -------- ------ ------
Total................................ $ 141.7 $ 190.7 $ 49.0 35% $ 16.7 12%
======== ======== ====== ======
Six-Month Period Ended June 30:
Lubricant additives.................... $ 251.0 $ 272.4 $ 21.4 8% $ 21.4 8%
Specialty chemicals.................... 29.4 69.9 40.5 138% 1.4 5%
-------- -------- ------ ------
Total................................ $ 280.4 $ 342.3 $ 61.9 22% $ 22.8 8%
======== ======== ====== ======
SEGMENT OPERATING INCOME
Three-Month Period Ended June 30:
Lubricant additives.................... $ 58.6 $ 72.8 $ 14.2 24% $ 14.2 24%
Specialty chemicals.................... 0.6 11.4 10.8 * 0.0 *
-------- -------- ------ ------
Total................................ $ 59.2 $ 84.2 $ 25.0 42% $ 14.2 24%
======== ======== ====== ======
Six-Month Period Ended June 30:
Lubricant additives.................... $ 114.2 $ 135.5 $ 21.3 19% $ 21.3 19%
Specialty chemicals.................... 1.4 16.4 15.0 * 0.1 7%
-------- -------- ------ ------
Total................................ $ 115.6 $ 151.9 $ 36.3 31% $ 21.4 19%
======== ======== ====== ======

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

* Calculation not meaningful

LUBRICANT ADDITIVES SEGMENT

Revenues increased 15% in the second quarter of 2004 compared to the same
period in 2003, primarily due to 12% higher volume with the remainder due to
higher average selling price driven almost entirely by favorable currency. The
combination of real selling price and product mix was neutral. Revenues
increased 12% in the first six months of 2004 compared to the same period in the
prior year, primarily due to 7% higher volume, 4% favorable currency and 1%
higher product mix and price. Sequentially, shipment volume in the second
quarter of 2004 increased 7% over the first quarter of 2004 and 15% over the
fourth quarter of 2003.

The following table shows our shipment volume by geographic zone in the
second quarter and the first half of 2004.

THREE-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 2004 JUNE 30, 2004
VOLUME VOLUME
------------- -------------

North America............................................... 41% 41%
Europe...................................................... 30% 30%
Asia-Pacific/Middle East.................................... 23% 23%
Latin America............................................... 6% 6%
--- ---
Total....................................................... 100% 100%
=== ===

S-41

Shipment volume patterns vary in different geographic zones. The following
table shows the changes in shipment volume by geographic zone in the second
quarter and the first six months of 2004.

THREE-MONTH SIX-MONTH
PERIODS PERIODS ENDED
ENDED JUNE 30, 2004 JUNE 30, 2004
VS. JUNE 30, 2003 VS. JUNE 30, 2003
% CHANGE % CHANGE
------------------- -------------------

North America..................................... 9% 6%
Europe............................................ 12% 4%
Asia-Pacific/Middle East.......................... 23% 16%
Latin America..................................... (2%) (3%)
Total............................................. 12% 7%

Overall, higher shipment volume in the second quarter of 2004 compared to
the same period in 2003 partially was due to market recovery for finished
lubricants. The shipment volume increase in North America for both periods
primarily resulted from increases in our driveline and industrial additives
product lines due to market share gains as well as market recovery. Higher
shipment volume in Europe in the second quarter primarily was due to increases
in our engine additives product lines due to lost marine diesel business that
occurred after the first quarter of 2003, which subsequently was regained late
in the first quarter of 2004. In addition, we experienced some business gains in
our industrial additives product lines. The shipment volume increase in
Asia-Pacific for both periods primarily was due to economic recovery, market
share gains in China and favorable timing of orders. The decrease in Latin
America was associated with the loss of a major international customer that we
previously disclosed in 2003.

Lubrizol Additives implemented a price increase in March 2004 for products
sourced from North America plants and in the second quarter 2004 for products
sourced from Asia-Pacific and Latin America. We announced a second price
increase in June 2004, which was effective beginning in mid-June for products
sourced from North America and Europe billed in U.S. dollar currency and
beginning in mid-July for products sourced from Latin America. We will also
begin implementing previously announced price increases in August for products
sourced from Asia-Pacific. The announced price increases were in response to raw
material cost increases and continuing high prices for natural gas used for
utilities in our plants.

Segment gross profit is defined as sales less cost of sales, which include
material cost and all manufacturing expenses. The 13% increase in segment gross
profit in the second quarter of 2004 and the 8% increase in the first six months
of 2004, compared with the same periods in 2003, primarily was due to higher
revenues partially offset by higher average raw material cost and manufacturing
expenses. In the second quarter of 2004, average material cost increased 7% and
manufacturing expenses increased 6%, compared to the second quarter of 2003. In
the first six months of 2004, average material cost increased 8% and
manufacturing expenses increased 10%, compared to the first six months of 2003.
The increase in manufacturing expenses for both periods primarily was due to
higher throughput, higher incentive compensation expense and unfavorable
currency effect.

The gross profit percentage for the segment was 27.6% for the second
quarter of 2004 compared with 28.1% for the second quarter of 2003, and 26.9%
for the first six months of 2004 compared with 27.8% in the first six months of
2003. The decrease primarily was due to higher average raw material cost.

Selling, technical, administrative and research, or STAR, expenses
increased $3.3 million, or 5% for the second quarter of 2004, compared with the
second quarter of 2003, primarily due to higher incentive compensation expense
and currency effects. STAR expenses increased $1.1 million, or 1% in the first
six months of 2004, compared with the same period in 2003 due to higher
incentive compensation expense and currency effects, partially offset by a $1.3
million decrease in technical expenses, primarily due to lower outside testing
expenses as a result of higher utilization of our internal testing facilities.

Segment operating income (revenues less expenses attributable to the
product lines aggregated within each segment) increased 24% for the second
quarter of 2004 and increased 19% for the first six months of

S-42

2004, compared with the same periods in 2003, due to higher gross profit that
was partially offset by higher expenses.

SPECIALTY CHEMICALS SEGMENT

Revenues increased 225% in the second quarter of 2004 and 140% in the first
six months of 2004 compared with the same periods in 2003, primarily due to the
2004 acquisitions of Noveon International and the hyperdispersants business and
the 2003 acquisition of the personal care specialty ingredients business.
Excluding acquisitions, revenues increased 11% in the second quarter of 2004
compared to the same period in 2003, due to 5% higher shipment volumes, 2%
favorable currency impact and 3% stronger price and product mix. Excluding
acquisitions, segment revenues increased 14% in the first six months of 2004
compared to the same period in the prior year primarily due to 8% higher volume,
3% favorable currency impact and 3% stronger price and product mix. The higher
priced product mix for both the second quarter 2004 and the first six months of
2004 primarily occurred in our consumer specialties product line.

The following table shows our shipment volume by geographic zone in the
second quarter and the first half of 2004.

THREE-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 2004 JUNE 30, 2004
VOLUME VOLUME
------------- -------------

North America............................................... 74% 75%
Europe...................................................... 16% 16%
Asia-Pacific/Middle East.................................... 7% 6%
Latin America............................................... 3% 3%
--- ---
Total....................................................... 100% 100%
=== ===

EXCLUDING
ACQUISITIONS
2004 VS. 2003 2004 VS. 2003
% CHANGE % CHANGE
------------- -------------

Three-Month Period Ended June 30:
North America............................................. 114% 3%
Europe.................................................... 161% 10%
Asia-Pacific/Middle East.................................. 342% 4%
Latin America............................................. 76% 26%
Total..................................................... 126% 5%
Six-Month Period Ended June 30:
North America............................................. 66% 7%
Europe.................................................... 92% 9%
Asia-Pacific/Middle East.................................. 268% 35%
Latin America............................................. 40% 14%
Total..................................................... 74% 8%

Excluding acquisitions, the shipment volume increase in North America for
both periods primarily was due to market share gains and growth in the
fermentation industry in our consumer specialties product line. This product
line also benefited for the first six months of 2004 from the extension of the
2003 sugar beet season. Additionally, the second quarter 2004 shipment volume
was higher due to improvements in the mining sector. The increase in Europe for
both periods was due to the impact of an improving European

S-43

economy and market share gains in our performance coatings product line. The
increase in Asia-Pacific/ Middle East for both periods was due to higher
shipment volume in our performance coatings product line as approvals we have
obtained in the United States and Europe are being transferred by our customers
to Asia. The first six-month comparison in this region also benefited from
market share gains in our consumer specialties product line.

The increase in Latin America for both periods primarily was due to new
business and market share gains in our consumer specialties product line.

Segment gross profit increased 225% (2% excluding acquisitions) in the
second quarter of 2004 and 138% (5% excluding acquisitions) in the first half of
2004 compared with the same periods in 2003. Excluding acquisitions, the
increase in segment gross profit for both periods was due to increased revenues
as a result of higher shipment volume and higher price and product mix partially
offset by higher raw material costs. The increase in segment gross profit for
the first six months of 2004 compared to the same period in 2003 partially was
also offset by higher manufacturing expenses. The gross profit percentage for
this segment was 23.6% in the second quarter of 2004 and 24.4% in the first half
of 2004 compared with 23.6% and 24.6% in the respective periods in 2003.
Excluding acquisitions, the gross profit percentage was 21.7% in the first
quarter of 2004 and 22.5% in the first six months of 2004. The decrease in gross
profit percentage for both periods was due to higher raw material costs that
partially were offset by higher product price and mix. We began implementing
price increases during the first quarter of 2004 in the range of 3% to 5% in
response to the rising raw material costs.

STAR expenses increased $19.5 million, or 143%, for the second quarter of
2004 and increased $22.8 million, or 83%, for the first six months of 2004
compared with the same periods in 2003, primarily due to acquisitions.

Segment operating income increased in the second quarter and first six
months of 2004 compared with the same periods in 2003, primarily due to the
impact of acquisitions.

2003 COMPARED WITH 2002

We had record consolidated revenues for 2003. However, income per share
before cumulative effect of a change in accounting principle declined 28% in
2003 to $1.76 per share from $2.45 per share in 2002. The primary operating
drivers of the lower earnings were lower shipment volume and higher raw material
costs and manufacturing expenses, which more than offset higher selling
price/mix, favorable currency exchange rate movements, a lower effective tax
rate and acquisitions that were accretive to earnings. In addition, a
restructuring charge reduced 2003 earnings by $0.29 per share.

Analysis of Revenues
----------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2002 2003 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Net sales............................... $1,980.3 $2,049.1 $68.8 3% $25.8 1%
Royalties and other revenues............ 3.6 3.0 (0.6) (15%) (0.6) (17%)
-------- -------- ----- -----
Total revenues.......................... $1,983.9 $2,052.1 $68.2 3% $25.2 1%
======== ======== ===== =====

In 2003, the increase in consolidated revenues was due to a 9% increase in
average selling price, partially offset by a 6% decline in shipment volume.

S-44

Changes in our shipment volume vary by geographic area. The following table
shows our 2003 shipment volume by geographic zone as well as the changes
compared with 2002.

Analysis of Volume
--------------------

EXCLUDING
2003 ACQUISITIONS
VOLUME % CHANGE % CHANGE
------ -------- ------------

North America............................................... 45% (5%) (9%)
Europe...................................................... 28% (8%) (8%)
Asia-Pacific/Middle East.................................... 20% (5%) (5%)
Latin America............................................... 7% (2%) (2%)
---
Total....................................................... 100% (6%) (8%)
===

Excluding acquisitions, approximately half of the decline in shipment
volume was due to the loss of a portion of the business associated with a major
international customer and 16% of the decline was due to a shift in our
viscosity modifier product line from liquids to higher-value concentrated solid
form. All geographic zones were affected by the loss of business with this
customer and the viscosity modifier shift, though the effects were mostly seen
in North America and Europe. In addition, weak worldwide demand for lubricants
negatively impacted volume for the year. We believe that the economic and
political conditions within certain countries of the Asia-Pacific/Middle East
region contributed to the volume decline in this zone. See the "Segment
Analysis" section for additional explanations of shipment volume changes by
business segment and geographic zone in 2003 compared with 2002.

The 9% increase in average selling price was due to a 5% increase in the
combination of price and product mix and 4% favorable currency effects. We
combine the impact of price and product mix, as frequent product changes in our
lubricant additives segment have made it difficult to distinguish between the
two components. Sequentially, the fourth quarter 2003 average selling price was
3% higher than the third quarter of 2003, due to favorable currency effects, and
6% higher than the first quarter of 2003, due to favorable currency effects and
price increases implemented in the first half of the year. In February 2004, we
announced an additional price increase in the lubricant additives segment.

Analysis of Costs and Expenses
--------------------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2002 2003 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Cost of sales.......................... $1,416.3 $1,507.8 $ 91.5 6% $61.7 4%
Selling and administrative expenses.... 196.9 202.9 6.0 3% 2.2 1%
Research, testing and development
expenses............................. 168.3 167.0 (1.3) (1%) (2.9) (2%)
Restructuring charge................... - 22.5 22.5 * 22.5 *
-------- -------- ------ -----
Total costs and expenses............. $1,781.5 $1,900.2 $118.7 7% $83.5 5%
======== ======== ====== =====

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

* Calculation not meaningful

Cost of sales increased due to higher average raw material cost and higher
manufacturing expenses, partially offset by lower shipment volume. Average raw
material cost increased 9% in 2003 compared with 2002, primarily due to 6%
higher raw material prices and, to a lesser extent, unfavorable currency
effects. Raw material prices started to increase in the second half of 2002 and
continued to increase in the first and third quarters of 2003. Sequentially, the
fourth quarter 2003 average raw material cost increased 2%

S-45

compared with the third quarter and 7% compared with the first quarter,
primarily due to higher raw material prices driven by higher prices of crude oil
and natural gas and unfavorable currency effects.

Manufacturing expenses, which are included in cost of sales, increased 14%
(12% excluding acquisitions) in 2003 compared with 2002. The increase was due to
unfavorable currency effects, acquisitions, higher utility expenses and higher
salary and benefit expenses, partially offset by a reduction in variable pay
expense. In addition, total manufacturing expenses in 2003 included a $2.6
million reclassification of expenses at certain subsidiaries of our specialty
chemicals segment that were charged in 2002 to selling and administrative
expenses or material costs.

Cost of sales in 2003 also included approximately $3.4 million in
manufacturing expenses to cover costs associated with two fires that occurred
during the second quarter of 2003. In April 2003, an after-working-hours fire
destroyed a metalworking additive blending facility we leased in Detroit. There
were no injuries, nor any damage to a nearby warehouse where we stored finished
goods. We were able to supply customers from this warehouse and have permanently
shifted production to our Painesville, Ohio plant.

In April 2003, a fire associated with a maintenance shutdown occurred in a
dispersant production unit at our plant in Le Havre, France. Again, there were
no injuries and we were able to continue to supply customers from other
facilities.

Excluding currency effects, acquisitions and the cost associated with the
fires, consolidated manufacturing expense increased 5% over 2002.

Gross profit (net sales less cost of sales) decreased $22.7 million, or 4%
($35.8 million, or 6%, excluding acquisitions), in 2003 compared with 2002. Our
gross profit percentage (gross profit divided by net sales) decreased to 26.4%
in 2003 compared with 28.5% in 2002. Excluding the impact of acquisitions, our
gross profit percentage was 26.3% in 2003. These decreases primarily were due to
lower shipment volume, higher average raw material cost and higher manufacturing
expenses, partially offset by higher average selling price and favorable net
currency effects.

The selling and administrative expenses increase, excluding acquisitions,
was due to higher salary and benefit expenses and unfavorable currency effects,
partially offset by lower variable pay expense and the reclassification to
manufacturing expense of approximately $1.1 million of specialty chemicals
segment costs that were classified as selling and administrative expenses in
2002.

The timing and amount of research, testing and development expenses
(technology expenses) are affected by lubricant additives segment product
standards, which change periodically to meet new emissions, efficiency,
durability and other performance factors as engine and transmission designs are
improved by OEMs. The decrease in technology expenses was due to lower testing
activity at outside laboratories and a reduction in our variable pay expense,
partially offset by unfavorable currency effects and higher salary and benefit
expenses. In addition, technology expenses in 2003 included a write-down of $1.1
million related to a former technical facility in Japan that we sold during the
third quarter of 2003. During 2003, approximately 82% of our technology cost was
incurred in company-owned facilities and 18% was incurred at third-party testing
facilities, compared with 78% and 22%, respectively, in 2002. In 2003, we
completed a development program for GF-4, the United States passenger car motor
oil technical standard that is scheduled for commercial introduction in 2004. We
do not expect a major shift by our customers to GF-4 before the fourth quarter
of 2004.

S-46

In 2003, we recorded a restructuring charge of $22.5 million, or $.29 per
share, related to the separation of approximately 250 employees in the United
States, Europe and India, comprising 5% of our worldwide workforce. The
components of the restructuring charge are shown in the table below:

Components of the Restructuring Charge
------------------------------------------

U.S. EUROPE INDIA TOTAL
----- ------ ----- -----
(DOLLARS IN MILLIONS)

Employee severance.......................................... $11.2 $4.6 $1.5 $17.3
Asset impairments........................................... - 3.3 - 3.3
Other*...................................................... 1.6 .3 - 1.9
----- ---- ---- -----
Total restructuring charge.................................. $12.8 $8.2 $1.5 $22.5
===== ==== ==== =====

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

* Other costs primarily include outplacement costs.

In November 2003, we announced workforce reductions of approximately 150
employees primarily at our headquarters in Wickliffe, Ohio, at our Deer Park and
Bayport, Texas manufacturing facilities and at our Hazelwood, England technical
facility. This resulted in a restructuring charge primarily for employee
severance costs in both the United States and England. The workforce reductions
were completed prior to the end of 2003. The charge for Europe also included
costs associated with the restructuring program announced in February 2003, for
our Bromborough, England intermediate production and blending facility. We have
eliminated some capacity at this facility and substantially completed workforce
reductions of 45 positions. An asset impairment charge of $3.3 million was
recorded at Bromborough for production units taken out of service. The charge
for Europe also included some severance-related costs for the closing of a sales
office in Scandinavia. The charge for India pertains to a voluntary separation
program of approximately 55 employees at our joint venture in India.

The 2003 restructuring programs were undertaken to achieve a more
competitive cost structure, primarily within the lubricant additives segment,
and to help mitigate cost pressures from higher energy, pension, health care and
insurance expenses. Annual savings are projected to be approximately $20.0
million, of which approximately $5.0 million were realized in 2003.

Excluding the effects of currency and acquisitions, we estimate 2004
operating expenses, which consist of manufacturing, selling, administrative and
technology expenses, will be approximately the same as 2003.

Analysis of Other Items and Net Income
------------------------------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2002 2003 CHANGE CHANGE CHANGE CHANGE
------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Other expense -- net....................... $ (5.4) $ (1.6) $ 3.8 * $ 4.5 *
Interest expense -- net.................... (16.6) (21.3) (4.7) * (4.7) *
Income before income taxes and cumulative
effect of change in accounting
principle................................ 180.4 129.1 (51.3) (28%) (58.5) (32%)
Provision for income taxes................. 54.1 38.3 (15.8) (29%) (17.9) (33%)
Income before cumulative effect of change
in accounting principle.................. 126.3 90.8 (35.5) (28%) (40.6) (32%)
Cumulative effect of change in accounting
principle................................ (7.8) - 7.8 * 7.8 *
Net income................................. $118.5 $ 90.8 $(27.7) (23%) $(32.8) (28%)

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

* Calculation not meaningful

S-47

The favorable change in other income (expense) primarily was due to
increased currency exchange translation gains.

Interest income decreased $2.9 million in 2003 compared with 2002 as a
result of lower interest rates. Interest expense increased $1.8 million in 2003
compared with 2002, due to the absence of the interest rate swap agreements that
we utilized in 2002. In 2002, we had swap agreements that reduced interest
expense by approximately $4.2 million ($3.1 million impact from outstanding swap
and $1.1 million amortization of deferred gain). We terminated the interest rate
swap agreements in 2002 and recorded an unrecognized gain, which is being
amortized as a reduction of interest expense through December 1, 2008.
Amortization of the unrealized gain reduced interest expense in 2003 by
approximately $2.7 million.

During 2003, the United States dollar weakened against most currencies,
especially the euro. We believe the change in currency exchange rates in 2003,
as compared with 2002 exchange rates, had a favorable effect on 2003 net income.

We had an effective tax rate of 29.7% in 2003 as compared with 30.0% in
2002. The 2003 effective tax rate was lower than the United States federal and
state statutory rate of 35%, primarily due to significant nontaxable translation
gains at foreign subsidiaries utilizing a United States dollar functional
currency. The low effective tax rate in 2002 was due primarily to a
non-recurring United States tax benefit resulting from the charitable
contribution of technology, partially offset by nontaxable translation losses.

As a result of the factors described above, income per share before the
cumulative effect of a change in accounting principle was $1.76 in 2003 compared
with $2.45 in 2002. The restructuring charge reduced earnings in 2003 by $0.29
per share.

During the first half of 2002, we completed the impairment analysis
required for SFAS No. 142, "Goodwill and Other Intangible Assets," which we
adopted on January 1, 2002. There was no impairment in the specialty chemicals
segment; however, for the lubricant additives segment, we recorded an impairment
of $7.8 million. The charge was recorded as a cumulative effect of a change in
accounting principle as of January 1, 2002. There was no tax benefit associated
with this charge.

After adjustment for the cumulative effect of a change in accounting
principle from the implementation of SFAS No. 142 in 2002, net income per share
was $1.76 in 2003 compared with $2.30 for 2002.

2002 COMPARED WITH 2001

We achieved higher revenues in 2002, primarily due to higher shipment
volume resulting from the consolidation of Lubrizol India Private Limited and
the favorable impact of acquisitions. Higher gross profit margins were realized
in 2002 compared with 2001, driven by lower average raw material cost combined
with lower unit manufacturing cost (manufacturing costs per metric ton sold) and
ongoing volume growth. The increased margin, elimination of goodwill
amortization and a lower effective tax rate, partially offset by higher STAR
(selling, testing, administrative and research) expenses, resulted in increased
net income in 2002 compared with 2001.

Beginning January 1, 2002, we consolidated all of the revenues, costs,
expenses, assets and liabilities of our joint venture, Lubrizol India Private
Limited, with an offset for our partner's minority interest. Before 2002, we
recorded our ownership in the joint venture as equity earnings, which was
included in other income on the income statement. The change from equity to
consolidation accounting resulted from an amendment to the joint venture
agreement with our partner, Indian Oil Corporation Limited, which gave us
operating control of Lubrizol India. We continue to own 50% of the voting
shares. This change had no effect on our net income, but it did affect the line
item comparisons for the income statement, the balance sheet and the statement
of cash flows.

S-48

Analysis of Revenues
----------------------

EXCLUDING
ACQUISITIONS
& LZ INDIA
---------------
$ % $ %
2001 2002 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Net sales.............................. $1,839.2 $1,980.3 $141.1 8% $33.1 2%
Royalties and other revenues........... 5.4 3.6 (1.8) (34%) 0.7 12%
-------- -------- ------ -----
Total revenues......................... $1,844.6 $1,983.9 $139.3 8% $33.8 2%
======== ======== ====== =====

The increase in 2002 revenues was due to 12% higher shipment volume,
partially offset by a 4% decline in average selling price. The consolidation of
Lubrizol India contributed 3% to the higher volume, acquisitions in our
specialty chemicals segment added 5.5% to volume and increases in ongoing
shipment levels provided the remaining 3.5% of the total shipment volume
increase.

Changes in our shipment volume vary by geographic area. The following table
shows our 2002 shipment volume by geographic zone as well as the changes
compared with 2001.

Analysis of Volume
--------------------

EXCLUDING
ACQUISITIONS
& LZ INDIA
2002 ------------
VOLUME % CHANGE % CHANGE
------ -------- ------------

North America............................................... 45% 20% 7%
Europe...................................................... 29% 6% 6%
Asia-Pacific/Middle East.................................... 20% 9% (6%)
Latin America............................................... 6% (3%) (3%)
---
Total....................................................... 100% 12% 3.5%
===

The increases in North America and Europe were due to acquisitions and the
strengthening of our business with major lubricant additives customer accounts
for engine oils and specialty driveline additives, along with the strengthening
of our lubricant additives markets, including coatings and inks and
metalworking. The decrease in Asia-Pacific volume, excluding the consolidation
of Lubrizol India, primarily was the result of business lost in Japan in
mid-2001 and the weak business environment and competitive intensity in Asia.
Latin America, our smallest zone, experienced volume declines as the result of
economic conditions, timing of orders and some business losses after the first
quarter of 2001 due to price increases.

The decrease in average selling price in 2002 compared with 2001 was due to
the combination of lower prices and product mix changes. Currency had a
negligible effect on average selling price for the year. Approximately half of
the decline in average selling price was the result of the Chemron acquisition
made in April 2002, due to its lower-priced product mix.

The decrease in royalties and other revenues in 2002 compared with 2001
primarily was due to the consolidation of Lubrizol India, effective January 1,
2002, as royalties from India were eliminated when reporting consolidated
results.

S-49

Analysis of Costs and Expenses
--------------------------------

EXCLUDING
ACQUISITIONS
& LZ INDIA
---------------
$ % $ %
2001 2002 CHANGE CHANGE CHANGE CHANGE
-------- -------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Cost of sales.......................... $1,335.5 $1,416.3 $ 80.8 6% $(4.3) 0%
Selling and administrative expenses.... 177.4 196.9 19.5 11% 15.0 8%
Research, testing and development
expenses............................. 158.5 168.3 9.8 6% 8.9 6%
-------- -------- ------ -----
Total costs and expenses............... $1,671.4 $1,781.5 $110.1 7% $19.6 1%
======== ======== ====== =====

The 2002 increase in cost of sales was due to higher shipment levels and
higher manufacturing expenses, partially offset by a decline in average raw
material cost. Average raw material cost decreased 6% in 2002 compared with
2001, due to both lower raw material prices and product mix changes.

Although average raw material cost decreased in 2002 compared with 2001 on
an annual basis, raw material prices started to increase in the second half of
2002. Sequentially in 2002, average raw material cost increased 1% in the third
quarter compared with the second quarter, and 4% in the fourth quarter compared
with the third quarter, due to the combination of higher raw material prices and
higher-cost product mix. There were five price increases in base oil, our
highest-volume raw material, between the end of April 2002 and the middle of
October 2002, along with increases in other raw material prices. To recover the
rapidly rising raw material prices that were affecting our business, we
implemented an additive price increase in our lubricant additives segment in
December 2002 for the North America zone and in January 2003 for the rest of the
world.

Manufacturing expenses, which are included in cost of sales, increased 9%
(2% excluding acquisitions and the consolidation of Lubrizol India), in 2002
compared with 2001. The increase in manufacturing expenses was due to higher
volume and higher compensation costs, consisting of variable pay and salary and
employee benefit expenses, partially offset by lower utility expenses. Even
though total manufacturing expenses increased, unit manufacturing cost was down
3% in 2002 compared with the prior year, primarily due to higher throughput and
productivity improvements.

Gross profit (net sales less cost of sales) increased $60.3 million, or 12%
($37.4 million, or 7%, excluding acquisitions and the consolidation of Lubrizol
India), in 2002 compared with 2001. The increase primarily was the result of
higher volume and lower raw material costs, partially offset by higher
manufacturing expenses and lower selling prices. Our gross profit percentage
(gross profit divided by net sales) increased to 28.5% in 2002 compared with
27.4% in 2001, due to the reasons explained previously. Excluding the impact of
the consolidation of Lubrizol India and acquisitions, our gross profit
percentage was 28.9% in 2002.

The 2002 increase in selling and administrative expenses, excluding
acquisitions, primarily was due to higher compensation costs for existing
businesses and incremental staffing and other costs associated with our strategy
to expand into new markets. In addition, we recorded a $2.0 million charge for a
contract claim related to an employee offsite personal injury.

The 2002 increase in research, testing and development expenses primarily
was a result of four engine oil programs. The first program pertained to the
United States passenger car motor oil technical standard, GF-4, which is slated
for commercial introduction at the end of 2004. The second program pertained to
the European program for reduced emission targets for both diesel and passenger
car applications (Euro IV). Commercial introduction was originally anticipated
for 2005, when Euro IV becomes mandatory. However, plans to offer road tax
incentives in Europe pushed commercial introduction to mid-2003. This resulted
in increased technology and commercial product development expense in the fourth
quarter of 2002 that had not been anticipated. The third program pertained to
the introduction in early 2003 of new European passenger car standards, which
significantly increased performance requirements. The change in the baseline

S-50

performance required by OEMs for their specifications resulted in the
redevelopment of several products. The fourth program pertained to the current
United States diesel engine oil specification, PC-9, which was formally
introduced in the third quarter of 2002.

Analysis of Other Items and Net Income
------------------------------------------

EXCLUDING
ACQUISITIONS
---------------
$ % $ %
2001 2002 CHANGE CHANGE CHANGE CHANGE
------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)

Other expense -- net....................... $(15.1) $ (5.4) $ 9.7 * $12.3 *
Interest expense -- net.................... (18.3) (16.6) 1.7 * 1.5 *
Income before income taxes and cumulative
effect of change in accounting
principle................................ 139.9 180.4 40.5 29% 28.0 20%
Provision for income taxes................. 45.8 54.1 8.3 18% (1.0) (2%)
Income before cumulative effect of change
in accounting principle.................. 94.1 126.3 32.2 34% 29.0 31%
Cumulative effect of change in accounting
principle................................ - (7.8) (7.8) * (7.8) *
Net income................................. $ 94.1 $118.5 $24.4 26% $21.2 23%

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

* Calculation not meaningful

Beginning in 2002, the other income (expense) line item no longer included
amortization of goodwill, due to a change in accounting standards, or equity
income from Lubrizol India. Goodwill amortization expense was approximately
$11.0 million in 2001. Equity income for Lubrizol India was $2.9 million in
2001. The remaining variance primarily was due to lower currency exchange
translation losses.

Interest income was about even in 2002 compared with 2001. Interest expense
decreased $1.6 million in 2002 compared with 2001, partially due to lower
interest rates. In addition, we terminated our interest rate swap agreements,
which had converted the fixed interest rate on $100.0 million of 5.875%
debentures to a variable rate. In terminating the swaps, we received cash of
$18.1 million and recorded a $17.3 million unrealized gain, which is being
amortized as a reduction of interest expense through December 1, 2008, the due
date of the underlying debt. Amortization of the unrealized gain reduced
interest expense in 2002 by $1.1 million.

During 2002, the United States dollar weakened against most currencies,
especially the euro and the yen, and we believe the change in currency exchange
rates had a slightly favorable effect on net income as compared with the impact
during 2001.

We had an effective tax rate of 30.0% in 2002, compared with 32.7% for
2001, which increased 2002 earnings by $.09 per share. The lower effective tax
rate in 2002 was primarily due to the United States tax benefit resulting from a
charitable contribution of technology made in 2002 that did not occur in 2001,
along with the elimination of goodwill amortization pursuant to the new
accounting standard.

As a result of the factors described above, income per share before the
cumulative effect of a change in accounting principle was $2.45 in 2002 compared
with $1.84 in 2001. After adjusting net income for the cumulative effect of a
change in accounting principle due to the implementation of SFAS No. 142, net
income per share was $2.30 in 2002 compared with $1.84 for 2001.

S-51

SEGMENT ANALYSIS

Operating Results by Segment
-------------------------------

2001 2002 2003
-------- -------- --------
(DOLLARS IN MILLIONS)

Revenues:
Lubricant additives.................................. $1,726.7 $1,798.2 $1,796.7
Specialty chemicals.................................. 117.9 185.7 255.4
-------- -------- --------
Total............................................. $1,844.6 $1,983.9 $2,052.1
======== ======== ========
Gross profit:
Lubricant additives.................................. $ 470.1 $ 515.0 $ 481.2
Specialty chemicals.................................. 33.7 49.0 60.1
-------- -------- --------
Total............................................. $ 503.8 $ 564.0 $ 541.3
======== ======== ========
Segment operating income (loss):
Lubricant additives.................................. $ 205.1 $ 235.2 $ 201.5
Specialty chemicals.................................. (11.3) 0.4 0.9
-------- -------- --------
Total............................................. $ 193.8 $ 235.6 $ 202.4
======== ======== ========

LUBRICANT ADDITIVES SEGMENT

Segment revenues decreased $1.5 million in 2003 compared with 2002 due to
an 8% decrease in shipment volume partially offset by a 7% increase in average
selling price. The increase in average selling price in 2003 primarily was due
to favorable currency effects of 4.5% and the remainder was due to higher prices
and favorable product mix.

Lubricant additives implemented a price increase in December 2002 for North
America and in January 2003 for the rest of the world. A second price increase
that was structured as a surcharge was implemented in late March 2003 for North
America and in late April for Asia and Latin America as well as for select
products in Europe. This surcharge was designed to address the continuing rise
in raw material prices and natural gas-fired utility costs that had occurred
since the last price increase in the fourth quarter of 2002. In February 2004,
we announced an additional price increase, effective March 2004, for products
sourced from North America and effective April 2004, for products sourced from
Latin America, in response to recent increases in the prices of raw materials
and energy.

The following table shows the changes in shipment volume by geographic zone
in 2003 compared with 2002:

Analysis of Volume -- 2003 vs. 2002
--------------------------------------

% CHANGE
-----------

North America............................................... (11)%
Europe...................................................... (9)%
Asia-Pacific/Middle East.................................... (6)%
Latin America............................................... (2)%
Total....................................................... (8)%

Approximately half of the total shipment volume decline in 2003 was due to
business losses associated with a major international customer. Lower unit sales
of viscosity modifiers products in 2003 also contributed to the decline,
principally caused by a shift from liquid polymers to solid polymers. Generally,
solids are one-tenth the volume of liquids. Excluding this shift in our
viscosity modifier product line, total shipment volume

S-52

decreased 7% in 2003. The shift had no impact on gross profit dollars. All
geographic zones were affected by the loss of business with this customer and
the viscosity modifier shift, though the effects were mostly seen in North
America and Europe. The declines in North America for 2003 also were due to the
conversion of some products in our specialty driveline product line to more
concentrated formulations. In addition, weak worldwide demand for lubricants
contributed to the declines in the North America and Europe zones in 2003. The
decrease in Asia-Pacific/Middle East volume primarily was due to the weak
business environment stemming from economic and political conditions in some
parts of this region.

Segment gross profit (net sales less cost of sales) decreased $33.8
million, or 7%, in 2003 compared with 2002. The decrease primarily was due to
lower shipment volume, higher average raw material cost and higher manufacturing
expenses, partially offset by higher average selling price and favorable net
currency effects. For these reasons, the gross profit percentage for this
segment decreased to 26.8% in 2003, compared with 28.7% in 2002.

Direct selling, testing, administrative and research (STAR) expense
decreased $2.9 million, or 1%, in 2003 compared with 2002, primarily due to
lower technical spending at outside test laboratories. Segment operating income
(revenues less expenses attributable to the product lines included within each
segment) decreased $33.7 million, or 14%, in 2003 compared with 2002 as a result
of lower gross profit and lower equity earnings from our joint venture in Saudi
Arabia, partially offset by lower technology expenses.

In 2002, segment revenues increased $71.5 million, or 4%, compared with
2001, with 6% higher shipment volume. Excluding the impact of the consolidation
of Lubrizol India, revenues increased $20.9 million, or 1%, due to a 3% increase
in ongoing shipment volume, partially offset by a 2% decrease in average selling
price. The combination of lower prices and product mix effects reduced average
selling price by 3%, but partially was offset by slightly favorable currency
effects, due to the weakening of the dollar against the euro and the yen.

The following table shows the changes in shipment volume by geographic zone
in 2002 compared with 2001:

Analysis of Volume -- 2002 vs. 2001
--------------------------------------

EXCLUDING LZ INDIA
% CHANGE % CHANGE
----------- ------------------

North America........................................... 7% 7%
Europe.................................................. 6% 6%
Asia-Pacific/Middle East................................ 9% (6)%
Latin America........................................... (5)% (5)%
Total................................................... 6% 3%

The 2002 shipment volume increases in North America and Europe primarily
were due to the strengthening of our engine additives product line and, to a
lesser extent, our specialty driveline product line. In North America, this
increase was with major international accounts, while in Europe it was across
our customer base. Excluding Lubrizol India, the decline in Asia-Pacific volume
primarily was as a result of lost engine oil business in Japan in mid-2001 and
the weak business environment and competitive intensity in Asia. Latin America,
our smallest zone, experienced volume declines as the result of economic
conditions, timing of orders and some business losses after the first quarter of
2001 due to price increases.

Segment gross profit increased $44.9 million, or 10%, in 2002 compared with
2001. Excluding the impact of the consolidation of Lubrizol India, gross profit
increased by $31.8 million, or 7%. The increase was due to 3% higher shipment
volume and lower average raw material cost, partially offset by increased
manufacturing expenses and lower average selling price. The gross profit
percentage for this segment was 28.7% in 2002 compared with 27.3% in 2001.

STAR expenses increased $20.4 million, or 8%, in 2002 compared with 2001,
primarily due to higher technical expense and marketing expenses. Amortization
expenses decreased by $7.8 million in 2002

S-53

compared with 2001, as 2002 expense no longer included the amortization of
goodwill due to a change in accounting standards.

Segment operating income increased $30.1 million, or 15%, in 2002 compared
with 2001. Excluding the impact of the consolidation of Lubrizol India, segment
operating income increased $22.5 million. The increase primarily was due to
higher gross profit and lower amortization expense, partially offset by higher
direct technology and marketing expenses.

SPECIALTY CHEMICALS SEGMENT

Segment revenues for specialty chemicals increased $69.7 million, or 38%
($26.7 million, or 14%, excluding acquisitions), in 2003 compared with 2002. The
acquisition-related increase primarily was due to the 2002 acquisitions of Dock
Resins Corporation and Chemron Corporation and the 2003 acquisition of a
personal care ingredients business. The 2003 increase in segment revenues,
excluding acquisitions, was due to a 9% increase in shipment volume along with
4% favorable currency impact and 1% stronger price and product mix.

The following table shows the changes in shipment volume by geographic zone
in 2003 compared with 2002:

Analysis of Volume -- 2003 vs. 2002

EXCLUDING ACQUISITIONS
% CHANGE % CHANGE
----------- ----------------------

North America........................................ 36% 7%
Europe............................................... 16% 14%
Asia-Pacific/Middle East............................. 31% 26%
Latin America........................................ 16% 16%
Total................................................ 31% 9%

The 2003 shipment volume increase in North America primarily was due to the
2002 acquisitions of Chemron and Dock Resins and the 2003 acquisition of a
personal care ingredients business. Excluding acquisitions, the increase in
North America in 2003 was due to market share gains in our consumer specialties
product line along with increases in our performance coatings product line from
the introduction of new products. The increase in Europe in 2003 was primarily
due to market share gains and new applications in our specialty monomers
products. The increase in 2003 for the Asia-Pacific/Middle East zone was spread
across many product lines and is due to an increasing focus in this region
leading to new business in most of our businesses. The increase in Latin America
in 2003 was due to a shift from North America to Latin America of our specialty
emulsifiers products with some of our existing customers, along with some
business gains of our coatings and inks, defoamer and specialty monomers
products.

Segment gross profit increased $11.1 million, or 23% (decreased $2.0
million, or 4%, excluding acquisitions), in 2003 compared with 2002. Excluding
acquisitions, the decrease in segment gross profit in 2003 was due to higher
manufacturing expenses and average raw material cost partially offset by higher
shipment volume and higher average selling price due to favorable currency
effects. The increase in manufacturing expenses was due to higher shipment
volume, $2.4 million in expenses associated with the integration of a
multi-purpose chemical production facility in Spartanburg, South Carolina that
was purchased in the second quarter of 2003, and higher manufacturing overhead
to some specialty chemicals products produced at lubricant additives facilities
as a result of unusually low lubricant additives volumes in 2003. The gross
profit percentage for this segment was 23.6% in 2003, compared with 26.4% in
2002. The decrease in the gross profit percentage in 2003 was due to higher raw
material costs and increased manufacturing expenses.

Specialty chemical segment operating income increased $0.5 million, or 125%
(decreased $6.7 million excluding acquisitions), in 2003 compared with 2002.
Excluding acquisitions, the decrease primarily was due

S-54

to lower gross profit, higher direct technology and selling expenses and higher
amortization expenses of intangibles that resulted from acquisitions.

In 2002, segment revenues increased $67.7 million, or 57% ($12.9 million,
or 11%, excluding acquisitions), compared with 2001. The acquisitions-related
increase primarily was due to the acquisitions of Chemron and Kabo Unlimited,
Inc. The 2002 increase in segment revenues, excluding acquisitions, was due to a
15% increase in shipment volume as a result of strengthening markets compared
with 2001, partially offset by a 4% decrease in average selling price.

The following table shows the changes in shipment volume by geographic zone
in 2002 compared with 2001:

Analysis of Volume -- 2002 vs. 2001

EXCLUDING ACQUISITIONS
% CHANGE % CHANGE
----------- ----------------------

North America........................................ 218% 14%
Europe............................................... 2% 2%
Asia-Pacific/Middle East............................. 242% 242%
Latin America........................................ 19% 19%
Total................................................ 123% 15%

The increase in North America shipment volume primarily was due to the
acquisitions of Chemron and Kabo. Excluding acquisitions, the ongoing volume
growth in North America was due to strengthening markets, particularly in our
performance coatings product line, as well as the introduction of new products
and some business gains in this area. The increase in the Asia-Pacific zone
primarily was due to new business gains across all of our businesses. The
increase in the Latin America zone was due to market share gains for our
coatings and inks and specialty emulsifiers products.

Segment gross profit increased $15.3 million, or 45%, in 2002 compared with
2001. Excluding acquisitions, gross profit increased $5.5 million, or 16%. The
increases primarily were due to higher shipment volume and lower average raw
material cost. The gross profit percentage for this segment was 26.4% in 2002,
compared with 28.6% in 2001. The decrease in the gross profit percentage
primarily was due to the impact of the Chemron acquisition, due to its
lower-priced product mix.

Segment operating income in 2002 was $0.4 million compared with a segment
operating loss of $11.3 million in 2001. The increase was due to higher gross
profit, the impact of acquisitions and the accounting change for goodwill
amortization. The elimination of goodwill amortization, effective January 1,
2002, benefited this segment by approximately $2.1 million in 2002.

RETURN ON AVERAGE SHAREHOLDERS' EQUITY

Return on average shareholders' equity was 10% in 2003, 14% in 2002 and 12%
in 2001 (10%, 15% and 12%, respectively, excluding the cumulative effect of the
change in accounting principle in 2002). The return on average shareholders'
equity is calculated as current year net income divided by the average of
year-end shareholders' equity for the current and prior year. The restructuring
charge in 2003 lowered the return on average shareholders' equity by
approximately 200 basis points.

S-55

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our financial performance indicators of
liquidity:

Selected Measures of Liquidity and Capital Resources
-------------------------------------------------------

DECEMBER 31, JUNE 30,
--------------- ---------
2002 2003 2004
------ ------ ---------

Cash and short-term investments (millions of dollars)....... $266.4 $258.7 $ 227.3
Working capital (millions of dollars)....................... $602.0 $638.4 $(1,123.5)
Current ratio............................................... 3.0 3.1 0.6
Debt as a % of capitalization............................... 31.6% 29.0% 71.0%
Average number of days sales in accounts receivable......... 52.7 54.1 53.4
Average number of days sales in inventory................... 80.6 89.4 88.0

The following table summarizes the major components of cash flow:

Summary of Cash Flows
-------------------------

SIX-MONTH
PERIODS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- ------------------
2001 2002 2003 2003 2004
------ ------- ------- ------ ---------
(DOLLARS IN MILLIONS)

Cash provided from/(used for):
Operating activities......................... $195.8 $ 244.9 $ 194.8 $ 44.5 $ 96.2
Investing activities......................... (81.6) (148.5) (155.9) (36.5) (1,002.9)
Financing activities......................... (68.7) (30.4) (59.5) (29.0) 868.9
Effect of exchange-rate changes on cash........ (2.4) 11.4 12.9 4.5 6.4
------ ------- ------- ------ ---------
Net increase/(decrease) in cash and short-term
investments.................................. $ 43.1 $ 77.4 $ (7.7) $(16.5) $ (31.4)
====== ======= ======= ====== =========

OPERATING ACTIVITIES

The increase in cash provided from operating activities in the first six
months of 2004 compared with the same period in the prior year primarily was due
to an increase in earnings after adjusting for non-cash items, specifically the
$35.0 million write-off of acquired IPR&D projects from the Noveon International
acquisition. We also had a working capital build-up in accounts receivable,
which used cash of $77.0 million. Our receivables increased by $265.1 million
from the prior year-end, primarily due to the Noveon International and
hyperdispersants acquisitions. Days sales in receivables averaged 53.4 days in
the first six months of 2004, which approximates our target for 2004 of 53.5
days. Days sales in inventory averaged 88.0 days for the first six months of
2004 compared with our 2004 target of 90 days.

Cash provided from operating activities in 2003 decreased $50.1 million, or
20%, compared with 2002. The decrease primarily was due to lower earnings and an
unfavorable change in working capital items of $9.0 million in 2003 compared
with a favorable change of $13.9 million in working capital items in 2002. Lower
receivable and inventory levels partially offset the increase in the other
working capital items, when currency effects and acquisitions are considered.

We manage our levels of inventories and accounts receivable on the basis of
average days sales in inventory and average days sales in receivables. Our
target for days sales in inventory is established with the goal of minimizing
our investment in inventories while at the same time ensuring adequate supply
for our customers. Our 2003 target for days sales in inventory was 87.0 days.
The actual 2003 average days sales in inventory of 89.4 exceeded our target
because we built strategic stock in mid-year to secure supplies of

S-56

certain key materials and because shipment volume was lower than anticipated,
especially in the third quarter of 2003. The actual 2002 average days sales in
inventory of 80.6 days was below the 2002 target level of 85.0 days because of
strong demand and high plant utilization in 2002. Our target for days sales in
accounts receivable is established primarily as a function of the average credit
terms offered to our customers. Our average days sales in receivables of 54.1
days was approximately equal to our target of 53.5 days in 2003.

We reduced accounts payable and accrued liabilities by $26.8 million in
2003 compared with a buildup of $2.6 million in 2002, due to lower variable pay
accrual and the timing of procurement and payment to vendors. We have not
changed our payment terms to suppliers.

INVESTING ACTIVITIES

Our capital expenditures in the first six months of 2004 were $42.2
million, as compared with $36.8 million for the same period in 2003. In 2004, we
estimate capital expenditures will be in the range of $135.0 million to $140.0
million, compared with $88.5 million in 2003. The 2004 estimate includes
approximately $40.0 million for the newly acquired Noveon International
business.

Our capital expenditures in 2003 were $88.5 million compared with $65.3 and
$66.3 million in 2002 and 2001, respectively. We manage our capital investments
at the authorization level and the expenditures occur over the period required
to complete the individual projects. We authorized projects totaling $105.4
million in 2003, $97.2 million in 2002 and $87.8 million in 2001. Significant
capital expenditures in 2003 included the purchase and integration of a
multipurpose chemical production facility in Spartanburg, South Carolina, for
$5.2 million, a number of projects at our Deer Park, Texas facility and expanded
production capabilities at our joint venture in China. In 2004, we are budgeting
our capital investment authorizations at approximately $95.0 million, which
approximates our estimated annual depreciation expense. We also estimate capital
expenditures will approximate $95.0 million in 2004.

In June 2004, we completed the Noveon International acquisition for cash of
$920.2 million plus transaction costs of $10.5 million less certain seller
expenses of $32.9 million and less cash acquired of $103.0 million.

In January 2004, we completed the acquisition of the hyperdispersants
business of Avecia for cash totaling $133.0 million. This additives business is
headquartered in Blackley, United Kingdom, and develops, manufactures and
markets high-value additives that are based on polymeric dispersion technology
and used in coatings and inks. These products enrich and strengthen color while
reducing production costs and solvent emissions, and are marketed under the
brand names Solsperse(R), Solplus(R) and Solthix(R). Historical annual revenues
of this business are approximately $50.0 million. We funded the acquisition
through E43.0 million borrowings ($55.0 million equivalent) under a 364-day
credit facility, $5.0 million in yen borrowings and the remainder in cash. At
December 31, 2003, we had a foreign currency forward contract of $125.0 million
in order to fix the U.S. dollar price for this acquisition. In the first quarter
of 2004, we recorded a pre-tax gain of $6.4 million ($0.08 per share) upon the
termination of this foreign currency forward contract.

In 2003, we completed two acquisitions in the specialty chemicals segment
for cash totaling $68.6 million. In September 2003, we acquired a personal care
ingredients business from Amerchol Corporation, a subsidiary of The Dow Chemical
Company. Products from this business are utilized in a wide variety of end-use
applications, including skin care and hair conditioners. Products include methyl
glucoside derivatives, lanolin derivatives and Promulgen(TM) personal care
ingredients. Historical annual revenues of this acquisition approximate $30.0
million. In July 2003, we purchased silicone product lines from BASF with
historical annual revenues of approximately $6.0 million, which expanded our
foam control additives business to approximately $40.0 million in annual
revenues. Silicones are used in the manufacture of sealants, caulks and
waterproofing products.

In 2002, we completed four acquisitions in the specialty chemicals segment
for cash of $86.7 million. In the first quarter, we purchased Kabo, which
specializes in the development, manufacture and sale of antifoam and defoaming
agents to the food, fermentation, mining and wastewater industries. Kabo's
product lines expanded our defoamer business. In the second quarter, we
purchased Chemron, which formulates, produces

S-57

and supplies specialty surfactants used in personal care products, industrial
cleaners and a wide range of other consumer and industrial products. The
acquisition extended our existing surfactants business into growth markets where
we previously had not competed. In October 2002, we acquired Dock Resins, which
develops, manufactures and sells proprietary polymers including acrylic,
methacrylic, alkyd and polyester resins to customers in the paint and coatings,
printing ink, laminating, adhesives and sealants and grease markets. In October,
we also acquired Brose Chemical Company, which has product lines that complement
our integrated defoamer business that are now manufactured in our Kabo foam
control facility. Annual 2002 revenues from these acquisitions in the aggregate
were approximately $85.0 million.

FINANCING ACTIVITIES

The increase in cash provided from financing activities of $868.9 million
in the first six months of 2004 was due to borrowings of $1,797.0 million under
our $2,450.0 million 364-day temporary bridge facility, the proceeds of which
were used to fund the Noveon International acquisition and repay assumed Noveon
International debt of $1,103.1 million.

Cash used in financing activities increased in 2003 primarily because cash
provided in financing activities in 2002 included proceeds of $18.1 million from
the termination of the interest rate swaps that did not recur in 2003. The
remainder of the increase was due to a net decrease in borrowings of $6.8
million and a $4.0 million reduction of cash received from exercise of stock
options.

During the first half of 2001, we repurchased approximately 1.0 million
common shares for $30.0 million pursuant to our share repurchase program. We
suspended this program indefinitely in the second quarter of 2001 in order to
hold our financial resources for acquisitions.

CAPITALIZATION AND CREDIT FACILITIES

Our total debt to capitalization ratio at June 30, 2004 was 71.0%.
Capitalization is shareholders' equity plus total debt.

After the announcement of the Noveon International acquisition, our
long-term debt and commercial paper credit ratings were downgraded. The credit
rating change eliminated our access to the commercial paper market. As a result,
we repaid our outstanding commercial paper and we terminated our existing
floating-to-fixed rate interest rate swaps with a notional value of $50.0
million effective April 29, 2004. The termination of the swaps resulted in a
$2.9 million dollar pre-tax charge that was recognized in the second quarter of
2004. In addition, we called and repaid the outstanding $18.4 million marine
terminal refunding revenue bonds, at par, in the second quarter of 2004.

Our ratio of current assets to current liabilities, excluding $1,797.1
million short-term debt that we expect to refinance, declined from 3.1 at
December 31, 2003 to 1.9 at June 30, 2004, because of the Noveon International
and hyperdispersants acquisitions.

At June 30, 2004, we had a $350.0 million revolving credit facility that
matures in July 2006, which allows us to borrow at or below the U.S. prime rate.
As of June 30, 2004, we had outstanding borrowings under this agreement of $75.0
million, the proceeds of which were used to fund the repayment of previously
outstanding commercial paper and marine terminal bonds, and liabilities
associated with the termination of various floating-to-fixed interest rate
swaps.

In May 2004, we obtained a 364-day credit facility of $2,450.0 million for
the purpose of financing the Noveon International acquisition. This temporary
bridge facility enables us to borrow at or below the U.S. prime rate. In June
2004, we borrowed $1,797.0 million under this facility to finance initially the
Noveon International acquisition and repay a portion of the assumed Noveon
International debt. In addition, in July 2004 we borrowed an additional $175.0
million under this facility to repay the outstanding notes also assumed as part
of the Noveon International acquisition.

Concurrently with this offering, we plan to implement a permanent capital
structure that will replace the temporary bridge facility. We expect the
long-term financing to include approximately $426.2 million in new

S-58

common equity and $1,150.0 million aggregate principal amount of senior
unsecured debt securities, with the remainder being financed through bank term
loans. When this permanent capital structure is in place, we estimate that our
total debt to capitalization will be approximately 60%. We have amended our
existing credit facility previously discussed to change the consolidated debt to
consolidated EBITDA ratio (as defined in the existing credit facility) from
3.25:1 to 5.75:1 until our permanent capital structure is in place.

In January 2004, we obtained a separate revolving credit facility that
enabled us to borrow up to E50.0 million for the purpose of financing European
acquisitions. We borrowed E43.0 million under this facility in January 2004.
This amount was repaid in June 2004 and the credit facility has been terminated.

We entered into a new credit agreement on August 24, 2004 pursuant to which
we and our designated subsidiaries may borrow up to $500.0 million under a
five-year unsecured revolving credit facility and $575.0 million under an
unsecured amortizing term note. Each of our wholly owned direct and indirect
domestic subsidiaries will unconditionally guarantee all of our obligations
under the credit agreement. We will not make any draws on the revolving credit
facility or the term note until the effective date of the facility, which is
expected to occur concurrently with the closing of this offering. We expect to
borrow the full amount under the term note on the closing date of this offering,
as described above. We do not expect to borrow under the revolving credit
facility at that time.

CONTRACTUAL CASH OBLIGATIONS

The following table shows our contractual cash obligations (in millions)
under debt agreements, leases, non-cancelable purchase commitments and other
long-term liabilities at June 30, 2004. Additional information on debt can be
found in Note 5 to our consolidated financial statements for the year ended
December 31, 2003.

PAYMENTS DUE BY PERIOD
-------------------------------------------------
REMAINDER 2005 & 2007 & 2009 &
TOTAL OF 2004 2006 2008 AFTER
-------- --------- -------- ------ ------

Total debt................................... $2,380.3 $191.1 $1,876.8 $212.4 $100.0
Operating leases............................. 76.3 19.4 26.3 13.4 17.2
Non-cancelable purchase commitments.......... 252.7 143.2 60.3 46.2 3.0
Other long-term liabilities.................. 41.6 2.2 15.0 7.7 16.7
-------- ------ -------- ------ ------
Total contractual cash obligations........... $2,750.9 $355.9 $1,978.4 $279.7 $136.9
======== ====== ======== ====== ======

Non-cancelable purchase commitments primarily include raw materials
purchased under take or pay contracts, drumming, warehousing and service
contracts, terminal agreements and toll processing arrangements. Other long-term
liabilities disclosed in the table represent long-term liabilities reported in
our consolidated balance sheet at June 30, 2004, under "other noncurrent
liabilities," excluding pension, postretirement and other non-contractual
liabilities. Total debt includes both the current and long-term portion of debt
as reported in Note 5 to our consolidated financial statements for the year
ended December 31, 2003. While we intend to refinance the temporary bridge
facility in 2004, the temporary bridge facility is not due and payable until May
2005.

We expect to make employer contributions for pension benefits in 2004
consisting of $10.5 million to the United States qualified plans including
Noveon International, $2.5 million to the United States non-qualified plan and a
range of $5.0 million to $6.0 million for the United Kingdom plan. In addition,
we expect non-pension postretirement benefit payments in the United States to be
approximately $4.2 million in 2004.

We had $2,380.3 million of debt outstanding at June 30, 2004, most of which
originated from our acquisition of Noveon International, including bridge loan
financing of $1,797.0 million, which is due in May 2005. As a result, our total
debt as a percent of capitalization has increased from 29% at December 31, 2003
to 71% at June 30, 2004. We will also incur increased interest expense. We
intend to implement a permanent capital structure in the near-term that will
replace the temporary bridge facility and reduce our interest cost.

S-59

We expect the permanent capital structure will include approximately $426.2
million in new common equity. Our debt level will require us to dedicate a
significant portion of our cash flow to make interest and principal payments,
thereby reducing the availability of our cash flow for acquisitions or other
purposes. Nevertheless, we believe our future operating cash flows will be
sufficient to cover our debt repayments and other obligations and that we have
untapped borrowing capacity that can provide us with additional financial
resources.

CRITICAL ACCOUNTING POLICIES

The determination and application of our accounting policies is an
important process that has developed as our business activities have evolved and
as the accounting rules have developed. Accounting rules generally do not allow
a selection among alternatives, but involve an implementation and interpretation
of existing rules and the use of judgment to the specific set of circumstances
existing in our business. We believe the proper implementation and consistent
application of the accounting pronouncements are critical. However, not all
situations are specifically addressed in the accounting rules and we use our
best judgment to adopt a policy for accounting for those situations not
addressed. We accomplish this by analyzing similar situations and the accounting
guidance governing them, and often consult with our independent auditors about
the appropriate interpretation and application of these policies.

Accounting policies for which our subjective judgment is particularly
important include estimating valuation reserves and contingencies, determining
the net periodic pension cost and postretirement benefit cost and accounting for
business combinations, goodwill impairment and debt issuance costs. To the
extent actual experience differs from our assumptions and estimates, we may have
to increase or decrease these reserves and contingencies and earnings could be
affected.

ACCOUNTING FOR RESERVES AND CONTINGENCIES

Our accounting policies for reserves and contingencies cover a wide variety
of business activities, including reserves for potentially uncollectible
receivables, slow-moving or obsolete inventory, legal and environmental
exposures, and tax exposures. We accrue these reserves when our assessments
indicate that it is probable that a liability has been incurred or an asset will
not be recovered and an amount can be reasonably estimated. We review these
estimates quarterly based on currently available information. Actual results may
differ from our estimates and our estimates may be revised upward or downward,
depending upon the outcome or changed expectations based on the facts
surrounding each exposure. We discuss annually with the audit committee of our
board of directors our reserves and contingencies, as well as our policies and
processes for evaluating them.

DETERMINATION OF NET PERIODIC PENSION COST

Each year we review with our actuaries the actuarial assumptions used in
the determination of United States net periodic pension cost, as prescribed by
SFAS No. 87, "Employers Accounting for Pensions." The determination of net
periodic pension cost is based upon a number of actuarial assumptions, including
the expected return on plan assets, the discount rate for determining the funded
status, and the rate of compensation increase. We also annually review our
international pension plan assumptions by country with the applicable plan
actuary and appropriately adjust the assumptions. Additionally, the assumptions
for each of our pension plans are reviewed with the audit committee of our board
of directors. Our net periodic pension cost for all pension plans was $14.1
million in 2003, $8.4 million in 2002 and $6.2 million in 2001. In 2003, our
United States pension expense represented approximately 60% of the consolidated
total pension expense.

S-60

Our assumption for the expected return on plan assets is based upon our
long-term experience and return targets for specific investment classes. During
2003, we maintained our assumption for the United States plans of 9% because we
believe that it represents a reasonable return that can be achieved over the
long term using our current asset allocation. We did not substantially change
our investment philosophy or investment mix of the asset portfolio in the United
States plans. For the Lubrizol plans at December 31, 2003, a change in the rate
of return of 100 basis points would have the following effects on the net
periodic pension cost:

Increase (Decrease) in Net Periodic Pension Cost from Change in Rate of Return
--------------------------------------------------------------------------------

100 BASIS POINT
---------------------
INCREASE DECREASE
--------- ---------
(DOLLARS IN MILLIONS)

United States pension plans................................. $(2.0) $2.0
International pension plans................................. (1.2) 1.2
----- ----
All pension plans........................................... $(3.2) $3.2
===== ====

The selection of a discount rate for pension plans is required to determine
future pension obligations and represents our estimate of the available cost in
the market place of settling all pension obligations through annuity purchases.
We determine the discount rate based upon current market indicators, including
rates of return on AA-rated corporate bonds or on long-term United States
Treasury obligations. We lowered the 2003 discount rate assumption for our
United States pension plans to 6.25% from 6.75% used in 2002. On a worldwide
basis, the 2003 weighted average discount rate was lowered to 5.88% from 6.34%
used in 2002. For the Lubrizol plans at December 31, 2003, a change in the
discount rate of 100 basis points would have the following effects on the
periodic pension cost:

Increase (Decrease) in Net Periodic Pension Cost from Change in Discount Rate
--------------------------------------------------------------------------------

100 BASIS POINT
---------------------
INCREASE DECREASE
--------- ---------
(DOLLARS IN MILLIONS)

United States pension plans................................. $(2.1) $4.3
International pension plans................................. (2.2) 2.5
----- ----
All pension plans........................................... $(4.3) $6.8
===== ====

The value of our United States plan assets increased in 2003 and the value
of the assets exceeds the accumulated benefit obligation liability by
approximately $19.0 million at the end of the year. The higher investment
returns in 2003 have increased the funded level of our United States plans. The
accumulated benefit obligation for all pension plans worldwide exceeds the value
of plan assets by approximately $23.0 million.

Changes in pension plan assumptions for the Lubrizol plans are expected to
increase pension expense for all pension plans worldwide in 2004 by
approximately $6.0 to $7.0 million, which will not have a significant impact on
our financial condition or results of operations. The increase in the pension
expense is due primarily to the decline in the discount rate, the addition of
approximately $1.0 million of unrecognized loss amortization in 2004, market
returns and other factors.

DETERMINATION OF POSTRETIREMENT BENEFIT COST

Annually we review with our actuaries the key economic assumptions used in
calculating postretirement benefit cost as prescribed by SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
Postretirement benefits include health care and life insurance plans. The
determination of postretirement benefit cost is based upon a number of actuarial
assumptions, including the discount rate for determining the accumulated
postretirement benefit obligation, the assumed health care cost trend rates and
ultimate health care trend rate. The same discount rate selected for the pension
plan generally is used for

S-61

calculating the postretirement benefit obligation. Net non-pension
postretirement benefit cost was $5.6 million in 2003, $4.7 million in 2002 and
$3.9 million in 2001. Our United States non-pension postretirement benefit cost
in 2003 approximated 92% of the total non-pension postretirement benefit cost.

For the Lubrizol plans at December 31, 2003, a change in the discount rate
of 100 basis points would have the following effects on the postretirement
benefit cost:

Increase (Decrease) in Postretirement Benefit Cost from Change in Discount Rate
--------------------------------------------------------------------------------

100 BASIS POINT
---------------------
INCREASE DECREASE
--------- ---------
(DOLLARS IN MILLIONS)

United States postretirement plans.......................... $(1.4) $1.7
International postretirement plans.......................... - 0.1
----- ----
All postretirement plans.................................... $(1.4) $1.8
===== ====

For the Lubrizol plans at December 31, 2003, a change in the assumed health
care cost trend rate of 100 basis points would have the following effects on the
postretirement benefit cost:

Increase (Decrease) in Postretirement Benefit Cost from Change in Assumed Health
Care Cost Trend Rate

100 BASIS POINT
---------------------
INCREASE DECREASE
--------- ---------
(DOLLARS IN MILLIONS)

United States postretirement plans.......................... $1.6 $(1.2)
International postretirement plans.......................... - (0.1)
---- -----
All postretirement plans.................................... $1.6 $(1.3)
==== =====

ACCOUNTING FOR BUSINESS COMBINATIONS

During the past several years, we have completed a number of business
combination transactions. We accounted for our past combinations using the
purchase method of accounting, which is the only method allowed under SFAS No.
141, "Business Combinations." The accounting for business combinations is
complicated and involves the use of significant judgment. Under the purchase
method of accounting, a business combination is accounted for at a purchase
price based upon the fair value of the consideration given including direct
acquisition costs, whether it is in the form of cash, assets, stock or the
assumption of liabilities. The assets and liabilities acquired are measured at
their fair values and the purchase price is allocated to the assets and
liabilities based upon these fair values. Generally, the acquisition price
exceeds the fair value of the tangible assets acquired and the various
intangible assets also acquired must be valued. Determining the fair values of
the assets and liabilities acquired involves the use of judgment, since some of
the assets and liabilities acquired do not have fair values that are readily
determinable. Different techniques may be used to determine fair values,
including market prices, where available, appraisals, comparisons to
transactions for similar assets and liabilities and present value of estimated
future cash flows. Since these estimates involve the use of significant
judgment, they can change as new information becomes available. During 2003, we
used an outside appraiser for our largest acquisition, Amerchol products, to
assist in the allocation of the purchase price to intangible assets and
goodwill. The appraiser used the income approach to value the intangibles, in
which the value is developed on the basis of capitalization of net earnings that
would be generated for a specific stream of income attributed to an asset or
group of assets. The value of the intangibles identified by the appraiser for
the Amerchol products acquisition was $17.9 million and goodwill was determined
to be $36.1 million. Amortization of the Amerchol intangible assets will result
in annual amortization expense of approximately $0.8 million.

On June 3, 2004, we acquired Noveon International. Various assets acquired
and liabilities assumed, primarily working capital accounts, of Noveon
International have been recorded at estimated fair values as

S-62

determined by us based on the information currently available. Appraisals of
long-lived assets and identifiable intangible assets, including an evaluation of
in-process research and development projects, are currently underway and will be
completed at various times within the next twelve months. In addition, the
valuations of our projected pension and other post-employment benefit
obligations are also in process and estimates have been reflected in the
preliminary allocation of purchase price. Such amounts are subject to adjustment
based on the completion of the valuations and appraisals. Accordingly, the
preliminary purchase price allocation is subject to revision.

The purchase price of Noveon International includes the estimated fair
value of research and development projects totaling $35.0 million that, as of
the acquisition date, had not reached technological feasibility and had no
alternative future use. As a result, this amount was immediately expensed in the
consolidated statement of income in the second quarter of 2004.

ACCOUNTING FOR GOODWILL IMPAIRMENT

We expect acquisitions to play an important role in our future growth
strategy and accordingly expect the accounting required under SFAS No. 142,
"Goodwill and Other Intangible Assets," to be important to the fair presentation
of our financial condition and results of operations. SFAS No. 142 requires
goodwill to be tested annually and between annual tests if events occur or
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. The annual goodwill impairment test
requires us to make a number of assumptions and estimates concerning future
levels of earnings and cash flow, which are based upon our strategic plans. A
discounted cash flow model is used to determine the fair value of each reporting
unit. The integrity of the model was reviewed by an outside independent
appraiser during 2002 and found to be appropriate. No impairment of goodwill was
identified in the annual impairment test completed in 2003.

ACCOUNTING FOR DEBT ISSUANCE COSTS

Costs incurred with the issuance of debt and credit facilities are
capitalized and amortized over the life of the associated debt using the
effective interest method of amortization. In June 2004, we financed the Noveon
International acquisition with a temporary bridge facility. Fees associated with
the temporary bridge facility were capitalized and are being amortized over the
bridge financing period. A total of $11.2 million was incurred in temporary
bridge facility fees in June 2004 and these fees are being expensed ratably
through September 2004 when a long-term financing arrangement is expected to be
completed.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which became effective for us on January 1, 2002. Intangibles resulting
from business acquisitions, including purchased technology, land use rights,
non-compete agreements, distributor networks, trademarks and patents, are
amortized on a straight-line method over periods ranging from 5 to 40 years.
Under SFAS No. 142, goodwill and other intangibles determined to have indefinite
lives are no longer amortized, but are tested for impairment at least annually.
We have elected to perform our annual tests for potential impairment of goodwill
and indefinite life intangibles as of October 1 of each year. We had goodwill
amortization expense of approximately $11.0 million in 2001. As part of the
annual impairment test required under SFAS No. 142, the useful lives of the
non-amortized trademarks are reviewed to determine if the indefinite status
remains appropriate. After considering the expected use of the trademarks and
reviewing any legal, regulatory, contractual, obsolescence, demand, competitive
or other economic factors that could limit the useful lives of the trademarks,
in accordance with SFAS No. 142, we determined that the trademarks had
indefinite lives.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which became effective for us on January 1, 2003. This
statement requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The amount recorded
as a liability is capitalized by increasing the carrying amount of the related
long-lived asset. Subsequent to initial measurement, the liability is accreted
to the ultimate amount anticipated to be paid and is also adjusted for

S-63

revisions to the timing or amount of estimated cash flows. The capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. The adoption of this statement did not
have a material impact on our consolidated financial position or results of
operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," that supersedes SFAS No. 121,
"Accounting for the Impairment or Disposal of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 related to the recognition and measurement of the
impairment of long-lived assets to be "held and used," provides more guidance on
estimating cash flows when performing a recoverability test, requires that a
long-lived asset (group) to be disposed of other than by sales (i.e. abandoned)
be classified as "held and used" until it is disposed of, and establishes more
restrictive criteria to classify an asset (group) as "held for sale." We adopted
SFAS No. 144 effective January 1, 2002. Upon adoption, this statement had no
impact on our consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires recording
costs associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan, which is generally before
an actual liability has been incurred. The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated after December 31,
2002. We adopted this statement effective January 1, 2003. The adoption of this
statement had no impact on our consolidated financial position or results of
operations.

In November 2002, the Emerging Issues Task Force, or EITF, reached a
consensus on Issue No. 00-21, or Issue 00-21, "Revenue Arrangements with
Multiple Deliverables." Issue 00-21 provides guidance on how to account for
arrangements that involve delivery or performance of multiple products, services
and/or rights to use assets. The adoption of Issue 00-21 in 2003 had no impact
on our consolidated financial position or results of operations.

In December 2002, the FASB issued Interpretation No. (FIN) 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." FIN 45 requires the disclosure of any
guarantees beginning December 31, 2002, and the recognition of a liability for
any guarantees entered into or modified after that date.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities." FIN 46 provides guidance on how to identify a variable
interest entity and determine when the assets, liabilities, non-controlling
interests and results of operations of a variable interest entity need to be
included in a company's consolidated financial statements. FIN 46 also requires
additional disclosures by primary beneficiaries and other significant variable
interest holders. In December 2003, the FASB issued a revision to FIN 46 (FIN
46R), which provided additional guidance on the definition of a variable
interest entity and delayed the effective date until the first reporting period
ending after March 15, 2004, except for special-purpose entities, which must be
accounted for under FIN 46 or FIN 46R no later than the end of the first
reporting period ending after December 15, 2003. The adoption of FIN 46R did not
have a material impact on our consolidated financial position or results of
operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The adoption of this statement had no impact on
our consolidated financial position or results of operations.

As of July 1, 2003, we adopted the provisions of SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity," including the deferral of certain effective dates as a result of the
provisions of FASB Staff Position SFAS No. 150-3, "Effective Date, Disclosures,
and Transition for Mandatorily Redeemable Financial Instruments of Certain
Nonpublic Entities and Certain

S-64

Mandatorily Redeemable Noncontrolling Interests Under FASB Statement No. 150,
Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity." We do not currently utilize these types of financial
instruments and the adoption of this statement had no impact on our consolidated
financial position or results of operation.

In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act was enacted, which introduced a Medicare prescription drug
benefit and a federal subsidy to sponsors of retiree health-care plans that
provide a benefit at least actuarially equivalent to the Medicare benefit. In
accordance with the FASB Staff Position SFAS No. 106-2, "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003," we have elected to defer recognition of the
effects of the new Medicare Act. The accumulated postretirement benefit
obligation and net periodic postretirement benefit cost do not reflect the
provisions of the Medicare Act. We estimate the annual cash flows from the
federal subsidy to be in the range of $0.6 million to $0.8 million, beginning in
2006. We have not yet determined the income statement effect.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We operate manufacturing and blending facilities, laboratories and offices
around the world and utilize fixed and variable rate debt to finance our global
operations. As a result, we are subject to business risks inherent in non-U.S.
activities, including political and economic uncertainties, import and export
limitations, and market risks related to changes in interest rates and foreign
currency exchange rates. We believe the political and economic risks related to
our foreign operations are mitigated due to the stability of the countries in
which our largest foreign operations are located.

In the normal course of business, we use derivative financial instruments
including interest rate and commodity hedges and forward foreign currency
exchange contracts to manage our market risks. Our objective in managing our
exposure to changes in interest rates is to limit the impact of such changes on
our earnings and cash flow. Our objective in managing the exposure to changes in
foreign currency exchange rates is to reduce volatility on our earnings and cash
flow associated with such changes. Our principal currency exposures are the
euro, the pound sterling, the Japanese yen and certain Latin American
currencies. Our objective in managing our exposure to changes in commodity
prices is to reduce the volatility on earnings of utility expense. We do not
hold derivatives for trading purposes.

We measure our market risk related to our holdings of financial instruments
based on changes in interest rates, foreign currency rates and commodity prices
utilizing a sensitivity analysis. The sensitivity analysis measures the
potential loss in fair value, cash flow and earnings based on a hypothetical 10%
change (increase and decrease) in interest, currency exchange rates and
commodity prices. We use current market rates on our debt and derivative
portfolios to perform the sensitivity analysis. Certain items such as lease
contracts, insurance contracts and obligations for pension and other
postretirement benefits are not included in the analysis.

Our primary interest rate exposures relate to our cash and short-term
investments, fixed and variable rate debt and interest rate swaps. The
calculation of potential loss in fair value is based on an immediate change in
the net present values of our interest rate-sensitive exposures resulting from a
10% change in interest rates. The potential loss in cash flow and income before
tax is based on the change in the net interest income/expense over a one-year
period due to an immediate 10% change in rates. A hypothetical 10% increase in
interest rates would have had a favorable impact and a hypothetical 10% decrease
in interest rates would have had an unfavorable impact on fair values of $53.0
million and cash flows of $38.8 million in 2004. In addition, a hypothetical 10%
increase in interest rates would have had an unfavorable impact and a
hypothetical 10% decrease in interest would have had a favorable impact on
income before tax of $3.1 million in 2004.

Our primary currency rate exposures are to foreign-denominated debt,
intercompany debt, cash and short-term investments and forward foreign currency
exchange contracts. The calculation of potential loss in fair value is based on
an immediate change in the United States dollar equivalent balances of our
currency exposures due to a 10% shift in exchange rates. The potential loss in
cash flow and income before tax is

S-65

based on the change in cash flow and income before tax over a one-year period
resulting from an immediate 10% change in currency exchange rates. A
hypothetical 10% increase in currency exchange rates would have had an
unfavorable impact and a hypothetical 10% decrease in currency exchange rates
would have had a favorable impact on fair values of $15.3 million, cash flows of
$31.6 million and income before tax of $12.7 million in 2003.

Our primary commodity hedge exposures relate to natural gas and electric
utility expenses. The calculation of potential loss in fair value is based on an
immediate change in the United States dollar equivalent balances of our
commodity exposures due to a 10% shift in the underlying commodity prices. The
potential loss in cash flow and income before tax is based on the change in cash
flow and income before tax over a one-year period resulting from an immediate
10% change in commodity prices. A hypothetical 10% increase in commodity prices
would have had a favorable impact and a hypothetical 10% decrease in commodity
prices would have had an unfavorable impact on fair value of $0.3 million, cash
flow of $0.3 million, and income before tax of $0.3 million in 2003.

S-66

BUSINESS

OVERVIEW

We are an industry leader in many of the markets in which our product lines
compete. We hold the #1 global position in the lubricant additives market. We
also produce products with well recognized brand names, such as Anglamol(R)
(gear oil additives), Carbopol(R) (acrylic thickeners for personal care
products), Estane(R) (thermoplastic polyurethane), Hycar(R) (water-borne acrylic
emulsions for performance coatings) and TempRite(R) (chlorinated polyvinyl
chloride resins and compounds used in plumbing systems).

We are geographically diverse, with an extensive global manufacturing,
supply chain, technical and commercial infrastructure. We operate facilities in
26 countries, comprised of production facilities in 22 countries, laboratories
in six countries and offices in 25 countries, in key regions around the world.
After giving effect to the recent acquisition of Noveon International, for the
six months ended June 30, 2004, we derived approximately 51% of our pro forma
consolidated net sales from North America, 27% from Europe, 17% from the
Asia/Pacific region and the Middle East and 5% from Latin America. We sell our
products in more than 100 countries and believe that our customers recognize and
value our ability to provide customized, high quality, cost-effective
performance formulations and solutions worldwide. We also believe our customers
value our global supply chain capabilities.

Our pro forma consolidated results for the year ended December 31, 2003
included net revenues of $3,182.2 million, net income of $52.5 million and
EBITDA of $433.6 million. Our pro forma consolidated results for the six months
ended June 30, 2004 included net revenues of $1,837.8 million, net income of
$79.9 million and EBITDA of $292.7 million, compared with net revenues of
$1,596.4 million, net income of $29.0 million and EBITDA of $234.8 million for
the six months ended June 30, 2003. See "Unaudited Pro Forma Consolidated
Financial Information" beginning on page S-26. We have generated consistently
strong cash flow from our diverse product lines, leading market positions,
disciplined capital expenditure programs and working capital management. We
believe our strong cash flow will enable us to maintain our leading market
positions and to invest in targeted growth strategies while continuing to reduce
indebtedness.

Following our acquisition of Noveon International, we reorganized our
business into two business units and reporting segments: the lubricant additives
segment, also referred to as Lubrizol Additives, and the specialty chemicals
segment, also referred to as Noveon. The Lubrizol Additives segment is comprised
of our previous business in fluid technologies for transportation, advanced
fluid systems, emulsified products and the former industrial additives product
group of our previous business in fluid technologies for industry. The Noveon
segment is comprised of the product lines of Noveon International and the former
performance chemicals product group of fluid technologies for industry.

OUR COMPETITIVE STRENGTHS

We believe that our expertise is critical to meeting our customers' needs,
sustaining our competitive advantages and capitalizing on growth opportunities.
Excluding acquisitions, in each of the past five years, approximately 40% of
sales were from products introduced within the previous five years. The
acquisition of Noveon International has further complemented and enhanced our
technological capabilities. We both share a strong foundation in polymer
chemistry. All our dispersants, which are our highest volume class of additives,
are polymers, as are most of our rheology control agents. Our dispersant
technology protects the surfaces of equipment by suspending contaminant
particles in fluids, and our rheology chemistry modifies the viscosity, or flow
characteristics, of a fluid. Noveon International's expertise in polymer
chemistry led to the invention of Carbopol(R), the world's leading acrylic
thickener. We employ more than 100 PhDs in our state-of-the-art laboratories in
North America, Europe and Asia, helping us to enhance our leadership in our
markets. Our commitment to technology is also demonstrated by continued
investment in research and development. For the year ended December 31, 2003, on
a pro forma basis, we invested $211.7 million, or 6.7% of net sales, in
research, testing and development activities.

SPECIALIZED VALUE-ADDED PRODUCTS. Our products are used to enhance our
customers' products. Our products generally represent a small percentage of our
customers' production costs, yet are critical to end-product performance. Many
of our products are developed in direct cooperation with our customers to meet
their specific needs, often resulting in long-standing and loyal customer
relationships. For decades we have worked with many of our lubricant additive
customers on various joint technology development projects such as customized
formulations for their premium product lines. In addition, many of our products
are specified in the formulations of OEMs and other of our customers, resulting
in significant barriers to changing suppliers. In our lubricant additives
business, we work with OEMs to design customer-specific additives for use with
the manufacturers' equipment. For example, we formulate complex additive
packages for automatic transmission fluids with automotive and transmission OEMs
to optimize the performance of the transmission. We work with coatings producers
to develop paints with unique properties. Additionally, our carbomer thickeners
are specified for use in personal care and pharmaceutical applications, and our
FDA-approved polymers are specified for use in food-packaging applications.

S-68

OUR CORPORATE STRATEGY

Our corporate strategy is balanced between sustaining our market leadership
in mature markets such as lubricant additives, and expanding our leadership in
higher growth markets, such as ingredients for personal care products. At the
core of our corporate strategy is our intention to continue to invest in
technology focused on identified market needs to create product differentiation
and sustainable competitive advantages.

S-69

time, we will continue to support our lubricant additives business by
emphasizing market leadership, a competitive cost structure and free cash flow
generation. Finally, we will divest underperforming or non-strategic businesses
in order to optimize our portfolio and improve our profitability and financial
flexibility. We have identified possible divestiture candidates with aggregate
annual revenues of $300.0 to $500.0 million.

ACQUISITION HISTORY

In the 1980s, growth in demand for lubricant additives slowed as
innovations in engine design and improved lubricant performance extended the
service intervals between required lubricant changes. We responded to this
decline in the lubricant additive growth rate by expanding into new markets.

Our initial expansion efforts focused on discovering new applications for
our additive chemistry. We also began making selective acquisitions driven by
our desire to gain access to new market channels as well as to higher growth,
adjacent markets such as coating additives and metalworking fluids. During the
1990s and through the end of 2000, we completed 16 acquisitions. In aggregate,
the annual revenues of these companies at the time of purchase totaled
approximately $270.0 million. The largest was the acquisition of BP p.l.c.'s
lubricant additive business, which we consolidated into our existing operations.

In 2000, we established a vision for growth that renewed our strategy to
grow our business significantly by broadening our end-market focus beyond our
traditional lubricant additive markets. To measure our progress toward achieving
our vision, we established aggressive revenue and profitability goals. A key
element of our strategy was organic growth through continued product innovation
and new formulations for new end markets.

We also increased our efforts to make larger, profitable acquisitions.
Among the areas targeted for growth through acquisitions were personal care
ingredients and coating additives. These areas fit our strengths in
surface-active chemistry and product innovation. We also introduced new tools
and training to improve our ability to complete acquisitions successfully,
including refinements to our due diligence and integration processes. Prior to
the acquisition of Noveon International, we made eight other acquisitions since
2000, with aggregate annual revenues of approximately $200.0 million.

By early 2004, we believe we had established the basis for acquiring Noveon
International. We had developed significant experience evaluating and
integrating acquired businesses and had expanded our presence in the personal
care and coatings markets that offered potential for synergies with Noveon
International.

THE NOVEON INTERNATIONAL ACQUISITION

On June 3, 2004, we acquired Noveon International, a leading global
producer and marketer of technologically advanced specialty materials and
chemicals used in the industrial and consumer markets. With the acquisition of
Noveon International, we have accelerated our program to attain a substantial
presence in the personal care and coatings markets by adding a number of higher
growth, industry-leading products under highly recognizable brand names,
including Carbopol(R) and Hycar(R), to our already strong portfolio of lubricant
and fuel additive products and consumer product ingredients. Additionally,
Noveon International has a number of industry-leading specialty materials
businesses, including TempRite(R) CPVC and Estane(R) TPU, that generate strong
cash flow. We believe that the Noveon International acquisition meets the core
tenets of our stated strategy to:

- maintain technology leadership;

- apply our formulation expertise to extend applications into new markets;
and

- expand the global breadth of our businesses.

We expect the diversity of our combined businesses, customer base and end
markets to provide greater stability for our operations, and to generate strong
cash flow from operations to reduce indebtedness while also pursuing selective
future growth opportunities.

S-70

With the acquisition of Noveon International, we have broadened our
customer base and have diversified the end uses for which we sell our products.
Based on 2003 pro forma revenues, 45% of our pro forma revenues were from sales
for vehicle and equipment maintenance, 15% from sales for industrial end uses,
15% from sales to the personal care and consumer industries, 8% from sales to
the vehicle production industry, 7% from sales to the construction industry, 5%
from sales to the textile industry and 5% from sales for paper, packaging and
printing.

The following chart sets forth the historical net revenues for the year
ended December 31, 2003 of Lubrizol and Noveon International attributable to
each of our primary product lines, including a pro forma combined total (in
millions):

PRO
NOVEON FORMA
REPORTING SEGMENTS AND PRODUCT LINES LUBRIZOL INTERNATIONAL COMBINED
------------------------------------ -------- ------------- --------

LUBRICANT ADDITIVES
Engine additives.......................................... $1,125.6 $1,125.6
Specialty driveline and industrial oil additives.......... 622.2 622.2
Services and equipment.................................... 48.9 48.9
-------- --------
1,796.7 1,796.7
SPECIALTY CHEMICALS
Consumer specialties...................................... 146.5 $ 411.5 558.0
Performance coatings...................................... 108.9 375.5 484.4
Specialty materials....................................... - 343.1 343.1
-------- -------- --------
255.4 1,130.1 1,385.5
-------- -------- --------
Total net revenues.......................................... $2,052.1 $1,130.1 $3,182.2
======== ======== ========

We have established a target of $40.0 million in annual cost savings from
the integration of Noveon International that we expect to achieve by reducing
costs of raw materials and outside services, rationalizing manufacturing
operations and consolidating corporate functions, and repositioning our
commercial development activities. Within a month of closing the acquisition, we
announced workforce reductions that are estimated to achieve $16.0 million in
annual cost savings. Longer term, we will seek to grow revenues and profits by
pursuing cross-marketing opportunities, leveraging our geographical
infrastructure, enhancing product development capabilities and further
streamlining operations. For example, Lubrizol's stronger position in the
European coatings market will be combined with Noveon International's greater
share of the North American coatings market to increase the cross-marketing
opportunities for our products. We expect that the integration of Noveon
International will be facilitated by our companies' common roots in the greater
Cleveland area.

BUSINESS SEGMENTS

S-71

The following chart summarizes the product groupings within each of our key
product lines.

THE LUBRIZOL CORPORATION

Lubricant Additives Segment (Lubrizol Additives)

Engine Additives
Passenger Car Motor Oils
Heavy-duty Diesel Engine Oils
Marine Diesel, Small Engines, Stationery Gas Oils
Viscosity Modifiers
Fuel, Refinery and OilField Products

Specialty Driveline and Industrial Oil Additives
Automatic Transmission Fluids
Gear Oils
Farm Tractor Fluids
Hydraulic Fluids
Grease Additives
Metalworking Fluids
Compressor Lubricants
Industrial Gear Oils

Services and Equipment
Custom Solutions
Fluid Metering Equipment
Diesel Oxidation Catalysts
Diesel Particulate Filters

Specialty Chemicals Segment (Noveon)

Consumer Specialties
Personal Care and Pharmaceuticals
Food and Beverage
Polymer Additives

Performance Coatings
Specialty Resins and Polymers
Coating Additives

Specialty Materials
TempRite(R) CPVC
Estane(R) TPU

LUBRICANT ADDITIVES SEGMENT

The lubricant additives segment, also referred to as Lubrizol Additives, is
the leading global supplier of additives for transportation and industrial
lubricants. We pioneered the development of lubricant additives over 75 years
ago and continue to maintain leadership in this $5.0 billion industry today. Our
customers rely on our products to reduce environmental impact and improve the
performance and lifespan of critical components, such as engines, transmissions
and gear drives for cars, trucks, buses, off-highway equipment, marine engines
and industrial applications.

S-72

Our products serve to increase cost-effectiveness by reducing friction and
heat, resisting oxidation, minimizing deposit formation, and preventing
corrosion and wear. Through our in-house research, development and testing
programs, we have the capability to invent and develop a broad range of
proprietary chemical components, including antioxidants, anti-wear agents,
corrosion inhibitors, detergents, dispersants, friction modifiers and viscosity
modifiers. We formulate proprietary additive packages by combining these
different components to create unique products targeting specific customer
problems. We are recognized by our customers for innovative technology, the
broadest product line and high quality products. Our key components of our
additive packages include:

- antioxidants that retard oil thickening;

- anti-wear agents that protect surfaces in metal-to-metal contact;

- corrosion inhibitors that prevent rust;

- detergents that prevent deposit build-up;

- dispersants that protect equipment by suspending contaminant particles;

- friction modifiers that control friction at surfaces;

- polymer-based viscosity modifiers that allow lubricants to operate over
broad temperature ranges; and

- pour point depressants that control low-temperature fluid thickening.

Our products are essential to the performance of the finished lubricant,
yet represent a relatively small portion of its volume. Our products are often
designed to meet specific customer requirements, creating a unique barrier to
competition. For example, we work with customers to develop additive packages
that perform in combination with their proprietary base oil or that meet their
marketing objectives to differentiate their lubricant. Extensive testing is
conducted in our world-class laboratories, global mechanical testing facilities
and in the field, to determine additive performance under actual operating
conditions. With this testing, we provide proof of performance, which enables
our customers to label and certify the lubricant as meeting the exact
performance specifications required for these products by the industry. The
majority of our products are designed to meet an industry standard or
specification.

We have three primary product lines within our Lubrizol Additives segment:
engine additives, specialty driveline and industrial oil additives, and services
and equipment.

ENGINE ADDITIVES. Our engine additives products hold the #1 global
position for a wide range of additives for passenger car, heavy-duty diesel,
marine diesel, stationary gas and small engines. We also produce fuel additives
and refinery and oilfield products. Our customers, who include major global and
regional oil companies, refineries and specialized lubricant producers and
marketers, blend our additive products with their base oil and distribute the
finished lubricant to end users via retail, commercial or vehicle OEM channels.
Passenger car motor oils and diesel engine oils are more than 80% of our engine
additive sales. In 2003, our engine additives products generated net sales of
$1,125.6 million.

The industry is relatively non-cyclical because it is primarily based on
the maintenance of vehicles and equipment. Fundamental drivers of demand
include:

- service intervals;

- vehicle usage including passenger car miles driven and diesel truck
tonnage;

- average age of the vehicle fleet in service; and

S-73

- requirements for new technology based on mandates for emissions control
and fuel economy.

We estimate the annual growth rate of the engine and fuel additives
industry is 0-1% worldwide. The growth rate of the market has declined in the
past decade because the improved performance of lubricants and additives allowed
lubricants to last longer between oil changes and innovations in engines,
vehicles and vehicle components extended the service intervals between required
fluid changes. Additionally, the industry has seen a wave of customer
consolidation, specifically among the oil companies. The result is intensified
competition among the lubricant additive suppliers. However, in 2003 and
currently in 2004, the industry has been able to increase prices in response to
higher raw material costs. We have traditionally been the price leader in the
industry.

The industry currently has capacity utilization rates in the 70-80% range.
Historically, we believe a capacity utilization rate of 85% or greater provided
good industry-wide profitability. Although there is excess capacity for some
chemical components, certain components such as sulfonate and phenate detergents
and aminic, phenolic and sulfurized antioxidants are near capacity. Certain raw
materials for dispersants are currently capacity constrained, exceeding 90%
utilization. These include polyisobutylene, maleic anhydride and polyisobutylene
succinic anhydride.

We see growth opportunities in the engine and fuel additives market based
on the following factors:

- Standard changes. The North American passenger car motor oil market is
moving to a new standard, designated GF-4, which is timed for the
introduction of the 2005 model-year vehicles. GF-4 is designed to allow
OEMs to extend their emissions systems warranties from 100,000 to 120,000
miles. We have met this standard successfully and expect a slight price
premium. Additionally, the 2007 diesel engine standard in North America
will require engine manufacturers to reduce diesel emissions by 90% from
current allowable levels. This standard is particularly challenging, but
we believe we can meet this standard successfully with new, higher
performance lubricant additives.

- Higher demand growth in emerging markets. We believe there is an
opportunity in emerging markets such as China and India. We estimate that
the potential market in China will be approximately $200.0 million in
five years. Through our joint venture with PetroChina, we are positioned
to grow our business in this emerging market.

- Fuel additives for alternative fuels. The increased use of alternative
fuels such as biodiesel, ethanol and ediesel, has created demand for
specific fuel additives. We have developed a proprietary range of fuel
additive products for the bulk market and the aftermarket that improve
horsepower, engine operation, engine life, and fuel economy, while also
reducing emissions.

The following is a list of representative uses for and a description of our
engine additives products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

Engine Additives Passenger car motor oils, heavy-duty Additives that extend engine life,
diesel engine oils, marine diesel, minimize emissions and enhance fuel
small engines, stationary gas and economy.
viscosity modifiers
Fuel, refinery and oilfield products Additives designed to eliminate
and other components deposits and provide fuel system
cleanliness, prevent rust and
corrosion, enhance fuel economy,
provide anti-knock, lower volatility
and improve storage stability.

SPECIALTY DRIVELINE AND INDUSTRIAL OIL ADDITIVES. We are a global supplier
of specialty driveline and industrial additive products for use in driveline and
industrial applications. In 2003, our specialty driveline and industrial oil
additives products generated net sales of $622.2 million.

S-74

SPECIALTY DRIVELINE ADDITIVES

Our specialty driveline additives product line includes additives for
automatic transmission oils and gear oils for cars, trucks, buses, off-highway
equipment and farm tractors. Relative to engine oils, specialty driveline
additives are more complex formulations that carry higher average pricing and
value and have longer product life cycles. We sell our products to major global
and regional oil companies, specialized lubricant producers and marketers. Our
customers use our products to blend with their lubricant fluids and distribute
the finished lubricant to end users via retail, commercial or vehicle OEM
channels. The specialty driveline additives industry is characterized by
well-established product lines that meet OEM specifications and carry OEM
approvals. Meeting OEM standards and approvals creates a barrier to competition.

The market for specialty driveline additives is stable but is dependent on
new auto and truck production. Fundamental drivers of demand include:

- new auto and truck production;

- OEM warranty claims;

- OEM decisions to differentiate and optimize total driveline system
performance;

- service intervals; and

- advances in power transmission technology.

We estimate the annual growth rate of the specialty driveline additives
industry is 0.5-1.0% worldwide. The growth rate has declined in the last decade
based on encouragement from OEMs for the development of "fill-for-life"
lubricants that do not require regular maintenance. Similar to engine additives,
heavy-duty truck fleets have increased drain intervals for gear oils and
transmission fluids, which has also reduced the industry growth rate. In
specialty driveline additives, we see opportunities for growth in the following
areas:

- Demand for high performance fluids. OEMs are increasingly incorporating
high-performance fluids in the component design process in order to
address long-term vehicle operating cost, fuel economy and warranty
issues. One example of this trend is in the European market, where
drivers are moving away from older manual transmissions toward
significantly advanced designs that include automatic and dual clutch
transmissions. We are working directly with our customers and OEMs to
design and formulate new specialized products to meet OEM requirements.
In addition, we are expanding our product lines by incorporating more of
our proprietary additives, such as polymer-based viscosity modifiers.

- Demand for global supply capabilities. OEMs are increasingly using
global standards that require approved, OEM-specific lubricants for use
in their products. We are the only producer in the industry with local
formulators and testing facilities in North America, Europe and Asia. Our
global infrastructure is a key component of our market leadership.

INDUSTRIAL OIL ADDITIVES

Our industrial oil additives product line includes additives for hydraulic
lubricants, metalworking fluids, industrial gear oils and grease, as well as
compressor lubricants. We sell our products to major global and regional oil
companies, specialized lubricant producers and marketers. Our customers use our
products to blend with their fluid products and distribute the finished
lubricant to end users via retail, commercial or OEM channels.

Because our products are sold to industrial end-markets, our industrial oil
additives product line is exposed to economic cycles more than other product
lines within the lubricant additives segment. Fundamental drivers of demand
include:

- service intervals;

- industrial production; and

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- evolution of environmentally friendly fluids.

We estimate the annual growth rate of the industrial oil additives industry
is 0.5-1.0% worldwide. Similar to the specialty driveline additives market,
growth prospects for industrial oil additives have been affected somewhat by the
market's transition to longer service intervals. In addition, improvements in
plant lubrication practices have reduced lubricant consumption. In industrial
oil additives, we see opportunities for growth in the following areas:

- Product substitution. We are developing new performance fluids to
substitute for products that are being phased-out or are no longer
available. Currently in the metalworking market there is a shift in
production substitution from natural sodium sulfonate emulsifiers to new,
synthetic formulations. Historically, natural sodium sulfonate
emulsifiers, by-products of white oil production, have been used to
provide lubricity and rust protection for cutting metals. Over time,
refinery process improvements have reduced the amount of by-product and,
as a result, the principal U.S. supplier eliminated its capacity in 2003.
We have created a cost-effective replacement product, based on our core
proprietary technology, which improves on the performance deficiencies of
the typical alternative synthetic sulfonates offered in the marketplace.

- Joint custom product design. To create additional competitive barriers,
we continue to work with OEMs and our oil company customers to design and
develop products that are a key component of the total value of their
equipment. Examples of our cooperative product development include custom
synthetic lubricants for refrigeration compressors and industrial
equipment, products that address safety issues regarding worker exposure
to metalworking fluids, grease products that reduce the customer's
manufacturing costs by reducing complexity and simplifying processing,
and hydraulic additives that address requirements of the construction
industry for improving the power of hydraulic systems.

The following is a list of representative uses for and a description of our
specialty driveline and industrial oil additives products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

Specialty Driveline and Driveline additives for automatic OEM-specific additives that provide
Industrial Oil Additives transmission fluids, gear oils and multiple and complex performance
farm tractor fluids properties, including reducing friction
in order to prevent wear of
transmissions, gears and farm tractor
components.
Additives for industrial fluids, A wide range of additives to meet the
including hydraulics, metalworking, lubricant performance requirements of
industrial gear, grease and industrial equipment.
compressor fluids

SERVICES AND EQUIPMENT. Our services and equipment product line includes
our commercial development activities in advanced fluid systems and emulsified
products, which is comprised of PuriNOx(TM) low-emissions diesel fuel. Advanced
fluid systems include products used in emission control, such as catalyst,
exhaust and filter systems, FluiPak(TM) sensor systems and precision metering
devices used in blending and additive injection operations. In 2003, our
services and equipment products generated net sales of $48.9 million.

The following is a list of representative uses for and a description of our
services and equipment products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

Services and Equipment Custom Solutions Custom blending of finished lubricants
and training services for oil company
customers
PuriNOx(TM) Low-emissions diesel fuel.
FluiPak(TM) Sensor systems and precision metering
devices used in blending and additive
injection operations.

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SPECIALTY CHEMICALS SEGMENT

The specialty chemicals segment, also referred to as Noveon, represents a
diverse portfolio of performance chemicals used in consumer and industrial
applications, such as ingredients for personal care and pharmaceutical products,
food and beverage products, emulsions and additives for coatings and inks, and
specialty plastics and materials.

We have three primary product lines within our Noveon segment: consumer
specialties, performance coatings and specialty materials.

CONSUMER SPECIALTIES. We are a global producer of specialty chemicals
targeting the personal care, pharmaceutical and food and beverage industries and
we are a provider of engineered adhesives, polymer additives and specialty
emulsifiers. Key products in this product line include Carbopol(R) acrylic
thickeners, film formers, fixatives, emollients, silicones, botanicals, active
pharmaceutical ingredients and intermediates, benzoate preservatives,
fragrances, synthetic food dyes, natural colorants, Hycar(R) reactive liquid
polymers, rubber and lubricant antioxidants, rubber accelerators and ADEX(TM)
emulsifiers for mining explosives. In 2003, our consumer specialties product
lines generated pro forma net sales of $558.0 million.

PERSONAL CARE AND PHARMACEUTICALS

We are a global producer of specialty chemicals targeting the personal care
and pharmaceutical industries. Our products impart physical and sensory
properties, such as texture, stability and thickness to products, including
lotions, shampoos, hair gels, cosmetics and personal and oral hygiene products.
Key products in this area include selected functional specialties and
formulation additives such as specialty surfactants, methyl glucoside and
lanolin derivatives, and Carbopol(R) acrylic thickeners, film formers and
fixatives. Our products are an important component of the functionality and
aesthetics of the end product, but typically represent a small portion of the
customer's total product costs. Key product families include:

- Carbopol(R) acrylic thickener, which is the global leader in synthetic
thickeners due to its efficient stabilizing properties and superior
thickening capabilities. Primary end-uses in the personal care industry
include hair care, skin care and personal and oral hygiene products.
Pharmaceutical primary end-uses include topical and controlled-release
applications.

- Methyl glucoside and lanolin derivatives that enhance the functional and
aesthetic properties of personal care products by delivering
characteristics such as emulsification, thickening and moisturizing, as
well as imparting the elegant feel to lotions and creams.

- AMPS(R) specialty monomers that are used in the manufacture of polymers
for a variety of applications such as dishwashing detergents to reduce
spotting, skin creams to improve lubricity and feel, medical gels for
defibrillator pads to enhance conductivity, and coatings and adhesives to
improve adhesion.

- Chemron specialty surfactants and additives that enhance the functional
and aesthetic properties of personal care products and household and
industrial cleaners by improving characteristics such as foaming,
cleansing, conditioning and mildness. Surfactants are primarily used in
hair care products, such as shampoos and body washes.

Key growth drivers for our personal care and pharmaceutical products
include:

- consumer demand for more efficient, innovative and convenient products;

- consumer preference for natural products;

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- an aging population that desires a youthful appearance;

- population growth; and

- growth in developing nations.

We estimate the annual growth rate of the personal care industry is 3-5%
worldwide. Carbopol(R) acrylic thickener shipment volume for personal care and
pharmaceuticals grew at a compound annual rate of approximately 8.5% per year
between 1993 and 2003. We continue to develop new end-use applications for
Carbopol(R) acrylic thickeners, which we believe will continue to drive
significant demand growth. We expect Carbopol(R) acrylic thickener growth to
exceed the growth of the personal care industry as its products continue to gain
sales at the expense of natural and inorganic thickeners. In addition, Noveon
International successfully launched new products including Carbopol(R) Aqua SF1,
a liquid thickener, in 2002 and Fixate(TM), a hair styling resin, in 2003, both
of which have expanded our personal care end-use applications.

Recent acquisitions have extended our product breadth in personal care. In
September 2003, we purchased a natural skin care ingredients business from Dow
Chemical. In October 2003, Noveon International purchased a controlling interest
in SNP, a Thailand-based manufacturer and marketer of botanical extracts used in
personal care product formulations. SNP provides us with access to products that
we plan to sell throughout our global distribution system. In January 2004,
Noveon International purchased Scher Chemicals, Inc., a manufacturer of
emollient and surfactant specialty chemicals used in cosmetic and other personal
care formulations.

In personal care, we see opportunities for growth in the following areas:

- Demand for innovations in skin care products. Recent acquisitions of
natural products, emollients and specialty surfactants allow us to
participate more fully in skin care formulations, one of the largest and
fastest growing areas of the personal care industry.

- Demand for functional ingredients that provide discernible
benefits. Consumers of personal care products increasingly value
performance in addition to aesthetic properties. In response, we have
expanded our personal care ingredients portfolio to offer functional
products. These include rheology modifiers, actives and specialty
silicones, emollients and surfactants.

- Value of ingredients and services that support formulators of personal
care products. Our formulating aids, including thickeners, emollients,
moisturizers, specialty emulsifiers, colors, pigments and specialty
surfactants, support the increasing technical challenges faced by
formulators who develop new personal care products. Formulators also
value our technical service, rapid order fulfillment and global
infrastructure.

The following is a list of representative uses for and a description of our
personal care and pharmaceuticals products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

Personal Care and Carbopol(R) Acrylic thickener, which imparts
Pharmaceuticals stability and improves aesthetics.
Often used as a controlled release
agent.
Pemulen(R) Polymeric emulsifier reducing
formulation irritancy and providing
unique sensory properties.
Avalure(R) Polymers for color cosmetics and skin
care.
Specialty silicones Polymers affecting slip-and-feel.
Fixate(TM) Resin for hair styling.
Emollients Improve skin feel and appearance.
Colorants Impart color in personal care products.
Botanical extracts Specialty additives for cosmetic and
skin care formulations.

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CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

Methyl glucoside derivatives, Natural thickeners, emulsifiers and
including Glucamate(R) moisturizers for shampoos, liquid
cleansers, face and body creams and
lotions.
Lanolin derivatives Natural emollients, emulsifiers and
conditioners for creams, lotions and
color cosmetics.
AMPS(R) monomers Specialty monomer for high performance
polymers.
Chemron specialty surfactants, Enhance cleansing, foaming and
including Sulfochem(R) moisturizing of shampoos, body washes,
industrial and household cleaners.
Polycarbophil Active agent for bulk laxatives.
Amino acid-based actives Active ingredients for pharmaceuticals.
Advanced intermediates Used in the production of active
pharmaceutical ingredients.
Cassia gum Gelling agents for human food (Japan)
and pet food.

FOOD AND BEVERAGE

We are a supplier of products that preserve freshness and improve the color
and consistency of food and beverages, making them more appealing to consumers.
We are a leading global producer of benzoate preservatives, a leading U.S.
supplier of synthetic colorants and an integrated producer of flavors,
fragrances and other food additives to the food and beverage industry. Benzoates
improve the shelf life of consumable goods and are the preservative of choice
for manufacturers of soft drinks, bottled beverages, fruit-based products and
prepared salads due to their anti-microbial properties. We believe that our
Kalama, Washington benzoate facility is the largest facility of its type in
North America and the second largest in the world, giving us the capability to
serve large customers globally. This facility also produces a number of
high-value, distinct flavor and fragrance products for use in many food and
personal care products as well as certain intermediate products. The
intermediate products include plasticizers used in adhesives, sealants and
safety glass, and phenol, a co-product, used for adhesive resins in
forest-product applications.

We consolidated a series of small acquisitions that supply foam control
agents that reduce the amount of foam generated in a variety of industrial
processes. Our antifoam and defoaming agents are based on a wide variety of
chemistries, including silicone. We specialize in defoamers and antifoam agents
for the food processing, fermentation, grain and sugar-sweetener industries, as
well as for the metalworking, coatings, ink, textile, pharmaceutical, water
treatment, mining and pulp and paper industries.

We also sell a full line of FDA-approved food, drug and cosmetic primary
dyes (including blends of primary dyes), as well as lakes and natural colors.
Primary end-uses for our product line within food and beverage applications
include soft drinks and processed foods, such as canned soup and pre-made meals.
In addition, within the colorant operation, we produce pigment dispersions for
use in architectural coatings and technical dyes used in household dyes and
other applications. We also sell defoamer and anti-foam additives that are used
in food applications to manage the level of foaming that occurs.

The food and beverage industry is a product-focused and fragmented industry
that has historically grown with gross domestic product. We expect growth to be
driven by consumer demand for convenient and nutritious foods that require
additives to preserve freshness and enhance taste, texture and appearance.

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The following is a list of representative uses for and a description of our
food and beverage products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

Food and Beverage COLORS
Food, drug and cosmetic dyes, lakes, Colorants for beverages, confectionary
natural colors and pigments goods, cosmetics, dry mixes/snacks,
processed foods and pet food and
colorants for inks, paints and paper
dyes.
BENZOATES
Sodium benzoate and potassium Improves shelf life for certain
benzoate consumable goods. Preservative for
manufacturers of soft drinks, bottled
beverages, fruit-based products and
prepared salads.
FLAVORS AND FRAGRANCES
Benzaldehyde-based chemicals Food, personal care and soap products.
INTERMEDIATES
Phenol, benzaldehyde, benzyl alcohol Pharmaceuticals, coatings, agrochemical
and benzoic acid products, plasticizers, adhesives,
sealant products and alkyd resins.
FOAM CONTROL AGENTS
Silicone and other chemistries Reduce foam in processing of food,
grain, fermentation and a wide range of
industrial products.

POLYMER ADDITIVES

We believe we are the largest global supplier of reactive liquid polymers
(RLP), sold under the trademark Hycar(R), and one of the leading North American
producers of polymer additives including rubber and lubricant antioxidants and
rubber accelerators. Our products in this category extend the life and improve
the performance characteristics of rubber, lubricating oil, plastics and
thermoset resin-based formulations. RLP is a high-growth niche product for
technologically challenging applications, including structural and engineered
adhesives used in aerospace, transportation and electronics. RLP improves impact
and crack resistance in composites and coatings and improves the toughness and
long-term durability of epoxy-based structural adhesives. RLP growth is
anticipated to exceed overall growth of the high-end adhesives industry, as the
product is increasingly utilized for its superior performance characteristics
relative to other binding agents.

Our antioxidant products are used in rubber, plastics and lubricants and
are marketed under the Good-Rite(R) name, a leading industry brand. Antioxidants
prevent oxidative degradation and are primarily utilized by rubber manufacturers
and, to a lesser extent, plastic manufacturers, to impart durability and prevent
the loss of functional attributes such as flexibility. In motor oil and other
lubricants, antioxidants prevent thermal breakdown and extend product life. We
also manufacture a line of accelerators, marketed under our brand, Cure-Rite(R),
which are utilized by rubber manufacturers to reduce the vulcanization/curing
time, and thereby improve manufacturing productivity. Key growth drivers for our
antioxidants and accelerators include:

- government regulation requiring higher quality lubricants;

- vehicle usage including passenger car miles driven and diesel truck
tonnage; and

- consumer and government pressure on tire manufacturers to produce higher
quality tires.

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The following is a list of representative uses for and a description of our
polymer additives products:

CATEGORY PRODUCT/BRAND DESCRIPTION
----------------- ------------------------------------- ----------------------------------------

Polymer Additives REACTIVE LIQUID POLYMER
Hycar(R) Used as a toughener and flexibilizer in
thermoset resin formulations
(construction, composites, coatings and
structural adhesives).
ANTIOXIDANTS
Good-Rite(R) Primarily used by rubber manufacturers
to prevent oxidative degradations,
impart durability and prevent loss of
flexibility.
ACCELERATORS
Cure-Rite(R) Helps reduce vulcanization/curing time.

PERFORMANCE COATINGS. We are a leading supplier of specialty resins and
additives for the coatings and inks markets worldwide. We offer a wide range of
products for formulating paints, coatings and inks. In 2003, our performance
coatings products generated pro forma net sales of $484.4 million.

Our business strategy for performance coatings is centered on our ability
to formulate and compound polymer emulsions to create customized solutions
meeting the specific needs of our customers. Many of our coatings customers have
expanded their operations around the world. In response, Noveon International
expanded its product lines and geographic coverage with a focus on strategic
international account customers. We also recognize the importance of middle tier
and local customers, who we service economically with our trained local agents
and distributor network. Noveon International had success with water-borne
acrylic and polyurethane technologies as global restrictions targeting the
reduction of the volatile organic compounds prevalent in solvent-based products
have become more stringent. We will continue to develop innovative products
based on these technologies to enhance our portfolio. We expect water-borne
formulations to continue to grow faster than the overall industry growth rate
for the niche industries in which we participate.

Key growth drivers include:

- environmental regulations that limit the use of solvent-based coatings
and stimulate development of powder, radiation-cured and water-based
coatings;

- consumer preference for creative packaging;

- consolidation and globalization of the customer base, leading to
preference for global suppliers of specialty resins and coating
additives;

- customer preference for fewer and larger suppliers of specialty resins
and coating additives, as they streamline costs and reduce complexity;
and

- improved performance and ease of application use of water-based products.

According to SRI International, an independent, nonprofit research
institute, the annual global demand in 2002 for paint and coatings was
approximately $60.0 billion, of which synthetic polymer resins comprised
approximately $10.0 billion. In addition, we selectively serve the additives
industry for paints, coatings and inks, which had estimated annual demand of
$2.8 billion in 2003, according to Kusumgar, Nerlfi and Growney, a consulting
and market research firm.

SPECIALTY RESINS AND POLYMERS

Our water-based polymer emulsions and dispersions, including resins and
auxiliaries, are used in the production of high-end paint and coatings for wood,
paper, metal, concrete, plastic, textiles and other surfaces. Our acrylic
emulsions and polyurethane dispersions, which are environmentally attractive
substitutes for solvent-based and hydrocarbon products, are valued for the
superior gloss and durability properties they provide. In addition, our polymers
are used as ink vehicles, overprint varnishes and functional coatings for

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specialty paper, printing and packaging applications. We supply acrylic
emulsions used to improve the appearance, texture, durability and flame
retardance of high-end specialty textiles sold to the home furnishings,
technical fabrics and apparel industries. In addition, we believe we are the
only fully integrated U.S. supplier of glyoxal and glyoxal-based resins for
durable press and wrinkle-resistant textile additives.

In addition to water-based polymers, we specialize in unique, non-aqueous
acrylic and other proprietary polymer resins for the paint and coatings,
printing ink, laminating, adhesives and sealants, and grease markets. These
value-added Doresco(R) specialty resins not only function as carriers for
pigment, but also provide surface protection and adhesion properties. We work
closely with our customers to develop resins that address their specific
problems.

The following is a list of representative uses for and a description of our
specialty resins and polymer products:

CATEGORY PRODUCT/BRAND DESCRIPTION
-------------------- ------------------------------------- ----------------------------------------

Specialty Resins and Acrylic Emulsions, Polyurethane Provide superior gloss and durability
Polymers Dispersions and Other Water-based properties to paints and coatings. End
Systems, Hycar(R), Sancure(R), markets include wood, paper, metal,
Algan(R), Performax(R) concrete, plastic and textiles.
Acrylic and Other Polymer Resins, Function as carriers for pigments, and
Doresco(R) provide surface protection and adhesion
properties. End-markets include paint
and coatings, printing ink, laminating,
adhesives and sealants and grease.

COATING ADDITIVES

Our additives for coatings and inks are used to enhance the appearance and
durability of coatings in architectural and industrial uses, as well as to
improve their processing and application characteristics. Additives such as
pigment dispersants enhance the processing and performance of printing ink,
while also maximizing color strength and stability in coatings and plastics. We
are a leading global supplier of surface modifiers that improve the abrasion
resistance properties and film characteristics of printing ink and coatings. Our
products include:

- High-performance hyperdispersants for coatings, inks, thermoplastics and
thermoset composites. We are a world leader in polymeric hyperdispersant
technology, sold under the Solsperse(R) and Solplus(R) trade names.
Hyperdispersants improve the dispersion of almost any solid particulate
(including pigments, fillers, flame retardants and fibers) into almost
any liquid medium (water, solvents and resins). They are primarily used
to achieve even color saturation. They enrich and strengthen color, while
reducing production costs and solvent emissions. We also produce
Ircosperse(R) pigment dispersants for coatings and COLORBURST(TM) pigment
dispersants for printing inks.

- Surface modifiers improve the performance of industrial, architectural,
can, coil, wood and powder coatings by enhancing and protecting surfaces.
Lanco(R), Lanco(R) Glidd, Lanco(R) Matt and Aquaslip(TM )surface
modifiers impart a variety of properties to a coating, including enhanced
slip, improved abrasion and scratch resistance, matting, texturing and a
silky, soft feel.

- Rheology control additives improve the performance of coatings by
providing thickening, sag control, pigment anti-settling and improved
surface appearance. Rheology control additives are sold under the brand
names Ircothix(R), Ircogel(R) and Solthix(R).

- Foam control additives for paints and coatings minimize air bubbles and
are sold under the FOAM BLAST(R) and Antibubble(TM) brands.

- Specialized additives for inks improve rub resistance properties and film
characteristics.

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The following is a list of representative uses for and a description of our
coating additives products:

CATEGORY PRODUCT/BRAND DESCRIPTION
----------------- ------------------------------------- ------------------------------------------

Coating Additives Dispersants, Solsperse(R) Improve the dispersion of almost any solid
Ircosperse(R), COLORBURST(TM) particulate into almost any liquid medium.
End-markets include coatings and printing
inks.
Surface Modifiers, Lanco(R), Lanco(R) Impart a variety of properties to a
Glidd, Lanco(R) Matt, Aquaslip(TM) coating, including enhanced slip, improved
abrasion and scratch resistance, matting,
texturing and a silky, soft feel. End
markets include industrial, architectural,
can and coil, wood and powder coatings.
Rheology Control Additives, Provide thickening, sag control and
Ircothix(R), Ircogel(R), Solthix(R) improved surface appearance of coatings.
Foam Control Additives, FOAM Minimize air bubbles in paints and
BLAST(R), Antibubble(TM) coatings.
Specialized Additives for Inks, Improve the processing, performance and
Duotron(R), Liquitron(R), Fluotron(R) rub resistance properties.

SPECIALTY MATERIALS. We are the largest global supplier of chlorinated
polyvinyl chloride (CPVC) resins and compounds, sold under the trademark
TempRite(R). We are also a leading producer of cross-linked polyethylene
compounds (PEX) sold under the trademark TempRite(R). Applications for
TempRite(R) resins and compounds include piping for residential and commercial
plumbing and fire sprinkler systems. In addition to TempRite(R), we are also a
leading producer of thermoplastic polyurethane (TPU), sold under the trademark
Estane(R). Applications for Estane(R) TPU include plastic film and sheet for
various coatings processes. In 2003, the specialty materials product line
generated pro forma net sales of $343.1 million.

CHLORINATED POLYVINYL CHLORIDE

TempRite(R) CPVC is a technologically advanced heat, fire and chemical
resistant polymer that we developed to serve technically demanding applications
not well served by traditional PVC and other commodity plastics. Our TempRite(R)
CPVC polymers are sold to customers who produce plastic piping for residential
and commercial plumbing, fire sprinkler systems and industrial piping
applications. TempRite(R) CPVC piping has inherent advantages over copper and
other metals due to its heat and corrosion resistance, increased insulation
properties, mold resistance, ease of installation and lower installed cost. We
market our branded TempRite(R) CPVC products for specific applications:
FlowGuard(R) and FlowGuard Gold(R) for residential and commercial plumbing,
BlazeMaster(R) for fire sprinkler systems and Corzan(R) for industrial piping.
We believe we have strong end-user awareness of our brands by using a direct
sales force that markets directly to builders, contractors, plumbers,
architects, engineers and building owners.

In 2001, Noveon International purchased select assets and technology to
manufacture PEX compounds, further used to produce PEX pipe. TempRite(R) PEX
enables us to add a flexible piping compound to our rigid piping product
offering. TempRite(R) PEX is a small but growing product for applications that
demand flexible piping systems.

Key growth drivers for TempRite(R) CPVC and TempRite(R) PEX include:

- continuing substitution of CPVC and PEX for metals, other plastics and
other more costly materials;

- increasing product awareness among builders, contractors and plumbers;

- residential and commercial real estate expenditures;

- housing needs in developing countries; and

- additional regulatory and building code approvals.

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Based on market research data from the Freedonia Group Incorporated, we
estimate that in 2002, the industry demand for all piping applications in which
CPVC and PEX participate was in excess of $1.0 billion. We expect the niche
applications for BlazeMaster(R) fire sprinkler piping and Corzan(R) industrial
piping to continue to grow at a faster rate than metals used in similar
applications. We believe that, just as plastic has replaced virtually all drain,
waste and vent piping systems, highly engineered plastics like CPVC and PEX
approved for potable water systems will continue to take market share from
copper and other metals in commercial and residential plumbing systems.

The following is a list of representative uses for and a description of our
CPVC and PEX products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

CPVC TempRite(R) Residential plumbing
FlowGuard(R) Residential and commercial plumbing
FlowGuard Gold(R) Residential and commercial plumbing
Corzan(R) Industrial piping
BlazeMaster(R) Fire sprinkler piping
PEX TempRite(R) Flexible piping systems

THERMOPLASTIC POLYURETHANE

Estane(R) TPU, an engineered, highly versatile thermoplastic, provides a
high quality, lower cost alternative to rigid plastics and flexible rubber.
Performance attributes of Estane(R) TPU include abrasion, heat and chemical
resistance, minimal fatigue from bending, ease of processing and good
paintability. These performance characteristics make Estane(R) TPU attractive
for use in a broad range of end-uses, including film and sheet for various
coating processes, wire and cable insulation, athletic equipment (such as
footwear), medical applications, pneumatic tubing and automotive molded parts.
Noveon International recently introduced several new product families that
extend the uses for Estane(R) TPU. This includes products that can be melt spun
into elastic spandex fibers and materials that offer enhanced breathability for
garments. We believe that Estane(R) TPU is one of the industry's leading brand
names. We also market Stat-Rite(R) thermoplastics, which are static dissipative
materials used in packaging for the electronics industry. In addition, we market
fiber-reinforced TPU under the Estaloc(R) brand. Estaloc(R) reinforced
engineering thermoplastics offer the functional properties of traditional TPU,
yet are reinforced for higher stiffness to provide the strength, dimensional
stability and impact resistance required to withstand a variety of tough
applications and harsh environments. Applications include sporting goods,
agricultural equipment and other mechanical components. Key growth drivers for
TPU include:

- demand for technical coated fabric and other materials;

- recreational activities;

- new application development; and

- increased substitution of TPU for other plastics.

We believe that the current annual global market for TPU products is
approximately $800.0 million. We expect substantial growth in TPU volumes to
occur in both new and existing end-use applications. The faster growing, higher
value portion of the industry is the extrusion sector, which is driven by its
rapid replacement of similar materials and its use in high-growth applications.
Overall sales of TPU should continue to grow through ongoing replacement of
rigid plastics, flexible rubber and other materials. We believe that we are well
positioned to grow faster than the overall TPU industry due to our focus on
extruded applications and our commitment to develop new technology for high
value applications.

In October 2003, Noveon International purchased select assets and
technology of Thermedics Polymer Products, LLC, a manufacturer of aliphatic TPU,
which will allow us to enter high-value optical film, medical tubing and other
applications.

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The following is a list of representative uses for and a description of our
TPU products:

CATEGORY PRODUCT/BRAND DESCRIPTION
------------------------ ------------------------------------- ---------------------------------------

TPU Estane(R) Aromatic grades for film and sheet,
wire and cable insulation, athletic
equipment, medical applications,
pneumatic tubing, automotive molded
parts and adhesives.
Estaloc(R) Automotive trim, sporting goods,
agricultural equipment and other
mechanical components.
Stat-Rite(R) Packaging of semiconductors, sensitive
electronic components, disk drive heads
and cell phone components.
Tecoflex(R) Aliphatic grades for optical film,
medical tubing and general industrial
applications.

COMPETITION

Our Lubrizol Additives business is highly competitive in terms of price,
technology development, product performance and customer service. Our principal
competitors, both in the United States and overseas, are Infineum, a joint
venture involving Shell Oil Company and Exxon Mobil Corporation; Chevron Oronite
Company, a subsidiary of ChevronTexaco Corporation; and Afton Chemical
Corporation, a subsidiary of NewMarket Corporation (formerly Ethyl Corporation).
Petroleum companies also produce, either directly or indirectly, lubricants and
fuel additives for their own use and also sell additives to others. These
petroleum companies are also our customers, and some of them sell raw materials
to us. We believe, based on volume sold, that we are the leading supplier of
performance additives for lubricants to the petroleum industry.

Our Noveon business faces a variety of competitors in each of our product
lines, but we believe no single company competes with us across all of our
existing product lines. The specialty chemicals industry is highly fragmented.
Individual products or service offerings compete on a global, regional and local
level due to the nature of the businesses and products, as well as the
applications and customers served. The following chart sets forth our principal
competitors of the Noveon business by product line:

PRODUCT LINE PRINCIPAL COMPETITORS
------------ ------------------------------------------------------------

Consumer specialties........... Cognis, CP Kelco, Croda, DSM, FMC, Hercules, ISP, Nihon
Junkayu, Quest, Rhodia, Rohm and Haas, Sensient, Sigma/3V,
Sumitomo Seika, Symrise, Tessenderlo, Velsicol
Performance coatings........... Avecia, BASF, Bayer, Byk, Ciba, Clariant, Dow Chemical,
Eastman, Johnson Polymer, OMNOVA, Parachem, PolymerLatex,
Reichhold, Rohm and Haas, Tego, UCB
Specialty materials............ Atofina, BASF, Bayer, Dow Chemical, Georgia Gulf, Huntsman,
Kaneka, Sekisui Chemical, Victaulic

SALES AND MARKETING

We primarily market our lubricant and fuel additives products worldwide
through our own direct sales organization. In addition, we use sales agents and
distributors where necessary. Our additives customers primarily consist of oil
refiners and independent oil blenders and are located in more than 100
countries. Our ten largest customers, most of which are international oil
companies and a number of which are groups of affiliated entities, accounted for
approximately 33% of our pro forma consolidated net sales in 2003.

In order to maximize our understanding of customer needs as well as
emerging trends, our sales and marketing activities for our specialty chemicals
products are organized by end-use applications. Each sales team includes
representatives from sales, marketing and research and development.

Most of our sales and marketing staff is technically oriented and works
closely with customers to develop products and formulations that deliver the
desired product attributes. Some of our laboratories are

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equipped with small-scale equipment that replicates our customers' processing
capabilities, which ensure our solutions are easily and efficiently implemented
at our customers' facilities.

Finally, some of our sales and marketing resources are dedicated to
stimulating end-use demand for our products. For example, in the case of our
TempRite(R) plumbing, fire sprinkler and industrial piping applications, our
resources are focused on marketing to building contractors, plumbers,
distributors and construction code officials to convince them to specify our
products in their projects or building codes.

RESEARCH, DEVELOPMENT AND TECHNOLOGY

Technology leadership in design and formulation of additives and specialty
chemicals drives our business. Historically, we have emphasized consistent
investment in research. Excluding acquisitions, research, development and
testing expense has consistently been about 8% of sales for the last two
decades -- higher than most chemical companies. Research expense alone has been
4.5% to 5.0% of sales annually for the last 10 years. We have developed
internally a large percentage of the products we manufacture and sell. Our
internal technical resources encompass chemical synthesis, state-of-the-art
physical and analytical science, statistical and computer modeling expertise and
extensive applications technology and testing laboratories. We balance
centralized research facilities with applications technology capabilities that
are closely tied to their counterparts in the commercial organizations. Our
technical facilities are located all over the world. We provide tools and
processes for knowledge sharing and for leveraging our technology globally and
across product lines.

LUBRICANT ADDITIVES. In our lubricant additives segment, the majority of
the additives we manufacture and sell are developed by our in-house research
group. Technological advances in materials and in the design of engines and
other automotive equipment, combined with rising demands for environmental
protection and fuel economy, require increasingly sophisticated research
capabilities to meet industry performance standards.

We have technical facilities in Wickliffe, Ohio; Hazelwood, England; and
Kinura, Japan for lubricant additives research. We also conduct a limited
program of corporate research designed to leverage technology across our product
lines. We maintain mechanical testing laboratories at those three locations,
equipped with a variety of gasoline and diesel engines, driveline and other
mechanical equipment to evaluate the performance of additives for lubricants and
fuels. In addition, we make extensive use of independent research firms. Global
field testing is conducted through various arrangements with fleet operators and
others.

We maintain offices in Detroit, Michigan; Hazelwood, England; Paris,
France; Hamburg, Germany; Shanghai, China; Bombay, India; Tokyo, Japan; and
Seoul, Korea to maintain close contact with the principal automotive and OEMs of
the world and to keep us abreast of the performance requirements for our
products. These liaison activities also serve as contacts for cooperative
development and evaluation of products for future applications.

SPECIALTY CHEMICALS. Our specialty chemicals segment has had a long
history as an industry innovator, creating proprietary, high-performance
materials for our customers, including ingredients for personal care products,
the invention of Carbopol(R) acrylic thickener, additives for coatings and the
commercial development of TempRite(R) CPVC. We have leveraged our core
surface-active chemistry into new specialty chemicals and materials markets
through acquisitions and application technology expertise. Our specialty
chemical and materials products are derived from a broad range of technology
platforms developed either internally or externally through licensing,
acquisition or joint technological alliances with global suppliers and
customers.

Our primary research facility for our Noveon segment is located in
Brecksville, Ohio, where we develop new technologies and products and conduct
applications development and technical service for our customers. We maintain
technical facilities for personal care in California and for coatings and inks
in New Jersey and Chicago. For our customers outside of North America, we
operate regional technical facilities in various locations in Europe and Asia.

PATENTS. We own approximately 3,000 patents worldwide relating to our
products and manufacturing processes. Although these domestic and foreign
patents expire from time to time, we continue to apply for and obtain patent
protection for new products on an ongoing basis. We believe that, in the
aggregate, our

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patents constitute an important asset. However, we do not regard our business as
being materially dependent upon any single patent or any group of related
patents. We use patents in both of our reporting segments.

RESEARCH, TESTING AND DEVELOPMENT EXPENDITURES. Our pro forma consolidated
research, testing and development expenditures were $211.7 million in 2003, or
6.7% of our pro forma consolidated net sales. Our research and development staff
includes approximately 700 professionals, many of whom possess PhDs or
equivalent degrees, and approximately 450 technical service employees. Our
research and development staff works with both our sales force and customers to
use our wide spectrum of technology platforms and processing capabilities to
enhance our product offerings in the specialty chemicals industry. We have
developed many of our products in cooperation with our customers, often as a
result of their specific needs, resulting in long-standing customer
relationships.

RAW MATERIALS

We use a broad variety of specialty and commodity chemical raw materials in
our manufacturing processes, and use oil in processing and blending additives.
These raw materials are available from several sources. The materials that we
choose to purchase from a single source generally have long-term supply
contracts as a basis to guarantee supply reliability. For the most part, our raw
materials are derived from petroleum and petrochemical-based feedstocks.

Lubricant base oil is our single largest purchased raw material,
representing about one-third of our purchases, by weight, for the Lubrizol
Additives segment. Other major categories of raw materials for lubricant
additives include olefins and esters (approximately 15% of purchases); inorganic
acids, bases and oxides (approximately 6%); and alcohols and glycols
(approximately 5%). We estimate that raw materials derived from petrochemicals
are approximately 75% of our purchases for the lubricant additives segment. For
our Noveon segment, no single raw material represents more than 5% of purchases.
The top seven raw materials total about 30% of purchases for Noveon. Principal
raw materials for the specialty chemicals segment include acrylates for personal
care and coatings, toluene for food and beverages, and PVC, PTMEG, MDI and
styrene for specialty materials.

ENVIRONMENTAL MATTERS

We are subject to foreign, federal, state and local laws and regulations
designed to protect the environment and limit manufacturing wastes and
emissions. We believe that, as a general matter, our policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and the consequent financial liability to us. Compliance with
environmental laws and regulations requires continuing management effort and
expenditures. We have incurred, and will continue to incur, costs and capital
expenditures in complying with these laws and regulations and to obtain and
maintain all necessary permits. We believe that the cost of complying with
environmental laws and regulations will not have a material effect on our
earnings, liquidity or competitive position, although we cannot provide you
assurance in that regard.

We believe that our business, operations and facilities are being operated
in compliance, in all material respects, with applicable environmental laws and
regulations, many of which provide for substantial fines, penalties and criminal
sanctions for violations. The operation of manufacturing plants entails
environmental risks, and we may incur material costs or liabilities in the
future that could adversely affect us. For example, we may be required to comply
with evolving environmental laws, regulations or requirements that may be
adopted or imposed in the future or to address newly discovered contamination or
other conditions or information that require a response on our part.

Among other environmental laws, we are subject to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (commonly known
as Superfund), under which we have been designated as a "potentially responsible
party" that may be liable for cleanup costs associated with various waste sites,
some of which are on the U.S. Environmental Protection Agency Superfund priority
list. Our experience, consistent with what we believe to be the experience of
others in similar cases, is that Superfund site liability tends to be
apportioned among parties based upon the contribution of materials to the
Superfund site. Accordingly, we measure our liability and carry out our
financial reporting responsibilities with respect

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to Superfund sites based upon this standard, even though Superfund site
liability is technically joint and several in nature. We accrue for estimated
environmental liabilities with charges to cost of sales. We believe our
environmental accrual is adequate to provide for our portion of the costs of all
such known environmental liabilities. Based upon consideration of currently
available information, we believe liabilities for environmental matters will not
have a material adverse affect on our financial position, operating results or
liquidity, although we cannot provide you assurance in that regard.

Noveon International is the beneficiary of agreements with Goodrich
Corporation that require Goodrich to indemnify Noveon International for, among
other things, certain environmental liabilities and costs relating to facilities
of the former Performance Materials Segment of Goodrich. However, we cannot
assure you that Goodrich or other third party indemnitors will, in the future,
honor their indemnification obligations to us.

EMPLOYEES

At July 31, 2004, we had approximately 7,700 employees of which
approximately 56% were in the United States. We believe that our relationship
with our employees is good. Seven of our U.S. sites, and approximately 11% of
our domestic employees, are organized by labor unions with collective bargaining
agreements that are subject to periodic renegotiation. The durations of these
collective bargaining agreements vary from three to five years, with four
agreements expiring in 2004 and 2005. We expect to enter into new agreements
with these unions as the current agreements expire.

MANUFACTURING AND PROPERTIES

We possess global manufacturing, laboratory and sales and technical service
facilities enabling us to provide customers with worldwide service and a
reliable supply of products. Our corporate headquarters is located in Wickliffe,
Ohio. We have manufacturing facilities, laboratories and offices, which we own
or lease, at 40 sites in the United States and 56 sites in 25 other countries.
We also have entered into long-term contracts for the exclusive use of major
marine terminal facilities at various ports and leases for storage facilities.
We maintain a capital expenditure program to support our operations and believe
our facilities are adequate for our present operations and for the foreseeable
future.

We supply our customers abroad through exports from the United States and
from overseas manufacturing plants. We believe the political and economic risks
related to our foreign operations are mitigated due to the stability of the
countries in which our largest foreign operations are located.

LEGAL PROCEEDINGS

We are engaged in legal proceedings arising in the ordinary course of
business. We believe that the ultimate outcome of these proceedings will not
have a material adverse impact on our results of operations, financial position
or cash flows.

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MANAGEMENT

The following table shows certain information regarding each of Lubrizol's
executive officers.

NAME AGE POSITION
---- --- --------

William G. Bares.......................... 63 Chairman of the Board
James L. Hambrick......................... 49 President and Chief Executive Officer
Joseph W. Bauer........................... 51 Vice President and General Counsel
Donald W. Bogus........................... 57 Senior Vice President and
President -- Noveon Segment
Charles P. Cooley......................... 49 Senior Vice President and Chief Financial
Officer
W. Scott Emerick.......................... 40 Controller
Stephen F. Kirk........................... 55 Senior Vice President and
President -- Lubrizol Additives Segment
Gregory R. Lewis.......................... 45 Vice President and General
Counsel -- Noveon Segment
Gregory P. Lieb........................... 51 Vice President, Finance -- Lubrizol
Additives Segment
Annora C. Marcus.......................... 42 Assistant Secretary
Scott A. McKinley......................... 43 Vice President, Finance -- Noveon Segment
Mark W. Meister........................... 50 Vice President and Chief Ethics Officer
Larry Norwood............................. 54 Vice President, Operations -- Lubrizol
Additives Segment
Rosanne S. Potter......................... 45 Treasurer
Leslie M. Reynolds........................ 44 Corporate Secretary
Patrick H. Saunier........................ 48 Vice President
Jeffrey A. Vavruska....................... 44 Chief Tax Officer
Joanne Wanstreet.......................... 52 Vice President

WILLIAM G. BARES is chairman of the board of directors of The Lubrizol
Corporation. Mr. Bares joined the Company as a process development engineer in
1963. He was appointed director of process development in 1972, vice president
in 1978, executive vice president in 1980, president in 1982, chief operating
officer in 1987, chief executive officer in 1996 and chairman in 1996. In April
2004, Mr. Bares stepped down from his role as chief executive officer. He
continues as an employee of the Company. In addition to his corporate
responsibilities, Mr. Bares is a director of Oglebay Norton Company, KeyCorp,
Applied Industrial Technologies and Cleveland Tomorrow/Greater Cleveland
Partnership. He is also an executive board member for the Boy Scouts of America
Greater Western Reserve Council, serves as a trustee for the Northeast Ohio
Council on Higher Education and holds an honorary position on the local Learning
About Business advisory board. He holds a BS degree in chemical engineering from
Purdue University and received an MBA from Case Western Reserve University.

JAMES L. HAMBRICK is president and chief executive officer of The Lubrizol
Corporation. He was elected president in January 2003 and chief executive
officer in April 2004. Mr. Hambrick began his career at Lubrizol's Deer Park,
Texas plant in 1973 as a co-operative education student and was hired full time
in 1978. His career has encompassed a variety of responsible positions in
operations, marketing, technology and business development. He led international
market development activities in the former Soviet Union and China for most of
the 1990s. He was global business manager for engine oils from 1998 to 1999, and
was elected an officer of the Company in April 2000. As vice president for
Asia-Pacific, he was based in Singapore and was responsible for leading the
Company's activities in the Far East region. Mr. Hambrick holds a BS degree in
chemical engineering from Texas A&M University. He is a member of the American
Institute of Chemical Engineers.

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JOSEPH W. BAUER is vice president and general counsel of The Lubrizol
Corporation. He joined Lubrizol in 1985 as litigation counsel, was named general
counsel of the Company in 1991 and elected an officer in 1992. Prior to joining
Lubrizol, Mr. Bauer practiced commercial litigation with the firm of Jones, Day,
Reavis & Pogue from 1981 to 1985. In recent years, Mr. Bauer has presented to
various groups of lawyers and judges including the Canadian-U.S. Law Institute,
The American Corporate Counsel Association, the Ohio Judicial Conference and
various law firms. He holds BA and JD degrees from The University of Toledo.

DONALD W. BOGUS is senior vice president of The Lubrizol Corporation and
president of the Noveon segment. He joined Lubrizol in 2000 as vice president
responsible for the Fluid Technologies for Industry segment. He also led
Lubrizol's mergers and acquisitions committee. Prior to joining Lubrizol, Mr.
Bogus was an executive officer at PPG Industries where he was vice president of
specialty chemicals and vice president of industrial coatings. Mr. Bogus holds a
BS degree in biology/chemistry from Baldwin Wallace College. Mr. Bogus is a
member of Baldwin Wallace's Board of Trustees and a Committee Member, and is on
their business division's Business Advisory Board.

CHARLES P. COOLEY is senior vice president and chief financial officer of
The Lubrizol Corporation. His responsibilities include treasury, planning,
mergers and acquisitions, financial reporting, internal audit, tax and risk
management. Mr. Cooley joined Lubrizol in 1998. Previously, he spent 15 years
with the Atlantic Richfield Company in Los Angeles in a variety of financial
positions, including vice president, finance for ARCO Products Company and
assistant treasurer for corporate finance. From 1978 to 1981, he was a
commercial loan officer with Manufacturers Hanover Trust Company in New York
City. Mr. Cooley holds a BA degree in philosophy from Yale University and
received an MBA from the Amos Tuck School of Business at Dartmouth College.

W. SCOTT EMERICK joined The Lubrizol Corporation as controller in June
2004. He has held positions at Ernst & Young LLP, Barmet Aluminum, Flexalloy
Textron and, most recently, at Noveon International as director of accounting
and external financial reporting and director of finance -- TempRite(R)
products. Mr. Emerick holds a BS degree in accounting from The University of
Akron.

STEPHEN F. KIRK is senior vice president of The Lubrizol Corporation and
president of the Lubrizol Additives segment. Mr. Kirk joined Lubrizol as a
process development engineer in 1972. He has served in a variety of sales and
marketing positions, including vice president of marketing, vice president of
sales and, in 1998, vice president of sales and marketing. He is on the board of
directors of the National Petrochemical and Refiners Association and is past
chairman of the American Chemistry Council Petroleum Additives Panel. He is also
a member of the Society of Automotive Engineers, American Petroleum Institute
and American Institute of Chemical Engineers. He is a director of Vocational
Guidance Service, and he has been active in Boy Scouts of America. Mr. Kirk
holds BS and ME degrees in chemical engineering from Cornell University and
received an MBA from Cleveland State University.

GREGORY R. LEWIS is vice president and general counsel to the Noveon
segment. Mr. Lewis joined Lubrizol in 1984 as a process development engineer,
after working two years at Gulf Oil and four years as a cooperative education
student at Lubrizol. While working, he obtained his law degree and, in 1992, he
transferred to Lubrizol's legal division. He has held positions as assistant to
the general counsel, assistant secretary of Lubrizol and vice president of Asia
Pacific, based in Singapore. He was appointed an officer in 2001. Mr. Lewis
holds a BS degree in chemical engineering from Purdue University and a JD degree
from Cleveland Marshall College of Law.

GREGORY P. LIEB is vice president of finance for the Lubrizol Additives
segment. He has spent twenty years with Lubrizol in the finance division. Most
recently, he was controller -- commercial analysis and support. Mr. Lieb holds a
BBA degree in accounting from Ohio University.

ANNORA C. MARCUS is assistant secretary of The Lubrizol Corporation. Ms.
Marcus joined Lubrizol in 1989 as a domestic tax analyst and has held various
domestic and international tax-related positions in the Company's finance
division, most recently as Director -- Foreign Audits/Transfer Pricing. Ms.
Marcus holds a BSBA in accounting from John Carroll University. Ms. Marcus is a
member of the Tax Executives Institute -- European Chapter.

S-90

SCOTT A. MCKINLEY is vice president of finance for the Noveon segment. From
2001 to 2004, he was vice president and controller for Noveon International.
Previously, he was the director, financial planning and analysis, for the
Performance Materials Segment of Goodrich Corporation. Prior to joining Goodrich
in late 1998, Mr. McKinley spent 15 years in a variety of financial roles with
the General Electric Company, including assignments at GE Power Systems,
Aerospace, Aircraft Engines, Transportation and the corporate headquarters. Mr.
McKinley holds a BBA degree from the University of Iowa.

MARK W. MEISTER has been the vice president of human resources for The
Lubrizol Corporation since 1993 and chief ethics officer since 1994. He oversees
the Company's global human resource function and has responsibility for the
ethical and legal conduct program. Mr. Meister has 25 years of experience in the
human resources field, having worked for firms including The Hoover Company and
Regal Ware and as director of human resources for Agrigenetics, a former
subsidiary of Lubrizol. He holds a BA degree from Marquette University and
received an MBA from Kent State University. Mr. Meister is active in the Ethics
Officers Association and the Josephson Institute and serves on the Board of
Trustees for the Council for Ethics in Economics.

LARRY NORWOOD is vice president of operations for the Lubrizol Additives
segment. He was appointed an officer in April 2004. Mr. Norwood joined Lubrizol
in 1973. He has held various management roles within operations at Lubrizol's
headquarters in Wickliffe, Ohio and the manufacturing facilities in Deer Park
and Bayport, Texas. Most recently, he has served as general manager of the Texas
facilities. Mr. Norwood received a BS degree in chemical engineering from Lamar
University.

ROSANNE S. POTTER is treasurer of The Lubrizol Corporation. She joined
Lubrizol in 2001. Her previous 20 years of treasury assignments include
extensive experience in the specialty chemical industry. She was vice president
and treasurer of Dexter Corporation, treasurer of BetzDearborn, Inc. and
assistant treasurer of Morton International. Ms. Potter holds a BA in economics
and French from Boston College and an MBA in finance from Loyola University.

LESLIE M. REYNOLDS is corporate secretary and counsel for The Lubrizol
Corporation. Ms. Reynolds joined Lubrizol in 1991 serving as legal counsel in
the areas of employee benefits, employment law and securities law. She served as
assistant secretary from 1997 until her appointment as corporate secretary in
April 2001. Prior to joining Lubrizol, Ms. Reynolds was an attorney for Squire,
Sanders & Dempsey L.L.P. where she specialized in employee benefits. She
received a BS in business administration with a major in accounting from Indiana
University and a JD degree from the University of Illinois.

PATRICK H. SAUNIER is vice president for information systems and business
processes for The Lubrizol Corporation. Mr. Saunier joined Lubrizol's
manufacturing facility in Rouen, France in 1981. He has held a variety of
positions in operations, marketing and information technology based in France,
the U.K. and the U.S. In the late 1990s, he led the implementation of Lubrizol's
enterprise resource planning system for the U.S. and Europe. Since 1999, he has
led the European shared services organization. Mr. Saunier received his degree
in chemical engineering from Institut National des Sciences Appliquees in
Toulouse and his degree in business management from Institut d'Administration
des Entreprises in Toulouse.

JEFFREY A. VAVRUSKA joined The Lubrizol Corporation as chief tax officer in
2004. Previously he worked 18 years in tax roles at American Greetings
Corporation, where he was executive director of tax, Cleveland Cliffs, Inc., BP
America and Price Waterhouse. Mr. Vavruska holds a BA degree in business
administration with a major in accounting from Cleveland State University and a
JD from Cleveland Marshall College of Law.

JOANNE WANSTREET is vice president with responsibility for global
communications and investor relations for The Lubrizol Corporation. Ms.
Wanstreet joined Lubrizol in 1987. She has held a variety of positions in
marketing, commercial development, R&D management and finance. Prior to her 2002
appointment as vice president, she was manager for investor relations. She
worked at McKinsey and Company before joining Lubrizol. Ms. Wanstreet holds a BA
degree in English from Case Western Reserve University and an MBA from the
University of Michigan.

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DESCRIPTION OF COMMON SHARES

We are authorized to issue up to 120,000,000 common shares, without par
value. For a description of the terms of our common shares, see the section of
the accompanying prospectus entitled "Description of Common Shares."

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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-U.S. HOLDERS OF OUR COMMON SHARES

The following is a description of the material United States federal income
and estate tax consequences of the purchase, ownership and disposition of our
common shares acquired by Non-U.S. Holders in this offering. A "Non-U.S. Holder"
means any person or entity that is a beneficial owner of our common shares,
other than an entity treated as a partnership, that is not any of the following
for U.S. federal income tax purposes:

- an individual citizen or resident of the United States;

- a corporation (including an entity treated as a corporation for U.S.
federal income tax purposes) created or organized in or under the laws of
the United States, or of any state thereof or the District of Columbia;

- an estate the income of which is includable in gross income for U.S.
federal income tax purposes regardless of its source; or

- a trust (1) if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of
the trust, or (2) which has made an election to be treated as a U.S.
person under applicable Treasury Regulations.

If a partnership holds the common shares, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. Persons who are partners of partnerships holding the common shares
should consult their tax advisors.

This summary is based on provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Regulations promulgated thereunder and
judicial and administrative authority, all as of the date hereof and all of
which are subject to change, possibly on a retroactive basis. We assume in the
summary that a Non-U.S. Holder holds our common shares as a capital asset within
the meaning of Section 1221 of the Code (generally, property held for
investment). It does not address aspects of U.S. federal taxation other than
income and estate taxation. This summary does not discuss all the tax
consequences that may be relevant to a Non-U.S. Holder in light of the Non-U.S.
Holder's particular circumstances, nor does it consider any specific facts or
circumstances that may apply to a Non-U.S. Holder subject to special treatment
under the U.S. federal income tax laws. In particular, this summary does not
address the tax treatment of special classes of Non-U.S. Holders, such as banks,
insurance companies, tax-exempt entities, financial institutions, broker-
dealers, partnerships or other entities classified as partnerships or
flow-through entities for U.S. federal income tax purposes, persons holding our
common shares as part of a straddle, hedge, conversion, or other integrated
transaction, or U.S. expatriates. Moreover, special rules may apply if a
Non-U.S. Holder is a "controlled foreign corporation," "passive foreign
investment company," or "foreign personal holding company," as defined under the
Code. In addition, this summary does not address any state, local, or foreign
tax considerations that may be relevant to a Non-U.S. Holder's decision to
purchase common shares.

PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES, AS WELL AS OTHER
U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES, AND THE NON-U.S. TAX
CONSEQUENCES, TO THEM OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON SHARES.

U.S. FEDERAL INCOME TAX

Distributions. If we pay distributions on our common shares, those
payments will constitute dividends for U.S. income tax purposes to the extent
paid from our current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. If those distributions exceed our current
and accumulated earnings and profits, (1) the distributions will constitute a
return of capital (to the extent of the Non-U.S. Holder's basis in the shares)
and will reduce the Non-U.S. Holder's basis in the shares, but not below zero,
and (2) any remaining amount of the distributions will be treated as capital
gain from the sale of shares.

S-93

In general, dividends we pay to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate of the gross amount (or a lower rate prescribed by
an applicable income tax treaty) unless the dividends are effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States and, if a treaty applies, are attributable to a permanent establishment
of the Non-U.S. Holder within the United States.

Dividends effectively connected with such a U.S. trade or business, and, if
a treaty applies, attributable to such a permanent establishment of a Non-U.S.
Holder, generally will not be subject to U.S. withholding tax if the Non-U.S.
Holder files certain forms, including Internal Revenue Service Form W-8ECI (or
any successor form), with the payor of the dividend, and generally will be
subject to U.S. federal income tax on a net income basis, in the same manner as
if the Non-U.S. Holder were a resident of the United States. A Non-U.S. Holder
that is a corporation may be subject to an additional branch profits tax at a
rate of 30% (or such lower rate as may be specified by an applicable income tax
treaty) on the repatriation or deemed repatriation from the United States of its
"effectively connected earnings and profits," subject to certain adjustments and
exceptions.

A Non-U.S. Holder of common shares who wishes to claim the benefit of an
applicable income tax treaty rate for U.S. withholding tax on dividends, will be
required (a) to complete Internal Revenue Service Form W-8BEN (or other
applicable form) and certify under penalties of perjury that such holder is not
a U.S. person or (b) if the common shares are held through certain foreign
intermediaries, to satisfy the relevant certification requirements of applicable
Treasury Regulations. Special certification and other requirements apply to
certain Non-U.S. Holders that are entities rather than individuals.

A Non-U.S. Holder of common shares eligible for a reduced rate of U.S.
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service.

Disposition Of Our Common Shares. Generally, Non-U.S. Holders will not be
subject to U.S. federal income tax, or withholding thereof, in respect of gain
recognized on a disposition of our common shares unless one or more of the
following exceptions applies:

- The gain is effectively connected with the Non-U.S. Holder's conduct of a
trade or business within the United States, or if a tax treaty applies,
is attributable to a permanent establishment of the Non-U.S. Holder in
the U.S. In any such case, gain will be subject to regular graduated U.S.
federal income tax rates, and the branch profits tax described above
under "U.S. Federal Income Tax -- Distributions" may also apply if the
Non-U.S. Holder is a corporation.

- In the case of a Non-U.S. Holder who is a non-resident alien individual
and holds our common shares as a capital asset, the Non-U.S. Holder is
present in the U.S. for 183 or more days in the taxable year of the sale
and other conditions are met. In any such case, the Non-U.S. Holder will
be subject to U.S. federal income tax at a 30% rate on the gain.

- The Non-U.S. Holder is subject to U.S. federal income tax under
provisions of U.S. federal income tax law applicable to certain United
States expatriates (including certain former citizens or residents of the
United States).

- We are or, during the past five years, have been a "United States real
property holding corporation" for U.S. federal income tax purposes and
certain other conditions are met.

Generally, a corporation is a "United States real property holding
corporation" if, at any time during the past five years, the fair market value
of its "United States real property interests" equals or exceeds 50% of the sum
of the fair market value of its worldwide real property interests plus its other
assets used or held for use in a trade or business. We do not believe that we
are or, during the past five years, have been a United States real property
holding corporation for U.S. federal income tax purposes, and we do not expect
to become one in the future. Even if we are or have been a United States real
property holding corporation for U.S. federal income tax purposes, a Non-U.S.
Holder who is otherwise not subject to U.S. federal income tax on gain realized
on a sale or other disposition of our common shares would not be subject to such
taxation,

S-94

but only if our common shares are "regularly traded on an established securities
market" for U.S. federal income tax purposes and such Non-U.S. Holder does not
own (and did not own), directly or indirectly, at any time during the five-year
period ending on the date of disposition, more than five percent of the
outstanding common shares.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, we must report annually to the Internal Revenue Service and to
each Non-U.S. Holder the amount of dividends that we paid to a Non-U.S. Holder,
and the amount of tax that we withheld on those dividends. These reporting
requirements apply regardless of whether withholding tax was reduced or
eliminated by an applicable tax treaty. This information may also be made
available to the tax authorities of a country in which the Non-U.S. Holder
resides or is established. Under some circumstances, Treasury Regulations
require backup withholding and additional information reporting on dividends. A
Non-U.S. Holder will be subject to backup withholding for the gross amount of
dividends paid to such holder (at the applicable rate of 28% through 2010 and
31% thereafter) unless such holder provides Internal Revenue Service Form W-8BEN
(or other applicable form) and certifies under penalty of perjury that it is a
Non-U.S. Holder, and the payor does not have actual knowledge or reason to know
that such holder is a U.S. person, or such holder otherwise establishes an
exemption. Generally, dividends paid to a Non-U.S. Holder that are subject to
the 30% U.S. federal withholding tax described above under "U.S. Federal Income
Tax -- Distributions" are not subject to backup withholding.

Information reporting and, depending on the circumstances, backup
withholding, will apply to the proceeds of a sale of common shares within the
United States or conducted through U.S.-related financial intermediaries unless
the beneficial owner certifies under penalties of perjury that it is a Non-U.S.
Holder (and the payor does not have actual knowledge or reason to know that the
beneficial owner is a U.S. person) or such holder otherwise establishes an
exemption.

Backup withholding is not an additional tax. A Non-U.S. Holder may obtain a
refund of any excess amounts withheld under the backup withholding rules or a
credit against such Non-U.S. Holder's U.S. federal income tax liability by
filing an appropriate claim for refund or credit with the Internal Revenue
Service.

Non-U.S. Holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situation, including the availability of and procedure for obtaining an
exemption from backup withholding under current Treasury Regulations.

U.S. FEDERAL ESTATE TAX

If an individual Non-U.S. holder owns, or is treated as owning, our common
shares at the time of his or her death, such common shares would generally be
includable in the individual's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

S-95

UNDERWRITING

Citigroup Global Markets Inc. is acting as the sole book-running manager of
the offering, and as representative of the underwriters named below. Subject to
the terms and conditions stated in the underwriting agreement dated the date of
this prospectus supplement, each underwriter named below has agreed to purchase,
and we have agreed to sell to that underwriter, the number of shares set forth
opposite the underwriter's name.

NUMBER OF
UNDERWRITER SHARES
----------- ----------

Citigroup Global Markets Inc. .............................. 7,370,000
KeyBanc Capital Markets, a division of McDonald Investments
Inc. ..................................................... 3,350,000
Deutsche Bank Securities Inc. .............................. 1,340,000
ABN AMRO Rothschild LLC..................................... 1,340,000
----------
Total..................................................... 13,400,000
==========

The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The underwriters
are obligated to purchase all the shares (other than those covered by the
over-allotment option described below) if they purchase any of the shares.

The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and some of the shares to dealers at the public offering price less a
concession not to exceed $0.798 per share. The underwriters may allow, and
dealers may reallow, a concession not to exceed $0.100 per share on sales to
other dealers. If all of the shares are not sold at the initial offering price,
the underwriters may change the public offering price and the other selling
terms.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to 2,010,000 additional
common shares at the public offering price less the underwriting discount. The
underwriters may exercise the option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent the option
is exercised, each underwriter must purchase a number of additional shares
proportionate to that underwriter's initial purchase commitment.

We and our officers and directors have agreed that, for a period of 90 days
from the date of this prospectus supplement, we and they will not, without the
prior written consent of Citigroup Global Markets Inc., dispose of or hedge any
of our common shares or any securities convertible into or exchangeable for our
common shares. Citigroup Global Markets Inc. in its sole discretion may release
any of the securities subject to these lock-up agreements at any time without
notice.

Each underwriter has represented, warranted and agreed that:

- it has not offered or sold and, prior to the expiry of a period of six
months from the closing date, will not offer or sell any shares included
in this offering to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;

- it has only communicated and caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of section 21 of the
Financial Services and Markets Act 2000 ("FSMA")) received by it in
connection with the issue or sale of any shares included in this offering
in circumstances in which section 21(1) of the FSMA does not apply to us;

S-96

- it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the shares
included in this offering in, from or otherwise involving the United
Kingdom; and

- the offer in The Netherlands of the shares included in this offering is
exclusively limited to persons who trade or invest in securities in the
conduct of a profession or business (which include banks, stockbrokers,
insurance companies, pension funds, other institutional investors and
finance companies and treasury departments of large enterprises).

The common shares are listed on the NYSE under the symbol "LZ."

The following table shows the underwriting discounts and commissions that
we are to pay to the underwriters in connection with this offering. The amounts
shown assume both no exercise and full exercise of the underwriters' option to
purchase additional common shares.

PAID BY LUBRIZOL
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------

Per share.................................................. $ 1.33 $ 1.33
Total...................................................... $17,822,000 $20,495,300

In connection with the offering, Citigroup Global Markets Inc., on behalf
of the underwriters, may purchase and sell common shares in the open market.
These transactions may include short sales, syndicate covering transactions and
stabilizing transactions. Short sales involve syndicate sales of common shares
in excess of the number of shares to be purchased by the underwriters in the
offering, which creates a syndicate short position. "Covered" short sales are
sales of shares made in an amount up to the number of shares represented by the
underwriters' over-allotment option. Transactions to close out the covered
syndicate short position involve either purchases of the common shares in the
open market after the distribution has been completed or the exercise of the
over-allotment option. In determining the source of shares to close out the
covered syndicate short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. The underwriters may also make "naked" short sales of
shares in excess of the over-allotment option. The underwriters must close out
any naked short position by purchasing common shares in the open market. A naked
short position is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who purchase in the
offering. Stabilizing transactions consist of bids for or purchases of shares in
the open market while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Citigroup Global Markets Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common shares. They may also cause the price
of the common shares to be higher than the price that otherwise would exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the NYSE or in the over-the-counter market or
otherwise. If the underwriters commence any of these transactions, they may
discontinue them at any time.

We estimate that our total expenses for this offering will be $1.5 million.

Certain of the underwriters and their affiliates have performed commercial
banking, investment banking and advisory services for us from time to time for
which they have received customary fees and expenses. The underwriters may, from
time to time, engage in transactions with and perform services for us in the
ordinary course of their business. In particular, Citigroup Global Markets Inc.
and Citicorp North America, Inc., an affiliate of Citigroup Global Markets Inc.,
are a lead arranger and the agent, respectively, under each of the temporary
bridge facility and the new credit facility entered into on August 24, 2004. In
addition, Citigroup Global Markets Inc. was our financial advisor in connection
with our acquisition of Noveon

S-97

International. ABN Amro Bank N.V. and KeyBank National Association, respective
affiliates of ABN AMRO Rothschild LLC and KeyBanc Capital Markets, are initial
lenders under the temporary bridge facility and the new credit facility.
Deutsche Bank AG New York Branch, an affiliate of Deutsche Bank Securities Inc.,
is an initial lender under the new credit facility.

Because more than 10% of the proceeds of this offering, not including
underwriting compensation, may be received by entities who are affiliated with
National Association of Securities Dealers, Inc. members who are participating
in this offering, this offering is being conducted in compliance with the NASD
Conduct Rule 2710(h). Pursuant to that rule, the appointment of a qualified
independent underwriter is not necessary in connection with this offering, as a
bona fide independent market (as defined in the NASD Conduct Rules) exists in
the common shares.

A prospectus supplement and the accompanying prospectus may be made
available in electronic format on the websites maintained by one or more of the
underwriters. The representative may agree to allocate a number of shares to
underwriters for sale to their online brokerage account holders. The
representative will allocate shares to underwriters that may make Internet
distributions on the same basis as other allocations. In addition, shares may be
sold by the underwriters to securities dealers who resell shares to online
brokerage account holders.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.

S-98

PROSPECTUS

$2,000,000,000

THE LUBRIZOL CORPORATION

COMMON SHARES
DEBT SECURITIES

This prospectus provides you with a general description of the common
shares and debt securities that we may offer and sell from time to time. Each
time we offer securities for sale we will provide a prospectus supplement that
contains specific information about the terms of the offered securities and may
add to, update or change the information contained in this prospectus. We will
also describe in the prospectus supplement any material risk factors that an
investor should consider before purchasing our securities. This prospectus may
not be used to consummate sales of our securities unless it is accompanied by a
prospectus supplement describing the terms of the offering.

Our common shares are listed for trading on the New York Stock Exchange
under the symbol "LZ." The mailing address and telephone number of our principal
executive offices are 29400 Lakeland Boulevard, Wickliffe, Ohio 44092-2298 and
(440) 943-4200.

You should read this prospectus, the documents that are incorporated herein
by reference and the applicable prospectus supplement carefully before you
decide to invest in our securities.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is August 27, 2004.

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
SEC utilizing a shelf registration process. Under this shelf process, we may
sell any combination of the securities described in this prospectus in one or
more offerings up to a total dollar amount of $2,000,000,000. This prospectus
provides you with a general description of the securities that we may offer.
Each time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. This prospectus may not be used to consummate sales of our
securities unless it is accompanied by a prospectus supplement describing the
terms of the offering. You should read both this prospectus and any applicable
prospectus supplement together with the additional information described below
under the heading "Where You Can Find More Information."

ABOUT THE LUBRIZOL CORPORATION

We are a leading global producer and marketer of technologically advanced
chemicals and specialty materials for the transportation, consumer and
industrial markets. We create additives, ingredients, resins and compounds that
enhance the performance, quality and value of our customers' products.

On June 3, 2004, we acquired Noveon International, Inc. We paid
approximately $920.0 million for the equity of Noveon International, less
certain transaction expenses of Noveon International, and subsequently paid
approximately $1.1 billion in connection with the refinancing of the outstanding
indebtedness of Noveon International and its subsidiaries. Noveon International
is a leading global producer and marketer of technologically advanced specialty
materials and chemicals used in a broad range of consumer and industrial
applications. Noveon International's business includes a number of
industry-leading product franchises marketed under some of the industry's most
recognized brand names, including Carbopol(R), TempRite(R), Estane(R) and
Hycar(R).

Following our acquisition of Noveon International, we reorganized our
business into two business units and operating segments: the lubricant additives
segment, also referred to as Lubrizol Additives, and the specialty chemicals
segment, also referred to as Noveon. The lubricant additives segment is
comprised of our previous business in fluid technologies for transportation,
advanced fluid systems, emulsified products and the former industrial additives
product group of fluid technologies for industry. The specialty chemicals
segment is comprised of the product lines of Noveon International and the former
performance chemicals product group of fluid technologies for industry.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act
of 1934, and we file annual, quarterly and current reports and other information
with the SEC. Our reports filed with the SEC may be inspected, without charge,
and copies may be obtained at prescribed rates, at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information regarding the SEC's public reference
facility by calling 1-800-SEC-0330. Our reports and other information filed by
us with the SEC are also available at the SEC's website on the Internet located
at www.sec.gov. Our common shares are listed for trading on the NYSE under the
symbol "LZ." We maintain a website on the Internet located at www.lubrizol.com.
The information on our website is not incorporated by reference in this
prospectus.

The SEC allows us to incorporate by reference in this prospectus the
information that we file with them. Incorporation by reference means that we can
disclose important information to you by referring you to other documents that
are considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede the information in this
prospectus and the documents listed below. We hereby incorporate by reference
our filings listed below and any future filings made by us with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this prospectus until all of the securities offered under this
prospectus are sold:

- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2003;

- Our Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2004;

- Our Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2004;

- Our Current Reports on Form 8-K filed with the SEC on April 16, May 20,
June 16, July 29, August 4 and August 20, 2004;

- The description of our common shares contained in Item 2 of our Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1991;

- Our Registration Statement on Form 8-A filed with the SEC on October 1,
1997; and

- Our Registration Statement on Form 8-A/A filed with the SEC on August 17,
1999.

We will provide without charge to each person to whom a copy of this
prospectus is delivered, including any beneficial owner, upon the written or
oral request of such person, a copy of any or all of the documents incorporated
by reference in this prospectus (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the information
that this prospectus incorporates). Requests should be directed to:

The Lubrizol Corporation
29400 Lakeland Boulevard
Wickliffe, Ohio 44092-2298
(440) 943-4200
Attn: Joanne Wanstreet

You should only rely on the information contained in this prospectus, any
prospectus supplement or any document incorporated by reference. We have not
authorized anyone else to provide you with different or additional information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information contained in this
prospectus, any prospectus supplement or any document incorporated by reference
is accurate as of any date other than the date of the applicable document.

FORWARD-LOOKING STATEMENTS

This prospectus contains, each prospectus supplement may contain and the
documents incorporated by reference herein contain or will contain
forward-looking statements within the meaning of the federal securities laws. As
a general matter, forward-looking statements are those focused upon future
plans, objectives or performance as opposed to historical items and include
statements of anticipated events or trends and expectations and beliefs relating
to matters not historical in nature. Forward-looking statements are subject to
uncertainties and factors relating to our operations and business environment,
all of which are difficult to predict and many of which are beyond our control.
These uncertainties and factors could cause our actual results to differ
materially from those matters expressed in or implied by any forward-looking
statements.

We believe that the following factors, among others, could affect our
future performance and cause our actual results to differ materially from those
expressed or implied by the forward-looking statements made by us:

- the effect of interest rate fluctuations on our interest expense;

- the conditions in the debt and equity markets at the time we implement
our permanent financing;

- our ability to refinance our bridge facility by May 27, 2005, when it is
due and payable;

- our indebtedness requires the use of a significant portion of our cash
flow to make interest and principal payments, thereby reducing the
availability of our cash flow to fund capital expenditures, acquisitions
or other general corporate purposes;

- the overall global economic environment and the overall demand for our
products on a worldwide basis;

- the demand for our products in developing regions such as China and
India, which geographic areas are an announced focus of our activities;

- technology developments that affect longer-term trends for our products;

- the extent to which we are successful in expanding our business in new
and existing markets;

- our ability to identify, complete and integrate acquisitions for
profitable growth, especially our ability to integrate the acquisition of
Noveon International;

- our success at continuing to develop proprietary technology to meet or
exceed new industry performance standards and individual customer
expectations;

- our ability to continue to reduce complexities and conversion costs and
modify our cost structure to maintain and enhance our competitiveness;

- our success in retaining and growing the business that we do with our
largest customers;

- the cost, availability and quality of raw materials, including
petroleum-based products;

- the cost and availability of energy, including natural gas and
electricity;

- the effects of fluctuations in currency exchange rates upon our reported
results from international operations, together with non-currency risks
of investing in and conducting significant operations in foreign
countries, including those relating to political, social, economic and
regulatory factors;

- the extent to which we achieve market acceptance of our commercial
development programs;

- significant changes in government regulations affecting environmental
compliance; and

- the ability to identify, understand and manage risks inherent in new
markets in which we choose to expand.

USE OF PROCEEDS

Unless otherwise disclosed in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of our securities to repay
outstanding indebtedness, including debt that we incurred in connection with the
acquisition of Noveon International, or for general corporate purposes.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our consolidated ratio of earnings to fixed
charges on an historical basis for the periods indicated.

YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------------------- ENDED
1999 2000 2001 2002 2003 JUNE 30, 2004
----- ----- ----- ----- ----- -------------

Ratio of earnings to fixed charges(1)....................... 7.71X 7.66X 6.97X 9.29X 6.19X 3.73X

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

(1) Our ratio of earnings to fixed charges has been computed by dividing
earnings (including distributed income of equity investees) before income
taxes plus fixed charges (excluding capitalized interest expense) by fixed
charges. Fixed charges consist of interest expense on debt (including
amortization of debt expense and capitalized interest).

DESCRIPTION OF COMMON SHARES

COMMON SHARES

The following is a summary of the provisions of our common shares. The
rights of our common shares are defined by our Amended Articles of Incorporation
and our Code of Regulations, as amended, and the provisions of the Ohio General
Corporation Law. You should refer to those documents and provisions for more
complete information regarding our common shares.

Holders of our common shares are entitled to one vote per share on all
matters upon which our shareholders are entitled to vote, including the election
of directors. The holders of common shares are entitled to dividends when, as
and if declared by our Board of Directors out of legally available funds. In the
event of any liquidation, dissolution or winding up of our business, each holder
of common shares is entitled to share ratably in all of our assets remaining
after the payment of liabilities. Holders of common shares have no preemptive
right to purchase any of our securities or any securities that are convertible
into or exchangeable for any of our securities. The common shares are not
subject to any provisions relating to redemption. The common shares have no
conversion rights and are not subject to further calls or assessments by us. All
of our common shares now outstanding, and all of our common shares that are
issued in an offering under this prospectus, are or will be when issued fully
paid and non-assessable.

As of August 15, 2004, we have 120,000,000 common shares authorized for
issuance under our Amended Articles of Incorporation, 51,774,231 common shares
issued and outstanding, and 5,602,124 common shares committed to be issued
pursuant to our various employee benefit and compensation plans.

Our common shares are listed for trading on the NYSE under the symbol "LZ."
As of August 15, 2004, we have 3,779 shareholders of record. This number
excludes beneficial owners of common shares held in street name. Based on
requests from brokers and other nominees, we estimate there are approximately
21,700 beneficial owners of our common shares.

PROVISIONS RELATING TO TAKEOVER MATTERS

Our Board of Directors must have at least nine, and no more than thirteen,
directors and is currently fixed at eleven directors, who are divided into three
classes. Two classes have four directors, and the other class has three
directors. Directors of each class serve for three-year terms, with one class
being elected each year. The authorized number of directors and the number of
directors in each class may be changed only by the affirmative vote of the
holders of at least a majority of the shares entitled to vote for the election
of directors that are represented at a meeting of shareholders called for the
purpose of electing directors or by the affirmative vote of a majority of the
directors then in office.

Under the Ohio General Corporation Law, if a corporation's Board of
Directors is divided into classes, then directors may be removed by the
shareholders only for cause. Under our Code of Regulations, a director may be
removed upon the vote of the holders of two-thirds of the shares that are
represented at an annual meeting or any special meeting of shareholders duly
called for that purpose. Unless all of the directors of a class are removed, a
director may not be removed if the number of shares voted against the director's
removal would be sufficient, if cumulatively voted at an election of all of the
directors or all of the directors of a particular class, to elect one director.
If any director is removed, the resulting vacancy may be filled by a majority
vote of the Board of Directors. Any director elected to fill a vacancy will hold
office until the expiration of the term of office for the class to which the
director was elected.

Nominations of persons for election as directors may be made at a meeting
of shareholders by or at the direction of the Board of Directors, by any
nominating committee or person appointed by the Board of Directors, or by any
shareholder entitled to vote for the election of directors who gives timely
notice. To be timely, a shareholder's notice must be received at our principal
executive offices not less than 60 days nor more than 90 days prior to the
meeting; except that, if less than 75 days' notice or prior public disclosure of
the date of the meeting is given to shareholders, notice by the shareholder will
be timely if it is received not

later than the 15th day following the earlier of the day on which such notice of
the date of the meeting was mailed or such public disclosure was made.

A special meeting of shareholders may be called by the chairman of the
board, the president, a majority of the directors acting with or without a
meeting, or by shareholders holding 50% or more of the outstanding shares
entitled to vote at the special meeting.

Our Code of Regulations provides that holders of shares entitling them to
exercise at least a majority of our voting power will constitute a quorum at any
meeting of shareholders; except that, whether or not a quorum is present, the
holders of a majority of the voting shares represented at a meeting may adjourn
the meeting without notice other than by announcement at the meeting.

Our Code of Regulations may be amended, repealed or superseded by new
regulations by the affirmative vote of the holders of a majority of the shares
represented at an annual meeting or any special meeting of shareholders duly
called for that purpose. The provisions of our Code of Regulations regarding the
number, classification and removal of directors, however, may be amended or
repealed only with the affirmative vote of the holders of at least two-thirds of
our voting power, unless the amendment or repeal has been recommended by at
least two-thirds of the directors then in office.

Section 1704.02 of the Ohio General Corporation Law (also known as the
Merger Moratorium Law) prohibits Chapter 1704 transactions (as defined below)
for a period of three years from the date on which a shareholder first becomes
an interested shareholder unless the directors of the corporation prior to the
shareholder becoming an interested shareholder approved the transaction or
approved the transaction pursuant to which the shareholder became an interested
shareholder. "Chapter 1704 transactions" include mergers, consolidations,
combinations, majority share acquisitions or sales of substantial assets between
an Ohio corporation and an interested shareholder or an affiliate or associate
of an interested shareholder. An "interested shareholder" is defined generally
as any person that beneficially owns 10% or more of the outstanding voting
shares of the corporation. After the three-year period, a Chapter 1704
transaction is prohibited unless certain fair price provisions are complied with
or the shareholders of the corporation approve the transaction by the
affirmative vote of two-thirds of the voting power of the corporation, including
at least a majority of the disinterested shareholders.

Under Ohio securities law, any person making a "control bid" pursuant to a
tender offer for the securities of certain publicly held companies, including
our company, must file upon commencement of the bid certain information relating
to the bid with the Ohio Division of Securities. The Division may within five
calendar days suspend the bid if the required information has not been filed, if
material information regarding the bid has not been provided to the shareholders
of the company, or if there has been any other violation of the Ohio Securities
Act.

Under the Ohio General Corporation Law, the approval by the affirmative
vote of holders of two-thirds of the voting power of a corporation entitled to
vote on the matter is required for mergers, consolidations, majority share
acquisitions, combinations involving the issuance of shares with one-sixth or
more of the voting power of the corporation, and any transfers of all or
substantially all of the assets of a corporation unless the articles of
incorporation of the corporation specify a different proportion (which cannot be
less than a majority). Our Amended Articles of Incorporation provide that these
actions generally can be authorized by the holders of a majority of the
outstanding shares.

Our Amended Articles of Incorporation include provisions that require prior
shareholder approval for any acquisition of shares in which a person or group
obtains voting power of our company in one of the following ranges: one-fifth or
more but less than one-third, one-third or more but less than a majority, or a
majority. Any such acquisition must be approved at a special meeting of
shareholders, at which a quorum is present, by the affirmative vote of both (1)
the holders of a majority of the outstanding voting shares and (2) the holders
of a majority of the outstanding voting shares after excluding interested
shares. For this purpose, "interested shares" includes shares held by the
directors who are employees and certain officers of our company and shares held
by the person or group acquiring the shares. Our company has "opted out" of a
similar provision that is set forth in the Ohio General Corporation Law.

Our Amended Articles of Incorporation contain provisions that require
certain related-party transactions to be approved by the affirmative vote of the
holders of both a majority of the outstanding voting shares and a majority of
such shares after excluding the shares owned by the related party involved in
the transaction, unless certain fair price provisions are complied with. For
this purpose, a "related party" means any person that beneficially owns 10% or
more, but less than 90%, of our outstanding voting shares and any of such
person's affiliates or associates. A "related-party transaction" includes any
merger or consolidation, any sale, purchase, lease, exchange or transfer of
substantial assets, the issuance or transfer of any securities, any
reclassification of securities or recapitalization or the adoption of any plan
or proposal for liquidation or dissolution, in each case with, to or for the
benefit of a related party.

Our Amended Articles of Incorporation may be amended, repealed or
superseded by new articles of incorporation by the affirmative vote of the
holders of at least two-thirds of the outstanding voting shares.

Our company has a shareholder rights plan. Under that plan, rights have
been distributed to all of our shareholders. If any person or group acquires 20%
or more of our common shares, these rights will "flip in" and permit all
holders, other than the acquiring person, to purchase additional shares at a
discounted price.

Some or all of these provisions of our Amended Articles of Incorporation,
Code of Regulations and Ohio law and our shareholder rights plan may have the
effect of delaying, hindering or preventing a change in control of our company
that is not supported by our Board of Directors, including a change in control
that might result in the receipt by shareholders of a purchase price in excess
of then current market prices.

DESCRIPTION OF DEBT SECURITIES

The following description of the debt securities sets forth the material
terms and provisions of the debt securities to which any prospectus supplement
may relate. The debt securities are to be issued under an indenture (the
"indenture") among Lubrizol, the Guarantors and Wells Fargo Bank, National
Association, as trustee, the form of which is filed as an exhibit to the
registration statement of which this prospectus forms a part. The particular
terms of the debt securities offered by any prospectus supplement, and the
extent to which the general provisions described below may apply to the offered
debt securities, will be described in the prospectus supplement.

Because the following is a summary of the material terms and provisions of
the indenture and the debt securities, you should refer to the indenture and the
debt securities for complete information regarding the terms and provisions of
the indenture and the debt securities, including the definitions of some of the
terms used below. You should also refer to the Trust Indenture Act of 1939,
certain terms of which are made a part of the indenture by reference. Wherever
particular articles, sections or defined terms of the indenture are referred to,
such articles, sections or defined terms are incorporated herein by reference,
and the statement in connection with which such reference is made is qualified
in its entirety by such reference. For purposes of this description of debt
securities, references to "Lubrizol" include only The Lubrizol Corporation and
not its subsidiaries.

GENERAL

The indenture does not limit the aggregate principal amount of debt
securities that Lubrizol may issue thereunder and provides that Lubrizol may
issue debt securities thereunder from time to time in one or more series.
(Section 3.1) The indenture does not limit the amount of other Debt (as defined
below) or debt securities, other than certain secured Debt as described below,
which Lubrizol or its subsidiaries may issue.

Unless otherwise provided in a prospectus supplement, the debt securities
will be unsecured obligations of Lubrizol, ranking senior in right of payment to
all future obligations of Lubrizol that are, by their terms, expressly
subordinated in right of payment to the debt securities and equally in right of
payment with all existing and future unsecured obligations of Lubrizol that are
not so subordinated.

The prospectus supplement relating to the particular debt securities
offered thereby will describe the following terms of the offered debt
securities:

- the title of such debt securities and the series in which such debt
securities will be included, which may include medium-term notes;

- any limit upon the aggregate principal amount of such debt securities;

- the date or dates, or the method or methods, if any, by which such date
or dates will be determined, on which the principal of such debt
securities will be payable;

- the rate or rates at which such debt securities will bear interest, if
any, which rate may be zero in the case of certain debt securities issued
at an issue price representing a discount from the principal amount
payable at maturity, or the method by which such rate or rates will be
determined (including, if applicable, any remarketing option or similar
method), and the date or dates from which such interest, if any, will
accrue or the method by which such date or dates will be determined;

- the date or dates on which interest, if any, on such debt securities will
be payable and any regular record dates applicable to the date or dates
on which interest will be so payable;

- whether and under what circumstances additional amounts in respect of
certain taxes, fees, duties, assessments or governmental charges that
might be imposed on holders of such debt securities will be payable and,
if so, whether and on what terms Lubrizol will have the option to redeem
such debt securities in lieu of paying such additional amounts (and the
terms of such option);

- the place or places where the principal of, any premium or interest on or
any additional amounts with respect to such debt securities will be
payable, any of such debt securities that are issued in registered form
may be surrendered for registration of transfer or exchange, and any such
debt securities may be surrendered for conversion or exchange;

- whether any of such debt securities are to be redeemable at the option of
Lubrizol and, if so, the date or dates on which, the period or periods
within which, the price or prices at which and the other terms and
conditions upon which such debt securities may be redeemed, in whole or
in part, at the option of Lubrizol;

- whether Lubrizol will be obligated to redeem or purchase any of such debt
securities pursuant to any sinking fund or analogous provision or at the
option of any holder thereof and, if so, the date or dates on which, the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such debt securities will be
redeemed or purchased, in whole or in part, pursuant to such obligation,
and any provisions for the remarketing of such debt securities so
redeemed or purchased;

- if other than in denominations of $1,000 and any integral multiple
thereof, the denominations in which any debt securities to be issued in
registered form will be issuable and, if other than a denomination of
$5,000, the denominations in which any debt securities to be issued in
bearer form will be issuable;

- whether the debt securities will be convertible into other securities of
Lubrizol and/or exchangeable for securities of other issuers and, if so,
the terms and conditions upon which such debt securities will be so
convertible or exchangeable;

- if other than the principal amount, the portion of the principal amount
(or the method by which such portion will be determined) of such debt
securities that will be payable upon declaration of acceleration of the
maturity thereof;

- if other than U.S. dollars, the currency of payment, including composite
currencies, of the principal of, any premium or interest on or any
additional amounts with respect to any of such debt securities;

- whether the principal of, any premium or interest on or any additional
amounts with respect to such debt securities will be payable, at the
election of Lubrizol or a holder, in a currency other than that in

which such debt securities are stated to be payable and the date or dates
on which, the period or periods within which, and the other terms and
conditions upon which such election may be made;

- any index, formula or other method used to determine the amount of
payments of principal of, any premium or interest on or any additional
amounts with respect to such debt securities;

- whether such debt securities are to be issued in the form of one or more
global securities and, if so, the identity of the depositary for such
global security or securities;

- any deletions from, modifications of or additions to the Events of
Default or covenants of Lubrizol with respect to such debt securities;

- whether the provisions described below under "Discharge, Defeasance and
Covenant Defeasance" will be applicable to such debt securities;

- whether any of such debt securities are to be issued upon the exercise of
warrants, and the time, manner and place for such debt securities to be
authenticated and delivered; and

- any other terms of such debt securities and any other deletions from or
modifications or additions to the indenture in respect of such debt
securities. (Section 3.1)

Lubrizol will have the ability under the indenture to "reopen" a previously
issued series of debt securities and issue additional debt securities of that
series or establish additional terms of that series. Lubrizol is also permitted
to issue debt securities with the same terms as previously issued debt
securities. (Section 3.1)

Unless otherwise provided in the related prospectus supplement, principal,
premium, interest and additional amounts, if any, with respect to any debt
securities will be payable at the office or agency maintained by Lubrizol for
such purposes (initially the designated corporate trust office of the trustee).
In the case of debt securities issued in registered form, interest may be paid
by check mailed to the persons entitled thereto at their addresses appearing on
the security register or by transfer to an account maintained by the payee with
a bank located in the United States. Interest on debt securities issued in
registered form will be payable on any interest payment date to the persons in
whose names the debt securities are registered at the close of business on the
regular record date with respect to such interest payment date. All paying
agents initially designated by Lubrizol for the debt securities will be named in
the related prospectus supplement. Lubrizol may at any time designate additional
paying agents or rescind the designation of any paying agent or approve a change
in the office through which any paying agent acts, except that Lubrizol will be
required to maintain a paying agent in each place where the principal of, any
premium or interest on or any additional amounts with respect to the debt
securities are payable. (Sections 3.7 and 10.2)

Unless otherwise provided in the related prospectus supplement, the debt
securities may be presented for transfer (duly endorsed or accompanied by a
written instrument of transfer, if so required by Lubrizol or the security
registrar) or exchanged for other debt securities of the same series (containing
identical terms and provisions, in any authorized denominations, and of a like
aggregate principal amount) at the office or agency maintained by Lubrizol for
such purposes (initially the designated corporate trust office of the trustee).
Such transfer or exchange will be made without service charge, but Lubrizol may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses then payable. Lubrizol will not be required to (1)
issue, register the transfer of, or exchange debt securities during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption of any such debt securities and ending at the close of
business on the day of such mailing or (2) register the transfer of or exchange
any debt security so selected for redemption in whole or in part, except the
unredeemed portion of any debt security being redeemed in part. (Section 3.5)
Lubrizol has appointed the trustee as security registrar. Any transfer agent (in
addition to the security registrar) initially designated by Lubrizol for any
debt securities will be named in the related prospectus supplement. Lubrizol may
at any time designate additional transfer agents or rescind the designation of
any transfer agent or approve a change in the office through which any transfer
agent acts, except that Lubrizol will be required to maintain a transfer agent
in each place

where the principal of, any premium or interest on or any additional amounts
with respect to the debt securities are payable. (Section 10.2)

Unless otherwise provided in the related prospectus supplement, the debt
securities will be issued only in fully registered form without coupons in
minimum denominations of $1,000 and any integral multiple thereof. (Section 3.2)
The debt securities may be represented in whole or in part by one or more global
debt securities registered in the name of a depositary or its nominee and, if so
represented, interests in such global debt security will be shown on, and
transfers thereof will be effected only through, records maintained by the
designated depositary and its participants as described below. Where debt
securities of any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special United
States federal income tax considerations, applicable to such debt securities and
to payment on and transfer and exchange of such debt securities will be
described in the related prospectus supplement.

The debt securities may be issued as original issue discount securities
(bearing no interest or bearing interest at a rate which at the time of issuance
is below market rates) to be sold at a substantial discount below their
principal amount. Special United States federal income tax and other
considerations applicable to original issue discount securities will be
described in the related prospectus supplement.

If the purchase price of any debt securities is payable in one or more
foreign currencies or currency units or if any debt securities are denominated
in one or more foreign currencies or currency units or if the principal of, or
any premium or interest on, or any additional amounts with respect to, any debt
securities is payable in one or more foreign currencies or currency units, the
restrictions, elections, certain United States federal income tax
considerations, specific terms and other information with respect to such debt
securities and such foreign currency or currency units will be set forth in the
related prospectus supplement.

Lubrizol will comply with Section 14(e) of the Securities Exchange Act of
1934 and any tender offer rules under the Securities Exchange Act of 1934, to
the extent applicable, in connection with any obligation of Lubrizol to purchase
debt securities at the option of the holders. Any such obligation applicable to
a series of debt securities will be described in the related prospectus
supplement.

Unless otherwise described in a prospectus supplement relating to any debt
securities, other than as described below under "-- Limitation on Liens" and
"-- Limitation on Sale/Leaseback Transactions," the indenture does not contain
any provisions that would limit the ability of Lubrizol to incur indebtedness or
that would afford holders of debt securities protection in the event of a sudden
and significant decline in the credit quality of Lubrizol or a takeover,
recapitalization or highly leveraged or similar transaction involving Lubrizol.
Accordingly, Lubrizol could in the future enter into transactions that could
increase the amount of indebtedness outstanding at that time or otherwise affect
Lubrizol's capital structure or credit rating. You should refer to the
prospectus supplement relating to a particular series of debt securities for
information regarding any deletions from, modifications of or additions to the
Events of Defaults described below or covenants of Lubrizol contained in the
indenture, including any addition of a covenant or other provisions providing
event risk or similar protection.

GUARANTEES

The debt securities will be jointly and severally guaranteed by each of the
following wholly owned, direct and indirect domestic Subsidiaries of Lubrizol:

- 1500 West Elizabeth Corporation - MPP Pipeline Corporation
- Carroll Scientific Inc. - Noveon International, Inc.
- Chemron Corporation - Noveon, Inc.
- CPI Engineering Services, Inc. - FCC Acquisition Corp.
- Engine Control Systems Ltd. - Noveon China, Inc.
- Gateway Additive Company - Noveon Diamalt, Inc.
- Lubricant Investments, Inc. - Noveon FCC, Inc.
- Lubrizol China, Inc. - Noveon Hilton Davis, Inc.
- Lubrizol Enterprises, Inc. - Noveon Holding Corporation
- Lubrizol Foam Control Additives, Inc. - Noveon Investments, LLC
- Lubrizol Holding Inc. - Noveon IP Holdings Corp.
- Lubrizol Inter-Americas Corporation - Noveon Kalama, Inc.
- Lubrizol International Management Corporation - Noveon Textile Chemicals, Inc.
- Lubrizol Overseas Trading Corporation - Performance Materials I Inc.
- Lubrizol Performance Systems Inc. - Performance Materials II LLC
- LZ Holding Corporation

The Guarantee of each Guarantor will be a general unsecured obligation of
such Guarantor and will rank senior in right of payment to all future
obligations of such Guarantor that are, by their terms, expressly subordinated
in right of payment to such Guarantee and equally in right of payment with all
existing and future unsecured obligations of such Guarantor that are not so
subordinated. The debt securities will be effectively subordinated to the
obligations of each of Lubrizol's direct and indirect Subsidiaries that are not
a Guarantor of the debt securities. The Guarantee of each Guarantor of the debt
securities of any series will rank equally with the Guarantee of such Guarantor
of the debt securities of each other series. No stock representing more than 65%
of the voting power of any foreign entity held directly or indirectly by a
Guarantor will be deemed to serve as security for the debt securities under the
Guarantees.

The Guarantee of a Guarantor will be released:

- in connection with any sale or other disposition of all of the Capital
Stock of such Guarantor to a Person other than Lubrizol or any Subsidiary
of Lubrizol;

- in connection with the sale or other disposition of all or substantially
all of the assets of such Guarantor, including by way of merger,
consolidation or otherwise, to a Person other than to Lubrizol or any
Subsidiary of Lubrizol;

- in the case of any Restricted Subsidiary that is required to Guarantee
outstanding debt securities pursuant to the covenant described under
"-- Issuance of Subsidiary Guarantees," upon the release or discharge of
the guarantee of such Restricted Subsidiary of debt of Lubrizol that
resulted in the obligation to so Guarantee the debt securities; or

- upon the release of such Guarantor from all of its obligations under its
guarantee granted in favor of the lenders under the Credit Agreement.

The amount of each Guarantee will be limited to the extent required under
applicable fraudulent conveyance laws to cause such Guarantee to be enforceable.

CONVERSION AND EXCHANGE

The terms, if any, on which debt securities of any series are convertible
into or exchangeable for other securities, whether or not issued by Lubrizol,
property or cash, or a combination of any of the foregoing, will be set forth in
the related prospectus supplement. Such terms may include provisions for
conversion or exchange, either mandatory, at the option of the holder, or at the
option of Lubrizol, in which the securities, property or cash to be received by
the holders of the debt securities would be calculated according to the factors
and at such time as described in the related prospectus supplement.

GLOBAL SECURITIES

The debt securities of a series may be issued in whole or in part in the
form of one or more global debt securities that will be deposited with, or on
behalf of, a depositary identified in the prospectus supplement relating to such
series.

The specific terms of the depositary arrangement with respect to a series
of debt securities will be described in the prospectus supplement relating to
such series. Lubrizol anticipates that the following provisions will apply to
all depositary arrangements.

Upon the issuance of a global security, the depositary for such global
security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the debt securities represented by
such global security. Such accounts will be designated by the underwriters or
agents with respect to such debt securities, or by Lubrizol if such debt
securities are offered and sold directly by Lubrizol. Ownership of beneficial
interests in a global security will be limited to persons that may hold
interests through participants. Ownership of beneficial interests in such global
security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the depositary or its nominee (with respect
to interests of participants) and on the records of participants (with respect
to interests of persons other than participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a global security.

So long as the depositary for a global security, or its nominee, is the
registered owner of such global security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by such global security for all purposes under the
indenture. Except as described below, owners of beneficial interests in a global
security will not be entitled to have debt securities of the series represented
by such global security registered in their names and will not receive or be
entitled to receive physical delivery of debt securities of that series in
definitive form.

Principal of, any premium and interest on, and any additional amounts with
respect to, debt securities registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global security representing such debt securities.
None of Lubrizol, any Guarantor, the trustee, any paying agent or the security
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the global security for such debt securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.

Lubrizol expects that the depositary for a series of debt securities or its
nominee, upon receipt of any payment with respect to such debt securities, will
credit immediately participants' accounts with payments in amounts proportionate
to their respective beneficial interest in the principal amount of the global
security for such debt securities as shown on the records of such depositary or
its nominee. Lubrizol also expects that payments by participants to owners of
beneficial interests in such global security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the responsibility of such participants.

The indenture provides that if (1) the depositary for a series of debt
securities notifies Lubrizol that it is unwilling or unable to continue as
depositary or if such depositary ceases to be eligible under the indenture

and a successor depositary is not appointed by Lubrizol within 90 days of
written notice, (2) Lubrizol determines that debt securities of a particular
series will no longer be represented by global securities and executes and
delivers to the trustee a company order to such effect, or (3) an Event of
Default has occurred and is continuing with respect to a series of debt
securities, the global securities will be exchanged for debt securities of such
series in definitive form of like tenor and of an equal aggregate principal
amount, in authorized denominations. Such definitive debt securities will be
registered in such name or names as the depositary shall instruct the trustee.
(Section 3.5) It is expected that such instructions may be based upon directions
received by the depositary from participants with respect to ownership of
beneficial interests in global securities.

CERTAIN COVENANTS

LIMITATION ON LIENS

Under the indenture, Lubrizol will covenant that, so long as any debt
securities are outstanding, it will not, nor will it permit any Restricted
Subsidiary to, create, incur, assume, guarantee or otherwise permit to exist any
Debt secured by any mortgage, pledge, lien, security interest or other
encumbrance (a "Lien") on any property (including shares of Capital Stock or
Debt) of Lubrizol or any Restricted Subsidiary, whether now owned or hereafter
acquired, without in any such case effectively providing, concurrently with the
creation, incurrence, assumption or guarantee of any such Debt, that the debt
securities (and, if Lubrizol shall so determine, any other Debt of Lubrizol or
any Restricted Subsidiary that is not subordinate to the debt securities or the
Guarantees and with respect to which the governing instruments require, or
pursuant to which Lubrizol or such Restricted Subsidiary is otherwise obligated
to provide, such security) shall be secured equally and ratably with or prior to
such Debt for at least the time period such other Debt is so secured; provided
that Debt secured by such Liens may be created, incurred, assumed or guaranteed,
without equally and ratably securing outstanding debt securities, if the
aggregate principal amount of all Debt then outstanding secured by Liens on
property (including shares of Capital Stock and Debt) of Lubrizol and of any
Subsidiary (not including Debt described in clauses (1) through (8) below) plus
Attributable Debt of Lubrizol and its Subsidiaries in respect of sale/leaseback
transactions described under "-- Limitation on Sale/ Leaseback Transactions"
below that would otherwise be subject to the restrictions described under
"-- Limitation on Sale/Leaseback Transactions," does not at the time the
principal amount of such Debt is incurred exceed 15% of Consolidated Net
Tangible Assets. If a secured revolving credit facility is established or
increased without equally and ratably securing outstanding debt securities in
compliance with the proviso in the immediately preceding sentence, then all
subsequent borrowings under such revolving credit facility shall be deemed to be
permissible under the limitation contained in the proviso in the immediately
preceding sentence. (Section 10.5)

The foregoing restrictions shall not apply to Debt secured by:

(1) Liens on property of Lubrizol or any Restricted Subsidiary
existing on the date of original issuance of the applicable series of debt
securities or such other date as may be specified for such series in
accordance with the indenture;

(2) Liens on property acquired by Lubrizol or any Restricted
Subsidiary (including acquisition through merger or consolidation),
provided that such Liens were in existence prior to and were not created in
contemplation of such acquisition and shall not extend to any other
property of Lubrizol or any Restricted Subsidiary;

(3) Liens on property (including in the case of a plant or facility,
the land on which it is erected and fixtures comprising a part thereof) of
Lubrizol or any Restricted Subsidiary securing the payment of all or any
part of the purchase price or construction cost thereof or securing any
Debt created, incurred, assumed or guaranteed prior to, at the time of or
within 120 days after the latest of the acquisition of such property or the
completion of such construction, for the purpose of financing all or any
portion of the purchase price or construction cost thereof (provided, in
the case of Liens securing the payment of all or any part of the purchase
price of property of Lubrizol or any Restricted Subsidiary, as the case may
be, or securing any Debt created, incurred, assumed or guaranteed for the
purposes of financing all

or any part of such purchase price, such Liens are limited to the property
then being acquired and fixed improvements thereon and the Capital Stock of
any Person formed to acquire such property and provided further, in the
case of Liens securing the payment of all or any part of the construction
cost of any property of Lubrizol or any Restricted Subsidiary, as the case
may be, or securing Debt created, incurred, assumed or guaranteed for the
purpose of financing all or any part of such construction cost, such Liens
are limited to the assets or property then being constructed and the land
on which such property is erected and fixtures comprising a part thereof);

(4) Liens on property of Lubrizol or any Restricted Subsidiary to
secure all or any part of the cost of development, construction,
alteration, repair or improvement of all or any part of such property, or
to secure Debt created, incurred, assumed or guaranteed prior to, at the
time of or within 120 days after the latest of the completion of such
development, construction, alteration, repair or improvement, for the
purpose of financing all or any part of such cost (provided such Liens do
not extend to or cover any property of Lubrizol or any Restricted
Subsidiary other than the property then being developed, constructed,
altered, repaired or improved and the land on which such property is
erected and fixtures comprising a part thereof);

(5) Liens in favor of Lubrizol or a Restricted Subsidiary securing
Debt of Lubrizol or a Restricted Subsidiary;

(6) Liens created in connection with tax assessments or legal
proceedings and mechanic's and materialman's liens and other similar liens
created in the ordinary course of business;

(7) Liens on property of Lubrizol or any Restricted Subsidiary (except
property consisting of the Capital Stock or Debt of Lubrizol or any
Restricted Subsidiary) in favor of the United States of America or any
State thereof, or any department, agency or instrumentality or political
subdivision of either, or in favor of any other country, or any department,
agency or instrumentality or political subdivision thereof, in each case to
secure payments pursuant to contract or statute or to secure Debt created,
incurred, assumed or guaranteed for the purpose of financing all or any
part of the purchase price or the cost of construction or improvement of
the property subject to such Liens, including Liens created in connection
with pollution control, industrial revenue bond or other similar
financings; and

(8) Certain permitted extensions, renewals or replacements (or
successive extensions, renewals or replacements), in whole or in part, of
any Lien referred to in the foregoing clauses (1) through (7), inclusive,
provided that any of the foregoing are limited to the same property subject
to, and securing no more Debt than the Lien so extended, renewed or
replaced.

For purposes of the "Limitation on Liens" covenant described above, the
creation of a Lien on property (including shares of Capital Stock or Debt) of
Lubrizol or any Restricted Subsidiary to secure Debt that existed prior to the
creation of such Lien will be deemed to involve the creation of Debt secured by
a Lien in an amount equal to the principal amount secured by such Lien.

LIMITATION ON SALE/LEASEBACK TRANSACTIONS

The indenture provides that neither Lubrizol nor any Restricted Subsidiary
will enter into any arrangement after the date of original issuance of the
applicable series of debt securities, or such other date as may be specified for
such series in accordance with the indenture, with any Person (other than
Lubrizol or a Restricted Subsidiary) providing for the leasing to Lubrizol or a
Restricted Subsidiary for a period of more than three years of any property
which has been, or is to be, sold or transferred by Lubrizol or such Restricted
Subsidiary to such Person or to any Person (other than Lubrizol or a Restricted
Subsidiary) to which funds have been or are to be advanced by such Person on the
security of the leased property unless:

(a) Lubrizol or such Restricted Subsidiary would be permitted,
pursuant to the provisions described under "-- Limitation on Liens"
above, to incur Debt in a principal amount equal to or exceeding the
Attributable Debt in respect of such sale/leaseback transaction, secured
by a Lien on the property to be leased, without equally and ratably
securing all outstanding debt securities issued under the indenture;

(b) since the date of the indenture and within a period commencing
within six months prior to the consummation of such arrangement and
ending six months after the consummation thereof, Lubrizol or such
Restricted Subsidiary has expended or will expend for any property
(including amounts expended for the acquisition thereof or for
additions, alterations, improvements and repairs thereto) an amount up
to the net proceeds of such arrangement and Lubrizol elects to designate
such amount as a credit against such arrangement (with any such amount
not being so designated to be applied as set forth in (c) below); or

(c) Lubrizol, during or immediately after the expiration of the 12
months after the consummation of such transaction, applies or causes
such Restricted Subsidiary to apply to the voluntary retirement,
redemption or defeasance of debt securities of any series or other
Funded Debt of Lubrizol (other than Funded Debt subordinated to the debt
securities) or Funded Debt of such Restricted Subsidiary an amount equal
to the greater of the net proceeds of the sale or transfer of the
property leased in such transaction and the fair value, in the opinion
of the Board of Directors of Lubrizol, of such property at the time of
entering into such transaction (in either case adjusted to reflect the
remaining term of the lease and any amount utilized by Lubrizol as set
forth in (b) above), less an amount equal to the principal amount of any
such Funded Debt of Lubrizol or such Restricted Subsidiary, other than
debt securities, voluntarily retired by Lubrizol or such Restricted
Subsidiary during such 12 month period. (Section 10.6)

ISSUANCE OF SUBSIDIARY GUARANTEES

Lubrizol will not cause or permit any of its Restricted Subsidiaries,
directly or indirectly, to guarantee any Debt of Lubrizol unless such Restricted
Subsidiary:

(1) executes and delivers to the trustee a supplemental indenture in
form reasonably satisfactory to the trustee pursuant to which such
Restricted Subsidiary shall unconditionally guarantee (each, a "Guarantee")
all of Lubrizol's obligations under the debt securities and the indenture
on the terms set forth in the indenture; and

(2) delivers to the trustee an opinion of counsel (which may contain
customary exceptions) that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary.

Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of the indenture until such Guarantee is released in accordance with
the provisions of the indenture. Lubrizol may cause any other Restricted
Subsidiary of Lubrizol to issue a Guarantee and become a Guarantor under the
indenture. (Section 10.7)

CONSOLIDATION, MERGER AND SALE OF ASSETS

The indenture provides that Lubrizol may not, in a single transaction or a
series of related transactions, consolidate or merge with or into any Person or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of Lubrizol's properties and
assets (determined on a consolidated basis for Lubrizol and its Restricted
Subsidiaries) to any Person, unless (a) Lubrizol shall be the surviving or
continuing corporation or the Person (if other than Lubrizol) formed by such
consolidation or into which Lubrizol is merged or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition has been made shall
be a corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by supplemental indenture satisfactory in form and substance to the
trustee, the due and punctual payment of the principal of, any premium and
interest on and any additional amounts with respect to all of the debt
securities issued thereunder, and the performance of Lubrizol's obligations
under such indenture and the debt securities issued thereunder, and shall
provide for conversion or exchange rights in accordance with the provisions of
the debt securities of any series that are convertible or exchangeable into
common stock or other securities; (b) immediately before and

after giving effect to such transaction and treating any Debt which becomes an
Obligation of Lubrizol or one of its Subsidiaries as a result of such
transaction as having been incurred by Lubrizol or such Subsidiary at the time
of such transaction, no Event of Default, and no event which after notice or
lapse of time or both would become an Event of Default, shall have occurred and
be continuing; and (c) certain other conditions are met. Notwithstanding the
foregoing restrictions in this paragraph, Lubrizol may (or cause or permit its
Restricted Subsidiaries to) sell, assign, transfer, lease, convey or otherwise
dispose of its Foreign Assets to Lubrizol or any of its Subsidiaries to the
extent that such sale, assignment, transfer, lease, conveyance or disposition is
also permitted under the Credit Agreement. (Section 8.1)

For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of Lubrizol shall be deemed to be the transfer of all
or substantially all of the properties and assets of Lubrizol.

No Guarantor (other than any Guarantor whose Guarantee is to be released in
accordance with the terms of the Guarantee and the indenture) will, and Lubrizol
will not cause or permit any Guarantor to, consolidate or merge with or into or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties and assets to any Person, other than
Lubrizol or any other Guarantor, unless (a) the Guarantor shall be the surviving
or continuing corporation or the Person (if other than the Guarantor) formed by
such consolidation or into which the Guarantor is merged or the Person to which
such sale, assignment, transfer, lease, conveyance or other disposition has been
made shall be a corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and shall
expressly assume, by supplemental indenture satisfactory in form and substance
to the trustee, all of the obligations of the Guarantor under the indenture and
such Guarantor's Guarantee, and shall provide for conversion or exchange rights
in accordance with the provisions of the debt securities of any series that are
convertible or exchangeable into common stock or other securities; (b)
immediately after giving effect to such transaction, no Event of Default, and no
event which after notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing; and (c) certain other conditions
are met. Notwithstanding the foregoing restrictions in this paragraph, any
Guarantor may, and Lubrizol may cause or permit any Guarantor to, sell, assign,
transfer, lease, convey or otherwise dispose of its Foreign Assets to any other
Subsidiary to the extent that such sale, assignment, transfer, lease, conveyance
or disposition is also permitted under the Credit Agreement. (Section 8.3)

DEFINITION OF CERTAIN TERMS

The term "Attributable Debt" as used in the indenture means, in respect of
any sale/leaseback transaction described under "-- Limitation on Sale/Leaseback
Transactions" above, at any date as of which the amount thereof is to be
determined, the total net amount of rent required to be paid by the lessee of
the property subject to such sale/leaseback transaction under the lease included
in such transaction during the remaining term thereof (including any period for
which such lease has been extended), discounted from the respective due dates
thereof to such date at the rate per annum equal to the weighted average of the
interest rate(s) of the debt securities, or, in the case of original issue
discount securities, the yield to maturity, compounded semiannually. The net
amount of rent required to be paid under any such lease for any such period
shall be the aggregate amount of the rent payable by the lessee with respect to
such period after excluding amounts required to be paid on account of
maintenance and repairs, services, insurance, taxes, assessments, water rates
and similar charges and contingent rents (such as those based on sales). In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount of rent shall include the lesser of (i) the total
discounted net amount of rent required to be paid from the later of the first
date upon which such lease may be so terminated or the date of the determination
of such amount of rent, as the case may be, and (ii) the amount of such penalty
(in which event no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated). (Section
1.1)

The term "Capital Stock" as used in the indenture means (1) with respect to
any Person that is a corporation, any and all shares, interests, participations
or other equivalents (however designated and whether

or not voting) of corporate stock, including each class of common stock and
preferred stock of such Persons, and (2) with respect to any Person that is not
a corporation, any and all partnership or other equity interests of such Person.
(Section 1.1)

The term "Capitalized Lease Obligation" as used in the indenture means, as
to any Person, the obligations of such Person under a lease that are required to
be classified and accounted for as capitalized lease obligations under generally
accepted accounting principles and, for purposes of this definition, the amount
of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with generally accepted
accounting principles. (Section 1.1)

The term "Consolidated Net Tangible Assets" as used in the indenture means,
as of any particular time, the aggregate amount of the Consolidated Assets (as
defined in the indenture) of Lubrizol and its Subsidiaries (less depreciation,
amortization and other applicable reserves and other items deductible therefrom
under generally accepted accounting principles) after deducting therefrom (i)
all current liabilities (excluding any which are by their terms extendible or
renewable at the option of the obligor to a time more than 12 months after the
time as of which the amount is being computed), (ii) all goodwill, trade names,
trademarks, patents and other intangibles, in each case net of applicable
amortization, and (iii) appropriate adjustments on account of minority interests
of other Persons holding stock of Subsidiaries, all as would be shown on a
consolidated balance sheet of Lubrizol and its Subsidiaries, prepared in
accordance with generally accepted accounting principles, as of the date of the
most recent quarterly consolidated balance sheet of Lubrizol and its
Subsidiaries, prepared in accordance with generally accepted accounting
principles, provided that, in the case of the balance sheet as of the end of the
first, second or fourth quarterly fiscal periods of Lubrizol, the date of such
balance sheet is not more than 125 days prior to the date of determination (130
days for quarterly fiscal periods for fiscal years ending on or after December
15, 2004 and before December 15, 2005) and, in the case of a balance sheet as of
the end of the third quarterly fiscal period of Lubrizol, the date of such
balance sheet is not more than 150 days prior to the date of determination (165
days for quarterly fiscal periods for fiscal years ending on or after December
15, 2004 and before December 15, 2005). (Section 1.1)

The term "Credit Agreement" as used in the indenture means the credit
agreement providing, inter alia, for revolving credit loans, term loans and/or
letters of credit entered into among Lubrizol and/or any Subsidiary and one or
more lenders on August 24, 2004, together with all related notes, letters of
credit, collateral documents, guarantees, and any other related agreements and
instruments executed and delivered in connection therewith, in each case as
amended, modified, supplemented, refinanced, refunded or replaced in whole or in
part from time to time.

The term "Debt" as used in the indenture means, with respect to any Person,
without duplication (1) Obligations of such Person for money borrowed; (2)
Obligations of such Person evidenced by notes, debentures, bonds or other
similar instruments; (3) all Capitalized Lease Obligations of such Person; (4)
all Obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all Obligations under any
title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted); (5) all Obligations
of such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than Obligations with
respect to letters of credit securing Obligations (other than Obligations
described in (1) through (4) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn upon
or, if and to the extent drawn upon, such drawing is reimbursed no later than
the third Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit); (6) all Obligations of
the type referred to in clauses (1) through (5) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable as obligor, guarantor or otherwise; (7) all Obligations
of any other Person of the type referred to in clauses (1) through (6) which are
secured by any Lien on any property or asset of such Person (whether or not such
Obligation is assumed by such Person), the amount of such Obligation being
deemed to be the lesser of the fair market value of such property or assets or
the amount of the Obligation so secured; and (8) any amendments, modifications,
refundings, renewals or extensions of any indebtedness or obligation described
as Debt in clauses (1) through (7) above. (Section 1.1)

The term "Domestic Subsidiary" as used in the indenture means each
Subsidiary of Lubrizol organized in the United States or a political subdivision
thereof.

The term "Foreign Assets" as used in the indenture means those assets of
Lubrizol or any of its Subsidiaries that (a) consist of capital stock or other
equity interests of Subsidiaries that are not Domestic Subsidiaries, (b) are
assets owned by Subsidiaries that are not Domestic Subsidiaries or (c) are
located outside of the United States.

The term "Funded Debt" as used in the indenture means indebtedness created,
assumed or guaranteed by a Person for money borrowed that matures by its terms,
or is renewable by the borrower to a date, more than 12 months after the date of
original creation, assumption or guarantee. (Section 1.1)

The term "Obligations" as used in the indenture means all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Debt. (Section 1.1)

The term "Person" as used in the indenture means any individual,
corporation, partnership, limited liability company, joint venture, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof. (Section 1.1)

The term "Restricted Subsidiary" as used in the indenture means (1) any
Wholly Owned Subsidiary of Lubrizol substantially all of the assets of which are
located in the United States (excluding territories or possessions) and (2) any
Wholly Owned Subsidiary of Lubrizol which owns, directly or indirectly, any
stock or indebtedness of a Restricted Subsidiary. (Section 1.1)

The term "Subsidiary" as used in the indenture means, with respect to any
Person, (1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of directors
under ordinary circumstances shall at the time be owned, directly or indirectly,
by such Person and (2) any other Person of which at least a majority of the
voting interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person. (Section 1.1)

The term "Wholly Owned Subsidiary" means, with respect to Lubrizol, any
Subsidiary of which all the outstanding voting securities are owned by Lubrizol
or any other Wholly Owned Subsidiary of Lubrizol. (Section 1.1)

EVENTS OF DEFAULT

Each of the following events will constitute an Event of Default under the
indenture with respect to any series of debt securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

(1) default in the payment of any interest on any debt security of
such series, or any additional amounts payable with respect thereto, when
such interest becomes or such additional amounts become due and payable,
and continuance of such default for a period of 30 days;

(2) default in the payment of the principal of or any premium on any
debt security of such series, or any additional amounts payable with
respect thereto, when such principal or premium becomes or such additional
amounts become due and payable either at maturity, upon any redemption, by
declaration of acceleration or otherwise;

(3) default in the deposit of any sinking fund payment, when and as
due by the terms of any debt security of such series;

(4) default in the performance, or breach, of any covenant or warranty
contained in the indenture for the benefit of such series or in the debt
securities of such series, and the continuance of such default or breach
for a period of 60 days after there has been given written notice as
provided in the indenture;

(5) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any Debt of Lubrizol or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Lubrizol or any of
its Restricted Subsidiaries), including an Event of Default under any other
series of debt securities, whether such Debt now exists or is hereafter
created or incurred, happens and consists of default in the payment of more
than $25,000,000 in principal amount of such Debt at the maturity thereof
(after giving effect to any applicable grace period) or results in such
Debt in principal amount in excess of $25,000,000 becoming or being
declared due and payable prior to the date on which it would otherwise
become due and payable, and such default is not cured or such acceleration
is not rescinded or annulled within a period of 30 days after there has
been given written notice as provided in the indenture;

(6) Lubrizol shall fail within 60 days to pay, bond or otherwise
discharge any uninsured judgment or court order for the payment of money in
excess of $25,000,000, which is not stayed on appeal or is not otherwise
being appropriately contested in good faith;

(7) certain events in bankruptcy, insolvency or reorganization of
Lubrizol or the Guarantors;

(8) any Guarantee of any Guarantor ceases to be in full force and
effect or any Guarantee of such Guarantor is declared to be null and void
and unenforceable or any Guarantee of such Guarantor is found to be invalid
or any Guarantor denies its liability under its Guarantee (other than the
release of such Guarantor in accordance with the terms of the indenture);
and

(9) any other Event of Default provided in or pursuant to the
indenture with respect to debt securities of such series. (Section 5.1)

If an Event of Default with respect to the debt securities of any series
(other than an Event of Default described in (7) of the preceding paragraph)
occurs and is continuing, either the trustee or the holders of not less than 25%
in principal amount of the outstanding debt securities of such series by written
notice as provided in the indenture may declare the principal amount (or such
lesser amount as may be provided for in the debt securities of such series) of
all outstanding debt securities of such series to be due and payable
immediately. At any time after a declaration of acceleration has been made, but
before a judgment or decree for payment of money has been obtained by the
trustee, and subject to applicable law and certain other provisions of the
indenture, the holders of not less than a majority in principal amount of the
outstanding debt securities of such series may, under certain circumstances,
rescind and annul such declaration of acceleration. An Event of Default
described in (7) of the preceding paragraph shall cause the principal amount and
accrued interest (or such lesser amount as provided for in the debt securities
of such series) to become immediately due and payable without any declaration or
other act by the trustee or any holder. (Section 5.2)

The indenture provides that, within 90 days after the occurrence of any
event which is, or after notice or lapse of time or both would become, an Event
of Default with respect to the debt securities of any series (a "default"), the
trustee must transmit, in the manner set forth in such indenture, notice of such
default to the holders of the debt securities of such series unless such default
has been cured or waived; provided, however, that except in the case of a
default in the payment of principal of, or premium, if any, or interest, if any,
on, or additional amounts or any sinking fund installment with respect to, any
debt security of such series, the trustee may withhold such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or responsible officers of the trustee in good faith determine
that the withholding of such notice is in the best interest of the holders of
debt securities of such series; and provided, further, that in the case of any
default of the character described in (5) of the second preceding paragraph, no
such notice to holders will be given until at least 30 days after the default
occurs. (Section 6.2)

If an Event of Default occurs and is continuing with respect to the debt
securities of any series, the trustee may in its discretion proceed to protect
and enforce its rights and the rights of the holders of debt securities of such
series by all appropriate judicial proceedings. (Section 5.3) The indenture
provides that, subject to the duty of the trustee during any default to act with
the required standard of care, the trustee will be under no obligation to
exercise any of its rights or powers under such indenture at the request or
direction

of any of the holders of debt securities, unless such holders shall have offered
to the trustee reasonable indemnity. (Section 6.1) Subject to such provisions
for the indemnification of the trustee, and subject to applicable law and
certain other provisions of the indenture, the holders of a majority in
principal amount of the outstanding debt securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or power conferred on
the trustee, with respect to the debt securities of such series. (Section 5.12)

MODIFICATION AND WAIVER

Lubrizol and the trustee may modify or amend the indenture with the consent
of the holders of not less than a majority in principal amount of the
outstanding debt securities of each series affected thereby; provided, however,
that no such modification or amendment may, without the consent of the holder of
each outstanding debt security affected thereby:

- change the stated maturity of the principal of, or any premium or
installment of interest on, or any additional amounts with respect to,
any debt security;

- reduce the principal amount of, or the rate (or modify the calculation of
such rate) of interest on, or any additional amounts with respect to, or
any premium payable upon the redemption of, any debt security;

- change the obligation of Lubrizol and the Guarantors to pay additional
amounts with respect to any debt security;

- reduce the amount of the principal of an original issue discount security
that would be due and payable upon a declaration of acceleration of the
maturity thereof or the amount thereof provable in bankruptcy;

- change the redemption provisions of any debt security or the right of
repayment at the option of any holder of any debt security, in either
case, in a manner adverse to the holder;

- change the place of payment or the coin or currency in which the
principal of, any premium or interest on or any additional amounts with
respect to any debt security is payable;

- impair the right to institute suit for the enforcement of any payment on
or after the stated maturity of any debt security (or, in the case of
redemption, on or after the redemption date or, in the case of repayment
at the option of any holder, on or after the repayment date);

- reduce the percentage in principal amount of the outstanding debt
securities, the consent of whose holders is required in order to take
specific actions;

- reduce the requirements for quorum or voting by holders of debt
securities in Section 15.4 of the indenture;

- modify any of the provisions in the indenture regarding the waiver of
past defaults and the waiver of certain covenants by the holders of debt
securities except to increase any percentage vote required or to provide
that other provisions of such indenture cannot be modified or waived
without the consent of the holder of each debt security affected thereby;

- make any change that adversely affects the right to convert or exchange
any debt security into or for other securities of Lubrizol or other
securities, cash or property in accordance with its terms;

- release any Guarantor from any of its obligations under its Guarantee or
the indenture otherwise in accordance with the terms of the indenture; or

- modify any of the above provisions. (Section 9.2)

Lubrizol and the trustee may modify or amend the indenture and the debt
securities of any series without the consent of any holder in order to, among
other things:

- provide for a successor to Lubrizol or a Guarantor pursuant to a
consolidation, merger or sale of assets;

- add to the covenants of Lubrizol or the Guarantors for the benefit of the
holders of all or any series of debt securities or to surrender any right
or power conferred upon Lubrizol or the Guarantors by the indenture;

- add to or change any provisions of the indenture relating to the
registration and exchange of bearer debt securities, change or eliminate
restrictions on payments with respect to debt securities, or permit the
issuance of debt securities in uncertificated form, all in a manner that
will not materially adversely affect the interests of the holders of debt
securities of any series;

- establish the form or terms of debt securities of a series;

- provide for a successor trustee with respect to the debt securities of
all or any series;

- cure any ambiguity or correct or supplement any provision in the
indenture which may be defective or inconsistent with any other
provision, or to make any other provisions with respect to matters or
questions arising under the indenture that will not materially adversely
affect the interests of the holders of debt securities of any series;

- change the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of debt
securities under the indenture;

- add any additional Events of Default with respect to all or any series of
debt securities;

- supplement any provisions of the indenture to permit or facilitate the
defeasance and discharge of any series of debt securities in a manner
that will not materially adversely affect the interests of the holders of
debt securities of any series;

- secure the debt securities;

- provide for conversion or exchange rights of the holders of any series of
debt securities; or

- make any other change that does not materially adversely affect the
interests of the holders of any debt securities then outstanding under
the indenture. (Section 9.1)

The holders of at least a majority in principal amount of the outstanding
debt securities of any series may, on behalf of the holders of all debt
securities of that series, waive compliance by Lubrizol with certain covenants
of the indenture. (Section 10.9) The holders of not less than a majority in
principal amount of the outstanding debt securities of any series on behalf of
the holders of all debt securities of that series may waive any past default and
its consequences under the indenture with respect to the debt securities of that
series, except a default (1) in the payment of principal, any premium or
interest on or any additional amounts with respect to debt securities of such
series or (2) in respect of a covenant or provision of the indenture that cannot
be modified or amended without the consent of the holder of each outstanding
debt security of any series affected. (Section 5.13)

Under the indenture, Lubrizol is required to furnish the trustee annually a
statement as to its performance of certain of its obligations under that
indenture and as to any default in such performance. Lubrizol is also required
to deliver to the trustee, within five days after knowledge of the occurrence
thereof, written notice of any Event of Default, or any event which after notice
or lapse of time or both would constitute an Event of Default, resulting from
the failure to perform or breach of any covenant or warranty contained in the
indenture or the debt securities of any series. (Section 10.10)

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

Lubrizol and/or any Guarantors may discharge certain obligations to holders
of any series of debt securities that have not already been delivered to the
trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by depositing with the trustee, in trust, funds in U.S. dollars or in the
Foreign Currency in which such debt securities are payable in an amount
sufficient to pay the entire indebtedness on such debt securities with respect
to principal and any premium, interest and additional amounts to the date of
such deposit (if such debt securities have become due and payable) or to the
maturity thereof, as the case may be. (Section 4.1)

The indenture provides that, unless the provisions of Section 4.2 thereof
are made inapplicable to the debt securities of or within any series pursuant to
Section 3.1 thereof, Lubrizol may elect either (1) to defease and discharge
itself and each Guarantor from any and all obligations with respect to such debt
securities (except for, among other things, obligations to register the transfer
or exchange of such debt securities, to replace temporary or mutilated,
destroyed, lost or stolen debt securities, to maintain an office or agency with
respect to such debt securities and to hold moneys for payment in trust)
("defeasance") or (2) to release itself from its obligations with respect to
such debt securities under certain covenants as described in the related
prospectus supplement, and any omission or failure to comply with such
obligations shall not constitute a default or an Event of Default with respect
to such debt securities ("covenant defeasance"). Defeasance or covenant
defeasance, as the case may be, shall be conditioned upon the irrevocable
deposit by Lubrizol with the trustee, in trust, of an amount in U.S. dollars or
in the Foreign Currency in which such debt securities are payable at stated
maturity, or Government Obligations (as defined below), or both, applicable to
such debt securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of, any premium and interest on, and any
additional amounts with respect to, such debt securities on the scheduled due
dates. (Section 4.2)

Such a trust may only be established if, among other things, (1) the
applicable defeasance or covenant defeasance does not result in a breach or
violation of, or constitute a default under, the indenture or any other material
agreement or instrument to which Lubrizol or the Guarantors is a party or by
which it is bound, (2) no Event of Default or event which with notice or lapse
of time or both would become an Event of Default with respect to the debt
securities to be defeased shall have occurred and be continuing on the date of
establishment of such a trust and, with respect to defeasance only, at any time
during the period ending on the 123rd day after such date and (3) Lubrizol has
delivered to the trustee an opinion of counsel (as specified in the indenture)
to the effect that the holders of such debt securities will not recognize
income, gain or loss for United States federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of counsel, in the case of defeasance, must refer to
and be based upon a letter ruling of the Internal Revenue Service received by
Lubrizol, a Revenue Ruling published by the Internal Revenue Service or a change
in applicable United States federal income tax law occurring after the date of
the indenture. (Section 4.2)

"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the euro, issued by the government of one or more
countries other than the United States of America or by any recognized
confederation or association of such governments. (Section 1.1)

"Government Obligations" means debt securities which are (1) direct
obligations of the United States of America or the government or the governments
which issued the Foreign Currency in which the debt securities of a particular
series are payable, for the payment of which its full faith and credit is
pledged or (2) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America or such government
or governments which issued the Foreign Currency in which the debt securities of
such series are payable, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of America
or such other government or governments, and which, in the case of clauses (1)
and (2), are not callable or redeemable at the option of the issuer or

issuers thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of or any other amount with respect
to any such Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian with respect to the Government Obligation or the specific payment of
interest on or principal of or any other amount with respect to the Government
Obligation evidenced by such depository receipt. (Section 1.1)

If after Lubrizol has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to debt securities of any
series, (1) the holder of a debt security of that series is entitled to, and
does, elect pursuant to Section 3.1 of the indenture or the terms of such debt
security to receive payment in a currency other than that in which such deposit
has been made in respect of such debt security, or (2) a Conversion Event occurs
in respect of the Foreign Currency in which such deposit has been made, the
indebtedness represented by such debt security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of,
any premium and interest on, and any additional amounts with respect to, such
debt security as such debt security becomes due out of the proceeds yielded by
converting the amount or other properties so deposited in respect of such debt
security into the currency in which such debt security becomes payable as a
result of such election or such Conversion Event based on (a) in the case of
payments made pursuant to clause (1) above, the applicable market exchange rate
for such currency in effect on the second business day prior to such payment
date, or (b) with respect to a Conversion Event, the applicable market exchange
rate for such Foreign Currency in effect (as nearly as feasible) at the time of
the Conversion Event. (Section 4.2)

"Conversion Event" means the cessation of use of (1) a Foreign Currency
both by the government of the country or the confederation which issued such
Foreign Currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community or
(2) any currency unit or composite currency for the purposes for which it was
established. All payments of principal of, any premium and interest on, and any
additional amounts with respect to, any debt security that are payable in a
Foreign Currency that ceases to be used by the government or governments of
issuance shall be made in U.S. dollars. (Section 1.1)

In the event Lubrizol effects covenant defeasance with respect to any debt
securities and such debt securities are declared due and payable because of the
occurrence of any Event of Default other than an Event of Default with respect
to any covenant as to which there has been covenant defeasance, the amount in
such Foreign Currency in which such debt securities are payable, and Government
Obligations on deposit with the trustee, will be sufficient to pay amounts due
on such debt securities at the time of the stated maturity but may not be
sufficient to pay amounts due on such debt securities at the time of the
acceleration resulting from such Event of Default. However, Lubrizol would
remain liable to make payment of such amounts due at the time of acceleration.

NEW YORK LAW TO GOVERN

The indenture, the debt securities and the Guarantees will be governed by,
and construed in accordance with, the laws of the State of New York applicable
to agreements made or instruments entered into and, in each case, performed in
that state. (Section 1.13)

PLAN OF DISTRIBUTION

We may sell our securities from time to time by any method permitted by the
Securities Act of 1933, including in the following ways:

- through one or more underwriters on a firm commitment or best-efforts
basis;

- directly to one or more purchasers;

- through agents;

- through broker-dealers, who may act as agents or principals, including a
block trade in which a broker or dealer so engaged will attempt to sell
the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;

- in privately negotiated transactions; and

- in any combination of these methods of sale.

We may also make direct sales through subscription rights distributed to
our shareholders on a pro rata basis, which may or may not be transferable. In
any distribution of subscription rights to shareholders, if all of the
underlying securities are not subscribed for, we may then sell the unsubscribed
securities directly to third parties or may engage the services of one or more
underwriters, dealers or agents, including standby underwriters, to sell the
unsubscribed securities to third parties.

The applicable prospectus supplement will set forth the specific terms of
the offering of our securities including the name or names of any underwriters,
dealers or agents; the purchase price of the securities and the proceeds to us
from the sale; any underwriting discounts and commissions or agency fees and
other items constituting underwriters' or agents' compensation; the initial
offering price to the public and any discounts or concessions allowed or
reallowed or paid to dealers; and any securities exchange on which the
securities may be listed. Any public offering price, discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.

Unless otherwise specified in the applicable prospectus supplement, each
series of securities will be a new issue with no established trading market,
other than our common shares, which are currently listed on the NYSE. We expect
that any common shares sold pursuant to a prospectus supplement will be listed
on the NYSE. We may elect to list any series of debt securities on an exchange,
but we are not obligated to do so. It is possible that one or more underwriters
may make a market in a series of securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of, or the
trading market for, any series of debt securities that we may issue.

The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed), at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices or at negotiated prices.

Offers to purchase our securities may be solicited by agents designated by
us from time to time. Broker-dealers or agents may receive compensation in the
form of commissions, discounts or concessions from us. Broker-dealers or agents
may also receive compensation from the purchasers of the securities for whom
they sell as principals. Each particular broker-dealer will receive compensation
in amounts negotiated in connection with the sale, which might be in excess of
customary commissions. Broker-dealers or agents and any other participating
broker-dealers participating in the distribution of our securities may be deemed
to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the securities may be deemed to be
underwriting discounts and commissions.

If required under applicable state securities laws, we will sell the
securities only through registered or licensed brokers or dealers. In addition,
in some states, we may not sell securities unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and complied with.

If the securities are sold by means of an underwritten offering, we will
execute an underwriting agreement with an underwriter or underwriters, and the
names of the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transaction, including commissions, discounts
and any other compensation of the underwriters and dealers, if any, will be set
forth in the applicable prospectus supplement, which will be used by the
underwriters to make resales of the securities. Under agreements into which we
may enter, underwriters, dealers and agents who participate in the

distribution of the securities may be entitled to indemnification by us against
some liabilities, including liabilities under the Securities Act of 1933.

If we use underwriters for an offering of securities, the underwriters may
acquire the securities for their own accounts. The underwriters may resell the
securities from time to time in one or more transactions at a fixed price or
prices, which may be changed, at varying prices determined by the underwriters
at the time of sale, or at negotiated prices. We also may, from time to time,
authorize underwriters acting as our agents to offer and sell the securities
upon the terms and conditions as will be set forth in the applicable prospectus
supplement. In connection with the sale of the securities, underwriters may be
deemed to have received compensation from us in the form of underwriting
discounts or commissions and also may receive commissions from purchasers of the
securities. Underwriters may sell the securities to or through dealers, who may
receive compensation in the form of discounts, concessions from the underwriters
and/or commissions from the purchasers of the securities.

Any underwriting compensation paid by us to underwriters or agents in
connection with any offering of the securities and any discounts, concessions or
commissions allowed by underwriters to participating dealers will be set forth
in the applicable prospectus supplement. Underwriters, dealers and agents
participating in the distribution of our securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions.

If so indicated in the applicable prospectus supplement, we may authorize
underwriters, dealers or agents to solicit offers from certain types of
institutions to purchase securities from us at the public offering price set
forth in the applicable prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date. Institutions with
which delayed delivery contracts may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions. The applicable prospectus
supplement will set forth the commission payable for solicitation of such
offers.

Our securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by the managing
underwriters. If any underwriters are utilized in the sale of the securities,
the underwriting agreement will provide that the obligations of the underwriters
are subject to specified conditions precedent. If we sell our securities to one
or more underwriters on a firm commitment basis, then the underwriters will be
obligated to purchase all of the securities offered if any are purchased.

We may grant to the underwriters options to purchase additional securities
to cover over-allotments, if any, at the public offering price with additional
underwriting discounts or commissions, as may be set forth in the applicable
prospectus supplement. If we grant any over-allotment option, the terms of the
over-allotment option will be set forth in the applicable prospectus supplement.

In connection with any offering, persons participating in the offering,
such as any underwriters, may purchase and sell the securities in the open
market. These transactions may include over-allotment and stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the offering. Stabilizing transactions consist of bids or
purchases for the purpose of preventing or retarding a decline in the market
price of the securities and syndicate short positions involve the sale by
underwriters of a greater number of securities than they are required to
purchase from us in the offering. Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the securities sold in the offering for their account may be
reclaimed by the syndicate if the securities are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the securities, which may be higher than
the price that might prevail in the open market, and these activities, if
commenced, may be discontinued at any time.

Any underwriters, dealers or agents involved in any distribution or sale of
our securities may be customers of, engage in transactions with or perform
services for us from time to time.

We will bear all costs, expenses and fees in connection with the
registration of the securities as well as the expense of all commissions and
discounts, if any, attributable to the sales of the securities by us.

LEGAL MATTERS

The validity of the securities that we are offering has been passed upon
for us by Thompson Hine LLP. Shearman & Sterling LLP, New York, New York, may
pass upon legal matters for the underwriters with respect to any underwritten
offering of common shares or debt securities. Shearman & Sterling LLP will rely
upon Thompson Hine LLP with respect to matters of Ohio law.

EXPERTS

The consolidated financial statements of The Lubrizol Corporation as of
December 31, 2003 and 2002 and for each of the three years in the period ended
December 31, 2003 incorporated in this prospectus by reference from The Lubrizol
Corporation's Current Report on Form 8-K dated August 20, 2004 have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report, which is incorporated herein by reference (which report
expresses an unqualified opinion and includes an explanatory paragraph relating
to the adoption of Statement of Financial Accounting Standards No. 142 in 2002),
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.

Ernst & Young LLP, independent registered public accounting firm, have
audited the consolidated financial statements of Noveon International, Inc. at
December 31, 2003 and 2002 and for the years ended December 31, 2003 and 2002
and for the ten months ended December 31, 2001, and the consolidated financial
statements of BFGoodrich Performance Materials (a segment of Goodrich
Corporation) for the two months ended February 28, 2001, as set forth in their
reports, included in The Lubrizol Corporation's Current Report (Form 8-K) dated
May 20, 2004 and incorporated by reference in The Lubrizol Corporation's Current
Report (Form 8-K/A) dated July 29, 2004, which are incorporated by reference in
this prospectus. Ernst & Young LLP has also audited the consolidated financial
statements of Noveon International, Inc. at December 31, 2003 and for the year
then ended, as set forth in their report, included in The Lubrizol Corporation's
Current Report (Form 8-K) dated August 4, 2004, which is incorporated by
reference in this prospectus. Such consolidated financial statements are
incorporated by reference in reliance on Ernst & Young's reports given on their
authority as experts in accounting and auditing.

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13,400,000 COMMON SHARES

[LUBRIZOL CORP LOGO]

THE LUBRIZOL CORPORATION

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PROSPECTUS SUPPLEMENT
SEPTEMBER 22, 2004

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CITIGROUP

KEYBANC CAPITAL MARKETS

ABN AMRO ROTHSCHILD LLC

DEUTSCHE BANK SECURITIES

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