listing particulars for bp amoco-arco combination

7/21/2019 Listing Particulars for BP Amoco-Arco Combination

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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. When considering wha acion !o" sho"#d

a$e% !o" are reco&&ended o see$ !o"r own 'ersona# (nancia# ad)ice *ro& !o"r soc$+ro$er% +an$ &anager% so#icior% acco"nan

or oher inde'enden (nancia# ad)iser a"horised "nder he ,inancia# Ser)ices Ac -/0 i&&ediae#!.

I* !o" ha)e so#d or oherwise rans*erred a## o* !o"r ho#ding o* shares in 1P A&oco% '#ease 'ass his doc"&en as soon as 'ossi+#e o

he '"rchaser or rans*eree or o he soc$+ro$er% +an$ or oher agen hro"gh who& he sa#e or rans*er was e**eced *or rans&ission

o he '"rchaser or rans*eree. The disri+"ion o* his doc"&en in 2"risdicions oher han he Unied 3ingdo& &a! +e resriced +! #aw

and here*ore 'ersons ino whose 'ossession his doc"&en co&es sho"#d in*or& he&se#)es a+o" and o+ser)e an! s"ch resricions.

An! *ai#"re o co&'#! wih hese resricions &a! consi"e a )io#aion o* he sec"riies #aws o* an! s"ch 2"risdicion.

A co'! o* his doc"&en% which co&'rises #ising 'aric"#ars re#aing o he Consideraion Shares in accordance wih he #ising r"#es

&ade "nder secion -45 o* he ,inancia# Ser)ices Ac -/0% has +een de#i)ered *or regisraion o he Regisrar o* Co&'anies in

Eng#and and Wa#es in accordance wih secion -4 o* ha Ac.

A''#icaion has +een &ade o he 6ondon Soc$ E7change *or he Consideraion Shares o +e ad&ied o he O*(cia# 6is.

Dea#ings in he Consideraion Shares are e7'eced o co&&ence a /.88 a& on he E**eci)e Dae.

1P A&oco '.#.c.9incor'oraed and regisered in Eng#and and Wa#es wih regisered no. -854/:

6ISTIN; PARTICU6ARS

re#aing o he co&+inaion o*

1P A&oco '.#.c.

and

A#anic Rich*ie#d Co&'an!

and

he iss"e o* "' o -%0


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Conens

Page

Par I 3e! In*or&aion

- Inrod"cion B

5 Sr"c"re o* he Co&+inaion and S"+di)ision B

B ARCOs 1"siness 4

4 1ac$gro"nd o he Co&+inaion >

> Reasons *or% and 1ene(s o*% he Co&+inaion >

0 Direcors o* 1P A&oco ,o##owing he Co&+inaion The Year 5888 Iss"e -8

-0 E7raordinar! ;enera# Meeing -8

-< 6ising and Dea#ing -8

-/ ,orward@6oo$ing Sae&ens Ma! Pro)e Inacc"rae --

- Na"re o* ,inancia# In*or&aion --

Par II In*or&aion Re#aing o 1P A&oco

- 1"siness Descri'ion o* 1P A&oco -5

5 E7racion o* ,inancia# In*or&aion -B

B Sae&en o* Acco"ning Po#icies -B4 ,inancia# In*or&aion *or 1P A&oco -0

> 1P A&oco Res"#s *or he Three@Monh Period ended B- March - S"&&ar! o* Di**erences +eween US ;AAP and U3 ;AAP -BB

0 ,inancia# In*or&aion *or ARCO *or he Three@Monh Period ended B- March - -44

Par I Pro ,or&a ,inancia# In*or&aion% Inde+edness and Wor$ing Ca'ia#

Secion A Pro ,or&a ,inancia# In*or&aion on he en#arged 1P A&oco ;ro"' -04Secion 1 Inde+edness o* he 1P A&oco ;ro"' and he ARCO ;ro"' -/-

Secion C Wor$ing Ca'ia# -/-

Par Secion A S"&&ar! o* he Ter&s o* he Co&+inaion -/5

Secion 1 Reg"#aor! Maers -8

Secion C S"+di)ision o* Ordinar! Share Ca'ia# -5

Par I 1P A&oco Cr"de Oi# and Na"ra# ;as Reser)es -4

Par II ARCO Cr"de Oi# and Na"ra# ;as Reser)es -0

Par III Addiiona# In*or&aion 555

De(niions 500

;#ossar! 5


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11 Inrod"cion

On - A'ri# - he 1oards o* 1P A&oco and ARCO anno"nced ha he! had reached agree&en on a 'ro'osed co&+inaion o*

heir wo co&'anies.

The Co&+inaion is s"+2ec o a n"&+er o* condiions% inc#"ding is a''ro)a# +! he ARCO Shareho#ders and 1P A&oco Shareho#ders in he

res'eci)e shareho#der &eeings. In addiion o shareho#der a''ro)a#% he Co&+inaion is condiiona# on a n"&+er o* reg"#aor!% a7 and oher

consens and con(r&aions in he US and he E"ro'ean Union. The co&'anies are wor$ing owards co&'#eing he Co&+inaion #aer his

!ear. The ARCO 1oard has a''ro)ed he Merger Agree&en and has reco&&ended ha ARCO Shareho#ders )oe in *a)o"r o* i. The 1P

A&oco 1oard has "nani&o"s#! reco&&ended ha 1P A&oco Shareho#ders )oe in *a)o"r o* he Co&+inaion.

12 Sr"c"re o* he Co&+inaion and S"+di)ision

2.1 Sr"c"re

The Co&+inaion is o +e e**eced +! a sa"or! &erger "nder De#aware #aw where+! Prairie Ho#dings% a who##!@owned s"+sidiar! o*1P A&oco% wi## +e &erged wih and ino ARCO and ARCO wi## +eco&e a who##!@owned s"+sidiar! o* 1P A&oco in accordance wih

he er&s o* he Merger Agree&en.

2.2 S"+di)ision

I is 'ro'osed o s"+di)ide he ordinar! share ca'ia# o* 1P A&oco wih e**ec *ro& 4 Oco+er - so ha each 1P A&oco Ordinar!

Shareho#der and each ho#der o* 1P A&oco ADSs wi## recei)e one addiiona# 1P A&oco Ordinar! Share or 1P A&oco ADS *or each 1P

A&oco Ordinar! Share or 1P A&oco ADS he! ho#d. I* he S"+di)ision occ"rs 'rior o he E**eci)e Dae his wi## a**ec he n"&+er o*

1P A&oco Ordinar! Shares o +e iss"ed o gi)e e**ec o he Co&+inaion. ,"rher deai#s o* he S"+di)ision are se o" in 'aragra'h

-5 o* his Par I and in Secion C o* Par .

2.3 Consideraion "nder he Co&+inaionThe aggregae consideraion o +e 'aid +! 1P A&oco '"rs"an o he Co&+inaion 9on he +asis se o" in 'aragra'h -


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(4) U'on he E**eci)e Dae% a## e&'#o!ee o'ions and oher righs o ac"ire ARCO Co&&on Shares wi## con)er ino o'ionsand oher righs o ac"ire 1P A&oco Ordinar! Shares% in he *or& o* 1P A&oco ADSs% a*er ad2"s&en o a$e acco"n o*

he E7change Raio.

A descri'ion o* he 'rinci'a# er&s o* he Co&+inaion is se o" in Secion A o* Par .

2.5 Shareho#der A''ro)a#s and Oher Condiions

(1) 1P A&oco Shareho#der a''ro)a#

The Co&+inaion is condiiona# "'on he 'assing o* Reso#"ion - +! 1P A&oco Shareho#ders a he E;M. A n"&+er o*

oher reso#"ions wi## a#so +e considered a he E;M and are s"&&arised in 'aragra'h -0 o* his Par I.

(2) ARCO Shareho#der a''ro)a#

The Co&+inaion is condiiona# "'on a''ro)a# +! he ho#ders o* a &a2ori! o* he )oing 'ower o* he o"sanding ARCO

Co&&on and Pre*erence Shares on he re#e)an record dae.

A s'ecia# &eeing o* ARCO Shareho#ders has +een con)ened *or B8 A"g"s -% a which ARCO Shareho#ders wi## +e as$ed

o ado' he Merger Agree&en.

(3) Oher condiions

The Co&+inaion is a#so condiiona# on he sais*acion or wai)er o* cerain oher condiions% deai#s o* which are se o" in

Secion A o* Par .

2.6 Consens and Ti&ing

The Co&+inaion is condiiona# on o+aining a## re"ired consens and c#earances. A''#icaion has +een &ade o he re#e)an US and

E"ro'ean Union a"horiies *or he necessar! consens and c#earances% *"rher deai#s o* which are se o" in Secion 1 o* Par .

S"+2ec o o+aining hese consens and c#earances and shareho#der a''ro)a#s% 1P A&oco and ARCO are wor$ing o co&'#ee he

Co&+inaion #aer his !ear.

2.7 Ter&inaion Righs

The Merger Agree&en &a! +e er&inaed +! 1P A&oco or ARCO in cerain circ"&sances +e*ore he E**eci)e Dae. I* he

Merger Agree&en is er&inaed

1s +! ARCO +eca"se he 1P A&oco 1oard wihdraws is a''ro)a# or *a)o"ra+#e reco&&endaion o* he Co&+inaion ohe 1P A&oco Shareho#dersG or

2s +! eiher 1P A&oco or ARCO +eca"se he 1P A&oco Shareho#ders do no a''ro)e he Co&+inaion a he E;M and 'rior ohe er&inaion he 1P A&oco 1oard has wihdrawn is a''ro)a# or *a)o"ra+#e reco&&endaion o* he Co&+inaion o he 1P

A&oco Shareho#ders%

hen a er&inaion 'a!&en o* =>88 &i##ion wi## +e 'a!a+#e +! 1P A&oco.

An e"i)a#en s"& 9inc#"ding 'ro( rea#isa+#e +! 1P A&oco "nder he Soc$ O'ion Agree&en: &a! +e recei)ed +! 1P A&oco

*ro& ARCO in cerain circ"&sances inc#"ding he wihdrawa# o* he ARCO 1oards a''ro)a# or *a)o"ra+#e reco&&endaion o* he

Co&+inaion o he ARCO Shareho#ders or where he ARCO 1oard +eco&es eni#ed o reco&&end o he ARCO Shareho#ders an

ac"isiion ransacion 'ro'osed +! a hird 'ar!.

,"rher deai#s on he er&inaion righs "nder he Merger Agree&en and Soc$ O'ion Agree&en are se o" in 'aragra'hs -8%

-- and -5 o* Secion A o* Par .

13 ARCOs 1"siness

ARCO is a wor#dwide oi# and gas ener'rise. Is "rno)er *or he !ear ended B- Dece&+er -/ was a''ro7i&ae#! =-8.B +i##ion and is gross

asses a ha dae were a''ro7i&ae#! =5>.5 +i##ion. I o'eraes in wo seg&ens e7'#oraion and 'rod"cion and re(ning and &ar$eing.


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E7'#oraion and 'rod"cion e7'#ores *or% de)e#o's and 'rod"ces oi# and na"ra# gas wor#dwide. Areas in which i has o'eraio

inc#"de A#as$a% he ;"#* o* Me7ico% China% Indonesia and he Unied 3ingdo& Norh Sea. The #arges e#e&en o* ARCOs o'eraions

he 6ower 4/ Saes o* he Unied Saes is he#d +! ARCOs /5 'er cen owned s"+sidiar!% asar.

Re(ning and &ar$eing is 'ri&ari#! res'onsi+#e *or 'ero#e"& re(ning% &ar$eing and rans'oraion. ARCOs re(ning and

&ar$eing o'eraions are 'ri&ari#! in he wesern Unied Saes. These o'eraions inc#"de wo wes coas re(neries and o)er -% F"#! -% whi#e hese disc"ssions were ongoing ARCO

was a''roached wih a s'eci(c 'ro'osa# *or a share *or share &erger +! anoher co&'an!. This 'ro'osa# had an i&'#ied )a#"e o*

a''ro7i&ae#! =/5.


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(1) A#as$an oi# and gas

The co&+ined A#as$an oi# asses o* 1P A&oco and ARCO wi## 'ro)ide 1P A&oco wih o''or"niies *or signi(can cos

red"cions and inceni)es *or new in)es&en% which sho"#d res"# in a &ore e*(cien and cos co&'eii)e A#as$an Norh S#o'e

oi# region. ARCOs signi(can A#as$an gas ineress% a$en ogeher wih 1P A&ocos e7ising ineress% wi## 2"si*! a new 'hase

o* in)esigaion ino he *easi+i#i! o* +ringing A#as$an Norh S#o'e gas de'osis ino 'rod"cion.

(2) Re(ning and &ar$eing

In he US% he co&+inaion o* ARCOs #eading 'osiion in re(ning and &ar$eing on he wes coas wih 1P A&ocos

s"+sania# 'osiion in he res o* he US wi## ena+#e he co&+ined gro"' o co&'ee on an e"a# *ooing wih oher &a2or

coas@o@coas &ar$eers o* gaso#ine.

(3) ;#o+a# gas asses

The addiion o* ARCOs gas 'rod"cion and reser)es wi## &a$e 1P A&oco he second #arges non@sae owned gas 'rod"cer in

he wor#d and o**er signi(can 'oenia# *or *"rher growh in 'rod"cion. In So"heas Asia ARCO wi## +ring o 1P A&oco% in

addiion o ARCOs c"rren gas 'rod"cing asses in China and Indonesia% signi(can growh ineress in he Thai#andMa#a!sia2oin de)e#o'&en one and in Indonesias wor#d@c#ass Tangg"h (e#d% each o* which is c"rren#! "nde)e#o'ed.

5.2 S!nergies

The co&+ined co&'an! is e7'eced o achie)e an ann"a# rae o* 're@a7 cos sa)ings o* a''ro7i&ae#! =- +i##ion d"ring he second

*"## !ear a*er he E**eci)e Dae o* he ransacion% wih anici'aed 're@a7 cos sa)ings o* a''ro7i&ae#! =088 &i##ion o +e achie)ed

d"ring he (rs *"## !ear. The esi&aed cos sa)ings% which are in addiion o cos sa)ings 're)io"s#! argeed +! 1P A&oco and

ARCO se'arae#!% are e7'eced o co&e *ro& he *o##owing

(1) organisaiona# e*(ciencies% inc#"ding red"cions in sa** and cor'orae o)erheadsG

(2) &ore *oc"sed e7'#oraion e**ors hro"gh he "se o* shared echno#og! o red"ce he ris$ o* "ns"ccess*"# we##s and hro"gh

he a+i#i! o choose on#! he &os araci)e o''or"niies a)ai#a+#e o he co&+ined co&'an!G

(3) sandardisaion and si&'#i(caion o* +"siness 'rocesses% e.g. in*or&aion echno#og!G and

(4) raiona#isaion o* o'eraions% e.g. hro"gh he e#i&inaion o* d"'#icae o*(ces and he ado'ion o* co&&on 'roc"re&en 'o#icies.

The anici'aed cos sa)ings are e7'eced o +e o**se +! resr"c"ring charges and ransacion e7'enses o* a''ro7i&ae#! =- +i##ion

in he (rs !ear a*er he E**eci)e Dae% inc#"ding a''ro7i&ae#! =488 &i##ion in U3 sa&' d"! o +e inc"rred on he iss"e o* 1P

A&oco ADSs o ARCO Co&&on Shareho#ders. 1P A&oco e7'ecs o red"ce he wor#dwide sa** o* he co&+ined co&'an! +!

a''ro7i&ae#! 5%888 'osiions as a res"# o* he Co&+inaion.

5.3 Addiiona# ConsideraionsIn he co"rse o* reaching is decision o a''ro)e he Co&+inaion% he 1P A&oco 1oard considered he *o##owing addiiona# *acors

(1) he o'inion o* Morgan San#e! o he e**ec ha% as a B8 March -% he E7change Raio was *air *ro& a (nancia# 'oin o* )iewo 1P A&ocoG

(2) ha he Co&+inaion wo"#d +e s"+2ec o ac"isiion acco"ning "nder U3 ;AAP% res"#ing in on@going addiiona# de'reciaionand a&orisaion charges. I is c"rren#! esi&aed ha hese addiiona# charges wi## a&o"n o =5.8 +i##ion in he (rs *"## !ear

*o##owing he Co&+inaion. Whi#s acce'ing ha his acco"ning rea&en wo"#d ha)e an ad)erse e**ec on re'ored earnings%

he 1oard recognised ha in)esors were increasing#! 're'ared o a$e oher &eas"res ino acco"n in assessing he

'er*or&ance o* a co&'an!G

(3) ha in he (rs *"## !ear o* he co&+ined co&'an!s o'eraions% he Co&+inaion wo"#d +e accrei)e o 1P A&ocos earnings'er ordinar! share% +ased on achie)ing anici'aed 're@a7 cos sa)ings o* a''ro7i&ae#! =088 &i##ion d"ring he (rs *"## !ear

and e7c#"ding he e**ec o* he addiiona# de'reciaion and a&orisaion charges% he resr"c"ring charges and ransacion

e7'enses. This anici'aed accreion ass"&ed ha 'ros'eci)e oi# 'rices wi## re&ain a+o)e =-8 'er +arre#. The 1oard a#so


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recognised ha he ransacion wo"#d generae signi(can incre&ena# cash Jow hro"gh red"ced cash coss arising *ro& he

0


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argeed s!nergies and red"ced ca'ia# e7'endi"re hro"gh he a''#icaion o* 1P A&oco ca'ia# e*(cienc! arges o a## o*

he co&+ined co&'an!s assesG

(4) ha he i&'#ied 're&i"& o +e 'aid *or ARCOs o"sanding shares% +ased on he re#ai)e &ar$e 'rices o* 1P A&oco andARCO shares% was a''ro7i&ae#! 50 'er cen +ased on a)erage c#osing &ar$e 'rices *or +oh he one@wee$ and one@&onh

'eriods 'rior o he (rs '"+#ic re'oring o* a 'ossi+#e co&+inaion. The 1oard a#so considered ha s"ch i&'#ied 're&i"& was

in #ine wih he i&'#ied 're&ia 'aid or 'a!a+#e in he 1PA&oco and E77onMo+i# &ergers when &eas"red +! re*erence o he

e"i)a#en rading 'eriodsG

(5) ha he growh o''or"niies in ARCOs e7ising asse +ase co"#d conri+"e "' o B88%888 +arre#s 'er da! in oi# or oe"i)a#ens o* new 'rod"cion +! 58-8G

(6) ha he 'ro'osed Co&+inaion was no e7'eced o res"# in an! change o he cei# ing arge *or 1P A&ocos gearing or o is'o#ic! o* 'a!ing di)idends e"a# o a''ro7i&ae#! >8 'er cen o* is esi&aed a)erage earnings% e7c#"ding he e**ec o*

addiiona# de'reciaion and a&orisaion charges res"#ing *ro& he Co&+inaion% o)er he co"rse o* a +"siness c!c#eG

(7) ha 1P A&ocos c"rren &anage&en wo"#d &anage he co&+ined co&'an!G

(8) he 'ossi+i#i! ha he 'rocess o* '#anning *or he inegraion o* ARCO ino 1P A&oco and he reg"#aor! a''ro)a# 'rocess anis e**ecs &igh ad)erse#! a**ec he de#i)er! o* 1P A&oco +"siness 'er*or&ance arges. The 1oard noed he 'ro'osa# o* 1

A&oco &anage&en ha he ris$ o* s"ch ad)erse e**ecs co"#d +e &ini&ised hro"gh he a''oin&en o* wo senior e7ec"i)e

dedicaed 'rinci'a##! o &anaging hese 'rocessesG and

(9) he 'ossi+i#i! o* enco"nering di*(c"#ies in achie)ing cos sa)ings in he a&o"ns c"rren#! esi&aed or in he i&e *ra&ec"rren#! cone&'#aed.

In )iew o* he wide )arie! o* *acors considered +! he 1P A&oco 1oard in connecion wih is e)a#"aion o* he Co&+inaion% he

1P A&oco 1oard did no consider i 'racica# o% and did no ae&' o% "ani*!% ran$ or oherwise assign re#ai)e weighs o he

s'eci(c *acors descri+ed a+o)e% and indi)id"a# &e&+ers o* he 1oard &a! ha)e gi)en di**eren weigh o di**eren *acors.

16 Direcors o* 1P A&oco ,o##owing he Co&+inaion

The co&'osiion o* he 1oard is no e7'eced o change as a res"# o* he Co&+inaion.

17 Acco"ning Trea&en and Re'oring

1P A&oco wi## acco"n *or he Co&+inaion "sing he ac"isiion &ehod o* acco"ning "nder U3 ;AAP. As a conse"ence% he asse

and #ia+i#iies o* ARCO wi## +e reJeced in he 1P A&oco ;ro"' acco"ns a heir *air )a#"e% and he e7cess o* he '"rchase 'rice *or

he ac"isiion o)er he *air )a#"e o* he asses and #ia+i#iies ac"ired wi## +e acco"ned *or as goodwi##% which wi## +e a&orised o)er iesi&aed econo&ic #i*e. The addiiona# de'reciaion on he *air )a#"e "'#i* o (7ed asses and he a&orisaion o* he goodwi## wi##

gi)e rise o non@cash charges agains 'ro( o* a''ro7i&ae#! =5.8 +i##ion in he (rs *"## !ear *o##owing he Co&+inaion. The! wi##

s#ow#! dec#ine +" wi## 'ersis *or a n"&+er o* !ears. These charges wi## no a**ec he Co&'an!s cashJows nor is i e7'eced ha he!

wi## a**ec he Co&'an!s a+i#i! o 'a! di)idends.

The Co&'an! inends o disc#ose addiiona# indicaors o* he 1P A&oco ;ro"'s (nancia# 'er*or&ance s"ch as E1ITDA and

Ad2"sed E1ITDA% he ai& o* which wi## +e o +ring greaer c#ari! o he re'oring o* he 'er*or&ance o* he 1P A&oco ;ro"'. Whi#s

no +eing recognised U3 or US ;AAP &eas"res% he Co&'an! +e#ie)es hese indicaors wi## in he *""re ena+#e in)esors o e)a#"ae

+eer +oh he Co&'an!s hisorica# 'er*or&ance and is 'er*or&ance agains ha o* is co&'eiors. These new indicaors are

e7'eced o +e disc#osed *or he (rs i&e wih he anno"nce&en o* he Co&'an!s - ha#* !ear res"#s. The addiiona# indicaors

o* (nancia# 'er*or&ance wi## +e '"+#ished wih% and +e reconci#a+#e o% 1P A&ocos oher &eas"res o* (nancia# 'er*or&ance.


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18 Di)idends ,o##owing he Co&+inaion

The *""re di)idends o* 1P A&oco wi## +e de'enden on is *""re earnings and (nancia# condiion and oher *acors a**ecing is

+"siness% +" i is e7'eced ha 1P A&oco wi## conin"e is c"rren 'o#ic! o* 'a!ing di)idends e"a# o a''ro7i&ae#! >8 'er cen o* isesi&aed a)erage earnings 9e7c#"ding he e**ec o* he de'reciaion and a&orisaion charges res"#ing *ro& he Co&+inaion: o)er he

co"rse o* he +"siness c!c#e.

1P A&oco c"rren#! e7'ecs ha he i&ea+#e *or di)idends o +e 'aid o is Ordinar! Shareho#ders o)er he ne7 we#)e &onhs

wi## +e as se o" +e#ow. ARCO Co&&on Shareho#ders wi## 'arici'ae in a## 1P A&oco di)idends ha ha)e a record dae on or a*er

he E**eci)e Dae.

Dae o* Anno"nce&en Record Dae Pa!&en Dae

-8 A"g"s - 58 A"g"s - -8 Se'e&+er -

5 No)e&+er - -5 No)e&+er - -8 Dece&+er -

-> ,e+r"ar! 5888 5> ,e+r"ar! 5888 54 March 5888

Ma! 5888 - Ma! 5888 -5 F"ne 5888

The anno"nce&en o* a di)idend in an! "arer is no g"araneed% and is "#i&ae#! wihin he discreion o* he 1P A&oco

1oard. Di)idends on he 1P A&oco Pre*erence Shares wi## conin"e o +e 'aid ha#*@!ear#! on B- Fan"ar! and B- F"#!.

19 1P A&oco ;ro"' Targes

,o##owing he &erger o* 1P and A&oco on B- Dece&+er -/% he ;ro"' Chie* E7ec"i)e and he &anage&en o* 1P A&oco

ha)e cond"ced a &a2or sraegic re)iew o* he co&+ined 1P A&oco ;ro"'s o'eraions and asse +ase and% as a conse"ence

o* his re)iew% ha)e de)e#o'ed arges *or is (nancia# 'er*or&ance. The 'ri&ar! arges are

(1) he 'ercenage re"rn on a)erage ca'ia# e&'#o!ed o* he 1P A&oco ;ro"' o +e increased% hro"gh e*(cienc! i&'ro)e&ensand growh% +! +eween ()e and si7 'ercenage 'oins o)er he hree !ear 'eriod o he end o* he !ear 588-G

(2) he gross #e)e# o* ca'ia# e7'endi"re o)er he hree !ear 'eriod o he end o* he !ear 588- o +e a+o" =50 +i##ionG

(3) aggregae asse dis'osa#s o* aro"nd -> 'er cen o* ca'ia# e&'#o!ed +! aro"nd he end o* he !ear 588- i.e.a''ro7i&ae#! =-8 +i##ion o* dis'osa#sG

(4) ca'ia# e&'#o!ed +! he 1P A&oco ;ro"' o grow in he hree !ear 'eriod o he end o* he !ear 588-G

(5) gearing o re&ain in a range *ro& a+o" 5> 'er cen o a+o" B8 'er cenG and

(6) conin"aion o* is c"rren di)idend 'o#ic! 9as descri+ed in 'aragra'h / a+o)e:.

The arges are e7'eced o +e achie)a+#e in e7erna# en)iron&ena# condiions 9inc#"ding oi# 'rices: o)er he 'eriod o he end o*

he !ear 588- which are no s"+sania##! worse han hose 're)ai# ing on a)erage d"ring -/.

These arges re'#ace 're)io"s#! anno"nced arges and a$e acco"n o* an e7'eced rae o* 're@a7 cos sa)ings o* =5 +i## ion 'er

ann"& res"#ing *ro& he &erger wih A&oco% a rae o* cos sa)ing which i is now +e#ie)ed can +e achie)ed +e*ore he end o* -%

+" do no reJec he i&'ac o* he Co&+inaion. In 'aric"#ar he arges do no inc#"de he esi&aed 're@a7 cos sa)ings o* =- +i## ion%

he e7'eced asse dis'osa#s o* a''ro7i&ae#! =B +i##ion or he e**ecs o* he *air )a#"aion o* ARCO asses and he res"#ing

a&orisaion and addiiona# de'reciaion charges. The arges wi## +e re)iewed *o##owing he Co&+inaion and &a! re"ire ad2"s&en.

-8 C"rren Trading and Pros'ecs

o#ai#i! in he genera# rading en)iron&en% 'aric"#ar#! in re#aion o higher cr"de oi# 'rices% wi## a**ec res"#s. Higher cr"de oi# 'rices in

he second "arer o* - are #i$e#! o ca"se an i&'ro)e&en in he second "arer - rading 'er*or&ance o* 1P A&oco andARCO o)er he corres'onding (rs "arer - 'er*or&ance.


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Resr"c"ring aci)i! has ca"sed 1P A&ocos (rs "arer - res"#s% and is #i$e#! o ca"se is near er& res"#s% o +e a**eced

+! resr"c"ring charges. These charges &a! +e signi(can in he cone7 o* a "arers or a *"## !ears res"#s.

The Direcors +e#ie)e ha he 'ros'ecs o* he 1P A&oco ;ro"' wi## +e enhanced +! he Co&+inaion.

-- Recen De)e#o'&ens

The Co&'an! has anno"nced a signi(can oi# disco)er! in he ;"#* o* Me7ico. 1ased on in*or&aion *ro& he iniia# disco)er! we##% i

a''ears ha he oi# (e#d &a! ho#d a #eas one +i# #ion +arre#s o* reco)era+#e oi#. The Co&'an! has a 'er cen ineres in he (e#d.

The Co&'an! has a#so anno"nced *"rher signi(can disco)eries in he ;"#* o* Me7ico% Ango#a and Aer+ai2an.

-5 S"+di)ision o* Ordinar! Share Ca'ia#

The Direcors 'ro'ose ha wih e**ec *ro& 4 Oco+er -% E7ising 1P A&oco Ordinar! Shares wi## +e s"+di)ided wih each Ordinar!

Shareho#der ho#ding wo New 1P A&oco Ordinar! Shares o* no&ina# )a#"e =8.5> *or each E7ising 1P A&oco Ordinar! Share o*

no&ina# )a#"e =8.>8. The New 1P A&oco Ordinar! Shares wi## ha)e he sa&e righs as he E7ising 1P A&oco Ordinar! Shares.

Addiiona# 1P A&oco ADSs wi## +e iss"ed in connecion wih he s"+di)ision o* E7ising 1P A&oco Ordinar! Shares here+!

&ainaining he e7ising raio o* one 1P A&oco ADS o si7 1P A&oco Ordinar! Shares.

1P A&oco Ordinar! Shares and 1P A&oco ADSs c"rren#! rade a 'rices which signi(can#! e7ceed he 'rices o* he sec"riies o*

1P A&ocos 'rinci'a# co&'eiors. The reason *or he S"+di)ision is o red"ce he 'rice a which 1P A&oco Ordinar! Shares and 1P

A&oco ADSs rade wih he inenion o* &a$ing 1P A&oco sec"riies &ore araci)e o reai# in)esors and increasing #i"idi!. A+sen

an! oher *acors a**ecing 'rice% he S"+di)ision is e7'eced o res"# in iniia# 'rices *or he New 1P A&oco Ordinar! Shares and he

1P A&oco ADSs re'resening he New 1P A&oco Ordinar! Shares which are a''ro7i&ae#! ha#* ha o* he 'rices o* he E7ising 1P

A&oco Ordinar! Shares and e7ising 1P A&oco ADSs i&&ediae#! 'rior o he S"+di)ision.

The S"+di)ision o* he 1P A&oco Ordinar! Shares wi## re"ire he a''ro)a# o* a &a2ori! o* shareho#ders )oing in 'erson or +!'ro7! a he E7raordinar! ;enera# Meeing. The Direcors +e#ie)e ha he S"+di)ision is in he +es ineress o* he shareho#ders.

,"rher in*or&aion on he S"+di)ision is se o" in Secion C o* Par .

-B Unied 3ingdo& and Unied Saes Ta7aion

A s"&&ar! o* he a7 'osiion in he Unied 3ingdo& and he Unied Saes is se o" in 'aragra'h -- o* Par III.

In +rie*

(1) he Direcors ha)e +een ad)ised ha neiher he S"+di)ision nor he iss"e o* 1P A&oco ADSs arising *ro& he S"+di)ision wi## +e

reaed as a dis'osa# o* E7ising 1P A&oco Ordinar! Shares *or he '"r'oses o* U3 a7aion o* ca'ia# gains or a a7a+#e e)en *or US*edera# inco&e a7 '"r'oses and ha no sa&' d"! or SDRT sho"#d +e 'a!a+#e as a res"# o* he S"+di)isionG and

(2) 1P A&oco wi## 'a! a## sa&' d"ies% SDRT and si&i#ar a7es or #e)ies i&'osed in connecion wih he creaion or iss"e o*he Consideraion Shares or re#aed 1P A&oco ADSs '"rs"an o he Co&+inaion.

-4 A&end&ens o Aric#es o* Associaion

I is 'ro'osed o a&end he Aric#es o* Associaion 9he KKAric#es: in order% iner a#ia% o 'ro)ide ha a## reso#"ions% oher han hose o*

a 'roced"ra# na"re% &a! on#! +e a''ro)ed +! a )oe on a 'o## and o ena+#e 'ro7ies o +e a''oined in e#ecronic *or& or +!

e#e'hone% sho"#d he Direcors so deer&ine. These changes are +eing &ade o reJec he 'racica#iies o* )oing and he

a''oin&en o* 'ro7ies in a #arge co&'an! wih shareho#ders a## o)er he wor#d.


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A co'! o* he Aric#es% showing in *"## he a&end&ens o he Aric#es i* he reso#"ion o a&end he Aric#es +eco&es e**eci)e% is

a)ai#a+#e *or ins'ecion a he o*(ces o* 6in$#aers% One Si#$ Sree% 6ondon EC5Y /HQ *ro& he dae o* his doc"&en "ni# he

E**eci)e Dae and a he Ro!a# ,esi)a# Ha## *ro& -8.88 a& on - Se'e&+er - "ni# he conc#"sion o* he E;M.

-> The Year 5888 Iss"e

The Year 5888 iss"e is he res"# o* co&'"er 'rogra&&es +eing wrien "sing wo digis raher han *o"r digis o de(ne he

a''#ica+#e !ear. ,or e7a&'#e% dae sensii)e so*ware &a! recognise a dae "sing KK88 as he !ear -88 raher han he !ear 5888.

This co"#d res"# in s!se& *ai#"res or &isca#c"#aions ca"sing disr"'ion o* o'eraions.

,"rher deai#s o* 1P A&oco and ARCOs '#ans o address his iss"e% and he ris$s and "ncerainies re#aed o i% are se o"

in 'aragra'h -> o* Par III.

-0 E7raordinar! ;enera# MeeingThe E;M has +een con)ened *or --.88 a& on - Se'e&+er -. A he E;M% he *o##owing reso#"ions wi## +e 'ro'osed

(1) Reso#"ion - wi## +e 'ro'osed o a''ro)e he Co&+inaionG

(2) Reso#"ion 5 wi## +e 'ro'osed o a''ro)e and gi)e e**ec o he S"+di)isionG

(3) Reso#"ion B wi## +e 'ro'osed o increase he a"horised share ca'ia# o* 1P A&ocoG

(4) Reso#"ion 4 wi## +e 'ro'osed o a"horise he 1P A&oco 1oard o a##o shares "' o an aggregae no&ina# a&o"no* =-%//> &i##ionG

(5) Reso#"ion > wi## +e 'ro'osed o disa''#! shareho#ders 're@e&'ion righs "' o an aggregae no&ina# a&o"no* =5/8 &i##ionG

(6) Reso#"ion 0 wi## +e 'ro'osed o a&end he Aric#es in order% iner a#ia% o 'ro)ide ha a## reso#"ions% oher han hose o*a 'roced"ra# na"re% +e a''ro)ed +! a )oe on a 'o## and o ena+#e 'ro7ies o +e a''oined in e#ecronic *or& or +!

e#e'hone% sho"#d he Direcors so deer&ine.

The Co&+inaion is condiiona# on he a''ro)a# o* Reso#"ion -. The Co&+inaion is no condiiona# on Reso#"ions 5 o 0

+eing 'assed. Reso#"ions B o > wi## no +e e**eci)e "n#ess Reso#"ion - is 'assed.

Reso#"ions - o 4 are +eing 'ro'osed as ordinar! reso#"ions which re"ire he a''ro)a# o* a &a2ori! o* he )oes cas in 'erson

or on a 'o## a he E;M. Reso#"ions > and 0 are +eing 'ro'osed as s'ecia# reso#"ions and re"ire he a''ro)a# o* no #ess han

'er cen o* he )oes cas on a 'o## a he E;M.

-< 6ising and Dea#ing

6ising and Dea#ing o* New 1P A&oco Ordinar! Shares on he S"+di)ision

A''#icaion has +een &ade o he 6ondon Soc$ E7change *or he New 1P A&oco Ordinar! Shares o +e ad&ied o he O*(cia#

6is. A''#icaion wi## +e &ade *or 1P A&oco ADSs re'resening he New 1P A&oco Ordinar! Shares o +e # ised on he New Yor$

Soc$ E7change. A''#icaion wi## a#so +e &ade o he oher soc$ e7changes on which 1P A&oco Ordinar! Shares and 1P A&oco

ADSs are a#so #ised *or he New 1P A&oco Ordinar! Shares and addiiona# 1P A&oco ADSs o +e #ised on s"ch e7changes.

Dea#ings in he New 1P A&oco Ordinar! Shares are e7'eced o co&&ence a /.88 a& on 4 Oco+er -.

The rea&en o* 1P A&oco ceri(caed and "nceri(caed sec"riies "'on he S"+di)ision is se o" in 'aragra'hs B and 4 o*Secion C o* Par .


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6ising and Dea#ing o* Consideraion Shares

A''#icaion has +een &ade o he 6ondon Soc$ E7change *or he Consideraion Shares o +e ad&ied o he O*(cia# 6is. A''#icaion has

+een &ade *or 1P A&oco ADSs re'resening he Consideraion Shares o +e #ised on he New Yor$ Soc$ E7change. Dea#ings in he

Consideraion Shares are e7'eced o co&&ence a /.88 a& on he E**eci)e Dae. I is a condiion o he Co&+inaion +eco&ing e**eci)e

ha he 6ondon Soc$ E7change sha## ha)e graned 'er&ission *or he #ising o* he Consideraion Shares o +e iss"ed in he Co&+inaion and

ha he 1P A&oco ADSs o +e iss"ed in he Co&+inaion are a"horised *or #ising on he New Yor$ Soc$ E7change.

A''#icaion wi## a#so +e &ade o he oher soc$ e7changes on which 1P A&oco Ordinar! Shares and 1P A&oco ADSs are #ised

*or he Consideraion Shares and he 1P A&oco ADSs o +e iss"ed in he Co&+inaion o +e #ised on s"ch e7changes.

-/ ,orward@6oo$ing Sae&ens Ma! Pro)e Inacc"rae

In order o "i#ise he KKSa*e Har+or 'ro)isions o* he Unied Saes Pri)ae Sec"riies 6iigaion Re*or& Ac o* ->% 1P A&oco

is 'ro)iding he *o##owing ca"ionar! sae&en.

Cerain sae&ens conained in his doc"&en% 'aric"#ar#! hose regarding 'ossi+#e or ass"&ed *""re 'er*or&ance% coss%

di)idends% re"rns% di)es&ens% reser)es and growh o* ARCO and 1P A&oco% ind"sr! growh and oher rend 'ro2ecions% and hose

regarding s!nergisic +ene(s o* he Co&+inaion and esi&aed co&'an! earnings% in 'aric"#ar hose se o" in 'aragra'hs >% /% %

-8 and -- o* his Par I are or &a! +e considered *orward@#oo$ing sae&ens ha in)o#)e ris$s and "ncerainies. Ac"a# res"#s &a!

di**er &aeria##! *ro& hose e7'ressed in s"ch sae&ens% de'ending on a )arie! o* *acors% inc#"ding he s'eci(c *acors ideni(ed

in he disc"ssions acco&'an!ing s"ch *orward@#oo$ing sae&ensG *""re #e)e#s o* ind"sr! 'rod"c s"''#!% de&and and 'ricingG

'o#iica# sa+i#i! and econo&ic growh in re#e)an areas o* he wor#dG he a+i#i! o* 1P A&oco and ARCO o inegrae heir +"sinesses

s"ccess*"##! a*er he Co&+inaionG de)e#o'&en and "se o* new echno#og! and s"ccess*"# 'arneringG he acions o* co&'eiorsG

na"ra# disasers and oher changes o +"siness condiionsG and oher *acors disc"ssed e#sewhere in his doc"&en.

- Na"re o* ,inancia# In*or&aion

A## (nancia# in*or&aion in his Par I and 'aragra'h - o* each o* Par II and Par III o* his doc"&en is e7raced *ro& he (nancia#

in*or&aion se o" in Pars II% III and I o* his doc"&en. Shareho#ders sho"#d read he who#e doc"&en and no 2"s re#! on $e! or

s"&&arised in*or&aion. E7ce' as oherwise indicaed% a## c"rrenc! con)ersions +eween ser#ing and US do##ars ha)e +een &ade a

he Noon 1"!ing Rae on F"#! - o* =-.>>-> L-.88.

-


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11 1"siness Descri'ion o* 1P A&oco

On B- Dece&+er -/% A&oco and 1P &erged. The &erger was e**eced +! 1P iss"ing ordinar! shares in he *or& o* 1P A&oco ADSs o

ho#ders o* A&oco co&&on soc$. ,o##owing his &erger% A&oco +eca&e a who##!@owned s"+sidiar! o* 1P which was rena&ed1P A&oco '.#.c.

1P A&oco is one o* he wor#ds o' hree 'ero#e"& and 'eroche&ica# gro"'s on he +asis o* &ar$e ca'ia#isaion% wih a wide

o'eraiona# and geogra'hic sco'e. The 1P A&oco ;ro"' has we## esa+#ished o'eraions in E"ro'e% Norh and So"h A&erica%

A"sra#ia% Asia and 'ars o* A*rica.

1P A&ocos &ain +"sinesses are e7'#oraion and 'rod"cion% re(ning and &ar$eing% and che&ica#s. E7'#oraion and

'rod"cions aci)iies inc#"de oi# and gas e7'#oraion and (e#d de)e#o'&en and 'rod"cion 9KK"'srea& aci)iies:% ogeher wih

'i'e#ine rans'oraion% gas 'rocessing and gas &ar$eing 9KK&idsrea& aci)iies:. The aci)iies o* re(ning and &ar$eing inc#"de

oi# s"''#! and rading as we## as oi# re(ning and &ar$eing 9KKdownsrea& aci)iies:. Che&ica#s aci)iies inc#"de 'eroche&ica#s

&an"*ac"ring and &ar$eing. The 1P A&oco ;ro"' 'ro)ides high "a#i! echno#ogica# s"''or *or a## is +"sinesses hro"gh is

research and engineering aci)iies. A#ho"gh re#ai)e#! s&a## in co&'arison o is &ain +"siness% he 1P A&oco ;ro"' a#so conains

one o* he wor#ds #eading so#ar +"sinesses 1P So#are7.

The &erger wih A&oco res"#ed in 1Ps esa+#ished oi# 'rod"cion +ase in A#as$a and is increasing 'resence in he ;"#* o*

Me7ico +eing co&+ined wih A&ocos ;"#* o* Me7ico ineress and is e7ensi)e oi# and gas 'rod"cion in he US 9oher han A#as$a:

o creae he #arges 'rod"cer o* oi# and gas in he US. The addiion o* A&ocos U3 Norh Sea asses srenghened 1Ps 'osiion as

he #arges 'rod"cer o* oi# in he U3.

In re(ning and &ar$eing% A&ocos srong 'resence and +rand in he &id@wes% eas and so"h@eas o* he US was rein*orced +!

1Ps e7ising +"siness in he &id@wes and so"h@eas. The &erger wih A&oco on B- Dece&+er -/ res"#ed in 1P A&oco ha)ing

a''ro7i&ae#! -0%B88 ser)ice saions in he US and -5%888 in he res o* he wor#d.

In che&ica#s% 1Ps 'o#!eh!#ene% aceic acid and acr!#oniri#e echno#og! and 'rod"cion was co&'#e&ened +! A&ocos

#eading 'osiion in '"ri(ed era'hha#ic acid% 'ara7!#ene and &ea7!#ene.

,"rher deai#s o* 1P A&oco ;ro"' reser)es are se o" in Par I o* his doc"&en.

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12 E7racion o* ,inancia# In*or&aion

The (nancia# in*or&aion *or 1P A&oco se o" in 'aragra'h 4 +e#ow has +een e7raced wiho" &aeria# ad2"s&en *ro& he

a"died (nancia# sae&ens *or 1P A&oco *or he hree !ears ended B- Dece&+er -/ (#ed wih he SEC on ,or& 0@3 on < F"#!-. The a"di o'inion on hese (nancia# sae&ens was "n"a#i(ed. This (nancia# in*or&aion was resaed o co&'#! wih

,inancia# Re'oring Sandard No. -5 KKPro)isions% Coningen 6ia+i#iies and Coningen Asses 9KK,RS-5:% 9see Noe 40 o

'aragra'h 4 o* his Par II *or *"rher in*or&aion:. The 1P A&oco ;ro"' ado'ed ,RS-5 wih e**ec *ro& - Fan"ar! - and

conse"en#! his was reJeced in he ineri& res"#s o* 1P A&oco *or he hree &onhs ended B- March -. The (nancia#

in*or&aion *or 1P A&oco does no consi"e sa"or! acco"ns wihin he &eaning o* Secion 548 o* he Ac.

13 Sae&en o* Acco"ning Po#icies

Acco"ning sandards

These (nancia# sae&ens are 're'ared in accordance wih a''#ica+#e U3 acco"ning sandards.

The (nancia# in*or&aion *or -/ has +een resaed o co&'#! wih he re"ire&ens o* ,RS-5. See Noe 40 o 'aragra'h 4 o*

his Par II *or *"rher in*or&aion. Co&'arai)e (g"res ha)e +een resaed in accordance wih he re)ised 'resenaion.

In addiion he (nancia# in*or&aion *or -< and -0 has +een resaed o co&'#! wih he re"ire&ens o* ,inancia#

Re'oring Sandard No. KKAssociaes and Foin en"res 9KK,RS:. See Noe 44 o 'aragra'h 4 o* his Par II *or *"rher

in*or&aion. The resae&en has had no e**ec on he 'ro( *or he !ear and ne asses.

Merger acco"ning

The (nancia# sae&ens ha)e +een 're'ared "sing he &erger &ehod o* acco"ning in re#aion o he &erger o* 1P and A&oco.

Under &erger acco"ning% he res"#s and cash Jows o* 1P and A&oco are co&+ined *ro& he +eginning o* he (nancia# 'eriod in

which he &erger o* 1P and A&oco occ"rred and heir asses and #ia+i#iies co&+ined a he a&o"ns a which he! were 're)io"s#!

recorded a*er ad2"sing o achie)e consisenc! o* acco"ning 'o#icies. Inco&e sae&en% +a#ance shee and cash Jow co&'arai)es

are resaed on he co&+ined +asis. See Noe 4> o 'aragra'h 4 o* his Par II *or *"rher in*or&aion.

Acco"ning con)enion

The (nancia# sae&ens are 're'ared "nder he hisorica# cos con)enion. Hisorica# cos acco"ns show he 'ro(s a)ai#a+#e o

shareho#ders and are he &os a''ro'riae +asis *or 'resenaion o* he 1P A&oco ;ro"'s +a#ance shee. Pro( or #oss deer&ined

"nder he hisorica# cos con)enion inc#"des soc$ ho#ding gains or #osses and% as a conse"ence% does no necessari#! reJec

"nder#!ing rading res"#s.

Re'#ace&en cos

The res"#s o* indi)id"a# +"sinesses and geogra'hica# areas are 'resened on a re'#ace&en cos +asis. Re'#ace&en cos

o'eraing res"#s e7c#"de soc$ ho#ding gains or #osses and reJec he a)erage cos o* s"''#ies inc"rred d"ring he !ear% and h"s

'ro)ide insigh ino "nder#!ing rading res"#s. Soc$ ho#ding gains or #osses re'resen he di**erence +eween he re'#ace&en cos

o* sa#es and he hisorica# cos o* sa#es ca#c"#aed "sing he ,I,O &ehod.

Soc$ )a#"aion

Soc$s are )a#"ed a cos o he 1P A&oco ;ro"' "sing he ,I,O &ehod or a ne rea#isa+#e )a#"e% whiche)er is he #ower. Sores

are saed a or +e#ow cos ca#c"#aed &ain#! "sing he a)erage &ehod.

;ro"' conso#idaion

The 1P A&oco ;ro"' (nancia# sae&ens co&'rise a conso#idaion o* he acco"ns o* he 'aren co&'an! and is s"+sidiar!

"ndera$ings 9KKs"+sidiaries:. The res"#s o* s"+sidiaries ac"ired or so#d are conso#idaed *or he 'eriods *ro& or o he dae on

which conro# 'asses.

An associaed "ndera$ing 9KKassociae: is an eni! in which he 1P A&oco ;ro"' has a #ong@er& e"i! ineres and o)er which i

e7ercises signi(can inJ"ence. The conso#idaed (nancia# sae&ens inc#"de he 1P A&oco ;ro"' 'ro'orion o* he o'eraing 'ro( or

#oss% e7ce'iona# ie&s% soc$ ho#ding gains or #osses% ineres e7'ense% a7aion and ne asses o* associaes 9he KKe"i! &ehod:.


19/277


A 2oin )en"re is an eni! in which he 1P A&oco ;ro"' has a #ong@er& ineres and shares conro# wih one or &ore co@)en"rers. The

conso#idaed (nancia# sae&ens inc#"de he 1P A&oco ;ro"' 'ro'orion o* "rno)er% o'eraing 'ro( or #oss% e7ce'iona# ie&s% soc$

ho#ding gains or #osses% ineres e7'ense% a7aion% gross asses and gross #ia+i#iies o* he 2oin )en"re 9he KKgross e"i! &ehod:.

Cerain o* he 1P A&oco ;ro"'s aci)iies are cond"ced hro"gh 2oin arrange&ens and are inc#"ded in he conso#idaed (nancia#

sae&ens in 'ro'orion o he 1P A&oco ;ro"'s ineres in he inco&e% e7'enses% asses and #ia+i#iies o* hese 2oin arrange&ens.

On he ac"isiion o* a s"+sidiar!% or o* an ineres in a 2oin )en"re or associaed "ndera$ing% *air )a#"es reJecing condiions a

he dae o* ac"isiion are ari+"ed o he ideni(a+#e ne asses ac"ired. When he cos o* ac"isiion e7ceeds he *air )a#"es

ari+"a+#e o he 1P A&oco ;ro"'s share o* s"ch ne asses he di**erence is reaed as '"rchased goodwi##. This is ca'ia#ised and

a&orised o)er is esi&aed "se*"# econo&ic #i*e% #i&ied o a &a7i&"& 'eriod o* 58 !ears.

,oreign c"rrencies

On conso#idaion% asses and #ia+i#iies o* s"+sidiar! "ndera$ings are rans#aed ino US do##ars a c#osing raes o* e7change. Inco&e

and cash Jow sae&ens are rans#aed a a)erage raes o* e7change.

E7change di**erences res"#ing *ro& he rerans#aion o* ne in)es&ens in s"+sidiar! and associaed "ndera$ings a c#osing

raes% ogeher wih di**erences +eween inco&e sae&ens rans#aed a a)erage raes and a c#osing raes% are dea# wih in

reser)es. E7change gains and #osses arising on #ong@er& *oreign c"rrenc! +orrowings "sed o (nance he 1P A&oco ;ro"'s

*oreign c"rrenc! in)es&ens are a#so dea# wih in reser)es.

A## oher e7change gains or #osses on se#e&en or rans#aion a c#osing raes o* e7change o* &onear! asses and #ia+i#iies

are inc#"ded in he deer&inaion o* 'ro( *or he !ear.

Deri)ai)e (nancia# insr"&ens

The 1P A&oco ;ro"' is a 'ar! o deri)ai)e (nancia# insr"&ens 9KKderi)ai)es: 'ri&ari#! o &anage e7'os"res o J"c"aions in *oreign

c"rrenc! e7change raes and ineres raes% and o &anage so&e o* is &argin e7'os"re *ro& changes in oi# and na"ra# gas 'rices.

A## deri)ai)es which are he#d *or rading '"r'oses and a## oi# 'rice deri)ai)es he#d *or ris$ &anage&en '"r'oses are &ar$ed o

&ar$e and a## gains and #osses recognised in he inco&e sae&en.

Ineres rae swa' agree&ens% swa'ions and *""res conracs are "sed o &anage ineres rae e7'os"res. A&o"ns 'a!a+#e

or recei)a+#e in res'ec o* hese deri)ai)es are recognised as ad2"s&ens o ineres e7'ense o)er he 'eriod o* he conracs.

As 'ar o* e7change rae ris$ &anage&en% *oreign c"rrenc! swa' agree&ens and *orward conracs are "sed o con)er non@US do##ar

+orrowings ino US do##ars. ;ains and #osses on hese deri)ai)es are de*erred and recognised on &a"ri! o* he "nder#!ing de+% ogeher

wih he &aching #oss or gain on he de+. ,oreign c"rrenc! *orward conracs and o'ions are "sed o hedge signi(can non@US do##ar (r&

co&&i&ens or anici'aed ransacions. ;ains and #osses on hese conracs and o'ion 're&ia 'aid are a#so de*erred and recognised in

he inco&e sae&en or as ad2"s&ens o carr!ing a&o"ns% as a''ro'riae% when he hedged ransacion occ"rs.

E7'#oraion e7'endi"re

E7'#oraion e7'endi"re is acco"ned *or in accordance wih he s"ccess*"# e**ors &ehod. E7'#oraion and a''raisa# dri##ing

e7'endi"re is iniia##! ca'ia#ised as an inangi+#e (7ed asse. When 'ro)ed reser)es o* oi# and na"ra# gas are deer&ined and

de)e#o'&en is sancioned% he re#e)an e7'endi"re is rans*erred o angi+#e 'rod"cion asses. A## e7'#oraion e7'endi"re

deer&ined as "ns"ccess*"# is charged agains inco&e. E7'#oraion #icence ac"isiion coss are a&orised o)er he esi&aed 'eriod

o* e7'#oraion. ;eo#ogica# and geo'h!sica# e7'#oraion coss are charged agains inco&e as inc"rred.

De'reciaion

Oi# and gas 'rod"cion asses are de'reciaed "sing a "ni@o*@'rod"cion &ehod +ased "'on esi&aed 'ro)ed reser)es. Oher

angi+#e and inangi+#e asses are de'reciaed on he sraigh #ine &ehod o)er heir esi&aed "se*"# #i)es. The a)erage esi&aed

"se*"# #i)es o* re(neries are 58 !ears% che&ica#s &an"*ac"ring '#ans are 58 !ears and ser)ice saions -> !ears. Oher inangi+#es

are a&orised o)er a &a7i&"& 'eriod o* 58 !ears.

The 1P A&oco ;ro"' "ndera$es a re)iew *or i&'air&en o* a (7ed asse or goodwi## i* e)ens or changes in circ"&sances indicae ha

he carr!ing a&o"n o* he (7ed asse or goodwi## &a! no +e reco)era+#e. To he e7en ha he carr!ing a&o"n e7ceeds he

-4


20/277

reco)era+#e a&o"n% ha is he higher o* ne rea#isa+#e )a#"e and )a#"e in "se% he (7ed asse or goodwi## is wrien down o

is reco)era+#e a&o"n. The )a#"e in "se is deer&ined *ro& esi&aed disco"ned *""re ne cash Jows.

Deco&&issioningPro)ision *or deco&&issioning is recognised in *"## a he co&&ence&en o* oi# and na"ra# gas 'rod"cion. The a&o"n recognised is

he 'resen )a#"e o* he esi&aed *""re e7'endi"re deer&ined in accordance wih #oca# condiions and re"ire&ens. A

corres'onding angi+#e (7ed asse is a#so creaed o* an a&o"n e"i)a#en o he 'ro)ision. This is s"+se"en#! de'reciaed as 'ar

he ca'ia# coss o* he 'rod"cion and rans'oraion *aci#iies. An! change in he 'resen )a#"e o* he esi&aed e7'endi"re is

reJeced as an ad2"s&en o he 'ro)ision and he (7ed asse.

Pero#e"& re)en"e a7

The charge *or 'ero#e"& re)en"e a7 is ca#c"#aed "sing a "ni@o*@'rod"cion &ehod.

Changes in "ni@o*@'rod"cion *acors

Changes in *acors which a**ec "ni@o*@'rod"cion ca#c"#aions are dea# wih 'ros'eci)e#!% no +! i&&ediae ad2"s&en o* 'rior

!ears a&o"ns.

En)iron&ena# #ia+i#iies

En)iron&ena# e7'endi"res ha re#ae o c"rren or *""re re)en"es are e7'ensed or ca'ia#ised as a''ro'riae. E7'endi"res ha

re#ae o an e7ising condiion ca"sed +! 'as o'eraions and ha do no conri+"e o c"rren or *""re earnings are e7'ensed.

6ia+i#iies *or en)iron&ena# coss are recognised when en)iron&ena# assess&ens or c#ean@"'s are 'ro+a+#e and he associaed coss ca

+e reasona+#! esi&aed. ;enera##!% he i&ing o* hese 'ro)isions coincides wih he co&&i&en o a *or&a# '#an o* acion or% i* ear#ier% on

di)es&en or on c#os"re o* inaci)e sies. The a&o"n recognised is he +es esi&ae o* he e7'endi"re re"ired. Where he #ia+i#i! wi## no +

se#ed *or a n"&+er o* !ears he a&o"n recognised is he 'resen )a#"e o* he esi&aed *""re e7'endi"re.

6eases

Asses he#d "nder #eases which res"# in 1P A&oco ;ro"' co&'anies recei)ing s"+sania##! a## ris$s and rewards o* ownershi' 9KK(nanc

#eases: are ca'ia#ised as angi+#e (7ed asses a he esi&aed 'resen )a#"e o* "nder#!ing #ease 'a!&ens. The corres'onding (nance

#ease o+#igaion is inc#"ded wih +orrowings. Rena#s "nder o'eraing #eases are charged agains inco&e as inc"rred.Research

E7'endi"re on research is wrien o** in he !ear in which i is inc"rred.

Ineres

Ineres is ca'ia#ised gross d"ring he 'eriod o* consr"cion where i re#aes eiher o he (nancing o* &a2or 'ro2ecs wih #ong

'eriods o* de)e#o'&en or o dedicaed (nancing o* oher 'ro2ecs. A## oher ineres is charged agains inco&e.

Pensions and oher 'os@reire&en +ene(s

The cos o* 'ro)iding 'ensions and oher 'os@reire&en +ene(s is charged o inco&e on a s!se&aic +asis% wih 'ension s"r'#"ses and

de(cis a&orised o)er he a)erage e7'eced re&aining ser)ice #i)es o* c"rren e&'#o!ees. The di**erence +eween he a&o"ns charged

o inco&e and he conri+"ions &ade o 'ension '#ans is inc#"ded wihin oher 'ro)isions or de+ors as a''ro'riae. The a&o"ns accr"ed

*or oher 'os@reire&en +ene(s and "n*"nded 'ension #ia+i#iies are inc#"ded wihin oher 'ro)isions.

De*erred a7aion

De*erred a7aion is ca#c"#aed% "sing he #ia+i#i! &ehod% in res'ec o* i&ing di**erences arising 'ri&ari#! *ro& he di**erence +eween

he acco"ning and a7 rea&ens o* +oh de'reciaion and 'ero#e"& re)en"e a7. Pro)ision is &ade or reco)er! anici'aed where

i&ing di**erences are e7'eced o re)erse in he *oreseea+#e *""re.

Disco"ning

The "nwinding o* he disco"n on 'ro)isions is inc#"ded wihin ineres e7'ense.


21/277


4 ,inancia# In*or&aion *or 1P A&oco

1P A&oco ;ro"' inco&e sae&en= &i##ion

,or he !ear ended B- Dece&+er Noe -/ -< -0

T"rno)er /B%04 -85%804

6ess Foin )en"res ->%45/ -0%/84

1P A&oco ;ro"' "rno)er - 0/%B84 -% -/%05-

Disri+"ion and ad&inisraion e7'enses B 0%844 0% /%5- %5> >44

Share o* 'ro(s o* associaed "ndera$ings > >55 >>0 00B

Toa# re'#ace&en cos o'eraing 'ro( > 0%>5- -8%0/B -8%0B4

Pro( 9#oss: on sa#e o* +"sinesses 0 B> -5< -5B B-B 95/:

Merger e7'enses 0 9-/:

Re(ner! newor$ raiona#isaion 0 94%/8 %/


22/277

1P A&oco ;ro"' +a#ance shee

= &i##

A B- Dece&+er Noe -/ -< -

,i7ed asses

Inangi+#e asses -< B%8B< 5%>/5 5%>

Tangi+#e asses -/ >4%//8 >5%>> >>%-

In)es&ens

Foin )en"res ;ross asses %8>B %-45B

Ne in)es&en - >%88> >%054

Associaed "ndera$ings - 4%-05 4%B>4 B%

Oher - 08> B/ -

%B BB%4

5 45%0-5 45%0-8 45%5


23/277


1P A&oco ;ro"' cash Jow sae&en

= &i##ion

,or he !ear ended B- Dece&+er Noe -/ -< -0

Ne cash inJow *ro& o'eraing aci)iies B8 %>/0 ->%>>/ -B%0>- 4


24/277

Noes o he *inancia# in*or&aion

- T"rno)er

= &i##

-/ -< -

Sa#es and o'eraing re)en"e B 50%5

1P A&oco ;ro"' "rno)er 0/%B84 -%- -4 -4 58B 5

1P A&oco ;ro"' "rno)er %08B %4-4

USA 4B 4-

Res o* Wor#d B8> %45/ -0%/84-a

T"rno)er o hird 'aries is saed +! origin which is no &aeria##! di**eren *ro& "rno)er +! desinaion.Trans*ers +eween 1P A&oco gro"' co&'anies are &ade a &ar$e 'rices a$ing ino acco"n he )o#"&es in)o#)ed.

+U3 area inc#"des he U3@+ased inernaiona# aci)iies o* Re*ining and Mar$eing.


25/277


12 Prod"cion a7es

= &i##ion

-/ -< -0

U3 'ero#e"& re)en"e a7 4> B80 4/8

O)erseas 'rod"cion a7es >> -%88- -%-B-

084 -%B8< -%0--

13 Disri+"ion and ad&inisraion e7'enses

= &i##ion

-/ -< -0

Disri+"ion 4%%-04 -%448

0%844 0%


26/277

15 Ana#!sis o* re'#ace&en cos 'ro(

= &i##

-

1P A&oco ;ro"' Toa# Re'#ace&re'#ace&en cos re'#ace&en cos cos 'ro

o'eraing Foin Associaed o'eraing E7ce'iona# +e*ore iner

Pro( 'ro(a )en"res "ndera$ings 'ro(a ie&s+ and

1! +"siness

E7'#oraion and Prod"cion 5%/< 0> -8 -%-88 4B -%-

Oher +"sinesses and

cor'orae 94: -8- 9B%- >55 0%>5- />8 0BB 580 B- 4 5%0B- >-- B%-

Res o* Wor#d >5< B4 -4 55 0%>5- />8 -5> -%>B8 9->: -%>Oher +"sinesses and

cor'orae 908B: 54: 955: 9>4

%>/B >44 >>0 -8%0/B -5/ -8%/

1! geogra'hica# area

U3c 5%


27/277


15 Ana#!sis o* re'#ace&en cos 'ro( 9conin"ed:

= &i##ion

-0

1P A&oco ;ro"' Toa# Re'#ace&enre'#ace&en cos re'#ace&en cos cos 'ro(

o'eraing Foin Associaed o'eraing E7ce'iona# +e*ore ineres

Pro*i 'ro(a )en"res "ndera$ings 'ro(a ie&s+ and a7

1! +"siness

E7'#oraion and Prod"cion B> 55/ 4 -0 -%/5B

Oher +"sinesses and

cor'orae 9>: /4 94-: 95-/: 94: 5%4/>

%


28/277

16 E7ce'iona# ie&s

E7ce'iona# ie&s co&'rise 'ro( 9#oss: on sa#e o* +"sinesses and (7ed asses% &erger e7'enses% re(ner! newor$

raiona#isaion and E"ro'ean re(ning and &ar$eing 2oin )en"re i&'#e&enaion coss as *o##ows= &i##

-/ -< -

Pro( 9#oss: on sa#e o* +"sinesses

;ro"' B-8 5>8 -

Foin )en"res /> 9-5B:

Pro( 9#oss: on sa#e o* (7ed asses ;ro"' 0>B B-B 95

-%84/ 448 9-

Merger e7'enses ;ro"' 9-/:

Re(ner! newor$ raiona#isaion ;ro"' 94: 95

E7ce'iona# ie&s />8 -5/ 94Ta7aion credi 9charge:

Sa#e o* +"sinesses 9B0: 9: 958/:

Merger e7'enses 5B

Re(ner! newor$ raiona#isaion 54

E"ro'ean re(ning and &ar$eing 2oin )en"re i&'#e&enaion >B

E7ce'iona# ie&s% ne o* a7 0>5 9-8: 94

Minori! shareho#ders ineres

0>5 9-8: 94

Sa#e o* +"sinesses and (7ed asses

The 'rinci'a# sa#es o* +"sinesses and (7ed asses d"ring -/ were e7'#oraion and 'rod"cion 'ro'eries in he USA and Pa'"a

New ;"inea% he re(ner! in 6i&a% Ohio% he sa#e and #ease+ac$ o* he A&oco +"i#ding in Chicago% I##inois% he reai# newor$ in he

Cech Re'"+#ic% he Adi+is *"e# addii)es +"siness and a s'ecia#i! che&ica#s disri+"ion +"siness. The 'ro( on sa#e o* +"sinesses

+! 2oin )en"res re#aes &ain#! o he dis'osa# +! he 1PMo+i# 2oin )en"re o* is reai# newor$ in 1e#gi"&.

The &a2or e#e&en o* he 'ro( in -< co&'rised he sa#e o* US e7'#oraion and 'rod"cion 'ro'eries and an inrasae na"ra#

gas 'i'e#ine "ni in Te7as. The #oss on sa#e o* +"sinesses +! 2oin )en"res re#aed 'rinci'a##! o he coss o* he 1PMo+i# 2oin

)en"re er&inaing +ase oi# &an"*ac"ring o'eraions a 6#andarc! in he U3.

The -0 #oss co&'rises he sa#e o* he 'o#!s!rene *oa& 'rod"cs and Car+or"nd"& +"sinesses% he 1P A&erica o*(ce +"i#ding

C#e)e#and% Ohio% cerain Canadian e7'#oraion and 'rod"cion 'ro'eries% he 1P A&oco ;ro"'s ineres in he "nde)e#o'ed Ross

(e#d in he Norh Sea and he Joaing 'rod"cion sorage )esse#s Sei##ean.

Addiiona# in*or&aion on he sa#e o* +"sinesses and (7ed asses is gi)en in Noe -0 Dis'osa#s.

Merger e7'enses

1P A&oco inc"rred *ees and e7'enses o* =-/ &i##ion in connecion wih he &erger o* 1P and A&oco. These coss re#ae 'rinci'a##!

o in)es&en +an$ing *ees as we## as #ega#% acco"ning and reg"#aor! (#ing *ees.

Re(ner! newor$ raiona#isaion

The charge *or re(ner! newor$ raiona#isaion in -< o* =4< &i##ion 9-0 =54 &i##ion: re'resens he +a#ance o* he coss

associaed wih he raiona#isaion o* he 1P A&oco ;ro"'s inernaiona# re(ning s!se& anno"nced in ->.


29/277


16 E7ce'iona# ie&s 9conin"ed:

E"ro'ean re(ning and &ar$eing 2oin )en"re i&'#e&enaion

The one@o** coss associaed wih he seing "' o* he E"ro'ean re(ning and &ar$eing 2oin )en"re wih Mo+i# were =50> &i##ion in-< and =50< &i##ion in -0. These coss inc#"de =50> &i##ion 9-0 =550 &i##ion: which re'resens he 1P A&oco ;ro"'s share o*

charges *or se)erance% resr"c"ring% re+randing and oher i&'#e&enaion charges and in -0% =4- &i##ion o* own coss o* asse

wrie@downs and 'ro*essiona# *ees.

< Ineres e7'ense

= &i##ion

-/ -< -0

1an$ #oans and o)erdra*s ->/ -// -


30/277

Ta7aion

= &i##

-/ -< -

Unied 3ingdo& cor'oraion a7

C"rren a B- 9-< a B-.> and -0 a BB: -%B5> -%B5 -%B

O)erseas a7 re#ie* 9>00: 9 and -0 a BB: 9-//: 5-


31/277


19 Ta7aion 9conin"ed:

I* 'ro)ision *or de*erred a7aion had +een &ade on he +asis o* he gross 'oenia# #ia+i#i! he a7aion charge *or he !ear wo"#d

ha)e +een increased 9decreased: as *o##ows= &i##ion

-/ -< -0

Unied 3ingdo& 948: /B -/8

O)erseas 48 4B --

B0 -50 B


32/277

-8 Disri+"ion o 1P A&oco Shareho#ders

'ence 'er share cens 'er share = &i##

-/ -< -0 -/ -< -0 -/ -< -

1P

Pre*erence di)idends 9non@e"i!: - -

Di)idends 'er ordinar! share ,irs "arer#! >. >.5> 4.5> .> /.0 0.0 >>- 48 B

Second "arer#! 0.88 >.>8 >.88 -8.8 .8 -< 4

Third "arer#! 0.88 >.>8 >.88 -8.8 .8 /4 >- 4

,o"rh "arer#! >. >.5> .4 /.5 >4B 4

-8 5.> B0.8 B8.4 -% 5%80 %>5 %>

1P A&oco Ordinar! Shares iss"a+#e "nder e&'#o!ee share sche&es 45 4

%0B/ %04- %0

In addiion o +asic earnings 'er share +ased on he hisorica# cos 'ro( *or he !ear% a *"rher &eas"re% +ased on re'#ace&en cos

'ro( +e*ore e7ce'iona# ie&s% is 'ro)ided as i is considered ha his &eas"re gi)es an indicaion o* "nder#!ing 'er*or&ance.


33/277


-- Earnings 'er 1P A&oco Ordinar! Share 9conin"ed:

cens 'er share

-/ -< -0

Pro( *or he !ear B4 > B/0

6and and +"i#dings B-> 50/ B04

-%-48 -%8>8 -%--

E7'endi"re on research 4-5 B/5 B0

-B A"diors re&"neraion

= &i##ion

-/ -< -0

U3 Toa# U3 Toa# U3 Toa#

A"di *ees Erns ? Yo"ng

1P A&oco ;ro"' a"di >./ -5.- B. /. 4.- /.4

6oca# sa"or! a"di and "arer#! re)iew 8./ >.- 8.< 4.5 8.0 4.5

0.0 -.5 5-.< B.4 -0.B 4.8 -/.-

/.< 5>.5 4. -.0 58.4

,ees o &a2or (r&s o* acco"nans oher han Erns ? Yo"ng *or non@a"di ser)ices a&o"ned o =-/- &i##ion 9-< =- &i##ion

and -0 =-85 &i##ion:.

5/


34/277

-4 1P A&oco ;ro"' +a#ance shee ana#!sis

= &i##

Ca'ia# e7'endi"re and ac"isiions O'eraing ca'ia# e&'#o!

-/ -< -0 -/ -< -

1! +"siness

E7'#oraion and Prod"cion 0%B-/

Re(ning and Mar$eing -%BB> &i##ion.

The cos o* ac"isiions in he 1P A&oco ;ro"' cash Jow sae&en co&'rises

= &i##ion

-/ -< -0

;oodwi## B/

Oher inangi+#e asses -

Tangi+#e asses -4 /-8 B>

,i7ed asses in)es&ens 8 'er cen ineres in E&'resa Pero#era

Chaco in 1o#i)ia% wo oi#@ and na"ra# gas@'rod"cing co&'anies% *or =/0> &i##ion.

-0 Dis'osa#s

The 'rinci'a# di)es&ens d"ring -/ were e7'#oraion and 'rod"cion 'ro'eries in he USA and Pa'"a New ;"inea% he

re(ner! in 6i&a% Ohio% he sa#e and #ease+ac$ o* he A&oco +"i#ding in Chicago% I##inois% he reai# newor$ in he Cech Re'"+#ic%

he Adi+is *"e# addii)es +"siness and a s'ecia#i! che&ica#s disri+"ion +"siness.

In -< he &a2or dis'osa#s were he sa#e o* US e7'#oraion and 'rod"cion 'ro'eries and an inrasae na"ra# gas 'i'e#ine in

Te7as. Oher di)es&ens inc#"ded oi# &ar$eing asses in Thai#and and ad)anced &aeria#s and 'heno#ic resin +"sinesses in he U3.

The 'rinci'a# dis'osa#s in -0 were he sa#e o* he 'o#!s!rene *oa& 'rod"cs and Car+or"nd"& +"sinesses% he 1P A&erica

o*(ce +"i#ding in C#e)e#and% Ohio% cerain Canadian e7'#oraion and 'rod"cion 'ro'eries% he 1P A&oco ;ro"'s ineres in he"nde)e#o'ed Ross (e#d and he Joaing 'rod"cion and sorage )esse# Sei##ean.

Toa# 'roceeds recei)ed *or dis'osa#s re'resen he *o##owing a&o"ns shown in he cash Jow sae&en

= &i##ion

-/ -< -0

Proceeds *ro& he sa#e o* +"sinesses


38/277

-0 Dis'osa#s 9conin"ed:

The dis'osa#s co&'rise he *o##owing

= &i##

-/ -< -

Inangi+#e asses ->- 5-

Tangi+#e asses 4> -%-/4 -%>

,i7ed asses in)es&ens ->< 48

Wor$ing ca'ia# // 58B B

Oher 9-5>: 9--8: 9-

-%5-0 -%BB/ -%/

Pro( 9#oss: on sa#e o* +"sinesses B-8 5>8 -

Pro( 9#oss: on sa#e o* (7ed asses 0>B B-B 95

Toa# consideraion 5%-0B B%

E7change ad2"s&ens 9-/: 0 9-8: 9Addiions B5 5 /

Trans*ers 94> B% -%8// -%85/ - 5: 9>%0- -- 0-%


41/277


-/ Tangi+#e asses 'ro'er!% '#an and e"i'&en 9conin"ed:

= &i##ion

E7'#oraion Re(ning o* which

and and Oher +"sinesses Asses "nder Prod"cion Mar$eing Che&ica#s and cor'orae Toa# consr"cion

Cos

A - Fan"ar! -/ /8%>>> -/%B80 -5%04> 5%8 -%- -/ > 9-04: -> >/> 9>%>4-:

De#eions 9-%/84: 9-: 9-/B: 940: 9B%44


42/277

5%/4B -%00- -%-/5

5%/-4 -%0/4 -%-B8

5%8 !ears "ne7'ired Oher


43/277

A B- Dece&+er -/ 0B 45 5

A B- Dece&+er -< 04 4- B8

A B- Dece&+er -0 -%>B >B >4

B4


44/277

- ,i7ed asses in)es&ens

= &i##

Own

Associaed "ndera$ings Foin )en"res 6oans sharesa

Oher+

To

Share o*reained

Shares 6oans 'ro(

Cos

A - Fan"ar! -< -%>B 4 -> -8< 4%-

E7change ad2"s&ens 9-/4: 90: 9558< >

Trans*ers 5< B5 />8 94: /

Asses "sed +! he 1PMo+i# 2oin

)en"re 9


45/277


- ,i7ed asses in)es&ens 9conin"ed:

= &i##ion

Own

Associaed "ndera$ings Foin )en"res 6oans sharesa Oher+ Toa#

Share o*reained

Shares 6oans 'ro(

Cos

A - Fan"ar! -/ 5%00- %054 B B- 45 -8%48-

E7change ad2"s&ens 4/ - 4> -4/ 9B: 5 4 54>

Addiions and ne &o)e&ens in

2oin )en"res 544 /5 9-0>: 95: - 5>4 0 9B-5:

Ac"isiions /8 4/ >- -8%885

A&o"ns 'ro)ided

A - Fan"ar! -/ 5B 5 5>

E7change ad2"s&ens - 9-:

Pro)ided in he !ear 588 588

Trans*ers 9B: -4 --

De#eions 90: 90:

A B- Dece&+er -/ 5-> -4 - 5B8

Ne +oo$ a&o"n

A B- Dece&+er -/ 5%>44 /B> %88> 00 4/ >8 %


46/277

5- De+ors

= &i##

-/ -

Wihin - !ear A*er - !ear Wihin - !ear A*er - !

Trade >%B < ->4

Pre'a!&ens and accr"ed inco&e 8 8 5

Pension 're'a!&en 5%5-B -%/

Oher -% 4-- -%


47/277

450 -%>


48/277


5B ,inance de+ 9conin"ed:

= &i##ion

-/ -88 &i##ion: which

were co)ered +! *or&a#

co&&i&ens. These

co&&ied *aci#iies are

&ain#! wih a n"&+er o*

inernaiona# +an$s and

e7'ire in 588-.

Co&&i&en *ees are

'aid on he "n"sed

'orion o* he #ines o*

credi and +orrowings

wo"#d +e a 're@agreed

raes. Cerain o* hese

*aci#iies s"''or he 1P

A&oco ;ro"'sco&&ercia# 'a'er

'rogra&&e.

Ana#!sis o* +orrowings +! c"rrenc!

US do##ars

Ser#ing

So"h A*rican rands

Oher c"rrencies

Toa# #oans

The 1P A&oco

;ro"' ai&s *ora +a#ance

+eween

Joaing and

(7ed ineres

raes and% in -/% 1Ps "''er #i&i *or he

'ro'orion o* Joaing rae de+ was 0> 'er

cen o* oa# ne de+ whi#e A&ocos "''er #i&i

was 08 'er cen o* oa# de+ o"sanding.

Aside *ro& de+ iss"ed in he US &"nici'a#

+ond &ar$es% ineres raes on Joaing rae

de+ deno&inaed in US do##ars are #in$ed

'rinci'a##! o 6I1OR% whi#e raes on de+ in

oher c"rrencies are +ased on #oca# &ar$e

e"i)a#ens. The 1P A&oco ;ro"' &oniors

ineres rae ris$ "sing a 'rocess o* sensii)i!

ana#!sis. Ass"&ing no changes o he

+orrowings and hedges descri+ed a+o)e% i isesi&aed ha a change o*

- 'er cen in he genera# #e)e# o* ineresraes on - Fan"ar! - wo"#d change -'ro( +e*ore a7 +! a''ro7i&ae#! =>>&i##ion.

B/


50/277

5B ,inance de+ 9conin"ed:

= &i##

-/ -

Carr!ing Carr!,air )a#"es and carr!ing a&o"ns o* +orrowings ,air )a#"e a&o"n ,air )a#"e a&o

Shor@er& +orrowings

6ong@er& +orrowings

Toa# +orrowings


51/277

-%/-< -%/->

--%-B0 -8%/


52/277

= &i##


53/277

-/ -

Wihin - Wihin -!ear A*er - !ear !ear A*er - !

Trade >%8- >%/>4

Foin )en"res 58> 54-

Associaed "ndera$ings ->4 4 5


54/277


5> Oher 'ro)isions= &i##ion

Oher 'os@Un*"nded 'ension reire&en

Deco&&issioning En)iron&ena# '#ans +ene(s Oher Toa#

A - Fan"ar! -< B%->B -%058 -%085 5%B %8--Prior !ear ad2"s&en

change in acco"ning'o#ic! 950: 9B>8: ->4 945:

Resaed 5%/>< -%5 B4 > -54Ui#isedde#eed 9/>: 9-5: 9-45: 948: 9>B:

A B- Dece&+er -< 5%//0 -%-B -%>50 5%B4/ 4B/ /%BB8

each a&o"ning o =0 +i##ion '#"s 're*erence shares o* L-5%8%888 9=5- &i##ion:. On B- Dece&+er -/% 1P iss"ed B%


57/277

E"i!

Ordinar! shares o* >8 cens each %0/B%8-8%85B 4%/45

Ordinar! shares o* 5> 'ence each

4%/0B-%/B%088 5%B-

4%BB8

On a show@o*@hands )oe on an ordinar!

reso#"ion a a genera# &eeing%

Shareho#ders 'resen in 'erson or +! 'ro7!

ha)e one )oe each. S'ecia# reso#"ions are

)oed on +! 'o##. On a 'o##% Shareho#ders'resen in 'erson or +! 'ro7! ha)e wo

)oes *or e)er! L> in no&ina# a&o"n o* he

1P A&oco Pre*erence Shares he#d and one

)oe *or e)er! 1P A&oco Ordinar! Share

he#d.

In he e)en o* he winding "' o* he Co&'an!

ho#ders o* 1P A&oco Pre*erence Shares wo"#d +e

eni#ed o a s"& e"a# o he ca'ia# 'aid "' on

he 1P A&oco Pre*erence Shares '#"s an a&o"n

in res'ec o* accr"ed and "n'aid di)idends and a

're&i"& e"a# o he higher o* 9i: -8 'er cen o*

he ca'ia# 'aid "' on he 1P A&oco Pre*erence

Shares and 9ii: he e7cess o* he a)erage &ar$e

'rice o)er 'ar )a#"e o* s"ch shares on he 6ondon

Soc$ E7change d"ring he 're)io"s si7 &onhs.

5/ Ca'ia# and reser)es


58/277

= &i##ion

Share Ca'ia# Pro(Share 're&i"& rede&'ion Merger and #ossca'ia# acco"n reser)e reser)e acco"n Toa#

A - Fan"ar! -< 4%B/5 B%480 B5< 0

E&'#o!ee share sche&es 1P > --< 945: /8

Share di)idend '#an 1P 40 940: -%54B -%54B

Share re'"rchases A&oco 958: 9>8/4:

Redeno&inaion o* 1P shares ino US do##ars 4/4 94/4:

Pro( *or he !ear B%554 B%554

Di)idends 94%-5-: 94%-5-:

E7change ad2"s&en -< - B -0 >>

A B- Dece&+er -/ 4%/0B B%8>0 BB8 0< BB%000 45%0-5

4B


59/277


5/ Ca'ia# and reser)es 9conin"ed:

1P A&oco ;ro"' reser)es inc#"de he *o##owing a&o"ns% he disri+"ion o* which is #i&ied +! sa"or! or oher resricions= &i##ion

-/ - 'ence o =8.>8 was e**eced +!

rans*erring =4/4 &i##ion *ro& he share 're&i"& acco"n.

5 Reconci#iaion o* &o)e&ens in shareho#ders ineres

= &i##ion

,or he !ear ended B- Dece&+er Noe -/ -%05:

Share di)idend '#an 1P -%54B 8:

Ne cash Jow 9/88: 0< 9>0: 9-%B5:

Oher &o)e&ens 9>B: 9>B:

E7change ad2"s&ens 95>: 9-: 48> 4 !ears 5%84< 5%5>B

Therea*er -%/0/ -%


62/277

B5 E&'#o!ee share sche&es

D"ring -/ 1P and A&oco o'eraed share sche&es *or heir e&'#o!ees. Howe)er% he arrange&ens o* he wo co&'anies di**ered reJecin

&ar$e 'racice in he U3 and he USA. Conse"en#! he arrange&ens o* each co&'an! are descri+ed se'arae#!. A re)iew wi## +e "ndera$d"ring - in order o *or&"#ae an inegraed e&'#o!ee share ownershi' sraeg! *or 1P A&oco. A he e7raordinar! genera# &eeing in

No)e&+er -/ shareho#ders a''ro)ed a new discreionar! share o'ion '#an 9he KK1P A&oco Share O'ion P#an:.

1P o**ered is e&'#o!ees and hose o* &os o* is 'rinci'a# o'eraing co&'anies he o''or"ni! o ac"ire a shareho#ding in 1P.

Sche&e design )aried +! co"nr!% reJecing #oca# #egis#aion% c"#"re and e&'#o!&en 'racice. There were wo caegories o*

sche&e hose which were genera##! a)ai#a+#e o &os sa** 9e.g. he Parici'aing and Sa)ings Re#aed Share O'ion Sche&es in

he U3: and hose *or de(ned caegories o* sa** 9e.g. he E7ec"i)e Share O'ion Sche&e 9KKESOS: *or &idd#e &anagers:.

Under 'arici'aing sche&es% 1P &ached e&'#o!ees own conri+"ions o* shares% a## o* which were hen he#d *or de(ned 'eriods

Wih sa)ings@re#aed sche&es% e&'#o!ees sa)ed reg"#ar#! oward he '"rchase o* shares a a 'rice (7ed when heir sa)ings conrac

co&&enced. The ESOS o**ered &idd#e &anagers he o''or"ni! o e7ercise share o'ions +eween he hird and enh anni)ersaries

o* he dae o* gran% a he &ar$e 'rice se a he i&e o* gran. ;rans &ade since -> "nder he ESOS wi## no +e e7ercisa+#e "ni#

'er*or&ance condiion has +een sais(ed. 1e*ore an! o'ions can +e e7ercised% he Re&"neraion Co&&iee wi## re"ire he oa#

re"rn o shareho#ders 9share 'rice increase wih a## di)idends rein)esed: on an in)es&en in 1P A&oco shares o e7ceed he &ean

oa# re"rn o shareho#ders o* a re'resenai)e gro"' o* U3 co&'anies +! a &argin se *ro& i&e o i&e +! he co&&iee. The

'er*or&ance 'eriod *or each gran wi## nor&a##! +e hree !ears.

An E&'#o!ee Share Ownershi' P#an 9KKESOP: has +een esa+#ished o ac"ire 1P A&oco Ordinar! Shares o sais*! *""re

re"ire&ens o* cerain e&'#o!ee share sche&es. ,"nding is 'ro)ided o he ESOP +! he Co&'an!. The asses and #ia+i#iies o* he

ESOP are recognised as asses and #ia+i#iies o* he Co&'an! wihin hese acco"ns. The ESOP has wai)ed is righs o di)idends.

D"ring -/ he ESOP ac"ired a *"rher -0%/>B%888 shares and re#eased 4%5>%888 shares *or he 'arici'aing share sche&es.

The cos o* shares re#eased *or hese sche&es has +een charged in hese acco"ns. A B- Dece&+er -/ he ESOP he#d

B-%B/4%888 1P A&oco Ordinar! Shares 9-< -/%%-// 1P A&oco Ordinar! Shares iss"ed o he QUEST had +een rans*erred o o'ion ho#ders e7ercising o'ions "nder he

1P ;ro"' Sa)ings Re#aed Share O'ion Sche&e.

In A&oco soc$ o'ions were "sed o a greaer e7en han in 1P as an e#e&en o* e&'#o!ee re&"neraion. Under he A&oco

Soc$ O'ion P#an o'ions were graned o $e! &anageria# and oher e#igi+#e e&'#o!ees. The e7ercise 'rice was he &ar$e 'rice o*

A&oco soc$ on he dae o* gran. O'ions graned "nder he '#ans genera##! +eco&e e7ercisa+#e one or wo !ears a*er he dae o*

gran and #a'se on he enh anni)ersar! o* he dae o* gran. There were no 'er*or&ance condiions. ,o##owing he &erger o* 1P and

A&oco o"sanding A&oco soc$ o'ions were con)ered ino 1P A&oco share o'ions on he +asis o* he raio o* B.


63/277


B5 E&'#o!ee share sche&es 9conin"ed:

In addiion A&oco a#so had a Resriced Soc$ ;ran P#an. This '#an 'ro)ided *or he awarding o* A&oco soc$ o se#eced

e&'#o!ees and non@e7ec"i)e direcors. Shares iss"ed "nder he '#an &a! no +e so#d or oherwise rans*erred *or a &ini&"& 'eriodas esa+#ished a he i&e o* gran.

E&'#o!ee share o'ions graned

d"ring he !ear 9o'ions ho"sands: -/ -< -0

1P sa)ings re#aed and si&i#ar sche&es 4%/0< %545

1P ESOS -%5// 5%50 -%8>

A&oco Soc$ O'ion P#an B8%B4/ 50%- 55%-0/

B0%>8B B0%04 5%B->

The e7ercise 'rices *or 1P o'ions graned d"ring he !ear were =-5.4- 94%> which e"aes o a 1P A&oco share 'rice o* =-8.%888 shares re#eased

*ro& he ESOP *or 'arici'aing share sche&es.

O'ions o"sanding a B- Dece&+er -/ -< -0

1P A&oco o'ions 9shares ho"sands: - &i##ion 9-< =5/ &i##ion and -0 =B- &i##ion:.

The )a#"e o* awards "nder he ->@< 6TPP &ade in -/ was =B0 &i##ion 9-

6TPP =>< &i##ion:.

4/


64/277

E&'#o!ee Share Ownershi' P#ans 9KKESOPs: ha)e +een esa+#ished o ac"ire 1P A&oco shares o sais*! an! awards &ade o

'arici'ans "nder he P#an and hen o ho#d he& *or he 'arici'ans d"ring he reenion 'eriod o* he P#an. In order o hedge he cos

o* 'oenia# *""re awards he ESOPs &a!% *ro& i&e o i&e o)er he 'er*or&ance 'eriod o* he P#ans% '"rchase 1P A&oco Ordinar!

Shares in he o'en &ar$e. ,"nding is 'ro)ided o he ESOPs +! he Co&'an!. The asses and #ia+i#iies o* he ESOPs are recognised

as asses and #ia+i#iies o* he Co&'an! wihin hese acco"ns. The ESOPs ha)e wai)ed heir righs o di)idends.

A B- Dece&+er -/ he ESOPs he#d B%-BB%888 9-< B%5

A&o"n awarded "nder #ong@er& inceni)e sche&es -%BB- -%B40 5%0

Accr"ed 'ension a B- Dece&+er 050 >>4 4

1a ,ees o* =4>%-%4/8: in res'ec o* Mr H M P Mi#es ser)ices as a non@e7ec"i)e direcor were'aid o his e&'#o!er.

As he &erger +eween 1P and A&oco occ"rred on B- Dece&+er -/% he in*or&aion shown a+o)e *or -/% -< and -0 is he

re&"neraion o* 1P direcors on#!.

E&o#"&ens

These a&o"ns co&'rise *ees 'aid o he chair&an and non@e7ec"i)e direcors% and% *or e7ec"i)e direcors% sa#ar! and +ene(s

earned d"ring he re#e)an (nancia# !ear% '#"s +on"ses awarded *or he !ear.

Pension conri+"ions

Si7 e7ec"i)e direcors 'arici'ae in a non@conri+"or! 'ension sche&e esa+#ished *or U3 sa** +! a se'arae r"s *"nd o which

conri+"ions are &ade +! 1P A&oco +ased on ac"aria# ad)ice. There were no conri+"ions o his 'ension sche&e in -/% -0 *or -0.= ho"sand

Ann"a# 1ene(s'er*or&ance and oher -/ -< -0

1ase sa#ar! +on"s e&o#"&ens Toa# Toa# Toa#

Sir Fohn 1rowne /> 45 -5< -%>-4 -%>B/ -%-%B/B 5%8/ >/8 /%/@< -0@/ -@< L/.88=-B.5/ ->@< a L- =-.00.

+

1ased on assessed 'er*or&ance and he oher er&s o* he 6TPP.c

1ased on &id@&ar$e 'rice o* 1P A&oco shares on -0 ,e+r"ar! - 9=-B.:.1d Mini&"& awards were deer&ined *or hese 6TPPs 'rior o he co&'#eion o* he &erger. Ac"a# awards wi## +e deer&ined a he

end o* each 'er*or&ance 'eriod.

>8


66/277

B4 Direcors re&"neraion 9conin"ed:

A&oco share o'ion awards

In co&&on wih US &ar$e 'racice% #ong@er& inceni)es in A&oco in -/ were in he *or& o* grans o* e7ec"i)e share o'ions. Thoseo'ions were graned a a #e)e# in #ine wih he oi# and genera# ind"sr! &ar$es in he USA and he! had no 'er*or&ance condiions.

Re&"neraion o* non@e7ec"i)e direcors

The re&"neraion o* he chair&an and non@e7ec"i)e direcors *or -/% -< and -0 is shown in he *o##owing a+#e.

9= ho"sa

Year ended Year ended Year endB- Dece&+er B- Dece&+er B- Dece&

-/ -< -

C"rren direcors

R S 1#oc$ 8 na n

F H 1r!an 8 na n

E 1 Da)is% Fr 8 na n

R F ,erris 8 na n

C , 3nigh >5a

>-+

, A Ma#2ers 8 na n

Dr W E Masse! 8 na n

H M P Mi#es 0-a% d 0-+% e

Sir Ro+in Nicho#son 40a% * >a B4+

P D S"her#and 500a

5-0+

-M H Wi#son 8 na n

R P Wi#son -/a

The 6ord Wrigh o* Rich&ond 0-a

0-+

Direcors #ea)ing he +oard in -/

D R 1ea## BBg

na n

Sir Fa&es ;#o)er 0-a

0+

Dr 3 N Horn >-a

>-+

A C Marine 544h

na n

M R Seger BBg

na n

Sir Paric$ Sheeh! >-a >4+

T M So#so 5-4i

na n

Direcors who reired +e*ore -/

The 6ord Si&on o* High+"r! >B>+ B

Dr C H Hahn

Toa# 5%>0 5%8/>

a Ser#ing 'a!&ens con)ered a he a)erage -/ e7change rae o* L- =-.00.

+ Ser#ing 'a!&ens con)ered a he a)erage -< rae o* L- =-.04.

c Ser#ing 'a!&ens con)ered a he a)erage -0 rae o* L- =-.>0.

d Paid in 'ar o his e&'#o!er.

e Paid o his e&'#o!er.* A#so recei)ed =55%0/< *or ser)ing on he Technica# Ad)isor! Co"nci#.

1g Inc#"des sandard non@e7ec"i)e direcor re&"neraion o* =/%


67/277



Addiiona#'ension earned Addiiona# 'ension Addiiona# 'ension

Accr"ed d"ring he !ear earned d"ring he earned d"ring heYears o* ser)ice eni#e&en a ended !ear ended !ear endeda B- Dece&+er B- Dece&+er B- Dece&+er B- Dece&+er B- Dece&+er

-/ -/a

-/a

-+R , Chase B4 458 B5 -/ - 5< >+ +

R 6 O#)er 5> B88 5< na+ +

1 3 Sanderson B4 458 B5 -0 -.* E7ercise 'rice L5./< *or >%5/8 shares and LB.8/ *or -5


68/277


Direcors SAYE share o'ionsA)erage Daes *ro& which

A - Fan / ;raned E7ercised A B- Dec / o'ion 'rice La

e7ercisa+#e E7'ir! da

Sir Fohn 1rowne 5%/4 5%/4 >.8 -88%/88 4%


69/277


B0 E&'#o!ee coss and n"&+ers 9conin"ed:

U3 Res o* E"ro'e USA Res o* Wor#d Toa#

9c: A)erage n"&+er o* e&'#o!ees

-/

E7'#oraion and Prod"cion 4%8>8 88 8

Re(ning and Mar$eing+

-8%B88 %8 >5%8Che&ica#s 4%0>8 >%->8 --%088 5%4>8 5B%/>8

Oher +"sinesses and cor'orae >8 B88 -%>>8 4>8 B%5>8

-%>8 -0%8>8 44%0>8 -/%5>8 /%88

U3 Res o* E"ro'e USA Res o* Wor#d Toa#

-8 088 B%0>8

-%588 ->%8 4>%88 -8 /%8 >8 /%>8 >%-88 -/%4>8

Re(ning and Mar$eing >8 %0>8 55%/>8 /%588 4/%5>8

Che&ica#s >%588 4%088 -B%B88 5%488 5>%>88

Oher +"sinesses and cor'orae 8 ->8 -%/>8 >8 B%8 ->%B>8 40%>8 -0%0>8 >%88

a Inc#"des -8: e&'#o!ees assigned o he 1PMo+i# 2oin )en"re.

1b Inc#"des /%>>8 9-< 8: e&'#o!ees assigned o he 1PMo+i# 2oin )en"re in he U3 and %B>8 9-< %088: e&'#o!ees inhe Res o* E"ro'e.

B< Pensions

Mos 1P A&oco ;ro"' co&'anies ha)e 'ension '#ans% he *or&s and +ene(s o* which )ar! wih condiions and 'racices in he co"nries

concerned. The &ain '#ans 'ro)ide +ene(s ha are co&'"ed +ased on an e&'#o!ees !ears o* ser)ice and (na# 'ensiona+#e sa#ar!. In

&os cases 1P A&oco ;ro"' co&'anies &a$e conri+"ions o se'arae#! ad&inisered r"ss% +ased on ad)ice *ro& inde'enden ac"aries

"sing ac"aria# &ehods% he o+2eci)e o* which is o 'ro)ide ade"ae *"nds o &ee 'ension o+#igaions as he! *a## d"e. In cerain co"nries

he '#ans are "n*"nded and he accr"ed #ia+i#i! *or 'ension +ene(s is inc#"ded wihin oher 'ro)isions.

The ne charge o inco&e *or 'ensions in -/ was =-B &i# #ion 9-< =-4- &i##ion and -0 =500 &i##ion:. This was assessed

in accordance wih inde'enden ac"aria# ad)ice "sing he 'ro2eced "ni &ehod *or he 1P A&oco ;ro"'s &a2or 'ension '#ans.

>4


70/277

B< Pensions 9conin"ed:

The 'rinci'a# ass"&'ions "sed in ca#c"#aing he credicharge *or he 'rinci'a# '#ans were as *o##ows

-/ -< -

U3 and oher E"ro'ean

Rae o* re"rn on asses &i##ion 9=-%558 &i##ion a B- Dece&+er -

'er cen *or +ene(ciaries aged o)er 0>% red"cing o > 'er cen *or +oh age gro"'s in he !ear 5885 and *or s"+se"en !ears.


71/277


B Coningen #ia+i#iies

There were coningen #ia+i#iies a B- Dece&+er -/ in res'ec o* g"aranees and inde&niies enered ino as 'ar o*% and c#ai&s

arising *ro&% he ordinar! co"rse o* he 1P A&oco ;ro"'s +"siness% "'on which no &aeria# #osses are #i$e#! o arise.

A''ro7i&ae#! 588 #aws"is were (#ed in Sae and ,edera# Co"rs in A#as$a see$ing co&'ensaor! and '"nii)e da&ages arising

o" o* he E77on a#de oi# s'i## in Prince Wi##ia& So"nd in March -/. Mos o* hose s"is na&ed E77on% A#!es$a Pi'e#ine Ser)ice

Co&'an! 9KKA#!es$a:% which o'eraes he oi# er&ina# a a#de% and he se)en oi# co&'anies which own A#!es$a. A#!es$a iniia##!

res'onded o he s'i## "ni# he res'onse was a$en o)er +! E77on. 1P A&oco owns a >8 'er cen ineres in A#!es$a hro"gh a

s"+sidiar! o* 1P A&erica Inc. A#!es$a and is owners ha)e se#ed a## o* he c#ai&s agains he& "nder hese #aws"is. E77on has

indicaed ha i &a! (#e a c#ai& *or conri+"ion agains A#!es$a *or a 'orion o* he coss and da&ages which i has inc"rred. I* an!

c#ai&s are assered +! E77on which a**ec A#!es$a and is owners% 1P A&oco wo"#d de*end he c#ai&s )igoro"s#!.

The Inerna# Re)en"e Ser)ice 9KKIRS: has cha##enged he a''#icaion o* cerain *oreign inco&e a7es as credis agains 1P A&oco

Cor'oraions US a7es ha oherwise wo"#d ha)e +een 'a!a+#e *or he !ears -/8 o -5. On -/ F"ne -5% he IRS iss"ed a

sa"or! Noice o* De(cienc! *or addiiona# a7es in he a&o"n o* =400 &i##ion% '#"s ineres% re#aing o -/8 o -/5. 1P A&oco

(#ed a 'eiion in he US Ta7 Co"r conesing he IRS sa"or! Noice o* De(cienc!. Tria# on he &aer was he#d in A'ri# ->% and adecision was rendered +! he US Ta7 Co"r in March -0% in 1P A&ocos *a)o"r. The IRS has a''ea#ed he Ta7 Co"rs decision o he

US Co"r o* A''ea#s *or he Se)enh Circ"i and on -- March -/ he Se)enh Circ"i a*(r&ed he Ta7 Co"rs 'rior decision. A

co&'ara+#e ad2"s&en o* *oreign a7 credis *or each !ear has +een 'ro'osed *or he !ears -/B o -5 +ased "'on s"+se"en IRS

a"dis. 1P A&oco Cor'oraion +e#ie)es ha he *oreign inco&e a7es ha)e +een reJeced 'ro'er#! in is US *edera# a7 re"rns.

Conse"en#!% his dis'"e is no e7'eced o ha)e a &aeria# ad)erse e**ec on #i"idi!% res"#s o* o'eraions% or he (nancia# 'osiion

o* he 1P A&oco ;ro"'.

The 1P A&oco ;ro"' is s"+2ec o n"&ero"s naiona# and #oca# en)iron&ena# #aws and reg"#aions concerning is 'rod"cs%

o'eraions and oher aci)iies. These #aws and reg"#aions &a! re"ire he 1P A&oco ;ro"' o a$e *""re acion o re&ediae he

e**ecs on he en)iron&en o* 'rior dis'osa# or re#ease o* che&ica# or 'ero#e"& s"+sances +! he 1P A&oco ;ro"' or oher 'aries.

S"ch coningencies &a! e7is *or )ario"s sies inc#"ding re(neries% che&ica# '#ans% oi# (e#ds% ser)ice saions% er&ina#s and wase

dis'osa# sies. In addiion% he 1P A&oco ;ro"' &a! ha)e o+#igaions re#aing o 'rior asse sa#es or c#osed *aci#iies. The "#i&aere"ire&en *or re&ediaion and is cos is inheren#! di*(c"# o esi&ae. Howe)er% he esi&aed cos o* $nown en)iron&ena#

o+#igaions has +een 'ro)ided in hese acco"ns in accordance wih he 1P A&oco ;ro"'s acco"ning 'o#icies. Whi#e he a&o"ns o*

*""re coss co"#d +e signi(can and co"#d +e &aeria# o he 1P A&oco ;ro"'s res"#s o* o'eraions in he 'eriod in which he! are

recognised% 1P A&oco does no e7'ec hese coss o ha)e a &aeria# e**ec on he 1P A&oco ;ro"'s (nancia# 'osiion or #i"idi!.

1P A&oco has iss"ed g"aranees "nder which a&o"ns o"sanding a

listing particulars for bp amoco-arco combination

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