The +525-degrees-C residues were examined to identify differences between those residue molecules that were converted to smaller distillate molecules and those that were not. Each +525-degrees-C residue was divided into five subfractions by gel permeation chromatography. Molecular weight distributions, elemental (H, C, S, N, Ni, V, and Fe) distributions, and distributions of carbon atom types were determined. With the exception of 10-20%, most of the unconverted +525-degrees-C molecules in the products were similar to the +525-degrees-C feedstock molecules. The ones that were different appeared to have formed by a combination of dehydrogenation and molecular condensation reactions. The macropores in the bimodal catalysts provided diffusion paths for the large molecules to the reaction sites which dissociate hydrogen within the catalyst interior and thereby had a major effect on diminishing these condensation and dehydrogenation reactions. In contrast, the molecules that were converted to distillates were formed by a combination of hydrogenation (greater H/C ratios) and cracking (smaller molecular weights) reactions. An explanation for the same feedstock molecules reacting simultaneously by a dehydrogenation/condensation sequence and a hydrogenation/cracking sequence is provided by the existence of two liquid phases at reaction conditions, as suggested by Shaw and co-workers. According to this concept, hydrogen is much more soluble in the nonpolar phase (where the hydrogenation/cracking reactions would occur) and much less soluble in the polar phase (where the dehydrogenation/condensaton reactions would occur).