SCHULMAN A INC

FORM 10-K405(Annual Report (Regulation S-K, item 405))

Filed 11/28/95 for the Period Ending 08/31/95

Address 3550 W MARKET ST

AKRON, OH 44333Telephone 3306663751

CIK 0000087565Symbol SHLM

SIC Code 2821 - Plastics Materials, Synthetic Resins, and Nonvulcanizable ElastomersIndustry Fabricated Plastic & Rubber

Sector Basic MaterialsFiscal Year 08/31

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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.

20549

FORM 10-K

(Mark One)

/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required)

For the fiscal year ended August 31, 1995 or

/ / Transition report pursuant to Section 13 or 15(d) of the Securities

Commission File No. 0-7459

A. SCHULMAN, INC.

(Exact Name of Registrant as Specified in its Charter)

Registrant's telephone number, including area code: (216)666-3751

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $1.00 Par Value (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No

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Exchange Act of 1934 (No Fee Required) For the transition period from to . ----------- -------------

Delaware 34-0514850 -------------------------- ------------- ----------------------- (State of Incorporation) (I.R.S. Emplo yer Identification No.) 3550 West Market Street, Akron, Ohio 44333 -------------------------------------------- --------------------- (Address of Principal Executive Offices) (ZIP Code)

[Cover Continued From Previous Page]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/

Aggregate market value of voting stock held by non-affiliates of the Registrant on October 23, 1995: $744,562,429

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practical date:

37,584,318 Shares of Common Stock, $1.00 Par Value, at October 23, 1995.

DOCUMENTS INCORPORATED BY REFERENCE

Neither the Report of the Compensation Committee on Executive Compensation nor the Performance Graph contained in the Registrant's Notice of Annual Meeting and Proxy Statement dated November 13, 1995 shall be deemed incorporated by reference herein.

Part of Form 10-K Document in Which Incorporated - -------- --------------------- Portions of the Registrant's Notice of Annual Meeting and Proxy Statement Dated November 13, 1995 III and IV Portions of the Registrant's 1995 Annual Report to Stockholders I and II

PART I

ITEM I. BUSINESS

A. Schulman, Inc. (the "Company") was organized as an Ohio corporation in 1928 and changed its state of incorporation to Delaware in 1969.

The Company operates in one industry segment which is the sale of plastic resins to customers who use the products as raw materials in their manufacturing operations. For informative purposes, the Company classifies its activities within its only industry segment as manufacturing, merchant or distribution. These activities are carried on in all markets and geographic areas in which the Company operates. The Company purchases plastic resins and other materials which either can be sold directly to customers or used by the Company in the manufacture of other products for sale to customers. Because of their interchangeable nature, inventories are not segregated as to manufacturing, merchant or distribution activities. All of the products which the Company sells are used for the same purpose--as raw material to be molded or extruded by the Company's customers. The Company has one sales force for all of its products and materials.

The first classification, manufacturing, involves primarily the formulation and manufacture of proprietary plastic compounds engineered to fulfill the application requirements of the

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Company's customers. These compounds, also known as engineered products, are formulated in the Company's laboratories and are manufactured in the Company's eleven plastics compounding plants in North America and Europe. The Company combines basic resins purchased from plastic resin producers with various additives in accordance with formulae and specifications developed in the Company's laboratories. Customers for the Company's proprietary plastic compounds include manufacturers, custom molders and extruders of a wide variety of plastic products and parts. Proprietary compounds are produced by the Company generally on the basis of customer commitments. When necessary, compounds are produced for future delivery and are stored in Company and public warehouses.

The Company's proprietary plastic compounds are sold to manufacturers and suppliers in various markets such as consumer products, electrical/electronics, packaging, office equipment, automotive and agriculture. For example, these compounds are used in the consumer products industry for such items as writing instruments, shelving, soft drink coolers, video tape cassettes, batteries, outdoor furniture, lawn sprinklers, artificial turf, skateboards, toys, games and plastic parts for various household appliances; in the electrical/electronics industry for such products as outdoor lighting, parts for telephones, connector blocks, transformers, capacitor housings and wire and cable insulation for power generation, distribution and control systems; in the packaging industry for such products as plastic

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bags and labels and packaging materials for food, soap, fragrances, flowers, gardening supplies and various household necessities; in the office equipment industry for such products as cases and housings for computers, folders and binders, stack trays and panels and drawers for copying machines; in the automotive industry for such products as grills, body side moldings, bumper protective strips, window seals, valance panels, bumper guards, air ducts, steering wheels, fan shrouds and other interior and exterior components; and in the agriculture industry for such products as greenhouse coverings, protective film for plants and agricultural mulch.

The Company manufactures various flame retardant engineered compounds, including Polyman(R), Polyflam(R) and Polyvin(R). These compounds are used in applications such as telephone system terminal blocks, parts for color televisions, electrical components and housings for household appliances and outdoor products.

Schulamid(R), a nylon compound, can be unfilled, reinforced or impact-modified and is used in applications which require good impact strength and resistance to high temperatures and chemicals. Typical applications include under-the-hood automotive components and various building and consumer products.

The Company manufactures Superohm(R), a specialized elastomer- based compound for use as insulation for high and medium voltage wire and cable which may be either flame retardant or resistant to high temperatures. The Company also manufactures Formion(R), a

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specialized compound which has good impact strength, is resistant to abrasion and has performance characteristics which do not decrease in low temperatures. This product is sold principally to the transportation industry for use in bumper blocks and protective rub strips.

In addition, the Company manufactures Polytrope(R), a thermoplastic elastomer which has high resiliency and good impact resistance. Presently, the principal market for this product is the domestic automotive industry. Typical applications are valance panels, body side moldings, grills and bumper rub strips. Parts molded from Polytrope(R) weigh less than equivalent metal parts, are impact-resistant and may be painted to match adjoining exterior body parts.

Polypur(R), a polyurethane-based compound manufactured by the Company, has good thermal stability, is easy to mold and can be finished with only one coat of paint. It presently is used for automotive exterior body components and trim parts such as body side moldings.

The Company also manufactures Polyfort(R), a reinforced polypropylene compound for applications which require stiffness and resistance to heat distortion. Examples of such applications are coffee makers, binders for computer printouts, seatbacks and under-the-hood products for automobiles. Schulink(R), a crosslink polyethylene-based compound, is used in rotational molding applications requiring high strength and chemical resistance.

The Company's plastics compounding operations include the

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manufacture of Polybatch(R), an additive or color concentrate used for modifying various plastic resins. An additive concentrate provides various physical properties required by customers. These properties include slip, anti-slip, UV stabilizers, etc. A color concentrate is a clear or natural plastic resin into which a substantial amount of color pigment is incorporated or dispersed. The Company manufactures its proprietary concentrates using its formulae and purchased prime natural resins. These concentrates are sold to manufacturers of plastic products. The Company also manufactures Polyblak(R), a line of black concentrates. In addition, the Company performs tolling of plastic compounds and concentrates using resins and formulae supplied by customers.

Concentrates provide specific color and/or other physical properties used in the manufacture of film for packaging, household goods, toys, automotive parts, mechanical goods and other plastic items. Black concentrates, which are resistant to weather and sunlight, are used by wire and cable manufacturers for insulation coating and in the production of plastic pipe, black film and other black plastic items.

Tolling, which accounted for less than 5% of the Company's revenues from manufacturing in its latest fiscal year, involves the use of resins and formulae provided by customers. Tolling is done principally for major plastic resin producers. The Company is compensated on the basis of an agreed price per pound plus an additional charge

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for any additives and packaging supplied by the Company.

On February 28, 1995, the Company, through a wholly-owned subsidiary, Texas Polymer Services, Inc., acquired the assets of the Polymer Services division of J. M. Huber Corporation. This acquisition provides new tolling production capabilities and additional compounding capacity.

In the second classification within its plastics industry segment, the Company, through its sales offices in North America and Europe, acts as a merchant which buys prime and off-grade plastic resins and resells these commodities, without further processing, to a variety of users. The plastic resins generally are purchased from major producers. Prime resins are purchased from these producers and usually are sold to small and medium-sized customers. In addition to prime resins, the Company also purchases supplies of resins resulting from overruns, changes in customers' specifications and failure to meet rigid prime specifications. Historically, these materials have been in continuous supply, generally in proportion to the total industry production of plastic resins.

In the third classification within its plastics industry segment, the Company, through its European operations, acts as a distributor for several major resin producers which include Huels AG, BASF, Dow Chemical, Exxon Chemical, and ATOCHEM.

The Company, through December 1995, is the exclusive third-party United States distributor for Enichem America, Inc. of prime polychloroprene (neoprene), nitrile and EPDM rubber.

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These products are purchased by the Company and are sold principally to the adhesive industry and to manufacturers of wire and cable products, automotive oil-resistant products, footwear heels and soles and heavy duty conveyor belting. Further, the Company is the exclusive third-party United States, Canada and Mexico distributor of nylon 11 and 12 for Elf Atochem North America, Inc. Nylon 11 and 12 are used in the rotational molding business and the extrusion and injection molding markets. The Company also acts as a United States distributor for Vestolit, a polyvinyl chloride dispersion resin manufactured by Huels AG of Marl, Germany.

In addition, the Company acts as United States distributor of Escorene(R) polypropylene resins and Escorene(R) roto molding resins, both manufactured by Exxon Chemical. The Company also is a distributor in the United States for Exxon Chemical of polyethylene used in injection molding, EMA and EVA. The Company also acts as a distributor of K-Resin(R) in the United States for Phillips Petroleum and of polypropylene in Canada for Epsilon Products Company.

Supplemental information regarding net sales and gross profit of the Company's three classifications within its sole industry segment is set forth on page 30 of the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by reference.

The Company's operations outside the United States are an important part of its business. The Company's foreign

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subsidiaries manufacture additives, concentrates, flame retardants and other proprietary and custom plastic compounds, act as merchants of plastic resins, and distribute certain plastic resins for foreign prime producers.

Information regarding the amount of sales, operating income and identifiable assets attributable to each of the Company's geographic areas and the amount of inter-geographic area sales for the last three years is set forth in Note 10 of the Notes to Consolidated Financial Statements in the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by reference.

The Company's foreign subsidiaries are as follows:

N.V. A. Schulman Plastics, S.A., a Belgian subsidiary located in Bornem, manufactures proprietary and custom concentrates and compounds. These products principally are sold in Germany, France, the Benelux countries, Italy and the Far East.

A. Schulman, Inc., Limited, a United Kingdom subsidiary located in South Wales, manufactures proprietary and custom plastic concentrates which are sold primarily in the United Kingdom.

A. Schulman GmbH, a German subsidiary located in Sindorf, operates seven sales offices and manufactures proprietary and custom plastic compounds. In addition, a major portion of the sales volume of this subsidiary is derived from merchant activities consisting of the purchase and sale of prime and

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off-grade plastic resins from major European producers. During the fiscal year ended August 31, 1995, this subsidiary purchased approximately 37% of the compounds manufactured in the Bornem, Belgium plant. Approximately 23% of the sales volume of A. Schulman GmbH during the same period was derived from its distribution activity of selling plastic resins and compounds of Huels AG. This subsidiary also distributes products for Dow Chemical and Exxon Chemical.

A. Schulman Canada Ltd., a Canadian subsidiary located in St. Thomas, Ontario, manufactures proprietary and custom plastic compounds, acts as a merchant of prime and off-grade plastic resins and distributes polypropylene for Epsilon Products Company. These products are sold primarily in Canada. Its principal sales office is located in Toronto.

A. Schulman AG, a Swiss subsidiary located in Zurich, is engaged as a merchant of plastic resins and sells plastic compounds and concentrates manufactured by other European subsidiaries of the Company.

A. Schulman, S.A., a French subsidiary, has four sales offices in France and is a distributor in France for ATOCHEM, a merchant of plastic resins, and sells compounds manufactured by the Company's subsidiaries in Bornem, Belgium, Sindorf, Germany and Givet, France.

Diffusion Plastique is a Paris-based distributor of plastic materials. A. Schulman Plastics, S.A., another French subsidiary, is located in Givet, France. This subsidiary

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produces plastic concentrates for the Company's European market. Both A. Schulman, S.A. and Diffusion Plastique are distributors in France for BASF.

Through its Mexican subsidiary, A. Schulman de Mexico, S.A. de C.V., the Company manufactures concentrates for the packaging industry and compounds for the automotive, construction, appliance and consumer products markets.

The Company has a 70% partnership interest in The Sunprene Company, which manufactures a line of PVC thermoplastic elastomers and compounds primarily for the North American automotive market. The other partner is an indirect wholly-owned subsidiary of Mitsubishi Chemical Corporation, one of the largest chemical companies in Japan. This partnership has a manufacturing line at the Company's Bellevue, Ohio facility. The Company's partner provides technical and manufacturing expertise.

As of August 31, 1995, the Company had approximately 938 employees in the United States and approximately 1,001 employees in its foreign operations. Substantially all of the Company's hourly production employees are represented by various unions under collective bargaining agreements.

The Company has laboratory facilities at each of its plastics compounding plants staffed by approximately 215 technical personnel. The Company's plastic compounding business is to a degree dependent on its ability to hire and retain qualified technical personnel. These personnel are involved in activities relating to the development of new compounds and the

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testing and sampling of material for conformity with product specifications. The Company has experienced no difficulty in hiring or retaining such personnel.

A large part of the Company's technical activities relates to the development of compounds for specific applications of customers. Research activities relating to the development of new products and the improvement of existing products are important to the Company; however, the amounts spent during the last three fiscal years have not been material.

Management believes that compliance with Federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not had a material effect upon the capital expenditures, earnings or competitive position of the Company.

During the year ended August 31, 1995, the Company's five largest customers accounted in the aggregate for less than 10% of total sales. In management's opinion, the Company is not dependent upon any single customer and the loss of any one customer would not have a materially adverse effect on the Company's business other than on a temporary basis.

The raw materials required by the Company readily are available from major plastic resin producers or other suppliers. The principal types of plastic resins used in the manufacture of the Company's proprietary plastic compounds are polypropylene, ABS (acrylontrile butadiene styrene), PVC (polyvinyl chloride), polyethylene and polystyrene.

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The Company's business is highly competitive. In its manufacturing classification, the Company competes with producers of the basic plastic resins, many of which also operate compounding plants, and also competes with other independent plastic compounders. The producers of basic plastic resins generally are large producers of petroleum and chemicals, which are much larger than the Company and have greater financial resources. Although no industry statistics are available, the Company believes that it is one of the largest of the ten to fifteen manufacturers of plastic compounds in the United States and Europe which is not also engaged in the petrochemical industry or a basic producer of plastic resins. Each of these ten to fifteen competitors competes with the Company generally in such competitor's own local market area.

The Company also competes with other merchants and distributors of plastic resins, synthetic rubber and other products. No accurate information is available to the Company as to the extent of its competitors' sales and earnings in these classifications, but management believes that the Company has only a small fraction of the total market.

The principal methods of competition in plastics manufacturing and distribution are innovation, quality, service and price. In the Company's merchant classification, the principal methods of competition are service and price. The primary competitive advantages of the Company arise from its financial capabilities, its excellent supplier relationships and

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its ability to provide quality plastic compounds at competitive prices.

The Company uses various trademarks and trade names in its business. These trademarks and trade names protect names of certain of the Company's products and are significant to the extent they provide a certain amount of goodwill and name recognition in the industry. Although these trademarks and trade names contribute to profitability, the Company does not consider a material part of its business to be dependent on such trademarks and trade names. The Company also holds some patents in various parts of the world for certain of its products. The products covered by these patents do not constitute a material part of the Company's business.

ITEM 2. PROPERTIES

The Company owns and operates seven plastics compounding plants in North America and four in Europe. The following Table indicates the location of each plastics compounding plant and the approximate annual plastics compounding capacity and approximate floor area, including warehouse space:

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(1) Includes 57,000 square feet for a facility purchased in fiscal 1995. This location has 36,000 square feet for warehouse space, 11,000 square feet for laboratory facilities and the balance for office and maintenance storage.

(2) Includes capacity of approximately 12 million pounds from a manufacturing line owned by The Sunprene Company, a partnership in which the Company has a 70% partnership interest. Excludes a new manufacturing line having a capacity of approximately 16 million pounds, which is being added by The Sunprene Company. This line is scheduled for start-up in late spring 1996.

(3) Excludes the following capital projects:

(a) A new manufacturing line having a capacity of approximately 12 million pounds is being installed. This line will commence operations in early fiscal 1996.

(b) The Company plans to invest $6 million in a new manufacturing facility in Indonesia. This facility is expected to have an initial annual capacity of approximately 13 million pounds and is scheduled to commence operations in late calendar year 1996.

(4) Includes approximately 32,000 square feet of sales and administrative office space, 197,000 square feet of warehouse space, and 96,000 square feet for manufacturing.

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Approx imate Approximate Capac ity Floor Area Location (lbs .) (Square Feet) - ------------------------------------------------- ------------------------------- Akron, Ohio 73,000,000 161,000(1) Bellevue, Ohio 80,000,000( 2) 156,000 Orange, Texas 72,000,000 147,000 Orange, Texas--Texas Polymer Services, Inc. 145,000,000 182,000 Nashville, Tennessee 60,000,000 131,000 San Luis Potosi, Mexico 25,000,000 78,000 Bornem, Belgium 130,000,000 356,000 Crumlin Gwent, South Wales(3)(a) 44,000,000 99,000 Givet, France (3)(a) 40,000,000 74,000 St. Thomas, Ontario, Canada 65,000,000 111,000 Sindorf, Germany 90,000,000 325,000(4) ---------- 824,000,000( 3)(a),(b) ===========

The approximate annual plastics compounding capacity set forth in the preceding Table is based upon several factors, including the weekly five-day, three-shift basis on which the Company customarily operates. Another factor is the approximate historical mix of specific types of plastic compounds manufactured at each plant, as a plant operating at full capacity will produce a greater or lesser quantity (in pounds) depending upon the specific plastic compound then being manufactured. The annual poundage of plastic compounds manufactured does not, in itself, reflect the extent of utilization of the Company's plants or the profitability of the plastic compounds produced.

The Company considers each of the foregoing facilities to be in good condition and suitable for its purposes.

Public warehouses are used wherever needed to store the Company's products conveniently for shipment to customers. The number of public warehouses in use varies from time to time, but a yearly average approximates 35. The Company also leases approximately 100,000 square feet of warehouse space located in Sindorf and Horrem, Germany.

The Company owns its corporate headquarters which is located in Akron, Ohio and which contains approximately 48,000 square feet of usable floor space. The Company leases sales offices in various locations in the United States, Canada, Mexico, the United Kingdom, Europe and Asia.

ITEM 3. PENDING LEGAL PROCEEDINGS

The Company is not a party to any material pending legal

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proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended August 31, 1995.

EXECUTIVE OFFICERS OF THE COMPANY

The age (as of October 23, 1995), business experience during the past five years and offices presently held by each of the Company's Executive Officers are reported below. The Company's By-Laws provide that officers shall hold office until their successors are elected and qualified.

Terry L. Haines: Age 49; President and Chief Executive Officer of the Company since January, 1991; formerly Chief Operating Officer, 1990-1991 and Vice President--North American Sales, 1989-1990; and prior to that time General Manager of A. Schulman Canada Ltd. since 1986.

Robert A. Stefanko: Age 52; Chairman of the Board since January, 1991; Executive Vice President--Finance and Administration of the Company since 1989; Chief Financial Officer of the Company since 1979; and formerly Vice President--Finance since 1979.

Larry A. Kushkin: Age 55; Executive Vice President--International Automotive Operations of the Company since 1989 and prior to that time Vice President--Automotive Sales of the Company since 1977.

Brian R. Colbow: Age 48; Treasurer of the Company since

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1984.

Alain C. Adam: Age 47; Vice President--Automotive Marketing since 1990; formerly General Manager--Automotive Marketing since 1989 and prior to that time Manager--Automotive Marketing since 1985.

Leonard E. Emge: Age 65; Vice President--Manufacturing since 1993 and prior to that time General Plant Manager--North America since 1985.

James H. Berick: Age 62; Secretary of the Company since 1979 and Chairman, Berick, Pearlman & Mills Co., L.P.A., Cleveland, Ohio (attorneys).

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND R ELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded in the over-the-counter market and is quoted through the NASDAQ National Market System.

Additional information in response to this Item is set forth on page 1 of the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

Information in response to this Item is set forth on pages 30 and 31 of the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by reference.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information in response to this Item is set forth on pages 28 and 29 of the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a) Financial Statements

The financial statements, together with the report thereon of Price Waterhouse LLP dated October 16, 1995, appearing on pages 16 through 27 of the Company's 1995 Annual Report to Stockholders, are incorporated herein by reference.

(b) Supplementary Data

Information in response to this Item is set forth in the financial statement schedules set forth on pages F-1 through F-2 of this Form 10-K.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL D ISCLOSURES

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CO MPANY

The information required in response to this Item in respect of Directors is set forth under the captions "Election of Directors" in the Company's proxy statement dated November 13, 1995, previously filed with the Commission, which information is incorporated herein by reference. The information required by this Item in respect of Executive Officers is set forth on pages 19 and 20 of this Form 10-K and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION

Information in response to this Item is set forth under the caption "Compensation of Executive Officers" in the Company's proxy statement dated November 13, 1995, previously filed with the Commission, which information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information in response to this Item is set forth under the caption "Election of Directors" in the Company's proxy statement dated November 13, 1995, previously filed with the Commission, which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACT IONS

Information in response to this Item is set forth under the caption "Compensation Committee Interlocks and Insider Participation" in the Company's proxy statement dated November 13, 1995, previously filed with the Commission, which information is incorporated herein by reference.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AN D REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

*Incorporated by reference from the indicated page of the Company s 1995 Annual Report to Stockholders. With the exception of this information and the information incorporated in Items 1, 5, 6, 7 and 8, the 1995 Annual Report to Stockholders is not deemed filed as part of this report.

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Page ---- (1) Financial Statements: --------------------- Report of Independent Accountants 27* Consolidated Statement of Income for the three years ended August 31, 1995 16* Consolidated Balance Sheet at August 31, 1995 and 1994 18* Consolidated Statement of Cash Flows for the three years ended August 31, 1995 20* Consolidated Statement of Stockholders' Equity for the three years ended August 31, 1995 17* Notes to Consolidated Financial Statements 21* (2) Financial Statement Schedules: ------------------------------ Report of Independent Accountants on Financial Statement Schedule F-1 VIII-Valuation and Qualifying Accounts F-2

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(3) Exhibits:

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Exhibit Number ------ 3(a) Restated Certificate of Incorporat ion (incorporated by reference to Exhibit 3(a) of the C ompany's Form 10-K for fiscal year ended August 31, 1990) . 3(b) Certificate of Amendment of Certif icate of Incorporation filed January 14, 1987 (incorporat ed by reference to Exhibit 3(b) of the Company's Form 10-K for fiscal year ended August 31, 1991). 3(c) Certificate of Amendment of Certif icate of Incorporation filed December 14, 1 987. (incorporated by reference to Exhibit 3(c) of the C ompany's Form 10-K for fiscal year ended August 31, 1 994). 3(d) Certificate of Amendment of Certif icate of Incorporation filed December 12, 1990 (incorpora ted by reference to Exhibit 3(d) of the Company's Form 10-K for fiscal year ended August 31, 1991). 3(e) By-Laws (incorporated by reference to Exhibit 3(c) of the Company's Form 10-K for fiscal yea r ended August 31, 1990). 3(f) Amendment to By-Laws dated October 20, 1986 (incorporated by reference to Exhibit 3(f) of th e Company's Form 10-K for fiscal year ended August 31, 1 991). 10(a)* 1981 Incentive Stock Option Plan ( incorporated by reference to Exhibit 10(b) of the Company's Form 10-K for fiscal year ended August 31, 1990) . 10(b)* A. Schulman, Inc. 1991 Stock Incen tive Plan (incorporated by reference to Exhibit 10(b) of t he Company's Form 10-K for fiscal year ended August 31, 1 991). 10(c)* A. Schulman, Inc. 1992 Non-Employe e Directors' Stock Option Plan (incorporated by refer ence to Exhibit A of the Company's Proxy Statement date d November 12, 1992

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Exhibit Number ------ filed as Exhibit 28 of the Company 's Form 10-K for fiscal year ended August 31, 1992). 10(d)* Non-Qualified Profit Sharing Plan. 10(e)* Employment Agreement between the C ompany and Robert A. Stefanko dated December 28, 1990 ( incorporated by reference to Exhibit 10(c) of the Company's Form 10-K for fiscal year ended August 31, 1991) . 10(f)* Employment Agreement between the C ompany and Terry L. Haines dated December 28, 1990 (in corporated by reference to Exhibit 10(d) of the Company's Form 10-Kfor fiscal year ended August 31, 1991). 10(g)* Employment Agreement between the C ompany and Larry A. Kushkin dated December 28, 1990 (i ncorporated by reference to Exhibit 10(e) of the Company's Form 10-K for fiscal year ended August 31, 1991) . 10(h)* Employment Agreement between the C ompany and Brian R. Colbow dated December 28, 1990 (in corporated by reference to Exhibit 10(f) of the Company's Form 10-K for fiscal year ended August 31, 1991). 10(i)* Employment Agreement between the C ompany and Alain C. Adam dated December 28, 1990 (inco rporated by reference to Exhibit 10(g) of the Company's Form 10-K for fiscal year ended August 31, 1991). 10(j)* Agreement between the Company and Robert A. Stefanko dated as of August 1, 1985 (incorp orated by reference to Exhibit 10(h) of the Company's For m 10-K for fiscal year ended August 31, 1991). 10(k)* Agreement between the Company and Larry A. Kushkin dated as of August 1, 1985 (incorporated by reference to Exhibit 10(i) of the Company's For m 10-K for fiscal year ended August 31, 1991). 10(l)* Agreement between the Company and Robert A. Stefanko dated as of March 21, 1991 (incorp orated by reference to Exhibit 10(l) of the Company's For m 10-K for fiscal year ended August 31, 1992). 10(m)* Agreement between the Company and Terry L. Haines dated as of March 21, 1991 (incorporated by reference to Exhibit 10(m) of the Company's For m 10-K for fiscal year ended August 31, 1992). 10(n)* Agreement between the Company and Larry A. Kushkin dated as of August 31, 1993 (incorporate d by reference

*Management contract or compensatory plan or arrangement required to be filed as an Exhibit hereto.

**Filed only in electronic format pursuant to Item 601(b)(27) of Regulation S-K.

(b) Reports on Form 8-K.

No reports on Form 8-K have been filed during the last quarter of the Company's fiscal year ended August 31, 1995.

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Exhibit Number ------ to Exhibit 10(n) of the Company's Form 10-K for fiscal year ended August 31, 1993). 10(o)* Agreement between the Company and Franz A. Loehr dated as of August 31, 1994. 10(p) Credit Agreement between the Compa ny, The Banks and Society National Bank, as Individu als and as Agent, dated as of March 13, 1995 (incorporated by reference to Exhibit 10 of the Company's Form 1 0-Q for fiscal quarter ended February 28, 1995). 11 Computation of Earnings Per Common Share 13 Company's 1995 Annual Report to St ockholders 21 Subsidiaries of the Company 23 Consent of Independent Accountants 24 Powers of Attorney 27** Financial Data Schedule 99 Notice of Annual Meeting and Proxy Statement Dated November 13, 1995

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

A. SCHULMAN, INC.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

*Powers of attorney authorizing Robert A. Stefanko to sign this annual report on Form 10-K on behalf of certain Directors of the Company are being filed with the Securities and Exchange Commission herewith.

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By: /s/Robert A. Stefanko --------------------- Robert A. Stefanko Chairman of the Board of Directors and Executive Vice President - Finance and Administration Dated: November 28, 1995

Signature Title Date - --------- ----- ---- /s/ Terry L. Haines Director and Princip al November 28, 1995 - ---------------------- Executive Officer Terry L. Haines /s/Robert A. Stefanko Director, Principal November 28, 1995 - ---------------------- Financial Officer and Robert A. Stefanko Principal Accounting Officer James H. Berick* Director Gordon E. Heffern* Director Larry A. Kushkin* Director Franz A. Loehr* Director Alan L. Ockene* Director Paul Craig Roberts* Director Rene C. Rombouts* Director Robert G. Wallace* Director Peggy Gordon Elliott* Director

*By: /s/ Robert A. Stefanko November 28, 1995 ---------------------- Robert A. Stefanko Attorney-in-Fact

REPORT OF INDEPENDENT ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of A. Schulman, Inc.

Our audits of the consolidated financial statements referred to in our report dated October 16, 1995, appearing on page 27 of the 1995 Annual Report to the Stockholders of A. Schulman, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes and its method of accounting for postretirement health care benefits and life insurance, effective September 1, 1992.

F-1

/s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Cleveland, Ohio October 16, 1995

SCHEDULE VIII

A. SCHULMAN, INC.

VALUATION AND QUALIFYING ACCOUNTS

Note:

(1) Acquisition of assets of Texas Polymer Services.

(2) Acquisition of assets of ComAlloy International.

(3) Represents current year change in valuation allowance for foreign tax credit carryforward benefits which are not likely to be utilized.

F-2

BALANCE AT CHARGED TO NET BALANCE AT BEGINNIN G OF COST AND WRITE TRANSLATION CLOSE OF PERIO D EXPENSES OFFS ADJUSTMENT OTHER PERIOD -------- ---- ---------- ----- ----------- ----- ---------- Reserve for doubtful accounts Year ended August 31, 1995 $4,111 ,000 $1,134,000 $(565,000) $ 163,000 $ 16,000 (1) $4,859,000 Year ended August 31, 1994 3,974 ,000 298,000 (450,000) 139,000 1 50,000 (2) 4,111,000 Year ended August 31, 1993 4,433 ,000 655,000 (576,000) (538,000) - 3,974,000 Valuation allowance - deferred tax assets Year ended August 31, 1995 4,197 ,000 - - - 6 23,000 (3) 4,820,000 Year ended August 31, 1994 5,557 ,000 - - - (1,3 60,000)(3) 4,197,000 Year ended August 31, 1993 - 5,557,000 - - - 5,557,000

Exhibit 10(d) Nonqualified Profit Sharing Plan

A. SCHULMAN, INC. NONQUALIFIED PROFIT SHARING PLAN

ARTICLE I ESTABLISHMENT AND PURPOSE

1.1 ESTABLISHMENT OF PLAN. A. Schulman, Inc., a Delaware corporation (the "Company"), hereby establishes a nonqualified profit sharing plan to be known as the "A. Schulman, Inc. Nonqualified Profit Sharing Plan" (the "Plan") as set forth in this document. The Plan permits the unfunded accrual of benefits to Plan participants.

1.2 PURPOSE OF PLAN. The purpose of the Plan is to promote the long term growth and profitability of the Company by providing key employees of the Company and its subsidiaries with the benefits which they would have received under the Company's Profit Sharing Plan but for the reduction of the compensation limit under Code Section 401(a)(17), effective for plan years beginning after December 31, 1993.

ARTICLE II DEFINITIONS

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended, and any successor statute.

"Committee" means the Compensation Committee of the Board.

"Company" means A. Schulman, Inc. or any successor thereto.

"Fiscal Year" means the Company's fiscal year beginning September 1 and ending on the following August 31.

"Participant" means an employee of the Company or any Subsidiary who is designated by the Committee to participate in the Plan.

"Profit Sharing Plan" means the A. Schulman Employees' Profit Sharing Trust, restated as of September 1, 1989.

"Subsidiary" means a corporation of which the Company owns, directly or indirectly, at least a majority of the shares having voting power in the election of directors.

ARTICLE III PARTICIPANTS AND PLAN ACCRUALS

3.1 DESIGNATION OF PARTICIPANTS. The Committee shall meet at least once in each Fiscal Year and irrevocably specify, before the end of such fiscal year, the name of each employee of the Company or a Subsidiary who is entitled to participate in the Plan for such Fiscal Year.

3.2 DETERMINATION OF ACCRUALS. The amount to be accrued under the Plan for a Participant for a fiscal year shall be equal to the excess of (i) the product of (x) the Participant's compensation for such fiscal year (excluding bonuses) multiplied by (y) the percentage determined by the Board or the Committee for purposes of calculating the Company's contribution to the Profit Sharing Plan for such Fiscal Year, OVER (ii) the Company contribution allocated to such Participant under the Profit Sharing Plan for such Fiscal Year.

3.3 EMPLOYMENT RIGHTS. Nothing in this Plan shall confer any right on an employee to continue in the employ of the Company or shall interfere in any way with the right of the Company to terminate an employee at any time.

ARTICLE IV VESTING, EARNINGS, FORFEITURES AND DISTRIBUTIONS

4.1 PARTICIPANT ACCOUNTS. The Committee shall cause a memorandum account to be kept in the name of each Participant.

4.2 VESTING OF ACCOUNTS. A Participant's account balance shall become vested and non-forfeitable in accordance with the following schedule:

"Years of Employment" shall be determined in accordance with applicable provisions of the Profit Sharing Plan. Notwithstanding the above, a Participant's account balance shall become 100% vested upon the Participant's death while an employee of the Company or disability (as determined under the profit sharing plan).

Years of Employment Percent Vested ------------------- -------- ------ Less than 3 0 % 3 but less than 4 20 % 4 but less than 5 40 % 5 but less than 6 60 % 6 but less than 7 80 % 7 or more 100 %

4.3 EARNINGS. At the end of each Fiscal Year, a Participant's account shall be credited with an estimated amount (the "Earnings") equal to the product of (i) the average yield received by such Participant's funds in the Profit Sharing Plan for the preceding Fiscal Year, multiplied by (ii) the Participant's account balance under this Agreement at the beginning of the Fiscal Year. Upon final determination of the average yields earned by the Profit Sharing Plan for a fiscal year, the Earnings credited to a Participant's account in respect of such Fiscal Year shall be adjusted appropriately.

4.4 DISTRIBUTIONS. Payment of a Participant's vested account balance shall be made at the time and in the manner that such Participant (or his or her designated beneficiary) is entitled to payment under the Profit Sharing Plan.

4.5 BENEFICIARIES. Each Participant shall have the right to designate one or more beneficiaries in accordance with the procedures set forth in the Profit Sharing Plan.

4.6 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS. Until a Participant's account balance becomes vested, the interest of a Participant (and his or her beneficiaries) is contingent and subject to forfeiture. To the extent that a Participant's account balance becomes vested, such Participant shall have the rights of an unsecured general creditor of the Company. The Company shall not be required to set aside any assets to meet its payment obligations hereunder, and Participants shall not have any property interest in any specific assets which are in fact set aside. Nothing in this Plan shall be deemed to create a trust of any kind or create a fiduciary relationship.

ARTICLE V ADMINISTRATION

5.1 RECORDS. The records to be maintained for the Plan shall be maintained by the Company at its expense and subject to the supervision and control of the Committee. All expenses of administration of the Plan shall be paid by the Company and shall not be charged against Participants' accounts.

5.2 ALIENATION. To the extent permitted by law, the right of any Participant or beneficiary in any benefit or payment hereunder shall not be subject in any manner to attachment or other legal process for the debts of such Participant or beneficiary, nor shall any such benefit or payment be subject to anticipation, alienation, sale, transfer, assignment or encumbrance.

5.3 COMPANY LIABILITY. No member of the Board or the Committee and no officer or employee of the Company shall be liable to any

person for any action taken or omitted in connection with the administration of this Plan unless attributable to his own fraud or willful misconduct. The Company shall not be liable to any person for any such action unless attributable to fraud or the willful misconduct of a director, officer or employee of the Company.

ARTICLE VI EFFECTIVE DATE AND AMENDMENT

6.1 EFFECTIVE DATE. The Plan shall be effective as of September 1, 1994.

6.2 AMENDMENT AND TERMINATION. The Plan may be amended or terminated by the Board at any time. Notice of any such action shall be given to each Participant and each beneficiary of a deceased Participant.

A. Schulman, Inc.

By: /s/ Robert A. Stefanko ---------------------------- Robert A. Stefanko, Chairman of the Board And By: /s/ James H. Berick ---------------------------- James H. Berick, Secretary

Exhibit 10(o)

Agreement Between the Company and Franz A. Loehr Dated as of

August 31, 1994

August 31, 1994

Mr. Franz A. Loehr Mommenstrasse 109 5000 Koln 41

Dear Franz:

This letter will set forth the consulting arrangement between you and A. Schulman GmbH (hereinafter "Schulman").

You and Schulman have agreed as follows:

CONSULTING

For the two (2) year period beginning September 1, 1994, and ending August 31, 1996 (the "Consulting Period"), you will serve as a special consultant for Schulman and will consult with Schulman on such matters as Schulman may request from time to time. In particular, you will assist Schulman in maintaining good relations and contacts with suppliers and customers, and you will introduce Schulman personnel to your contacts at Schulman's suppliers and customers. Part of your consulting activities will also consist of assisting Schulman in the transition of leadership from you to new managers of Schulman.

In performing your consulting duties, you will make yourself available on a reasonable basis during such times and at such places in Western Europe as Schulman may request from time to time, and Schulman will provide you with such reasonable access to the records of, and other information relative to, its operations as you in the proper discharge of your consulting duties may require. However, you will not be required to relocate your home or office from Cologne.

COMPENSATION

In consideration of the consulting services provided by you,

Schulman will pay you a fee (the "Consulting Fee") in an amount equal to the equivalent of USD 75,000 per year (based on the September 1, 1994 exchange rate) for each year during the Consulting Period. Monthly, at the beginning of each month, you will submit invoices to Schulman for one-twelfth (1/12th) of the yearly Consulting Fee plus expense reimbursement in respect of expenses incurred by you during the preceding month as provided in paragraph 4, below. Such invoices, in addition, will include a separate charge for any applicable value added tax. All amounts due will be paid to you within fifteen (15) days after the date of invoice or as you and Schulman otherwise mutually shall agree.

The exchange rate of USD to German marks on September 1, 1994, will be used to fix the compensation in German marks. No fluctuations in exchange rates after September 1, 1994, will affect the amounts payable hereunder.

In addition to the Consulting Fee, during the Consulting Period you will continue to have the use of your current Schulman-owned automobile. Schulman will continue to pay or reimburse you for reasonable expenses related to the automobile, such as gasoline, maintenance and insurance. You agree to keep the automobile appropriately maintained and insured during the Consulting Period. At the end of the Consulting Period, at your option, Schulman will transfer (at a cost of USD 100) the automobile to you, provided that you pay all costs and expenses (including applicable taxes) associated with such transfer. Since you were a former employee of the A. Schulman Group, you also will be entitled to your bonus for the fiscal year ending August 31, 1994, which will be paid to you in the customary manner or as we otherwise mutually agree.

Schulman also will provide you with office space in Schulman's Sindorf facility and with reasonable clerical assistance.

DEATH OR DISABILITY: SICKNESS

In the event of your death or disability prior to the end of the Consulting Period, this Agreement will terminate. As used in this paragraph, the term disability means a mental or physical infirmity which prevents you from performing your duties under this Agreement for a period in excess of ninety (90) consecutive days in any twelve (12) month period.

REIMBURSEMENT OF EXPENSES

Schulman also will reimburse you for reasonable and properly documented out-of-pocket expenses incurred by you and approved by Schulman's General Manager in performing services for Schulman hereunder.

NON-COMPETE AND NON-DISPARAGEMENT

During the Consulting Period, you will not, either directly or indirectly, engage in, or assist others in engaging in, any business which competes with the current business of Schulman, A. Schulman, Inc. (the "Parent") or any subsidiary or affiliate of Schulman or the Parent (Schulman, the Parent and such entities being herein referred to collectively as the "Companies" and individually as a "Company"). In addition, you will not assist or induce any employee of the Companies to terminate his or her employment.

Furthermore, Schulman, for itself and the Parent on the one hand, and you on the other hand, agree that, after the date hereof, each will not defame or disparage the other or make any derogatory remarks to any persons concerning the financial or business capabilities of the other, nor will you defame, disparage or make any derogatory remarks about any shareholder, director, officer or agent of Schulman or the Parent.

TRADE SECRETS

You confirm and agree that all of the trade secrets, as that term is understood in business parlance, of the Companies, including, but not limited to, business plans, customer lists, financial or computer data, marketing methods, formulae, and production methods, are, and shall remain, the exclusive property of the Companies and shall not be used by you except in connection with the performance of your consulting duties for Schulman.

REMEDIES

You agree that in the event that you violate the provisions of paragraphs 5 or 6, above, the Companies may suffer damages which are not compensable by the payment of money alone. Therefore, you agree that if you violate any of the provisions of paragraphs 5 or 6, any of the Companies will be entitled to immediate injunctive relief, in addition to any other rights and remedies they may have.

SEVERABLE PROVISIONS

The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and a partially unenforceable provision, to the extent enforceable in any jurisdiction nevertheless will be binding and enforceable. In the event that any provision of this Agreement is deemed unenforceable, Schulman and you agree that a court of competent jurisdiction will have jurisdiction to reform such provision to the extent necessary to cause it to be enforceable to the maximum extent permitted by law, and will abide by what said court determines.

INDEPENDENT CONTRACTOR ONLY

You are being retained by Schulman only for the purposes and to the extent set forth in this Agreement, and your relationship with Schulman is that of an independent contractor. You will be solely responsible for all taxes (including, without limitation, social security taxes as imposed on a self-employed individual) and other governmental obligations arising out of your performance of services and the payments to be made to you hereunder. You will indemnify and hold Schulman harmless from and against any liability to pay any such taxes or obligations.

From and after August 31, 1994, none of the Companies will have any obligation to pay you any further salary, benefits or other compensation or remuneration whatsoever except for (i) any pension or other benefits arising out of your prior employment and accrued prior to August 31, 1994, and (ii) the payments to be made hereunder. Specifically, none of the Companies will be responsible to pay or reimburse you for legal, accounting or other professional fees incurred by you after August 31, 1994.

RESIGNATION; RETURN OF SHARES

Effective as of August 31, 1994, you will resign from all Boards of Directors of the Companies on which you serve, except that of the Parent. In addition, you will deliver to Schulman free of charge all shares of stock or other interests in any of the Companies or any other entity which are being held by you as a nominee on behalf of any Company. Such shares or interests will be accompanied by such documents or instruments as are necessary effectively to vest title therein in Schulman or any nominee of Schulman, as Schulman shall direct. It is agreed and understood that during the period of this Agreement, i.e., until August 31, 1996, if you should then be serving as a Director of the Parent, you will not receive any additional compensation for your service as a Director. However, the Parent will reimburse you for all reasonable expenses you incur in connection with your service as a Director.

MISCELLANEOUS

This Agreement is binding upon and inures to the benefit of the parties and their respective heirs, personal representatives, successors and assigns and supersedes all prior agreements and understandings between the parties concerning the subject matter hereof and may not be modified or terminated orally. No modification, termination or attempted waiver of this Agreement shall be valid unless in writing and signed by a party against whom the same is sought to be enforced. This Agreement shall be governed by and construed in accordance with the laws of Germany.

If this Agreement sets forth correctly our understanding, please sign the enclosed counterpart and return it to the undersigned.

Sincerely yours,

A. SCHULMAN GMBH

AGREED TO AND ACCEPTED:

/s/Franz A. Loehr Dated as of: August 31 , 1994 FRANZ A. LOEHR

/s/Terry L. Haines /s/Robert A. Stefanko /s/Rene Rombouts - ------------------ --------------------- ---------------- Terry L. Haines Robert A. Stefanko Rene Rombouts

Exhibit 11

Computation of Earnings Per Common Share.

A. SCHULMAN, INC.

COMPUTATION OF EARNINGS PER COMMON SHARE

Year e nded August 31, ------ --------------- 1995 1994 1993 ---- ---- ---- Net income $53,618,000 $44,571,000 $36,738,000 Dividends on preferred stock 54,000 54,000 54,000 ----------- ----------- ----------- Net income applicable to common stock $53,564,000 $44,517,000 $36,684,000 =========== =========== =========== Weighted average number of shares of common stock outstanding, net of treasury shares 37,544,408 37,438,118 37,325,547 Net income per share of common stock $1.43 $1.19 $ .98 ===== ===== =====

Exhibit 13

Company's 1995 Annual Report to Stockholders.

A. Schulman Inc. 1995 Annual Report

PHOTO 1

Photo of two swimmers swimming in pool between red, white and blue lane markers.

A. Schulman is a leading international supplier of high-performance plastic compounds and resins. These materials are fabricated into a wide variety of end products by manufacturers around the world.

The Company's principal product lines consist of engineered plastic compounds which are custom formulated to match customer product specifications. A. Schulman also produces specialty color concentrates and additive masterbatches widely used in products such as plastic packaging films, fibers and other applications.

In addition, the Company's worldwide marketing organization serves as a distributor and merchant for plastic materials manufactured by major polymer producers.

A. Schulman's business is highly service oriented, providing timely and effective response to challenging technical, product performance and materials delivery requirements. For the first time, in fiscal 1995, the Company's revenues exceeded $1 billion.

Headquartered in Akron, Ohio, A. Schulman operates 11 manufacturing plants in North America and Europe, and plans to open a new production facility in Asia in 1996. The Company employs more than 1,900 people.

A. Schulman stock is quoted through the NASDAQ National Market System (Symbol: SHLM).

PHOTO 2 (Inside Front Cover) Fro nt Cover and Left: Photo of two swimmers resting Hig h-visibility swimming in pool with arms on poo l lane markers are red, white and blue lane mol ded from a pre-colored markers; photo of red, pol yethylene compound white and blue lane marker sup plied by A. Schulman. components in foreground. Use d in international com petition, these markers are uniquely shaped to red uce water turbulence bet ween adjacent swi mming lanes.

Financial HighlIghts

Year Ended August 3 1, 1995 1994 1993 Net sales $1,027,458,000 $748,778,00 0 $685,112,000 Income before cumulative effect of accounting chang es $ 53,618,000 $ 44,571,00 0 $ 38,907,000 Cumulative effect of accounting changes(1) - - $ (2,169,000) Net income $ 53,618,000 $ 44,571,00 0 $ 36,738,000 Net income per share of common stock: Before cumulative effect of accounting changes $ 1.43 $ 1.1 9 $ 1.04 Cumulative effect of accounting changes(1) - - ($ .06) Net income $ 1.43 $ 1.1 9 $ .98 Capital expenditures $ 58,533,000 $ 25,302,00 0 $ 18,158,000 Long-term debt and other non-current liabilities $ 106,326,000 $ 50,673,00 0 $ 34,120,000 Long-term liabilities to capital 20.8% 12. 8% 10.4% Stockholders' equity $ 405,218,000 $345,919,00 0 $294,209,000 Book value per common share $ 10.75 $ 9.2 1 $ 7.84 Number of stockholders 1,352 1,40 5 1,426 Cash dividends per share 1st Quarter $.075 $ .06 4 $ .056 2nd Quarter .085 .07 2 .064 3rd Quarter .085 .07 5 .064 4th Quarter .085 .07 5 .064 $.330 $.28 6 $.248 ============= =========== = ============ Common stock price range High - Low High - Low High - Low 1st Quarter 29 3/4 - 25 3/4 25 - 2 1 1/4 27 1/8- 21 2nd Quarter 29 1/4 - 24 1/4 29 - 2 2 3/4 25 1/4 - 21 1/8 3rd Quarter 32 3/4 - 28 28 3/8 - 2 1 24 3/4 - 20 3/4 4th Quarter 31 1/2 - 23 1/4 28 3/8 - 2 3 1/2 25 1/2 - 21 1/8 (1) Effective September 1, 1992, the company ad opted SFAS 106, "Employers' Accounting for Postretirement Benefits Othe r Than Pensions", and SFAS 109, "Accounting for Income Taxes".

NET SALES NET INCOME CAPITAL EXPENDITURES (Dollars in Billions) (Dollars in Millions) (Dollars in Millions) - --------------------- --------------------- --------------------- Fiscal Fiscal Fiscal Year $ Year $ Year $ ------ ------ ------ ------- ------ ------- 1986 $ .388 1986 $15.186 1986 $11.879 1987 $ .464 1987 $19.813 1987 $11.167 1988 $ .598 1988 $27.646 1988 $11.710 1989 $ .624 1989 $30.812 1989 $25.982 1990 $ .679 1990 $36.096 1990 $17.668 1991 $ .736 1991 $42.349 1991 $17.997 1992 $ .732 1992 $43.760 1992 $15.827 1993 $ .685 1993 $36.738 1993 $18.158 1994 $ .749 1994 $44.571 1994 $25.302 1995 $1.027 1995 $53.618 1995 $58.533

To Our Stockholders:

We are pleased to report that sales and net income established new records for the fiscal year ended August 31, 1995.

Sales for fiscal 1995 climbed to the $1 billion level for the first time in our history. Sales were $1,027.5 million, 37% higher than last year's sales of $748.8 million. Net income also established another record, our twelfth in the last thirteen years. Net income for fiscal 1995 was $53,618,000 or $1.43 per common share, an increase of 20% over 1994 earnings of $44,571,000 or $1.19 per share.

Sales for the fourth quarter ended August 31,1995 were $242.0 million, or 16% higher than sales of $209.0 million for the comparable 1994 quarter. Net income was $12,047,000 or $.32 per common share compared with $13,761,000 or $.37 per share for the 1994 fourth quarter.

Earnings in the fourth quarter were down because of lower profit margins resulting from competitive price pressures and start-up costs in Mexico. In addition, interest expense increased due to a higher level of borrowing.

The strength of our European operations was responsible for the new earnings record for 1995. Net income for fiscal 1995 advanced 39% on a sales increase of 42%. Fourth quarter earnings were up 17% in Europe on a 23% increase in sales.

Sales in our North American operations were up 6% for the quarter and 31% for fiscal 1995, but a decline in earnings of $3.3 million for the fourth quarter more than offset the $1.6 million improvement in European income.

Although tonnage in North America advanced 1.4% in the fourth quarter, gross profits declined $2.3 million due to lower margins which were 11.4% compared with 14.7% in the same quarter of 1994. The lower margins were the result of lackluster economic conditions and extremely competitive pricing pressures. Customers also were reducing their inventories because of sharp declines in plastic resin prices. Furthermore, start-up costs of our new Mexican facility also adversely affected income.

Worldwide tonnage was down 5.6% for the fourth quarter, but tonnage for the year was up 10.5% over 1994. Manufacturing tonnage was up 9.7% for the quarter and 21.5% for the year. The largest increases in manufacturing tonnage were generated in our North American operations, which were up 15.8% for the quarter and 29% for the year. The major reason was the inclusion of Texas Polymer Services since February 28, 1995, the date of its acquisition.

The translation effect of the lower value of the U.S. dollar continued to have a positive impact on our European sales and profits. The translation effect for fiscal 1995 increased sales by $68.9 million and net income by $4,618,000 or $.12 per common share. For the 1995 fourth quarter, translation increased sales by $14.5 million and net income by $1,164,000 or $.03 per common share.

Capital expenditures for 1995 were $58.5 million, the highest in our history. Major expenditures were the acquisition of the assets of Texas Polymer Services, a new manufacturing line placed in service at our Canadian facility, and new lines in our United Kingdom and Givet, France facilities, both of which commenced operation during the first quarter of fiscal 1995. We recently dedicated our new Mexican facility in San Luis Potosi. This facility, which commenced operation in September 1995, represents an investment of $15 million. Initially, the plant's total capacity is approximately 25 million pounds. This facility will service the Mexican and Latin American markets which are expected to provide extremely good long-term growth opportunities for A. Schulman.

We plan to commence construction soon on a new manufacturing facility in Indonesia. This facility, our first in the Far East, is scheduled for completion at the end of 1996. The total investment in this project will be $6 million. It will provide us with local manufacturing capabilities in this growing market.

During the past year, we have established marketing representative offices in Singapore and Barcelona, Spain. These locations will enable us to expand into new markets with our broad range of products.

We have continued our investment program and increased capacity throughout our operations to meet projected long-term demand. We have upgraded and improved our manufacturing facilities to utilize the best technology available.

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We remain committed to expanding our manufacturing operations and capabilities throughout the world. This will provide the foundation for continued growth in future years.

In January 1995, we increased our annual dividend rate to $.34, an increase of 15% over last year's rate. This increase reflects the Board's continuing confidence in the long-term prospects for A. Schulman. The Board will review the current dividend rate and policy at its meeting in January 1996.

At its October 1995 meeting, the Board of Directors confirmed a 1987 authorization to repurchase up to four million of the Company's common shares. Any such purchases would be made from time-to-time in the open market at current market prices. The timing of any purchases will depend on the price of the stock and value it provides to the Company. On November 6, 1995, the Company made its initial purchases under this authorization.

It's always gratifying to report another year of record earnings, but it is disappointing to end the 1995 fiscal year with lower earnings in the final quarter. During the last half of the year, there has been a significant change in our industry. After prices peaked in February 1995, there was an overall slowing in the worldwide economies. Customers who purchased materials in advance to avoid continuing price increases decided to reduce inventories. In addition, worldwide competitive pressures continue to squeeze our profit margins.

Results posted in the first half of fiscal 1995 were extremely good. Continuing pressure on margins and slower growth in the economies will make it difficult to achieve the same level of earnings posted in last year's first half. We also anticipate general economic weakness and additional start-up costs at our new Mexican facility.

We remain optimistic about the outlook for A. Schulman. Our financial position is extremely strong and enables us to continue to invest for future growth. We anticipate that earnings will improve and return to traditional growth patterns during the second half of our 1996 fiscal year.

In September 1995, we increased the size of PHOTO 3 our Board of Directors from eleven to fourteen memb ers. Photo of Terry L. Haines We are pleased to welcome to our Board, Willard R. and Robert A. Stefanko Holland, Chief Executive Officer of Ohio Edison Com pany in upper-right corner in Akron, James A. Karman, President and a director of of page. RPM, Inc. in Medina, Ohio and James S. Marlen, Chai rman and Chief Executive Officer of Ameron, Inc. in Cali fornia. The broad experience of these new members will prov ide additional strength and expertise for our expanding worldwide operations.

/s/ Terry L. Haines /s/ Robert A. Stefanko - -------------------- ----------------------- Terry L. Haines Robert A. Stefanko President and Chairman Chief Executive Officer November 10, 1995 3

During the past year, A. Schulman continued to strengthen its position as a global leader in the plastics industry. Revenues surpassed $1 billion for the first time in Company history. Capital expenditures exceeded $55 million, and will provide A. Schulman with the tools required to carry out its long-term strategic global plan.

The Company has dedicated, highly trained employees, and utilizes superior technology and state-of-the-art plants and equipment. It has the ability to effectively meet customer needs, and its financial strength provides a solid base to achieve profitable growth in the years ahead.

Technology. A. Schulman is a global leader in the high-performance plastics market. Customers rely on the Company's technical expertise and superior manufacturing capabilities to meet their most challenging product requirements. With A. Schulman's extensive

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This popular tennis ball retriever is manufactured in Canada from a filled and reinforced polypropylene compound supplied by A. Schulman. The material is strong, impact resistant and stable in prolonged outdoor exposure. Building on Our Strengths ... and Extending Our Global Reach

PHOTO 4 People. A. Schulman's greatest strength, Photo of yellow tennis first and f oremost, is its employee ball in motion worldwide. The Company is customer driven. Eve ry individual on the A. Schulman te am is committed to providing customers w ith products of the highest quality and unparalleled service.

PHOTO 5 Photo of black Wilson(R) tennis ball retriever containing yellow tennis balls, with three yellow tennis balls and a portion of a tennis racket in the foreground

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Elegant patio grill offers PHOTO 6 kitchen convenience outdoors. Photo o f patio grill with The grill incorporates corn, t omato, salt and components made from pepper shakers, lobster and an A. Schulman high-impact pans (p hoto covers the top thermoplastic alloy which is of page s 6 and 7); photo resistant to abrasion, grease of corn on the cob with and weather exposure. butter in foreground

product line, it is able to provide customers with a wide range of materials. In addition, the Company is able to develop custom formulated materials for customers' specific needs.

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Facilities. A. Schulman's manufacturing operations PHOTO 6 focus on engineered specialty plastic compounds. See description The Company's production plants are among the from page 6 most modern and efficient in the industry. Over the years, the Company has invested significant amounts in state-of-the-art manufacturing systems designed to achieve both high quality and production versatilit y. Meeting Customer Needs. The Company serves many of the world's largest multi-national manufacturers in the automotive, packaging, industrial and consumer

product sectors. Each of these customers has a unique set of requirements regarding quality, price, innovation, and technical performance. Customer focus is an important factor in the Company's plans for continuing expansion throughout the world.

Today, many customers are reducing their number of suppliers and working with fewer, more capable sources. Customers know that they can rely on A. Schulman to meet their unique individual needs cost-effectively without sacrificing quality or service.

Financial Strength. A. Schulman's financial strength provides assurance to customers of a reliable, long-term source for their polymer material requirements. The Company's financial capability has enabled it to invest strategically in the best facilities, equipment, and personnel available.

Extending Our Global Reach

With market demand for high quality plastic materials growing around the world, A. Schulman's opportunities for future business development are promising. Over the years, A. Schulman has continuously expanded its production base in accordance with market demand.

Disposable infant diapers use a waterproof liner made from A. Schulman's Polybatch(R) plastic material. Supplied in colors of pink, blue and other pastels, Polybatch also is used, in clear form, for diaper packaging in Mexico, where pasteboard packaging is banned.

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PHOTO 7 PHOTO 8 PHOTO 9 Photo of Photo of Photo of male baby in female baby male baby diaper with in diaper in diaper puppy crawling sitting

PHOTO 10

Photo of male baby sitting in diaper with white teddy

bear

10

A. Schulman provides PHO TO 11 automakers with a range Pho to of two cheerleaders of engineered and proprietary in red and blue uniforms plastic compounds for wit h red and blue vehicle exterior and interior pom -poms, one sitting applications on cars, trucks in and one leaning against and the latest minivan models. a w hite minivan (photo cov ers the top of pages 10 and 11); photo of red and blue pom-pom in foreground.

11

The Company has manufacturing facilities throughout the world which can effectively serve customers in new geographic regions. The Pacific Rim, an area which is expanding PHOTO 11 economically at a faster rate than any other in the See description world, is a region that offers great potential for on Page 10 A. Schulman. Southeast Asia currently is one of th e largest markets for the Company's plastic packaging materials. These products are presently being supp lied by A. Schulman's European operations. To increase sales and service to this region, the Company will constr uct a new plant in Indonesia. This facility is expected to become operational in late 1996. It will serve as the cornerstone for A. Schulman's expansion into Asia.

Attractive electrically-powered hot water pot is used for preparing tea and other beverages. This small appliance is molded from A. Schulman 's strong Polyfort(R) reinforced plastic, which is supplied in a variety of colors.

The Company has opened a customer service center in Singapore to further enhance its position in the Pacific Rim. This facility brings technical expertise and marketing support closer to area customers.

Elsewhere, the Company's new Mexican manufacturing plant began operations in September 1995. The facility, which has annual production capacity of 25 million pounds, is now supplying the growing Mexican market. It will facilitate service to other customers throughout Latin America. The region's large population makes it a prime consumption area for quality, high-performance plastics, particularly additives and concentrates for packaging applications.

Eastern Europe is another area of strong sales potential. A. Schulman currently operates a sales office in Leipzig. This office provides a base to establish new customer contacts and coordinate the supply of materials from the Company's Western European plants. A. Schulman will continue to add sales and technical support as business increases in this region.

12

PHOTO 12 Dur ing 1995, Photo of one red A. Schulman also and one blue rei nforced its commitment electrically-powered to geographically developed plastic hot water mar ket sectors. Expansion of pots man ufacturing capabilities in

PHOTO 13 Photo of red electrically-powered plastic hot water pot

14

Stylish European-designed PHO TO 14 clock is mounted in a case Pho to of black European-designed made of Schulman plastic. clo ck with two green apples This radio controlled clock (ph oto covers top of pages 14 self-adjusts to the Greenwich and 15); photo of white electric time signal. spa ce heater in foreground Portable electric space heater (below) is fabricated from A. Schulman's Polyflam(R) flame-retardant plastic.

Europe included a new 12 million pound capacity production line in France and another new line of similar capacity in the United Kingdom. North American capabilities were expanded with a new PHOTO 14 production line in Canada and the acquisition of See description on Texas Polymer Services Inc., a compounding page 14 and tolling production facility. The Company has established net income records during twelve of the last thirteen years. A. Schulman has a strong global presence and is rea dy to take advantage of reduced barriers to competitio n and new access to formerly closed countries. The Company is well positioned to advance into the next century well ahead of its competition. 15

The accompanying notes are an integral part of the consolidated financial statements.

16

A. Schulman, Inc. CONSOLIDATED STATEMENT OF INCOME

Year Ended August 31, ============== ============== =================== 1995 1994 1993 NET SALES $1,027,458,000 $748,778,000 $685,112,000 INTEREST AND OTHER INCOME 7,099,000 7,456,000 8,103,000 -------------- ------------ ------------ TOTAL 1,034,557,000 756,234,000 693,215,000 -------------- ------------ ------------ COSTS AND EXPENSES: Cost of sales 863,409,000 617,855,000 565,284,000 Selling, general and administrative expenses 75,551,000 66,201,000 64,141,000 Interest expense 5,250,000 1,222,000 1,176,000 Foreign currency transaction losses (gains) 20,000 90,000 (97,000) Minority interest 515,000 426,000 260,000 -------------- ------------ ------------ 944,745,000 685,794,000 630,764,000 -------------- ------------ ------------ INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 89,812,000 70,440,000 62,451,000 PROVISION FOR U.S. AND FOREIGN INCOME TAXES 36,194,000 25,869,000 23,544,000 -------------- ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 53,618,000 44,571,000 38,907,000 CUMULATIVE EFFECT OF ACCOUNTING CHANGES: Postretirement Benefits Other Than Pensions -- -- (4,841,000) Income Taxes -- -- 2,672,000 -------------- ------------ ------------ NET INCOME $ 53,618,000 $ 44,571,000 $ 36,738,000 ============== ============== =================== EARNINGS PER SHARE OF COMMON STOCK: Before Cumulative Effect of Accounting Changes $ 1.43 $ 1.19 $ 1.04 Cumulative Effect of Accounting Changes: Postretirement Benefits Other Than Pensions -- -- (.13) Income Taxes -- -- .07 -------------- ------------ ------------ Net Income $ 1.43 $ 1.19 $ 0.98 ============== ============== ===================

A. Schulman, Inc. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

17

Cumulative Foreign Unearned Currency Stock Common Other Retained Translation Grant Stock Capital Earnings Adjustment Compensation =========== =================================================== =============== Balance at August 31, 1992 $30,116,000 $31,551,000 $203,111,000 $53,470,000 ($905,000) Net income for 1993 36,738,000 Cash dividends paid or accrued: Preferred stock, $5 per share (54,000) Common stock, $.248 per share (9,266,000) Foreign currency translation adjustment (43,223,000) Stock options exercised 238,000 2,018,000 Amortization of restricted stock 182,000 ----------- ----------- ------------ ----------- --------- Balance at August 31, 1993 30,354,000 33,569,000 230,529,000 10,247,000 (723,000) Net income for 1994 44,571,000 Cash dividends paid or accrued: Preferred stock, $5 per share (54,000) Common stock, $.286 per share (10,730,000) Foreign currency translation adjustment 16,323,000 Stock options exercised 58,000 1,351,000 Five-for-four stock split paid as a 25% stock dividend on April 15, 1994 7,490,000 (7,490,000) Grant of restricted stock 893,000 (893,000) Amortization of restricted stock 191,000 ----------- ----------- ------------ ----------- --------- Balance at August 31, 1994 37,902,000 35,813,000 256,826,000 26,570,000 (1,425,000) Net income for 1995 53,618,000 Cash dividends paid or accrued: Preferred stock, $5 per share (54,000) Common stock, $.33 per share (12,411,000) Foreign currency translation adjustment 15,409,000 Stock options exercised 120,000 2,256,000 Amortization of restricted stock 361,000 ----------- ----------- ------------ ----------- --------- Balance at August 31, 1995 $38,022,000 $38,069,000 $297,979,000 $41,979,000 ($1,064,000) =========== =================================================== ===========

A. Schulman, Inc. CONSOLIDATED BALANCE SHEET

The accompanying notes are an integral part of the consolidated financial statements.

18

August 31, August 31, 1995 1994 ============ ============ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 83,997,000 $ 60,062,000 Short-term investments, at cost 60,275,000 61,763,000 Accounts receivable, less allowance for doubtful accounts of $4,859,000 in 1995 and $4,111,000 in 1994 143,183,000 129,010,000 Inventories, average cost or market, whichever is l ower 190,946,000 136,667,000 Prepaids, including tax effect of temporary differe nces 12,705,000 11,870,000 ------------ ------------ TOTAL CURRENT ASSETS 491,106,000 399,372,000 ------------ ------------ OTHER ASSETS: Cash surrender value of life insurance 377,000 340,000 Deferred charges, etc., including tax effect of temporary differences 14,506,000 12,604,000 ------------ ------------ 14,883,000 12,944,000 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT, AT COST: Land and improvements 8,909,000 5,813,000 Buildings and leasehold improvements 62,362,000 54,124,000 Machinery and equipment 173,325,000 141,365,000 Furniture and fixtures 19,054,000 15,227,000 Construction in progress 19,471,000 5,380,000 ------------ ------------ 283,121,000 221,909,000 Accumulated depreciation and investment grants of $415,000 in 1995 and $634,000 in 1994 141,944,000 123,806,000 ------------ ------------ 141,177,000 98,103,000 ------------ ------------ $647,166,000 $510,419,000 ============ ============

19

August 31, August 31, 1995 1994 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 17,800,000 $ 12,300,000 Current portion of long-term debt 39,000 35,000 Accounts payable 60,204,000 54,286,000 U.S. and foreign income taxes payable 15,009,000 9,939,000 Accrued payrolls, taxes and related benefits 16,820,000 16,901,000 Other accrued liabilities 18,194,000 14,903,000 ------------ ------------ TOTAL CURRENT LIABILITIES 128,066,000 108,364,000 ------------ ------------ LONG-TERM DEBT 75,096,000 23,126,000 OTHER LONG-TERM LIABILITIES 31,230,000 27,547,000 DEFERRED INCOME TAXES 5,973,000 3,794,000 MINORITY INTEREST 1,583,000 1,669,000 STOCKHOLDERS' EQUITY: Preferred stock, 5% cumulative, $100 par value, aut horized, issued and outstanding - 10,705 shares in 1995 1,071,000 1,071,000 Special stock, 1,000,000 shares authorized, none ou tstanding -- -- Common stock, $1 par value Authorized - 75,000,000 shares Issued - 38,022,242 shares in 1995 and 37,902,043 shares in 1994 38,022,000 37,902,000 Other capital 38,069,000 35,813,000 Cumulative foreign currency translation adjustment 41,979,000 26,570,000 Retained earnings 297,979,000 256,826,000 Treasury stock, at cost, 442,674 shares in 1995 and 1994 (10,838,000) (10,838,000) Unearned stock grant compensation (1,064,000) (1,425,000) ------------ ------------ COMMON STOCKHOLDERS' EQUITY 404,147,000 344,848,000 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 405,218,000 345,919,000 ------------ ------------ $647,166,000 $510,419,000 ============ ============

A. Schulman, Inc. CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of the consolidated financial statements.

20

Year Ended August 31, ============ ============== ============== 1995 1994 1993 Provided from (used in) operating activities: Net income $ 53,618,000 $ 44,571,000 $ 36,738,000 Items not requiring the current use of cash: Cumulative effect of accounting changes: Postretirement benefits other than pensions --- --- 4,841,000 Income taxes --- --- (2,672,000) Depreciation 16,834,000 14,728,000 14,717,000 Non-current deferred taxes 1,870,000 1,196,000 (96,000) Foreign pension and other deferred compensatio n 2,871,000 2,252,000 2,372,000 Postretirement benefit obligation 713,000 1,088,000 920,000 Changes in working capital: Accounts receivable (6,757,000) (28,312,000) (11,815,000) Inventories (49,110,000) (37,437,000) 17,919,000 Prepaids (775,000) (919,000) 57,000 Accounts payable 1,867,000 14,104,000 8,433,000 Income taxes 4,657,000 908,000 (303,000) Accrued payrolls and other accrued liabilities 1,610,000 664,000 4,637,000 Changes in other assets and other long-term liabi lities (2,265,000) (3,582,000) (1,728,000) ------------ ------------ ------------ Net cash provided from operating activi ties 25,133,000 9,261,000 74,020,000 ------------ ------------ ------------ Provided from (used in) investing activities: Expenditures for property, plant and equipment (58,533,000) (25,302,000) (18,158,000) Disposals of property, plant and equipment 371,000 232,000 297,000 Purchases of short-term investments (112,044,000) (67,729,000) (64,663,000) Proceeds from sales of short-term investments 117,776,000 53,546,000 26,656,000 ------------ ------------ ------------ Net cash used in investing activities (52,430,000) (39,253,000) (55,868,000) ------------ ------------ ------------ Provided from (used in) financing activities: Cash dividends paid (12,442,000) (10,774,000) (9,311,000) Increase (decrease) of notes payable 5,500,000 12,300,000 (4,800,000) Reduction of long-term debt (37,000) (32,000) (27,000) Increase of long-term debt 52,000,000 13,000,000 110,000 Exercise of stock options 2,376,000 1,409,000 2,256,000 Investment grants from foreign countries --- 241,000 --- Increase (decrease) in minority interest, net of distributions (86,000) 6,000 260,000 ------------ ------------ ------------ Net cash provided (used in) financing a ctivities 47,311,000 16,150,000 (11,512,000) ------------ ------------ ------------ Effect of exchange rate changes on cash 3,921,000 4,214,000 (10,902,000) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalent s 23,935,000 (9,628,000) (4,262,000) Cash and cash equivalents at beginning of year 60,062,000 69,690,000 73,952,000 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 83,997,000 $ 60,062,000 $ 69,690,000 ============ ============ ============ Cash paid during the year for: Interest $ 3,846,000 $ 1,006,000 $ 1,042,000 Income Taxes $ 31,093,000 $ 25,650,000 $ 21,723,000

A. Schulman, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIE S PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of A. Schulman, Inc. and its domestic and foreign subsidiaries. All significant intercompany transactions have been eliminated.

Minority interest represents a 30% equity position of Mitsubishi Kasei Vinyl in a partnership with the Company.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents. Such investments amounted to $56,198,000 at August 31, 1995 and $50,942,000 at August 31, 1994. Investments with maturities between three and twelve months are considered to be short-term investments. Investments are placed with numerous financial institutions having good credit ratings.

DEPRECIATION

It is the Company's policy to depreciate the cost of property, plant and equipment over the estimated useful lives of the assets generally using the straight-line method. The estimated useful lives used in the computation of depreciation are as follows:

The cost of property sold or otherwise disposed of is eliminated from the property accounts and the related reserve accounts, with recognition of gain or loss.

Maintenance and repair costs are charged against income. The cost of renewals and betterments are capitalized in the property accounts.

INVENTORIES

The Company and its subsidiaries do not distinguish between raw materials and finished goods because numerous products which can be sold as finished goods are also used as raw materials in the production of other inventory items.

GOODWILL

Net goodwill of $7,156,000 is being amortized over 15 to 25 years using the straight-line method and is included in deferred charges.

RETIREMENT PLANS

The Company has several pension plans covering hourly employees in the U.S. and certain employees in foreign countries. For certain plans in the U.S., pension funding is based on an amount paid to trust funds at an agreed rate for each hour for which employees are paid. For other U.S. plans, the policy is to fund amounts to cover current cost and amortize prior service costs over approximately 30 years.

Generally, the foreign plans accrue the current and prior service costs annually. In certain countries, funding is not required and the liability for such pensions is included in other long-term liabilities.

The Company also has deferred profit sharing plans for its North American salaried employees for which contributions are determined at the discretion of the Board of Directors.

FOREIGN CURRENCY TRANSLATION

The financial position and results of operations of the Company's foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. The cumulative foreign currency translation adjustment account in stockholders' equity includes primarily translation adjustments arising from the use of different exchange rates on the balance sheet from period to period.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Buildings and leasehold improvements 10 to 40 ye ars Machinery and equipment 5 to 12 ye ars Furniture and fixtures 10 ye ars

Effective September 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This statement requires the Company to accrue over the employee service period the expected costs of providing postretirement healthcare and life insurance benefits. Previously, the Company accounted for such costs on a cash basis. The cumulative effect of this change to September 1, 1992 was to decrease pretax income by $7.7 million and net income by $4.8 million or $.13 per share.

INCOME TAXES

Effective September 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This statement requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Previously, provisions for deferred income taxes were made where differences existed between the time that transactions affected taxable income and the time that these transactions entered into the determination of income for financial statement purposes. The cumulative effect of this change to September 1, 1992 was to increase net income by $2.7 million, or $.07 per share.

EARNINGS PER COMMON SHARE

Earnings per common share are based on net income after reduction for dividends on preferred stock and on the weighted average number of shares of common stock outstanding during the year. Stock options had no dilutive effect on earnings per common share.

NOTE 2 - INVESTMENT GRANTS

The Company has received investment grants from various European countries. These grants have been provided to subsidize a portion of the Company's European manufacturing facilities. The total cost of the facilities has been included in plant and equipment and the amount of the grants has been included with accumulated depreciation in the financial statements. The entire cost of the facilities are depreciated over their estimated useful life and the investment grants are amortized against the related depreciation charges. The amortization of these grants amounted to $254,000 in 1995, $187,000 in 1994, and $148,000 in 1993.

21

NOTE 3 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS

In March 1995, the Company entered into a new $75,000,000 credit agreement with several banks which replaced an existing $40,000,000 agreement. The new agreement provides for borrowings of up to $75,000,000 on a revolving credit basis through February 28, 2000. Interest rates will be either the London Interbank Offered Rate (LIBOR) plus 1/4%, certificate of deposit rate plus 3/8%, or the prime rate. A facility fee of 1/8% must also be paid to the banks. Under the terms of this agreement, approximately $118,000,000 of retained earnings was available for the payment of cash dividends at August 31, 1995.

The 5% note for $135,000 is a French Franc obligation which is repayable in quarterly installments.

Annual maturities of long-term debt for the five years subsequent to August 31, 1995 are $39,000 in 1996, $41,000 in 1997, $44,000 in 1998, $11,000 in 1999 and $75,000,000 in 2000.

The Company has $42,500,000 of unsecured short-term lines of credit from various domestic banks. Borrowings under these credit lines bear interest at the prime rate or at rates based on the bank's cost of funds. Short-term borrowings of $17,800,000 at August 31, 1995 and $12,300,000 at August 31, 1994 were outstanding under these domestic lines.

The Company has $36,123,000 of unsecured short-term foreign lines of credit available to its subsidiaries at August 31, 1995. No foreign short-term borrowings were outstanding at August 31, 1995 or 1994.

NOTE 4 - FOREIGN CURRENCY FORWARD CONTRACTS

The Company enters into forward foreign exchange contracts as a hedge against substantially all amounts due or payable in foreign currencies. These contracts limit the Company's exposure to loss resulting from adverse fluctuations in foreign currency exchange rates. Any gains or losses associated with these contracts as well as the offsetting gains or losses from the underlying assets or liabilities hedged are recognized on the foreign currency transaction line in the Consolidated Statement of Income. The Company does not hold or issue foreign exchange contracts for trading purposes.

The following table presents a summary of foreign exchange contracts outstanding as of August 31, 1995 and August 31, 1994:

The fair value of foreign exchange contracts was estimated by obtaining quotes from banks. All of the foreign exchange contracts were in European or United States currencies and generally have maturities of less than nine months. Foreign exchange contracts are entered into with several financial institutions having good credit ratings.

NOTE 5 - INCOME TAXES

Income before taxes and cumulative effect of accounting changes is as follows:

August 31, === ======== =========== 1995 1994 A. Schulman, Inc.: Revolving credit loan, 6.5083% in 1995 and 4.7554% in 1994 $75 ,000,000 $23,000,000 Notes payable of foreign subsidiary: 5% through September 1998 135,000 161,000 --- -------- ----------- 75 ,135,000 23,161,000 Less current portion 39,000 35,000 --- -------- ----------- $75 ,096,000 $23,126,000 === ======== ===========

1995 1994 =========================== =========================== Contract Fair Contract Fair Amount Value Amount Value ----------- ----------- ----------- ----------- Buy Currency $ 4,002,000 $ 4,052,000 $ 8,947,000 $ 9,139,000 Sell Currency $44,221,000 $44,678,000 $37,758,000 $37,863,000

Year Ended August 31, 1995 1994 1993 =========== =========== =========== Domestic $17,231,000 $19,012,000 $14,513,000 Foreign 72,581,000 51,428,000 47,938,000 ----------- ----------- -----------

The provisions for U.S. and foreign income taxes consist of the following:

A reconciliation of the statutory U.S. federal income tax rate with the effective tax rates of 40.3% in 1995, 36.7% in 1994 and 37.7% in 1993 is as follows:

22

$89,812,000 $70,440,000 $62,451,000 =========== =========== ===========

Year Ended August 31 , 1995 1994 1993 =========== =========== =========== Current taxes: U.S. $ 4,244,000 $ 6,700,000 $ 3,988,000 Foreign 29,252,000 20,290,000 18,671,000 ----------- ----------- ----------- 33,496,000 26,990,000 22,659,000 ----------- ----------- ----------- Deferred taxes: U.S. 1,868,000 (715,000 ) 83,000 Foreign 830,000 (406,000 ) 802,000 ----------- ----------- ----------- 2,698,000 (1,121,000 ) 885,000 ----------- ----------- ----------- $36,194,000 $25,869,000 $23,544,000 =========== =========== ===========

1995 1994 1993 % of % of % of Pretax Pret ax Pretax (in thousands) Amount Income Amount Inco me Amount Income ============= =========== ================== Statutory U.S. tax rate $31,434 35.0% $24,654 35. 0% $21,652 34.7% Amount of foreign income taxes in excess of U.S. taxes at statutory rate 4,326 4.8 700 1. 0 1,730 2.7 Other, net 434 .5 515 . 7 162 .3 ------------- ----------- ------------------ $36,194 40.3 $25,869 36. 7 $23,544 37.7 ============= =========== ==================

Deferred tax assets and (liabilities) consist of the following at August 31, 1995 and August 31, 1994:

The valuation allowance is for foreign tax credit carryforward benefits which are not likely to be utilized. The foreign tax credit carryforwards will expire in periods from 1996 to 2000.

The tax effect of temporary differences included in prepaids were $7,216,000 and $7,853,000 at August 31, 1995 and 1994 respectively. Deferred charges also included $1,052,000 and $922,000 from the tax effect of temporary differences at August 31, 1995 and 1994 respectively.

At August 31, 1995, no taxes have been provided on the undistributed earnings of certain foreign subsidiaries amounting to $210,409,000 because the Company intends to reinvest these earnings.

NOTE 6 - RETIREMENT PLANS

The total expense for all retirement plans was $5,503,000 in 1995, $4,510,000 in 1994, and $4,306,000 in 1993.

The components of pension expense are as follows:

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(in Thousands) 1995 1993 ======= ======= Pensions $ 2,068 $ 1,969 Inventory reserves 1,274 1,871 Bad debt reserves 871 699 Accruals 2,600 2,393 Dividend to be received 785 1,217 Postretirement benefits other than pensions 3,659 3,409 Foreign tax credit carryforwards 4,820 4,197 Other 1,878 1,747 ------- ------- Gross deferred tax assets 17,955 17,502 Valuation allowance (4,820) (4,197) ------- ------- Total deferred tax assets 13,135 13,305 ------- ------- Depreciation (10,839) (8,300) Other -- (24) ------- ------- Gross deferred tax liabilities (10,839) (8,324) ------- ------- $ 2,296 $ 4,981 ======= =======

Year Ended August 31, 1995 1994 1993 ========== ========== ====== ==== Defined Benefit Plans: Service cost-benefits earned during the period $1,243,000 $1,060,000 $1,035 ,000 ---------- ---------- ------ ---- Interest accrued on projected benefit obligation 1,520,000 1,319,000 1,336 ,000 Actual return on assets (184,000) (325,000) (689 ,000) Net amortization and deferral 67,000 254,000 506 ,000 ---------- ---------- ------ ---- 2,646,000 2,308,000 2,188 ,000 Defined contribution plans 2,857,000 2,202,000 2,118 ,000 ---------- ---------- ------ ---- Net Periodic pension cost $5,503,000 $4,510,000 $4,306 ,000 ---------- ---------- ------ ---- ========== ========== ====== ====

The following table presents the funded status of the defined benefit plans as of August 31, 1995 and August 31, 1994:

In respect to multiemployer plans in the U.S., ERISA extends the Company's liability for benefit obligations in the event of termination or withdrawal. The extent of any potential unfunded liability is not determinable at this time.

The Company has agreements with three current employees that upon retirement, or death or disability prior to retirement, it shall make ten payments of $100,000 each to two employees or their beneficiaries for a ten year period and $75,000 to one employee or his beneficiary for a ten year period. Under these agreements, $1,000,000 is fully vested and $1,750,000 will vest over the next six to seven years. However, vesting and payments may be accelerated under certain conditions. The Company has provided $182,000 in 1995, $206,000 in 1994 and $270,000 in 1993 to cover the current cost for such agreements. In connection with such agreements, the Company owns and is the beneficiary of life insurance policies amounting to $3,500,000. The amounts provided are included in other long-term liabilities.

NOTE 7 - POSTRETIREMENT HEALTH CARE AND LIFE INSURA NCE BENEFITS

The Company provides postretirement health care and life insurance benefits to certain domestic employees. The postretirement benefit cost includes the following components:

The Company's postretirement health care and life insurance plans are not funded. The status of the plans at August 31, 1995 and August 31, 1994 is as follows:

1995 1994 =========================== ========= ================== Assets Exceed Accumulated Assets Ex ceed Accumulated Accumulated Benefits Accumula ted Benefits Benefits Exceed Assets Benefit s Exceed Assets ---------- ------------ -------- -- ------------ Actuarial present value of benefit obligations: Vested benefit obligation $2,150,000 $ 15,280,000 $1,724,0 00 $ 12,766,000 Non-vested benefit obligation 3,000 2,349,000 2,0 00 2,059,000 ---------- ------------ -------- -- ------------ Accumulated benefit obligation $2,153,000 $ 17,629,000 $1,726,0 00 $ 14,825,000 ========== ============ ======== == ============ Projected benefit obligation $2,600,000 $ 21,049,000 $2,134,0 00 $ 17,643,000 Plan assets at fair value 2,605,000 886,000 2,233,0 00 1,046,000 ---------- ------------ -------- -- ------------ Projected benefit obligation less than (in excess of) plan assets 5,000 (20,163,000) 99,0 00 (16,597,000) Unrecognized net liability (asset) at date of adopt ion of SFAS No. 87 (33,000) 1,998,000 (36,0 00) 2,080,000 Unrecognized prior service cost 56,000 464,000 59,0 00 496,000 Unrecognized net loss (gain) 99,000 79,000 (40,0 00) (600,000) Adjustment required to recognize minimum liability - (984,000) - (1,031,000) ---------- ------------ -------- -- ------------ Prepaid (accrued) pension cost $ 127,000 $(18,606,000) $ 82,0 00 $(15,652,000) ========== ============ ======== == ============ Significant Assumptions: U.S.-1995 Foreign-1995 U.S.-19 94 Foreign-1994 - ----------------------- ---------- ------------ ------ ---- ------------ Discount rate 7.25% 7.0%-09.0% 7.25 % 7.0%-09.0% Expected rate of return on assets 9.5% 0.0%-11.0% 9.5% 0.0%-11.0% Rate of increase in compensation levels - 4.0%-07.0% - 4.0%-07.0%

Ye ar Ended August 31, =========== =============================== 1995 1994 1993 -------- ---------- ---------- Service cost - benefits earned during the period $509,000 $ 666,000 $ 558,000 Interest cost on projected benefit obligation 558,000 653,000 573,000 Net amortization (146,000) - - -------- ---------- ---------- $921,000 $1,319,000 $1,131,000 ======== ========== ==========

1995 1994 =========== ========== Actuarial present value of accumulated postretirement benefit obligation: Retirees $2,258,000 $2,625,000 Fully eligible active plan participants 1,483,000 1,376,000 Other active plan participants 4,258,000 3,640,000 ----------- ---------- 7,999,000 7,641,000 Unrecognized net gain (loss) 411,000 (467,000) Unrecognized prior service cost 2,043,000 2,566,000

The net postretirement benefit liability is included in other long-term liabilities.

In 1994, the Company amended its postretirement benefit program which reduced the accumulated benefit obligation at August 31, 1994 by $2.6 million. This reduction is amortized over the average future service period of active employees starting in 1995.

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 11% in 1995, 12.5% in 1994 and 13% in 1993, gradually declining to 6% in 2007 and remaining at that level thereafter. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation by $1,040,000 at August 31, 1995 and the postretirement benefit cost by $218,000 for the year then ended.

A discount rate of 7.25% was used in determining the accumulated postretirement benefit obligation at August 31, 1995 and 1994.

24

----------- ---------- Net postretirement benefit liability $10,453,000 $9,740,000 =========== ==========

NOTE 8 - INCENTIVE STOCK PLANS

In 1981, the Company adopted an Incentive Stock Option Plan. One year from the date of grant, 25% of the options are exercisable and an additional 25% become exercisable in each of the next three years. Options must be exercised within five years from the date of grant. Options may no longer be granted under this Plan.

Effective in December 1991, the Company adopted the 1991 Stock Incentive Plan and authorized 1,875,000 shares for future grants. The 1991 Plan provides for the grant of incentive stock options, nonqualified stock options and restricted stock awards. The option price of incentive stock options is the fair market value of the common shares on the date of grant. In the case of nonqualified stock options, the Company intends to grant options at fair market value on the date of grant, however, the Plan does provide that the option price may not be less than 50% of the fair market value of the common shares on the date of grant. Stock options may be exercised as determined by the Company, but in no event prior to six months following the date of grant or after the tenth anniversary date of grant. At August 31, 1995, there were 1,258,068 shares available for issuance under the 1991 Plan.

Effective in October 1992, the Company adopted the 1992 Non-Employee Directors' Stock Option Plan and authorized 125,000 shares for future grants. The 1992 Plan provides for the grant of 875 nonqualified stock options to each non-employee director on the first business day of February of each year. The option price is the fair market value of the common shares on the first business day immediately preceding the date of grant. All options become exercisable at the rate of 25% per year, commencing on the first anniversary of the date of grant of the option. Each option expires five years from the date of grant. At August 31, 1995, there were 107,500 shares available for issuance under the 1992 Plan.

The following is a summary with respect to options for all three plans:

At August 31, 1995, options for 314,310 shares were exercisable at $19.74 per share under the 1981 Plan. Under the 1991 Plan, options for 91,184 shares were exercisable at $26, 84,735 shares at $24.60, and 33,012 shares at $26.25. Under the 1991 Plan, 35,125 shares of restricted stock were granted on August 18, 1992 and 34,000 shares were granted on August 19, 1994. The fair market value on the date of grant in 1992 was $26 per share and in 1994 was $26.25 per share. These shares vest five years following the date of grant so long as the holder remains employed by the Company. Unearned compensation representing the fair market value of the shares at the date of grant is charged to income over the five year vesting period.

NOTE 9 - CAPITAL STOCK

The Special Stock of 1,000,000 shares was authorized with such preferences or special terms and for such consideration as may be determined at the discretion of the Board of Directors.

NOTE 10 - BUSINESS SEGMENT INFORMATION

The Company is engaged in the sale of plastic resins in various forms which are used as raw materials by its customers. The Company considers its business to be a single industry segment.

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Year Ended August 31, === =================================================== === 1995 1994 --- ---------------------- ---------------------- --- Sha res Option Shares Option Un der Price Under Price Opt ion Per Share Option Per Sh are --- ---- --------- ------- ------ --- Outstanding at beginning of year 907 ,876 $20-27 694,595 $20-26 Granted during the year 169 ,900 26-28 138,175 26-27 Exercised during the year (120 ,199) 20-26 (57,450) 20-26 Cancelled during the year (38 ,018) 20-26 (23,675) 20-26 Five-for-four stock split paid as a 25% stock dividend on April 15, 1994 --- 156,231 --- ---- ------- Outstanding at end of year 919 ,559 $20-28 907,876 $20-27 === ==== =======

A summary of operating information by geographic area for the three years ended August 31, 1995 is as follows:

The North American geographic area includes operations in the United States, Canada and Mexico. The Company's European operations are conducted in Belgium, France, Germany, Switzerland and the United Kingdom.

Inter-geographic sales are based on selling prices which are negotiated at the time of the transaction. These sales have no significant effect on the operating income of any geographic segment.

Adjustments North and (In thousands) America Eur ope Eliminations Consolidated ------- --- --- ------------ ------------ AUGUST 31, 1995 Sales to unaffiliated customers $417,893 $60 9,565 - $1,027,458 Inter-geographic sales 2,748 658 $(3,406) - -------- --- ----- ------- --------- Total sales $420,641 $61 0,223 $(3,406) $1,027,458 ======== === ===== ======= ========= Operating income $ 35,945 $ 6 3,615 $ - $ 99,560 ======== === ===== ======= Interest expense (5,250) Corporate expense less revenues (4,478) Foreign currency transaction losses (20) --------- Income before taxes $ 89,812 ========= Identifiable assets $284,806 $36 1,917 $ (600) $ 646,123 Corporate assets ======== === ===== ======= 1,043 --------- Total assets $647,166 AUGUST 31, 1994 Sales to unaffiliated customers $319,192 $42 9,586 - $ 748,778 Inter-geographic sales 187 332 $ (519) - -------- --- ----- ------- --------- Total sales $319,379 $42 9,918 $ (519) $ 748,778 ======== === ===== ======= ========= Operating income $ 33,325 $ 4 1,880 $ - $ 75,205 ======== === ===== ======= Interest expense (1,222) Corporate expense less revenues (3,453) Foreign currency transaction losses (90) --------- Income before taxes $ 70,440 ========= Identifiable assets $202,006 $30 7,397 $ (322) $ 509,081 ======== === ===== ======= Corporate assets 1,338 ------- Total assets $ 510,419 ========= AUGUST 31, 1993 Sales to unaffiliated customers $259,136 $42 5,976 - $ 685,112 Inter-geographic sales 670 253 $ (923) - -------- --- ----- ------- --------- Total sales $259,806 $42 6,229 $ (923) $ 685,112 ======== === ===== ======= ========= Operating income $ 25,056 $ 3 9,392 $ 36 $ 64,484 ======== === ===== ======= Interest expense (1,176) Corporate expense less revenues (954) Foreign currency transaction gains 97 --------- Income before taxes and cumulative effect of accounting changes $ 62,451 ========= Identifiable assets $150,249 $25 5,918 $ (230) $ 405,937 ======== === ===== ======= Corporate assets 1,928 --------- Total assets $ 407,865 =========

Operating income is total revenues less operating expenses, gains on disposals of properties and excludes corporate expense and revenues, interest expense, loss or gain on foreign currency transactions, and income taxes.

General corporate expense and revenue are primarily domestic central office administrative expenses less other income.

Assets of geographic segments represent those assets identified with the operation of each segment. Corporate assets consist mainly of cash and other miscellaneous investments.

NOTE 11 - LEASES

Total rental expense was $2,760,000 in 1995, $2,606,000 in 1994, and $2,391,000 in 1993. The future minimum rental commitments for non-cancellable leases excluding obligations for taxes, insurance, etc. are as follows:

NOTE 12 - CONTINGENCIES

The Company is engaged in various legal proceedings arising in the ordinary course of business. The ultimate outcome of these proceedings is not expected to have a material adverse effect on the Company's financial condition.

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Year ended August 31, Minimum rental =================================================== ======= 1996 $1, 840,000 1997 1, 380,000 1998 1, 160,000 1999 1, 107,000 2000 677,000 Later years 210,000 --- ------- $6, 374,000

NOTE 13 - QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED ) (In thousands, except per share data)

A. Schulman, Inc.

REPORT OF INDEPENDENT ACCOUNTANTS

[logo]

Price Waterhouse LLP

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF A. SCHULMAN, INC.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of A. Schulman, Inc. and its subsidiaries at August 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management, our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Notes 4 and 6 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 109, "Account- ing for Income Taxes," and Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," both effective as of September 1, 1992.

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Quarter ended Year e nded ------------------- --------------------------------------- ------ ---- Nov. 30, Feb . 28, May 31, Aug. 31, Aug. 31, 1994 1 995 1995 1995 199 5 =================== ======================================= ====== ==== Net sales $251,241 $24 9,637 $284,535 $242,045 $1,027 ,458 Gross profit 41,664 4 1,298 45,665 35,422 164 ,049 Net income 13,235 1 3,097 15,239 12,047 53 ,618 Net income per share of common stock $.35 $.35 $.41 $.32 $ 1.43

Quarter ended Year e nded ------------------- --------------------------------------- ------ ---- Nov. 30, Feb . 28, May 31, Aug. 31, Aug. 31, 1993 1 994 1994 1994 199 4 =================== ======================================= ====== ==== Net sales $167,960 $16 8,055 $203,766 $208,997 $ 748, 778 Gross profit 30,468 2 9,188 35,761 35,506 130, 923 Net income 9,787 8,956 12,067 13,761 44, 571 Net income per share of common stock $.26 $.24 $.32 $.37 $1 .19

/s/ Price Waterhouse LLP Cleveland, Ohio October 16, 1995

A. Schulman, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS

RESULTS OF OPERATIONS 1995

Net sales for 1995 were $1,027.5 million or 37.2% higher than 1994 sales of $748.8 million. A comparison of net sales is as follows:

The translation effects from the weaker U.S. dollar increased 1995 sales by $68.9 million.

Worldwide tonnage increased 10.5% in 1995 over 1994. The largest increase occurred in manufacturing where tonnage was up 21.5%. The inclusion of Texas Polymer Services since its acquisition on February 28, 1995, increased manufacturing tonnage from 13.6% to 21.5%. In addition, higher selling prices during the first nine months of 1995 contributed to greater net sales.

Gross margins on sales were 16% in 1995 compared to 17.5% in 1994. The decline in gross margins was primarily due to competitive price pressures and additional period costs resulting from increases in capacities. A comparison of gross profit is as follows:

Selling, general and administrative expenses increased $9.4 million in 1995. The weakening of the U.S. dollar increased these expenses by $5.1 million in 1995. In addition, expenses were higher due to the acquisition of ComAlloy International Company on March 31, 1994, the acquisition of Texas Polymer Services, Inc. on February 28, 1995, higher compensation levels and additional costs to support the increase in sales volume.

Interest expense increased in 1995 mainly in the United States due to greater levels of borrowing and higher rates.

Foreign currency transaction losses were primarily due to changes in the value of currencies within the European Monetary System.

Other income was down because of lower interest income resulting from a decline in European interest rates on temporary investments.

The effective tax rate was 40.3% in 1995 and 36.7% in 1994. The 1995 tax rate was higher primarily because of greater earnings in Europe which has a higher tax rate than the United States. Also, a retroactive 10% surtax was enacted in France during the Company's fourth quarter and a reduction in utilization of foreign tax credits.

The weakening in the value of the U.S. dollar increased net income by approximately $4.6 million or $.12 per share in 1995. The translation effects from currency fluctuations are not covered with contracts, options or other devices. Generally, forward contracts are used to mitigate exposure to currency transactions. The Company does not utilize any other types of derivative instruments.

Earnings in Europe increased approximately 39% in 1995. Although tonnage was up only 2.9%, sales increased 42% due to higher selling prices and the weaker U.S. dollar.

North American earnings decreased approximately 14% in 1995. Lower margins and higher interest expense were the primary reasons for the decline in profits. In addition, start-up costs of the Company's new Mexican facility also adversely affected income.

During the latter part of 1995, prices of many plastic resins declined sharply. Customers reduced inventory levels in anticipation of improving supplies of plastic resins and lower resin pricing. In addition, worldwide competitive pressures made it difficult to obtain traditional levels of profit margins.

(In Tho usands) ========== === ===================== 1995 1 994 Increase Manufacturing $ 593,478 $44 9,085 $144,393 Merchant 230,330 14 9,798 80,532 Distribution 203,650 14 9,895 53,755 ---------- --- ----- -------- $1,027,458 $74 8,778 $278,680 ========== === ===== ========

(In Th ousands) ========== === ===================== 1995 1 994 Increase Manufacturing $106,690 $ 8 8,609 $18,081 Merchant 31,929 2 2,582 9,347 Distribution 25,430 1 9,732 5,698 ---------- --- ----- -------- $164,049 $13 0,923 $ 33,126 ========== === ===== ========

Results in the first half of fiscal 1995 were extremely good. In 1996, continuing pressure on margins and slower growth in the worldwide economies will make it difficult to achieve the same level of earnings attained in the first half of 1995. It is also expected that general economic weakness and additional start-up costs will slow growth at the new Mexican facility.

1994

Net sales were $748.8 in 1994, an increase of 9.3% over 1993 sales of $685.1 million. A comparison of net sales is as follows:

The translation effects from the stronger U.S. dollar, primarily during the first six months of the fiscal year, decreased 1994 sales by $16.3 million.

Tonnage increased in all classifications and was up 11% for 1994. European tonnage increased approximately 5% and North American tonnage grew approximately 21%.

Gross margins on sales were 17.5% in both 1994 and 1993. A comparison of gross profit is as follows:

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(In Th ousands) ========== === ===================== 1994 1 993 Increase Manufacturing $449,085 $40 8,763 $ 40,322 Merchant 149,798 13 6,116 13,682 Distribution 149,895 14 0,233 9,662 ---------- --- ----- -------- $748,778 $68 5,112 $ 63,666 ========== === ===== ========

(In Tho usands) ======== === ===================== 1994 1 993 Increase (Decrease) Manufacturing $ 88,609 $ 7 8,548 $ 10,061 Merchant 22,582 2 1,495 1,087 Distribution 19,732 1 9,784 (52) -------- --- ----- -------- $130,923 $11 9,827 $ 11,096 -------- --- ----- --------

Prices of most plastic resins advanced sharply during the last quarter of 1994, mainly because of strong demand and lack of new supplies. These increases resulted in some erosion in margins during the fourth quarter, primarily in Europe, due to competitive pricing pressures.

Selling, general and administrative expenses increased $2.1 million in 1994 due to the inclusion of ComAlloy International which was acquired as of March 31, 1994, higher compensation levels and additional costs required to support the increase in sales volume. The strengthening of the U.S. dollar decreased these expenses by $1.4 million in 1994.

Interest expense increased in 1994 due to greater levels of borrowing and higher interest rates.

Other income is lower primarily due to reduced interest income from temporary investments, because of lower European interest rates.

The effective tax rate in 1994 was 36.7% compared with 37.7% in 1993. The reduction in 1994 was due to lower taxes in the German operations and the settlement of certain outstanding tax matters in Europe. These decreases were partially offset by the imposition of a surtax in Belgium.

The strengthening in the value of the U.S. dollar decreased net income by approximately $1.2 million or $.03 per share in 1994.

Earnings in Europe were up approximately 9% in 1994 on a volume increase of 5%.

In North America, earnings increased approximately 26% on a volume increase of 21%.

FINANCIAL CONDITION

Historically, the Company's primary source of funds has been from operations. It is expected that this source of cash flow will continue to provide a substantial portion of the Company's future needs.

The assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars using current exchange rates. Income statement items are translated at average exchange rates prevailing during the period. The resulting translation adjustments are recorded in the "cumulative foreign currency translation adjustment" account in stockholders' equity. The weakening of the U.S. dollar during the latter part of the fiscal year increased this account by approximately $15.4 million during 1995. If the U.S. dollar continues to weaken, this trend will continue in 1996.

Working capital and the current ratio are as follows:

The following represent key measurements of the capital structure and profitability of the Company:

The ratio of long-term liabilities to capital is computed by dividing long-term debt and other long-term liabilities by the sum of total stockholders' equity plus long-term debt and other long-term liabilities. This ratio increased in 1995 primarily due to greater borrowings to finance the acquisition of assets of Texas Polymer Services, Inc. and greater working capital requirements.

The return on average net worth is computed by dividing income before cumulative effect of accounting changes by the average of the total stockholders' equity during the year. This ratio increased in 1995 due to a higher level of earnings.

In March 1995, the Company entered into a new $75 million credit agreement with several banks which replaced an existing $40 million agreement. The new agreement provides for borrowings on a revolving credit basis through February 28, 2000.

Short-term lines of credit are maintained with various domestic and foreign banks. The unused commitment under these lines was $60.8 million at August 31, 1995.

(Dollars in Thousands ) ======== =========== ============= 1995 1994 1993 Working capital $363,040 $291,008 $237,930 Current ratio 3.8:1 3.7:1 4.2:1

(Dollars in Thousands except per share data) === ===== ======================== 1 995 1994 1993 Net worth $40 5,218 $345,919 $294,209 Book value per share $ 10.75 $9.21 $7.84 Ratio of long-term liabilities to capital 20.8% 12.8% 10.4% Return on average net worth 14.3% 13.9% 12.9% Net income as a percent of sales 5.2% 6.0% 5.4%

Capital expenditures were $58.5 million in 1995. New manufacturing lines will go into operation during the first quarter of 1996 in the United Kingdom and France. In addition, a new manufacturing facility in Mexico commenced operation in September 1995. Also, the construction of a new $6 million manufacturing facility in Indonesia is scheduled for completion at the end of 1996.

On June 30, 1995, the Company sold the assets of its East St. Louis, Illinois plant. This facility produced rubber shims and tie pads. Strategically, this business did not fit the Company's future growth plans. The financial impact of this transaction was not significant.

The Company's unfunded pension liability is $20.2 million at August 31, 1995. This amount is primarily due to a book reserve plan maintained by the Company's German subsidiary. Under such plans, there is no separate vehicle to accumulate assets to provide for the payment of benefits. The benefits are paid directly by the Company to the participants. It is anticipated that the German subsidiary will generate sufficient funds from operations to pay these benefits in the future.

Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires the recognition by employers of benefits provided to former or inactive employees after employment but before retirement was adopted by the Company in 1995. The impact of this Statement was immaterial.

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A. Schulman, Inc. TEN YEAR SUMMARY OF SELECTED FINANCIAL DATA (In thousands, except per share data)

SUPPLEMENTAL INFORMATION (In thousands of dollars)

30

Year Ended August 31, ========== ================ ========================== 1995 1994 1993 1992 Net sales $1,027,458 $748,778 $685,112 $732,170 Interest and other income 7,099 7,456 8,103 6,778 ---------- ---------- ---------- ---------- 1,034,557 756,234 693,215 738,948 ---------- ---------- ---------- ---------- Cost of sales 863,409 617,855 565,284 599,009 Other costs, expenses, etc. 81,336 67,939 65,480 66,838 ---------- ---------- ---------- ---------- 944,745 685,794 630,764 665,847 ---------- ---------- ---------- ---------- Income before taxes and cumulative effect of accoun ting changes 89,812 70,440 62,451 73,101 Provision for U.S. and foreign income taxes 36,194 25,869 23,544 29,341 ---------- ---------- ---------- ---------- Income before cumulative effect of accounting chang es 53,618 44,571 38,907 43,760 Cumulative effect of accounting changes (1) - - (2,169) - ---------- ---------- ---------- ---------- Net income $ 53,618 $ 44,571 $ 36,738 $ 43,760 ========== ================ ========================== Total assets $ 647,166 $510,419 $407,865 $427,966 Long-term debt $ 75,096 $ 23,126 $ 10,149 $ 10,108 Total stockholders' equity $ 405,218 $345,919 $294,209 $307,576 Average number of common shares outstanding, net of treasury shares 37,544,408 37,438,118 37,325,547 37,024,548 Per share of common stock: Net income: Before cumulative effect of accounting changes $ 1.43 $1.19 $1.04 $1.18 Cumulative effect of accounting changes (1) - - ($ .06) - Net income $ 1.43 $1.19 $ .98 $1.18 Cash dividends $ .33 $ .286 $ .248 $ .216 Stockholders' equity $10.75 $9.21 $7.84 $8.26 (1)Effective September 1, 1992, the Company adopted SFAS 106, "Employers' Accounting for Postretireme nt Benefits Other Than Pensions," and SFAS 109, "Accounting for Income Ta xes." (2)Includes a gain of $887,000 or $.02 per share fr om life insurance proceeds and a tax benefit of $94 5,000 or $.03 per share from a new U.S./German tax treaty. This tax benefit includ ed $466,000 or $.01 per share applicable to 1990 an d $479,000 or $.01 per share applicable to prior years. (3)Includes special cash dividend of $.02 per share paid on November 23, 1987.

Year Ended August 31, =================== ========= =================================================== ============================== 1995 1994 1993 199 2 1991 NET SALES Manufacturing $593,478 58% $449,085 60% $408,763 60% $426,846 58% $410,987 56% Merchant Activities 230,330 22% 149,798 20% 136,116 20% 147,587 20% 178,268 24% Distribution 203,650 20% 149,895 20% 140,233 20% 157,737 22% 146,752 20% ------------------- --------- --------------------------------------------------- ------------------------------ Total $1,027,458 100% $748,778 100% $685,112 100% $732,170 100% $736,007 100% =================== ========= =================================================== ============================== GROSS PROFIT Manufacturing $ 106,690 65% $ 88,609 68% $ 78,548 66% $ 87,476 66% $ 74,547 61% Merchant Activities 31,929 19% 22,582 17% 21,495 18% 23,399 18% 27,747 23% Distribution 25,430 16% 19,732 15% 19,784 16% 22,286 16% 19,712 16% ------------------- --------- --------------------------------------------------- ------------------------------ Total $ 164,049 100% $130,923 100% $119,827 100% $133,161 100% $122,006 100% =================== ========= =================================================== ==============================

CORPORATE HEADQUARTERS 3550 West Market Street Akron, Ohio 44333 (216) 666-3751

ANNUAL MEETING of Stockholders will be held on Thursday, December 7, 1995, at 10 AM E.S.T., at the Fairlawn Country Club, 200 North Wheaton Road Akron, Ohio 44313

INDEPENDENT ACCOUNTANTS Price Waterhouse LLP BP America Building 27th Floor 200 Public Square Cleveland, Ohio 44114-2301

STOCK LISTING The common stock of A. Schulman, Inc. is traded and quoted through the NASDAQ National Market System. Symbol: SHLM

TRANSFER AGENT Society National Bank Corporate Trust Division P.O. Box 6477 Cleveland, Ohio 44101

Any questions regarding shareholder records should be directed to Society National Bank. 800-542-7792 216-813-5745

The annual report to the Securities

=================================================== ======================================== 1991 1990 1989 1988 1987 1986 $736,007 $678,644 $624,410 $ 597,696 $463,824 $387,833 4,083 2,409 1,675 1,211 1,245 680 - ---------- ---------- ---------- - --------- ---------- ---------- 740,090 681,053 626,085 598,907 465,069 388,513 - ---------- ---------- ---------- - --------- ---------- ---------- 614,001 566,872 528,296 505,907 390,247 330,426 55,876 50,644 43,000 42,567 37,063 29,368 - ---------- ---------- ---------- - --------- ---------- ---------- 669,877 617,516 571,296 548,474 427,310 359,794 - ---------- ---------- ---------- - --------- ---------- ---------- 70,213 63,537 54,789 50,433 37,759 28,719 27,864 27,441 23,977 22,787 17,946 13,533 - ---------- ---------- ---------- - --------- ---------- ---------- 42,349 36,096 30,812 27,646 19,813 15,186 - - - - - - - ---------- ---------- ---------- - --------- ---------- ---------- $ 42,349 (2) $ 36,096 $ 30,812 $ 27,646 $ 19,813 $ 15,186 =================================================== ======================================== $344,273 $328,210 $257,687 $ 240,475 $214,698 $174,467 $ 9,000 $ 7,000 $ 10,000 $ 9,570 $ 11,230 $ 10,137 $232,567 $223,973 $166,640 $ 145,183 $125,803 $101,620 36,963,010 37,699,043 37,674,290 37, 665,819 37,665,819 37,290,224 $1.14 $ .96 $ .82 $ .73 $ .52 $ .41 - - - - - - $1.14 (2) $ .96 $ .82 $ .73 $ .52 $ .41 $ .186 $ .153 $ .135 $ .132 (3) $ .086 $ .068 $6.26 $5.91 $4.39 $3.82 $3.31 $2.68

and Exchange Commission, Form 10-K, will be made available upon request without charge. Write:

Robert A. Stefanko, Chairman and Chief Financial Officer A. Schulman, Inc. 3550 West Market Street Akron, Ohio 44333

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A. SCHULMAN, INC.

32

THE BOARD OF DIRECTORS EXE CUTIVE OFFICERS DOMEST IC OFFICES ROBERT A. STEFANKO TER RY L. HAINES AKRON, OHIO 44333 Chairman Pre sident and Chief Executive Officer Corpor ate Headquarters 3550 W est Market Street TERRY L. HAINES ROB ERT A. STEFANKO (216) 666-3751 President and Chief Executive Officer Cha irman and Chi ef Financial Officer BIRMIN GHAM, MICHIGAN 48009-6524 JAMES H. BERICK 2100 E ast Maple Road Managing Partner, LAR RY A. KUSHKIN (810) 643-6100 Berick, Pearlman & Mills Exe cutive Vice President - Int ernational Automotive Operations EAGAN, MINNESOTA 55121 DR. PEGGY GORDON ELLIOTT 1380 C orporate Center Curve President, The University of Akron ALA IN C. ADAM Suite 316 Vic e President - Automotive Marketing (612) 681-8020 GORDON E. HEFFERN Former Chairman and Director, LEO NARD E. EMGE EVANSV ILLE, INDIANA 47712 Society Corporation and Vic e President - Manufacturing 122 N. St. Joseph Avenue Society National Bank (812) 423-5836 BRI AN R. COLBOW WILLARD R. HOLLAND Tre asurer FORT W AYNE, INDIANA 46825 President and Chief Executive Officer, 9017 C oldwater Ohio Edison Company JAM ES H. BERICK Suite 300A Sec retary (219) 497-0371 JAMES A. KARMAN President, GRAND RAPIDS, MICHIGAN 49546 RPM, Inc. Eur opean Operations 500 Ca scade West Parkway, SE (616) 285-2800 LARRY A. KUSHKIN REN E' C. ROMBOUTS Executive Vice President - Gen eral Manager - Europe HOCKES SIN, DELAWARE 19707 International Automotive Operations 724 Yo rklyn Road, Suite 260 GER ALD M. WEINBERGER (302) 234-4870 FRANZ A. LOEHR Man aging Director - Germany Former Managing Director - Germany and HOUSTO N, TEXAS 77060 Associate General Manager - Europe OTT O H. BRUDER 363 N. Sam Houston Parkway E. Man aging Director - France Suite 480 JAMES S. MARLEN (713) 820-8093 Chairman, President and RIT SON D. GILLINGS Chief Executive Officer, Man aging Director - United Kingdom PASADE NA, CALIFORNIA 91106 Ameron, Inc. 600 So uth Lake Avenue Suite 506 ALAN L. OCKENE (818) 792-0053 Former President and Chief Executive Officer, General Tire, Inc. CAN ADIAN OPERATIONS PISCAT AWAY, NEW JERSEY 08854 144B C arlton Avenue DR. PAUL C. ROBERTS GOR DON L. TRIMMER (908) 424-9130 Chairman, The Institute for Man aging Director - Canada Political Economy SCHAUM BURG, ILLINOIS 60173 Distinguished Fellow, Cato Institute Embass y Plaza 1933 N . Meacham Road RENE' C. ROMBOUTS Suite 500 General Manager-Europe (708) 397-3973 ROBERT G. WALLACE ST. LO UIS, MISSOURI 63045-1303 Former Executive 514 Ea rth City Expressway Vice President and Director, Suite 351 Phillips Petroleum Company (314) 291-8626 * * * MELVIN D. SACKS NASHVI LLE, TENNESSEE 37211-3333 Director Emeritus ComAll oy International Company 481 Al lied Drive (615) 333-3453 ORANGE , TEXAS 77632 Texas Polymer Services, Inc. 6522 I nterstate Highway 10 West (409) 882-5890

A. SCHULMAN, INC.

33

OTHER SALES LOCATIONS FOREIGN OFFI CES PLANTS ARLINGTON, MASSACHUSETTS 02174 BORNEM, BELG IUM AKRON, OHIO 44310 20 Pierce Street #1 N.V.A. Schul man Plastics, S.A. 790 E. Tallmadge Ave. (617) 684-6949 Pedro Coloma laan 25 (216) 633-8164 Industriepar k ARLINGTON, TEXAS 76006 2880 Bornem, Belgium BELLEVUE, OHIO 44811 1907 Mill Run Dr. 3-8904211 350 North Buckeye Stre et (817) 265-8000 (419) 483-2931 SINDORF, GER MANY ATLANTA, GEORGIA 30350 A. Schulman GmbH ORANGE, TEXAS 77630 1302 Harbor Pointe Parkway Huttenstrabe 211 (Dispersion Plant) (770) 395-7305 D-50170 Kerp en 3007 Burnett (2273) 5610 (409) 883-9371 CAMBRIDGE, MASSACHUSETTS 02139 129 Franklin St. PARIS, FRANC E NASHVILLE, TENNESSEE 3 7211-3333 Suite 102 A. Schulman, S.A./ ComAlloy International Company (617) 577-1123 Diffusion Pl astique 481 Allied Drive Immeuble Dyn asteur (615) 333-3453 WESTON, MASSACHUSETTS 02193 10/12 rue An dras Beck 130 Concord Rd. 92360 Meudon -la-Foret ORANGE, TEXAS 77632 P.O. Box 355 (1) 41 07 75 00 Texas Polymer Services , Inc. (617) 891-5485 6522 Interstate Highwa y 10 West CRUMLIN, SOU TH WALES (U.K.) (409) 882-5890 A. Schulman Inc. Limited Croespenmaen Industrial Estate BORNEM, BELGIUM Crumlin, New port N.V.A. Schulman Plasti cs, S.A. REPRESENTATIVE OFFICES Gwent NP1 4A G Pedro Colomalaan 25 BARCELONA, SPAIN Newbridge 14 95-244090 Industriepark A. Schulman 2880 Bornem, Belgium Oficina de Representation en Espana ZURICH, SWIT ZERLAND 3-8904211 Paseje Francesc Ferrer n(degree)3 A. Schulman AG 08348 Cabrils (Barcelona), Spain Kernstrabe 1 0 SINDORF, GERMANY (34) (3) 750 76 63 CH 8004 Zuri ch, A. Schulman GmbH Switzerland Huttenstrabe 211 SINGAPORE (1) 241 60 3 0 D-50170 Kerpen A. Schulman, Inc. (2273) 5610 Singapore Representative Office MISSISSAUGA, ONTARIO, CANADA Contact Address: L5R 3G5 CRUMLIN, SOUTH WALES ( U.K.) 05-05, Balmoral Condominium A. Schulman Canada Ltd. A. Schulman Inc. Limit ed Singapore - 259802 5770 Huronta rio Street Croespenmaen Industria l Estate 65-235-7675 Suite 602 Crumlin, Newport (905) 568-84 70 Gwent NP1 4AG Newbridge 1495-244090 MEXICO CITY, MEXICO A. Schulman de Mexico, S.A. de C.V. GIVET, FRANCE Manuel E. Iz aguirre #13 A. Schulman Plastics S .A. Despacho 304 - Ciudad Satelite Rue Alex Schulman Naucalpan, E do. de Mexico 5310 F-08600 Givet, France (525) 393-12 16 (24) 42 71 61 MONTERREY, M EXICO ST. THOMAS, ONTARIO, C ANADA A. Schulman de Mexico, S.A. de C.V. N5P 3Z5 Camino del L ago #4517 A. Schulman Canada Ltd . Sector 4 400 S. Edgeware Road Colonia Cort ijo del Rio (519) 633-3451 Monterrey, N .L. 64890 (5283) 655-5 05 SAN LUIS POTOSI, MEXIC O A. Schulman de Mexico, S.A. de C.V. SAN LUIS PO TOSI, MEXICO Avenida CFE, 730 A. Schulman de Mexico, S.A. de C.V. Entre Eje 134 y Eje 13 6 Avenida CFE , 730 Zona Industrial del Po tosi Entre Eje 1 34 y Eje 136 San Luis Potosi, S.L.P . 78090 Zona Indust rial del Potosi (5248) 240-708 San Luis Po tosi, S.L.P. 78090 (5248) 240- 708

PHOTO 15 Photo of swimming pool with red, white and blue

lane markers.

[LOGO], A. Schulman Inc.

3550 West Market Street, Akron, Ohio 44333 - 216/666-3751

Exhibit 21

Subsidiaries of the Company.

SUBSIDIARIES OF A. SCHULMAN, INC.

(1) Owned by N.V. A. Schulman, S.A. (2) Owned by A. Schulman, S.A. (3) Owned by A. Schulman International, Inc.

(4) Owned by A. Schulman GmbH

Jurisdiction Name of Incorporation - ---- ---------------- N.V. A. Schulman, Plastics, S.A. Belgium N.V. A. Schulman, S.A. Belgium A. Schulman, S.A. (1) France A. Schulman Plastics, S.A. France Diffusion Plastique (2) France A. Schulman GmbH Germany A. Schulman, Inc., Limited United Kingdom A. Schulman Canada Ltd. Ontario, Canada A. Schulman Foreign Sales Corporation Virgin Islands Master Grip, Inc. Ohio Gulf Coast Plastics, Inc. Texas A. Schulman AG Switzerland ASI Investments Holding Co. Delaware ASI Akron Land Co. Delaware ComAlloy International Company Ohio A. Schulman International, Inc. Delaware A. Schulman de Mexico, S.A. de C.V. (3) Mexico ASI Employment, S.A. de C.V. (3) Mexico AS Mex Hold, S.A. de C.V. (3) Mexico Texas Polymer Services, Inc. Ohio Polyvin GmbH(4) Germany ______________________________

Exhibit 23

Consent of Independent Accountants.

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-69042) of A. Schulman, Inc. of our report dated October 16, 1995 appearing on page 27 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-1 of this Form 10-K.

/s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Cleveland, Ohio November 22, 1995

Exhibit 24

Powers of Attorney.

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorney, and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ James H. Berick ------------------- James H. Berick

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/Alan L. Ockene ----------------- Alan L. Ockene

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ Peggy Gordon Elliott ------------------------ Dr. Peggy Gordon Elliott

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/Franz A. Loehr ----------------- Franz A. Loehr

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ Larry A. Kushkin -------------------- Larry A. Kushkin

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ Robert G. Wallace --------------------- Robert G. Wallace

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ Gordon E. Heffern --------------------- Gordon E. Heffern

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ Dr. Paul Craig Roberts -------------------------- Dr. Paul Craig Roberts

POWER OF ATTORNEY

The undersigned Director of A. Schulman, Inc. (the "Corporation"), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Corporation's fiscal year ended August 31, 1995, hereby constitutes and appoints TERRY L. HAINES, JAMES H. BERICK and ROBERT A. STEFANKO, and each of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for the undersigned and in my name, place and stead, as Director of said Corporation, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorneys, and any of them and any such substitute.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of October, 1995.

/s/ Rene C. Rombouts -------------------- Rene C. Rombouts

ARTICLE 5 This schedule contains summary financial information extracted from the consolidated balance sheet as of August 31, 1995 and 1994 and the consolidated statement of income for each of the three years ended August 31, 1995 and is qualified in its entirety by reference to such financial statements.

CIK: 0000087565

NAME: A. SCHULMAN, INC.

MULTIPLIER: 1,000

PERIOD TYPE YEAR FISCAL YEAR END AUG 31 1995 PERIOD START SEP 01 1994 PERIOD END AUG 31 1995 CASH 83,997 SECURITIES 60,275 RECEIVABLES 143,183 ALLOWANCES 4,859 INVENTORY 190,946 CURRENT ASSETS 491,106 PP&E 283,121 DEPRECIATION 141,944 TOTAL ASSETS 647,166 CURRENT LIABILITIES 128,066 BONDS 75,096 COMMON 38,022 PREFERRED MANDATORY 0 PREFERRED 1,071 OTHER SE 366,125 TOTAL LIABILITY AND EQUITY 647,166 SALES 1,027,458 TOTAL REVENUES 1,034,557 CGS 863,409 TOTAL COSTS 944,745 OTHER EXPENSES 0 LOSS PROVISION 0 INTEREST EXPENSE 5,250 INCOME PRETAX 89,812 INCOME TAX 36,194 INCOME CONTINUING 53,618 DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET INCOME 53,618 EPS PRIMARY 1.43 EPS DILUTED 1.43

Exhibit 99

Notice of Annual Meeting and Proxy Statement Dated November 13, 1995.

[A. SCHULMAN INC. LOGO] NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Notice is hereby given that the Annual Meeting of Stockholders of A. Schulman, Inc. will be held at the Fairlawn Country Club, 200 North Wheaton Road, Akron, Ohio, on Thursday, December 7, 1995 at 10:00 A.M., local time, for the purpose of considering and acting upon:

1. The election of five (5) Directors for a three-year term expiring in 1998;

2. The ratification of the selection by the Board of Directors of Price Waterhouse LLP as independent accountants for the fiscal year ending August 31, 1996; and

3. The transaction of any other business which properly may come before the meeting and any adjournments thereof.

Stockholders of A. Schulman, Inc. of record at the close of business on October 23, 1995 are entitled to vote at the Annual Meeting and any adjournments thereof.

By order of the Board of Directors

JAMES H. BERICK Secretary

Akron, Ohio November 13, 1995

YOUR VOTE IS IMPORTANT. STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

[A. SCHULMAN INC. LOGO] 3550 West Market Street

Akron, Ohio 44333

PROXY STATEMENT

November 13, 1995

The accompanying proxy is solicited by the Board of Directors of the Corporation for use at the Annual Meeting of Stockholders to be held on December 7, 1995, and any adjournments thereof.

Stockholders of record at the close of business on October 23, 1995 (the record date) will be entitled to vote at the Annual Meeting. At that date the Corporation had issued and outstanding 37,584,318 shares of Common Stock, $1.00 par value. Each such share is entitled to one vote on all matters properly coming before the Annual Meeting. At least 18,792,160 shares of Common Stock of the Corporation must be represented at the meeting in person or by proxy in order to constitute a quorum for the transaction of business.

This Proxy Statement and the accompanying form of proxy were first mailed to stockholders on November 13, 1995.

ELECTION OF DIRECTORS

The Board of Directors of the Corporation presently is comprised of fourteen Directors. The Directors of the Corporation are divided into three classes; Classes I and III each consist of five Directors and Class II consists of four Directors. At the Annual Meeting, five Directors of Class III are to be elected to serve for three-year terms expiring in 1998 and until their respective successors are duly elected and qualified. Unless a stockholder requests that voting of the proxy be withheld for any one or more of the nominees for Director in accordance with the instructions set forth on the proxy, it presently is intended that shares represented by proxies will be voted for the election as Directors of the five Class III nominees named in the table below.

All nominees have consented to being named in this Proxy Statement and to serve if elected. Should any nominee subsequently decline or be unable to accept such nomination to serve as a

Director, an event which the Board of Directors does not now expect, the persons voting the shares represented by proxies solicited hereby either may vote such shares for a slate of five persons which includes a substitute nominee or for a reduced number of nominees, as they may deem advisable.

The following information concerning each nominee and each Director continuing in office is based in part on information received from the respective nominees and Directors and in part on the Corporation's records:

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PRINCIPAL OCCUPATION DURING PAST FIVE YEARS FIRST NAME OF AND AGE AS OF BECAME NOMINEE OR DIRECTOR OCTOBER 23, 1995 DIRECTOR - ------------------------------- ------------------------------------------------- -------- NOMINEES TO SERVE UNTIL 1998 ANNUAL MEE TING OF STOCKHOLDERS (CLASS III) James H. Berick degree dagger double dagger Ch airman, Berick, Pearlman & Mills Co., L.P.A., 1973 Cleveland, Ohio (attorneys) and Secretary of the Corporation; President and Treasurer, Realty ReFund Trust since 1990; Age 62 Terry L. Haines* Pr esident and Chief Executive Officer of the 1990 Corporation since 1991; formerly Chief Operating Officer, 1990-1991; Vice President -- North American Sales, 1989-1990; prior thereto General Manager of A. Schulman Canada, Ltd.; Age 49 Dr. Paul Craig Roberts degree Di stinguished Fellow, Cato Institute since 1993; 1992 Chairman of Institute for Political Economy since 1985; Columnist for Business Week since 1983 and The Washington Times since 1988; nationally syndicated Columnist for Scripps Howard News Service since 1989; formerly William E. Simon Chair in Political Economy at Center for Strategic and International Studies, 1982-1993, and Assistant Secretary of Treasury for Economic Policy, 1981-1982; Age 56 Rene C. Rombouts Ge neral Manager of the Corporation's European 1992 subsidiaries since 1993 and Director of European Marketing -- Manufactured Products of the Corporation since 1983; Age 57 James A. Karman Pr esident and Chief Operating Officer, RPM, Inc. 1995 (coatings, sealants and specialty chemicals) since 1978; formerly, Chief Financial Officer, RPM, Inc. 1982-1993; Age 58

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PRINCIPAL OCCUPATION DURING PAST FIVE YEARS FIRST NAME OF AND AGE AS OF BECAME NOMINEE OR DIRECTOR OCTOBER 23, 1995 DIRECTOR - ------------------------------- -------------------------------------------------- -------- CONTINUING DIRECTORS SERVING UNTIL 1996 ANN UAL MEETING OF STOCKHOLDERS (CLASS I) Larry A. Kushkin* Ex ecutive Vice President -- International 1989 Automotive Operations of the Corporation since 1989; formerly Vice President -- Automotive Sales of the Corporation; Age 55 Franz A. Loehr Re tired; formerly Associate General Manager of 1984 the Corporation's European subsidiaries and Managing Director, A. Schulman GmbH; Age 66 Alan L. Ockene degree dagger double dagger Ch airman, Akron Regional Development Board, since 1992 January, 1995; formerly, President and Chief Executive Officer of General Tire, Inc. 1991-1994; and Vice President of Goodyear Tire & Rubber Company -- International, 1985-1991; Age 64 Robert G. Wallace dagger double dagger Re tired; formerly Executive Vice President, 1988 Phillips Petroleum Company and President of Phillips 66 Company; Age 69 Willard R. Holland Pr esident and Chief Executive Officer, Ohio 1995 Edison Company (electric utility) and Chairman of the Board and Chief Executive Officer of its subsidiary, Pennsylvania Power Company, since 1993; formerly, Chief Operating Officer, Ohio Edison Company, 1991-1993; prior thereto Senior Vice President, Detroit Edison Company (electric utility), 1988-1991; Age 59 CONTINUING DIRECTORS SERVING UNTIL 1997 ANNU AL MEETING OF STOCKHOLDERS (CLASS II) Gordon E. Heffern degree dagger double dagger Co nsultant to KeyCorp (formerly Society 1983 Corporation) since 1990; formerly Professor, Kent State University, fall 1992 and prior thereto 1988-1990; formerly President and Chief Executive Officer, Akron Community Foundation, 1990-1992; also formerly Chairman and Chief Executive Officer, Society Corporation and Chairman, Society National Bank, 1983-1987; Age 71 Robert A. Stefanko* Ch airman of the Board of the Corporation since 1980 1991; Executive Vice President -- Finance and Administration of the Corporation since 1989; Chief Financial Officer of the Corporation since 1979; formerly Vice President -- Finance of the Corporation; Age 52

Mr. Haines is a Director of First Bancorporation of Ohio. Mr. Berick is a Director of MBNA Corporation, Realty ReFund Trust, The Tranzonic Companies and The Town and Country Trust. Mr. Heffern is a Director of Pioneer Standard Electronics, Inc. Dr. Roberts is a Director of 12 of the Value Line Mutual Funds. Mr. Wallace is a Director of CBI Industries, Inc. and Valmont Industries, Inc. Dr. Elliott is a Director of The Lubrizol Corporation. Mr. Marlen is a Director of Ameron, Inc. Mr. Karman is a Director of RPM, Inc., McDonald & Co. Investments, Inc., Shiloh Industries, Inc. and Sudbury, Inc. Mr. Holland is a Director of Ohio Edison Company.

The Board of Directors has established the following committees: Executive Committee, Audit Committee, Compensation Committee and Nominating Committee.

The functions performed by the Audit Committee of the Board of Directors include: (i) recommending to the Board of Directors the appointment of a firm of independent accountants to examine the books and accounts of the Corporation and its subsidiaries; (ii) reviewing with the independent accountants the scope of their work, prior to their examination; (iii) reviewing with the independent accountants the scope of their examination after it has been completed, as well as any recommendations made by the independent accountants; (iv) reviewing with the independent accountants the requirements of the Foreign Corrupt Practices Act of 1977, as amended; (v) reviewing with the independent accountants and approving each non-audit service performed or proposed to be performed by the independent accountants, as well as the relationship of audit to non-audit fees; and (vi) considering the possible effect of the non-audit services upon the independence of the accountants. The Audit Committee held two meetings during the year ended August 31, 1995.

The functions performed by the Compensation Committee of the Board of Directors include making recommendations to the Board of Directors concerning compensation policies, salaries,

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PRINCIPAL OCCUPATION DURING PAST FIVE YEARS FIRST NAME OF AND AGE AS OF BECAME NOMINEE OR DIRECTOR OCTOBER 23, 1995 DIRECTO R - ------------------------------- ------- ------------------------------------------ ----- --- Dr. Peggy Gordon Elliott degree President , The University of Akron since 1992; 1994 formerl y Chancellor and Chief Executive Officer , Indiana University Northwest, 1984- 1992; A ge 58 James S. Marlen Chairman of the Board of Ameron, Inc. 1995 (constr uction and industrial manufacturing) since J anuary, 1995; President and Chief Executi ve Officer of Ameron, Inc. since June, 1993; f ormerly, Vice President, GenCorp., Inc. (aerosp ace, automotive, chemical and plastics) and Pre sident, GenCorp. Polymer Products, a subsidi ary of GenCorp., Inc., 1988-1993; Age 54 - --------------- * Member of Executive Committee degree Member of Audit Committee dagger Member of Nominating Committee double dagger Member of Compensation Committee

grants of stock options and other forms of compensation for management and certain other employees of the Corporation. The Compensation Committee held two meetings during the year ended August 31, 1995.

The functions performed by the Nominating Committee include identifying potential directors and making recommendations as to the size, functions and composition of the Board and its committees. The Nominating Committee has no formal procedures for consideration of nominees recommended by stockholders. The Nominating Committee held one meeting during the year ended August 31, 1995.

The Board of Directors held five meetings during the year ended August 31, 1995. All incumbent Directors attended at least 75% of the meetings of the Board of Directors and any committees thereof on which they served during the year.

COMPENSATION OF DIRECTORS

Each Director of the Corporation who is not an employee of the Corporation receives an annual Director's fee of $20,000 plus $800 for each Board or committee meeting attended. In addition, on the first business day of February of each year, each non-employee Director of the Corporation receives a grant of an option to purchase 875 Shares of the Common Stock of the Corporation, at an option price equal to the fair market value of such shares on the first business day immediately preceding the date of grant. Mr. Loehr has a Consulting Agreement with the Corporation providing for annual compensation of $75,000 for each of the years ended August 31, 1995 and 1996.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTI CIPATION

James H. Berick, Secretary, Director, and a member of the Corporation's Compensation Committee is the Chairman of Berick, Pearlman & Mills Co., L.P.A., which is retained by the Corporation as legal counsel.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSA TION

This report describes the Corporation's executive compensation programs and the basis on which fiscal year 1995 compensation determinations were made by the Corporation's Compensation Committee in respect of the executive officers of the Corporation, including the Chief Executive Officer and the other executive officers named in the compensation tables in this proxy statement.

To ensure that the compensation program is administered in an objective manner, the Compensation Committee is comprised entirely of independent Directors. The duties of the Compensation Committee include recommending to the Board of Directors the base salary level and bonus for the Chief Executive Officer, setting the base salaries and bonuses for all other executive officers, and approving the design and awards of all other elements of the executive pay program. The Compensation Committee further evaluates executive performance and addresses other matters related to executive compensation.

COMPENSATION POLICY AND OVERALL OBJECTIVES

In determining the amount and composition of executive compensation, the Compensation Committee's goal is to provide a compensation package that will enable the Corporation to attract and retain talented executives, reward outstanding performance and link the interests of the Corporation's executives to the interests of the Corporation's shareholders. In determining

5

actual compensation levels, the Compensation Committee considers all elements of the program in total, rather than any one element in isolation.

The Compensation Committee members believe that each element of the compensation program should target compensation levels at rates that are reflective of current market practices. Offering market-comparable pay opportunities allows the Corporation to maintain a stable, successful management team.

Competitive market data is provided by an independent compensation consultant. The data provided compares the Corporation's compensation practices to those of a group of comparison companies. The Corporation's market data for compensation comparison purposes is comprised of a group of diversified manufacturing companies that have national and international business operations. The Compensation Committee reviews and approves the selection of companies used for compensation comparison purposes.

In establishing a comparison group for compensation purposes, the Compensation Committee neither bases its decisions on quantitative relative weights of various factors, nor follows mathematical formulae. Rather, the Compensation Committee exercises its discretion and makes its judgment after considering the factors it deems relevant.

The key elements of the Corporation's executive compensation are base salary, annual bonuses and long-term incentives. These key elements are addressed separately below. In determining compensation, the Compensation Committee considers all elements of an executive's total compensation package.

BASE SALARIES

The Compensation Committee regularly reviews each executive's base salary. Base salaries for executives initially are determined by evaluating executives' levels of responsibility, prior experience, breadth of knowledge, internal equity issues and external pay practices. Increases to base salaries are driven primarily by individual performance. Individual performance is evaluated based on sustained levels of individual contribution to the Corporation.

In determining Mr. Haines' base salary in 1995, the Compensation Committee considered the Corporation's financial performance for the prior year, Mr. Haines' individual performance and his long-term contributions to the success of the Corporation. The Compensation Committee also compares Mr. Haines' base salary to the base salaries of other chief executive officers.

ANNUAL BONUSES

The Corporation's bonus program promotes the Corporation's pay-for-performance philosophy by providing executives with direct financial incentives in the form of annual cash bonuses based on individual performance. Annual bonus opportunities allow the Corporation to communicate specific goals that are of primary importance during the coming year and motivate executives to achieve these goals.

Although target bonus opportunities are not established at the beginning of the year, the payouts are intended to represent a significant portion of each executive's total compensation. This practice reinforces the Corporation's pay-for-performance philosophy. The sizes of the payouts are determined at the discretion of the Compensation Committee, based upon each

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executive's performance during the prior fiscal year and on Corporation performance. Mr. Haines' 1995 bonus award was determined using the same criteria as the other executive officers and is reported in the Summary Compensation Table, below.

LONG-TERM INCENTIVES

Long-term incentives are provided pursuant to the Corporation's 1991 Stock Incentive Plan (the "1991 Plan").

In keeping with the Corporation's commitment to provide a total compensation package which includes at-risk components of pay, the Compensation Committee makes annual decisions regarding appropriate stock-based grants for each executive. When determining these awards, the Compensation Committee considers the Corporation's financial performance in the prior year, executives' levels of responsibility, prior experience, historical award data, and compensation practices at the comparison companies.

Stock options were granted in 1995 at an option price equal to the fair market value of the Corporation's common stock on the date of grant. Accordingly, stock options granted in 1995 have value only if the stock price appreciates following the date the options are granted. This design focuses executives on the creation of shareholder value over the long term and encourages equity ownership of the Corporation. These stock options become exercisable at the rate of 25% per year commencing on the first anniversary of the date of grant of the option, so long as the holder remains employed by the Corporation or a subsidiary.

In 1995, Mr. Haines received options to purchase 27,500 shares at the fair market value ($25.50) of such shares on the date of grant. These grants were established after comparison to the averages of long-term incentive grants at the comparison companies. The Compensation Committee believes that this equity interest provides a strong link to the interests of shareholders.

RESTRICTED STOCK

Shares of restricted stock are awarded to certain executives bi-annually. Restricted stock awarded to executives vests five years after the date awarded. Because of its vesting requirements, restricted stock enhances the Corporation's ability to maintain a stable executive team, focused on the Corporation's long-term success. Restricted stock provides executives with an immediate link to shareholder interests. Dividends are accrued until the lapse of restrictions on the restricted stock and are paid out thereafter. In 1995, no executives received awards of shares of restricted stock.

The Compensation Committee:

Gordon E. Heffern, Chairman James H. Berick

Robert G. Wallace Alan L. Ockene

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COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the compensation paid or to be paid by the Corporation and its subsidiaries in respect of services rendered during the Corporation's last three fiscal years to the Corporation's Chief Executive Officer and each of the four most highly compensated executive officers (as measured by salary and bonus) whose aggregate salary and bonus during the fiscal year ended August 31, 1995, exceeded $100,000:

SUMMARY COMPENSATION TABLE

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LONG-TERM COMPENSATI ON --------------------- --- ANN UAL COMPENSATION (1) AWARDS -------- -------------------------- --------------------- --- OTHER RESTRICTED ANNUAL STOCK ALL OTHER FISCAL COMPENSA- AWARD(S) OPTION S COMPEN- NAME AND PRINCIPAL POSITION YEAR SALARY BONUS TION(2) (3) (#) SATION(4) - ------------------------------ ------ ------ -- -------- ---------- ---------- ----- ----- --------- Terry L. Haines 1995 $325,000 $180,000 $ 21,910 $ 0 27, 500 $130,819 (5) President & Chief 1994 $270,833 $180,000 $ 12,075 $157,500 25, 000 $117,309 Executive Officer 1993 $250,000 $150,000 $ 72,781 $0 30, 000 $123,688 Robert A. Stefanko 1995 $270,833 $180,000 $118,335 $0 23, 000 $122,274 (5) Chairman of the Board 1994 $226,667 $180,000 $0 $131,250 20, 000 $116,474 of Directors, Chief 1993 $210,000 $150,000 $377,081 $0 25, 000 $131,154 Financial Officer and Executive Vice President-- Finance and Administration Larry A. Kushkin 1995 $200,000 $160,000 $139,899 $0 14, 000 $ 69,278 (5) Executive Vice President-- 1994 $185,000 $155,000 $0 $ 78,750 12, 000 $ 76,585 International Automotive 1993 $175,000 $135,000 $514,206 $0 10, 000 $ 87,231 Operations Leonard E. Emge 1995 $135,000 $ 60,000 $ 11,646 $0 7, 000 $ 14,610 (5) Vice President-- 1994 $117,833 $ 40,000 $ 7,121 $ 39,375 5, 000 $ 13,570 Manufacturing 1993 $103,834 $ 30,000 $0 $0 4, 500 $ 11,687 Alain C. Adam 1995 $116,000 $ 55,000 $0 $0 3, 500 $ 12,710 (5) Vice President-- 1994 $110,000 $ 53,000 $ 2,165 $ 31,500 3, 500 $ 12,787 Automotive Marketing 1993 $105,000 $ 45,000 $ 34,271 $0 3, 000 $ 12,287 - --------------- (1) Includes amounts earned in fiscal year, whether or not deferred. (2) Represents the net value (market value less exe rcise price) realized in respect of Common Shares purchased from the Cor poration pursuant to exercise of stock options. (3) The total number of restricted shares and the a ggregate market value at August 31, 1995: Mr. Haines held 11,000 shares valued at $291,500; Mr. Stefanko held 8,750 shares valued at $231,875; Mr. Kushkin held 5,500 shares valued at $145,750; Mr. Adam held 2,325 shares valued at $61,613; and Mr. Emge held 2,375 shares valued at $62,938. Divid ends accrue but are not paid on the restricted shares until the restrictions thereon lapse. The aggregate market value is based on the fair market value at August 31, 1995 of $26.50. (4) Represents the following compensation: Corporat ion contributions to Profit Sharing Plan; amounts accrued by the Corporatio n for the fiscal year under non-qualified profit sharing plan (which was ef fected in fiscal year 1995); Corporation payments of term life insurance pre miums; amounts accrued by the Corporation for the fiscal year under deferred compensation agreements; and Director's fees received from the Corporation's Belgian subsidiary.

(5) Amounts shown include the following: Corporation contributions to Profit Sharing Plan -- $15,000 for each of Messrs. Haines, Stefanko, and Kushkin, $11,600 for Mr. Adam and $13,500 for Mr. Emge; amounts accrued by the Corporation for the fiscal year ended August 31, 1995 under non-qualified profit sharing plan -- $17,500 for Mr. Haines, $12,083 for Mr. Stefanko, and $5,000 for Mr. Kushkin; Corporation payments of term life insurance premiums -- $1,110 for each named executive officer; amounts accrued by the Corporation under deferred compensation agreements for the fiscal year ended August 31, 1995 -- $75,061 for Mr. Haines ($45,037 of which was not vested), $71,933 for Mr. Stefanko ($22,518 of which was not vested), and $53,168 for Mr. Kushkin ($14,990 of which was not vested); and Director's fees received from the Corporation's Belgian subsidiary -- $22,148 for each of Messrs. Haines and Stefanko.

STOCK OPTIONS

The following table contains information concerning the grant of stock options during fiscal year 1995 to the named executive officers. The amounts shown for each of the named executive officers as potential realizable values are based on arbitrarily assumed annualized rates of stock appreciation of five percent and ten percent over the full five-year term of the options, which would result in stock prices of approximately $31.00 and $37.33, respectively. No gain to the optionees is possible without an increase in stock price which will benefit all stockholders proportionately. Actual gains, if any, on an option exercise are dependent upon future performance of the Corporation's Common Stock and overall market conditions. There can be no assurance that the potential realizable values shown in this table will be achieved.

OPTION GRANTS IN LAST FISCAL YEAR

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INDIVIDUA L GRANTS IN 1995 POTENTIAL REALIZABLE % OF TO TAL VALUE AT ASSUMED OPTION S ANNUAL RATE S OF STOCK GRANTED TO EXERCISE PRICE APPRE CIATION FOR EMPLOYEE S IN OR BASE 5-YEAR OP TION TERM OPTIONS FISCA L PRICE(3) EXPIRATION 5% ($) 10% ($) NAME (#)GRANTED(1) YEAR(2 ) ($/SH) DATE (4) (4) - ---------------------- ------------- ------ ------ -------- ----------- -------- -------- Terry L. Haines 27,500 10.24 % $25.50 08/17/00 $151,250 $325,325 Robert A. Stefanko 23,000 8.57 % $25.50 08/17/00 $126,500 $272,090 Larry A. Kushkin 14,000 5.22 % $25.50 08/17/00 $ 77,000 $165,620 Leonard E. Emge 7,000 2.61 % $25.50 08/17/00 $ 38,500 $ 82,810 Alain C. Adam 3,500 1.30 % $25.50 08/17/00 $ 19,250 $ 41,405 - --------------- (1) All options for common shares were granted purs uant to the 1991 Plan. Such options become exercisable at the rate of 25% p er year commencing on the first anniversary of the date of grant of the o ption, so long as the optionee remains employed by the Corporation. (2) Based on 268,450 options granted to all employe es. (3) Fair market value on the date of grant. (4) The share price represents the price of the Com mon Stock if the assumed annual rates of stock price appreciation are ac hieved. If the named executive officers realize these values, the Co rporation's shareholders will realize aggregate appreciation in the price of the 37,584,318 shares of Common Stock outstanding of $206.7 million or $ 444.6 million, respectively, over the five-year term of the options.

The following table contains information concerning stock option exercises during fiscal year 1995 by the named executive officers and the value of their unexercised options at August 31, 1995.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

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NUMBER OF UNEXERCISED VALUE OF UNE XERCISED, OPTIONS AT FISCAL IN-THE-MONEY OPTIONS SHARES YEAR END(#) AT FISCAL YE AR END(2) ACQUIRED ON VALUE --------------------------- --------------- ------------ NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE U NEXERCISABLE - -------------------- ----------- ------------ --- ----------- ------------- ----------- ------------- Terry L. Haines 2,500 $ 21,910 53,705 69,688 $ 143,264 $ 70,157 Robert A. Stefanko 15,000 $ 118,335 37,611 57,532 $ 72,429 $ 58,391 Larry A. Kushkin 15,201 $ 139,899 23,692 32,375 $ 51,586 $ 29,688 Leonard E. Emge 1,500 $ 111,646 7,718 13,250 $ 23,197 $ 11,813 Alain C. Adam 0 $ 0 19,937 8,938 $ 102,420 $ 8,188 - --------------- (1) Represents the net value (market value less exe rcise price). (2) Represents the net value of all exercisable and unexercisable options which, on August 31, 1995, had an exercise price equal to or less than the market value of the Corporation's shares of Common Sto ck on August 31, 1995 ($26.50).

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of October 23, 1995 in respect of beneficial ownership of shares of the Corporation's Common Stock by each person known to the Corporation to own five percent or more of its Common Stock, by each Director, by each named executive officer, and by all Directors and executive officers as a group:

* Less than 1% of the shares outstanding

(1) Includes the following number of shares which are not owned, but can be purchased within 60 days upon the exercise of options granted under the Corporation's 1981 Incentive Stock Option Plan and 1991 Stock Incentive Plan: 14,643 and 39,062, respectively, by Terry L. Haines; 5,067 and 18,895, respectively, by Larry A. Kushkin; 5,268 and 32,343, respectively, by Robert A. Stefanko; 0 and 31,250, respectively, by Franz A. Loehr; 14,375 and 5,562, respectively, by Alain C. Adam; 2,718 and 5,000, respectively, by Leonard E. Emge;

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AMOUNT AND N ATURE OF BENEFIC IAL PERCENT OF NAME OWNERSHIP(1) (2)(3) OUTSTANDING - ----------------------------------- ---------- ------- ----------- Nicholas Company, Inc. (4) 2,353,90 6 6.26% 700 North Water Street Milwaukee, Wisconsin 53202 Gordon E. Heffern 2,04 6 * Robert A. Stefanko 133,57 3(5) * Dr. Peggy Gordon Elliott 1,00 0 * James H. Berick 15,65 5 * Terry L. Haines 92,20 5 * Dr. Paul Craig Roberts 1,88 0 * Rene C. Rombouts 67,79 8 * Larry A. Kushkin 308,23 0(6) * Franz A. Loehr 173,72 4 * Alan L. Ockene 4,35 5 * Robert G. Wallace 5,84 3 * James S. Marlen 1,00 0 * Willard R. Holland 50 0 * James A. Karman 0 * Alain C. Adam 30,38 5 * Leonard E. Emge 26,91 9 * All Directors and Executive Officers as a group (17 persons) 913,30 8 2.4%

20,268 and 20,937, respectively, by Rene C. Rombouts; and 72,339 and 155,792, respectively, by all Directors and executive officers as a group.

(2) Includes 655 shares which are not owned but can be purchased within 60 days upon the exercise of options granted under the Corporation's 1992 Non-Employee Directors' Stock Option Plan by each of Alan L. Ockene, Robert G. Wallace, Gordon E. Heffern, James H. Berick, and Dr. Paul Craig Roberts and 3,275 shares by all Directors and executive officers as a group.

(3) Includes the following number of restricted shares of Common Stock awarded under the Corporation's 1991 Stock Incentive Plan: 11,000 for Terry L. Haines, 8,750 for Robert A. Stefanko, 5,500 each for Larry A. Kushkin and Rene C. Rombouts, 3,750 for Franz A. Loehr, 2,325 for Alain C. Adam, 2,375 for Leonard E. Emge, and 40,525 for all Directors and executive officers as a group.

(4) According to their report on Schedule 13G, as of February 6, 1995, Nicholas Company, Inc., a registered investment advisor, and Albert O. Nicholas, a director, majority shareholder and president of Nicholas Company, Inc., each directly or indirectly beneficially owned 2,353,906 shares of the Corporation's Common Stock held for investment advisory clients of Nicholas Company, Inc. Nicholas Company, Inc. stated in the Schedule 13G that it was deemed to beneficially own, and Albert O. Nicholas may be deemed to beneficially own, the shares because of their discretionary authority to dispose of the shares for Nicholas Company Inc.'s investment advisory clients.

(5) Includes 2,500 shares held solely by Mr. Stefanko's wife, the beneficial ownership of which Mr. Stefanko disclaims.

(6) Includes 5,815 shares held solely by Mr. Kushkin's wife and 55,820 shares held in trust for Mr. Kushkin's children, the beneficial ownership of all of which Mr. Kushkin disclaims.

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PERFORMANCE GRAPH

The following graph compares total stockholder returns in respect of the Corporation's Common Shares over the last five fiscal years (i.e. the cumulative changes over the past five-year period of $100 invested) to the Standard & Poor's 500 Stock Index ("S&P 500") and the Standard and Poor's Specialty Chemical Group ("S&P Specialty Chemicals"). Total return values for the Corporation's Common Shares, S&P 500 and S&P Specialty Chemicals were calculated based upon market weighting at the beginning of the period and include reinvestment of dividends on a quarterly basis. The stockholder returns shown on the graph below are not necessarily indicative of future performance.

The following graph shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent the Corporation specifically incorporates this information by reference and otherwise shall not be deemed filed under such Acts.

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Measurement Period A. Schulman, S&P Specialty (Fiscal Year Covered) Inc. S&P 500 Chemicals 8/90 100.00 100.00 100.00 8/91 156.70 126.71 125.61 8/92 210.41 136.77 134.33 8/93 185.63 158.02 157.46 8/94 212.60 166.02 152.82 8/95 215.13 201.41 192.26

EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEM ENTS

In 1990, the Corporation entered into employment agreements with Messrs. Haines, Stefanko, Kushkin and Adam and certain other senior personnel. The employment agreements of Messrs. Haines, Stefanko and Kushkin provide for remaining three-year terms at all times and the employment agreement of Mr. Adam provides for a remaining one-year term at all times. The employment agreements provide that in the event employment is terminated by the employer as a result of a merger, consolidation or liquidation of the Corporation or by a change in control of the Corporation, the employee shall receive a lump sum payment in an amount equal to his salary for the term of his employment agreement, plus an amount equal to three times (for a three-year employment agreement), or one time (for a one-year employment agreement), the employee's average annual bonus during the most recent five calendar years of employment; provided, however, that the employer shall not be obligated to pay any amount which is in excess of the maximum amount which it can deduct for federal income tax purposes. In addition, if the employer terminates an employee's employment other than by reason of the events described in the preceding sentence or by reason of death, disability or cause, the employee shall receive his salary for the term of his employment agreement, plus a bonus each year for the term of his agreement in an amount equal to fifty percent of his average annual bonus during the most recent five calendar years of employment. These employment agreements may tend to discourage a takeover attempt of the Corporation due to the possible increased expenses.

In addition, the Corporation has a qualified Profit Sharing Plan (the "Profit Sharing Plan") which provides that in any year the Corporation's Board of Directors, in its discretion, may authorize the payment of contributions to the Corporation's Profit-Sharing Trust, which contributions are allocated among participants. The maximum amount which may be allocated to a participant generally is limited to the lesser of (i) $30,000 or (ii) 25% of the participant's compensation. Participation in the Profit Sharing Plan is available to all salaried employees of the Corporation who are employed on the last day of the Profit Sharing Plan Year. Benefits under the Profit Sharing Plan vest in accordance with a specified formula which provides for partial vesting starting after three years of employment with the Corporation and full vesting after seven years of employment with the Corporation. The assets of the Profit-Sharing Trust are invested, and each participant's account reflects the aggregate investment performance of the Trust assets. For the fiscal year ended August 31, 1995, the amounts contributed to the Profit Sharing Plan accounts of the persons listed in the Summary Compensation Table were: Mr. Haines, $15,000; Mr. Stefanko, $15,000; Mr. Kushkin, $15,000; Mr. Adam, $11,600; and Mr. Emge, $13,500.

The Corporation also has a non-qualified Profit Sharing Plan (the "Non-Qualified Plan") which provides that in any year the Corporation's Board of Directors, in its discretion, may authorize the accrual by the Corporation of certain amounts for the benefit of the Non-Qualified Plan's participants, in order to restore to such participants amounts not available to them under the Profit Sharing Plan due to certain limitations thereunder. Benefits under the Non-Qualified Plan vest in accordance with a specified formula which provides for partial vesting starting after three years of employment with the Corporation and full vesting after seven years of employment with the Corporation. Amounts accrued by the Corporation under the Non-Qualified Plan for the benefit of each participant reflect the investment performance which would have been realized had a corresponding amount been invested for the benefit of such participant

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during such year in the Profit Sharing Trust pursuant to the Profit Sharing Plan. For the fiscal year ended August 31, 1995, the amounts accrued by the Corporation pursuant to the Non-Qualified Plan for the benefit of the persons listed in the Summary Compensation Table were: Mr. Haines, $17,500; Mr. Stefanko, $12,083; and Mr. Kushkin $5,000.

The Corporation also has deferred compensation agreements with Messrs. Stefanko, Haines and Kushkin, providing for the payment of benefits for ten years following retirement, disability or death in the annual amount of $100,000 (two agreements each in the annual amount of $50,000), $100,000 and $75,000 (two agreements in the annual amounts of $50,000 and $25,000), respectively, except that any amounts payable at retirement will be reduced proportionately to the extent that Messrs. Stefanko, Haines and Kushkin are employed by the Corporation for less than ten years from the date of their agreements. The effective dates of Mr. Stefanko's two agreements are 1985 and 1991, of Mr. Haines' agreement is 1991 and of Mr. Kushkin's two agreements are 1985 and 1992. No additional benefits are payable under the agreements upon a change in control of the Corporation; however, payment of all of the benefits of Messrs. Stefanko, Haines, and Kushkin will be accelerated in the event of a termination of employment following certain changes in control. The Corporation owns and is the beneficiary of life insurance policies upon the lives of Messrs. Stefanko, Haines and Kushkin, in the amount of $1,000,000, $1,000,000 and $500,000, respectively.

SELECTION OF ACCOUNTANTS

Upon the recommendation of its Audit Committee, the Board of Directors of the Corporation has selected Price Waterhouse LLP as independent accountants to examine the books, records and accounts of the Corporation and its subsidiaries for the fiscal year ending August 31, 1996. In accordance with past practice, this selection is being presented to stockholders for ratification or rejection at this Annual Meeting. The Board of Directors recommends that such selection be ratified. Price Waterhouse LLP is the independent accountant of the Corporation for the fiscal year ended August 31, 1995, and is considered by the Board of Directors to be well qualified. Representatives of Price Waterhouse LLP will be present at the Annual Meeting to make a statement if they desire to do so and will be available to respond to appropriate questions.

For ratification, this proposal will require the affirmative vote of the holders of a majority of the shares of Common Stock represented at the meeting in person or by proxy. If the resolution is rejected, or if Price Waterhouse LLP declines to act or becomes incapable of action, or if its employment is discontinued, the Board will appoint other public accountants whose continued employment after the following Annual Meeting of Stockholders will be subject to ratification by stockholders.

OTHER MATTERS

The Board of Directors knows of no matters to be presented for action at the Annual Meeting other than those described in this Proxy Statement. Should other matters come before the meeting, the shares represented by proxies solicited hereby will be voted in respect thereof in accordance with the best judgment of the proxy holders.

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GENERAL INFORMATION

VOTING OF PROXIES

Shares represented by properly executed proxies will be voted at the meeting, and if a stockholder has specified how the shares represented thereby are to be voted, they will be voted in accordance with such specification. It is intended that shares represented by proxies on which no specification has been made will be voted (i) for the election of Directors and (ii) for ratification of the selection of the independent accountants.

STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the next Annual Meeting of Stockholders, presently scheduled for December 1996, must be received by the Corporation no later than July 15, 1996 for consideration for inclusion in the proxy statement and form of proxy for that meeting.

REVOCATION OF PROXIES

A proxy may be revoked at any time before a vote is taken or the authority granted is otherwise exercised. Revocation may be accomplished by the execution of a later proxy with regard to the same shares or by giving notice in writing or in open meeting.

SOLICITATION OF PROXIES

The cost of soliciting the accompanying proxies will be borne by the Corporation. The Corporation does not expect to pay any compensation for the solicitation of proxies but may pay brokers, nominees, fiduciaries and custodians their reasonable expenses for sending proxy material to principals and obtaining their instructions. In addition to solicitation by mail, proxies may be solicited in person, by telephone or telegraph or by officers, Directors and regular employees of the Corporation.

By order of the Board of Directors

JAMES H. BERICK Secretary

November 13, 1995

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End of Filing

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