<PAGE>   1
                                                                Exhibit 13


The Geon Company
1996 Annual Report

[PHOTO - LA PORTE, TEXAS MANUFACTURING FACILITY]

[LOGO - THE GEON COMPANY]

<PAGE>   2

                                ABOUT THE COMPANY

The Geon Company, headquartered in Avon Lake, Ohio, is a leading North American
producer of polyvinyl chloride (PVC) resins and the world's largest producer of
PVC compounds. The Company has 13 manufacturing plants in the United States,
Canada and Australia, and joint ventures in Europe and Southeast Asia. Since
spinning off from The BFGoodrich Company in 1993, Geon, through its leadership
and approximately 1,700 dedicated employees, has been striving to create the
benchmark company in the polymer and chemical industry.

                                ABOUT THE COVER

     Quality, efficiency and safety in manufacturing are central to Geon's
leadership in the vinyl industry. This year's annual report focuses on some of
the people and facilities of Geon, their accomplishments and their importance to
the Company's long-term objectives.


                                GEON AT A GLANCE
<TABLE>
<CAPTION>
                                       
PRODUCTS                     VINYL CHLORIDE MONOMER (VCM)        POLYVINYL CHLORIDE (PVC)         COMPOUNDS
--------                     ----------------------------        ------------------------         ---------
<S>                         <C>                                <C>                               <C>
MANUFACTURING LOCATIONS      LaPorte, Texas                      Altona, Victoria, Australia      Avon Lake, Ohio
                                                                 Deer Park, Texas                 Long Beach, California
                                                                 Henry, Illinois                  Louisville, Kentucky
                                                                 Louisville, Kentucky             Mentone, Victoria, Australia
                                                                 Niagara Falls, Ontario, Canada   Niagara Falls, Ontario, Canada
                                                                 Pedricktown, New Jersey          Plaquemine, Louisiana
                                                                 Scotford, Alberta, Canada        Terre Haute, Indiana
                                                                                                  Newton Aycliffe, England (J.V.)
                                                                                                  Singapore (J.V.)

CAPACITIES                   2.4 billion pounds per year         2.6 billion pounds per year      800 million pounds per year

APPLICATIONS AND MARKETS     Feedstock for PVC polymerization    Water and drainage piping        Appliance housings and components
                                                                 House siding                     Computer enclosures
                                                                 Flooring/Medical tubing/bags     Electrical enclosures
                                                                 Packaging                        Pipe fittings
                                                                 Coatings                         Vertical blinds
                                                                                                  Windows
                                                                                                  Wire and cable insulation and
                                                                                                   jacketing
                                                                                                  Weatherstripping
                                                                                                  Automotive components

PERCENT OF TOTAL SALES       3%                                  57%                              39%
</TABLE>




<PAGE>   3

The Geon Company

Financial Highlights


<TABLE>
<CAPTION>
                                                      Year Ended December 31,
(Dollars in Millions Except Per Share Data)       1996         1995         1994
--------------------------------------------------------------------------------
<S>                                           <C>         <C>         <C>     
Sales                                          $1,144.4    $1,267.8    $1,208.6
Employee separation and plant phase-out             -          63.9         -
Operating income                                   29.9        63.3       102.1
Net income                                         12.2        32.2        56.6
Capital expenditures                               73.4        70.0        61.5
Depreciation and amortization                      54.1        56.6        58.2
Total debt                                        156.8       147.2       104.0
Average equity market value                       580.2       680.9       765.7
Stockholders' equity                              222.4       208.9       240.2
Earnings per share                                  .50        1.24        2.01
Common shares outstanding (in millions)            23.3        24.7        26.3
Number of employees (year-end)                    1,683       1,725       1,808
Employee and Management Stock Ownership              12%          8%          4%
Shareholders (estimated as of December 31)        7,000       7,000      13,500
</TABLE>


[GRAPH]

<TABLE>
<CAPTION>
             DIVIDENDS AND REPURCHASE OF COMMON STOCK
                         $ Millions
             ----------------------------------------
<S>                     <C>
96
95
94
93
</TABLE>



[PIE CHART]

<TABLE>
<CAPTION>
         1996 SALES BY PRODUCT
         ---------------------
           $ Millions
           ----------
<S>          <C>         <C>
Resin         $645.8      57%
Compound      $452.0      39%
VCM            $33.5
Other          $13.1
</TABLE>



[PIE CHART]

<TABLE>
<CAPTION>
         1996 SALES BY GEOGRAPHIC REGION
         -------------------------------
           $ Millions
           ----------
<S>          <C>        <C>
US            $784.0     69%
Canada        $199.9     17%
NA Export      $85.7      7%
Australia      $74.8      7%
</TABLE>


                                       1


<PAGE>   4

The Geon Company

To Our Stockholders


[PHOTO]

From left to right: William F. Patient, Thomas A. Waltermire, Donald P.
Knechtges, Louis M. Maresca, Edward C. Martinelli, Gregory L. Rutman.


For several years now, the people of Geon have been saying that they are
determined to be the best. In everything we do, our sole focus has been to set
the benchmark for excellence in the chemical and polymer industry, creating a
company that serves customers, rewards stockholders and fosters employee pride.

     With this as our standard, all of us are dissatisfied with the results of
1996. Market forces, along with operating problems caused by our own mistakes,
combined for a disappointing year in earnings.

     When Geon was created through its initial public offering, we talked about
the cyclical nature of our business. In fact, we made a commitment that by
re-engineering processes, reducing costs, improving productivity and shutting
down older, inefficient operations, we would put a financial floor under Geon at
the bottom of the earnings cycle. We believe we have done just that, creating an
earnings base that on a comparable basis is more than $100 million better than
in 1992.

     Without that improvement, Geon would have suffered serious operating losses
in 1996. The competitive nature of the industry drove polyvinyl chloride (PVC)
cash margins to historic lows, more than $0.02 per pound below the last trough
in 1992-1993. Each $0.01 in cash margins represents about $0.50 per share in
earnings. Although the causes of these lower margins are clear, we believe we
must still reward our stockholders even in these tough conditions. That is our
commitment to you, our stockholders, and it is one that every Geon employee
takes seriously.

     The operating problems in 1996, which now have been resolved, occurred
during start-up of our expanded vinyl chloride monomer (VCM) facility and at
certain PVC plants. Together, these resulted in an estimated negative impact on
earnings of $0.30 per share for the year. While the absence of these losses
would not have been enough to turn the year into a satisfactory one, these
problems certainly do not reflect the kind of operating excellence we need in
this very competitive business.

     For Geon, net income in 1996 was $12.2 million, or $0.50 per share, on
sales of $1.1 billion. In 1995, net income was $71.3 million, or $2.75 per
share, before special charges, on sales of $1.3 billion.


                                       2


<PAGE>   5

     The good news for 1996 is that the business grew well. We learned some
lessons, solved some problems and achieved further cost improvements while doing
business in a highly competitive marketplace. As we head into 1997, we remain
confident in our quest for Geon to become the most profitable producer in the
vinyl industry.

                         LOW MARGINS IMPACT 1996 RESULTS

     After a tight supply-demand balance in early 1995, PVC prices and cash
margins eroded as ethylene and chlorine costs rose. Vinyl prices rose in early
1996 in response to increased demand. However, during the second half, industry
margins shrank again because of rising raw material costs and a drop in prices
at year-end. Additional North American industry capacity, as well as soft export
prices because of sluggish economies in Europe and Japan, exerted downward
pressure on North American resin prices during most of 1996. Consequently, PVC
industry cash margins for the year were approximately $0.065 per pound less than
in 1995 and $0.02 per pound less than in the down-cycle period of 1992-1993.

     World vinyl production is estimated to have reached 49 billion pounds in
1996, growing nearly 5 percent per year over the past five years. Geon expects
global demand will rise by about 6 percent per year through 2000, driven by
growth in the Asia/Pacific and other developing regions, along with continued
strength in North America.

     Industry shipments rebounded by 11 percent in North America in 1996 after a
relatively flat 1995. The rejuvenated Canadian economy was an important
contributor to the rise in demand, along with low interest rates and healthy
industrial production in the United States. Demand was especially strong in the
pipe, siding and window markets.

     People throughout the world continue to request vinyl because of its
durability and cost-effective performance.

                     VALUE CREATED THROUGH GEON INITIATIVES

     For 1996, we established some tough, challenging and important goals.
Following is a report on our progress:

                  CONTINUING COST AND PRODUCTIVITY IMPROVEMENTS

-    In our efforts to improve earnings through cost reductions, productivity
     gains, quality enhancements and growth, we established goals totaling $55
     million for the year. We achieved $32 million of that goal, with most of
     the shortfall resulting from the aforementioned problems with our VCM
     expansion and PVC manufacturing early in the year. Nevertheless, by
     year-end, resin productivity, measured in pounds of resin per employee, was
     up 16 percent, and we reduced cash conversion costs by 5 percent. Since
     1992, resin productivity has more than doubled, and we have decreased
     production costs per pound by more than 40 percent.

-    We continue to achieve impressive productivity gains in compound, with
     pounds per capacity hour up 11 percent. Today, we are running half as many
     production lines as we did in 1992, even though unit sales have grown 18
     percent. We have achieved significant savings by redesigning and
     streamlining our product line to require fewer raw materials, by reducing
     down times and by increasing run rates. The consolidation of rigid compound
     manufacturing at Avon Lake, Ohio, is almost complete, and we started up the
     new line in the first quarter of 1997. We completed the shutdown of our New
     Jersey compound line during 1996.

                          REDUCING RAW MATERIAL COSTS

-    We completed the 800-million-pound expansion of our LaPorte, Texas, VCM
     facility, bringing the plant's total capacity to 2.4 billion pounds. Our
     LaPorte facility is the largest and clearly one of the lowest-cost VCM
     plants in the world. The additional capacity reduces cost by eliminating
     most of our need to purchase VCM at market prices. In 1996, the expansion
     resulted in $8 million in raw material savings and is anticipated to save
     $8 million in 1997, if VCM cash margins remain unchanged. The start-up
     issues are now behind us and the plant is achieving planned production and
     cost targets.

-    Our joint venture agreement with Olin Corporation to jointly build a
     250,000-ton chlor-alkali plant in McIntosh, Alabama, was finalized during
     the third quarter, and construction has begun. Known as Sunbelt
     Chlor-Alkali, the joint venture will supply one-third of LaPorte's current
     chlorine needs and will be one of the lowest-cost plants


                                       3


<PAGE>   6
The Geon Company
To Our Stockholders continued



     in the industry. Construction should be completed by the end of 1997, with
     full operation in early 1998. Industry conditions in 1996 demonstrated the
     need for Geon to explore additional opportunities beyond the Sunbelt
     project to reduce raw material costs. We are continuing to look for
     creative, high-return opportunities that offer a competitive advantage.

-    Consolidation of compounding raw materials resulted in the elimination of
     nearly 140 products and approximately $1.5 million in savings.

                           PURSUING PROFITABLE GROWTH

-    Compound shipments grew well, up 11 percent for the year. Sales reached
     $452 million. Aggressive cost and productivity gains, plus solid growth,
     have significantly improved the contribution of compounds to shareholder
     economic value.

-    Specialty resins are playing an increasingly important role as we focus on
     areas to improve our profitability and growth for the future. As a result
     of rising customer demand, we are expanding our dispersion resin production
     facility in Pedricktown, New Jersey. Dispersion resins are used in a wide
     variety of flooring, automotive, coating and consumer products.

                      ENHANCING THE WAY WE SERVE CUSTOMERS

-    We have a team of very dedicated individuals bringing our new Geon 2000
     information system closer to completion. The system, which uses SAP
     computer software technology, was put into operation in late 1996 for our
     resin business. When completed companywide in 1997, it will reduce our
     operating and working capital costs, improve our service to customers and
     tie our organization together on a real-time basis for faster response.

-    We also accomplished our objective for all of our plants to earn ISO 9002
     certification. This means our customers can be sure that all of our
     facilities operate according to world-class standards of quality and
     consistency.

                           REWARDING OUR STOCKHOLDERS

-    In July, the Company completed its 1995 authorization to repurchase 10
     percent of Geon common stock. Subsequently, the Board of Directors
     authorized an additional repurchase of up to 2.5 million shares, of which
     600,000 shares have been purchased to date. Since 1993, the Company has
     repurchased 4.5 million shares and returned more than 110 percent of our
     net income to stockholders through dividends and share repurchases.

                      DRIVING RESULTS WITH INCENTIVE PLANS

-    We recognize our employees' contributions and accomplishments through our
     gain-sharing and Success-Sharing programs, which link employee
     compensation directly to stockholder value. The gain-sharing program is
     based on specific improvement and performance targets for our manufacturing
     employees. In addition, all employees are eligible for Geon stock awards
     under our Success-Sharing plan, which follows the same criteria as our
     management incentive plan, so that everyone is focused on the same Company
     goals. In 1996, as a result of our performance, payouts were down
     substantially from 1995 and totaled $7.5 million. Geon employees and
     directors now hold 12 percent of all outstanding shares, up from 8 percent
     last year.

                    SETTING RECORDS IN SAFETY AND ENVIRONMENT

-    Once again, we were very proud of our safety and environmental performance
     this year. Many sites set new record-lows for accidents and environmental
     releases. In North America, we have now completed more than three years, or
     12 million employee hours, without a lost-time accident. We believe this is
     an unprecedented achievement in the chemical industry.

                                 1997 AND BEYOND

     As we look forward to 1997, we once again see challenges for Geon. Just as
in 1996, we are beginning the year at very low margins in our commodity resin
business. While we have announced price increases of $0.06 per pound for resins



[PHOTO - WILLIAM F. PATIENT]
WILLIAM F. PATIENT
Chairman of the Board, President and Chief Executive Officer
/S/ W. F. Patient


                                       4


<PAGE>   7

and $0.03 per pound for compounds, our major raw materials (ethylene and
chlorine) are also starting the year with announced price increases.

     We estimate additional vinyl industry capacity in 1997 to be comparable to
the trend line for industry growth. On the demand side, we anticipate returning
to a more normal growth rate of approximately 2 times real gross domestic
product. As a result, industry capacity utilization rates in 1997 are projected
to be similar to those in 1996. Certain risk factors that may affect these
forward-looking comments are discussed on page 33.

     At Geon, we are proceeding with our strategy of creating new ways to
generate an acceptable level of earnings even at the bottom of the cycle. Our
belief is that to run the business right, we must focus on driving costs even
lower, improving efficiencies and achieving operational excellence in every
aspect of our business. We need to innovate the best and lowest-cost systems,
processes and products to provide more value to our customers than the
competition. Simply, we must achieve the industry's best quality, reliability,
productivity and cost.

     In resins, we remain highly focused on becoming the low-cost provider. We
have set clear cost-reduction targets for 1997 and 1998 to improve earnings,
even if the industry persists at current record-low margins. Also, we will
continue to leverage our existing assets to grow with our customers, while
minimizing additions to capital.

     We intend to strengthen compounds by being the low-cost provider and the
industry leader in quality and service. As in resins, the effort to reduce costs
is relentless. We will provide better service by improving product consistency
and on-time delivery. Also, by penetrating new markets, participating in
international joint ventures and targeting customers who are growing faster than
the rest of their industry, we will enhance compound growth.

     Our accomplishments have proved that our people are a primary key to our
success. The people of Geon understand that our industry and our competitors are
not standing still. Continuous improvement will be necessary if we are to set
the benchmark for excellence in our industry and create new value for our
stockholders.

     Through productivity improvement, business simplification, overhead
reduction, wise investment in technology and -- most importantly -- cost
efficiency, we will create customer satisfaction and the kind of profitability
you, our stockholders, expect.

     The management and employees of Geon are committed to that goal!

                                                           March 3, 1997


[PHOTO - DONALD P. KNECHTGES]
DONALD P. KNECHTGES
Senior Vice President, Technology/Engineering
/S/ D. P. Knechtges


[PHOTO - LOUIS M. MARESCA]
LOUIS M. MARESCA
Vice President, Operations
/S/ L. M. Maresca


[PHOTO - EDWARD C. MARTINELLI]
EDWARD C. MARTINELLI
Senior Vice President, Commercial
/S/ E. C. Martinelli


[PHOTO - GREGORY L. RUTMAN]
GREGORY L. RUTMAN
Vice President, General Counsel and Secretary
/S/ G. L. Rutman


[PHOTO - THOMAS A. WALTERMIRE]
THOMAS A. WALTERMIRE
Chief Financial Officer
and Senior Vice President, Human Resources
/S/ T. A. Waltermire



                                       5

<PAGE>   8

The Geon Company

40 Years of Excellence in Serving North America
Niagara Falls Plant


[PHOTO - MARK MESAROS  & DAVE DUNSEITH]
/S/ Mark Mesaros
/S/ Dave Dunseith

[PHOTO - CLIFF MORRIS]
/S/ Cliff Morris

[PHOTO - B. MARSHALL]
/S/ B. Marshall


Geon's Niagara Falls plant, the largest producer of vinyl resins and compounds
in Canada, is marking its 40th anniversary in 1997. The plant and its 160
employees serve primarily the siding, rigid profile, general flexible and
automotive markets in eastern Canada. Its current capacity of nearly 600 million
pounds of resin and compound per year is more than 50 times its capacity when it
opened as a BFGoodrich facility in 1957 with 50 employees.

     Niagara Falls employees take a cross-functional team approach to address
strategic issues such as product quality, process uptime, product change time,
unit operations and gain-sharing. As a result of these efforts, the resin and
compound units set six new monthly production records during 1996, and resin
maintenance downtime and costs were the lowest in the Company in the fourth
quarter.

     As noted in the Safety and Environmental Performance section of this
report, the plant has achieved more than three years without an environmental
exceedance, thanks largely to the efforts of its wastewater treatment team,
which totally revamped the plant's treatment operating procedures. Each day, the
plant treats 3.5 million to 4 million liters of wastewater.

     Niagara Falls employees reached the milestone of 1 million hours worked
without a lost-time injury on September 21, 1996. In honor of this achievement,
the plant received an award from the Ontario Industrial Accident Prevention
Association. The plant has experienced only one recordable injury since August
1994.

     Operational excellence and responsible care are the foundations for
benchmark performance at the Niagara Falls plant, where employees are satisfied
with nothing less than being the best.

                                       6

<PAGE>   9



[PHOTO - KATHY BRIEN & LILI L. PILLITTERI         
/S/ Kathy Brien
/S/ Lili L. PILLITTERI        

[PHOTO - RANDY REEB]
/S/ Randy Reeb

[PHOTO - DENNIS J. REYNOLDS AND DAN POWELL]
/S/ Dennis J. Reynolds
/S/ Dan Powell



NIAGARA FALLS EMPLOYEES:

WILLIAM T. ABBOTT - TRACY L. AIELLO - DOMENIC J. ANELLO - DANIEL H. ARSENEAULT -
MICHAEL N. BABIN - ROBERT B. BABIN - ROGER BARTHE - DARREN M. BAYES - ARTHUR R.
BENVENUTI - ANTHONY F. BORG - CAMERON A. BOTTING - JOHN J. BOUDREAU - MARK R.
BRAIN - CHAD R. BRAUNECKER - KATHLEEN R. BRIEN - PAUL R. BRUNET - LEE A.
BUCKBOROUGH - BRIAN BURLEY - DENNIS L. BUSH - LEO BUSSI - JOHN E. CAESAR - BRIAN
A. CAIN - JOHN L. CAIN - DIANE E. CAMPBELL - ANTHONY T. CANHAM - DOMENIC
CARCHIDI - GIOVANNI P. CARDINALE - MARK C. CLENDENNIN - GAVIN D. COCKMAN -
DONALD L. COTTER - SCOTT W. CRAIN - JAMES E. CULP - ANNA M. CUPOLA - DONALD J.
DAVIDSON - RUSSELL K. DEKKER - DOUGLAS DEROCHIE - ARTHUR S. DICK - HERMAN G.
DIEPOLD - MICHAEL D. DIETRICH - FRANK P. DIODATI - LAURENT A. DUCHESNE - WARREN
A. DUNN - DAVID G. DUNSEITH - DANIEL E. ELLIS - ARTHUR P. FEDEROW - GREGORY G.
FINKBEINER - JOHN M. FRANIC - DANIEL FROUDE - ROBERT J. GARTNER - CHRISTOPHER S.
GAUTHIER - TIMOTHY C. GORDON - HERB GRAF - GREGORY A. GREEN - A. TERRY HALLIGAN
- JOHN A. HALLIGAN - JURGEN J. HAMM - RALF G. HAMM - STEPHEN A. HARRIGAN -
ROBERT D. HAWKEN - LAYN C. HAYES - GERALD R. HEDGE - ROBERT J. HEENEY - DAVID
HILL - NORMAN L. HOLMES - RAYMOND J. HORTH - KITCHENER S. HOWARD - RICHARD J.
HUNTER - JAMES F. IRWIN - WILLIAM P. IRWIN - GEORGE D. JACKSON - DAVID J.
JARRETT - RONALD S. JOHNSTON - W.R. GLEN JOHNSTON - CHARLES T. KELLY - JAROSLAW
O. KIT - PATRICK F. KORTE - STEPHEN KVAS - CHRISTOPHER D. KYLE - GERALD E.
LALONDE - DONALD G. LASLO - PETER LITNEWSKI - JEFFREY W. LITTLE - CHRIS H.
LOCOCO - NORMAN J. LUMSDEN - EDWARD E. LUTZ - SCOTT L. MAC INNES - DIANE S.
MACLEAN - P. MICHAEL MACLEAN - PATTI-ANNE MACLEAN - PAUL C. MACLEAN - DONALD N.
MAJOR - THOMAS M. MARALDO - ANTHONY MARRARA - BERTRAM MARSHALL - PHILIP W.
MARSHALL - FIONA H. MCCABE - JAMES MCCANN - WILLIAM J. MCDONALD - MARTIN E.
MCRAE - BYRON E. MCWHIRTER - MARK S. MESAROS - BRIAN B. METHVEN - FRANK MOLNAR -
HAROLD J. MOLNAR - RENATO A. MORETTIN - CLIFFORD E. MORRIS - EDWARD A. MORRIS -
ROSE MURPHY - FREDERICK M. MURRAY - KENNETH J. NIVEN - PAUL R. OWENS - CHRIS A.
PALMER - TIMOTHY H. PARKES - STEPHEN J. PARKINSON - JOHN F. PELLEGRINO - JAMES
F. PERRY - DALE A. PIDGEON - BRADLEY J. PIFIEFER - LILI L. PILLITTERI - DANNY M.
POTTER - THOMAS J. POUPORE - DANIEL W. POWELL - BRIAN C. PREECE - JOHN M. PUN -
CRAIG RAE - DOUGLAS D. REEB - RANDY D. REEB - BRIAN J. REES - CHRISTOPHER G.
REID - DAVID A. REID - DENNIS J. REYNOLDS - JOAN R. RICHARDSON - COLIN ROHRMOSER
- CHRIS A. RUDDY - STEVE G. RUSKOFF - EDWARD D. RYAN - MAURICE D. SAUVE -
SUZANNE M. SAWATSKY - MELVIN C. SCHABEL - BLAIR C. SCHIEBEL - RAJENDRA N. SHAH -
DAVID A. SHELLEY - BRIAN J. SIMS - FIORINDO F. SINIBALDI - JAMES C. SMITH -
THOMAS W. SMITH - DANNY D. SNIDER - ROBERT M. SOYKA - SAVIOUR SPITERI - DAVID J.
STEWART - LARRY J. STRADER - JAN STRYJSKI - LEONARD SUTTON - BRUNO TANASI - PAUL
TANASI - LOUISE M. TAYLOR - STEPHEN A. THOMPSON - JAMES THOMS - JACK TOFFOLO -
MARGARET A. VERES - JOHN E. VOOGT - PETER J. VOOGT - MIHKEL U. WAHER - GEORGE A.
WALLACE - JEFF D. WARRELL - MARK J. WHITWELL - LINDA S. WIDDIFIELD - WILLIAM H.
WILKIE, JR. - ERWIN J. WILLAMS - WALTER WIRA - KAREN M. WOODRUFF - R. MATTHEW M.
WOODRUFF - ROBERT F. WOODRUFF

                                       7


<PAGE>   10

The Geon Company

Creating Value through Profitable Expansion
LaPorte Plant


[PHOTO - JERRY R. DIAL & ALEX JONES]
/S/ Jerry R. Dial
/S/ Alex Jones

[PHOTO - BRUCE ? GRABILL]
/S/ Bruce ??. Grabill

[PHOTO - DOUGLAS ??. ???]
/S/ Douglas ??. ???


When the expansion of Geon's LaPorte, Texas, vinyl chloride monomer (VCM)
manufacturing plant was completed in 1996, the facility became the largest of
its kind in the world. But size isn't the only thing that makes the LaPorte
plant unique. It is the only VCM plant in the United States to receive ISO 9002
certification, recognized worldwide as the standard of quality processes.

     The facility is also one of the most efficient VCM manufacturing plants in
the world. Since 1991, its people have achieved $8 million in annual savings
through efficiency and productivity improvements.

     For The Geon Company, the expansion of the LaPorte plant's capacity by 60
percent, to 2.4 billion pounds per year, was one of the most significant
developments of 1996. VCM is the building-block material in the manufacture of
polyvinyl chloride resin. The process combines ethylene and chlorine into
ethylene dichloride, which is purified and fed to cracking furnaces where VCM is
produced. The VCM is then shipped to Geon's resin plants or sold on the open
market.

     Geon's increased self-sufficiency in VCM reduces its raw material costs
because the Company can produce the material at the LaPorte plant for less than
market prices. By lowering the cost of the VCM supplied to the Company's resin
manufacturing facilities, Geon advances a step further toward its objective of
being a low-cost leader in the world vinyl industry.

     Safety and the environment also are high priorities at the LaPorte plant,
and its performance consistently ranks as the best in the industry. The plant
was named the Texas Chemical Council's "Best in Texas" in 1993 and is currently
pursuing "STAR" recognition by the Occupational Safety and Health
Administration. Since 1989, approximately $10 million has been spent to improve
the plant's safety and environmental systems.

     The plant employs about 175 full-time workers in operations, maintenance,
engineering and support functions, along with 50 contract employees to
supplement maintenance. The people of LaPorte are committed to the mission of
reliably achieving high-quality, low-cost monomer manufacturing in a safe and
environmentally sound manner.


                                       8


<PAGE>   11


[PHOTO - GINA L. ENSMANN & WALLACE GABRIEL]
/S/ Gina L. Ensmann
/S/ Wallace Gabriel

[PHOTO - GLENN HUDSON]
/S/ Glenn Hudson

[PHOTO - DEAN McGEE]
/S/ Dean McGee


LAPORTE EMPLOYEES:

David W. Abbott - Dennis C. Ayers - Gary D. Bass - Patrick S. Bearb - Max A.
Bennett - Shane Bilbrey - Robert E. Blythe - Lynn R. Boedecker - Preston K.
Bonner - Dennis D. Brown - Mary L. Brownfield - Phillip H. Buck - Clayton D.
Burrell - Christopher Burrell - Michael A. Butler - Kathleen K. Cameron - Juan
A. Canizales - Norman J. Carlegis - William H. Carraway - Gerald S. Carrier -
Rickey D. Caruso - Ernest R. Chance - David F. Charba - Eddie L. Childs - Dan R.
Clark - Douglas A. Conner - Doswell A. Conner, Jr. - Richard Contreras -
Christopher A. Crandall - Richard A. Crandall, Jr. - Calvin D. Crew - Steven J.
Crowson - Constance J. Dattilo - William L. Davis, Jr. - Lee E. Dearman -
Kathleen M. Deitz - Kenneth R. Delaney - Stephen A. Delasbour - Dennis J. Demel
- Jerry R. Dial - Eduardo L. Diaz-Sandi - James G. Dominy, Jr. - Ronald J.
Dupree - Wilmer E. Easter - Gina L. Ensmann - John P. Estrella - Edward G.
Flores - Bruce D. Foley - Jonathan P. Fried - D. Andrew A. Furnas - Wallace E.
Gabriel, Jr. - Ryan P. Garnett - Gary L. Glover - Albert P. Golt - Johnny D.
Gonzalez - Milton J. Goudeau - Lloyd R. Goyer - Katherine M. Grabill - Bruce W.
Grabill - Bruce A. Graham - James G. Greer - Gerald E. Griffin - David A.
Hamilton - Beverly J. Hancock - Jack W. Hanel - James R. Harper - Donald L.
Harrison, Jr. - Jerry W. Heintschel - Lujuna J. Henley - David J. Hinson -
Thurman Hively - Mark C. Hoffman - John D. Hollaway - Ben A. Holliday - Troy F.
Hollin - Owen R. Huckabay - Glenn R. Hudson - Rogers M. Jackson, Jr. - James D.
Jaster - Barry H. Johnson - Victor J. Johnston - Bryan D. Jones - Craig E. Jordy
- Kathleen A. Kapsiak - Patrick H. Kelly - Carl A. Kemp - Ronald P. Klein -
Kenneth L. Lacy - Charles A. Lambard - James T. Lancelin - David L. Laubacher -
Paul E. Leadon - Jerry L. Leos - William P. Lesko - Joel H. Lindahl - Troy D.
Lindsey - Larry J. Logan - Jeffrey D. Logan - Juan G. Lopez - Timothy C. Lowell
- Sammy D. Lozano - Kevin W. Machemehl - Franklin J. Manahan - Timothy G.
Manning - William G. Marin - Harold I. Maris - John O. Marshall - Mark P.
Mascorro - Donald C. Maughn - Victor L. McClure - Alfred D. McGee - Shawn P.
McGlynn - David S. McNair - Lloyd L. Mercer - Nick W. Mitchell, Jr. - Martha H.
Moreno - Epifanio Moreno, Jr. - Scott D. Morgan - Robert L. Morgan - Joe R.
Morris - Michael W. Mounts - Billy V. Munselle - Randy C. Nalley - Robert A.
Neibert - James P. Nolan - Lester V. Olive - James C. O'Sullivan - Ronald A.
Paige - Paul D. Pawlowski - Curtis R. Peery - Abel R. Perez - David W. Peterson
- David A. Pierce - Lawrence Popiel - Carroll C. Potts - Istvan Potyondy - Larry
I. Probst - Roger A. Ratisseau, Jr. - Sylvia J. Ray - Dennis G. Roberts, Jr. -
James S. Robinson - Johnny B. Rowell - Alan T. Sakach - John E. Sanders o
Stephen Schultz - Anne L. Selcer - Oren T. Sheppard - Gary D. Shields - Donald
R. Shrum - David L. Simmons - Gary L. Smotherman - Carol A. Spencer - Alan K.
Spriggs - Peter K. St. Julian - Arthur R. Starnes - Joseph M. Steele - Joseph B.
Stilwell - Mark A. Stroderd - John T. Sullivan - Betty A. Swearingen - Cecil V.
Tanner - John L. Taylor, Jr. - Reggie E. Threlkeld - Chris B. Timmins -
Alejandro Torres - Terry E. Townsend - Samuel O. Tuck - Pamela M. Vaughn -
Ronald J. Vaught - Ronnie L. Venable - William A. Wagner - Mark E. Wilkins -
Leslie E. Williams - Tadarell L. Woods - Robert L. Wronko


                                       9


<PAGE>   12

The Geon Company

Working Together for Benchmark Performance
Louisville Plant


[PHOTO - CARL FRANK]
/S/ Carl Frank

[PHOTO - PETE CASTELLA]
/S/ Pete Castella

[PHOTO - PAUL E. SUMPTER]
/S/ Paul E. Sumpter


The people of Geon's Louisville, Kentucky, plant have worked so far this decade
without a lost-time injury, accumulating more than 3.4 million safe working
hours during that span. Such exemplary performance is standard operating
procedure at the Louisville plant. The facility, which was opened by BFGoodrich
in 1942, today employs 137 people and produces 700 million pounds of resins and
compounds per year.

     Since 1992, productivity improvements have increased the plant's resin
production capability by nearly 50 percent. Debottlenecking efforts during 1996
increased resin capacity by 120 million pounds per year, or 20 percent, at a
cost of $4 million.

     Self-directed teams have achieved significant improvements in several
important areas. In compounds, for example, Louisville employees set a new
production record in 1996. Another self-directed team has increased the cost
efficiency of utility usage and eliminated steam outages, leading to more
consistent production.

     In an intensive employee involvement program, department committees
generate ideas to make their departments more competitive. The committees
conduct pilot programs to test their ideas. Successful programs are submitted to
a vote of the department's employees. If the employees vote to implement a
program, it is sent to a joint steering committee -- consisting of five
union-designated representatives and five company-designated representatives --
for final approval. In this way, management, the union's leadership and its
membership are working together to make the Louisville plant a world-class
facility.


                                       10


<PAGE>   13


[PHOTO - JOSEPH E. MORRIS JR.]
/S/ Joseph E. Morris Jr.

[PHOTO - ROY E. TITUS]
/S/ Roy E. Titus

[PHOTO - LATASCA D. SMITH & GEORGE A. HAYSLEY]
/S/ Latasca D. Smith
/S/ George A. Haysley


LOUISVILLE EMPLOYEES:

Edward R. Adams - Joseph W. Arnold - Edward L. Ballard - Anthony W. Barker -
Patrick E. Barnes - Gerald Bartz - Charles A. Beck - John M. Bell - Edwin J.
Blake, Jr. - Robert L. Boehnlein - Thomas D. Boisvert - Michael J. Booth - Mark
S. Bradley - Stephen T. Brown - Donald L. Bunch - Lloyd B. Byrd - Mickey J.
Carmack - Pete Castella - Wallace P. Cawthon - Richard H. Charles - Paul T.
Clagett - Gerald T. Clark - Herman Cornett - Charles R. Darst - Jerry T.
Davenport - William L. Davis - Stephen A. Deetsch - Carl E. Denner, Jr. -
Richard A. Doebler - Michael T. Dove - Kathy L. Eads - John E. Eddleman -
Richard W. Exton - Harold R. Finley, Sr. - Karen C. Finn - Larry M. Foreman -
Phillip L. Fortwengler, Sr. - Carl W. Frank - Richard L. French - Robert J.
Fritz - David A. Gahafer - William L. Gant - Gordon B. Garrett, Jr. - Michael G.
Goebel - Russell G. Gregory - Darrell R. Gresham - Thomas D. Guelda - James C.
Hafling - Stephen E. Hale - David A. Hale, Jr. - Elmer R. Hall - Michael L.
Harmon - George A. Haysley - Ronald W. Herink - David C. Hicks - Ronald L. Hill
- Jerry D. Hooper - Joseph D. Hughes - Glyn W. Humphrey - William K. Jarrett -
Lester R. Jewell - James R. Johnson - Michael E. Johnson - Mark D. Johnson -
Stephen E. Kannapel - James A. Kennedy - Richard W. Kern - William H. Kirksey -
Gary L. Lantz - Merrill G. Law - James B. Ledford III - Francis J. Levy, Jr. -
David A. Lile - Holly L. Livermore - Albert J. Lorey, Jr. - Carl A. Manion -
James S. Martin - David L. Mask - Paul D. May - Ted J. Michalik - Michael V.
Mindel - William T. Minor - Jason L. Moore - Franklin D. Moore - Joseph E.
Morris, Jr. - William T. Mullins - John O. Nacke - James S. Nelson - Morris J.
Newhouse - Merrille Noe - Larry F. Norfleet - John J. O'Bryan - Ben F. Owens -
Isaac A. Owens - Robert L. Patton - Randal B. Paul - Gerald R. Payne - John E.
Peay - Bradley R. Perkins - Ernie E. Phelps - Sarah O. Puckett - Darrell L.
Purvis - Gary L. Rapp - John H. Rayburn - Paul H. Reger - Edwin P. Reyling -
Robert J. Richardson - Vickie L. Sabel - Karl V. Sanders - John C. Schaap -
Fredric M. Schuler - David R. Scoggin - Miriam D. Shelburne - Thomas L. Shields
III - Robert G. Short - Ronald Shuffitt - Dave L. Sibley - La'Tasca D. Smith -
James A. Smith, Jr. - Nelson E. Snider - Charles B. Spencer - Larry W. Stivers -
Paul E. Sumpter - Michael J. Thompson - Roy E. Titus - Bruce H. Todd, Jr. -
Charles Torain, Jr. - Rex A. Turner - Terry D. Vincent - James K. Walsh - Jerry
E. Walston - Robert E. White - Thomas E. Willett - Winfrey Williams - Larry Wise
- Victor L. York


                                       11


<PAGE>   14

The Geon Company

Safety and Environmental Performance Report


Geon's excellent safety and environmental record reflects the high priority our
people place on preventing accidents, eliminating chemical emissions and
reducing waste. In the past year, the people of Geon continued their already
stellar performance in each of these areas.

     On January 11, 1997, our North American employees completed a third full
year without a lost-time injury, defined as an on-the-job injury which requires
an employee to be away from the workplace for at least one day. This is
equivalent to 12.2 million employee working hours without a lost-time injury.
Worldwide, Geon facilities have not experienced a lost-time injury since October
1995, or 5.1 million working hours.

                              OPERATING INJURY-FREE

     Many of our plants have operated for extraordinary lengths of time without
a lost-time injury. Deer Park has experienced no lost-time injuries in the past
11 years, or 2.2 million working hours. The Henry and Terre Haute plants have
recorded 8 1/2 years each, or 3.4 million and 1.5 million working hours,
respectively, and the Louisville plant has operated 7 1/2 years, or 3.7 million
working hours, without a lost-time injury.

     Five of our plants -- Altona, Avon Lake Compounding, Long Beach, Plaquemine
and Scotford -- completed 1996 without a recordable injury of any kind. Of
these, Plaquemine has operated more than four years, and Scotford more than
three years, without a recordable injury, defined as one which requires more
than first-aid treatment.

     Geon's injury prevention success is having a significant positive impact on
workers' compensation claims, resulting in cost reductions for the Company. For
the three-year period of 1994 through 1996, workers' compensation claims, both
in dollar terms and the actual number of claims, were reduced by approximately
75 percent compared with the period of 1991 through 1993.

                          REDUCING EMISSIONS AND WASTE

     The Company also continued its progress in reducing chemical emissions and
other waste materials in 1996. We matched our previous best-ever performance of
1995 in reportable chemical releases and permit exceedances, with six of our
plants exhibiting 100 percent compliance during 1996. Such performance



[GRAPH]
                     1996 GEON EMPLOYEE SAFETY PERFORMANCE

<TABLE>
<CAPTION>
                                  INCIDENCE RATE (1)
                            ------------------------------
                            TOTAL RECORDABLES    LOST TIME
                            -----------------    ---------
<S>                         <C>                 <C>    
CMA COMPANIES OVER 
  2 MILLION HOURS/YEAR
GEON(2)                                              0

<FN>
(1)  Injuries per 200,000 hours (or 100 employees/year)
(2)  Full-year 1996 Geon statistics
Source: CMA 1st-half 1996 Injury & Illness Report
</TABLE>


[GRAPH]
<TABLE>
<CAPTION>
                 GEON LANDFILL DISPOSAL
                    Index 1993 = 100
                 ----------------------
<S>                     <C>
93
94
95
96
</TABLE>


                                       12


<PAGE>   15

represents a truly exceptional team effort by all employees at each of our
plants. Noteworthy is the Niagara Falls plant, which has completed three years
without a wastewater exceedance, and the LaPorte plant, which maintained
excellent environmental and safety performance while undergoing a major capacity
expansion and the subsequent start-up of new process equipment.

     A combination of process improvements and recycling efforts at all Geon
plants has reduced the Company's overall generation of wastes disposed at
landfills and through other means. At most of our plants, employees are rewarded
for meeting waste reduction goals as part of their overall gain-sharing
programs.

     Just as a focus on safety can translate into cost savings, an effective
recycling program can also provide monetary returns for the Company. Overall,
Geon recycled 7.6 million pounds of materials in 1996, resulting in a net
savings of approximately $500,000.

     For example, the Pedricktown plant recycled a variety of materials,
including drums, paper, cardboard, wood, used oil and solvents, for a net return
of $49,000 in 1996. The Avon Lake site program recycled 1.4 million pounds of
various materials during the year.

                    AWARDS RECOGNIZE OUTSTANDING PERFORMANCE

     In recognition of our employees' personal diligence, teamwork and
outstanding safety record, the Chemical Manufacturers Association (CMA) honored
Geon with its Lammot du Pont Safety Award in June 1996. The award was
established in 1951 to encourage member companies to improve their industrial
safety programs. Geon won the award in the category of companies with 2 million
to 20 million employee hours per year. Geon achieved the greatest reduction in
injury and illness incidence rates among all CMA companies in the category for
the five-year period ended December 31, 1995.

[GRAPH]
                            GEON PLANT EMISSIONS(1)
                               Base Year 1987=100
<TABLE>
<CAPTION>
                    87    88    89    90    91    92    93    94    95    96e
                    --    --    --    --    --    --    --    --    --    ---
<S>                <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>
AIR
WATER
OFF-SITE(2)        100

<FN>
(1)  SARA Title III Emissions
(2)  Landfill and other
</TABLE>



[PHOTO - GARY SMOTHERMAN]
/S/ Gary Smotherman

[PHOTO - GERALD GRIFFIN]
/S/ Gerald Griffin

[PHOTO - SAMMY D. LOZANO]
/S/ Sammy D. Lozano

[PHOTO] In June 1996, the people of Geon received the Chemical Manufacturers
Association's Lammot du Pont Safety Award, one of the highest honors a chemical
company can earn. The award recognizes Geon's stellar performance in preventing
injuries and accidents.


                                       13


<PAGE>   16

The Geon Company

Safety and Environmental... continued

[PHOTO]

     Geon once again received the Conrail Diamond Drop Award for flawless
shipping, based on performance in 1995. The award recognizes companies that ship
at least 1,000 rail cars of hazardous material during the year without a
shipper-caused release. Of the 26 chemical producers that earned the award last
year, Geon is the only company that has received the award in each of the eight
years since the award's inception.

     In April 1996, the Vinyl Institute presented awards to five Geon plants for
their achievements to improve worker safety and protect the environment. Deer
Park received the Environmental Excellence Award for its nine consecutive years
of perfect compliance with national standards for vinyl chloride emissions.
Niagara Falls, Pedricktown, Scotford and LaPorte each received the Environmental
Achievement Award for minimizing air pollutant emissions, and the Safety
Performance Award for improving worker safety.

                      ENVIRONMENTAL SCIENCE SUPPORTS VINYL

     Scientific research is providing additional evidence that vinyl is not a
significant source of dioxins in the environment, as some environmental groups
have claimed.

     In the largest independent study ever conducted on the potential
relationship between chlorine and dioxin emissions from waste combustors, no
statistically significant relationship between waste feedstock containing
chlorine and dioxin output concentrations was found. Of 90 facilities with
sufficient data to analyze the effect of chlorine on dioxin concentrations, 80
percent showed no relationship, while 11 percent displayed an increase in dioxin
emissions and 9 percent showed a decrease.

     These results indicate that factors other than chlorine, such as combustor
equipment and operating conditions, are what influence dioxin concentrations.
The study, which was directed by the American Society of Mechanical Engineers,
confirms the findings of an earlier study by the New York State Energy Research
and Development Authority, which concluded that the presence or absence of vinyl
has no effect on the amount of dioxin emitted during the incineration process.

     The vinyl industry recently established an independent review panel of
experts who will participate in a multi-year testing program designed to measure
potential dioxin emissions from various points in the vinyl production process.
Results of this "characterization" program, of which Geon is a key participant,
are being shared with the U.S. Environmental Protection Agency as they become
available.

     In this and other environmental and safety matters, Geon and its people are
dedicated to setting high standards and acting responsibly as the benchmark for
the rest of the industry. We are determined to continue leading the way through
outstanding performance in the coming years.


                                       14


<PAGE>   17

The Geon Company and Subsidiaries

Financial Summary


TABLE OF CONTENTS
Management's Analysis..................................................16
Consolidated Statements of Income......................................17
Consolidated Balance Sheets............................................19
Consolidated Statements of Cash Flows..................................21
Consolidated Statements of Stockholders' Equity........................22
Notes to Consolidated Financial Statements.............................23
Quarterly Data.........................................................31
Selected Five-Year Financial Data......................................32
Report of Independent Auditors.........................................33
Corporate Information..................................................34
Board of Directors.....................................................35


[GRAPH]

<TABLE>
                                         GEON SALES AND SHIPMENTS
                                               $ Millions
                                             Index, 1992=100
<CAPTION>
                                     92     93     94     95     96
                                     --     --     --     --     --
<S>                                 <C>    <C>    <C>    <C>    <C>
Dollars, Total
Shipments, Resins & Compounds
  North America
</TABLE>



[GRAPH]

<TABLE>
<CAPTION>
             GEON SALES PER EMPLOYEE
               Pounds per Employee
                 Index, 1992=100
             -----------------------
<S>                  <C> 
92
93
94
95
96
</TABLE>


[GRAPH]

<TABLE>
                                 CAPITAL EXPENDITURES AND DEPRECIATION
                                             $ Millions
<CAPTION>
                                     92     93     94     95     96
                                     --     --     --     --     --
<S>                                 <C>    <C>    <C>    <C>    <C>
Capital Expenditures
Depreciation
</TABLE>



[GRAPH]

<TABLE>
<CAPTION>
                EARNINGS BEFORE INTEREST, TAX,
                DEPRECIATION AND AMORTIZATION
                        $ Millions
                -----------------------------
<S>                  <C> 
92
93
94
95
96
</TABLE>



[GRAPH]


<TABLE>
                                    INDUSTRY PVC SHIPMENTS AND MARGINS
                                            Billions of Pounds
                                             Cents per Pound
<CAPTION>

                                90     91     92     93     94     95     96
                                --     --     --     --     --     --     --
<S>                            <C>    <C>    <C>    <C>    <C>    <C>    <C>
PVC Shipments
Margin Over Feedstock(1)

<FN>
(1) Based on contract ethylene and chlorine prices, and pipe resin price as
    reported by CMAI and Chem Data Inc.
</TABLE>


                                       15


<PAGE>   18


The Geon Company and Subsidiaries

Management's Analysis - Statements of Income


     In 1996, the Company achieved record resin and compound shipments. Income
fell, due to a lower spread between selling prices and the cost of key raw
materials. New production capacity throughout the industry depressed the
capacity utiliza-tion rate and undermined attempts to pass on rising raw
material costs. The spread over raw materials averaged 2 cents per pound below
the last industry cycle trough of 1992-1993. Despite the lower margins, Geon's
operating income of $29.9 million was an improvement of $52.8 million over 1992.
This improvement is the result of Company efforts to increase unit sales
volumes, higher productivity and reduced costs.

INDUSTRY CONDITIONS - The Company believes that, based on the Society of
Plastics Industry's December 1996 data, North American (U.S. and Canada)
producer shipments (including ex-ports) of PVC resins are estimated to have
increased 11% over 1995. In 1996, based on U.S. government data, export
shipments (8% of total shipments) are estimated to have decreased 22% from 1995.
Total 1995 shipments were flat with 1994.

     Capacity utilization (shipments/capacity) for North America is estimated at
95% of effective capacity (89% of nameplate) in 1996. North American capacity
increased 9% over 1995. Effective capacity utilization rates in 1995 and 1994
were 94% and 101%, respectively.

     The Company believes that average industry operating margins (price less
raw material costs) for the largest PVC resin market applications decreased
approximately 6.5 cents per pound in 1996 as compared with 1995. This decrease
was the result of lower average selling prices of nearly 20%, only partially
offset by lower average feedstock costs. Average chlorine costs approximated
1995 levels. While ethylene costs increased continually during 1996, they
averaged slightly below 1995 levels. The 1995 average operating margins were
approximately 1.5 cents per pound above 1994.

1996 RESULTS OF OPERATIONS - The Company had sales of $1.144 billion for 1996, a
decrease of 10% from 1995. The Company's unit shipment growth exceeded the
industry with increases in resin and compound of 14% and 11%, respectively. This
unit sales volume growth was more than offset by decreases in resin selling
prices. Also, the VCM volume being exported substantially decreased from 1995.

     In 1996, the Company had operating income of $29.9 million, down from
$127.2 million in 1995, excluding the special charge primarily associated with
the compound manufacturing reconfiguration. This decline in operating income
primarily resulted from the severe drop in industry operating margins. The lower
1996 operating margins, as compared with 1995, decreased resin operating income
by approximately $110 million. The Company continues to focus on cost reductions
and productivity improvements. In April 1996, the 800-million-pound VCM
expansion commenced production. Construction is proceeding on a jointly owned
250,000-ton chlor-alkali plant. The plant's start-up is expected in late 1997.
During the year, the Company further improved its resin production per unit of
capacity and compound manufacturing output per line hour. Also in 1996,
employment declined by 2%.

1995 RESULTS OF OPERATIONS - Sales revenue for 1995 increased 5% over 1994. The
increase resulted primarily from higher selling prices. Resin and compound
volumes decreased 2% and 8%, respectively. The Company had 1995 operating income
of $127.2 million, which was an improvement of 25% over 1994, excluding special
charges. During 1995, the Company decided to reconfigure its compound
manufacturing and recorded a before-tax charge of $63.9 million ($39.1 million
after tax) principally for employee separation and plant phase-out costs. Of
this charge, $49.1 million was for write-downs of surplus equipment and
property. The improved 1995 earnings resulted from improved productivity, cost
reductions and improved operating margins. During 1995, employment decreased 5%.


                                       16


<PAGE>   19



The Geon Company and Subsidiaries

Consolidated Statements of Income
(In Millions, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                        -----------------------------------
                                                            1996         1995         1994
                                                        -----------------------------------
<S>                                                     <C>          <C>          <C>     
SALES .............................................      $1,144.4     $1,267.8     $1,208.6
OPERATING COSTS AND EXPENSES:
  Cost of sales ......................................    1,061.8      1,090.2      1,055.4
  Selling and administrative .........................       52.7         50.4         51.1
  Employee separation and plant phase-out ............        -           63.9          -
                                                        -----------------------------------
                                                          1,114.5      1,204.5      1,106.5
                                                        -----------------------------------
OPERATING INCOME .....................................       29.9         63.3        102.1
Interest expense .....................................      (10.8)        (6.2)        (7.8)
Interest income ......................................        1.4          1.8           .7
Other income (expense), net ..........................         .2         (6.5)         (.2)
                                                        -----------------------------------
INCOME BEFORE INCOME TAXES ...........................       20.7         52.4         94.8
Income tax expense ...................................       (8.5)       (20.2)       (36.9)
                                                        -----------------------------------
INCOME BEFORE EXTRAORDINARY ITEM .....................       12.2         32.2         57.9
Extraordinary loss on early extinguishment of debt            -            -           (1.3)
                                                        -----------------------------------
    NET INCOME .......................................   $   12.2     $   32.2     $   56.6
                                                        ===================================

EARNINGS PER SHARE:
  Before extraordinary item ..........................   $    .50     $   1.24     $   2.06
  Extraordinary loss .................................        -            -           (.05)
                                                        -----------------------------------
    NET INCOME .......................................   $    .50     $   1.24     $   2.01
                                                        ===================================
Number of shares used to compute earnings per share ..       24.6         25.9         28.1
</TABLE>






                 See Notes to Consolidated Financial Statements


                                       17


<PAGE>   20


The GEON Company and Subsidiaries

Management's Analysis - Balance Sheets


     The consolidated balance sheet at December 31, 1996, reflects the solid
financial position of The Geon Company.

ASSETS - Total assets of $736.9 million at year-end 1996 were 2% lower than
year-end 1995. Decreases in cash and accounts receivable were nearly offset by
the increases in all remaining asset categories, with other assets having the
largest change. The decrease in receivables is due to a $37.5 million increase
in the level of receivables sold versus last year. Other assets include the
Company's investment in equity affiliates.

LIABILITIES AND EQUITY - The Company has outstanding $125 million in debentures
issued in 1995 and maturing in 10 years and 20 years from issuance. The
debentures have received investment-grade credit ratings. In addition, at the
end of 1996, the Company had available unsecured lines of credit and overdraft
facilities totaling $180 million. The improved funded status of the Company's
pension plan at year-end 1996 as compared with last year resulted in the accrued
pension liability decreasing by $27.8 million. During 1996, the Company returned
$44.5 million to stockholders in the form of dividends and the repurchase of 1.5
million shares or 6% of the shares outstanding at the beginning of the year.

ENVIRONMENTAL MATTERS - The Company generates both hazardous and non-hazardous
wastes - the treatment, storage, transportation and disposal of which are
regulated by various governmental agencies. The Company has been designated a
potentially responsible party by the U.S. Environmental Protection Agency in
connection with one plant and various other sites. The Company has accrued $27
million to cover future environmental remediation expenditures and does not
believe any of the matters either individually or in the aggregate will have a
material adverse effect on its capital expenditures, earnings, cash flow or
liquidity. Capital expenditures related to the limiting and monitoring of
hazardous and non-hazardous wastes amounted to $3 million, $7 million and $1
million for 1996, 1995 and 1994, respectively. The Company estimates capital
expenditures during 1997 of approximately $2 million to $4 million. Expenditures
related to the remediation of previously contaminated sites are projected to be
$19 million over the next five years. The risk of additional costs and
liabilities is inherent in certain plant operations and certain products
produced at the Company's plants, as is the case with other companies involved
in the PVC industry. For additional discussion of environmental matters, refer
to Note J of the Notes to Consolidated Financial Statements.

PUT AGREEMENT - The BFGoodrich Company (BFG) has the right (Put Option) to
require the Company to purchase its Calvert Facilities (and certain associated
liabilities) located principally at Calvert City, Kentucky, between April 1,
2000, and March 31, 2003, at the then fair value determined by an independent
appraisal. The Put Option also extends to any ethylene dichloride (EDC) or VCM
facility that BFG may build or acquire at or adjacent to the Calvert Facilities.

     BFG in its Form 10-K, filed February 1996 with the Securities and Exchange
Commission for the year 1995, reported that Westlake Monomers Corporation
(Westlake) had stated it intended to purchase the Calvert Facilities at an
appraised value of approximately $170 million, including working capital. BFG's
10-K further stated that Westlake had previously asserted a value for the
Calvert Facilities as low as $40 million. Subsequently during 1996, Westlake
elected not to purchase the Calvert Facilities.

     The Company believes there are too many variables to be able to predict
with any certainty what the market conditions and fair value might be between
the years 2000 and 2003. The Company believes the above noted appraised value is
overstated due to the location and age of the assets and less favorable current
industry conditions.

                                       18

<PAGE>   21


The Geon Company and Subsidiaries

Consolidated Balance Sheets
(In Millions, Except Per Share Data)


<TABLE>

                                                                                            December 31,
---------------------------------------------------------------------------------------------------------
                                                                                          1996       1995
---------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>        <C>   
                                                          ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ......................................................      $ 17.9     $ 61.1
  Accounts receivable ............................................................        72.7      102.3
  Inventories ....................................................................       105.1       92.2
  Deferred income tax assets .....................................................        18.1       14.0
  Prepaid expenses ...............................................................        20.0       13.4
---------------------------------------------------------------------------------------------------------
    TOTAL CURRENT ASSETS .........................................................       233.8      283.0
Property .........................................................................       457.2      444.7
Deferred charges and other assets ................................................        45.9       24.3
---------------------------------------------------------------------------------------------------------
      TOTAL ASSETS ...............................................................      $736.9     $752.0
=========================================================================================================

                                                        LIABILITIES
CURRENT LIABILITIES:
  Short-term bank debt ...........................................................      $ 18.9     $  8.6
  Accounts payable ...............................................................       126.4      125.8
  Accrued expenses ...............................................................        57.6       58.0
  Current portion of long-term debt ..............................................          .7         .7
---------------------------------------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES ....................................................       203.6      193.1
Long-term debt ...................................................................       137.2      137.9
Deferred income tax liabilities ..................................................        33.0       37.3
Postretirement benefits other than pensions ......................................        86.7       86.7
Other non-current liabilities ....................................................        54.0       88.1
---------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES ..........................................................      $514.5     $543.1
---------------------------------------------------------------------------------------------------------

                                                   STOCKHOLDERS' EQUITY
Preferred stock, 10.0 shares authorized; no shares issued ........................          -          -
Common stock, $.10 par, 100.0 shares authorized; 27.9 issued .....................         2.8        2.8
Additional paid-in capital .......................................................       296.1      273.9
Retained earnings ................................................................        62.4       62.3
Common stock held in treasury, 4.6 shares in 1996 and 3.2 shares in 1995 .........      (115.7)     (86.6)
Other ............................................................................       (23.2)     (43.5)
---------------------------------------------------------------------------------------------------------
  TOTAL STOCKHOLDERS' EQUITY .....................................................       222.4      208.9
---------------------------------------------------------------------------------------------------------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................................      $736.9     $752.0
=========================================================================================================
</TABLE>




                 See Notes to Consolidated Financial Statements


                                       19

<PAGE>   22


The Geon Company and Subsidiaries

Management's Analysis - Cash Flows


     Net cash used by net operating and investing activities was $8.6 million in
1996, or a change of $42.9 million from 1995. The change was primarily due to
lower earnings before non-cash charges (employee separation and plant phase-out,
depreciation and amortization, and deferred income taxes) partially offset by a
decrease in operating working capital (accounts receivable plus inventory less
accounts payable). At December 31, 1996, operating working capital was $18.7
million lower than a year ago.

     Net cash provided by net operating and investing activities decreased $46.7
million in 1995 as compared with 1994. The change was primarily due to an
increase in operating working capital and other payments partially offset by a
$21.3 million increase in earnings before non-cash charges. The 1995 year-end
inventories anticipated some manufacturing outages due to the start-up of plant
expansions in early 1996. Other uses in 1995 included higher pension
contributions which totaled $23.6 million.

     Financing activities in 1996 primarily reflect repurchase of common stock
and payment of dividends. During 1995, the Company issued debentures and prepaid
the long-term bank debt.

     The Company believes it has sufficient funds to support dividends, debt
service requirements and normal capital expenditures plus expenditures
associated with the previously announced chlor-alkali plant based on projected
operations, the existing working capital facilities and other available
permitted borrowings. Certain factors that may affect these forward-looking
comments are discussed on page 33. Under an August 1996 Board of Directors
resolution, the Company is authorized to repurchase an additional 1.9 million
shares of Geon common stock. The timing of any purchases depends on the
Company's cash flow and market price of the stock.

INFLATION - The Company employs a number of strategies to mitigate the impact of
inflation on financial results. A considerable amount of capital spending is
directed toward cost-reduction and productivity-improvement projects. Moreover,
through its research and development efforts, the Company is continually
exploring ways to reduce the cost of existing products and to develop new
products with improved performance characteristics that will command premium
prices. The Company is also reviewing and re-engineering its administrative
activities on an ongoing basis in order to streamline operations and reduce
costs.

                                       20


<PAGE>   23


The Geon Company and Subsidiaries

Consolidated Statements of Cash Flows
(In Millions)

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
--------------------------------------------------------------------------------------------------------
                                                                              1996       1995       1994
--------------------------------------------------------------------------------------------------------
<S>                                                                         <C>        <C>        <C>  
                                                   OPERATING ACTIVITIES
Net income ............................................................      $12.2      $32.2      $56.6
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Extraordinary loss on early extinguishment of debt .................         -          -         1.3
   Employee separation and plant phase-out ............................         -        63.9         -
   Depreciation and amortization ......................................       54.1       56.6       58.2
   Provision for deferred income taxes ................................        8.8        1.5       16.8
   Changes in assets and liabilities:
     Accounts receivable ..............................................       30.1       43.1      (48.1)
     Inventories ......................................................      (12.0)     (18.1)       1.2
     Accounts payable .................................................         .6      (43.3)      52.3
     Accrued expenses .................................................       (2.5)      (3.9)       3.0
     Income taxes payable .............................................        2.1      (11.1)      11.6
     Other ............................................................       (8.8)     (16.5)     (10.4)
--------------------------------------------------------------------------------------------------------
   NET CASH PROVIDED BY OPERATING ACTIVITIES ..........................       84.6      104.4      142.5

                                                   INVESTING ACTIVITIES
Purchases of property .................................................      (73.4)     (70.0)     (61.5)
Investment in equity affiliates .......................................      (19.8)       (.1)        -
--------------------------------------------------------------------------------------------------------
   NET CASH (USED) PROVIDED BY OPERATING AND INVESTING ACTIVITIES .....       (8.6)      34.3       81.0
--------------------------------------------------------------------------------------------------------

                                                   FINANCING ACTIVITIES
Increase (decrease) in short-term debt ................................        9.8       (1.4)      10.4
Proceeds from long-term debt ..........................................         -       125.0       79.4
Repayment of long-term debt ...........................................        (.7)     (80.0)     (92.6)
Net proceeds from issuance of common stock ............................         .4        1.6        3.6
Repurchase of common stock ............................................      (32.4)     (48.9)     (40.3)
Dividends .............................................................      (12.1)     (12.7)     (13.8)
Other .................................................................         -        (5.0)        -
--------------------------------------------------------------------------------------------------------
   NET CASH USED BY FINANCING ACTIVITIES ..............................      (35.0)     (21.4)     (53.3)

Effect of exchange rate changes on cash ...............................         .4         .7        (.2)
--------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ......................      (43.2)      13.6       27.5

Cash and cash equivalents at beginning of year ........................       61.1       47.5       20.0
--------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ..............................      $17.9      $61.1      $47.5
========================================================================================================
</TABLE>



                 See Notes to Consolidated Financial Statements


                                       21


<PAGE>   24


The Geon Company and Subsidiaries

Consolidated Statements of Stockholders' Equity
(Dollars in Millions, Shares in Thousands)

<TABLE>
<CAPTION>

                                                 Common
                                                 Shares                           Additional                Common
                                    Common       Held in                  Common    Paid-In    Retained   Stock Held
                                    Shares      Treasury      Total        Stock    Capital    Earnings   in Treasury   Other
-----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>          <C>           <C>      <C>        <C>         <C>         <C>    
BALANCE DECEMBER 31, 1993 ...       27,619          33       $230.0        $2.8     $262.3     $ -         $ (.8)      $(34.3)

Net income ..................                                  56.6                             56.6
Stock-based compensation and
      exercise of options ...          213          48          5.9                    4.4                  (1.1)         2.6
Repurchase of common stock ..                    1,432        (40.3)                                       (40.3)
Adjustment of minimum
   pension liability ........                                   3.8                                                       3.8
Translation adjustment ......                                  (2.0)                                                     (2.0)
Cash dividends ..............                                 (13.8)                           (13.8)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 ...       27,832       1,513       $240.2        $2.8     $266.7     $42.8      $(42.2)      $(29.9)

Net income ..................                                  32.2                             32.2
Stock-based compensation and
      exercise of options ...           45        (160)         9.0                    7.2                   4.5        (2.7)
Repurchase of common stock ..                    1,844        (48.9)                                       (48.9)
Adjustment of minimum
   pension liability ........                                 (13.5)                                                    (13.5)
Translation adjustment ......                                   2.6                                                       2.6
Cash dividends ..............                                 (12.7)                           (12.7)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995 ...       27,877       3,197       $208.9        $2.8    $273.9      $62.3      $(86.6)     $ (43.5)

Net income ..................                                  12.2                             12.2
Stock-based compensation and
      exercise of options ...                     (107)         3.0                  (3.7)                   3.3          3.4
Repurchase of common stock ..                    1,469        (32.4)                                       (32.4)
Adjustment of minimum
   pension liability ........                                  16.4                                                      16.4
Adjustment related to step-up
   in tax basis .............                                  25.9                  25.9
Translation adjustment ......                                    .5                                                        .5
Cash dividends ..............                                 (12.1)                           (12.1)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996 ...       27,877       4,559       $222.4        $2.8     $296.1     $62.4     $(115.7)      $(23.2)
=============================================================================================================================
</TABLE>




                 See Notes to Consolidated Financial Statements


                                       22


<PAGE>   25


The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements



NOTE A. THE COMPANY

     The Geon Company (Company or Geon), together with its subsidiaries, is one
of the leading North American producers and marketers of polyvinyl chloride
(PVC) resins and the largest producer and marketer of PVC compounds. The Company
also produces and markets vinyl chloride monomer (VCM), an intermediate
precursor to PVC. The Company operates primarily in the United States and Canada
in one business segment. Sales include exports from North America of $85.7
million, $183.0 million and $136.1 million in 1996, 1995 and 1994, respectively.


NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions are eliminated.

CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments purchased with a
maturity of less than three months to be cash equivalents.

INVENTORIES

     Inventories are stated at the lower of cost or market. Most domestic
inventories are valued by the last-in, first-out (LIFO) cost method. Inventories
not valued by the LIFO method are valued principally by the average cost method.

PROPERTY AND DEPRECIATION

     Property, plant and equipment is recorded at cost, net of depreciation and
amortization computed principally by the straight-line method. Property, plant
and equipment is generally depreciated on accelerated methods for income tax
purposes. Repairs and maintenance costs are expensed as incurred, except for
plant turnaround costs which are deferred and amortized over the period
benefited. At December 31, 1996 and 1995, unamortized turnaround costs were $6.4
million and $0.7 million, respectively.

FINANCIAL INSTRUMENTS

     The fair values of cash equivalents and short-term bank debt approximate
their carrying amount because of the short maturity of those instruments. The
fair values of long-term debt and debentures are estimated based on the
present-value of the underlying cash flows discounted at the Company's estimated
borrowing rate. At December 31, 1996 and 1995, the fair value of long-term debt
approximates its carrying value.

REVENUE RECOGNITION

     The Company recognizes revenues at the point of passage of title, which is
generally at the time of shipment.

ENVIRONMENTAL COSTS

     The Company expenses, on a current basis, recurring costs associated with
managing hazardous substances and pollution in ongoing operations. Costs
associated with the remediation of environmental contamination are accrued when
it becomes probable that a liability has been incurred and the Company's
proportionate share of the amount can be reasonably estimated.

RESEARCH AND DEVELOPMENT EXPENSE

     Research and development costs, which were $17.5 million, $18.0 million and
$16.8 million in 1996, 1995 and 1994, respectively, are charged to expense as
incurred.

FOREIGN CURRENCY TRANSLATION

     Income statement items are translated at average currency exchange rates.
Transaction gains and losses are included in determining net income. All balance
sheet accounts of foreign subsidiaries are translated at the current exchange
rate as of the end of the period. The resulting translation adjustment is
recorded as part of the other component of stockholders' equity. The cumulative
unrecognized translation adjustment loss was $18.6 million, $19.1 million and
$21.7 million at December 31, 1996, 1995 and 1994, respectively.

EARNINGS PER COMMON SHARE

     Earnings per share for 1996, 1995 and 1994 are based on the weighted
average number of shares of common stock, including common stock equivalents,
outstanding.

STOCK OPTIONS

     The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

CHANGES IN ACCOUNTING METHODS

     Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The effect of
adopting SFAS No. 121 was not material.


                                       23


<PAGE>   26


The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements continued


RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which establishes, among other things, new criteria for
determining whether a transfer of financial assets in exchange for cash or other
consideration should be accounted for as a sale or as a pledge of collateral in
a secured borrowing. The Company will adopt SFAS No. 125 effective January 1,
1997, and there will be no effect on income from the adoption.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATION

     Certain amounts for 1995 and 1994 have been reclassified to conform to the
1996 presentation.

NOTE C. FINANCING ARRANGEMENTS

     Aggregate maturities of long-term debt during the five years subsequent to
December 31, 1996, are as follows: 1997-$0.7 million; 1998-$0.8 million;
1999-$0.8 million; 2000-$1.8 million; and 2001-$0.3 million. Interest paid
amounted to $10.9 million, $7.6 million and $6.2 million during 1996, 1995 and
1994, respectively. At December 31, long-term debt consisted of the following:


<TABLE>
<CAPTION>
(In Millions)                               1996          1995
--------------------------------------------------------------
<S>                                      <C>           <C>   
6.875% Debentures
   (maturing 2005) ....................   $ 75.0        $ 75.0
7.500% Debentures
   (maturing 2015) ....................     50.0          50.0
6.660% Industrial revenue
   bonds (maturing to 2009) ...........      9.9          10.3
Other .................................      3.0           3.3
--------------------------------------------------------------
                                           137.9         138.6
Less current portion ..................       .7            .7
--------------------------------------------------------------
                                          $137.2        $137.9
==============================================================
</TABLE>



     The Company had the following short-term unsecured lines of credit and
overdraft facilities, all of which are short-term except for the revolving
credit facility which expires in the year 2000.


<TABLE>
<CAPTION>
                                        Number of    Permitted
(Dollars in Millions)                     Lines     Borrowings
--------------------------------------------------------------
<S>                                        <C>         <C>   
U.S. (including the $100
  revolving credit facility)                7           $153.0
Canada                                      2             18.0
Australia                                   3              9.4
--------------------------------------------------------------
                                                        $180.4
==============================================================
</TABLE>


     At December 31, 1996, $163.9 million of the credit and overdraft facilities
was available. The weighted average interest rate on short-term borrowings was
5.8% at December 31, 1996. The Company's bank agreements contain restrictive
covenants and require the maintenance of financial ratios. No specific
restrictions have been placed on dividends or share repurchases.

     In 1994, the Company recognized an extraordinary loss on early
extinguishment of debt of $1.3 million ($2.2 million before tax) comprising the
unamortized fees from previous financing.


NOTE D. LEASING ARRANGEMENTS

     The Company leases warehouse space, machinery and equipment, automobiles
and railcars under operating leases with remaining terms up to 12 years. Rent
expense amounted to $23.8 million, $16.4 million and $15.1 million during 1996,
1995 and 1994, respectively. The future minimum lease payments under
non-cancelable operating leases with initial lease terms in excess of one year
at December 31, 1996, are as follows: 1997-$26.7 million; 1998-$26.3 million;
1999-$23.3 million; 2000-$20.2 million; 2001-$178.6 million; thereafter-$17.6
million.

     In June 1996, the Company began making lease payments under an operating
lease for a VCM production facility. During the year, the Company amended the
lease agreement to include additional equipment for which the Company has also
assumed a $45 million construction performance obligation.


                                       24


<PAGE>   27


The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements continued


The accumulated construction in process was $3.1 million at December 31, 1996.
Under the terms of the lease, the Company has options to renew the lease for
five one-year periods and may purchase the VCM facility and additional equipment
at the then fair value at anytime during the lease term. The lease provides for
a substantial residual value guarantee by the Company at the termination of the
lease.


NOTE E. SALE OF ACCOUNTS RECEIVABLE

     The Company has an agreement with a syndicate of banks to sell an undivided
interest in certain trade accounts receivable under which, on an ongoing basis,
a maximum of $85.0 million can be sold from a designated pool subject to limited
recourse. Payments are collected from the sold accounts receivable; the
collections are reinvested in new accounts receivable for the buyers; and a
yield based on defined short-term market rates is transferred to the buyers.
Buyers have collection rights to recover payments from the receivables in the
designated pool. Sales of accounts receivable averaged $40.5 million, $68.7
million and $54.6 million in 1996, 1995 and 1994, respectively. Accounts
receivable at December 31, 1996 and 1995, are net of $68.1 million and $30.6
million, respectively, representing the interests in receivables sold under
these agreements. The discount from the Company's sale of receivables is
included in "Other expense, net" in the Consolidated Statements of Income.


NOTE F. INVENTORIES

<TABLE>
<CAPTION>
                                               December 31,
(In Millions)                               1996            1995
----------------------------------------------------------------
<S>                                      <C>             <C>   
At FIFO or average cost, which
approximates current costs:
  Finished products and
    in process                            $102.2          $ 94.4
  Raw materials and supplies                36.3            27.4
----------------------------------------------------------------
                                           138.5           121.8
Reserve to reduce certain
   inventories to LIFO basis               (33.4)          (29.6)
----------------------------------------------------------------
                                          $105.1          $ 92.2
================================================================
</TABLE>


     Approximately 67% and 72% of the pre-LIFO inventory amounts have been
valued by the LIFO method at December 31, 1996 and 1995, respectively.


NOTE G. PROPERTY

<TABLE>
<CAPTION>
                                               December 31,
(In Millions)                               1996            1995
----------------------------------------------------------------
<S>                                     <C>             <C>    
Land                                     $   7.9         $   7.5
Buildings                                  146.4           151.5
Machinery and equipment                  1,025.6           972.9
----------------------------------------------------------------
                                         1,179.9         1,131.9
Less allowances for depreciation
   and amortization                        722.7           687.2
----------------------------------------------------------------
                                         $ 457.2         $ 444.7
================================================================
</TABLE>



     Capital expenditures for 1996, 1995 and 1994 include $1.1 million, $1.6
million and $0.4 million, respectively, of capitalized interest costs.


NOTE H. OTHER BALANCE SHEET LIABILITIES

<TABLE>
<CAPTION>
                                      Accrued            Non-current
(In Millions)                         Expenses           Liabilities
-----------------------------------------------------------------------
                                    December 31,          December 31,
                                  1996       1995       1996       1995
-----------------------------------------------------------------------
<S>                             <C>        <C>        <C>        <C>  
Employment costs ..........      $21.0      $22.2      $ 5.9      $ 7.9
Environmental .............        6.0        8.2       21.2       20.9
Plant utilities ...........        1.4        1.4        4.6        6.0
Taxes, other than
  income ..................       10.8        9.2         -          -
Postretirement benefits ...        7.7        7.7         -          -
Pension ...................         -          -        16.5       44.3
Other .....................       10.7        9.3        5.8        9.0
-----------------------------------------------------------------------
                                 $57.6      $58.0      $54.0      $88.1
=======================================================================
</TABLE>


                                       25


<PAGE>   28

The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements continued


NOTE I. EMPLOYEE BENEFIT PLANS

PENSION BENEFIT PLANS

     The Company has two defined benefit pension plans covering substantially
all domestic employees. The plan covering salaried employees generally provides
benefit payments using a formula that is based on employees' compensation and
length of service. The plan covering union wage employees generally provides
benefit payments of stated amounts for each year of service. Annual
contributions to the plans are sufficient to satisfy legal requirements. Plan
assets consist principally of corporate and government obligations and funds
invested in equities. Annual pension expense included the following components:

<TABLE>
<CAPTION>
(In Millions)                     1996         1995         1994
----------------------------------------------------------------
<S>                             <C>          <C>          <C>  
Service cost for benefits
  earned ..................      $ 4.0        $ 2.8        $ 3.3
Interest cost .............       18.8         18.0         16.5
(Income) loss on
  plan assets .............      (33.4)       (33.4)         7.2
Net amortization and
  deferral ................       22.3         22.7        (15.9)
----------------------------------------------------------------
Pension expense, net ......      $11.7        $10.1        $11.1
================================================================

</TABLE>


     The following table sets forth as of December 31, 1996 and 1995, the status
of the Company's funded defined benefit pension plans. This table excludes
accrued pension costs of $2.9 million and $1.8 million for unfunded,
non-qualified pension plans and the related projected benefit obligations (PBO)
of $4.1 million and $3.1 million at December 31, 1996 and 1995, respectively.

<TABLE>
<CAPTION>
                                                      Change
(In Millions)                1996         1995     1996 vs. 1995
----------------------------------------------------------------
<S>                        <C>          <C>           <C>   
Plan assets at
   fair value ..........    $212.2       $189.2        $ 23.0
Accumulated benefit
   obligation (ABO) ....     234.2        239.0           4.8
----------------------------------------------------------------
Plan assets less
   than ABO ............    $ 22.0       $ 49.8        $ 27.8
================================================================
</TABLE>


     At December 31, 1996, the plan assets were $212.2 million, which represents
an increase of $23.0 million over year-end 1995. The growth in these assets was
the result of actions taken by the Company and favorable security markets.
Income earned on these assets was $31.4 million, which represents a return of
16% in 1996. The Company also made contributions in 1996 of $12.0 million. Over
the last three years, the Company's contributions have totaled $57.1 million, or
$24.2 million above normal pension expense recognized during this period. From
plan assets, benefit payments of $19.7 million were made in 1996.

<TABLE>
<CAPTION>
                                                      Change
(In Millions)                1996         1995     1996 vs. 1995
----------------------------------------------------------------
<S>                        <C>          <C>           <C>   
ABO ....................... $234.2       $239.0        $  4.8
Effect of projected
  salary increases ........   27.6         27.8            .2
----------------------------------------------------------------
PBO ....................... $261.8       $266.8        $  5.0
================================================================
Plan assets less
  than PBO ................ $ 49.6       $ 77.6        $ 28.0
Unamortized balances:
  Transitional liability ..   (6.9)        (8.1)         (1.2)
  Prior service cost ......   (5.7)        (5.5)           .2
  Net actuarial loss ......  (38.0)       (63.9)        (25.9)
  Adjustments required
    to recognize
    minimum liability .....   14.6         42.4          27.8
----------------------------------------------------------------
Accrued pension cost        $ 13.6      $  42.5        $ 28.9
================================================================
</TABLE>


     Major assumptions used in accounting for the Company's defined benefit
pension plans are as follows:

<TABLE>
<CAPTION>
(In Millions)                    1996         1995         1994
----------------------------------------------------------------
<S>                             <C>          <C>          <C>  
Discount rate for
  obligations .............      7.5%         7.1%         8.9%
Rate of increase in
  compensation
  levels ..................      4.0%-7.0%    4.0%-7.0%    4.0%-7.0%
Expected long-term
  rate of return on
  plan assets .............      9.5%         9.0%         9.8%
</TABLE>


                                       26


<PAGE>   29



The GEON Company and Subsidiaries

Notes to Consolidated Financial Statements continued

     At December 31, 1996 and 1995, $3.3 million and $19.7 million,
respectively, was recorded as the cumulative additional minimum pension
liability and included in the other component of stockholders' equity as a
reduction.

Retirement Savings Plan

     The Company maintains a voluntary retirement savings plan (RSP) for all
U.S. and Canadian employees. Under provisions of the RSP, eligible employees can
receive Company matching contributions up to the first 6% of their eligible
earnings. For 1996, 1995 and 1994, Company contributions amounted to $4.7
million, $4.7 million and $4.5 million, respectively. In addition, the Company
makes profit-sharing payments to the RSP for those employees not covered by
management incentive compensation plans. The 1996, 1995 and 1994 profit-sharing
cost was $1.0 million, $2.5 million and $4.1 million, respectively.

POSTRETIREMENT BENEFIT PLANS

     The Company sponsors several unfunded defined benefit postretirement plans
that provide certain health care and life insurance benefits to eligible
employees. The health care plans are contributory, with retiree contributions
adjusted periodically, and contain other cost-sharing features such as
deductibles and coinsurance. The life insurance plans are generally
non-contributory. Below are the plans' combined status at December 31:

<TABLE>
<CAPTION>
(In Millions)                                      1996       1995
------------------------------------------------------------------
<S>                                             <C>        <C>    
Accumulated postretirement benefit
obligation (APBO):
  Retirees .................................     $ 81.4     $ 88.8
  Fully eligible active plan participants ..        3.5        3.8
  Other active plan participants ...........        6.6        7.4
  Unrecognized gain (loss) .................        2.9       (5.6)
------------------------------------------------------------------
                                                 $ 94.4     $ 94.4
==================================================================
</TABLE>


     The annual postretirement benefit expense for each of the years ended
December 31 included the following components:


<TABLE>
<CAPTION>
(In Millions)                     1996         1995         1994
----------------------------------------------------------------
<S>                             <C>          <C>          <C>  
Service cost for
  benefits earned ..........     $  .4        $  .3        $  .4
Interest cost on APBO ......       6.5          7.1          6.7
----------------------------------------------------------------
Postretirement
   expense net .............     $ 6.9        $ 7.4        $ 7.1
================================================================
Payment of claims ..........     $ 7.1        $ 7.4        $ 6.7
================================================================
</TABLE>

     At December 31, 1996, the average assumed rate of increase in the per
capita cost of covered benefits is 9% for 1997 and is assumed to decrease
gradually to 5% in 2005 and thereafter. An increase in the assumed health care
cost trend rates by 1% in each year would increase the APBO as of December 31,
1996, by $4.5 million and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1996 by $0.3 million.

     The discount rates used in determining the APBO at December 31, 1996 and
1995, were 7.5% and 7.1%, respectively. The increase in the discount rate in
1996 from 1995 decreased the APBO at December 31, 1996, by $2.4 million.


NOTE J. COMMITMENTS

ENVIRONMENTAL

     The Company has been notified by the U.S. Environmental Protection Agency,
a state environmental agency or a private party that it may be a potentially
responsible party (PRP) in connection with seven active and inactive non-Company
owned sites. While government agencies frequently claim PRPs are jointly and
severally liable at these sites, in the Company's experience interim and final
allocation of liability costs are generally made based on the relative
contribution of waste. The Company believes that it has potential continuing
liability with respect to only four such sites. In addition, the Company
initiates corrective and preventive environmental projects of its own to ensure
safe and lawful activities at its operations. The Company believes that
compliance with current governmental regulations at all levels will not have a
material adverse effect on its financial condition. Based on estimates prepared
by the Company's environmental engineers and consultants, the Company at
December 31, 1996, had accruals totaling


                                       27


<PAGE>   30

The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements continued


$27.2 million to cover future environmental expenditures related to previously
contaminated sites. Of this accrued amount, $16 million is attributable to
future remediation expenditures at the Calvert City, Kentucky, site and less
than $0.2 million is attributable to off-site environmental remediation
liabilities, including the four sites mentioned above. The remaining amount is
primarily attributable to other environmental remediation projects at nine
Company-owned facilities. At Calvert City, consent orders have been signed with
both the U.S. Environmental Protection Agency and the Commonwealth of Kentucky
Department of Environmental Protection, which pro-vide for a site wide
remediation program primarily to remove EDC from groundwater, the cost of which
is included in the $27.2 million accrual. The Company expended $6.1 million,
$3.0 million and $2.9 million during 1996, 1995 and 1994, respectively, on the
remediation of such sites.

PUT AGREEMENT

     BFG has the right (Put Option) to require the Company to purchase all or a
portion of the Calvert Facilities (BFG chlor-alkali, ethylene and utility
operations located at Calvert City, Kentucky) between April 1, 2000, and March
31, 2003, at fair value as determined by an independent appraisal. The Put
Option also extends to any EDC or VCM facility that BFG may build or acquire at
or adjacent to the Calvert Facilities.

PARTICIPATION AGREEMENT

     The Company has a 50% participation in a joint venture to construct and
operate a chlor-alkali plant. In the initial phase, the plant will have an
annual capacity of 250,000 tons of chlorine and 275,000 tons of caustic soda.
Mechanical completion is expected in late 1997. The plant's construction is
being financed by the venture partners as the venture pursues its own
non-recourse financing.

GUARANTEES

     At December 31, 1996, the Company, through an indemnification agreement
with BFG, is contingently liable through December 31, 2001, with respect to
guarantees of securities of other issuers in the amount of $47.5 million, for
which the Company would be reimbursed by Occidental Chemical Holding Corporation
for any amounts paid under the guarantees.

OTHER

     The Company and its subsidiaries have commitments for a substantial portion
of key raw material feedstocks and energy incidental to the ordinary course of
business. The Company is also from time to time subject to routine litigation
incidental to its business. The Company believes that any liability that may
finally be determined would not have a material adverse effect on its financial
condition.


NOTE K. OTHER INCOME (EXPENSE), NET


<TABLE>
<CAPTION>
(In Millions)                      1996         1995         1994
-----------------------------------------------------------------
<S>                              <C>         <C>          <C>  
Currency exchange
  (loss) gain ..................  $ 1.6       $ (.9)       $ 2.1
Income from equity affiliates ..    1.0          .1           .2
Discount on sale of trade
   receivables .................   (2.4)       (4.5)        (2.3)
Other expense, net .............     -         (1.2)         (.2)
----------------------------------------------------------------
                                  $  .2       $(6.5)       $ (.2)
================================================================
</TABLE>


NOTE L. INCOME TAXES

     Income (loss) before income taxes consists of the following:

<TABLE>
<CAPTION>
(In Millions)                      1996         1995         1994
-----------------------------------------------------------------
<S>                              <C>         <C>          <C>  
Domestic .......................  $ (8.9)     $  40.1      $ 62.9
Foreign ........................    29.6         12.3        31.9
-----------------------------------------------------------------
                                  $ 20.7      $  52.4      $ 94.8
=================================================================
</TABLE>


     A summary of income tax (expense) benefit is as follows:


<TABLE>
<CAPTION>
(In Millions)                      1996         1995         1994
-----------------------------------------------------------------
<S>                              <C>         <C>          <C>  
Current:
  Federal ..................      $ 10.4      $(10.0)      $(10.0)
  State ....................          -         (2.0)         (.9)
  Foreign ..................       (10.1)       (6.7)        (9.2)
-----------------------------------------------------------------
    Total current ..........          .3       (18.7)       (20.1)
-----------------------------------------------------------------
Deferred:
  Federal ..................        (8.8)       (4.0)       (11.6)
  State ....................          .4         (.5)        (2.9)
  Foreign ..................         (.4)        3.0         (2.3)
-----------------------------------------------------------------
    Total deferred .........        (8.8)       (1.5)       (16.8)
-----------------------------------------------------------------
    Total tax expense ......      $ (8.5)     $(20.2)      $(36.9)
=================================================================
</TABLE>

                                       28

<PAGE>   31

The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements continued


     The income tax rate for financial reporting purposes varied from the
federal statutory rate as follows:


<TABLE>
<CAPTION>
(In Millions)                     1996        1995         1994
---------------------------------------------------------------
<S>                              <C>         <C>          <C>  
Federal statutory
  income tax rate ............    35.0%       35.0%        35.0%
---------------------------------------------------------------
Increase (decrease):
  State tax net of
    federal benefit ..........    (1.5)        3.1          2.6
  Differences in rates of
    foreign operations .......      .8        (1.1)          .3
  Foreign withholding accrued
    on unremitted earnings ...     4.7         2.0           .5
  Other, net .................     2.1         (.5)          .5
---------------------------------------------------------------
  Effective income tax rate ..    41.1%       38.5%        38.9%
===============================================================
</TABLE>


     Significant components of the Company's deferred tax liabilities and assets
at December 31 are as follows:

<TABLE>
<CAPTION>
(In Millions)                             1996           1995
-------------------------------------------------------------
<S>                                    <C>            <C>   
Deferred tax liabilities:
Tax over book depreciation              $ 84.0         $ 74.9
State taxes                               (2.3)           3.4
Other, net                                19.1           22.8
-------------------------------------------------------------
Total deferred tax liabilities           100.8          101.1
-------------------------------------------------------------
Deferred tax assets:
Postretirement benefits other
   than pensions                          33.1           33.1
Employment cost and pension                5.9           13.8
Environmental                              9.5           10.3
Net operating loss carryforward            8.1             -
LIFO inventory                             3.3            (.8)
Intangibles                                5.8             .4
Alternative minimum tax
   credit carryforward                     5.9            4.7
Foreign tax credit carryforward            4.3             -
Foreign tax valuation allowance           (4.3)            -
Other, net                                14.3           16.3
-------------------------------------------------------------
Total deferred tax assets                 85.9           77.8
-------------------------------------------------------------
Net deferred tax liabilities            $ 14.9         $ 23.3
=============================================================
</TABLE>


     SFAS No. 109, "Accounting for Income Taxes," requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. As
realization of the foreign tax credit carryforwards is considered uncertain, a
valuation allow-ance has been recorded. The Company believes that the timing of
the reversal of its deferred tax liabilities, principally relating to
accelerated depreciation, will be sufficient to fully recognize its remaining
deferred tax assets. In particular, the turnaround of the largest deferred tax
asset, related to accounting for postretirement benefits other than pensions,
will occur over an extended period of time and, as a result, will be realizable
for tax purposes over those future periods.

     During 1996, the Company finalized the effects of the step-up in the tax
basis of its assets as a result of formation and recorded adjustments to
deferred taxes and equity of $25.9 million.

     The Company has provided for U.S. federal and foreign withholding tax on
$53.6 million or 28% of foreign subsidiaries' undistributed earnings as of
December 31, 1996. Regarding the undistributed earnings on which no federal and
foreign withholding has been provided, earnings are intended to be reinvested
indefinitely. It is not practical to determine the amount of income tax
liability that would result had such earnings been actually repatriated. On
repatriation, certain foreign countries impose withholding taxes. The amount of
foreign withholding taxes that would be payable on remittance of the entire
amount of undistributed earnings would approximate $8.3 million.

     During 1996, 1995 and 1994, the Company paid income taxes net of refunds of
$2.2 million, $37.9 million and $6.1 million, respectively. The Company has a
net operating loss carryforward of approximately $23.2 million, which will
expire in 2011. In addition, the Company has foreign tax carryforwards of $4.3
million, which will expire from 1998 through 2001, and an alternative minimum
tax credit carryforward of $5.9 million.


                                       29


<PAGE>   32

The Geon Company and Subsidiaries

Notes to Consolidated Financial Statements continued


NOTE M. RELATED PARTY TRANSACTIONS

     In the ordinary course of business, the Company shares certain facilities
with BFG. The cost of these facilities is allocated at cost to the Company or
BFG under the provisions of formal agreements, primarily based on usage. Sales
of products to BFG were $26.8 million, $30.2 million and $34.3 million, and
purchases of products from BFG were $75.8 million, $150.8 million and $133.6
million in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995, the
receivable balances from BFG were $5.8 million and $3.9 million, respectively,
and the payable balances to BFG were $10.4 million and $21.4 million,
respectively. An officer of BFG currently serves as an outside director of the
Company.

NOTE N. EMPLOYEE SEPARATION AND PLANT PHASE-OUT CHARGES

     In 1995, the Company recorded a $63.9 million before-tax charge, primarily
related to the reconfiguration of the manufacturing of vinyl compound products.
Of this charge, $49.1 million related to the write-down of property, $8.7
million related to enhanced retirement pension benefits, and the balance for
employee separation and other associated costs.

NOTE O. STOCK OPTION AND STOCK INCENTIVE PLANS

     The 1995 Incentive Stock Plan provides for the awarding or granting of
options to purchase common stock of the Company. Generally, options granted
become exercisable at the rate of 35% after one year, 70% after two years and
100% after three years. Certain options are fully exercisable after grant. The
term of each option cannot extend beyond 10 years from the date of grant.
Certain options carry with them limited stock appreciation rights exercisable in
the event of a change in control. All options under the plans have been granted
at 100% of market (as defined) on the date of the grant. In addition, certain
senior level executives received special awards in connection with the formation
of the Company and the initial public offering (IPO) of stock on April 29, 1993,
which included stock options with rights to purchase 1.2 million shares. These
awards become exercisable four years after grant date. The Company also has a
stock plan for non-employee directors under which options are granted.


<TABLE>
<CAPTION>
(In Thousands Except
Per Share Data)             Number       Option Price Per Share
----------------------------------------------------------------
<S>                         <C>         <C>             
Outstanding at
   January 1, 1996           2,055       $14.92    to    $30.13
Issued                         284        19.25    to     28.13
Exercised                       21        16.31    to     26.75
Canceled                         3        26.31    to     27.75
---------------------------------------------------------------
Outstanding at
   December 31, 1996         2,315        14.92    to     30.13
===============================================================
Exercisable at
   December 31, 1996           854       $14.92    to    $30.13
===============================================================
</TABLE>

     Under the Company's incentive programs, senior executives and other key
employees are also eligible annually to receive bonus awards, consisting of
stock or a combination of both stock and cash. Under these plans, performance
measures are established and used to determine the payout, if any.

     At December 31, 1996, restricted shares totaling 0.4 million were
outstanding. The restrictions generally lapse over one to four years with some
subject to acceleration based on the Company's stock price performance. The
unamortized portion of compensation expense related to these stock awards
included in other component of stockholders' equity was $1.3 million and $4.7
million at December 31, 1996 and 1995, respectively.

     The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its incentive plans.
Accordingly, no compensation cost has been recognized for its fixed option plans
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant. The compensation cost
related to the stock portion of the annual incentive plans, the three-year
incentive plan, and amortization of restricted stock awarded at the IPO amounted
to $3.0 million, $4.2 million and $5.5 million in 1996, 1995 and 1994,
respectively. The effect of applying the fair value method of accounting for the
Company's stock-based awards in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," results in net income and earnings per share that are
not materially different from amounts reported.

     At December 31, 1996, 3.4 million shares were reserved for future issuance
upon exercise of stock options granted or were available for future grants under
the Company's incentive plans.


                                       30

<PAGE>   33

The Geon Company and Subsidiaries

Quarterly Data (Unaudited)
(In Millions, Except Per Share Data)

<TABLE>
<CAPTION>
                                                           1996 Quarters                               1995 Quarters
-----------------------------------------------------------------------------------      ---------------------------------------
                                             Fourth      Third     Second     First      Fourth      Third     Second      First
-----------------------------------------------------------------------------------      ---------------------------------------
<S>                                         <C>        <C>        <C>       <C>         <C>        <C>        <C>        <C>   
Sales .................................      $279.1     $307.8     $311.8    $245.7      $263.8     $310.2     $357.6     $336.2
Operating income (loss) ...............         4.6       13.4       18.4      (6.5)        8.4       26.6      (10.9)      39.2
Net income (loss) .....................         1.6        6.1       10.1      (5.6)        4.4       14.4       (8.0)      21.4
--------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
   Net income (loss) ..................      $  .07     $  .25      $ .40    $  (.22)     $  .18    $  .56     $ (.31)    $  .80
   Dividend paid per common share .....        .125       .125       .125       .125        .125      .125       .125       .125
Common stock price
   High ...............................    $ 23 1/2   $ 25 1/8   $ 28 3/4   $ 28 3/8   $ 26 3/4   $ 31 3/8   $ 29 3/4      $ 30
   Low ................................      18 1/8     18 1/8     22 1/2     24 3/8     23 3/8     25 1/8     23 1/2        26
</TABLE>

1995: Second- and fourth-quarter results include the after-tax charges of $34.5
million ($56.5 million before tax) and $4.6 million ($7.4 million before tax)
for employee separation and plant phase-out costs, respectively.


                                       31


<PAGE>   34

The Geon Company and Subsidiaries

Selected Five-Year Financial Data
(In Millions, Except Per Share Data)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATING DATA                                        Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------
                                                                                  (1)Pro Forma
                                                                                  (Unaudited)                   Historical
                                      1996          1995          1994          1993          1992           1993          1992
------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>             <C>           <C>           <C>           <C>   
SALES ........................    $1,144.4      $1,267.8      $1,208.6        $972.5        $894.3        $982.8        $969.9
Employee separation and
  plant phase-out ............          -           63.9            -            9.7          14.4           9.7          16.0
Operating income (loss) ......        29.9          63.3         102.1          14.5         (22.9)         18.6         (19.3)
Income (loss) before
  extraordinary item and
  cumulative effect of
  change in method of
  accounting .................        12.2          32.2          57.9           2.2         (22.1)          6.0         (15.0)
Extraordinary loss on early
  extinguishment of debt .....          -             -           (1.3)           -             -              -            -
Cumulative effect of change
  method of accounting .......          -             -             -           (1.1)        (57.5)         (1.1)        (70.4)
NET INCOME (LOSS) ............        12.2          32.2          56.6           1.1         (79.6)          4.9         (85.4)
------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE:
  BEFORE EXTRAORDINARY ITEM
  AND CHANGE IN METHOD OF
  ACCOUNTING .................    $    .50        $  1.24        $ 2.06       $   .08      $   (.84)
  Extraordinary loss on early
    extinguishment of debt ...          -              -           (.05)          -             -
  Cumulative effect of change
    in method of accounting ..          -              -             -           (.04)        (2.18)
  NET INCOME (LOSS) ..........         .50           1.24          2.01           .04         (3.02)
</TABLE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
BALANCE SHEET DATA                                          At December 31,
--------------------------------------------------------------------------------------------------
                                      1996          1995          1994          1993          1992
--------------------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>             <C>           <C>     
Total assets                      $ 736.9       $  752.0       $ 791.7       $ 721.2        $686.9
Long-term debt and capital
   lease obligations                137.2          137.9          93.0          88.3          18.7

<FN>
(1)On February 11, 1993, the Company was formed as a wholly owned subsidiary of
BFG in preparation for the IPO of its common stock on April 29, 1993. BFG
transferred to the Company substantially all of the operating assets and
liabilities of its Geon Vinyl Division, other than the net assets of the
chlor-alkali, ethylene and utility operations of BFG located principally at
Calvert City, Kentucky (Calvert Facilities), in exchange for the Company's
common stock.

The historical results for 1993 and 1992 include the results of operations
associated with the Calvert Facilities through February 28, 1993. The cost of
VCM consumed from the Calvert Facilities was recorded at historical intercompany
cost through April 29, 1993.

The pro forma results for 1993 and 1992 exclude the results of operations
associated with the Calvert Facilities. The data is also presented as if the
Company purchased the VCM associated with the Calvert Facilities at market
prices rather than historical intercompany costs. Subsequent to the initial
public offering of the Company's common stock on April 29, 1993, the Company
through December 31, 1995, purchased VCM from BFG at market prices. The pro
forma results also include the cost associated with certain May 1993 bank
arrangements, as if they had occurred at the beginning of 1993.
</TABLE>


                                       32

<PAGE>   35

The GEON Company and Subsidiaries

Report of Independent Auditors



To the Stockholders and Board of Directors
of The Geon Company:

     We have audited the accompanying consolidated balance sheets of The Geon
Company and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements, which appear on pages 17, 19, and 21 through 30, are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Geon
Company and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.


/S/ Ernst & Young LLP

     Cleveland, Ohio
     January 29, 1997

================================================================================
    

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

     This report contains statements concerning certain trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigations Reform Act
of 1995. Actual results could differ materially from those projected in such
forward-looking statements contained in this report for a variety of factors,
including but not limited to: (1) unanticipated changes in world, regional, or
U.S. growth rates affecting the Company's markets; (2) unanticipated changes in
industry capacity or in the rate at which anticipated changes in industry
capacity come on line; (3) fluctuations in raw materials prices and supply, in
particular fluctuations outside the range of normal industry cycles; (4)
unanticipated delays in achieving or inability to achieve cost-reduction and
employee-productivity goals; (5) unanticipated production outages; and (6)
delays in realizing or inability to realize anticipated profitability
improvements attributable to the chlor-alkali joint venture.


                                       33

<PAGE>   36

The Geon Company

Corporate Information


EXECUTIVE OFFICERS

WILLIAM F. PATIENT
Chairman of the Board, President and Chief Executive Officer

DONALD P. KNECHTGES
Senior Vice President, Technology/Engineering

LOUIS M. MARESCA
Vice President, Operations

EDWARD C. MARTINELLI
Senior Vice President, Commercial

GREGORY L. RUTMAN
Vice President, General Counsel and Secretary

THOMAS A. WALTERMIRE
Chief Financial Officer and Senior Vice President, Human Resources

FACILITIES

ALTONA, VICTORIA, AUSTRALIA
Resins

AVON LAKE, OHIO
Headquarters
Research & Development
Compounds

DEER PARK, TEXAS
Resins

HENRY, ILLINOIS
Resins

LAPORTE, TEXAS
VCM

LONG BEACH, CALIFORNIA
Compounds

LOUISVILLE, KENTUCKY
Resins and Compounds

MENTONE, VICTORIA, AUSTRALIA
Compounds

NIAGARA FALLS, ONTARIO, CANADA
Resins and Compounds

PEDRICKTOWN, NEW JERSEY
Resins

PLAQUEMINE, LOUISIANA
Compounds

SCOTFORD, ALBERTA, CANADA
Resins

TERRE HAUTE, INDIANA
Compounds

STOCK EXCHANGE LISTING

The Geon Company Common Stock is listed on the New York Stock Exchange.
Symbol: GON.

STOCKHOLDER INQUIRIES

If you have any questions concerning your account
as a stockholder, such as name or address changes, inquiries regarding dividend
checks or stock certificates, or if you need tax information regarding your
account, please contact our transfer agent:

  The Bank of New York
  P.O. Box 11258
  Church Street Station
  New York, New York 10286-1258
  Phone: (800) 524-4458

Complimentary copies of Form 10-K and other reports filed with the Securities
and Exchange Commission as well as The 1996 Geon Fact Book are available from:

  Investor Relations
  The Geon Company
  One Geon Center
  Avon Lake, Ohio 44012
  Phone: (216) 930-1221

ANNUAL MEETING

The annual meeting of stockholders of The Geon Company will be held May 1, 1997,
at 9:00 a.m. at The Forum Conference and Education Center, One Cleveland Center,
1375 East 9th Street, Cleveland, Ohio.

The meeting notice and proxy materials were mailed to stockholders with this
report. The Geon Company urges all stockholders to vote their proxies so that
they can participate in the decisions at the annual meeting.


FINANCIAL INFORMATION

Security analysts and representatives of financial institutions are invited to
contact:

  Thomas A. Waltermire
  Chief Financial Officer and Senior Vice President
  The Geon Company
  One Geon Center
  Avon Lake, Ohio 44012
  Phone: (216) 930-1222
  Fax: (216) 930-1002

  and

  Dennis A. Cocco
  Director of Corporate and Investor Affairs
  The Geon Company
  One Geon Center
  Avon Lake, Ohio 44012
  Phone: (216) 930-1538
  Fax: (216) 930-1428

AUDITORS

  Ernst & Young LLP
  1300 Huntington Building
  925 Euclid Avenue
  Cleveland, Ohio 44115-1405

MEDIA CONTACT

  Dennis A. Cocco
  Director of Corporate and Investor Affairs
  Phone: (216) 930-1538
  Fax: (216) 930-1428

INTERNET ACCESS

Information on The Geon Company's products and services is available on the
Internet at: http://www.geon.com

Company news releases also are available on line via PR Newswire's Web site at:
http://www.prnewswire.com



(C)Copyright The Geon Company 1997

[LOGO] This entire annual report was printed on recycled paper.


                                      34


<PAGE>   37

The Geon Company

Board of Directors

STANDING FROM LEFT TO RIGHT: JOHN D. ONG, J. A. FRED BROTHERS, R. GEOFFREY P.
STYLES, D. LARRY MOORE, JAMES K. BAKER, J. DOUGLAS CAMPBELL, AND SITTING: GALE
DUFF-BLOOM, HARRY A. HAMMERLY, AND WILLIAM F. PATIENT.


WILLIAM F. PATIENT, 62
Chairman of the Board, President and Chief Executive Officer

JAMES K. BAKER, 65
Executive Vice President and Group Operating Officer, Arvin Industries, a
worldwide supplier of original equipment and replacement automotive parts.
(1),(4),(5)*

GALE DUFF-BLOOM, 57
President of Marketing and Company Communications, J.C. Penney Company, Inc., a
major retailer of apparel, jewelry, home furnishings and services through
department stores and catalogs. (1),(2),(5)

J. A. FRED BROTHERS, 56
Senior Vice President and Group Operating Officer, Ashland Inc., a worldwide
energy and chemical company with operations in refining, retail gasoline
marketing, motor oils, chemicals, highway construction, oil and gas, and coal.
(2)*,(3),(5)

J. DOUGLAS CAMPBELL, 55
President and Chief Executive Officer, Arcadian Corporation, the leading Western
Hemisphere producer and marketer of nitrogen chemicals and fertilizers.
(2),(3)*,(5)

HARRY A. HAMMERLY, 63
Retired Executive Vice President, 3M Company, a worldwide diversified
manufacturer of industrial, commercial, consumer and health care products.
(1),(2),(4)*

D. LARRY MOORE, 60
President and Chief Operating Officer, Honeywell Inc., a global enterprise
providing electronic automation and control systems for homes, buildings,
process control industries and aerospace. (1),(2),(3)

JOHN D. ONG, 63
Chairman of the Board, The BFGoodrich Company, a provider of aircraft
components, systems and services, as well as specialty chemical products such as
plastics, additives, sealants and adhesives. (3),(4)

R. GEOFFREY P. STYLES, 66
Retired Vice Chairman, Royal Bank of Canada, Canada's largest bank. (1)*,(3),(4)

(1) Audit Committee
(2) Compensation Committee
(3) Environmental, Health & Safety Committee
(4) Financial Policy Committee
(5) Nominating Committee
*   Denotes Chairman

                                       35

<PAGE>   38

                            [LOGO - THE GEON COMPANY]

                     One Geon Center - Avon Lake, Ohio 44012