Use these links to rapidly review the document HUNTSMAN LLC QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005 TABLE OF CONTENTS

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)
ý	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
For the quarterly period ended June 30, 2005
OR
o	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

For the transition period from to

Commission file number 333-112279

HUNTSMAN LLC
(Exact name of registrant as specified in its charter)

Utah (State or other jurisdiction of incorporation or organization) 87-0533091 (I.R.S. Employer Identification No.) 500 Huntsman Way Salt Lake City, Utah 84108 (801) 584-5700 (Address of principal executive offices and telephone number)

Utah		87-0533091
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~Securities~~500 Huntsman Way ~~registered~~Salt ~~pursuant~~Lake toCity, ~~Section 12~~Utah 84108 (b801) 584-5700 (Address of ~~the~~principal ~~Act:~~executive ~~None~~offices and telephone number)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES o NO ý

On August 16 10, ~~2004~~2005, 10,000,000 units of membership interest of the registrant were outstanding. There is no established trading market for the registrant's ~~units~~ units of membership interest. All of the registrant's units of membership interest are held by an affiliate.

HUNTSMAN LLC QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, ~~2004~~2005 TABLE OF CONTENTS

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	3
ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)	4
	Condensed Consolidated Statement of Member's Equity (Deficit) (unaudited)	5
	Condensed Consolidated Statements of Cash Flows (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	63
ITEM 4.	Controls and Procedures	63
PART II	OTHER INFORMATION	64
ITEM 1.	Legal Proceedings	64
ITEM 6.	Exhibits	66

PART I FINANCIAL INFORMATION
	ITEM 1.	Unaudited Financial Statements
		Consolidated Balance Sheets
		Consolidated Statements of Operations and Comprehensive Loss
		Consolidated Statements of Member's Equity
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
		Supplemental Discussion of Results of Operations for the Restricted Group
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk
	ITEM 4.	Controls and Procedures
PART II OTHER INFORMATION
	ITEM 1.	Legal Proceedings
	ITEM 6.	Exhibits and Reports on Form 8-K

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HUNTSMAN LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in Millions)

			June 30, 2004			December 31, 2003
ASSETS
Current assets:
	Cash and cash equivalents		$	116.3		$	127.8
	Accounts and notes receivables (net of allowance for doubtful accounts of $17.5 and $19.7, respectively)			1,067.8			925.1
	Inventories			869.8			892.9
	Prepaid expenses			21.0			40.3
	Deferred income taxes			3.0			3.0
	Other current assets			88.2			87.0
		Total current assets		2,166.1			2,076.1
Property, plant and equipment, net				4,361.8			4,572.1
Investment in unconsolidated affiliates				162.2			158.0
Intangible assets, net				262.2			281.9
Goodwill				3.3			3.3
Deferred income taxes				12.0			12.0
Other noncurrent assets				628.7			611.5
		Total assets	$	7,596.3		$	7,714.9
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
	Accounts payable, including overdraft of $12.4 and $7.5, respectively		$	832.9		$	752.1
	Accrued liabilities			597.3			585.7
	Deferred income taxes			14.5			14.5
	Current portion of long-term debt			41.7			134.0
		Total current liabilities		1,486.4			1,486.3
Long-term debt				5,209.1			5,059.8
Long-term debt—affiliates				423.9			393.8
Deferred income taxes				235.0			234.8
Other noncurrent liabilities				429.8			456.2
		Total liabilities		7,784.2			7,630.9
Minority interests				57.8			134.5
Commitments and contingencies (Note 15)
Member's equity (deficit):
	Member's equity, 10,000,000 units			1,095.2			1,095.2
	Accumulated deficit			(1,367.3	)		(1,182.5	)
	Accumulated other comprehensive income			26.4			36.8
		Total member's (deficit) equity		(245.7	)		(50.5	)
		Total liabilities and member's equity	$	7,596.3		$	7,714.9

See accompanying notes to consolidated financial statements.

HUNTSMAN LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) (Dollars in Millions)

			Three Months Ended June 30,						Six Months Ended June 30,
			2004			2003			2004			2003
REVENUES:
	Trade sales		$	2,470.8		$	1,554.3		$	4,818.4		$	2,334.3
	Related party sales			17.2			22.8			24.3			74.6
		Total revenues		2,488.0			1,577.1			4,842.7			2,408.9
Cost of goods sold				2,207.9			1,410.0			4,349.1			2,201.2
Gross profit				280.1			167.1			493.6			207.7
EXPENSES:
	Selling, general and administrative			127.6			105.5			252.3			144.1
	Research and development			14.6			13.6			32.4			19.3
	Other operating (income) expense			21.0			(16.1	)		14.4			(20.0	)
	Restructuring and plant closing costs			150.5			22.4			159.2			22.4
		Total expenses		313.7			125.4			458.3			165.8
Operating (loss) income				(33.6	)		41.7			35.3			41.9
Interest expense, net				(133.3	)		(103.7	)		(277.5	)		(138.2	)
Loss on accounts receivable securitization program				(3.0	)		(8.5	)		(6.5	)		(8.5	)
Equity in income (losses) of investment in unconsolidated affiliates				1.0			(4.0	)		1.7			(38.1	)
Other expense				(2.1	)		—			(3.9	)		(0.3	)
Loss before income tax and minority interests				(171.0	)		(74.5	)		(250.9	)		(143.2	)
Income tax benefit (expense)				(6.4	)		6.3			(7.5	)		6.3
Loss before minority interest				(177.4	)		(68.2	)		(258.4	)		(136.9	)
Minority interest in subsidiaries' loss				47.5			15.8			73.6			15.8
NET LOSS				(129.9	)		(52.4	)		(184.8	)		(121.1	)
Other comprehensive (loss) income				(11.8	)		51.8			(10.4	)		59.2
COMPREHENSIVE LOSS			$	(141.7	)	$	(0.6	)	$	(195.2	)	$	(61.9	)

See accompanying notes to consolidated financial statements.

See "Note 1—General" concerning the consolidation of HIH, effective as of May 1, 2003, and its effect on comparability of amounts.

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED ~~STATEMENTS~~BALANCE OFSHEETS ~~MEMBER'S EQUITY~~ (~~DEFICIT) (~~UNAUDITED) (Dollars ~~and Units~~ in Millions)

		Member's equity
			June 30, 2005			December 31, 2004(1)
						Accumulated deficit			Accumulated other comprehensive income (loss)
ASSETS
		Units	Amount									Total
Current assets:
Balance, December 31, 2003		10.0	$	1,095.2		$	(1,182.5	)	$	36.8		$	(50.5	)
	Cash and cash equivalents		$	14.2		$	11.7
Net loss		—		—			(184.8	)		—		$	(184.8	)
	Restricted cash			13.5			8.9
Other comprehensive loss		—		—			—			(10.4	)		(10.4	)
	Accounts and notes receivable (net of allowance for doubtful accounts of $9.0 and $7.7, respectively)			494.8			540.3
Balance, June 30, 2004		10.0	$	1,095.2		$	(1,367.3	)	$	26.4		$	(245.7	)
	Accounts receivable from affiliates			78.5			64.4
	Inventories			356.2			338.8
	Prepaid expenses			1.8			21.9
	Deferred income taxes			0.5			0.7
	Other current assets			1.9			1.6
		Total current assets		961.4			988.3
Property, plant and equipment, net				1,211.2			1,232.1
Investment in unconsolidated affiliates				197.9			196.0
Intangible assets, net				30.7			32.4
Goodwill				3.3			3.3
Deferred income taxes				8.3			8.2
Receivables from affilitates				9.5			12.8
Other noncurrent assets				162.2			179.2
		Total assets	$	2,584.5		$	2,652.3
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Current liabilities:
	Accounts payable		$	319.7		$	318.4
	Accounts payable to affiliates			15.4			21.6
	Accrued liabilities			199.5			233.7
	Deferred income taxes			8.3			8.2
	Current portion of long-term debt			4.6			25.3
		Total current liabilities		547.5			607.2
Long-term debt				1,554.6			1,912.0
Long-term debt to affiliates				—			40.9
Deferred income taxes				0.4			1.0
Other noncurrent liabilities				269.2			271.9
		Total liabilities		2,371.7			2,833.0
Commitments and contingencies (Note 15 and 16)
Member's equity (deficit):
	Member's equity, 10,000,000 units			1,428.4			1,095.2
	Accumulated deficit			(1,230.3	)		(1,359.3	)
	Accumulated other comprehensive income			14.7			83.4
		Total member's equity (deficit)		212.8			(180.7	)
		Total liabilities and member's equity (deficit)	$	2,584.5		$	2,652.3

(1): In connection with Huntsman Corporation's initial public offering of common and preferred stock on February 16, 2005 and the related reorganization transactions among certain affiliates, our ownership of HIH (as defined below) was reduced to 42% effective February 16, 2005 from 60% as of December 31, 2004. For financial reporting purposes this was considered a reorganization of entities under common control, accordingly, we no longer consolidated HIH with our results of operations beginning in March 2005 and have reclassified our financial statements to reflect our membership interest in HIH using the equity method for all periods presented. For more information, see "Note 1—General" to the accompanying unaudited condensed consolidated financial statements below.
See accompanying notes to unaudited condensed consolidated financial statements.

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH~~OPERATIONS ~~FLOWS~~AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (Dollars in Millions)

					Six months ended June 30,
				Three months ended June 30,						Six months ended June 30,
					2004			2003
				2005			2004(1)			2005			2004(1)
CASH FLOW FROM OPERATING ACTIVITIES:
Revenues:
Net loss					$	(184.8	)	$	(121.1	)
	Trade sales			$	1,095.8		$	914.4		$	2,223.9		$	1,800.5
Adjustments to reconcile net loss to net cash provided by operating activities:
	Related party sales				72.9			54.6			149.3			108.2
	Equity in (income) losses of investment in unconsolidated affiliates					(1.7	)		38.0
		Total revenues			1,168.7			969.0			2,373.2			1,908.7
	Depreciation and amortization					224.5			111.8
Cost of goods sold					1,054.8			916.8			2,097.9			1,787.5
	Provision for loss on accounts receivable					2.6			—
Gross profit					113.9			52.2			275.3			121.2
	Noncash restructuring, plant closing, and asset impairment charges					102.6			12.3
Expenses:
	Net cost of debt repayment					2.1			—
	Selling, general and administrative				46.5			37.8			85.0			72.5
	Net cash interest on affiliate debt					0.3			—
	Research and development				5.5			5.8			10.6			11.4
	Loss on disposal of plant and equipment					0.7			0.8
	Other operating income				(0.5	)		(3.8	)		(2.2	)		(5.2	)
	Noncash interest expense					70.3			26.0
	Restructuring and plant closing costs				0.9			25.6			4.3			25.6
	Deferred income tax expense (benefit)					5.1			(6.9	)
		Total expenses			52.4			65.4			97.7			104.3
	Gain on foreign currency transactions					(9.3	)		(14.8	)
Operating income (loss)					61.5			(13.2	)		177.6			16.9
	Minority interests in subsidiaries					(73.6	)		(15.8	)
Interest expense, net					(37.7	)		(42.1	)		(78.4	)		(88.9	)
	Changes in operating assets and liabilities:
Equity in income (losses) of investment in unconsolidated affiliates					35.0			(70.8	)		69.9			(109.9	)
		Accounts and notes receivables				(184.6	)		92.3
Other expense					(1.6	)		(2.1	)		(40.1	)		(3.7	)
		Change in receivables sold, net				29.7			1.9
Income (loss) before income taxes					57.2			(128.2	)		129.0			(185.6	)
		Inventories				19.2			(54.6	)
Income tax (expense) benefit					(0.8	)		(1.6	)		—			0.8
		Prepaid expenses				20.9			26.2
Net income (loss)					56.4			(129.8	)		129.0			(184.8	)
		Other current assets				(26.9	)		(7.5	)
Other comprehensive loss					(42.0	)		(11.9	)		(68.7	)		(10.5	)
		Other noncurrent assets				(47.2	)		(13.4	)
Comprehensive income (loss)				$	14.4		$	(141.7	)	$	60.3		$	(195.3	)
		Accounts payable				58.4			(73.1	)
		Accrued liabilities				27.1			(9.2	)
		Other noncurrent liabilities				4.2			(3.5	)
			Net cash provided by (used in) operating activities			39.6			(10.6	)
CASH FLOW FROM INVESTING ACTIVIES:
	Capital expenditures					(89.9	)		(58.9	)
	Net cash received from unconsolidated affiliates					8.3			1.0
	Investment in unconsolidated affiliate					(11.8	)		—
	Advances to unconsolidated affiliates					(1.1	)		(1.5	)
			Net cash used in investing activities			(94.5	)		(59.4	)
CASH FLOW FROM FINANCING ACTIVIES:
	Net borrowings under revolving loan facilities					89.3			116.3
	Net borrowings on overdraft					(7.5	)		—
	Capital contribution by minority shareholder					2.7			1.8
	Issuance of senior unsecured notes					400.0			—
	Repayment of long-term debt					(388.6	)		(21.9	)
	Debt issuance costs					(12.1	)		(12.8	)
			Net cash provided by financing activities			83.8			83.4
	Effect of exchange rate changes on cash					(40.4	)		11.8
	Increase (decrease) in cash and cash equivalents					(11.5	)		25.2
	Cash and cash equivalents at beginning of period					127.8			31.4
	Cash and cash equivalents of HIH at May 1, 2003 (date of consolidation)					—			62.2
	Cash and cash equivalents at end of period				$	116.3		$	118.8
Supplemental cash flow information:
		Cash paid for interest				203.1			81.7
		Cash paid for income taxes				20.8			3.8

(1): In connection with Huntsman Corporation's initial public offering of common and preferred stock on February 16, 2005 and the related reorganization transactions among certain affiliates, our ownership of HIH was reduced to 42% effective February 16, 2005 from 60% as of December 31, 2004. For financial reporting purposes this was considered a reorganization of entities under common control, accordingly, we no longer consolidated HIH with our results of operations beginning in March 2005 and have reclassified our financial statements to reflect our membership interest in HIH using the equity method for all periods presented. For more information, see "Note 1—General" to the accompanying unaudited condensed consolidated financial statements below.
~~Supplemental~~See accompanying ~~non-cash~~notes ~~activities:~~ to unaudited condensed consolidated financial statements.

On May 9, 2003, HMP, the indirect parent of the Company, exercised an option that it held to purchase ICI's 30% membership interest in HIH. At that time, HMP purchased the remaining approximate 9% membership interest in HIH owned by certain institutional investors. As such, effective May 1, 2003, HIH became a consolidated subsidiary of the Company. As of May 1, 2003, HIH's total assets of $5,163.9 million (including cash of $62.2 million), total liabilities of $4,889.2 million and minority interest of $1.0 million were consolidated into the Company. In addition, the Company recorded minority interest of $111.1 million to reflect HMP's 40% interest in HIH. See "Note 1—General."

See accompanying notes to consolidated financial statements.

HUNTSMAN LLC AND SUBSIDIARIES ~~NOTES~~CONDENSED TO CONSOLIDATED ~~FINANCIAL~~STATEMENT ~~STATEMENTS~~OF MEMBER'S EQUITY (DEFICIT) (UNAUDITED) (Dollars in Millions)

1. General

	Member's equity
	Member's equity			Accumulated Deficit			Accumulated other comprehensive income (loss)
	Units	Amount		Accumulated Deficit			Accumulated other comprehensive income (loss)			Total
Balance, December 31, 2004	10,000,000	$	1,095.2	$	(1,359.3	)	$	83.4		$	(180.7	)
Net income	—		—		129.0			—			129.0
Other comprehensive loss	—		—		—			(68.7	)		(68.7	)
Contribution from parent	—		333.2		—			—			333.2

Balance, June 30, 2005	10,000,000	$	1,428.4	$	(1,230.3	)	$	14.7		$	212.8

~~Description~~See accompanying ofnotes ~~Business~~ to unaudited condensed consolidated financial statements.

Huntsman LLC (the "Company," including its subsidiaries, unless the context otherwise requires) is a leading manufacturer and marketer of a wide range of chemical products that are sold to diversified consumer and industrial end markets. The Company has 47 primary manufacturing facilities located in North America, Europe, Asia, Australia, South America and Africa and sells its products globally through its five principal business segments: Polyurethanes, Performance Products, Polymers, Pigments and Base Chemicals.

Company

The Company is a Utah limited liability company and all of its units of interest are owned by HMP Equity Holdings Corporation ("HMP"). HMP is a Delaware corporation and is owned 100% by Huntsman Group Inc., a Delaware corporation ("HGI"), subject to warrants that, if exercised, would entitle the holders to acquire up to 12% of the common stock of HMP. HGI is owned 100% by Huntsman Holdings, LLC, a Delaware limited liability company ("Huntsman Holdings"). The voting membership interests of Huntsman Holdings are owned 50.2% by the Huntsman family, 47.8% by MatlinPatterson Global Opportunities Partners, L.P. ("MatlinPatterson"), 1.8% by Consolidated Press Holdings Limited and its subsidiaries ("Consolidated Press") and 0.2% by senior management. In addition, Huntsman Holdings has issued certain non-voting preferred units to Huntsman Holdings Preferred Member LLC, which, in turn, is owned 93.7%, indirectly, by MatlinPatterson, 3.6% by Consolidated Press, 1.8% by the Huntsman Cancer Foundation, 0.6% by senior management and 0.3% by the Huntsman family. Huntsman Holdings has also issued certain non-voting preferred units to the Huntsman family, MatlinPatterson and Consolidated Press that track the performance of an affiliate, Huntsman Advanced Materials LLC ("AdMat"). AdMat's results of operations are not included in the Company's consolidated financial statements. The Huntsman family has board and operational control of the Company.

Prior to its conversion into a Utah limited liability company on September 9, 2002, the Company, then named Huntsman Corporation, was a Utah corporation. As part of the conversion to a limited liability company, the holders of shares of preferred and common stock exchanged their shares in the Company for units of membership interest. Because these exchange transactions were between related entities, the exchange was recorded at the historical carrying value of the stock and no gain or loss was recognized.

Prior to September 30, 2002, the Company was owned by members of the Huntsman family and by certain affiliated entities. On September 30, 2002, the Company and its subsidiary, Huntsman Polymers Corporation ("Huntsman Polymers"), completed debt for equity exchanges (the "Restructuring"). Pursuant to the Restructuring, the Huntsman family contributed all of their equity interests in the Company and its subsidiaries, including minority interests acquired from Consolidated Press and the interests described in the second following paragraph, to Huntsman Holdings in exchange for equity interests in Huntsman Holdings. MatlinPatterson and Consolidated Press exchanged approximately $679 million in principal amount of the Company's outstanding subordinated notes and Huntsman Polymers' 113/4% senior unsecured notes (the "Huntsman Polymers Notes") they held into equity interests in Huntsman Holdings. There was also approximately $84 million in accrued interest that was cancelled as a result of the exchange. The net book value of the $763 million of principal and accrued

~~interest~~ ~~exchanged~~ ~~for~~ HUNTSMAN ~~equity,~~LLC ~~after~~AND ~~considering~~SUBSIDIARIES CONDENSED ~~debt~~CONSOLIDATED ~~issuance~~STATEMENTS ~~costs,~~OF ~~was~~CASH ~~$753 million.~~FLOWS ~~Huntsman~~(UNAUDITED) (Dollars ~~Holdings~~in ~~now indirectly owns all the equity of the Company.~~ Millions)

In connection with the Restructuring, the effective cancellation of debt was recorded as a capital contribution by the Company because MatlinPatterson and Consolidated Press received equity of Huntsman Holdings, the Company's indirect parent, in exchange. The fair value of the equity received approximated the carrying value of the debt exchanged. No gain was recorded on the Restructuring.

		Six months ended June 30,
		2005			2004(1)
Operating Activities:
Net income (loss)		$	129.0		$	(184.8	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in (income) losses of investment in unconsolidated affiliates			(69.9	)		109.9
Depreciation and amortization			63.0			66.6
Provision for (recovery of) losses on accounts receivable			1.4			(0.7	)
Loss on disposal of assets			1.0			0.7
Loss on early extinguishment of debt			38.6			4.2
Noncash interest expense			4.4			3.5
Noncash interest expense on affiliate debt			—			0.3
Noncash restructuring and plant closing costs			—			21.5
Deferred income taxes			—			(0.9	)
Unrealized loss on foreign currency transactions			0.8			—
Changes in operating assets and liabilities:
	Accounts and notes receivables		40.7			(58.1	)
	Inventories		(19.2	)		12.3
	Prepaid expenses		20.2			25.6
	Other current assets		(0.6	)		(1.6	)
	Other noncurrent assets		3.2			(25.3	)
	Accounts payable		(23.4	)		52.1
	Accrued liabilities		(32.7	)		(23.8	)
	Other noncurrent liabilities		2.3			(2.1	)

Net cash provided by (used in) operating activities			158.8			(0.6	)

Investing Activities:
Capital expenditures			(34.5	)		(29.5	)
Net cash received from unconsolidated affiliates			1.7			—
Change in restricted cash			(4.6	)		(3.0	)

Net cash used in investing activities			(37.4	)		(32.5	)

Financing Activities:
Net (repayment) borrowings under revolving loan facilities			(53.0	)		74.3
Repayment of long-term debt			(366.5	)		(430.3	)
Issuance of senior unsecured notes			—			400.0
Net borrowings from affiliate			—			0.1
Cost of early extinguishment of debt			(31.7	)		—
Debt issuance costs paid			(0.2	)		(12.1	)
Capital contribution from parent			333.2			—

Net cash (used in) provided by financing activities			(118.2	)		32.0

Effect of exchange rate changes on cash			(0.7	)		(0.8	)

Increase (decrease) in cash and cash equivalents			2.5			(1.9	)
Cash and cash equivalents at beginning of period			11.7			19.5

Cash and cash equivalents at end of period		$	14.2		$	17.6

Supplemental cash flow information:
	Cash paid for interest	$	85.4		$	78.6
	Cash paid for income taxes		0.8			16.7

(1): In connection with Huntsman Corporation's initial public offering of common and preferred stock on February 16, 2005 and the related reorganization transactions among certain affiliates, our ownership of HIH was reduced to 42% effective February 16, 2005 from 60% as of December 31, 2004. For financial reporting purposes this was considered a reorganization of entities under common control, accordingly, we no longer consolidated HIH with our results of operations beginning in March 2005 and have reclassified our financial statements to reflect our membership interest in HIH using the equity method for all periods presented. For more information, see "Note 1—General" to the accompanying unaudited condensed consolidated financial statements below.
~~As discussed~~See ~~above,~~accompanying onnotes ~~September 30,~~to ~~2002,~~unaudited ~~the~~condensed ~~Company~~consolidated ~~effectively~~financial ~~acquired~~statements. ~~the following interests from Huntsman Holdings:~~

The Company accounted for the acquisition of the minority interests from Huntsman Holdings as an equity contribution with a value of $71.1 million (including cash of $7.9 million and net of debt assumed of $35.3 million).

The Company owns 60% of the membership interests of Huntsman International Holdings LLC ("HIH"), and, prior to May 9, 2003, HMP owned approximately 1% of the membership interests of HIH. On May 9, 2003, HMP completed the acquisition of the 30% of the HIH membership interests held by Imperial Chemical Industries PLC ("ICI") and the remaining approximately 9% of the HIH membership interests held by certain institutional investors (the "HIH Consolidation Transaction"). HIH is a global manufacturer and marketer of polyurethanes, amines, surfactants, titanium dioxide ("TiO2") and basic petrochemicals. HIH and its subsidiaries are non-guarantor, unrestricted subsidiaries of the Company pursuant to the Company's various debt agreements. HIH and its subsidiaries, including Huntsman International LLC ("HI"), are separately financed from the Company, their debt is non-recourse to the Company, and the Company is not obligated to make cash contributions to, or investments in, HIH and its subsidiaries.

Prior to May 1, 2003, the Company accounted for its investment in HIH using the equity method of accounting due to the significant management participation rights formerly granted to ICI pursuant to the HIH limited liability company agreement. As a consequence of HMP's 100% direct and indirect ownership of HIH and the resulting termination of ICI's management participation rights, the Company is considered to have a controlling financial interest in HIH. Accordingly, the Company no longer accounts for HIH using the equity method of accounting, but effective May 1, 2003 HIH's results of operations are consolidated with the Company's results of operations, with HMP's 40% interest in HIH recorded as a minority interest. Consequently, results of HIH through April 30, 2003 are recorded using the equity method of accounting, and results of HIH beginning May 1, 2003 are recorded on a consolidated basis. As a result, the summary historical financial data for periods ending prior to May 1, 2003 are not comparable to financial periods ending on or after May 1, 2003.

~~The~~ ~~following~~ ~~table~~ HUNTSMAN isLLC aAND ~~summary~~SUBSIDIARIES NOTES ofTO ~~the~~CONDENSED ~~net~~CONSOLIDATED ~~assets~~FINANCIAL ~~of HIH as of May 1, 2003~~ STATEMENTS (~~dollars in millions~~UNAUDITED):

Current assets	$	1,364.5
Property, plant and equipment, net		3,082.2
Other noncurrent assets		740.4
Total assets	$	5,187.1
Current liabilities	$	885.0
Long term debt (including current portion)		3,638.1
Other noncurrent liabilities		366.1
Total liabilities	$	4,889.2

1. GENERAL

Certain Definitions

For convenience in this report, the terms "Company," "our," "us" or "we" may be used to refer to Huntsman LLC and, unless the context otherwise requires, its subsidiaries. In this report, "HI" refers to Huntsman International LLC, "HIH" refers to Huntsman International Holdings LLC, "Huntsman Specialty" refers to Huntsman Specialty Chemicals Corporation, "HMP" refers to HMP Equity Holdings Corporation, "Huntsman Holdings" refers to Huntsman Holdings, LLC, "Huntsman Corporation" refers to Huntsman Corporation and its predecessors, and, unless the context otherwise requires, their subsidiaries, "AdMat" refers to Huntsman Advanced Materials LLC and, unless the context otherwise requires, its subsidiaries, and "MatlinPatterson" refers to MatlinPatterson Global Opportunities Partners L.P. and its affiliates.

Company

We are a Utah limited liability company and all of our units of interest are owned by Huntsman Corporation.

Prior to February 16, 2005, we were owned by HMP. On February 16, 2005, Huntsman Corporation completed an initial public offering of common and preferred stock. Net proceeds to Huntsman Corporation from the offering were approximately $1,500 million, substantially all of which has been used to repay outstanding indebtedness of certain of Huntsman Corporation's subsidiaries, including HMP, our Company and HIH. In connection with the offering, Huntsman Corporation and certain affiliates engaged in a series of reorganization transactions such that we are now a direct, 100% owned subsidiary of Huntsman Corporation.

HIH is a global manufacturer and marketer of polyurethanes, amines, surfactants, titanium dioxide ("TiO₂") and basic petrochemicals. HIH and its subsidiaries, including HI, are separately financed from us, their debt is non-recourse to us, and we are not obligated to make cash contributions to, or investments in, HIH and its subsidiaries. Prior to February 16, 2005, we owned 60% of the membership interests of HIH. In connection with the Huntsman Corporation reorganization transactions, our ownership of HIH was reduced to 42% effective February 16, 2005 from 60% as of December 31, 2004. For financial reporting purposes this was considered a reorganization of entities under common control, and, beginning in March 2005, we no longer consolidate HIH with our results of operations and have reclassified our financial statements to reflect our membership interest in HIH using the equity method for all periods presented.

Proposed Merger into Huntsman International LLC and Proposed New Credit Facility

In July 2005, we obtained the required consents from the holders of our senior secured notes (the "HLLC Senior Secured Notes") and our senior notes (the "HLLC Senior Notes") to amend certain provisions in the indentures governing these notes. The amendments will facilitate the proposed merger of our Company with and into HI. The amendments include, among other things, the increase in the amount of secured indebtedness we can incur. In addition, with respect to the HLLC Senior Secured Notes, the amendment also provides for the elimination of stock pledges of subsidiaries as collateral under the applicable indentures.

The proposed merger of our Company with and into HI will help simplify the financing and reporting structure of Huntsman Corporation and is expected to facilitate other organizational

efficiencies. We have recently completed the syndication of the proposed new secured credit facility for the merged company. The proposed secured credit facility is expected to be comprised of a $1.85 billion term loan due 2012 and a $650 million revolving loan facility due 2011. Initial interest rate margins under the proposed secured credit facility are contemplated to be at LIBOR plus 1.75%. Proceeds from the new credit facility will be used to repay outstanding borrowings under our existing senior secured credit facilities, HI's senior secured credit facilities and certain other debt. We expect to complete the merger and related financing in the third quarter of 2005. However, there can be no assurances that the new facility will be obtained. If the credit facility is not obtained, the proposed merger will not occur.

The following tables provide a summary of our structure before and after the proposed merger:

(1): Represents Huntsman Corporation's equity in Huntsman Advanced Materials LLC. The balance of the equity is owned by third parties, including affiliates of SISU Capital Limited.

Business

We are a manufacturer and marketer of a wide range of chemical products that are sold to diversified consumer and industrial end markets. We have manufacturing facilities located in North America, Europe and Australia and sell our products globally through our three principal operating segments: Performance Products, Polymers and Base Chemicals.

Principles of Consolidation

Our condensed consolidated financial statements include the accounts of our wholly-owned and majority-owned subsidiaries and any variable interest entities for which we are the primary beneficiary.

Interim Financial Statements

~~The~~Our unaudited interim condensed consolidated financial statements ~~of the Company~~ were prepared in accordance with accounting principles generally accepted in the United States of of America ("GAAP") and in management's opinion, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, financial position and cash flows for the periods ~~shown, have been made~~presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These ~~financial~~condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and notes to condensed consolidated financial statements included in ~~the~~our ~~Company's~~Annual ~~special~~Report ~~financial report~~ on Form 10-K for the year ended December 31, ~~2003~~2004. Information in this report for dates and periods prior to December 31, 2004 differs from amounts previously presented due to the reorganization transaction as discussed in "—Company" above.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the condensed consolidated financial statements for prior periods have been reclassified to conform with the current presentation.

2. ~~Recently~~RECENTLY ~~Issued~~ISSUED ~~Financial~~ACCOUNTING ~~Accounting Standards~~PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued Financial Interpretation No. ("FIN") 46, "Consolidation of Variable Interest Entities." FIN 46 addresses the requirements for business enterprises to consolidate related entities, for which they do not have controlling interests through voting or other rights, if they are determined to be the primary beneficiary as a result of variable economic interests. Transfers to a qualifying special purpose entity are not subject to this interpretation. In December 2003, the FASB issued a ~~complete~~ replacement of FIN 46 (FIN 46R), to clarify certain complexities. ~~The~~We ~~Company~~adopted ~~is required to adopt~~ this ~~standard~~financial interpretation on January 1, 2005, ~~and~~as required. isThe ~~currently~~impact ~~evaluating~~of ~~its~~FIN ~~impact~~46R ~~but~~was ~~does~~ not ~~expect the impact to be~~ significant.

In ~~May~~November 2004, the FASB issued ~~FASB~~Statement ~~Staff~~of ~~Position~~Financial ~~No. 106-2~~Accounting Standards ("~~FSP 106-2~~SFAS") No. 151, "~~Accounting~~Inventory ~~and~~Costs—an ~~Disclosure~~amendment ~~Requirements~~of ~~Related to~~ARB ~~the~~No. 43." ~~Medicare~~SFAS ~~Prescription~~No. 151 ~~Drug,~~requires ~~Improvement~~abnormal ~~and~~amounts ~~Modernization Act~~ of ~~2003"~~idle ~~(the~~facility ~~"Act")~~expense, ~~which~~freight, ~~superceded~~handling ~~FSP 106-1 of the same name~~costs, ~~which was issued in January 2004~~ and ~~permitted~~wasted amaterial ~~sponsor~~to ofbe arecognized ~~post~~as current-~~retirement~~period ~~health~~charges. It ~~care~~also ~~plan~~requires that ~~provides~~allocation aof ~~prescription~~fixed ~~drug~~production ~~benefit~~overhead to ~~make~~the acosts ~~one-time~~of ~~election~~conversion tobe ~~defer~~based ~~accounting~~on ~~for~~ the ~~effects~~normal capacity of the ~~Act~~production ~~until~~facilities. ~~more~~The ~~authoritative~~requirements ~~guidance~~of on the ~~accounting~~standard ~~for~~will ~~the~~be effective ~~federal~~for ~~subsidy~~inventory ~~was~~costs ~~issued.~~incurred ~~FSP~~during ~~106-2~~fiscal ~~provides~~years ~~guidance~~beginning onafter ~~how~~June 15, to2005. ~~account~~We ~~for~~are ~~future~~reviewing ~~subsidies~~SFAS ~~available beginning~~No. 151 into ~~2006~~determine tothe ~~employers~~statement's ~~who~~impact ~~provide~~on ~~prescription~~our ~~drug~~consolidated financial statements.

7 In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets—an amendment of APB Opinion No. 29." SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in APB Opinion No. 29 and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this standard are effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. We will apply this standard prospectively.

~~benefits~~ In ~~that~~December 2004, ~~are~~the FASB issued SFAS No. 123R, "~~actuarially~~Share ~~equivalent~~Based Payment." SFAS No. 123R requires entities to ~~those~~measure the ~~that~~cost ~~will~~of beemployee ~~provided~~services ~~under~~received ~~Medicare~~in exchange for an award of equity instruments based on the grant-date fair value of the award. ~~Sponsors~~That ~~that~~cost ~~provide~~will ~~actuarially~~be ~~equivalent~~recognized ~~benefits~~over ~~must~~the ~~account~~period ~~for~~during which the ~~subsidy~~employee asis arequired ~~reduction~~to provide services in exchange for the ~~accumulated~~ ~~postretirement~~award. ~~benefit~~This ~~obligation~~standard ~~and~~eliminates ~~any~~the ~~reduction~~alternative ofto use the ~~sponsor's~~intrinsic ~~share~~value method of ~~future~~accounting ~~costs~~for ~~should~~share-based bepayments ~~reflected~~as previously provided in ~~service~~APB ~~cost~~Opinion inNo. 25, ~~the~~"Accounting ~~period~~for ofStock ~~implementation~~Issued to Employees." ~~The~~We ~~Company~~adopted isSFAS ~~currently~~No. 123R effective ~~evaluating~~January 1, ~~whether~~2005, ~~the~~and ~~drug~~have ~~benefit~~applied ~~provided~~this bystandard ~~its~~prospectively ~~postretirement~~to ~~plans~~share-based ~~would~~awards beissued ~~considered~~to ~~actuarially~~our ~~equivalent~~employees in connection with Huntsman Corporation's initial public offering. IfIn ~~the~~connection ~~Company~~with Huntsman ~~determines~~Corporation's ~~its~~initial ~~plans~~public ~~are~~offering ~~actuarially~~of ~~equivalent~~common and preferred stock on February 16, ~~FSP~~2005, certain of our employees received Huntsman Corporation stock options and restricted stock. ~~106~~Accordingly, we were allocated share-2based ~~will~~compensation beexpense ~~effective~~of $2.1 and $2.7 million during the ~~quarter~~three months ended ~~September~~June 30, ~~2004.~~2005 and during the six months ended June 30,

3. Inventories

Inventories consist of the following (dollars in millions):

	June 30, 2004			December 31, 2003
Raw materials and supplies	$	225.6		$	257.2
Work in progress		32.7			32.7
Finished goods		653.2			619.8
Total		911.5			909.7
LIFO reserves		(41.2	)		(15.5	)
Lower of cost or market reserves		(0.5	)		(1.3	)
Net	$	869.8		$	892.9

In the normal course of operations, the Company at times exchanges raw materials and finished goods with other companies for the purpose of reducing transportation costs. The net open exchange positions are valued at the Company's cost. Net amounts deducted from or added to inventory under open exchange agreements, which represent the net amounts payable or receivable by the Company under open exchange agreements, were approximately $9.9 million payable and $8.2 million payable (46,700,196 and 26,910,072 pounds, respectively) at June 30, 2004 and December 31, 2003, respectively.

4. Property, Plant and Equipment

The cost and accumulated depreciation of property, plant and equipment consist of the following (dollars in millions):

	June 30, 2004			December 31, 2003
Land	$	101.5		$	100.7
Buildings		382.8			383.4
Plant and equipment		5,942.8			6,004.2
Construction in progress		261.6			249.0
Total		6,688.7			6,737.3
Less accumulated depreciation		(2,326.9	)		(2,165.2	)
Net	$	4,361.8		$	4,572.1

5. Investments in Unconsolidated Affiliates

The Company's ownership percentage and investments in unconsolidated affiliates, primarily manufacturing joint ventures, consist of the following (dollars in millions):

		June 30, 2004		December 31, 2003
Equity Method:
Polystyrene Australia Pty Ltd. (50%)		$	3.5	$	3.6
Sasol-Huntsman GmbH and Co. KG (50%)			13.8		13.2
Louisiana Pigment Company, L.P. (50%)			122.1		130.4
Rubicon, LLC (50%)			1.1		1.0
BASF Huntsman Shanghai Isocyanate Inventment BV (50%)(1)			17.9		6.1
Others			1.3		1.2
	Total equity method investment		159.7		155.5
Cost Method:
Gulf Advanced Chemicals Industry Corporation (4%)			2.5		2.5
	Total cost method investment		2.5		2.5
	Total investment	$	162.2	$	158.0

6. Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets consist of the following (dollars in millions):

	June 30, 2004						December 31, 2003
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Patents, trademarks, and technology	$	409.6	$	163.3	$	246.3	$	405.0	$	143.7	$	261.3
Licenses and other agreements		18.3		10.5		7.8		18.3		9.5		8.8
Non-compete agreements		49.6		42.2		7.4		49.6		38.5		11.1
Other intangibles		2.5		1.8		0.7		2.4		1.7		0.7
Total	$	480.0	$	217.8	$	262.2	$	475.3	$	193.4	$	281.9

Amortization expense for intangible assets for the six month period ended June 30, 2004 and 2003, is $16.5 million and $1.2 million, respectively. Estimated future amortization expense for intangible assets over the next five years is as follows (dollars in millions):

Year Ended December 31	Estimated Amortization Expense
2004	$	38.0
2005		37.5
2006		29.3
2007		29.3
2008		29.3

72005. ~~Other~~ We ~~Noncurrent~~did ~~Assets~~ not have share-based awards prior to the awards issued in connection with Huntsman Corporation's initial public offering.

~~Other~~In March 2005, ~~noncurrent~~the ~~assets~~FASB ~~consist~~issued ofFIN 47, "Accounting for Conditional Asset Retirement Obligations." FIN 47 clarifies the ~~following~~term conditional ~~(dollars~~asset retirement obligation used in ~~millions):~~SFAS No. 143, "Accounting for Asset Retirement Obligations," and clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of December 2005. We are reviewing FIN 47 to determine its impact on our financial statements.

	June 30, 2004		December 31, 2003
Prepaid pension assets	$	256.1	$	254.4
Debt issuance costs		125.6		83.5
Capitalized turnaround expense		121.1		83.9
Receivables from affiliates		11.4		25.2
Spare parts inventory		45.5		100.5
Other noncurrent assets		69.0		64.0
Total	$	628.7	$	611.5

In March 2005, the Emerging Issues Task Force issued a preliminary consensus on issue 04-13, "Accounting for Purchases and Sales of Inventory with the Same Counterparty," that, if ratified by the FASB, would require companies to recognize an exchange of finished goods for raw materials or work-in-process within the same line of business at fair value. All other exchanges of inventory would be reflected at the recorded amount. We are evaluating the impact of this preliminary consensus to determine its impact on our results of operations.

8 In May 2005, the FASB issued SFAS No. ~~Accrued~~ 154, ~~Liabilities~~ "Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change or unless specific transition provisions are proscribed in the accounting pronouncements. SFAS No. 154 does not change the accounting guidance for reporting a correction of an error in previously issued financial statements or a change in accounting estimate. SFAS No. 154 is effective for accounting changes and error corrections made after December 31, 2005. We will apply this standard prospectively.

~~Accrued liabilities consist of the following (dollars in millions):~~ 3. INVENTORIES

	June 30, 2004		December 31, 2003
Payroll, severance and related costs	$	101.0	$	124.1
Interest		121.7		103.9
Volume and rebates accruals		75.8		89.5
Income taxes		43.2		51.7
Taxes (property and VAT)		62.6		61.8
Pension liabilities		24.8		21.3
Restructuring and plant closing costs		86.3		22.6
Environmental accruals		10.6		8.6
Interest and commodity hedging accruals		1.8		11.3
Other miscellaneous accruals		69.5		90.9
Total	$	597.3	$	585.7

Inventories consisted of the following (dollars in millions):

9. Other Noncurrent Liabilities

	June 30, 2005			December 31, 2004
Raw materials and supplies	$	113.0		$	106.0
Work in progress		16.8			16.7
Finished goods		307.2			297.5

Total		437.0			420.2
LIFO reserves		(80.8	)		(81.0	)
Lower of cost or market reserves		—			(0.4	)

Net	$	356.2		$	338.8

~~Other~~As of ~~noncurrent~~June 30, ~~liabilities~~2005 ~~consist~~and December 31, 2004, approximately 55.8% and 56.2%, respectively, of ~~the~~inventories ~~following~~were ~~(dollars~~recorded using the last-in, ~~millions~~first-out cost method ("LIFO"):. At June 30, 2005 and December 31, 2004, the excess of current cost over the stated LIFO value was $80.8 million and $81.0 million, respectively.

	June 30, 2004		December 31, 2003
Pension liabilities	$	300.6	$	246.5
Other postretirement benefits		82.5		78.8
Environmental accruals		22.3		26.3
Restructuring and plant closing costs		—		2.7
Fair value of interest derivative		4.8		9.5
Other noncurrent liabilities		19.6		92.4
Total	$	429.8	$	456.2

In the normal course of operations, we at times exchange raw materials and finished goods with other companies for the purpose of reducing transportation costs. No gains or losses are recognized on these exchanges and the net open exchange positions are valued at our cost. Net amounts deducted from or added to inventory under open exchange agreements, which represent the net amounts payable or receivable by us under open exchange agreements, were approximately $2.1 million payable and $6.4 million payable (0.1 million and 10.8 million pounds) at June 30, 2005 and December 31, 2004, respectively.

10. Restructuring and Plant Closing Costs

As of June 30, 2004 and December 31, 2003, the Company had reserves for restructuring and plant closing costs of $86.3 million and $25.3 million, respectively. During the six months ended June 30, 2004, the Company, on a consolidated basis, recorded additional reserves of $78.1 million, including

~~reserves for workforce reductions, demolition and decommissioning and facility closure costs~~4. ~~During the 2004 period~~ PROPERTY, ~~the~~PLANT ~~Company~~AND ~~made cash payments against these reserves of $17.1 million.~~ EQUIPMENT

~~As of~~The ~~June 30,~~cost ~~2004, accrued restructuring~~ and ~~plant~~accumulated ~~closing~~depreciation ~~costs~~of byproperty, ~~type~~plant ofand ~~cost~~equipment ~~consist~~were ofas ~~the~~follows ~~following~~ (dollars in millions):

			Workforce reductions			Demolition and decommissioning			Non-cancelable lease costs			Facility closure costs		Total
		June 30, 2005			December 31, 2004
Accrued liabilities as of December 31, 2003			$	22.5		$	2.6		$	0.2		$	—	$	25.3
Land		$	66.3		$	65.9
	Charges			56.8			5.5			—			15.8		78.1
Buildings			235.6			233.9
	Payments(1)			(16.7	)		(0.2	)		(0.2	)		—		(17.1	)
Plant and equipment			2,043.6			2,009.0
Accrued liabilities as of June 30, 2004			$	62.6		$	7.9		$	—		$	15.8	$	86.3
Construction in progress			64.4			65.7
Total			2,409.9			2,374.5
Less accumulated depreciation			(1,198.7	)		(1,142.4	)
Net		$	1,211.2		$	1,232.1

~~Details~~Depreciation expense ~~with~~was ~~respect~~$28.0 million toand ~~the~~$55.8 million, ~~Company's~~and ~~reserves~~$29.8 million ~~for restructuring~~ and ~~plant~~$58.6 million ~~closing~~for ~~costs~~three ~~are~~and ~~provided~~six ~~below~~months byended ~~segments~~June 30, ~~(dollars~~2005 inand ~~millions):~~2004, respectively.

		Polyurethanes			Performance Products			Pigments			Polymers			Base Chemicals		Total
Accrued liability as of December 31, 2003		$	15.8		$	2.4		$	4.3		$	2.8		$	—	$	25.3
	Charges		22.9			20.9			27.0			5.1			2.2		78.1
	Payments(1)		(10.6	)		(0.5	)		(5.6	)		(0.4	)		—		(17.1	)
Accrued liability as of June 30, 2004		$	28.1		$	22.8		$	25.7		$	7.5		$	2.2	$	86.3

Property, plant and equipment includes gross assets acquired under capital leases of $4.9 million at both June 30, 2005 and December 31, 2004, respectively; related amounts included in accumulated depreciation were $1.7 million and $1.5 million at June 30, 2005 and December 31, 2004, respectively.

~~As of December 31, 2003, the Polyurethanes segment reserve consisted of $15~~5.~~8 million~~ INVESTMENT ~~related~~IN toUNCONSOLIDATED the restructuring activities at the Rozenburg, Netherlands site (as announced in 2003), the workforce reductions throughout the Polyurethanes segment (as announced in 2003), and the closure of the Shepton Mallet, U.K. site (as announced in 2002). During the six months ended June 30, 2004, the Polyurethanes segment recorded additional restructuring charges of $22.9 million and made cash payments of $10.6 million. In the first quarter 2004, the Polyurethanes segment recorded restructuring expenses of $4.8 million, all of which are payable in cash. In the second quarter 2004, the Polyurethanes segment announced restructuring charges of $18.1 million, all of which are payable in cash, including the closure of its West Deptford, New Jersey site. These restructuring activities are expected to result in additional restructuring charges of approximately $15 million through 2005 and result in workforce reductions of approximately 160 employees, of which 48 positions have been reduced during the six months ended June 30, 2004. As of June 30, 2004, the Polyurethanes segment restructuring reserve totaled $28.1 million. AFFILIATES

~~As of~~Our ~~December 31,~~ownership ~~2003,~~percentage the Performance Products segment reserve consisted of $2.4 million related to the closure of a number of plants at its Whitehaven, U.K. facility, the closure of an administrative office in London, U.K., the rationalization of its surfactants technical center in Oldbury, U.K., and ~~the~~investment ~~restructuring of its facility~~ in ~~Barcelona,~~unconsolidated ~~Spain.~~affiliates ~~During~~were ~~the six~~as ~~months~~follows ~~ended~~(dollars ~~June 30, 2004, the Performance Products segment accrued restructuring charges of $20.9 million, of which $5.1 million are payable~~ in ~~cash,~~millions): and made cash payments of $0.5 million related to these restructuring activities. There are no material additional charges expected related to these restructuring activities. On July 1, 2004, the Company announced the closure of its Guelph, Ontario, Canada Performance Products manufacturing facility. Production will be moved to the Company's other larger, more efficient facilities. These restructuring activities are not expected to result in additional charges. Workforce

	June 30, 2005		December 31, 2004
Equity Method:
Polystyrene Australia Pty Ltd.(50%)	$	3.4	$	4.7
Sasol-Huntsman GmbH and Co. KG (50%)		19.9		17.5
HIH (42% and 60%, respectively)		172.1		171.3

Total		195.4		193.5
Cost Method:
Gulf Advanced Chemicals Industry Corporation (4%)		2.5		2.5

Total Investment	$	197.9	$	196.0

~~reductions~~ The offollowing ~~approximately~~is 66summarized ~~positions~~statement ~~are~~of ~~anticipated.~~operations ~~The~~information ~~Performance~~for ~~Products~~HIH ~~segment~~for ~~reserve~~the ~~totaled~~three ~~$22.8 million~~and assix ofmonths ended June 30, 2005 and 2004. (dollars in millions):

As of December 31, 2003, the Polymers segment reserve consisted of $2.8 million related to its demolition and decommissioning of the Odessa, Texas styrene manufacturing facility and noncancelable lease costs. During the six months ended June 30, 2004, the Polymers segment recorded restructuring expenses related to the closure of an Australian manufacturing unit of $5.1 million, of which $1.5 million are payable in cash, and made cash payments of $0.4 million related to these restructuring activities. These restructuring activities are expected to result in additional charges of less than $1.0 million through 2005 and in workforce reductions of approximately 23 positions, of which 13 positions have been reduced in the six months ended June 30, 2004. The Polymers segment reserve totaled $7.5 million as of June 30, 2004.

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
Revenues	$	1,930.2		$	1,605.5		$	3,878.5		$	3,085.6
Cost of goods sold		1,599.8			1,373.1			3,189.1			2,704.4

Gross profit		330.4			232.4			689.4			381.2
Operating expenses		122.5			251.3			258.8			360.0

Operating income (loss)		207.9			(18.9	)		430.6			21.2
Interest expense, net		(53.3	)		(91.2	)		(137.3	)		(188.6	)
Other non-operating expense		(4.2	)		(3.0	)		(43.1	)		(6.7	)

Income (loss) before income taxes		150.4			(113.1	)		250.2			(174.1	)
Income tax expense		(33.2	)		(4.7	)		(56.7	)		(8.3	)
Loss from discontinued operations		(40.4	)		(0.9	)		(43.0	)		(1.7	)
Minority interest in earnings		—			—			(0.1	)		—

Net income (loss)	$	76.8		$	(118.7	)	$	150.4		$	(184.1	)

As of June 30, 2004 and December 31, 2003, the Pigments segment reserve consisted of $25.7 and $4.3 million, respectively. During the six months ended June 30, 2004, the Pigments segment recorded additional restructuring charges of $108.1 million and made cash payments of $5.6 ~~million~~. INTANGIBLE In the first quarter 2004, the Pigments segment recorded restructuring expenses of $3.9 million, all of which are payable in cash. In the second quarter 2004, the Pigments segment recorded restructuring expenses of $104.2 million, of which $81.1 million is not payable in cash. In April 2004, the Company announced that, following a review of the Pigments business, it will idle approximately 55,000 tonnes, or about 10%, of its total TiO2 production capacity in the fourth quarter of 2004. As a result of this decision, the Company has recorded a restructuring charge of $17.0 million, a $77.2 million asset impairment charge and a $3.9 million charge for the write off of spare parts inventory and other assets. Concerning the impairment charge, the Company determined that the value of the related long-lived assets was impaired and recorded the non-cash charge to earnings for the impairment of these assets. The fair value of these assets for purposes of measuring the impairment was determined using the present value of expected cash flows. During the second quarter of 2004, the Company recorded additional charges of $10.0 million in regard to previously announced restructuring activities which primarily relate to workforce reductions. These restructuring activities are expected to result in additional restructuring charges of approximately $13 million through 2005 and result in workforce reductions of approximately 475 employees, of which 46 positions have been reduced during the six months ended June 30, 2004. As of June 30, 2004, the Pigments segment restructuring reserve totaled $25.7 million. ASSETS

~~As of~~The ~~June 30,~~gross ~~2004~~carrying ~~and~~amount ~~December 31, 2003, the Base Chemicals segment reserve consisted of $2.2~~ and ~~nil,~~accumulated ~~respectively,~~amortization related to workforce reductions arising from the announced change in work shift schedules at the Wilton, U.K. facility. During the six months ended June 30, 2004, the Base Chemicals segment recorded restructuring charges of ~~$2.2 million,~~ ~~all~~intangible ofassets ~~which~~were isas ~~payable~~follows in(dollars ~~cash. These restructuring activities are expected to result~~ in ~~additional~~millions): ~~charges of approximately $4.3 million and in workforce reductions of approximately 68 positions.~~

	June 30, 2005						December 31, 2004
	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Patents, trademarks, and technology	$	38.2	$	14.2	$	24.0	$	57.4	$	33.0	$	24.4
Licenses and other agreements		14.2		7.5		6.7		18.3		10.9		7.4
Other intangibles		—		—		—		1.3		0.7		0.6

Total	$	52.4	$	21.7	$	30.7	$	77.0	$	44.6	$	32.4

Amortization expense was $1.3 million and $2.2 million, and $1.4 million and $3.0 million for the three and six months ended June 30, 2005 and 2004, respectively.

7. OTHER NONCURRENT ASSETS

Other noncurrent assets consisted of the following (dollars in millions):

	June 30, 2005		December 31, 2004
Prepaid pension costs	$	1.3	$	1.2
Debt issuance costs, net		20.7		28.9
Capitalized turnaround costs, net		37.7		43.9
Catalyst assets, net		11.9		15.2
Spare parts inventory, net		48.4		46.3
Other noncurrent assets		42.2		43.7

Total	$	162.2	$	179.2

11 Amortization expense of catalyst assets was $2. ~~Debt~~ 7 million and $5.0 million, and $2.6 million and $4.8 million for the three and six months ended June 30, 2005 and 2004, respectively.

~~Debt~~8. ACCRUED ~~outstanding consists of the following (dollars in millions):~~ LIABILITIES

		June 30, 2004		December 31, 2003
Huntsman LLC Debt (excluding HIH and HI):
HLLC credit facilities:
	Term Loan A	$	606.3	$	606.3
	Term Loan B		96.1		459.0
	Revolving loan facility		86.5		12.2
Other debt:
	HLLC senior secured notes		450.9		450.5
	Huntsman Polymers senior unsecured notes		—		36.8
	HLLC senior unsecured fixed rate notes		300.0		—
	HLLC senior unsecured floating rate notes		100.0		—
	HLLC senior subordinated fixed rate notes		44.2		44.2
	HLLC senior subordinated floating rate notes		15.1		15.1
	Huntsman Specialty Chemicals Corporation subordinated note		100.3		99.7
	Huntsman Australia Holdings Corporation (HAHC) credit facilities		36.8		44.5
	Huntsman Chemical Company Australia (HCCA) credit facilities		14.4		48.7
	Subordinated note and accrued interest—affiliate		38.0		35.5
	Term note payable to a bank		9.4		9.5
	Other		6.4		5.6
Total HLLC debt, excluding HIH and HI			1,904.4		1,867.6
HI debt:
HI credit facilities:
	Term B loan		620.1		620.1
	Term C loan		620.1		620.1
	Revolving loan facility		37.0		22.0
Other debt:
	HI Senior notes		456.6		457.1
	HI Senior subordinated notes		1,150.4		1,169.8
	Other debt		36.5		38.0
Total HI debt			2,920.7		2,927.1
HIH debt:
	Senior discount notes		463.7		434.6
	Senior subordinated discount notes—affiliate		385.9		358.3
Total HIH debt			849.6		792.9
Total HIH consolidated debt			3,770.3		3,720.0
Total debt		$	5,674.7	$	5,587.6
Current portion		$	41.7	$	134.0
Long-term portion—excluding affiliates			5,209.1		5,059.8
Total long-term debt—excluding affiliates			5,250.8		5,193.8
Long-term debt—affiliates			423.9		393.8
Total debt		$	5,674.7	$	5,587.6

Accrued liabilities consisted of the following (dollars in millions):

	June 30, 2005		December 31, 2004
Payroll, severance and related costs	$	28.5	$	28.2
Interest		26.7		38.7
Volume rebate accruals		24.8		30.3
Income taxes		10.8		9.0
Taxes (other than income tax)		19.1		27.6
Restructuring and plant closing costs		7.2		11.2
Environmental accruals		2.0		2.0
Other accrued liabilities		80.4		86.7

Total	$	199.5	$	233.7

9. OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities consisted of the following (dollars in millions):

	June 30, 2005		December 31, 2004
Pension liabilities	$	143.5	$	142.6
Other postretirement benefits		68.2		66.3
Environmental accruals		10.2		11.9
Restructuring and plant closing costs		2.7		2.3
Other noncurrent liabilities		44.6		48.8

Total	$	269.2	$	271.9

~~Huntsman~~ 10. RESTRUCTURING ~~LLC~~AND ~~Debt~~PLANT ~~(Excluding~~CLOSING ~~HIH and HI)~~COSTS

As ~~HLLC~~of ~~Credit~~June 30, ~~Facilities~~ 2005, accrued restructuring and plant closing costs by type of cost and activity consisted of the following (dollars in millions):

As of June 30, 2004, the Company's senior secured credit facilities (the "HLLC Credit Facilities") consist of a $275 million revolving credit facility maturing in 2006 (the "HLLC Revolving Facility") and two term loan facilities maturing in 2007 in the amount of $606.3 million ("Term Loan A") and $96.1 million ("Term Loan B" and, collectively with Term Loan A, the "HLLC Term Facilities"). Term Loan A has scheduled quarterly maturities commencing March 2006, with the final balance due at maturity. The total outstanding balance of Term Loan B is due at maturity.

	Workforce reductions(1)			Demolition and decommissioning			Non-cancelable lease costs			Other restructuring costs			Total(2)
Accrued liabilities as of December 31, 2004	$	11.0		$	2.5		$	—		$	—		$	13.5
2005 charges for 2004 activities		0.3			0.1			—			4.4			4.8
Reversal of reserves no longer required		—			—			—			(0.5	)		(0.5	)
2005 payments for 2004 activities		(3.9	)		(0.1	)		(0.5	)		(3.3	)		(7.8	)
Foreign currency effect on reserve balance		(0.1	)		—			—			—			(0.1	)

Accrued liabilities as of June 30, 2005	$	7.3		$	2.5		$	(0.5	)	$	0.6		$	9.9

(1): Substantially all of the positions terminated in connection with the restructuring programs were terminated under ongoing termination benefit arrangements. Accordingly, the related liabilities were accrued as a one-time charge to earnings in accordance with SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
(2): Accrued liabilities by activities were as follows:

On June 22, 2004, the Company applied $362.9 million from the proceeds from its offering of the HLLC Unsecured Notes (as defined below) to Term Loan B. See "—Senior Unsecured Notes (HLLC Unsecured Notes)" below. In addition, as discussed in "—Senior Secured Notes (2003 HLLC Secured Notes)" below, in 2003, the Company repaid a total of $331.8 million on Term Loan A and $65.0 million on the HLLC Revolving Facility, without reducing commitments. The next scheduled quarterly amortization payment under the HLLC Credit Facilities is due March 2006.

	June 30, 2005		December 31, 2004
Accrued liabilities by activities were as follows:
2001 activities	$	2.8	$	2.8
2004 activities		6.5		10.0
Foreign currency effect on reserve balance		0.6		0.7

Total	$	9.9	$	13.5

The HLLC Revolving Facility is secured by a first lien on substantially all the assets of the Company, HSCHC, Huntsman Specialty Chemicals Corporation ("Huntsman Specialty") and the Company's domestic restricted subsidiaries, which does not include HIH or HI. The HLLC Term Facilities are secured by a second lien on substantially the same assets that secure the HLLC Revolving Facility. The HLLC Credit Facilities are also guaranteed by HSCHC and Huntsman Specialty and by the Company's domestic restricted subsidiaries (collectively, the "HLLC Guarantors"). Neither HIH nor HI are HLLC Guarantors. As of June 30, 2004 and December 31, 2003, the weighted average interest rates on the HLLC Credit Facilities were 5.8% and 7.3%, respectively, excluding the impact of interest rate hedges.

The HLLC Revolving Facility is subject to a borrowing base of accounts receivable and inventory and is available for general corporate purposes. Borrowings under the HLLC Revolving Facility bear interest, at the Company's option, at a rate equal to (i) a LIBOR-based eurocurrency rate plus an applicable margin ranging from 2.75% to 3.50% as based on the Company's most recent ratio of total debt to "EBITDA" (as defined in the HLLC Revolving Facility credit agreement), or (ii) a prime-based rate plus an applicable margin ranging from 1.75% to 2.50%, also based on the Company's most recent ratio of total debt to EBITDA. As of June 30, 2004, the interest rate on the HLLC Revolving Facility was LIBOR plus 3.50%.

As of June 30, 2004, borrowings under the HLLC Term Facilities bear interest, at the Company's option, at a rate equal to (i) a LIBOR-based eurocurrency rate plus an applicable margin of 4.0% and 9.0% for Term Loan A and Term Loan B, respectively, or (ii) a prime-based rate plus an applicable margin of 3.00% and 8.0% for Term Loan A and Term Loan B, respectively. On June 23, 2004, in accordance with the HLLC Credit Facilities agreement, the applicable margin for Term Loan A decreased 0.75% (75 basis points) in conjunction with the repayment of $362.9 million on Term Loan B. This agreement also provides for quarterly escalating interest rates on Term Loan B of up to maximum LIBOR and prime based margins of 9.75% and 8.75%, respectively by July 2004.

The HLLC Credit Facilities provide for financial covenants including a minimum interest coverage ratio, a minimum fixed charge ratio and maximum debt to EBITDA ratio, as defined, and limits on capital expenditures, in addition to restrictive covenants customary to financings of these types, including limitations on liens, debt and the sale of assets. On May 6, 2004, the Company amended certain financial covenants in the HLLC Credit Facilities. The amendment applies to both the HLLC Revolving Facility and the HLLC Term Facilities and provides for, among other things, the amendment of certain financial covenants through the fourth quarter 2005. The amendment provided for an increase in the maximum leverage ratio, and a decrease in the minimum interest coverage ratio and the fixed charge coverage ratio. The amendment also amended the mandatory prepayment provisions

~~contained~~ Details inwith ~~the~~respect ~~HLLC Credit Facilities~~ to ~~permit~~our ~~the~~reserves ~~Company,~~for ~~after~~restructuring ~~certain~~and ~~levels~~plant ofclosing ~~repayment~~costs ofare ~~Term~~provided ~~Loan~~below B,by tosegments ~~use~~and ~~subordinate~~activity ~~debt~~(dollars ~~or equity proceeds to repay a portion of the outstanding indebtedness of certain of its Australian subsidiaries. As noted~~ in "—Other Debt" below, on June 24, 2003, the Company used $25 million of the proceeds from the offering of the HLLC Unsecured Notes to repay existing indebtedness at Huntsman Chemical Company Australia Pty. ("HCCA"millions).:

Management believes that the Company is in compliance with the covenants of the HLLC Credit Facilities as of June 30, 2004.

		Performance Products			Polymers			Base Chemicals			Total
Accrued liabilities as of December 31, 2004		$	7.7		$	5.8		$	—		$	13.5
2005 charges for 2004 activities			1.4			2.9			0.5			4.8
Reversal of reserves no longer required			(0.1	)		—			(0.4	)		(0.5	)
2005 payments for 2004 activities			(3.4	)		(4.4	)		—			(7.8	)
Foreign currency effect on reserve balance			(0.1	)		—			—			(0.1	)

Accrued liabilities as of June 30, 2005		$	5.5		$	4.3		$	0.1		$	9.9
Current portion of restructuring reserve		$	5.2		$	1.9		$	0.1		$	7.2
Long-term portion of restructuring reserve			0.3			2.4			—			2.7
Estimated additional future cash charges for current restructuring projects:
	Estimated additional charges within one year	$	5.6		$	—		$	—		$	5.6
	Estimated additional charges beyond one year	$	—		$	—		$	—		$	—

As of ~~Senior~~June 30, ~~Secured~~2005 ~~Notes~~and December 31, 2004, we had reserves for restructuring and plant closing costs of $9.9 million and $13.5 million, respectively. During the six months ended June 30, 2005 we recorded net charges of $4.3 million (~~2003~~all ~~HLLC~~of ~~Secured~~which ~~Notes~~is payable in cash) for workforce reductions, non-cancelable lease costs, and other restructuring costs associated with closure or curtailment of activities at our smaller, less efficient manufacturing facilities. During the first six months of 2005, we made cash payments against these reserves of $7.8 million.

OnAs of ~~September~~December 3031, ~~2003~~2004, ~~the~~our ~~Company~~Performance ~~sold~~Products ~~$380 million~~segment ~~aggregate~~reserve ~~principal~~consisted ~~amount~~ of ~~115/8%~~$7.7 million ~~senior~~related ~~secured~~to ~~notes~~various ~~due~~restructuring ~~2010~~programs, atmainly ~~a discount to yield 117/8%~~ in aconnection ~~private~~with ~~offering (~~the ~~"September 2003~~closure of ~~Offering").~~our ~~The~~Guelph, ~~proceeds~~Ontario, ~~from the offering were used to repay $65~~St.~~0 million~~ ~~on the HLLC Revolving Facility~~Louis, ~~without~~ ~~reducing~~Missouri ~~commitments,~~ and ~~$296.6 million on Term Loan A. On December 3~~Austin, ~~2003~~Texas ~~the Company sold an additional $75~~facilities.~~4 million~~ ~~aggregate~~During ~~principal amount of its senior secured notes (collectively with~~ the ~~notes~~six ~~sold~~months inended ~~the September~~June ~~2003~~30, ~~Offering~~2005, ~~the~~our ~~"2003~~Performance ~~HLLC~~Products ~~Secured~~segment ~~Notes")~~recorded atnet arestructuring ~~discount~~charges ~~to yield 11.72% (the "December 2003 Offering"). The proceeds~~ of ~~this~~ ~~offering were used to repay~~ $351.23 million onrelated ~~Term Loan A. The remaining proceeds of this offering were temporarily applied~~ to ~~reduce~~2004 ~~outstanding~~activities ~~borrowings under the HLLC Revolving Facility,~~ and ~~the~~made ~~Company, on January 28, 2004, used $37.5 million of the net~~ cash ~~proceeds~~payments ~~to redeem the Huntsman Polymers Notes (representing principal~~ of $363.84 million ~~plus accrued interest)~~. ~~The~~These ~~Huntsman~~restructuring ~~Polymers~~activities ~~Notes~~are ~~would~~expected ~~have~~to ~~been~~result ~~due~~ in ~~December 2004~~additional ~~and~~charges ~~were redeemed at 100%~~ of ~~their aggregate principal amount. The 2003 HLLC Secured Notes bear interest at a rate of~~approximately ~~115/8% per annum and interest is payable semi-annually on April~~$6 15million ~~and~~through ~~October 15~~2006. The 2003 HLLC Secured Notes mature on October 15, 2010 and are secured by a second lien on substantially all the assets of the Company, HSCHC, Huntsman Specialty and the Company's domestic restricted subsidiaries (which do not include HIH or HI). The 2003 HLLC Secured Notes are effectively subordinated to all the Company's obligations under the HLLC Revolving Facility and rank pari passu with the HLLC Term Facilities. The 2003 HLLC Secured Notes are also guaranteed by the HLLC Guarantors. In accordance with the Company's contractual obligation to register the 2003 HLLC Secured Notes, the Company's registration statement on Form S-4/A filed with the U.S. Securities and Exchange Commission became effective on February 13, 2004 and the exchange offer of unregistered 2003 HLLC Secured Notes for registered 2003 HLLC Secured Notes was completed on March 29, 2004.

~~The~~As ~~2003~~of ~~HLLC~~December 31, ~~Secured~~2004, ~~Notes~~our ~~are~~Polymers ~~redeemable~~segment ~~after~~reserve ~~October 15,~~consisted ~~2007~~of ~~at 105~~$5.~~813%~~8 million ofrelated primarily to the ~~principal~~closure ~~amount~~of ~~thereof,~~a ~~declining~~phenol ~~ratably~~manufacturing tounit ~~par~~in onAustralia and restructuring ~~after~~activities ~~October 15,~~at ~~2009~~our Odessa, Texas and ~~prior~~ ~~to October 15~~Mansonville, ~~2007~~Canada atfacilities. aDuring ~~redemption~~the ~~price~~six ~~equal~~months toended ~~the~~June 30, ~~greater~~2005, ofour ~~(1) 105.813%~~Polymers ofsegment ~~the~~recorded ~~principal~~restructuring ~~amount~~charges ~~thereof~~of $2.9 million ~~plus~~related ~~all~~to ~~required~~these ~~interest~~activities, ~~payments~~all ~~due~~of onwhich ~~such~~are ~~notes~~payable ~~through October 15,~~in ~~2007~~cash, ~~discounted~~and tomade ~~the~~cash ~~redemption~~payments ~~date~~of ~~using~~$4.4 million. ~~the~~These ~~treasury~~restructuring ~~rates,~~activities ~~plus~~are ~~0.50%,~~not ~~plus,~~expected into ~~each~~result ~~case,~~in ~~accrued~~any material ~~and~~additional ~~unpaid~~restructuring ~~interest~~charges. toDuring the ~~date~~six ofmonths ~~redemption~~ended June 30, or2005, ~~(2) 100%~~our ofPolymers ~~the principal~~segment ~~amount~~made ~~thereof~~workforce reductions of 7 positions.

~~The~~During ~~indenture~~the ~~governing~~six ~~the~~months ~~2003~~ended ~~HLLC~~June 30, ~~Secured~~2005, ~~Notes~~our ~~contains~~Base ~~covenants~~Chemicals ~~relating~~segment torecorded ~~the~~restructuring ~~incurrence~~charges of ~~debt,~~$0.5 million ~~limitations on distributions, asset sales~~ and ~~affiliate~~reversed ~~transactions, among other things~~$0.4 million ~~The~~of ~~indenture~~accruals ~~also~~related ~~requires the Company~~ to ~~offer to repurchase~~ the ~~2003~~relocation ~~HLLC Secured Notes upon a change~~ of ~~control.~~our ~~Management~~corporate ~~believes~~offices ~~that~~to ~~the~~The ~~Company~~Woodlands, isTexas inand ~~compliance with~~ the ~~covenants~~ consolidation of ~~the~~our ~~2003~~U.S. ~~HLLC~~purchasing ~~Secured~~functions ~~Notes~~which aswere ofno ~~June 30,~~longer ~~2004~~required.

Senior Unsecured Notes (HLLC Unsecured Notes)

On June 22, 2004, the Company sold $300 million of senior unsecured fixed rate notes that bear interest at 11.5% and mature on July 15, 2012 (the "HLLC Unsecured Fixed Rate Notes") and $100 million of senior unsecured floating rate notes that bear interest at a rate equal to LIBOR plus 7.25% and mature on July 15, 2011 (the "HLLC Unsecured Floating Rate Notes," and together with

~~the HLLC Unsecured Fixed Rate Notes, the "HLLC Unsecured Notes")~~11. LONG-TERM The interest rate on the HLLC Unsecured Floating Rate Notes as of June 30, 2004 was 8.80%. The proceeds from the offering were used to repay $362.9 million on Term Loan B and $25 million to repay existing indebtedness at HCCA. See "—Other Debt" below. The HLLC Unsecured Notes are unsecured obligations of the Company and are guaranteed by the HLLC Guarantors. DEBT

~~The HLLC~~Long-term ~~Unsecured~~debt ~~Fixed~~outstanding ~~Rate~~as ~~Notes are redeemable after July 15, 2008 at 105.75%~~ of ~~the principal amount thereof, declining ratably to par on and after July~~June 1530, ~~2010,~~2005 and ~~prior~~ ~~to July~~December 1531, ~~2008~~2004 atwas aas ~~redemption~~follows ~~price equal to the greater of~~ (~~1) 105.75%~~dollars ~~of the principal amount thereof plus all required interest payments due on such notes through July 15, 2008, discounted to the redemption date using the treasury rates, plus 0.50%, plus,~~ in ~~each case, accrued and unpaid interest to the date of redemption, or (2~~millions) ~~100%~~: of the principal amount thereof. The HLLC Unsecured Floating Rate Notes are redeemable after July 15, 2006 at 104.0% of the principal amount thereof, declining ratably to par on and after July 15, 2008, and prior to July 15, 2006 at a redemption price equal to the greater of (1) 104.0% of the principal amount thereof plus all required interest payments due on such notes through July 15, 2006, discounted to the redemption date using the treasury rates, plus 0.50%, plus, in each case, accrued and unpaid interest to the date of redemption, or (2) 100% of the principal amount thereof.

The indenture governing the HLLC Unsecured Notes contains covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other things. The indenture also requires the Company to offer to repurchase the HLLC Unsecured Notes upon a change of control. Management believes that the Company is in compliance with the covenants of the HLLC Unsecured Notes as of June 30, 2004.

			June 30, 2005		December 31, 2004
Senior secured credit facilities:
	Term Loan B		$	665.0	$	715.0
	Revolving facility			63.0		125.0
Other debt:
	Huntsman LLC senior secured notes			293.4		451.1
	Huntsman LLC senior unsecured fixed rate notes			198.0		300.0
	Huntsman LLC senior unsecured floating rate notes			100.0		100.0
	Huntsman LLC senior subordinated fixed rate notes			44.2		44.2
	Huntsman LLC senior subordinated floating rate notes			15.1		15.1
	Huntsman Specialty Chemicals Corporation subordinated note			102.0		101.2
	Huntsman Australia Holdings Pty Ltd (HCA) credit facilities			47.2		43.2
	Huntsman Corporation Chemical Company Australia (HCCA) credit facilities			19.0		16.0
	Subordinated note and accrued interest—affiliate			—		40.9
	Term note payable to a bank			8.6		9.0
	Other			3.7		17.5

		Total debt	$	1,559.2	$	1,978.2

	Current portion of long-term debt		$	4.6	$	25.3
	Long-term debt			1,554.6		1,912.0
	Long-term debt—affiliate			—		40.9

		Total debt	$	1,559.2	$	1,978.2

Senior ~~Subordinated~~Secured ~~Fixed~~Credit ~~And~~Facilities ~~Floating Rate Notes~~ (HLLC ~~Notes)~~Credit ~~And Huntsman Polymers Senior Unsecured Notes (Huntsman Polymers Notes~~Facilities)

~~The~~On ~~Company's~~October 14, ~~9.5%~~2004, ~~fixed~~we ~~and~~completed ~~variable~~a ~~subordinated~~$1,065 million ~~notes~~refinancing ~~due~~of ~~2007~~our ~~(the~~senior ~~"HLLC~~secured ~~Notes")~~credit ~~with~~facilities an(as ~~outstanding~~refinanced, ~~principal~~the ~~balance~~"HLLC ~~of $59~~Credit Facilities").~~3 million~~ asOn of June 3027, ~~2004~~2005, ~~are~~we ~~unsecured~~made ~~subordinated~~a ~~obligations~~$50 million ofvoluntary ~~the~~prepayment ~~Company~~under ~~and are junior in right of payment to all existing and future secured or unsecured senior indebtedness of~~ the ~~Company~~term ~~and effectively~~facility ~~junior~~portion ~~to any secured indebtedness~~ of the ~~Company~~HLLC toCredit ~~the extent of the collateral securing such indebtedness~~Facilities. ~~Interest~~Following isthis ~~payable~~prepayment, on the HLLC ~~Notes~~Credit Facilities ~~semiannually~~consist onof ~~January 1~~a ~~and July~~$350 1million atrevolving ancredit ~~annual~~facility ~~rate~~due ofOctober 2009 ~~9.5% on~~ (the ~~fixed~~"HLLC ~~rate~~Revolving ~~notes~~Facility") and ~~LIBOR~~a ~~plus~~$665 million ~~3.25%~~term onloan ~~the~~B ~~floating~~facility ~~rate~~due ~~notes.~~March 2010 ~~The~~ (the "HLLC ~~Notes~~Term ~~are~~Facility"). ~~redeemable~~Proceeds ~~at the option~~ of the ~~Company~~refinancing ~~after~~were ~~July 2002~~used atto ~~a price~~repay ~~declining~~in ~~from~~full ~~104.75%~~the tooutstanding ~~100%~~borrowings ofunder ~~par~~our ~~value~~prior assenior ofsecured ~~July 1,~~credit ~~2005~~facilities. The ~~weighted~~HLLC ~~average~~Term ~~interest~~Facility ~~rate~~has onscheduled ~~the~~annual amortization ~~floating~~payments ~~rate notes was 4.5% and 4.4% as~~ of ~~June~~$6.7 ~~30,~~million ~~2004~~commencing ~~and~~ December 31, ~~2003~~2006, ~~respectively~~with the remaining balance due at maturity.

OnThe ~~January 28,~~HLLC ~~2004,~~Revolving ~~the~~Facility ~~Company~~is ~~used~~secured ~~$37.5 million~~by ofa ~~the~~first ~~net~~priority ~~cash~~lien ~~proceeds~~on ~~from~~substantially ~~the~~all ~~December 2003~~of ~~Offering~~our tocurrent ~~redeem~~and ~~the~~intangible ~~Huntsman~~assets ~~Polymers~~and ~~Notes~~those ~~(representing principal~~ of ~~$36.8 million~~our ~~plus~~domestic ~~accrued~~restricted ~~interest).~~subsidiaries; ~~The~~and ~~Huntsman~~is secured ~~Polymers~~by ~~Notes~~a ~~were~~second ~~unsecured~~priority ~~senior~~lien ~~obligations~~on substantially all of ~~Huntsman~~our ~~Polymers;~~property, ~~they~~plant ~~had~~and anequipment ~~original~~and ~~maturity~~those of ~~December 2004,~~our ~~a fixed~~restricted domestic subsidiaries and our indirect equity interest ~~rate~~in ofHIH. ~~113/4%,~~The ~~and~~HLLC anTerm Facility ~~outstanding~~is ~~balance~~secured ofby ~~$36.8 million~~a asfirst priority lien on substantially all of ~~December 31~~our property, ~~2003.~~plant ~~The~~and ~~Huntsman~~equipment ~~Polymers~~and ~~Notes~~that ~~would~~of ~~have~~our ~~been~~restricted ~~due~~domestic subsidiaries and our indirect equity interest in ~~December 2004~~HIH; and by a second priority lien on substantially all of our current and ~~were~~intangible ~~redeemed~~assets atand ~~100%~~those of ~~their~~our ~~aggregate~~restricted ~~principal~~domestic ~~amount~~subsidiaries. The HLLC Credit Facilities are also guaranteed by Huntsman Specialty Chemicals Holdings

Prior to the Restructuring completed September 30, 2002, the indentures governing the HLLC Notes and Huntsman Polymers Notes contained certain restrictive covenants. Concurrently with the closing of the Restructuring, previously executed amendments to the indentures became effective and virtually all the restrictive covenants contained in the indentures were eliminated.

Corporation and ~~Other~~Huntsman ~~Debt~~ Specialty and by our domestic restricted subsidiaries (collectively, the "HLLC Guarantors"). Neither HIH nor HI is our restricted subsidiary and they are not HLLC Guarantors.

~~Huntsman~~The HLLC ~~Specialty's~~Revolving ~~subordinated~~Facility ~~note~~is insubject ~~the~~to ~~aggregate~~a ~~principal~~borrowing ~~amount~~base of ~~$75.0 million~~accounts ~~accrued~~receivable ~~interest~~and ~~until~~inventory ~~April 15,~~and ~~2002~~is atavailable 7%for ~~per~~general ~~annum~~corporate purposes. ~~Pursuant~~ toBorrowings under the ~~note~~HLLC ~~agreement,~~Revolving Facility ~~effective~~bear ~~April 15~~interest, ~~2002,~~at ~~all~~our ~~accrued~~option, ~~interest~~at ~~was~~a ~~added~~rate equal to ~~the~~(i) a ~~principal~~LIBOR-based ofeurocurrency ~~the~~rate ~~note~~plus ~~for~~an aapplicable ~~total~~margin ~~principal amount~~ of ~~$106~~2.~~6 million.~~25%, ~~Such~~or ~~principal balance will be payable in~~ (ii) a ~~single~~prime-based ~~installment~~rate onplus ~~April 15,~~an ~~2008.~~applicable ~~Interest~~margin ~~has been payable quarterly in cash, commencing July 15, 2002~~of 1.25%. ~~For~~The ~~financial~~HLLC ~~reporting~~Revolving ~~purposes,~~Facility ~~the~~allows ~~note~~us ~~was initially~~to ~~recorded~~borrow atup ~~its~~to ~~estimated fair value of~~ $~~58.2~~50 million, ~~based~~secured onby ~~prevailing~~letters ~~market~~of ~~rates~~credit; ashowever, of the ~~effective date. As of June~~$350 ~~30,~~million ~~2004~~revolving ~~and~~credit ~~December 31,~~facility ~~2003,~~is ~~the~~reduced ~~unamortized~~dollar-for-dollar ~~discount~~by onany ~~the~~letters ~~note~~of iscredit $6outstanding.~~3 million~~ ~~and $6.9 million, respectively.~~

~~Certain~~As of ~~the~~June 30, ~~Company's~~2005, ~~Australian subsidiaries maintain credit facilities that are non-recourse to~~ the ~~Company.~~weighted ~~HCCA,~~average ininterest ~~its~~rate ~~capacity~~on asour ~~trustee~~senior ofcredit ~~the~~facilities ~~HCA~~was ~~Trust~~6.3%, ~~holds~~excluding the ~~Company's~~ ~~Australian~~impact ~~styrenics assets. HCCA maintains a credit facility (the "HCCA Facility"), consisting~~ of ainterest ~~term~~rate ~~facility~~hedges. OnAs of June 2430, ~~2004~~2005, the HLLC ~~Company~~Revolving ~~used~~Facility ~~$25 million~~and ofHLLC ~~proceeds from~~Term ~~the~~Facility ~~offering~~bear ofinterest ~~the~~at ~~HLLC~~LIBOR ~~Unsecured~~plus ~~Notes~~2.25% toper ~~repay~~year aand ~~portion~~LIBOR ofplus ~~the~~3.0% ~~HCCA~~per ~~Facility~~year, ~~including~~respectively. ~~repaying~~In inaccordance ~~full~~with the ~~working~~HLLC ~~capital~~Term ~~facility~~Facility ~~and~~agreement, ~~reducing~~as ~~the~~a ~~term facility to $14.4 million~~result ~~(A$20.9 million).~~of InHuntsman ~~connection~~Corporation's ~~with~~initial ~~this~~public ~~repayment,~~offering aof ~~preexisting~~common ~~payment~~and ~~default~~preferred ~~was~~stock ~~cured~~ and the ~~remaining~~use ~~term~~of ~~facility~~offering ~~was~~proceeds ~~amended.~~for ~~The~~the ~~outstanding~~permanent ~~loan~~reduction ~~amount~~of ~~matures~~indebtedness ~~and~~by ~~is due on July 31~~us, ~~2005.~~the ~~The~~HLLC ~~HCCA~~Term Facility ~~contains~~interest norate margin ~~financial~~decreased ~~covenants,~~from ~~and~~LIBOR ~~borrowings~~plus ~~under~~3.50% ~~the~~to ~~HCCA~~LIBOR ~~Facility~~plus ~~bear~~3.0%. ~~interest~~The atagreements agoverning ~~base~~the ~~rate~~HLLC ~~plus~~Credit aFacilities ~~spread~~contain ofcustomary ~~1.25%,~~financial ~~plus~~covenants; ancovenants ~~additional~~relating ~~0.5%~~to ~~line~~the ~~use fee.~~incurrence As of ~~June 30~~debt, ~~2004,~~ the purchase ~~weighted~~and ~~average~~sale ~~interest~~of ~~rate~~assets, ~~for~~limitations ~~the~~on ~~HCCA~~investments ~~Facility~~and ~~was~~affiliate ~~6.8%.~~transactions; ~~The~~change ~~HCCA~~of ~~Facility~~control isprovisions; ~~secured~~events byof ~~effectively~~default ~~all~~provisions; ~~the~~and ~~assets~~acceleration ~~of the HCA Trust~~provisions. Management believes that ~~HCCA~~we are is in compliance with the covenants of the ~~HCCA~~HLLC ~~Facility~~Credit ~~as of June 30, 2004~~Facilities.

~~Huntsman Australia~~Senior ~~Holdings~~Secured ~~Corporation~~Notes (~~"HAHC")~~2003 ~~and~~Secured ~~certain of its subsidiaries hold the Company's Australian surfactants assets. HAHC and certain of its subsidiaries are parties to credit facilities established in December 1998 (the "HAHC Facilities"~~Notes). As of June 30, 2004, borrowings under the HAHC Facilities total A$53.2 million ($36.8 million) and bear interest at a base rate plus a spread of 2%. As of June 30, 2004, the weighted average interest rate for the HAHC Facilities was 7.5%. Principal payments are due semiannually through December 2005. The HAHC Facilities are collateralized by effectively all of the assets of the HAHC subsidiaries in addition to a stock pledge of the shares of one of its U.S. subsidiaries. The HAHC Facilities are subject to financial covenants, including a debt service ratio, a leverage ratio, an interest coverage ratio and limits on capital expenditures, in addition to restrictive covenants customary to financings of this type, including limitations on liens, debt and the sale of assets. As of June 30, 2004, HAHC was current on all scheduled amortization and interest payments under the HAHC Facilities but was not in compliance with certain financial covenants in the agreements governing the HAHC Facilities. The outstanding debt balances due under the HAHC Facilities have been classified in current portion of long-term debt.

On ~~July~~ September 230, ~~2001~~2003, ~~the~~we ~~Company~~sold ~~entered~~$380 million ~~into~~aggregate aprincipal 15amount of 11.625% ~~note~~senior ~~payable~~secured ~~with~~notes andue ~~affiliated~~October 15, ~~entity~~2010 inat ~~the~~an ~~amount~~issue price of ~~$25~~98.08% (the "September ~~million~~2003 Offering"). ~~The~~On ~~note~~December 3, is2003, ~~due~~we ~~and~~sold ~~payable~~an onadditional ~~the~~$75.4 million ~~earlier~~aggregate principal amount of ~~the tenth~~senior ~~anniversary~~secured ofnotes (collectively with the ~~issuance~~notes ~~date~~sold orin the ~~date~~September 2003 ofOffering, the ~~repayment~~"HLLC inSenior ~~full~~Secured inNotes") ~~cash~~at ofan ~~all~~issue ~~indebtedness~~price of 99.5%. Interest on the ~~Company~~HLLC ~~under~~Senior ~~its~~Secured ~~senior~~Notes ~~secured~~is ~~credit~~payable ~~facilities.~~semiannually ~~Interest~~on isApril 15 ~~not~~and October 15. ~~paid~~The ineffective ~~cash,~~interest ~~but~~rate is ~~accrued~~11.9%. atThe aHLLC ~~designated~~Senior ~~rate~~Secured ~~of 15%~~Notes ~~per~~are ~~annum,~~effectively ~~compounded~~subordinated ~~annually.~~to Asall ofour ~~June 30,~~obligations ~~2004~~under ~~and~~the ~~December 31,~~HLLC ~~2003,~~Revolving ~~accrued~~Facility ~~interest~~and ~~added~~rank pari topassu with the HLLC ~~principal~~Term ~~balance~~Facility. ~~was~~The ~~$13.0 million~~HLLC ~~and~~Senior ~~$10~~Secured Notes are guaranteed by the HLLC Guarantors.~~5 million,~~ ~~respectively.~~

HI The HLLC ~~Debt~~ Senior Secured Notes are redeemable after October 15, 2007 at 105.813% of the principal amount thereof, declining ratably to par on and after October 15, 2009. At any time prior to October 15, 2006, we may redeem up to 35% of the original aggregate principal amount of the HLLC Senior Secured Notes at a redemption price of 111.625% with the net cash proceeds of a qualified equity offering. As a result of Huntsman Corporation's initial public offering of common and preferred stock, we redeemed 35%, or approximately $159.4 million, of the aggregate principal amount of the HLLC Senior Secured Notes on February 28, 2005 and paid a call premium of approximately $18.5 million. Following this partial redemption of the HLLC Senior Secured Notes, there remain approximately $296.0 million in aggregate principal amount of the HLLC Senior Secured Notes outstanding.

The indenture ~~HIH~~governing ~~and~~the HIHLLC ~~debt~~Senior ~~transactions~~Secured ~~and~~Notes ~~balances~~contains ~~prior~~covenants relating to the ~~HIH~~incurrence ~~Consolidation~~of ~~Transaction~~debt, ~~effective~~limitations ~~May 1~~on distributions, ~~2003~~asset sales and affiliate transactions, ~~are~~among other ~~not~~things. ~~included~~The indenture also requires us to offer to repurchase the HLLC Senior Secured Notes upon a change of control. Management believes that we are in compliance with the ~~accompanying~~covenants of the HLLC ~~financial~~Senior ~~statements~~Secured Notes. For information with respect to the consent solicitation of holders of the HLLC Senior Secured Notes and the HLLC Senior Notes, see "Note 1—General—Proposed Merger Into Huntsman International LLC and Proposed New Credit Facility."

Senior ~~Secured~~Unsecured ~~Credit~~Notes ~~Facilities~~ (HIHLLC ~~Credit~~Senior ~~Facilities~~Notes)

AsOn of June 3022, 2004, HIwe ~~had~~sold ~~senior secured credit facilities (the "HI Credit Facilities") which consisted of a revolving loan facility of up to~~ $~~400~~300 million ~~that~~of ~~was~~our ~~scheduled~~senior tounsecured ~~mature~~fixed onrate ~~June 30,~~notes ~~2005, a $620.1 million term loan B facility~~ that ~~was~~bear ~~scheduled~~interest toat ~~mature~~11.5% ~~on June 30, 2007,~~ and ~~a $620.1 million term loan C facility that was scheduled to~~ mature on ~~June 30, 2008. On~~ July 1315, ~~2004,~~2012 ~~HI amended and restated~~ (the "HLLC HIUnsecured ~~Credit~~Fixed ~~Facilities.~~Rate ~~The~~Notes") ~~HI Credit Facilities as amended~~ and ~~restated now consist of a revolving loan facility of up to~~ $~~375~~100 million ~~with~~of aour ~~maturity~~senior ofunsecured ~~September 2008~~floating ~~(the~~rate ~~"HI~~notes ~~Revolving~~that ~~Facility"),~~bear ~~which~~interest ~~includes~~at a ~~$50 million~~rate ~~multicurrency revolving~~equal ~~loan~~to ~~facility~~LIBOR ~~available~~plus ~~in euros, GBP Sterling and U~~7.S.25% ~~dollars,~~ and amature ~~term~~on ~~loan~~July 15, B2011 ~~facility~~(the "HLLC ~~consisting~~Unsecured ofFloating aRate $1Notes,~~305 million~~" ~~term~~and ~~portion~~together ~~and~~with athe ~~€50 million (approximately~~HLLC ~~$61.6 million)~~Unsecured ~~term~~Fixed ~~portion~~Rate (Notes, the "HIHLLC ~~Term~~Senior ~~Facility~~Notes"). AtThe ~~the~~interest ~~closing~~rate ofon the ~~amendment~~HLLC ~~and~~Unsecured ~~restatement~~Floating ofRate ~~the~~Notes HIas ~~Credit Facilities,~~ of ~~the $126.6~~June ~~million of net proceeds~~30, ~~$82.4 million~~2005 was ~~applied~~approximately to10.4%. ~~repay~~Interest ~~all outstanding borrowings~~ on the HIHLLC ~~Revolving~~Unsecured ~~Facility~~Fixed ~~and~~Rate ~~the~~Notes ~~balance,~~is ~~net~~paid ofeach ~~fees,~~January 15 ~~increased~~and ~~cash~~July 15 and ~~cash equivalents. The increased liquidity~~ is ~~available~~ ~~for~~paid ~~general~~on ~~corporate~~the ~~purposes~~HLLC ~~and~~Unsecured toFloating ~~provide~~Rate aNotes ~~portion~~on ~~of funds for~~ the ~~potential~~15th ~~construction~~ of ~~a polyethylene production facility at HI's Wilton, U.K. facility. Scheduled amortization of~~ ~~the HI Term Facility is 1% per annum~~January, ~~commencing June 30~~April, ~~2005,~~July ~~with~~and ~~the remaining unpaid balance due at maturity~~October. The ~~maturity~~proceeds offrom the HIoffering ~~Term~~of ~~Facility is December 31, 2010; provided that~~ the ~~maturity~~HLLC ~~will~~Senior beNotes ~~accelerated~~were used to ~~December~~repay $362.9 ~~31,~~million ~~2008~~on ifour HIprior ~~has~~term ~~not~~loan ~~refinanced~~B ~~all~~facility ofand ~~the~~$25 million ~~outstanding~~to HIrepay indebtedness ~~Senior~~at ~~Notes~~HCCA. ~~(as~~See ~~defined~~"—Other Debt" below). ~~and~~The HIHLLC ~~Subordinated~~Senior Notes ~~(as~~are ~~defined~~our ~~below)~~unsecured onobligations ~~or before~~and ~~December 31,~~are ~~2008~~guaranteed onby ~~terms satisfactory to~~ the ~~administrative~~HLLC ~~agent under the HI Credit Facilities~~Guarantors.

~~Interest~~The ~~rates~~HLLC ~~for~~Unsecured ~~the~~Fixed ~~amended~~Rate ~~and~~Notes ~~restated HI Credit Facilities~~ are ~~based~~redeemable ~~upon~~after July 15, 2008 at ~~HI's~~105.75% ~~option,~~of ~~either~~the aprincipal ~~eurocurrency~~amount ~~rate~~thereof, ~~(LIBOR)~~declining orratably ato ~~base~~par ~~rate~~on ~~(prime)~~and ~~plus~~after ~~the~~July 15, ~~applicable spread~~2010. The ~~applicable~~HLLC ~~spreads~~Unsecured ~~vary~~Floating ~~based~~Rate onNotes aare ~~pricing~~redeemable ~~grid~~after July 15, in2006 ~~the~~at ~~case~~104.0% of ~~eurocurrency-based~~the ~~loans~~principal amount thereof, ~~from~~declining ~~2.25%~~ratably to ~~3.25%~~par ~~per annum depending~~ on ~~the~~and ~~loan~~after ~~facility~~July 15, ~~and~~2008. ~~whether~~At ~~specified~~any ~~conditions~~time ~~have~~prior ~~been~~to ~~satisfied~~July 15, ~~and~~2007, inwe may redeem up to 40% of the ~~case~~original aggregate principal amount of ~~base~~ ~~rate~~the ~~loans,~~HLLC ~~from~~Unsecured ~~1.00%~~Fixed toRate 2Notes at a redemption price of 111.005% ~~per~~with ~~annum~~proceeds of a qualified equity offering. AsAt ofany ~~June 30,~~time ~~2004~~prior ~~and~~to ~~December~~July 3115, ~~2003~~2006, ~~(which~~we ~~was~~may ~~prior~~redeem up to 40% of the ~~amendment~~aggregate ~~and~~original ~~restatement~~principal amount of the HIHLLC ~~Credit~~Unsecured ~~Facilities),~~Floating Rate Notes with the ~~average~~proceeds of a qualified ~~interest~~equity ~~rates~~offering onat ~~the~~a HIredemption ~~Credit~~price ~~Facilities~~equal ~~were~~to ~~5.4%~~the ~~and~~par 5value plus LIBOR plus 7.625%,. ~~respectively,~~As ~~excluding~~a ~~the~~result ~~impact~~ of ~~interest~~Huntsman ~~rate~~Corporation's ~~hedges.~~initial ~~Pursuant~~public tooffering ~~the~~of ~~amendment~~common and ~~restatement~~preferred stock, ~~the~~we ~~current~~redeemed ~~applicable~~34%, ~~interest~~or ~~rate~~approximately ~~spreads~~$102.0 million ~~were~~of ~~reduced~~combined byaggregate ~~0.25%~~principal ~~(25~~amount ~~basis~~of ~~points)~~the onHLLC ~~the~~Unsecured HIFixed ~~Revolving~~Rate ~~Facility~~Notes on March 14 and byMarch 17, 02005 with combined call premiums of approximately $11.~~875%~~7 million. ~~(87~~Following this partial redemption, there remain approximately $198.50 million ~~basis~~in ~~points)~~aggregate onprincipal amount of the HIHLLC ~~Term~~Unsecured ~~Facility~~Fixed Rate Notes outstanding.

~~HI's~~The ~~obligations~~indenture ~~under~~governing the HIHLLC ~~Credit~~Senior ~~Facilities~~Notes ~~are~~contains ~~supported~~covenants byrelating ~~guarantees~~to the incurrence of ~~the~~debt ~~Company~~and limitations on distributions, ~~substantially~~asset ~~all~~sales ofand ~~HI's~~affiliate ~~domestic~~transactions, ~~subsidiaries~~among ~~and~~other things. ~~certain~~The ~~foreign~~indenture ~~subsidiaries,~~also asrequires ~~well~~us ~~as pledges~~to offer to repurchase the HLLC Senior Notes upon a change of ~~substantially~~control. ~~all~~Management ~~their~~believes ~~assets,~~that ~~including~~we ~~65%~~are in compliance with the covenants of the ~~voting~~HLLC ~~stock~~Senior Notes. For information with respect to the consent solicitation of ~~certain~~holders ~~non-U.S.~~of ~~subsidiaries~~the HLLC Senior Secured Notes and the HLLC Senior Notes, see "Note 1—General—Proposed Merger Into Huntsman International LLC and Proposed New Credit Facility."

~~The HI~~Senior ~~Credit~~Subordinated ~~Facilities~~Fixed ~~contain~~And ~~covenants~~Floating ~~relating~~Rate toNotes ~~the~~(HLLC incurrence of debt, purchase and sale of assets, limitations on investments, affiliate transactions, change in control provisions, capital expenditures and maintenance of certain financial ratios. The amendment and restatement provided for, among other things, the amendment of certain financial covenants, including changes to the maximum leverage ratio, the minimum interest coverage ratio, and an increase in the permitted amount of annual consolidated capital expenditures from $250 million to $300 million, with a provision for carryover to subsequent years. In addition, the mandatory prepayment level in connection with HI's accounts receivable securitization program was increased from $310 million to $325 million. For more information, see "Note 13—Securitization of Accounts Receivable." Management believes that, as of June 30, 2004, HI was in compliance with the covenants of the HI Credit Facilities. Notes)

Our HI9.5% ~~Senior~~fixed and variable subordinated notes due 2007 (the "HLLC Notes") with an outstanding principal balance of $59.3 million as of June 30, 2005 are our unsecured subordinated obligations and HIare ~~Senior~~junior ~~Subordinated~~in right of payment to all of our existing and future secured or unsecured senior indebtedness and effectively junior to any of our secured indebtedness to the extent that collateral secures such indebtedness. Interest is payable on the HLLC Notes semiannually on January 1 and July 1 at an annual rate of 9.5% on the fixed rate notes and LIBOR plus 3.25% on the floating rate notes. The HLLC Notes are redeemable at our option after July 2002 at a price declining from 104.75% to 100% of par value as of July 1, 2005. The weighted average interest rate on the floating rate notes was approximately 6.0% as of June 30, 2005. As a result of previously executed amendments to the indentures, virtually all the restrictive covenants contained in the indentures have been eliminated.

~~In March~~On August ~~2002~~2, HI2005, we issued ~~$300 million~~a ~~97/8%~~notice ~~Senior~~of ~~Notes~~redemption ~~(collectively~~for ~~with~~all of the ~~2003~~outstanding HIHLLC ~~Senior~~ Notes ~~(defined~~in ~~below),~~accordance ~~the~~with ~~"HI Senior Notes"). Interest on~~ the HIamended ~~Senior~~and ~~Notes~~restated isindenture ~~payable~~governing ~~semi-annually and~~ the HIHLLC ~~Senior~~ Notes ~~mature on March 1, 2009~~. ~~The HI Senior Notes are unsecured and are fully and~~ ~~unconditionally~~Accordingly, ~~guaranteed~~at ~~on a joint and several basis by~~ the ~~HI Guarantors. The HI~~

~~Senior~~time ~~Notes~~of ~~are~~the ~~redeemable,~~merger inof ~~whole~~the orCompany inwith ~~part,~~and atinto ~~any time by~~ HI ~~on or prior to March 1~~, ~~2006~~we atwill ~~100%~~deliver offunds ~~the~~to ~~face value plus a "make whole" premium, as defined in~~ the ~~applicable~~trustee ~~indenture. After~~sufficient ~~March 1,~~to ~~2006,~~redeem the HIHLCC ~~Senior~~notes ~~Notes may be redeemed by HI,~~ in ~~whole~~full oron ~~in part, at a redemption price that declines from 104.937% to 100% after March~~September 1, ~~2008~~2005. ~~On April 11, 2003, HI sold an additional $150 million in aggregate principal amount of 97/8% Senior Notes due 2009 (the "2003 HI Senior Notes"). The 2003 HI Senior Notes were priced at 105.25%.~~

HI also has outstanding $600 million and €450 million ($550.4 million as of June 30, 2004) 101/8% Senior Subordinated Notes (the "HI Subordinated Notes"). Interest on the HI Subordinated Notes is payable semi-annually and the HI Subordinated Notes mature on July 1, 2009. The HI Subordinated Notes are unsecured and are fully and unconditionally guaranteed on a joint and several basis by substantially all of HI's domestic subsidiaries and certain foreign subsidiaries (collectively, the "HI Guarantors"). The HI Subordinated Notes are redeemable, in whole or in part, at any time by HI prior to July 1, 2004 at 100% of the face value plus a "make whole" premium, as defined in the applicable indenture. On or after July 1, 2004 the HI Subordinated Notes may be redeemed by HI at 105.063% of the principal amount thereof, declining ratably to par on and after July 1, 2007.

The HI Senior Notes and the HI Subordinated Notes contain covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other things. They also contain a change of control provision requiring HI to offer to repurchase the HI Senior Notes and the HI Subordinated Notes upon a change of control. Management believes that HI is in compliance with the covenants of the HI Senior Notes and the HI Subordinated Notes as of June 30, 2004.

Other Debt

HIHuntsman ~~maintains~~Specialty's asubordinated note, in the aggregate principal amount of $2575.0 million, ~~multicurrency~~accrued ~~overdraft~~interest ~~facility~~until ~~for~~April 15, ~~its~~2002 ~~European~~at ~~subsidiaries~~7% (per annum. Pursuant to the ~~"HI~~note ~~European~~agreement, ~~Overdraft~~effective ~~Facility")~~April 15, 2002, all accrued interest was added to the principal of ~~which~~the note for a total principal amount of $106.6 million. Such principal balance will be payable in a single installment on April 15, 2008. Interest has been payable quarterly in cash, commencing July 15, 2002. For financial reporting purposes, the note was ~~available~~initially asrecorded at its estimated fair value of ~~June~~$58.2 30million, ~~2004~~based on prevailing market rates as of the effective date. As of June 30, 2005 and December 31, ~~2003~~2004, HIthe unamortized ~~had~~discount ~~approximately~~on the note was $74.6 million and $5.4 million, ~~outstanding~~respectively. ~~under~~We ~~the~~have HIalso ~~European~~given ~~Overdraft~~notice ~~Facility~~that ~~included~~we ~~within~~intend ~~trade~~to ~~payables.~~redeem ~~The HI~~these ~~European~~notes ~~Overdraft~~in ~~Facility~~full, isat ~~used~~completion ~~for~~of ~~daily~~the ~~working~~proposed merger ~~capital~~of ~~needs~~the Company with and into HI.

~~Included~~Huntsman ~~within~~Corporation ~~other~~Australia ~~debt is debt associated with one of HI's Chinese MDI joint ventures~~Pty Ltd. ~~In January 2003~~("HCA"), HIour ~~entered~~indirect ~~into~~Australian asubsidiary ~~joint~~that ~~venture~~holds ~~agreement~~its ~~with~~Australian ~~Shanghai~~surfactants ~~Chlor-Alkali Chemical Company~~assets, ~~Ltd.~~ tomaintains ~~build~~credit ~~MDI production~~ facilities ~~near Shanghai, China. HI owns 70% of~~ (the ~~joint venture, Huntsman Polyurethanes Shanghai Ltd. (~~"~~HPS~~HCA Facilities")~~, which is a consolidated affiliate~~. OnAs ~~September~~of June 1930, ~~2003~~2005, ~~HPS~~borrowings ~~obtained~~under ~~secured financing for~~ the ~~construction~~HCA ofFacilities ~~the~~totaled ~~production facilities. HPS obtained term loans for the construction of its plant in the maximum principal amount of approximately~~ A$8262.4 million, ~~a working capital credit line in the amount of approximately~~ ($3547.12 million), ~~and~~which ainclude ~~facility for funding value added tax ("VAT") payments in the amount of approximately~~ A$041.60 million. ~~As of June 30, 2004, there were~~ ($431.01 million) ~~outstanding~~on inthe term ~~U.S.~~loan ~~dollar~~facility ~~borrowings~~ and 10A$21.04 million ~~in RMB borrowings~~ ($116.21 million) ~~under these facilities. The interest rate~~ on ~~these facilities is LIBOR plus 0.48% for U.S. dollar borrowings and 90% of~~ the ~~Peoples~~revolving ~~Bank~~credit ~~of China rate for RMB borrowings~~line. AsOn ~~of June~~August 3031, 2004, ~~the~~HCA ~~interest~~refinanced ~~rate for U.S. dollar borrowings was approximately 2.1% and 5.2% for RMB borrowings. The loans are secured by substantially all~~ the ~~assets~~previously ofexisting ~~HPS~~debt ~~and~~facilities ~~will~~with ~~be repaid~~an ~~in 16 semi-annual installments, beginning no later than June~~ A$30,.0 million ~~2007~~($23.1 million) ~~The~~revolving ~~financing~~credit isline ~~non-recourse~~supported ~~to HI, but is guaranteed during the construction phase~~ by ~~affiliates of~~a ~~HPS,~~borrowing ~~including~~base ~~Huntsman Holdings. Huntsman Holdings unconditionally guarantees 70%~~ of ~~any~~eligible ~~amounts~~accounts ~~due~~receivable and ~~unpaid~~inventory byand ~~HPS~~an ~~under the loans described above (except for the VAT facility which is not guaranteed)~~A$44. ~~Huntsman Holdings' guarantees remain in effect until HPS has (i)~~0 ~~commenced~~million ~~production at least 70% of capacity for at least 30 days, and~~ (~~ii)~~$33.9 ~~achieved~~million) ~~a debt service~~term ~~cover ratio of at least 1:1~~facility.

Huntsman Chemical Company Australia Pty Ltd. ("HCCA") and certain Australian affiliates hold our Australian styrenics assets. On August 31, 2004, HCCA refinanced the previously existing debt facilities of HCCA with an A$30.0 million ($23.1 million) revolving credit line supported by a borrowing base of eligible accounts receivable (the "HCCA Facility"). As of June 30, 2005, borrowings under the HCCA Facility totaled A$24.9 million ($19.0 million).

The HCA Facilities and the HCCA Facility are secured by a lien on substantially all their respective assets, bear interest at a rate of 2.9% above the Australian base rate, mature in August 2007 and are non-recourse to us. As of June 30, 2005, the interest rate on the HCA Facilities and the HCCA Facility was approximately 8.6%. On June 24, 2004, we used $25 million of proceeds from the offering of the HLLC Senior Unsecured Notes to repay a portion of the previously existing debt facilities of HCCA. Management believes that HCA and HCCA are in compliance with the covenants of the HCA Facilities and the HCCA Facility.

On July 2, 2001, we entered into a 15% note payable (the "Affiliate Note") with an affiliated entity in the amount of $25.0 million. Interest on the Affiliate Note was not paid in cash, but accrued at a designated effective rate of 15% per annum, compounded annually. On February 16, 2005, the Affiliate Note was satisfied in full from proceeds of Huntsman Corporation's initial public offering. As of December 31, 2004 and February 16, 2005, accrued interest added to the principal balance was $15.9 million and $16.6 million, respectively.

~~HIH~~Scheduled ~~Debt~~Maturities

On June 30, 1999, HIH issued senior discount notes ("HIH Senior Discount Notes") and senior subordinated discount notes (the "HIH Senior Subordinated Discount Notes" and, collectively with the HIH Senior Discount Notes, the "HIH Discount Notes") to ICI with initial stated values of $242.7 million and $265.3 million, respectively. The ~~HIH~~ ~~Discount~~scheduled ~~Notes~~maturities ~~are due December 31, 2009. Interest on the HIH Discount Notes is paid in kind. The HIH Discount Notes contain limits on the incurrence~~ of debt, ~~restricted~~by ~~payments,~~year ~~liens, transactions~~are ~~with~~as ~~affiliates,~~follows ~~and~~(dollars ~~merger and sales of assets. Management believes that HIH is~~ in ~~compliance~~millions): ~~with the covenants of the HIH Discount Notes as of June 30, 2004.~~

Interest on the HIH Senior Discount Notes accrues at 133/8% per annum. The HIH Senior Discount Notes are redeemable prior to July 2004 for an amount equal to the net present value of 106.688% of the projected July 1, 2004 accreted value and thereafter at stipulated redemption prices declining to 100% of accreted value in 2007.

Year ending December 31:
2005	$	2.3
2006		18.6
2007		127.6
2008		109.3
2009		70.3
Later years		1,231.1

Total	$	1,559.2

~~The~~In ~~HIH~~connection ~~Senior~~with Subordinated Discount Notes have a stated rate of 8% that originally was to reset to a market rate in June 2002 and can be redeemed at 100% of accreted value at any time until June 30, 2004. On December 21, 2001, the ~~terms~~repayment of ~~the~~indebtedness ~~HIH~~from ~~Senior Subordinated Discount Notes were modified, including deferring~~ the ~~reset~~proceeds date until September 2004, at which time the interest rate will reset to a market rate. For financial reporting purposes, the HIH Senior Subordinated Discount Notes were initially recorded at their estimated fair value of ~~$223 million~~ ~~based~~Huntsman ~~upon~~Corporation's ~~prevailing~~initial ~~market~~public ~~rates~~offering ~~at June 30, 1999. The modification~~ of ~~the~~common ~~terms~~stock ~~resulted in a significant decrease in the present value of the debt~~ and, aspreferred ~~a result~~stock, ~~the debt~~we ~~was treated effectively as an extinguishment and reissuance of the debt. The debt was~~ recorded ~~using~~ a ~~16%~~loss ~~interest~~on ~~rate, the estimated market rate for the debt as of December 20, 2001. In~~early ~~connection~~extinguishment ~~with the financial restructuring~~ of ~~Huntsman~~debt ~~LLC on September 30, 2002, MatlinPatterson contributed its interest~~ in the ~~HIH~~six ~~Senior~~months ~~Subordinated~~ended ~~Discount Notes to HMP. On May~~June 930, ~~2003,~~2005 ~~HMP completed the purchase~~ of ~~the HIH Senior Subordinated Discount Notes from ICI~~$38. ~~As of June~~6 ~~30, 2004, the HIH Senior Subordinated Discount Notes are held by HMP~~million.

~~As of June 30, 2004 and December 31, 2003, the HIH Senior Discount Notes included $221~~12.~~0 million~~ DERIVATIVE ~~and~~INSTRUMENTS ~~$191.9 million~~AND ofHEDGING accrued interest, respectively. As of June 30, 2004 and December 31, 2003, the HIH Senior Subordinated Discount Notes included $127.4 million and $112.3 million of accrued interest, respectively, and $6.8 million and $19.2 million of discount, respectively. ACTIVITIES

		Years Ended
		June 30, 2005			June 30, 2006 - 2008			June 30, 2009 - 2010			After June 30, 2010			Total
Total debt		$	41.7		$	1,034.8		$	3,709.7		$	888.5		$	5,674.7

We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to time, we enter into transactions, including transactions involving derivative instruments, to manage interest rate exposure, but do not currently hedge for movements in commodities or foreign exchange rates. We manage interest rate exposure through a program designed to reduce the impact of fluctuations in variable interest rates and to meet the requirements of certain credit agreements.

12. Derivatives and Hedging Activities

Interest Rate Hedging

Through ~~the~~our ~~Company's~~ borrowing activities, itwe isare exposed to interest rate risk. Such risk arises due to the structure of ~~the~~our ~~HLLC Credit Facilities and the Company's~~ debt portfolio, including the duration of the portfolio and the mix of fixed and floating interest rates. ~~The HI Credit Facilities require that a certain portion of debt be at fixed rates through either interest rate hedges or through other means that provide a similar effect.~~ Actions taken to reduce interest rate risk include managing the mix and rate characteristics of various interest bearing liabilities as well as entering into interest rate swaps, collars and options.

As of June 30, 2005 and December 31, 2004, we had entered into various types of interest rate contracts to manage our interest rate risk on our long-term debt as indicated below (dollars in millions):

		June 30, 2005			December 31, 2004
Pay fixed swaps
	Notional amount	$	183.7		$	184.3
	Fair value		(2.5	)		(3.2	)
	Weighted average pay rate		4.44	%		4.44	%
	Maturing		2005-2007			2005-2007

As We purchase both interest rate swaps and interest rate collars to reduce the impact of ~~June 30~~changes in interest rates on our floating-rate long-term debt. Under interest rate swaps, ~~2004~~we ~~and~~agree ~~December 31~~with other parties to exchange, ~~2003~~at specified intervals, the ~~Company~~difference ~~had~~between ~~entered~~fixed-rate ~~into~~and ~~various~~floating-rate ~~types~~interest ofamounts ~~interest~~calculated ~~rate~~by reference ~~contracts~~to an agreed notional principal amount. The collars entitle us to ~~manage~~receive ~~its~~from the counterparties (major banks) the amounts, if any, by which our interest payments on certain of our floating-rate ~~risk~~borrowings exceed a certain rate, and require us to pay to the counterparties (major banks) the amount, if any, by which our interest payments on ~~its~~certain of our ~~long~~floating-~~term~~rate ~~debt~~borrowings asare ~~indicated~~less ~~below~~than ~~(dollars~~a incertain ~~millions):~~rate.

		June 30, 2004			December 31, 2003
Interest rate swaps
	Notional amount	$	295.0		$	447.5
	Fair value		(5.2	)		(14.4	)
	Weighted average pay rate		4.66	%		5.49	%
	Maturing		2004 - 2007			2004 - 2007
Interest rate collars
	Notional amount	$	100.0		$	150.0
	Fair value		(1.0	)		(4.8	)
	Weighted average cap rate		7.13	%		7.00	%
	Weighted average floor rate		6.25	%		6.25	%
	Maturing		2004			2004

Interest rate contracts with a fair value of $2.5 million and $3.2 million were recorded as a component of other noncurrent liabilities as of June 30, 2005 and December 31, 2004, respectively. The fair value of cash flow hedges and interest rate contracts not designated as hedges was $0.8 million and $1.7 million, respectively, as of June 30, 2005, and $2.0 million and $1.2 million, respectively, as of December 31, 2004. The changes in the fair value of cash flow hedges resulted in a $0.6 million increase and a $1.0 million decrease, and a $0.6 million increase and a $0.4 million decrease in interest expense for the three and six months ended June 30, 2005 and 2004, respectively. The change to the fair value of cash flow hedges resulted in a $0.9 million increase and a $3.7 million increase, and a $1.9 million increase and a $2.8 million increase in other comprehensive income for the three and six months ended June 30, 2005 and 2004, respectively. The changes in the fair value of interest rate contracts not designated as hedges resulted in a $1.6 million increase and a $2.3 million decrease, and a $0.6 million increase and a $1.5 million decrease in interest expense for the three and six months ended June 30, 2005 and 2004, respectively.

~~Under~~We ~~interest~~are ~~rate~~exposed ~~swaps,~~to credit losses in the ~~Company~~event ~~agrees~~of ~~with~~nonperformance ~~other~~by ~~parties~~a counterparty to ~~exchange,~~the atderivative ~~specified~~financial ~~intervals~~instruments. We anticipate, ~~the~~however, ~~difference~~that ~~between~~the ~~fixed-rate~~counterparties ~~and~~will ~~floating-rate~~be ~~interest~~able to ~~amounts~~fully ~~calculated~~satisfy byobligations ~~reference~~under tothe ancontracts. ~~agreed~~Market ~~notional~~risk ~~principal~~arises ~~amount~~from changes in interest rates.

~~The Company purchases interest rate cap and interest rate collar agreements to reduce the impact of changes in interest rates on its floating-rate long-term debt~~13. ~~The~~ EMPLOYEE ~~cap~~BENEFIT agreements entitle the Company to receive from the counterparties (major banks) the amounts, if any, by which the Company's interest payments on certain of its floating-rate borrowings exceed a certain rate. The floor agreements require the Company to pay to the counterparties (major banks) the amount, if any, by which the Company's interest payments on certain of its floating-rate borrowings are less than a certain rate. PLANS

~~The majority~~Components of the ~~interest~~net ~~rate~~periodic ~~contracts~~benefit ~~have~~costs ~~been~~for ~~designated as cash flow hedges of future interest payments on~~ the ~~Company's~~three ~~variable~~and ~~rate~~six ~~debt.~~months ~~The~~ended ~~fair value of these interest rate contracts designated as hedges as of~~ June 30, ~~2004~~2005 and December 31, 2003 was a loss of approximately $4.5 million and $13.0 million, respectively, which is recorded in other accrued liabilities and in accumulated other comprehensive income (loss) to the extent of the effective portions of the hedging instruments. Gains and losses related to these contracts will be reclassified from other comprehensive income (loss) into earnings in the periods in which the related hedged interest payments are made. As of June 30, 2004, ~~losses~~were of approximately $7.1 million are expected to be reclassified into earnings over the remainder of 2004. Gains and losses on these agreements, including amounts recorded related to hedge ineffectiveness, are reflected as ~~interest~~follows ~~expense~~(dollars in ~~the~~millions): ~~statement of operations. Income of $0.3 million and $0.7 million was recorded in interest expense in the six months ended June 30, 2004 and 2003, respectively.~~

As of June 30, 2004 and December 31, 2003, swap agreement liabilities with a fair value of $1.7 million and $6.2 million, respectively, have not been designated as hedges for financial reporting purposes. The change in the liability resulted in interest income of $3.9 million.

		Defined Benefit Plans						Other Postretirement Benefit Plans
		Three months ended June 30,						Three months ended June 30,
		2005			2004			2005			2004
Service cost		$	6.1		$	3.8		$	0.7		$	0.6
Interest cost			6.0			6.1			1.6			1.6
Expected return on assets			(4.8	)		(4.3	)		—			—
Amortization of transition obligation			0.3			0.3			—			—
Amortization of prior service cost			(0.8	)		0.2			(0.5	)		(0.4	)
Amortization of actuarial cost			1.2			0.9			0.9			0.8

	Net periodic benefit cost	$	8.0		$	7.0		$	2.7		$	2.6

The Company is exposed to credit losses in the event of nonperformance by a counterparty to the derivative financial instruments. The Company anticipates, however, that the counterparties will be able to fully satisfy obligations under the contracts.

Commodity Price Hedging

		Defined Benefit Plans						Other Postretirement Benefit Plans
		Six months ended June 30,						Six months ended June 30,
		2005			2004			2005			2004
Service cost		$	12.2		$	7.6		$	1.4		$	1.2
Interest cost			12.0			12.2			3.2			3.2
Expected return on assets			(9.6	)		(8.6	)		—			—
Amortization of transition obligation			0.6			0.6			—			—
Amortization of prior service cost			(1.6	)		0.4			(1.0	)		(0.8	)
Amortization of actuarial cost			2.4			1.8			1.8			1.6

	Net periodic benefit cost	$	16.0		$	14.0		$	5.4		$	5.2

As14. OTHER ofCOMPREHENSIVE ~~June 30,~~INCOME ~~2004 and December 31, 2003, there were no cash flow commodity price hedging contracts recorded in other current assets and other comprehensive income.~~ (LOSS)

~~As of~~Other ~~June 30,~~comprehensive ~~2004~~income ~~there~~(loss) ~~were~~consisted ~~no commodity price hedging contracts designated as fair value hedges. As~~ of ~~December 31, 2003, commodity price hedging contracts designated as fair value hedges are included in~~ the ~~balance~~following ~~sheet~~(dollars ~~as $0.8 million~~ in ~~accrued~~millions): ~~liabilities and $0.5 million in inventory.~~

Commodity price contracts not designated as hedges as defined by SFAS No. 133 are reflected in the balance sheet as $0.5 million and $0.3 million in other current assets and accrued liabilities, respectively, as of June 30, 2004, and as $0.5 million and $0.3 million in other current assets and accrued liabilities, respectively, as of December 31, 2003.

	Accumulated Other Comprehensive Income (Loss)						Other Comprehensive Income (Loss)						Other Comprehensive Income (Loss)
							Three months ended						Six months ended
	June 30, 2005			December 31, 2004			June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Foreign currency translation adjustments	$	15.2		$	21.4		$	(3.6	)	$	(4.6	)	$	(6.2	)	$	(5.2	)
Unrealized gain (loss) on nonqualified plan investments		0.8			0.9			—			0.1			(0.1	)		0.1
Unrealized (loss) gain on derivative instruments		(3.3	)		(4.8	)		0.9			1.9			1.5			2.8
Minimum pension liability		(42.1	)		(42.1	)		0.1			—			—			—
Other comprehensive income (loss) of unconsolidated affiliates		44.1			108.0			(39.4	)		(9.3	)		(63.9	)		(8.2	)

Total	$	14.7		$	83.4		$	(42.0	)	$	(11.9	)	$	(68.7	)	$	(10.5	)

~~During~~Items ~~the~~of ~~six~~other ~~months~~comprehensive ~~ended~~income ~~June 30,~~(loss) ~~2004~~have ~~and~~been ~~the six months ended June 30, 2003, the Company~~ recorded annet ~~increase~~ of ~~$3.3 million~~tax ~~and a reduction~~ of ~~$2.6 million,~~ ~~respectively,~~nil inbecause ~~cost~~ of ~~goods~~valuation ~~sold~~allowances. ~~related~~The totax ~~net~~effect ~~gains~~is ~~and~~determined ~~losses~~based ~~from settled contracts, net gains and losses in fair value price hedges, and the change in fair value~~ on ~~commodity~~ ~~price hedges not designated as hedges as defined in SFAS No. 133. During~~ the ~~six months~~jurisdiction ~~ended~~where ~~June 30, 2003,~~ the ~~Company recorded a reduction of $0.9 million in~~income ~~cost~~or ofloss ~~goods~~was sold related to net gains and losses from settled contracts, net gains and losses in fair value price hedges, and the change in fair value on commodity price hedging contracts not designated as hedges as defined in SFAS Norecognized. ~~133.~~

~~Foreign~~15. COMMITMENTS ~~Currency~~AND ~~Rate Hedging~~CONTINGENCIES

~~The~~Purchase Company may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. These contracts are not designated as hedges for financial reporting purposes and are recorded at fair value. As of June 30, 2004 and December 31, 2003 and for the six months ended June 30, 2004 and 2003, the fair value, change in fair value, and realized gains (losses) of outstanding foreign currency rate hedging contracts was not material. Commitments

~~Net~~ We ~~Investment~~have ~~Hedging~~ various purchase commitments extending through 2023 for materials and supplies entered into in the ordinary course of business. The purchase commitments are contracts that require minimum volume purchases. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a facility. The contractual purchase price for substantially all of these contracts require minimum payments, even if no volume is purchased. These contracts approximate $14 million annually through 2005, decreasing to approximately $9 million after 2008. Historically, we have not made any minimum payments under our take or pay contracts without taking product.

Currency effects of net investment hedges produced a gain of $19.0 million and a loss of $48.8 million in other comprehensive income (loss) (foreign currency translation adjustments) for the six months ended June 30, 2004 and 2003, respectively. As of June 30, 2004 and December 31, 2003, there was a cumulative net loss of approximately $107.3 million and $126.3 million, respectively.

13. Securitization of Accounts Receivable

On December 21, 2000, HI initiated an accounts receivable securitization program under which it grants an undivided interest in certain of its trade receivables to a qualified off-balance sheet entity (the "Receivables Trust") at a discount. This undivided interest serves as security for the issuance of commercial paper and medium term notes by the Receivables Trust. At June 30, 2004, the Receivables Trust had outstanding approximately $195 million in U.S. dollar equivalents in medium term notes and approximately $114 million in commercial paper. Under the terms of the agreements, HI and its subsidiaries continue to service the receivables in exchange for a 1% fee of the outstanding receivables, and HI is subject to recourse provisions.

HI's retained interest in receivables (including servicing assets) subject to the program was approximately $184 million and $154 million as of June 30, 2004 and December 31, 2003, respectively. The value of the retained interest is subject to credit and interest rate risk. For the six months ended June 30, 2004 and 2003, new sales of accounts receivable sold into the program totaled approximately $2,379.6 million and $2,054.6 million, respectively, and cash collections from receivables sold into the program that were reinvested totaled approximately $2,335.1 million and $2,035.1 million, respectively.

~~Servicing fees~~Legal ~~received during the six months ended June 30, 2004 and 2003 were approximately $2.6 million and $2.4 million, respectively.~~ Matters

~~HI incurs~~We ~~losses~~have onbeen ~~the~~a ~~accounts~~party ~~receivable~~to ~~securitization~~various ~~program~~lawsuits ~~for~~brought ~~the~~by ~~discount~~persons onalleging ~~receivables~~personal ~~sold~~injuries ~~into~~and/or ~~the~~property ~~program~~damage ~~and~~based ~~fees~~upon ~~and~~alleged ~~expenses~~exposure ~~associated~~to ~~with~~toxic ~~the~~air ~~program~~emissions. ~~HI also~~ ~~retains~~For ~~responsibility~~example, ~~for~~since ~~the~~June 2003, ~~economic~~a ~~gains~~number ~~and~~of ~~losses~~lawsuits onhave ~~forward~~been ~~contracts~~filed ~~mandated~~in bystate ~~the~~district ~~terms~~court ofin ~~the~~Jefferson ~~program~~County, toTexas ~~hedge~~against ~~the~~several ~~currency~~local ~~exposures~~chemical onplants ~~the~~and ~~collateral~~refineries, ~~supporting~~including ~~the~~our ~~off-balance~~subsidiary, ~~sheet~~Huntsman ~~debt~~Petrochemical ~~issued~~Corporation. ~~Gains~~Generally, ~~and~~these ~~losses~~lawsuits onhave ~~forward~~alleged ~~contracts~~that ~~included as a component of~~ the ~~loss~~refineries onand ~~accounts~~chemical ~~receivable~~plants ~~securitization~~located ~~program~~in ~~are~~the avicinity ~~loss~~ of ~~$1.4 million~~the ~~and a~~plaintiffs' ~~loss~~homes ofdischarged ~~$17.0 million~~chemicals into ~~for~~ the ~~six~~air ~~months~~that ~~ended~~interfere ~~June 30,~~with ~~2004~~use and ~~2003,~~enjoyment ~~respectively. As~~ of ~~June 30,~~property ~~2004~~ and ~~December 31,~~cause ~~2003,~~health ~~the~~problems ~~fair~~and/or ~~value~~property ~~of the open forward currency contracts is $0~~damages.~~1 million~~ ~~and~~None ~~$6.8 million,~~of ~~respectively,~~these ~~which~~lawsuits ishave included asthe aamount ~~component~~ of ~~the~~damages ~~residual~~being ~~interest~~sought. ~~that~~The isfollowing table ~~included~~presents asinformation aabout ~~component~~the number of ~~trade~~claims ~~receivables~~asserting ondamages ~~HI's balance~~based ~~sheet.~~upon Onalleged ~~April 16,~~exposure ~~2004~~to HItoxic ~~amended~~air ~~the~~emissions ~~commercial~~for ~~paper~~the ~~facility~~period indicated. ~~Pursuant~~Claims toinclude ~~the~~all ~~amendment,~~claims ~~the~~for ~~maturity~~which ofservice ~~the~~has been ~~commercial~~received ~~paper~~by ~~facility~~us, ~~was~~and ~~extended~~each tosuch ~~March 31,~~claim ~~2007.~~represents ~~In addition,~~a ~~the~~plaintiff ~~amendment~~who ~~permits~~is ~~the~~pursuing ~~issuance~~a ofclaim ~~euro-denominated~~against ~~commercial paper~~us.

The key economic assumptions used in valuing the residual interest at June 30, 2004 are presented below:

		Six months ended June 30, 2005
Claims filed during period		2,104
Claims resolved during period		2,988
Claims unresolved at end of period		0

Weighted average life (in months)	3
Credit losses (annual rate)	Less than 1	%
Discount rate (annual rate)	2	%

All claims filed as of June 30, 2005 have been resolved through dismissal and/or settlement.

AIn ~~10%~~addition, ~~and~~we ~~20%~~have ~~adverse~~been ~~change~~named as a "premises defendant" in ~~any~~a number of ~~the~~asbestos ~~key~~exposure ~~economic~~cases, ~~assumptions~~typically ~~would~~a ~~not~~claim ~~have~~by a ~~material~~non-employee ~~impact~~of onexposure ~~the~~to ~~fair~~asbestos ~~value~~while ofat a facility. These cases typically involve multiple plaintiffs bringing actions against multiple defendants, and the ~~retained~~complaint ~~interest.~~does ~~Total~~not ~~receivables~~indicate ~~over~~which ~~60 days past~~plaintiffs ~~due~~are asmaking ofclaims ~~June 30~~against which defendants, ~~2004~~where ~~and~~or ~~December 31~~how the alleged injuries occurred, ~~2003~~or ~~were~~what ~~$12.9 million~~injuries ~~and~~each ~~$15~~plaintiff claims.~~6 million~~ These facts, ~~respectively~~which are central to any estimate of probable loss, can be learned only through discovery.

14 Where the alleged exposure occurred prior to our ownership or operation of the relevant "premises," the prior owners and operators generally have contractually agreed to retain liability for, and to indemnify us against, asbestos exposure claims. ~~Other~~ ~~Comprehensive~~This ~~Income~~indemnification ~~(Loss)~~ is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender it to the prior owner or operator. None of the complaints in these cases state the amount of damages being sought. The prior owner or operator accepts responsibility for the conduct of the defense of the cases and payment of any amounts due to the claimants. In our ten-year experience with tendering these cases, we have not made any payment with respect to any tendered asbestos cases. We believe that the prior owners or operators have the intention and ability to continue to honor their indemnities, although we cannot assure you that they will continue to do so or that we will not be liable for these cases if they do not.

The following ~~components~~table ofpresents ~~other~~for ~~comprehensive~~the ~~income~~period ~~(loss)~~indicated ~~consist~~certain ofinformation about cases for which service has been received that we have tendered to the ~~following~~prior ~~(dollars~~owner inor ~~millions):~~operator, all of which have been accepted.

	Accumulated income (loss)						Income (loss)
	Six months ended June 30, 2005
	June 30, 2004			December 31, 2003			June 30, 2004			June 30, 2003
Tendered during the period	84
Foreign currency translation adjustments	$	146.8		$	171.6		$	(24.8	)	$	10.1
Resolved during the period	21
Unrealized loss on nonqualified plan investments		0.7			0.6			0.1			0.3
Unresolved at end of the period	461
Unrealized gain (loss) on derivative instruments		(7.9	)		(15.7	)		7.8			3.1
Minimum pension liability, net of tax		(95.2	)		(95.2	)		—			—
Minimum pension liability unconsolidated affiliate		(5.6	)		(5.6	)		—			—
Unrealized gain (loss) on securities		0.1			0.2			(0.1	)		—
Other comprehensive income (loss) of minority interest		(22.4	)		(28.3	)		5.9			(0.4	)
Other comprehensive income (loss) of unconsolidated affiliates		9.9			9.2			0.7			46.1
Total	$	26.4		$	36.8		$	(10.4	)	$	59.2

15 We have never made any payments with respect to these cases. ~~Commitments~~ As of June 30, 2005, we had an accrued liability of $12.5 million relating to these cases and ~~Contingencies~~ a corresponding receivable of $12.5 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability

The Company has various purchase commitments extending through 2017 for materials, supplies and services entered into in the ordinary course of business. The purchase commitments are contracts that require minimum volume purchases. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a facility. The contractual

~~purchase~~will ~~price~~not ~~for~~exceed ~~substantially~~our ~~all~~accruals ofor ~~these~~that ~~contracts~~our isliability ~~variable~~associated ~~based~~with ~~upon~~these ~~market~~cases ~~prices,~~would ~~subject~~not tobe ~~annual~~material negotiations. The Company has also entered into a limited number of contracts which require minimum payments, even if no volume is purchased. These contracts approximate $35 million annually through 2005, declining to ~~approximately~~our ~~$16 million~~financial ~~after 2011. Historically~~condition, ~~the~~ ~~Company~~results ~~has~~of ~~not~~operations ~~made any minimum payments under its take~~ or ~~pay contracts~~liquidity.

~~The~~Certain ~~Company~~cases isin awhich ~~party~~we toare ~~various~~a proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise discussed in "~~Note 16—Legal~~premises ~~Matters,~~defendant" ~~based~~are innot ~~part~~subject ~~on the indemnities provided~~ to ~~the~~indemnification ~~Company~~ by ~~Imperial Chemical~~prior ~~Industries~~owners ~~PLC~~or ~~("ICI")~~operators. ~~and~~The ~~Huntsman~~following ~~Specialty~~table inpresents ~~connection~~for ~~with~~ the ~~transfer~~period ofindicated ~~business~~certain information toabout ~~the Company and insurance coverage, management does not believe that the outcome of any of~~ these ~~matters~~ ~~will~~cases. ~~have~~Cases ainclude ~~material~~all ~~adverse~~cases ~~effect~~for onwhich ~~the~~service ~~Company's~~has ~~business,~~been ~~financial~~received ~~condition,~~by ~~results of operations or cash flows~~us.

16. Legal Matters

		Six months ended June 30, 2005
Filed during period		38
Resolved during period		1
Unresolved at end of period		66

~~HI has settled certain claims during and prior to the second quarter of 2004 relating to discoloration of unplasticised poly vinyl chloride ("u-PVC")~~We ~~products~~paid ~~allegedly~~gross ~~caused~~settlement bycosts ~~HI's~~for ~~TiO2~~asbestos ~~("Discoloration~~exposure ~~Claims").~~cases ~~Substantially all of the TiO2~~ that ~~was~~are ~~the~~not subject ~~of these claims was manufactured prior~~ to ~~HI's~~indemnification ~~acquisition~~ of ~~its~~approximately ~~TiO2 business from ICI in 1999. Net of amounts HI has received from insurers and pursuant to contracts of indemnity~~$5,000 HIduring ~~has~~the ~~paid~~six ~~approximately~~months ~~£8 million~~ended ~~($14.9~~June ~~million)~~30, ~~in costs and settlement amounts for Discoloration Claims~~2005.

~~Certain~~As ~~insurers~~of ~~have~~June 30, ~~denied~~2005, ~~coverage~~we ~~with~~had ~~respect~~accrued toreserves ~~certain~~of ~~Discoloration Claims~~$1.2 million HIrelating ~~brought~~to ~~suit~~these ~~against~~cases. ~~these~~We ~~insurers~~cannot toassure ~~recover~~you ~~the~~that ~~amounts~~our itliability ~~believes~~will ~~are~~not ~~due~~exceed toour ~~it.~~accruals Aor ~~judgment~~that inour ~~this~~liability ~~suit~~associated iswith ~~expected~~these atcases ~~the~~would ~~end~~not ofbe ~~the~~material ~~third~~to ~~quarter~~our orfinancial ~~beginning~~condition, results of ~~the~~operations ~~fourth~~or ~~quarter 2004~~liquidity.

~~During~~We ~~the~~are ~~second quarter 2004, HI recorded~~ a ~~charge~~party into ~~the~~various ~~amount~~other ofproceedings ~~$14.9 million~~instituted ~~with~~by ~~respect~~private toplaintiffs, ~~Discoloration~~governmental ~~Claims.~~authorities HIand ~~expects~~others ~~that~~arising itunder ~~will~~provisions ~~incur~~of ~~additional~~applicable ~~costs with respect to Discoloration Claims~~laws, ~~potentially~~ including ~~additional settlement amounts. However~~various environmental, HIproducts ~~does~~liability ~~not~~and ~~believe~~other ~~that~~laws. itExcept ~~has~~as ~~material~~otherwise ~~ongoing~~disclosed ~~exposure~~in ~~for~~this ~~additional Discoloration Claims~~report, ~~after giving~~we ~~effect~~do tonot ~~its~~believe ~~rights~~that ~~under~~the ~~contracts~~outcome of ~~indemnity,~~any ~~including the rights~~ of ~~indemnity~~these itmatters ~~has against ICI. Nevertheless, HI can provide no assurance that its costs with respect to Discoloration Claims~~ will ~~not~~ have a material adverse ~~impact~~effect on ~~its~~ our financial condition, results of operations or ~~cash~~liquidity. ~~flows~~See "Note 16—Environmental, Health and Safety Matters" for a discussion of environmental proceedings.

The Company is a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws16. ~~Except as otherwise disclosed in this report~~ ENVIRONMENTAL, ~~and~~HEALTH ~~based~~AND inSAFETY part on the indemnities provided to the Company in connection with the transfer of businesses to it and its insurance coverage, the Company does not believe that the outcome of any of these matters will have a material adverse effect on its financial condition or results of operations. MATTERS

17. Environmental Matters

General

~~The~~We ~~Company~~are is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In the ordinary course of business, ~~the~~we ~~Company~~are is subject to ~~frequent~~ frequent environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, ~~the~~our ~~Company's~~ production facilities require operating permits that are subject to renewal, modification and, in certain circumstances, revocation. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial ~~fines and~~ civil or criminal sanctions, as well as, under some environmental laws, the assessment of strict liability and/or joint and several liability. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations. Accordingly, environmental or regulatory matters may cause us to incur significant unanticipated losses, costs or liabilities.

Environmental, Health and Safety Systems

We are committed to achieving and maintaining compliance with all applicable environmental, health and safety ("EHS") legal requirements, and we have developed policies and management systems that are intended to identify the multitude of EHS legal requirements applicable to our operations, enhance compliance with applicable legal requirements, ensure the safety of our employees, contractors, community neighbors and customers and minimize the production and emission of wastes and other pollutants. Although EHS legal requirements are constantly changing and are frequently difficult to comply with, these EHS management systems are designed to assist us in our compliance goals while also fostering efficiency and improvement and minimizing overall risk to us.

~~as, under~~EHS ~~some~~Capital environmental laws, the assessment of strict liability and/or joint and several liability. Moreover, changes in environmental regulations could inhibit or interrupt the Company's operations, or require it to change its equipment or operations, and any such changes could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. Accordingly, environmental or regulatory matters may cause the Company to incur significant unanticipated losses, costs or liabilities. Expenditures

We ~~Environmental~~may ~~Capital~~incur ~~Expenditures~~future costs for capital improvements and ~~Accruals~~ general compliance under EHS laws, including costs to acquire, maintain and repair pollution control equipment. For the six months ended June 30, 2005 and 2004, our capital expenditures for EHS matters totaled $6.1 million and $15.9 million, respectively. Since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, we cannot provide assurance that our recent expenditures will be indicative of future amounts required under EHS laws.

~~The~~Governmental ~~Company~~Enforcement may incur future costs for capital improvements and general compliance under environmental and safety laws, including costs to acquire, maintain and repair pollution control equipment. The Company estimates that, on a consolidated basis, capital expenditures for environmental and safety matters during 2004 will be approximately $64 million, including approximately $34 million for HIH. However, since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, the Company cannot provide assurance that material capital expenditures beyond those currently anticipated will not be required under environmental and safety laws. Proceedings

~~The Company~~On ~~has~~occasion, ~~established~~we ~~financial~~receive ~~reserves~~notices ~~relating~~of toviolation, ~~anticipated~~enforcement ~~environmental restoration~~ and ~~remediation~~other ~~programs,~~complaints asfrom ~~well~~regulatory asagencies ~~certain~~alleging ~~other~~non-compliance ~~anticipated~~with ~~environmental~~applicable ~~liabilities.~~EHS ~~Management~~law. ~~believes~~By ~~these~~way ~~reserves~~of ~~are~~example, ~~sufficient~~we ~~for known requirements. Liabilities~~ are ~~recorded~~aware ~~when~~of ~~potential~~the ~~liabilities~~individual ~~are~~matters ~~either~~set ~~known~~out orbelow, ~~considered~~which ~~probable~~we ~~and~~believe ~~can~~to be ~~reasonably~~the ~~estimated. The~~most ~~Company's~~significant ~~liability~~presently ~~estimates~~pending ~~are~~matters ~~based upon available facts, existing technology~~ and ~~past~~unasserted ~~experience~~claims. OnAlthough awe ~~consolidated~~may ~~basis,~~incur acosts or ~~total~~penalties ofin ~~approximately~~connection ~~$32 million~~with ~~has~~the ~~been~~governmental ~~accrued~~proceedings ~~related to~~discussed ~~environmental related liabilities as of June 30~~below, ~~2004,~~based ~~including~~on ~~approximately~~currently ~~$16 million~~available ~~related~~information toand ~~HIH.~~our ~~However~~past experience, nowe ~~assurance~~believe ~~can be given~~ that ~~all~~the ~~potential~~ultimate ~~liabilities~~resolution ~~arising out~~ of ~~the~~these ~~Company's~~matters will ~~present~~not orhave ~~past~~a ~~operations~~material orimpact ~~ownership~~on ~~have~~our ~~been~~results ~~identified~~of oroperations, ~~fully~~financial ~~assessed~~position or ~~that future environmental liabilities will not be material to the Company~~liquidity.

In May 2003, ~~Potential~~the ~~Liabilities~~ State of Texas settled an air enforcement case with us relating to our Port Arthur plant. Under the settlement, we are required to pay a civil penalty of $7.5 million over more than four years, undertake environmental monitoring projects totaling about $1.5 million in costs, and pay $0.4 million in attorney's fees to the Texas Attorney General. As of June 30, 2005, we have paid $3.5 million toward the penalty and $0.4 million for the attorney's fees. The monitoring projects are underway and on schedule. We do not anticipate that this settlement will have a material adverse effect on our results of operations, financial position or liquidity.

~~Given~~ In the ~~nature~~third quarter of ~~the~~2004, ~~Company's~~our ~~business~~Jefferson County, Texas facilities received notification from the Texas Commission on Environmental Quality ("TCEQ") of potential air emission violations relating to the operation of ~~environmental~~cooling ~~laws~~towers ~~may~~at ~~result~~three inof ~~restrictions~~our ~~imposed~~plants onand ~~its~~alleged ~~operating~~upset ~~activities,~~air ~~substantial~~emissions. ~~fines,~~ TCEQ proposed penalties, ~~damages~~of or$0.2 million ~~other~~for ~~costs,~~the ~~any~~alleged ofupset ~~which~~violations ~~could~~and $0.1 million ~~have~~for athe ~~material~~alleged ~~adverse~~cooling ~~effect~~tower onviolations. In the ~~Company's~~second ~~business,~~quarter ~~financial~~of ~~condition~~2005, ~~results~~TCEQ proposed a penalty of ~~operations~~$0.1 million orrelated ~~cash~~to ~~flows~~alleged upset emissions at our Port Neches facilities in late 2004 and early 2005. ~~The~~Additionally, ~~Company~~based ison ~~aware~~allegations of separate upset-related violations at our Port Neches facilities occurring from mid-2004 to early 2005, the ~~following~~TCEQ ~~matters~~has ~~and~~proposed ~~believes~~a (separate penalty of $0.1) ~~the~~million. ~~reserves~~Negotiations ~~related~~are toanticipated ~~these~~between ~~matters~~us and TCEQ with respect to bethe ~~sufficient~~resolution ~~for~~of ~~known~~these ~~requirements,~~alleged ~~and~~violations. ~~(2) the~~We ~~ultimate~~do not believe that the resolution of these matters will ~~not~~ have a material adverse impact on ~~its~~our results of operations, or financial position: or liquidity.

OnBy ~~June~~letter dated March 2917, ~~2004~~2005, ~~management at~~ the ~~Port~~TCEQ ~~Neches,~~notified ~~Texas~~us ~~facilities~~that ~~was~~it ~~notified~~intends byto ~~the~~pursue ~~Texas~~an ~~Commission~~enforcement onaction ~~Environmental~~as ~~Quality~~a ~~("TCEQ")~~result of ~~potential~~various ~~Clean~~upset ~~Air~~emission ~~Act~~events ~~violations~~occurring at our Port Arthur ~~relating~~facility tobetween August 2003 and the ~~operation~~end of ~~cooling~~2004. ~~towers~~TCEQ atalleged ~~two~~that ofeach ~~the~~upset ~~plants.~~event ~~The~~is ~~Company~~a ~~was~~separate ~~invited~~violation byof ~~TCEQ~~its toair ~~provide~~emission ~~information~~rules ~~that~~and ~~might~~proposed ~~mitigate~~a ~~the~~civil ~~various~~penalty ~~alleged~~of ~~violations~~$0.1 million. ~~The~~In ~~Company responded in~~a ~~writing~~similar tovein, the TCEQ ~~during~~issued ~~the~~a ~~week~~Notice of ~~July~~Enforcement to us on February 1916, 2005 for alleged violations at our Port Neches plants arising out of upset emission events on various dates in 2004. TCEQ Ithas isnot ~~likely~~yet proposed a penalty in this second matter, although we anticipate that ~~penalties~~it will. beWe ~~proposed~~will byseek ~~the~~to ~~agency~~negotiate ~~for~~a ~~some~~settlement orwith TCEQ on all of the alleged violations. We do not believe that the resolution of these matters will result in the imposition of costs material to our results of operations, financial position or liquidity.

BySee ~~letter dated July~~Note ~~13,~~15 ~~2004,~~Commitments ~~the~~and ~~TCEQ~~Contingencies—Legal ~~notified~~Matters ~~the Company that it is contemplating an enforcement action against the Company~~ for ~~nuisance~~a ~~odors~~discussion ~~near~~of ~~the~~environmental ~~Port~~lawsuits ~~Neches,~~brought ~~Texas plant~~by onprivate ~~May 28,~~party ~~2004~~plaintiffs. ~~The notice advises the Company to begin taking actions immediately to address the outstanding alleged violation. The plant is currently investigating the matter.~~

By letter dated July 20, 2004, the TCEQ notified the Company that it is contemplating an enforcement action based upon 29 separate alleged violations for various upset events at the Port Neches facilities. The notice advises the Company to begin taking actions immediately to address the outstanding alleged violations. The plant is currently investigating the allegations.

~~On October 1,~~Remediation 2003, the U.S. Environmental Protection Agency ("EPA") sent the Company an information request under section 114 of the federal Clean Air Act. The request seeks information regarding all upset releases of air contaminants from the Port Arthur, Texas plant for the period from August 1999 to August 2003. Four other companies with plants located in Port Arthur also received similar requests. The Company responded in a timely manner to the request. Whether this request will result in an enforcement action being initiated against the Company is unknown at this time. Liabilities

~~On June 25~~We have incurred, ~~2003~~and we may in the future incur, aliability ~~group~~to ofinvestigate ~~more~~and ~~than~~clean ~~500~~up ~~plaintiffs~~waste ~~filed~~or acontamination ~~lawsuit~~at inour ~~state~~current ~~district~~or ~~court~~former infacilities ~~Beaumont,~~or ~~Texas~~facilities operated ~~against~~by ~~six~~third ~~local~~parties ~~chemical~~at ~~plants~~which ~~and~~we ~~refineries~~may have disposed of waste or other materials. Similarly, ~~including~~we may incur costs for the cleanup of wastes that were disposed of prior to the purchase of our ~~Company~~businesses. ~~The~~Under ~~lawsuit~~some ~~alleges~~circumstances, ~~that~~the scope of our liability may extend to damages to natural resources. Specifically, under the ~~refineries~~U.S. Comprehensive Environmental Response, Compensation and Liability ~~chemical~~Act ~~plants~~of ~~discharge~~1980, ~~chemicals~~as ~~into~~amended ~~the~~("CERCLA"), ~~air~~and similar ~~that~~state ~~cause~~laws, ~~health~~a ~~problems~~current or former owner or operator of real property may be liable for ~~area~~remediation ~~residents.~~costs ~~The~~regardless ~~claim~~of ~~does~~whether ~~not~~the ~~specify~~release or disposal of hazardous substances was in compliance with law at the time it occurred, and a ~~dollar~~current ~~amount~~owner or operator may be liable regardless of whether it owned or operated the facility at the time of the release. In addition, ~~but~~under the U.S. Resource ~~seeks~~Conservation ~~damages~~and ~~for~~Recovery ~~heath~~Act ~~impacts~~of 1976, as ~~well~~amended ("RCRA"), and similar state laws, we may be required to remediate contamination originating from our properties as ~~property~~a ~~value~~condition ~~losses~~to our hazardous waste permit. ~~The~~For ~~suit~~example, our Odessa, Port Arthur, and Port Neches facilities in Texas are the subject of ongoing remediation requirements under RCRA authority. In many cases, our potential liability arising from historical contamination is based on ~~emissions~~operations ~~data~~and ~~from~~other ~~reports~~events ~~that~~occurring prior to our ownership of the relevant facility. In these ~~plants~~situations, ~~filed~~we ~~with~~frequently obtained an indemnity agreement from the ~~TCEQ~~prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully exercised our rights under these contractual covenants for a number of sites, and where applicable, mitigated our ultimate remediation liability. We cannot assure you, however, that all of such matters will be subject to indemnity or that our existing indemnities will be sufficient to cover our liabilities for such matters.

OnWe ~~October 6,~~have ~~2002,~~been anotified ~~leak~~by ofthird ~~sulphuric~~parties ~~acid~~of ~~from~~claims ~~two~~against ~~tanks~~us ~~located~~or ~~near~~our ~~the~~subsidiaries ~~Whitehaven,~~for ~~U.K.~~cleanup ~~plant~~liabilities ~~was~~at ~~discovered.~~approximately ~~About~~12 ~~342~~former tofacilities ~~347 tonnes of acid were released onto the ground~~ and ~~into~~other ~~the~~third ~~soil~~party ~~near the tanks. Although the Company took immediate steps to contain the spillage and recover acid~~sites, aincluding ~~quantity of acid reached a nearby beach via a geological fault. The Company did~~but not ~~own~~limited ~~the~~to ~~tanks~~sites ~~from~~listed ~~which~~under ~~the acid leaked; however, it did own the acid in the tanks~~CERCLA. ~~The~~Based ~~U.K. Health and Safety Executive issued three Improvement Notices requiring corrective action with which the Company is complying. The U.K. Environment Agency ("EA")~~ on orcurrent ~~about~~information April 27, 2004, served a summons providing notice to Huntsman Surface Sciences UK Limited that a criminal prosecution has been initiated against it as a result of the spill based on alleged violations of the Water Resources Act and ~~Environmental~~past ~~Protection~~experience ~~Act.~~at Aother ~~similar~~CERCLA ~~prosecution~~sites, ~~was~~we ~~initiated~~do ~~against~~not ~~the~~expect ~~owner~~any of ~~the~~ ~~tanks,~~these ~~Rhodia,~~third-party ~~S.A.~~claims ~~Both companies agreed~~ to ~~plead~~result ~~guilty to one charge. Huntsman Surface Sciences UK Limited was fined £40,000 and assessed £8,000~~ in ~~prosecution~~material ~~costs~~liability onto ~~August 5, 2004~~us.

~~The~~One ~~Company~~of ~~has~~these ~~been~~sites, ~~named~~the asNorth aMaybe ~~"premises~~Canyon ~~defendant"~~CERCLA site, includes an abandoned phosphorous mine located in a ~~number~~U.S. ofNational ~~asbestos~~Forest ~~exposure~~in ~~lawsuits~~Idaho. ~~These~~The ~~suits~~North ~~often~~Maybe ~~involve~~Canyon ~~multiple~~mine ~~plaintiffs~~may ~~and~~have ~~multiple~~been operated ~~defendants,~~by ~~and,~~one ~~generally,~~of ~~the complaint~~our inpredecessors for approximately two out of the ~~action~~eight ~~does~~years ~~not~~(1964 ~~indicate~~to 1972) during which ~~plaintiffs~~it ~~are~~held ~~making~~mining ~~claims~~leases ~~against~~in athe ~~specific~~area. ~~defendant~~In 2004, ~~where~~we received from the ~~alleged~~Forest ~~injuries~~Service ~~were~~a ~~incurred~~notice orof potential ~~what~~liability ~~injuries~~for ~~each~~the ~~plaintiff~~mine ~~claims~~under CERCLA. ~~These~~According ~~facts~~to information from the U.S. government, North Maybe Canyon was actively mined for a total of about 20 years. The current owner, NuWest ~~must~~Industries, Inc., bea ~~learned~~subsidiary ~~through~~of ~~discovery~~Agrium, Inc., ~~There~~operated ~~are~~the mine for at least six of those years. Under an administrative order with the Forest Service and other governmental agencies, NuWest is currently 39undertaking ~~asbestos~~an ~~exposure~~investigation ~~cases~~of ~~pending~~the ~~against~~site, with a specific focus on the ~~Company~~release of selenium-contaminated surface water into streams in the area. ~~Among~~By letter dated May 27, 2005, the ~~cases~~Forest ~~currently~~Service ~~pending~~put us (as well as NuWest and Wells Cargo, Inc.) ~~management~~on notice that it is ~~aware~~demanding payment of ~~three~~its ~~claims~~incurred costs in the amount of ~~mesothelioma~~$0. 1 million. The ~~Company~~letter ~~does~~also ~~not~~indicated that ~~have~~the ~~sufficient~~Forest ~~information~~Service wishes to initiate negotiations on a response action at the ~~present~~site ~~time~~with tothe ~~estimate~~objective ~~any~~of ~~liability~~putting a Consent Decree in ~~these~~place ~~cases~~obligating NuWest, Wells Cargo and us to conduct and fund that action. ~~Although~~We are currently investigating the ~~Company~~factual ~~cannot~~issues ~~provide~~concerning ~~specific~~anticipated ~~assurances,~~allocation ~~based~~and onresponse ~~its~~action ~~understanding~~issues. ~~of similar~~We ~~cases,~~have ~~management~~initiated ~~believes~~contact ~~that~~with the ~~Company's~~Forest ~~ultimate~~Service ~~liability~~and inthe ~~these~~other potentially ~~cases~~responsible ~~will~~persons ("PRPs") to determine whether to pursue negotiations. We do not becurrently ~~material~~have sufficient information to ~~its~~estimate ~~financial~~actual ~~position~~remediation costs or ~~results~~our actual liability, if any, for investigation and cleanup of ~~operations~~the North Maybe Canyon site.

~~The~~At ~~Company~~another has incurred, and may in the future incur, liability to investigate and clean up waste or contamination at current or former facilities or facilities operated by third parties at which it may have disposed of ~~waste~~these ~~or other materials. Similarly~~sites, the ~~Company~~Seaboard ~~may~~Chemical ~~incur~~Corporation ~~costs~~facility ~~for~~in ~~the~~Jamestown, ~~cleanup~~North ofCarolina, ~~wastes~~a ~~that~~removal ~~were~~action ~~disposed~~under ofCERCLA ~~prior~~was tofirst ~~the~~initiated ~~purchase~~in ~~of its businesses~~1992. ~~Under some~~In ~~environmental laws~~December 1995, ~~the Company may be jointly and severally liable for the costs of environmental contamination on or from its properties and at off-site locations where it disposed~~ ~~of or arranged for the disposal or treatment of hazardous wastes and may incur liability for damages to natural resources. For example~~we, ~~under~~along ~~the~~with ~~Comprehensive~~hundreds ~~Environmental Response, Compensation and Liability Act~~ of ~~1980,~~other ~~as amended ("CERCLA")~~PRPs, ~~and~~entered ~~similar~~into ~~state~~an ~~laws,~~administrative aorder ~~current~~on ~~owner~~consent or operator of real property may be liable for such costs regardless of whether the owner or operator owned or operated the real property at the time of the release of the hazardous substances and regardless of whether the release or disposal was in compliance with ~~law at~~ the ~~time~~State itrequiring ~~occurred. In addition, under~~ the ~~Resource~~PRP ~~Conservation~~group ~~and~~to ~~Recovery~~conduct ~~Act~~a ofremedial ~~1976,~~investigation/feasibility asstudy ~~amended~~ ("~~RCRA~~RI/FS"),. ~~and~~The initial ~~similar~~RI/FS ~~state~~was ~~laws,~~submitted asto the ~~holder~~State ofin ~~permits~~mid-1999. toBased ~~treat~~on ~~or store hazardous wastes,~~ the ~~Company~~investigative ~~may~~work, ~~under some circumstances, be required to remediate contamination at or from its properties regardless of when~~ the ~~contamination~~PRP ~~occurred.~~group ~~For~~proposed ~~example,~~a

~~the~~remediation ~~Odessa,~~plan ~~Port~~for ~~Arthur,~~the ~~and~~site ~~Port~~in ~~Neches~~early ~~facilities~~2005. inThat ~~Texas~~plan ~~are~~has ~~the~~now ~~subject~~been ofaccepted ~~ongoing~~by ~~RCRA~~the ~~remediation.~~State ~~Based~~and ona ~~current~~draft ~~information~~consent ~~and~~order ~~past~~for ~~costs~~implementation ~~relating~~is tobeing ~~these~~negotiated. ~~matters~~Additionally, the ~~Company~~PRPs ~~does~~developed ~~not~~allocation ~~believe~~numbers ~~such~~based ~~matters~~on ~~will~~relative ~~have~~waste acontribution, ~~material~~with ~~adverse~~our ~~effect.~~share ~~There~~set ~~can~~at be2.84%. noBased ~~assurance,~~on ~~however,~~the ~~that~~total ~~any~~estimated ~~such~~cost ~~matters~~of ~~will~~remediation, ~~not~~we have aestablished ~~material~~an ~~adverse~~accrual ~~effect~~of ~~on the Company~~$0.3 million.

~~The Company~~Environmental is aware that there is or may be soil or groundwater contamination at some of its other facilities resulting from past operations. Based on available information and the indemnification rights (including indemnities provided by ICI, Nova Chemicals Corporation, The Rohm and Haas Company, Rhodia, S.A., Shell, Texaco and Dow Chemical, for the facilities that each of them transferred to the Company), the Company believes that the costs to investigate and remediate known contamination will not have a material adverse effect on its financial condition, results of operations or cash flows; however, the Company cannot give any assurance that such indemnities will fully cover the costs of investigation and remediation, that it will not be required to contribute to such costs or that such costs will not be material. Reserves

~~In addition,~~We ~~the~~have ~~Company~~established ~~has~~financial ~~been~~reserves ~~notified~~relating byto ~~third~~anticipated ~~parties~~environmental ~~of claims against it or its subsidiaries for~~ cleanup ~~liabilities~~obligations, atsite ~~certain~~reclamation ~~former facilities~~ and ~~other~~closure ~~third~~costs ~~party~~and ~~sites,~~known penalties. ~~including~~Liabilities ~~Belpre,~~are ~~Ohio~~recorded (awhen ~~former~~potential ~~facility);~~liabilities ~~Georgetown~~are ~~Canyon,~~either ~~Idaho~~known ~~(an~~or ~~alleged~~considered ~~former~~probable ~~property~~and oncan ~~which~~be ~~phosphorus~~reasonably ~~mining~~estimated. ~~was~~Our ~~conducted);~~liability ~~Aerex~~estimates ~~Refinery,~~are ~~Bloomfield,~~based ~~New~~upon ~~Mexico~~available ~~(an~~facts, ~~alleged~~existing ~~former~~technology ~~property);~~and ~~Turtle~~past ~~Bayou~~experience. ~~Superfund~~On ~~Site,~~a ~~Texas~~consolidated ~~(an~~basis, ~~alleged~~we ~~off-site~~have ~~disposal~~accrued ~~location);~~approximately ~~the~~$12.2 million ~~Martin~~and ~~Aaron~~$13.9 million ~~Superfund~~for ~~Site,~~environmental ~~Camden,~~liabilities ~~New~~as ~~Jersey~~of ~~(an~~June 30, ~~off-site~~2005 ~~disposal~~ and ~~reconditioning~~December 31, ~~facility~~2004, ~~which~~respectively. ~~ICI~~Of isthese ~~alleged~~amounts, toapproximately ~~have~~$2.0 million ~~used);~~are ~~the~~classified ~~Gulf~~as ~~Nuclear~~accrued ~~Sites~~liabilities inon ~~Odessa~~our ~~and~~consolidated ~~near~~balance ~~Houston,~~sheets ~~Texas~~as ~~(off-site~~of ~~waste~~each ~~handling~~of ~~sites); Star Lake Superfund Site~~June 30, ~~Texas~~2005 ~~(located~~and ~~near~~December 31, ~~the~~2004, ~~Port~~and ~~Neches~~approximately ~~facility);~~$10.2 million ~~the~~and ~~San~~$11.9 million ~~Angelo~~are ~~Electric~~classified ~~Service~~as ~~Company~~other ~~Site,~~noncurrent ~~San~~liabilities ~~Angelo,~~on ~~Texas~~our ~~(an~~consolidated ~~alleged~~balance ~~PCB-handling~~sheets ~~site);~~as ~~the~~of ~~North Maybe Canyon Mine near Soda Springs~~June 30, ~~Idaho~~2005 ~~(an alleged former property on which phosphorus was mined);~~ and ~~the Malone Services Site~~December 31, ~~Texas City~~2004, ~~Texas (an off-site disposal location)~~respectively. ~~With~~In ~~respect~~certain ~~to the Belpre~~cases, ~~Georgetown Canyon,~~our ~~Aerex,~~remediation ~~and~~liabilities ~~North Maybe Canyon sites, which~~ are ~~under~~payable ~~investigation,~~over ~~the~~periods ~~Company~~of isup ~~unable~~ to ~~determine~~30 years. ~~whether~~We ~~such liabilities~~ may beincur ~~material~~losses tofor itenvironmental ~~because~~remediation ~~it does not have information~~in ~~sufficient~~excess toof ~~evaluate~~ the ~~claims.~~amounts ~~With~~accrued; ~~respect to the remaining matters~~however, ~~based~~we onare ~~current~~not ~~information~~able ~~and~~to ~~past~~estimate ~~experience,~~ the ~~Company~~amount ~~does~~or ~~not~~range ~~believe~~of such ~~matters will have a material adverse effect on it~~losses.

Based upon currently available information, the Company does not anticipate that any of the potential liabilities referenced above will materially adversely affect its financial position or results of operations.

Regulatory Developments

InUnder athe ~~March 30,~~European ~~2004~~Union ~~Federal~~("EU") ~~Register,~~Integrated ~~the~~Pollution ~~EPA~~Prevention ~~announced~~and ~~that~~Control itDirective ~~will~~("IPPC"), ~~designate~~EU ~~the~~member ~~Beaumont-Port~~governments ~~Arthur,~~are ~~Texas~~to ~~area~~adopt asrules inand ~~"serious"~~implement a ~~non~~cross-~~attainment~~media ~~with~~(air, ~~the~~water ~~one-hour~~and ~~ozone~~waste) ~~national~~environmental ~~ambient~~permitting ~~air~~program ~~quality~~for ~~standard~~individual facilities. ~~The~~While ~~Company~~the ~~currently~~EU ~~believes~~countries ~~that~~are ~~this~~at ~~change~~varying stages in ~~status~~their ~~will~~respective ~~not~~implementation ~~require~~of ~~additional~~the ~~controls~~IPPC permit ~~and/or~~program, ~~work~~we ~~practices~~have submitted all necessary IPPC permit applications required to ~~meet~~date, and in some cases received completed permits from the asapplicable ~~yet~~government ~~undefined~~agency. ~~regulatory~~We ~~requirements~~expect ~~for~~to ~~nitrogen~~submit ~~oxides~~all other IPPC applications and ~~volatile~~related ~~organic~~documents ~~compounds.~~on ~~Although~~a notimely ~~assurance~~basis ~~can~~as bethe ~~given,~~various countries implement the ~~Company~~IPPC ~~believes~~permit ~~that~~program. ~~any additional~~Although ~~capital~~we ~~required~~do tonot ~~comply~~know with ~~the~~certainty ~~new~~what ~~rules~~each ~~based~~IPPC onpermit ~~this~~will ~~area~~require, ~~reclassification~~we believe, ~~above~~based ~~its~~upon ~~existing~~our ~~operating~~experience ~~plans~~with ~~for~~the ~~plants~~permits inreceived ~~Port~~to ~~Arthur~~date, ~~and~~that ~~Port~~the ~~Neches,~~costs ~~Texas,~~of compliance with the IPPC permit program will not be material to our results of operations, financial position or liquidity.

~~Under~~In October 2003, the European ~~Union~~Commission ("adopted a proposal for a new EU") ~~Integrated~~regulatory ~~Pollution~~framework ~~Prevention~~for ~~and~~chemicals. ~~Control~~Under ~~Directive~~this (proposed new system called "~~IPPC~~REACH" (Registration, Evaluation and Authorization of Chemicals), EUcompanies ~~member~~that ~~governments~~manufacture ~~are~~or toimport ~~adopt~~more ~~rules~~than ~~and~~one ~~implement~~ton of a ~~cross-media~~chemical ~~(air,~~substance ~~water~~per ~~and waste)~~year ~~environmental~~would ~~permitting~~be ~~program~~required ~~for~~to ~~individual~~register ~~facilities~~such manufacture or import in a central database. The ~~U.K.~~REACH ~~was~~initiative, ~~the~~as ~~first~~proposed, EUwould ~~member~~require ~~government~~risk toassessment ~~request~~of ~~IPPC~~chemicals, ~~permit~~preparations ~~applications~~(e.g., ~~from~~soaps ~~the~~and ~~Company.~~paints) Inand ~~the~~articles U(e.Kg., ~~sites~~consumer atproducts) ~~Wilton,~~before ~~North~~those materials ~~Tees,~~could ~~and~~be ~~Whitehaven~~manufactured ~~have~~or ~~all~~imported ~~submitted~~into ~~applications~~EU ~~and~~countries. ~~received~~Where ~~certification~~warranted ofby a risk assessment, hazardous substances would require authorizations for their ~~permits~~use. ~~The~~This ~~site~~regulation atcould ~~Llanelli~~impose ~~has~~risk ~~submitted~~control strategies athat ~~report~~would torequire capital expenditures by us. As proposed, REACH would take effect in three primary stages over the ~~Environmental~~eleven ~~Agency~~years ~~and~~following athe ~~draft~~final ~~permit~~effective ~~has~~date ~~been~~(assuming final ~~received~~approval). The impacts of REACH on the chemical industry and ison ~~currently~~us ~~under~~are ~~review~~unclear ~~for~~at ~~comment.~~this ~~The~~time ~~Grimsby~~because ~~site~~the ~~will~~parameters ~~accelerate~~of ~~its~~the ~~IPPC~~program are still being actively debated.

submission to 2004 (rather than 2005) to address site operational changes, while the Greatham site is preparing to submit its application in 2005. The Company is not yet in a position to know with certainty what the other U.K. IPPC permits will require, and it is possible that the costs of compliance could be material; however, the Company believes, based upon its experience to date, that the costs of compliance with IPPC permitting in the U.K. will not be material to its financial condition or results of operations. Additionally, the IPPC directive has recently been implemented in France, and similar to its operations in the U.K., the Company does not anticipate having to make material capital expenditures to comply. In the French program, sites must submit ten-year reviews of their environmental, health and safety plans and performance, and the Calais, St Mihiel and Lavera sites are developing the necessary documents.

With respect to its facilities in EU jurisdictions other than the U.K. and France, IPPC implementing legislation is not yet in effect, or the Company has not yet been required to seek IPPC permits. In Spain and Italy the IPPC directive has not yet been fully implemented. However, regional authorities in both countries have initiated discussions with local chemical producers; and the sites at Barcelona, Scarlino, Patrica, and Castiglione have all started to develop programs for IPPC submissions. In the Netherlands and Germany, existing legislation covers most, if not all, of the IPPC requirements, thus no significant work is anticipated for the sites in those countries (Rozenburg, Osnabrück and Deggendorf.). The Petfurdo site in Hungary has started to prepare its IPPC report, as required under the rules agreed upon for EU accession.

On October 29, 2003, the European Commission adopted a proposal for a new EU regulatory framework for chemicals. Under this proposed new system called "REACH" (Registration, Evaluation and Authorisation of CHemicals), enterprises that manufacture or import more than one ton of a chemical substance per year would be required to register such manufacture or import in a central database. The REACH initiative, as proposed, would require risk assessment of chemicals, preparations (e.g., soaps and paints) and articles (e.g., consumer products) before those materials could be manufactured or imported into EU countries. Where warranted by a risk assessment, hazardous substances would require authorizations for their use. This regulation could impose risk control strategies that would require capital expenditures by the Company. As proposed, REACH would take effect in three primary stages over the eleven years following the final effective date (assuming final approval). The impacts of REACH on the chemical industry and on the Company are unclear at this time because the parameters of the program are still being actively debated. Nevertheless, it is possible that REACH, if implemented, would be costly to the Company.

MTBE Developments

~~The~~We ~~use~~currently ofmarket ~~MTBE~~approximately is95% ~~controversial~~of inour ~~the~~MTBE ~~United~~to ~~States~~customers ~~and~~located ~~elsewhere and may be substantially curtailed or eliminated~~ in the ~~future~~U.S. byfor ~~legislation~~use oras ~~regulatory action~~a gasoline additive. The presence of MTBE in some groundwater supplies in California and other U.S. states (primarily due to gasoline leaking from underground storage tanks) and in surface water (primarily from recreational watercraft) has led to public concern about MTBE's potential to contaminate drinking water supplies. Heightened public awareness regarding this issue has resulted in ~~state, federal and foreign initiatives to rescind the federal oxygenate requirements for reformulated gasoline or restrict or prohibit the use of MTBE in particular.~~

For example, the California Air Resources Board adopted regulations that prohibit the addition of MTBE to gasoline as of January 1, 2004. Certain other states have also taken actions to restrict or eliminate the current or future use of MTBE. States which have taken action to prohibit or restrict the use of MTBE accounted for over 40% of the U.S. market for MTBE prior to the taking of such action. In connection with its ban, the State of California requested that the EPA waive the federal oxygenated fuels requirements of the federal Clean Air Act for gasoline sold in California. The EPA denied the State's request on June 12, 2001. Certain of the state bans, including California's ban, have been challenged in court as unconstitutional (in light of the Clean Air Act). On June 4, 2003, a federal court 27

state, federal and foreign initiatives to rescind the federal oxygenate requirements for reformulated gasoline or restrict or prohibit the use of MTBE in particular. For example, California, New York and Connecticut have adopted rules that prohibit the use of MTBE in gasoline sold in those states. Overall, states that have taken some action to prohibit or restrict the use of MTBE in gasoline account for a substantial portion of the "pre-ban" U.S. MTBE market. Thus far, attempts by others to challenge these state bans in federal court under the reformulated gasoline provisions of the federal Clean Air Act have been unsuccessful.

In August 2005, the Energy Policy Act of 2005 was signed into law. The new law will likely have an adverse impact on our MTBE business in the U.S., although a full evaluation of the law's provisions is underway and the extent of potential impacts, if any, is unclear. The new legislation mandates increased use of renewable fuels and eliminates the oxygenate requirement for reformulated gasoline established by the 1990 Clean Air Act Amendments, and the combination of these two provisions could substantially reduce the market for MTBE in the U.S. However, unlike previously proposed federal legislation, the new law does not purport to ban the use of MTBE as a motor vehicle fuel additive. Thus, we do not believe it will prevent us from either manufacturing MTBE in our plants or offering MTBE for sale in the U.S. A significant reduction in demand for our MTBE could result in a material loss in revenues or material costs or expenditures. As an alternative to selling our MTBE in the U.S., we believe we will be able to export MTBE to Europe, Asia or Latin America, although this may produce a lower level of cash flow than the sale of MTBE in the U.S. We may also elect to use all or a portion of our precursor TBA to produce saleable products other than MTBE. If we opt to produce products other than MTBE, necessary modifications to our facilities may require significant capital expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

In September 2002, the EU issued a final risk assessment report on MTBE. No ban of MTBE was recommended for Europe, although several risk reduction measures relating to storage and handling of MTBE-containing fuel were recommended.

A number of lawsuits have been filed, primarily against gasoline manufacturers, marketers and distributors, by persons seeking to recover damages allegedly arising from the presence of MTBE in groundwater. We have not been named as a defendant in any litigation concerning the environmental effects of MTBE. However, we cannot provide assurances that we will not be involved in any such litigation or that such litigation will not have a material adverse effect on our results of operations, financial position or liquidity.

17. OTHER EXPENSE

Other expense consisted of the following (dollars in millions):

		Three Months Ended June 30,						Six Months Ended June 30,
		2005			2004			2005			2004
Loss on early extinguishment of debt		$	(0.3	)	$	(2.3	)	$	(38.6	)	$	(4.2	)
Other, net			(1.3	)		0.2			(1.5	)		0.5

	Total other expense	$	(1.6	)	$	(2.1	)	$	(40.1	)	$	(3.7	)

18. INCOME TAXES

We had income tax expense of $0.8 million and nil for the three and six months ended June 30, 2005, respectively, and income tax expense of $1.6 million and benefit of $0.8 million for the three and six months ended June 30, 2004, respectively. We use the asset and liability method of accounting for

ofincome ~~appeals~~taxes. ~~rejected~~Deferred ~~such~~income ataxes ~~challenge~~reflect tothe ~~California's~~net ~~ban,~~tax ~~ruling~~effects ~~that~~of temporary differences between the ~~ban~~carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate the resulting deferred tax assets to determine whether it is more likely than not ~~pre~~that they will be realized. Valuation allowances have been established against our entire domestic and certain of our non-~~empted~~U.S. deferred tax assets due to the uncertainty of realization. Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether a change in circumstances has occurred to provide enough positive or negative evidence to support a change in judgment about the ~~Clean~~realizability ~~Air~~of ~~Act~~the related deferred tax asset.

~~The energy bill pending in the U~~19.S. OPERATING ~~Congress~~SEGMENT would eliminate the oxygenated fuels requirements in the Clean Air Act and phase out or curtail MTBE use. To date, no such legislation has become law. However, such legislation is being considered by Congress and if it were to become law it could result in a federal ban on the use of MTBE in gasoline. In addition, on March 20, 2000, the EPA announced its intention, through an advanced notice of proposed rulemaking, to phase out the use of MTBE under authority of the federal Toxic Substances Control Act. In its notice, the EPA also called on the U.S. Congress to restrict the use of MTBE under the Clean Air Act. INFORMATION

~~In Europe,~~We ~~the~~derive EUour ~~issued a final risk assessment report on MTBE on September 20~~revenues, ~~2002.~~earnings ~~While no ban of MTBE was recommended, several risk reduction measures relating to storage~~ and ~~handling~~cash offlows ~~MTBE-containing fuel were recommended. Separate~~ from EUthe ~~action,~~manufacture ~~Denmark~~and ~~entered into a voluntary agreement with refiners to reduce the~~ sale of ~~MTBE~~a inwide ~~Denmark.~~variety ~~Under the agreement, use~~ of ~~MTBE~~differentiated ~~in 92-~~ and ~~95-octane~~commodity ~~gasoline~~chemical inproducts. ~~Denmark~~We ~~ceased~~have ~~by May 1, 2002; however, MTBE is still an additive in a limited amount of 98-octane~~three ~~gasoline~~reportable ~~sold~~operating insegments: ~~about~~Performance ~~100~~Products, ~~selected~~Polymers ~~service~~and ~~stations~~Base ~~in Denmark~~Chemicals.

~~Any~~The ~~phase-out~~major or other future regulation of MTBE in other states, nationally or internationally may result in a significant reduction in demand for the Company's MTBE and result in a material loss in revenues or material costs or expenditures. In the event that there should be a phase-out of MTBE in the United States, the Company believes it will be able to export MTBE to Europe or elsewhere or use its co-product TBA to produce saleable products ~~other than MTBE. If the Company opts to produce products other than MTBE, necessary modifications to its facilities may require significant capital expenditures and the sale~~ of ~~the~~each ~~other~~reportable ~~products~~operating ~~may~~segment ~~produce~~are aas ~~materially~~follows: ~~lower level of cash flow than the sale of MTBE.~~

In addition, while the Company has not been named as a defendant in any litigation concerning the environmental effects of MTBE, it cannot provide assurances that it will not be involved in any such litigation or that such litigation will not have a material adverse effect on its business, financial condition, results of operations or cash flows. In 2003, the U.S. House of Representatives passed a version of an energy bill that contained limited liability protection for producers of MTBE. The Senate's version of the bill did not have liability protection. This issue was one of the reasons that a compromise energy bill was not passed. Whether a compromise will be reached on this legislation in 2004, and whether any compromise will provide liability protection for producers, are unknown. In any event, the liability protection provision in the House bill applied only to defective product claims; it would not preclude other types of lawsuits.

Segment		Products
Performance Products		Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals, glycols and technology licenses
Polymers		Ethylene (produced at the Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymers
Base Chemicals		Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, cyclohexane and paraxylene

Other Matters

The TCEQ and the Company settled outstanding allegations of environmental regulatory violations at the Port Neches, Texas, facilities on May 29, 2003. The settlement imposes penalties totaling $352,250 and requires enhanced air monitoring around the C4 plant, an air compliance audit performed by an outside consultant at that plant, and application for an air emissions permit for the joint wastewater treatment plant that services all of the Port Neches facilities. Although management does not anticipate it, it is possible that the terms of a joint wastewater treatment plant air permit, which will likely be issued as a result of the settlement, may cause the Company to incur costs that could be material.

~~The State of Texas settled an air enforcement case with the Company relating to the Port Arthur plant on May 13, 2003. Under the settlement, the Company is required to pay a civil~~Sales ~~penalty~~between ofsegments ~~$7.5 million~~are ~~over~~generally ~~more~~recognized ~~than~~at ~~four~~external ~~years,~~market ~~undertake~~prices ~~environmental~~and ~~monitoring~~eliminate ~~projects~~upon ~~totaling~~consolidation ~~about~~(dollars ~~$1.5 million~~ in ~~costs, and pay $375,000 in attorney's fees to the Texas Attorney General~~millions). Thus, as of May 17, 2004, the Company has paid $1.8 million toward the penalty and $375,000 for the attorney's fees; the monitoring projects are underway and on schedule. It is not anticipated that this settlement will have a material adverse effect on the Company's financial position.

18. Operating Segment Information

			Three months ended						Six months ended
			June 30, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Revenues:
	Performance Products		$	356.2		$	284.8		$	694.4		$	586.3
	Polymers			408.2			324.2			821.8			638.7
	Base Chemicals			482.2			430.3			1,023.0			815.6
	Eliminations			(77.9	)		(70.3	)		(166.0	)		(131.9	)

		Total	$	1,168.7		$	969.0		$	2,373.2		$	1,908.7

Segment EBITDA(1)
	Performance Products		$	60.3		$	13.6		$	127.0		$	47.1
	Polymers			32.5			0.2			77.4			19.1
	Base Chemicals			20.9			23.3			80.3			45.2
	Corporate and other(2)			13.2			(89.2	)		(14.3	)		(141.5	)

		Total	$	126.9		$	(52.1	)	$	270.4		$	(30.1	)

Segment EBITDA(1)			$	126.9		$	(52.1	)	$	270.4		$	(30.1	)
	Interest expense, net			(37.7	)		(42.1	)		(78.4	)		(88.9	)
	Income tax (expense) benefit			(0.8	)		(1.6	)		—			0.8
	Depreciation and amortization			(32.0	)		(34.0	)		(63.0	)		(66.6	)

		Net income (loss)	$	56.4		$	(129.8	)	$	129.0		$	(184.8	)

(1): EBITDA is defined as net income (loss) before interest, income tax, depreciation and amortization.
(2): EBITDA from corporate and other includes unallocated corporate overhead, foreign exchange gains or losses and other non-operating income (expense).

~~The Company derives its revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated and commodity chemical products~~20. CONDENSED ~~The Company~~CONSOLIDATING ~~has~~FINANCIAL ~~five reportable operating segments: Polyurethanes, Performance Products, Polymers, Pigments and Base Chemicals. The major products of each reportable operating segment are as follows:~~ STATEMENTS

Segment		Products
Polyurethanes		MDI, TDI, TPU, polyols, aniline, PO and MTBE
Performance Products		Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals and glycols
Polymers		Ethylene (produced at the Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymers
Pigments		TiO2
Base Chemicals		Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, cyclohexane and paraxylene

The following are condensed consolidating financial statements which present, in separate columns: the parent company with our investments in subsidiaries using the equity method; the Guarantors on a combined, or where appropriate, consolidated basis, carrying the investments in the Non-Guarantors under the equity method; and the Non-Guarantors on a consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of June 30, 2005 and December 31, 2004 and for the three and six months ended June 30, 2005 and 2004. There are no restrictions limiting transfers of cash from guarantor to non-guarantor subsidiaries to us. The combined Guarantors are our wholly-owned subsidiaries and have fully and unconditionally guaranteed $296.0 million of the 2003 Secured Notes on a joint and several basis.

Sales between segments are generally recognized at external market prices.

The Company uses EBITDA to measure the financial performance of its global business units and for reporting the results of its operating segments. This measure includes all operating items relating to the businesses. The EBITDA of operating segments excludes items that principally apply to the Company as a whole. The Company believes that EBITDA is useful in helping investors assess the

~~results~~ of ~~its~~ HUNTSMAN ~~business~~LLC ~~operations.~~AND ~~The~~SUBSIDIARIES CONDENSED ~~revenues~~CONSOLIDATING ~~and~~BALANCE ~~EBITDA~~SHEETS AS ~~for~~OF ~~each~~JUNE of30, ~~the~~2005 ~~Company's reportable operating segments are as follows~~ (~~dollars~~Unaudited) (Dollars in ~~millions~~Millions):

			Three Months Ended June 30,						Six Months Ended June 30,
			Parent Company			Guarantors			Non- guarantors			Eliminations			Consolidated Huntsman LLC
			2004			2003			2004			2003
ASSETS
Revenues:
Current assets:
	Polyurethanes		$	733.8		$	385.9		$	1,373.4		$	385.9
	Cash and cash equivalents		$	2.2		$	0.7		$	11.3		$	—		$	14.2
	Performance Products			451.2			365.6			906.0			644.9
	Restricted cash			0.6			12.9			—			—			13.5
	Polymers			324.2			269.6			638.7			558.4
	Accounts and notes receivable, net			75.9			354.3			64.6			—			494.8
	Pigments			278.2			170.6			533.1			170.6
	Accounts receivable from affiliates			285.1			378.8			33.2			(618.6	)		78.5
	Base Chemicals			911.2			511.4			1,770.3			827.7
	Inventories			44.4			239.9			71.9			—			356.2
	Eliminations			(210.6	)		(125.9	)		(378.8	)		(178.6	)
	Prepaid expenses			0.2			0.9			0.7			—			1.8
		Total	$	2,488.0		$	1,577.2		$	4,842.7		$	2,408.9
	Deferred income tax			—			(0.2	)		0.7			—			0.5
Segment EBITDA(1)
	Other current assets			—			—			10.7			(8.8	)		1.9
	Polyurethanes		$	100.0		$	30.8		$	172.8		$	30.8
		Total current assets		408.4			987.3			193.1			(627.4	)		961.4
	Performance Products			16.0			9.2			51.4			46.1
Property, plant and equipment, net				101.7			1,002.4			107.1			—			1,211.2
	Polymers			0.2			22.7			19.1			36.1
Investment in unconsolidated affiliates				(627.3	)		407.5			31.8			385.9			197.9
	Pigments			(83.5	)		19.1			(75.8	)		19.1
Intangible assets, net				1.8			10.2			18.7			—			30.7
	Base Chemicals			81.2			30.2			134.5			22.0
Goodwill				—			—			3.3			—			3.3
	Corporate and other(2)			10.3			12.6			22.7			(31.5	)
Deferred income tax				0.4			7.9			—			—			8.3
		Total	$	124.2		$	124.6		$	324.7		$	122.6
Receivables from affiliates				2,168.0			104.6			15.9			(2,279.0	)		9.5
Segment EBITDA(1)			$	124.2		$	124.6		$	324.7		$	122.6
Other noncurrent assets				41.5			114.3			10.0			(3.6	)		162.2
	Interest income (expense), net			(132.9	)		(103.7	)		(277.5	)		(138.2	)
		Total assets	$	2,094.5		$	2,634.2		$	379.9		$	(2,524.1	)	$	2,584.5
	Income tax benefit (expense)			(6.8	)		6.3			(7.5	)		6.3
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
	Depreciation and amortization			(114.4	)		(79.6	)		(224.5	)		(111.8	)
Current liabilities:
		Net loss	$	(129.9	)	$	(52.4	)	$	(184.8	)	$	(121.1	)
	Accounts payable		$	37.4		$	234.4		$	47.9		$	—		$	319.7
	Accounts payable to affiliates			291.8			282.8			59.4			(618.6	)		15.4
	Accrued liabilities			77.0			106.9			24.4			(8.8	)		199.5
	Deferred income tax			0.4			7.8			0.1			—			8.3
	Current portion of long-term debt			0.1			1.2			3.3			—			4.6
		Total current liabilities		406.7			633.1			135.1			(627.4	)		547.5
Long-term debt				1,378.6			2,250.2			204.3			(2,278.5	)		1,554.6
Deferred income taxes				—			(0.6	)		1.0			—			0.4
Other noncurrent liabilities				96.4			166.2			7.2			(0.6	)		269.2
		Total liabilities		1,881.7			3,048.9			347.6			(2,906.5	)		2,371.7
	Minority interest in consolidated subsidiaries			—			91.3			—			(91.3	)		—
Member's equity (deficit):
	Member's equity			1,428.4			270.9			104.2			(375.1	)		1,428.4
	Subsidiary preferred stock			—			73.4			1.4			(74.8	)		—
	Accumulated deficit			(1,230.3	)		(890.4	)		(52.8	)		943.2			(1,230.3	)
	Accumulated other comprehensive income (loss)			14.7			40.1			(20.5	)		(19.6	)		14.7
		Total member's equity (deficit)		212.8			(506.0	)		32.3			473.7			212.8
	Total liabilities and member's equity (deficit)		$	2,094.5		$	2,634.2		$	379.9		$	(2,524.1	)	$	2,584.5

~~19. Employee~~ ~~Benefit~~ ~~Plans~~ HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 2004 (Unaudited) (Dollars in Millions)

Components of the net periodic benefit costs for the three months and six months ended June 30, 2004 and 2003, are as follows (dollars in millions):

			Parent Company			Guarantors			Non- guarantors			Eliminations			Consolidated Huntsman LLC
ASSETS
Current assets:
	Cash and cash equivalents		$	(0.1	)	$	3.5		$	8.3		$	—		$	11.7
	Restricted cash			0.3			8.6			—			—			8.9
	Accounts and notes receivables, net			62.1			402.3			75.9			—			540.3
	Accounts receivable from affiliates			76.5			178.9			3.1			(194.1	)		64.4
	Inventories			41.1			218.9			78.8			—			338.8
	Prepaid expenses			1.5			27.3			1.2			(8.1	)		21.9
	Deferred income tax			—			—			0.7			—			0.7
	Other current assets			—			0.1			1.5			—			1.6

		Total current assets		181.4			839.6			169.5			(202.2	)		988.3
Property, plant and equipment, net				98.6			1,025.8			107.7			—			1,232.1
Investment in unconsolidated affiliates				(685.5	)		400.9			43.0			437.6			196.0
Intangible assets, net				2.0			8.0			22.4			—			32.4
Goodwill				—			—			3.3			—			3.3
Deferred income tax				0.4			7.8			—			—			8.2
Receivable from affiliates				2,208.8			73.8			27.2			(2,297.0	)		12.8
Other noncurrent assets				50.2			124.5			9.8			(5.3	)		179.2

		Total assets	$	1,855.9		$	2,480.4		$	382.9		$	(2,066.9	)	$	2,652.3

LIABILITIES AND MEMBER'S (DEFICIT) EQUITY
Current liabilities:
	Accounts payable		$	34.8		$	223.3		$	60.2		$	0.1		$	318.4
	Accounts payable to affiliates			9.2			172.8			33.7			(194.1	)		21.6
	Accrued liabilities			92.8			133.2			15.8			(8.1	)		233.7
	Deferred income tax			0.4			7.8			—			—			8.2
	Current portion of long-term debt			20.7			1.2			3.4			—			25.3

		Total current liabilities		157.9			538.3			113.1			(202.1	)		607.2
Long-term debt				1,784.1			2,259.8			206.2			(2,297.2	)		1,952.9
Deferred income taxes				(0.4	)		—			1.4			—			1.0
Other noncurrent liabilities				95.0			170.4			7.1			(0.6	)		271.9

		Total liabilities		2,036.6			2,968.5			327.8			(2,499.9	)		2,833.0

Minority interest in consolidated subsidiaries				—			65.8			—			(65.8	)		—
Member's (deficit) equity:
	Member's equity			1,095.2			—			—			—			1,095.2
	Subsidiary preferred stock			—			70.6			1.4			(72.0	)		—
	Subsidiary common stock			—			56.4			77.2			(133.6	)		—
	Additional paid in capital			—			214.4			39.1			(253.5	)		—
	Accumulated deficit			(1,359.3	)		(1,004.3	)		(46.4	)		1,050.7			(1,359.3	)
	Accumulated other comprehensive income (loss)			83.4			109.0			(16.2	)		(92.8	)		83.4

		Total member's (deficit) equity		(180.7	)		(553.9	)		55.1			498.8			(180.7	)

	Total liabilities and member's (deficit) equity		$	1,855.9		$	2,480.4		$	382.9		$	(2,066.9	)	$	2,652.3

		Defined Benefit Plans						Other Postretirement Benefit Plans
Components of net periodic benefit cost		Three Months Ended June 30, 2004			Three Months Ended June 30, 2003			Three Months Ended June 30, 2004			Three Months Ended June 30, 2003
	Service cost	$	10.3		$	9.3		$	0.7		$	0.8
	Interest cost		18.3			16.6			1.7			2.0
	Expected return on assets		(17.9	)		(15.2	)		—			—
	Amortization of transition obligation		0.4			0.4			—			—
	Amortization of prior service cost		0.3			0.4			(0.4	)		(0.1	)
	Amortization of actuarial loss		4.0			4.0			0.9			0.8
	Net periodic benefit cost	$	15.4		$	15.5		$	2.9		$	3.5

		Defined Benefit Plans						Other Postretirement Benefit Plans
Components of net periodic benefit cost		Six Months Ended June 30, 2004			Six Months Ended June 30, 2003			Six Months Ended June 30, 2004			Six Months Ended June 30, 2003
	Service cost	$	14.1		$	12.5		$	1.4		$	1.5
	Interest cost		24.4			22.5			3.2			3.9
	Expected return on assets		(22.3	)		(19.4	)		—			—
	Amortization of transition obligation		0.8			0.8			—			—
	Amortization of prior service cost		0.6			0.6			(0.7	)		(0.1	)
	Amortization of actuarial loss		4.6			4.3			1.7			1.4
	Net periodic benefit cost	$	22.2		$	21.3		$	5.6		$	6.7

The Company's employees participate in a trusteed, non-contributory defined benefit pension plan (the "Plan") that covers substantially all full-time employees of the Company and certain of its affiliates. The Plan provides benefits based on years of service and final average salary. However, effective July 1, 2004, the existing Plan formula for employees not covered by a collective bargaining agreement was converted to a cash balance design. For represented employees, participation in the cash balance design is subject to the terms of negotiated contracts, and as of July 1, 2004, one collectively bargained unit had negotiated to participate. For participating employees, benefits accrued as of June 30, 2004 under the prior formula were converted to opening cash balance accounts. The new cash balance benefit formula provides annual pay credits from 4% to 12% of eligible pay, depending on age and service, plus accrued interest. Participants in the plan on July 1, 2004 may be eligible for additional annual pay credits from 1% to 8%, depending on their age and service as of that date, for up to five years.

20. Condensed Consolidating Financial Statements

The following condensed consolidating financial statements present, in separate columns, financial information for the following: Huntsman LLC (on a parent only basis), with its investment in subsidiaries recorded under the equity method; the HLLC Guarantors, on a combined, and where appropriate, consolidated basis, with its investment in the non-guarantors recorded under the equity

~~method;~~ ~~and~~ ~~the~~ HUNTSMAN ~~non-guarantors~~LLC onAND aSUBSIDIARIES CONDENSED ~~combined,~~CONSOLIDATING ~~and~~STATEMENTS ~~where~~OF ~~appropriate,~~OPERATIONS ~~consolidated~~AND ~~basis.~~COMPREHENSIVE ~~Additional~~INCOME ~~columns~~(LOSS) THREE ~~present~~MONTHS ~~eliminating~~ENDED ~~adjustments~~JUNE ~~and consolidated totals as of June~~ 30, ~~2004~~ ~~and~~2005 ~~December 31, 2003. There are no contractual restrictions limiting transfers of cash from the HLLC Guarantors to the Company, other than Huntsman Specialty. Each of the HLLC Guarantors~~(Unaudited) (Dollars isin 100% owned by the Company and has fully and unconditionally guaranteed the 2003 HLLC Secured Notes and the HLLC Notes on a joint and several basis. The Company has not presented separate financial statements and other disclosures for each of the HLLC Guarantors because management believes that such information is not material to investors. Millions)

		Parent Company			Guarantors			Non-guarantors			Eliminations			Consolidated Huntsman LLC
Revenues:
	Trade sales	$	120.7		$	877.7		$	97.4		$	—		$	1,095.8
	Related party sales		—			73.9			19.3			(20.3	)		72.9
	Expense billed to subsidiaries		9.8			(9.4	)		(0.4	)		—			—

Total Revenues			130.5			942.2			116.3			(20.3	)		1,168.7
Cost of goods sold			104.3			857.3			113.3			(20.1	)		1,054.8

Gross Profit			26.2			84.9			3.0			(0.2	)		113.9
Selling, general and administrative			17.1			23.4			6.2			(0.2	)		46.5
Research and development			0.1			4.8			0.6			—			5.5
Other operating expense (income)			0.9			(1.5	)		0.1			—			(0.5	)
Restructuring and plant closing (credits) costs			(0.2	)		1.1			—			—			0.9

Operating income (loss)			8.3			57.1			(3.9	)		—			61.5
Interest income (expense), net			12.4			(46.2	)		(3.9	)		—			(37.7	)
Equity in income of investment in unconsolidated affiliates and subsidiaries			36.8			36.6			2.8			(41.2	)		35.0
Other expense			(0.3	)		—			(1.3	)		—			(1.6	)

Income (loss) before income taxes and minority interest			57.2			47.5			(6.3	)		(41.2	)		57.2
Income tax (expense) benefit			(0.8	)		0.1			(0.1	)		—			(0.8	)

Income (loss) before minority interest			56.4			47.6			(6.4	)		(41.2	)		56.4
Minority interest in subsidiaries' income			—			(9.5	)		—			9.5			—

Net income (loss)			56.4			38.1			(6.4	)		(31.7	)		56.4
Other comprehensive loss			(42.0	)		(41.9	)		(2.9	)		44.8			(42.0	)

Comprehensive income (loss)		$	14.4		$	(3.8	)	$	(9.3	)	$	13.1		$	14.4

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING ~~BALANCE~~STATEMENTS ~~SHEETS~~OF ASOPERATIONS OFAND COMPREHENSIVE INCOME (LOSS) THREE MONTHS ENDED JUNE 30, 2004 (~~UNAUDITED~~Unaudited) (Dollars in Millions)

			Parent Company	~~Parent Company~~		Guarantors	~~Guarantors~~		Non-guarantors	~~Non- guarantors~~		Eliminations	~~Eliminations~~		Consolidated Huntsman LLC	~~Consolidated Huntsman LLC~~
ASSETS
Revenues:
Current assets:
	Trade sales		$	99.5		$	720.6		$	94.3		$	—		$	914.4
	Cash and cash equivalents			$	1.4		$	14.9		$	100.0		$	—		$	116.3
	Related party sales			—			55.2			7.5			(8.1	)		54.6
	Receivables-net				61.7			353.9			729.3			(77.1	)		1,067.8
	Expense billed to subsidiaries			7.5			(7.2	)		(0.3	)		—			—
	Inventories				39.6			191.4			638.8			—			869.8
Total Revenues				107.0			768.6			101.5			(8.1	)		969.0
	Prepaid expenses				0.1			0.7			20.2			—			21.0
Cost of goods sold				91.7			741.2			91.8			(7.9	)		916.8
	Deferred income tax				—			—			3.0			—			3.0
Gross Profit				15.3			27.4			9.7			(0.2	)		52.2
	Other current assets				0.3			(0.2	)		88.1			—			88.2
Selling, general and administrative				8.4			34.4			(4.8	)		(0.2	)		37.8
		Total current assets			103.1			560.7			1,579.4			(77.1	)		2,166.1
Research and development				—			4.8			1.0			—			5.8
Property, plant and equipment, net					98.6			1,048.1			3,194.3			20.8			4,361.8
Other operating (income) expense				(1.4	)		(2.5	)		0.1			—			(3.8	)
Investment in unconsolidated affiliates					(736.4	)		318.6			180.4			399.6			162.2
Restructuring and plant closing costs				—			0.2			25.4			—			25.6
Intangible assets, net					2.2			9.2			254.9			(4.1	)		262.2
Operating income (loss)				8.3			(9.5	)		(12.0	)		0.0			(13.2	)
Goodwill					—			3.3			—			—			3.3
Interest income (expense), net				8.6			(47.4	)		(3.3	)		—			(42.1	)
Deferred income tax					0.7			13.8			—			(2.5	)		12.0
Equity in (losses) income of investment in unconsolidated affiliates and subsidiaries				(140.5	)		(90.3	)		1.0			159.0			(70.8	)
Other noncurrent assets					2,219.7			180.3			458.1			(2,229.4	)		628.7
Other (expense) income				(6.1	)		0.4			3.6			—			(2.1	)
		Total assets		$	1,687.9		$	2,134.0		$	5,667.1		$	(1,892.7	)	$	7,596.3
Loss before income taxes and minority interest				(129.7	)		(146.8	)		(10.7	)		159.0			(128.2	)
LIABILITIES AND MEMBER'S EQUITY
Income tax expense				(0.1	)		—			(1.5	)		—			(1.6	)
Current liabilities:
Loss before minority interest				(129.8	)		(146.8	)		(12.2	)		159.0			(129.8	)
	Trade accounts payable			$	53.2		$	219.3		$	637.5		$	(77.1	)	$	832.9
Minority interest in subsidiaries' loss				—			0.7			—			(0.7	)		—
	Accrued liabilities				62.7			86.6			448.0			—			597.3
Net (loss) income				(129.8	)		(146.1	)		(12.2	)		158.3			(129.8	)
	Deferred income tax				0.7			13.8			—			—			14.5
Other comprehensive (loss) income				(11.9	)		(14.0	)		2.3			11.7			(11.9	)
	Current portion of long-term debt				2.0			1.2			52.9			(14.4	)		41.7
Comprehensive (loss) income			$	(141.7	)	$	(160.1	)	$	(9.9	)	$	170.0		$	(141.7	)
		Total current liabilities			118.6			320.9			1,138.4			(91.5	)		1,486.4
Long-term debt					1,737.0			2,219.3			3,891.5			(2,214.8	)		5,633.0
Other noncurrent liabilities					77.9			146.8			205.1			—			429.8
Deferred income taxes					—			—			237.5			(2.5	)		235.0
		Total liabilities			1,933.5			2,687.0			5,472.5			(2,308.8	)		7,784.2
Minority interest in consolidated subsidiaries					—			59.0			6.1			(7.3	)		57.8
Member's equity (deficit:)
	Member's equity				1,095.2			56.4			565.5			(621.9	)		1,095.2
	Subsidiary preferred stock				—			72.0			—			(72.0	)		—
	Subsidiary common stock				—			214.4			116.5			(330.9	)		—
	Accumulated deficit				(1,367.1	)		(983.0	)		(547.3	)		1,530.1			(1,367.3	)
	Accumulated other comprehensive loss				26.3			28.2			53.8			(81.9	)		26.4
		Total member's (deficit) equity			(245.6	)		(612.0	)		188.5			423.4			(245.7	)
		Total liabilities and member's equity		$	1,687.9		$	2,134.0		$	5,667.1		$	(1,892.7	)	$	7,596.3

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING ~~BALANCE~~STATEMENTS ~~SHEETS~~OF ASOPERATIONS OFAND ~~DECEMBER~~COMPREHENSIVE 31INCOME (LOSS) SIX MONTHS ENDED JUNE 30, ~~2003~~2005 (Unaudited) (Dollars in Millions)

			Parent Company	~~Parent Company~~		Guarantors	~~Guarantors~~		Non-guarantors	~~Non- guarantors~~		Eliminations	~~Eliminations~~		Consolidated Huntsman LLC	~~Consolidated Huntsman LLC~~
ASSETS
Revenues:
Current assets:
	Trade sales		$	243.5		$	1,785.9		$	194.5		$	—		$	2,223.9
	Cash and cash equivalents			$	1.7		$	10.0		$	116.1		$	—		$	127.8
	Related party sales			—			150.2			38.6			(39.5	)		149.3
	Receivables-net				125.3			553.5			580.4			(334.1	)		925.1
	Expense billed to subsidiaries			19.6			(18.7	)		(0.9	)		—			—
	Inventories				36.5			203.1			653.3			—			892.9
Total Revenues				263.1			1,917.4			232.2			(39.5	)		2,373.2
	Prepaid expenses				1.5			23.3			23.8			(8.3	)		40.3
Cost of goods sold				213.7			1,702.1			221.2			(39.1	)		2,097.9
	Deferred income tax				—			—			3.0			—			3.0
Gross Profit				49.4			215.3			11.0			(0.4	)		275.3
	Other current assets				—			0.2			86.8			—			87.0
Selling, general and administrative				28.9			44.5			12.0			(0.4	)		85.0
		Total current assets			165.0			790.1			1,463.4			(342.4	)		2,076.1
Research and development				0.1			9.3			1.2			—			10.6
Property, plant and equipment, net					104.6			1,064.6			3,381.0			21.9			4,572.1
Other operating expense (income)				0.4			(3.0	)		0.4			—			(2.2	)
Investment in unconsolidated affiliates					(523.3	)		457.8			176.3			47.2			158.0
Restructuring and plant closing (credits) costs				(0.2	)		4.4			0.1			—			4.3
Intangible assets, net					2.4			10.5			273.1			(4.1	)		281.9
Operating income (loss)				20.2			160.1			(2.7	)		—			177.6
Goodwill					—			3.3			—			—			3.3
Interest income (expense), net				21.3			(91.9	)		(7.8	)		—			(78.4	)
Deferred income tax					0.7			13.8			—			(2.5	)		12.0
Equity in income of investment in unconsolidated affiliates and subsidiaries				126.4			75.7			5.1			(137.3	)		69.9
Other noncurrent assets					2,164.3			121.1			467.8			(2,141.7	)		611.5
Other expense				(38.4	)		—			(1.7	)		—			(40.1	)
	Total assets			$	1,913.7		$	2,461.2		$	5,761.6		$	(2,421.6	)	$	7,714.9
Income (loss) before income taxes and minority interest				129.5			143.9			(7.1	)		(137.3	)		129.0
LIABILITIES AND MEMBER'S EQUITY
Income tax (expense) benefit				(0.5	)		—			0.5			—			—
Current liabilities:
Income (loss) before minority interest				129.0			143.9			(6.6	)		(137.3	)		129.0
	Trade accounts payable			$	22.5		$	179.9		$	522.8		$	1.7		$	726.9
Minority interest in subsidiaries' income				—			(26.1	)		—			26.1			—
	Accounts payable-affiliates				153.5			165.1			42.4			(335.8	)		25.2
Net income (loss)				129.0			117.8			(6.6	)		(111.2	)		129.0
	Accrued liabilities				81.8			105.7			406.6			(8.4	)		585.7
Other comprehensive loss				(68.7	)		(68.7	)		(3.6	)		72.3			(68.7	)
	Deferred income tax				0.7			13.8			—			—			14.5
Comprehensive income (loss)			$	60.3		$	49.1		$	(10.2	)	$	(38.9	)	$	60.3
	Current portion of long-term debt				1.3			37.7			95.0			—			134.0
		Total current liabilities			259.8			502.2			1,066.8			(342.5	)		1,486.3
Long-term debt					1,622.9			2,157.0			3,812.7			(2,139.0	)		5,453.6
Other noncurrent liabilities					81.5			147.9			229.4			(2.6	)		456.2
Deferred income taxes					—			—			237.3			(2.5	)		234.8
		Total liabilities			1,964.2			2,807.1			5,346.2			(2,486.6	)		7,630.9
Minority interest in consolidated subsidiaries					—			60.9			3.6			70.0			134.5
Member's equity (deficit:)
	Member's equity				1,095.2			—			565.5			(565.5	)		1,095.2
	Subsidiary preferred stock				—			72.0			—			(72.0	)		—
	Subsidiary common stock				—			270.8			116.3			(387.1	)		—
	Accumulated deficit				(1,182.5	)		(790.9	)		(338.1	)		1,129.0			(1,182.5	)
	Accumulated other comprehensive loss				36.8			41.3			68.1			(109.4	)		36.8
		Total member's (deficit) equity			(50.5	)		(406.8	)		411.8			(5.0	)		(50.5	)
		Total liabilities and member's equity		$	1,913.7		$	2,461.2		$	5,761.6		$	(2,421.6	)	$	7,714.9

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS ~~FOR~~) SIX ~~THE THREE~~ MONTHS ENDED JUNE 30, 2004 (~~UNAUDITED~~Unaudited) (Dollars in Millions)

		Parent Company			Guarantors			Non-~~Guarantors~~guarantors			Eliminations			Consolidated Huntsman LLC
REVENUES:
Revenues:
	Trade sales	$	99187.56		$	~~720~~1,425.70		$	~~1,650~~187.69		$	—		$	21,~~470~~800.85
	Related party sales		—			55109.29			~~74.~~8.4			(~~112~~10.81	)		17108.2
	Expenses billed to subsidiaries		7.1			(1.4	)		(5.7	)		—			—
	Expense billed to subsidiaries		14.2			(13.6	)		(0.6	)		—			—
	Total revenues		106.6			774.5			1,719.7			(112.8	)		2,488.0
Total Revenues			201.8			1,521.3			195.7			(10.1	)		1,908.7
Cost of goods sold			91171.68			~~741~~1,447.20			~~1,484~~178.25			(~~109~~9.18	)		21,~~207~~787.95
Gross profit			15.0			33.3			235.5			(3.7	)		280.1
Gross Profit			30.0			74.3			17.2			(0.3	)		121.2
EXPENSES:
Selling, general and administrative			17.1			54.9			0.9			(0.4	)		72.5
Selling, general and administrative			8.0			29.4			93.4			(3.2	)		127.6
Research and development			—			9.4			2.0			—			11.4
Research and development			—			4.8			9.8			—			14.6
Other operating (expense) income			(1.5	)		(4.3	)		0.6			—			(5.2	)
Other operating income (expense)			(1.4	)		(2.5	)		24.9			—			21.0
Restructuring and plant closing costs			—			0.2			25.4			—			25.6
Restructuring and plant closing costs			—			0.2			150.3			—			150.5
Operating income (loss)			14.4			14.1			(11.7	)		0.1			16.9
	Total expenses		6.6			31.9			278.4			(3.2	)		313.7
Interest income (expense), net			8.0			(90.2	)		(6.7	)		—			(88.9	)
Operating income (loss)			8.4			1.4			(42.9	)		(0.5	)		(33.6	)
Equity in (loss) income of investment in unconsolidated affiliates and subsidiaries			(201.4	)		(128.7	)		1.7			218.5			(109.9	)
Interest income (expense), net			8.6			(47.4	)		(94.5	)		—			(133.3	)
Other (expense) income			(7.9	)		0.4			3.8			—			(3.7	)
Loss on accounts receivable securitization program			—			—			(3.0	)		—			(3.0	)
Loss before income taxes and minority interest			(186.9	)		(204.4	)		(12.9	)		218.6			(185.6	)
Equity in (losses) income of investment in unconsolidated affiliates and subsidiaries			(140.6	)		(90.3	)		1.0			230.9			1.0
Income tax benefit (expense)			2.1			—			(1.3	)		—			0.8
Other (expense) income			(6.0	)		0.4			3.5			—			(2.1	)
Loss before minority interest			(184.8	)		(204.4	)		(14.2	)		218.6			(184.8	)
Loss before income taxes and minority interest			(129.6	)		(135.9	)		(135.9	)		230.4			(171.0	)
Minority interest in subsidiaries' loss			—			1.5			—			(1.5	)		—
Income tax expense			(0.2	)		—			(6.2	)		—			(6.4	)
Net (loss) income			(184.8	)		(202.9	)		(14.2	)		217.1			(184.8	)
Loss before minority interest			(129.8	)		(135.9	)		(142.1	)		230.4			(177.4	)
Other comprehensive (loss) income			(10.5	)		(13.1	)		1.4			11.7			(10.5	)
Minority interest in subsidiaries' loss			—			0.7			—			46.8			47.5
Comprehensive (loss) income		$	(195.3	)	$	(216.0	)	$	(12.8	)	$	228.8		$	(195.3	)
Net (loss) income			(129.8	)		(135.2	)		(142.1	)		277.2			(129.9	)
Other comprehensive loss			(11.8	)		(14.0	)		(13.2	)		27.2			(11.8	)
Comprehensive loss		$	(141.6	)	$	(149.2	)	$	(157.3	)	$	306.4		$	(141.7	)

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF ~~OPERATIONS~~CASH ~~AND~~FLOWS SIX ~~COMPREHENSIVE INCOME (LOSS) FOR THE THREE~~ MONTHS ENDED JUNE 30, ~~2003~~2005 (~~UNAUDITED~~Unaudited) (Dollars in Millions)

			~~Parent Company~~	Parent Company		~~Guarantors~~	Guarantors		~~Non- Guarantors~~	Non- Guarantors		~~Eliminations~~	Eliminations		~~Consolidated Huntsman LLC~~	Consolidated Huntsman LLC
REVENUES:
Operating activities:
	Trade sales		$	70.3		$	534.1		$	939.4		$	10.5		$	1,554.3
Net income (loss)				$	129.0		$	117.8		$	(6.6	)	$	(111.2	)	$	129.0
	Related party sales			—			74.1			26.3			(77.6	)		22.8
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Expenses billed to subsidiaries			22.5			(13.2	)		5.5			(14.8	)		—
	Equity in income of investment in unconsolidated affiliates				(126.4	)		(75.7	)		(5.1	)		137.3			(69.9	)
Total revenues				92.8			595.0			971.2			(81.9	)		1,577.1
	Minority interest in subsidiaries				—			26.1			—			(26.1	)		—
Cost of goods sold				72.4			574.4			844.5			(81.3	)		1,410.0
	Depreciation and amortization				7.0			48.0			8.0			—			63.0
Gross profit				20.4			20.6			126.7			(0.6	)		167.1
	Provision for losses on accounts receivable				—			1.4			—			—			1.4
EXPENSES:
	Loss on disposal of assets				0.1			0.9			—			—			1.0
Selling, general and administrative				(19.0	)		35.2			74.7			14.6			105.5
	Loss on early extingishment of debt				38.6			—			—			—			38.6
Research and development				—			5.0			8.6			—			13.6
	Noncash interest (income) expense				(89.7	)		88.5			5.6			—			4.4
Other operating income				(1.6	)		(4.6	)		(9.9	)		—			(16.1	)
	Loss (gain) on currency revaluation				—			1.4			(0.6	)		—			0.8
Restructuring and plant closing costs				—			0.9			21.5			—			22.4
	Changes in operating assets and liabilities:
Operating income (loss)				41.0			(15.9	)		31.8			(15.2	)		41.7
		Accounts and notes receivables			(222.4	)		(153.5	)		(7.0	)		423.6			40.7
Interest expense, net				(0.6	)		(36.3	)		(66.8	)		—			(103.7	)
		Inventories			(3.4	)		(21.0	)		5.2			—			(19.2	)
Loss on accounts receivable securitization program				—			—			(8.5	)		—			(8.5	)
		Prepaid expenses			1.3			26.4			0.6			(8.1	)		20.2
Equity in income (losses) of investment in unconsolidated affiliates and subsidiaries				(88.5	)		(29.3	)		0.4			113.4			(4.0	)
		Other current assets			—			—			(0.6	)		—			(0.6	)
Other income (expense)				—			—			—			—			—
		Other noncurrent assets			(0.5	)		1.9			1.8			—			3.2
Loss before income taxes and minority interest				(48.1	)		(81.5	)		(43.1	)		98.2			(74.5	)
		Accounts payable			286.0			120.5			(5.0	)		(424.9	)		(23.4	)
Income tax benefit				—			—			6.3			—			6.3
		Accrued liabilities			(15.8	)		(27.0	)		0.7			9.4			(32.7	)
Loss before minority interest				(48.1	)		(81.5	)		(36.8	)		98.2			(68.2	)
		Other noncurrent liabilities			7.6			(5.1	)		(0.2	)		—			2.3
Minority interest in subsidiaries' loss				—			0.4			—			15.4			15.8
Net cash provided by (used in) operating activities					11.4			150.6			(3.2	)		—			158.8
Net loss				(48.1	)		(81.1	)		(36.8	)		113.6			(52.4	)
Investing activities:
Other comprehensive income (loss)				51.8			47.3			(64.6	)		17.3			51.8
Capital expenditures					(9.9	)		(19.6	)		(5.0	)		—			(34.5	)
Comprehensive income (loss)			$	3.7		$	(33.8	)	$	(101.4	)	$	130.9		$	(0.6	)
Net cash received from unconsolidated affiliates					—			—			1.7			—			1.7
Change in restricted cash					(0.4	)		(4.2	)		—			—			(4.6	)
Net cash used in investing activities					(10.3	)		(23.8	)		(3.3	)		—			(37.4	)
Financing activities:
Net (repayment) borrowings under revolving loan facilities					(62.1	)		—			9.1			—			(53.0	)
Repayment of long-term debt					(365.0	)		(0.6	)		(0.9	)		—			(366.5	)
Net borrowings (repayments) of debt to affiliate					127.4			(129.0	)		1.6			—			—
Cost of early extinguishment of debt					(31.7	)		—			—			—			(31.7	)
Debt issuance costs paid					(0.2	)		—			—			—			(0.2	)
Capital contribution from parent					333.2			—			—			—			333.2
Net cash provided by (used in) financing activities					1.6			(129.6	)		9.8			—			(118.2	)
Effect of exchange rate changes on cash					(0.4	)		—			(0.3	)		—			(0.7	)
Increase (decrease) in cash and cash equivalents					2.3			(2.8	)		3.0			—			2.5
Cash and cash equivalents at beginning of period					(0.1	)		3.5			8.3			—			11.7
Cash and cash equivalents at end of period				$	2.2		$	0.7		$	11.3			—		$	14.2

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF ~~OPERATIONS~~CASH ~~AND COMPREHENSIVE LOSS FOR THE~~ FLOWS SIX MONTHS ENDED JUNE 30, 2004 (~~UNAUDITED~~Unaudited) (Dollars in Millions)

			~~Parent Company~~	Parent Company		~~Guarantor~~	Guarantors		~~Non- Guarantors~~	Non- Guarantors		~~Eliminations~~	Eliminations		~~Consolidated Huntsman LLC~~	Consolidated Huntsman LLC
REVENUES:
Operating activities:
	Trade sales		$	187.6		$	1,425.0		$	3,205.8		$	—		$	4,818.4
Net (loss) income				$	(184.8	)	$	(202.9	)	$	(14.2	)	$	217.1		$	(184.8	)
	Related party sales			—			109.9			112.3			(197.9	)		24.3
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
	Expenses billed to subsidiaries			14.2			(13.6	)		(0.6	)		—			—
	Equity in losses (income) of investment in unconsolidated affiliates				201.4			128.7			(1.7	)		(218.5	)		109.9
Total revenues				201.8			1,521.3			3,317.5			(197.9	)		4,842.7
	Minority interest in subsidiaries				—			(1.5	)		—			1.5			—
Cost of goods sold				171.8			1,447.0			2,920.8			(190.5	)		4,349.1
	Depreciation and amortization				7.6			48.7			10.3			—			66.6
Gross profit				30.0			74.3			396.7			(7.4	)		493.6
	(Recovery of) provision for losses on accounts receivable				(0.3	)		(0.9	)		0.5			—			(0.7	)
EXPENSES:
	Loss on disposal of assets				—			0.5			0.2			—			0.7
Selling, general and administrative				17.1			54.9			186.7			(6.4	)		252.3
	Loss (gain) on early extingishment of debt				6.1			1.7			(3.6	)		—			4.2
Research and development				—			9.4			23.0			—			32.4
	Noncash interest expense				2.7			0.8			—			—			3.5
Other operating income (expense)				(1.5	)		(4.3	)		20.2			—			14.4
	Noncash interest expense on affilate debt				—			—			0.3			—			0.3
Restructuring and plant closing costs				—			0.2			159.0			—			159.2
	Noncash restructuring and plant closing costs				—			—			21.5			—			21.5
	Total Expenses			15.6			60.2			388.9			(6.4	)		458.3
	Deferred income taxes				—			—			(0.9	)		—			(0.9	)
Operating income (loss)				14.4			14.1			7.8			(1.0	)		35.3
	Net changes in operating assets and liabilities:
Interest income (expense), net				8.0			(90.2	)		(195.3	)		—			(277.5	)
		Accounts and notes receivables			63.9			200.5			(54.9	)		(267.6	)		(58.1	)
Gain on accounts receivable securitization program				—			—			(6.5	)		—			(6.5	)
		Inventories			(3.1	)		11.6			3.8			—			12.3
Equity in (losses) income of investment in unconsolidated affiliates and subsidiaries				(201.3	)		(128.7	)		1.7			330.0			1.7
		Prepaid expenses			2.9			22.6			0.1			—			25.6
Other (expense) income				(7.9	)		0.4			3.6			—			(3.9	)
		Other current assets			(0.2	)		0.4			(1.8	)		—			(1.6	)
Loss before income taxes and minority interest				(186.8	)		(204.4	)		(188.7	)		329.0			(250.9	)
		Other noncurrent assets			—			(25.4	)		0.2			(0.1	)		(25.3	)
Income tax benefit (expense)				2.1			—			(9.6	)		—			(7.5	)
		Accounts payable			(122.9	)		(125.7	)		33.1			267.6			52.1
Loss before minority interest				(184.7	)		(204.4	)		(198.3	)		329.0			(258.4	)
		Accrued liabilities			(19.3	)		(19.2	)		14.7			—			(23.8	)
Minority interest in subsidiaries' loss				—			1.5			72.1			—			73.6
		Other noncurrent liabilities			(0.6	)		8.6			(10.1	)		—			(2.1	)
Net loss				(184.7	)		(202.9	)		(126.2	)		329.0			(184.8	)
Net cash (used in) provided by operating activities					(46.6	)		48.5			(2.5	)		—			(0.6	)
Other comprehensive (loss) income				(10.5	)		(13.1	)		(12.3	)		25.5			(10.4	)
Investing activities:
Comprehensive (loss) income			$	(195.2	)	$	(216.0	)	$	(138.5	)	$	354.5		$	(195.2	)
Capital expenditures					(1.5	)		(26.7	)		(1.3	)		—			(29.5	)
Change in restricted cash					0.3			(3.3	)		—			—			(3.0	)
Net cash used in investing activities					(1.2	)		(30.0	)		(1.3	)		—			(32.5	)
Financing activities:
Net borrowings on revolving loan facilities					74.3			—			—			—			74.3
Repayment of long-term debt					(362.9	)		(37.0	)		(30.4	)		—			(430.3	)
Issuance of senior unsecured notes					400.0			—			—			—			400.0
Net (repayments) borrowings from affiliate					(50.4	)		23.2			27.3			—			0.1
Debt issuance costs paid					(12.1	)		—			—			—			(12.1	)
Net cash provided by (used in) financing activities					48.9			(13.8	)		(3.1	)		—			32.0
Effect of exchange rate changes on cash					(1.2	)		(3.1	)		3.5			—			(0.8	)
(Decrease) increase in cash and cash equivalents					(0.1	)		1.6			(3.4	)		—			(1.9	)
Cash and cash equivalents at beginning of period					0.9			0.4			18.2			—			19.5
Cash and cash equivalents at end of period				$	0.8		$	2.0		$	14.8		$	—		$	17.6

HUNTSMAN LLC AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) (Dollars in Millions)

		Parent company			Guarantors			Non- guarantors			Eliminations			Consolidated Huntsman LLC
REVENUES:
	Trade sales and services	$	158.3		$	1,161.9		$	1,025.0		$	(10.9	)	$	2,334.3
	Related party sales		—			133.9			34.7			(94.0	)		74.6
	Expenses billed to subsidiaries		28.0			(26.6	)		(1.4	)		—			—
Total revenues			186.3			1,269.2			1,058.3			(104.9	)		2,408.9
Cost of goods sold			142.3			1,234.3			928.6			(104.0	)		2,201.2
Gross profit			44.0			34.9			129.7			(0.9	)		207.7
EXPENSES:
Selling, general and administrative			20.5			45.7			78.3			(0.4	)		144.1
Research and development			—			10.1			9.2			—			19.3
Other operating income			(2.5	)		(8.4	)		(9.1	)		—			(20.0	)
Restructuring and plant closing costs			—			0.9			21.5			—			22.4
	Total Expenses:		18.0			48.3			99.9			(0.4	)		165.8
Operating income (loss)			26.0			(13.4	)		29.8			(0.5	)		41.9
Interest income (expense), net			2.3			(71.2	)		(69.3	)		—			(138.2	)
Loss on sale of accounts receivable			—			—			(8.5	)		—			(8.5	)
Equity in (losses) income of investment in unconsolidated affiliates			(167.7	)		(63.2	)		0.9			191.9			(38.1	)
Other income (expense)			0.1			0.4			(0.8	)		—			(0.3	)
Loss before income taxes and minority interest			(139.3	)		(147.4	)		(47.9	)		191.4			(143.2	)
Income tax benefit			—			—			6.3			—			6.3
Loss before minority interest			(139.3	)		(147.4	)		(41.6	)		191.4			(136.9	)
Minority interest in subsidiaries' loss			—			—			—			15.8			15.8
Net loss			(139.3	)		(147.4	)		(41.6	)		207.2			(121.1	)
Other comprehensive income (loss)			59.2			53.5			(61.9	)		8.4			59.2
Comprehensive loss		$	(80.1	)	$	(93.9	)	$	(103.5	)	$	215.6		$	(61.9	)

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED) (Dollars in Millions)

	Parent Company			Guarantors			Non- Guarantors			Eliminations		Consolidated Huntsman LLC
Net cash (used in) provided by operating activities	$	(58.0	)	$	48.6		$	49.0		$	—	$	39.6
Investing activities:
Capital expenditures		(1.5	)		(26.7	)		(61.7	)		—		(89.9	)
Investment in unconsolidated affiliate		—			—			(11.8	)		—		(11.8	)
Net borrowings (repayments) of intercompany debt		(50.4	)		23.2			34.4			—		7.2
Net cash used in investing activities		(51.9	)		(3.5	)		(39.1	)		—		(94.5	)
Financing activities:
Net borrowings under revolving loan facilities		74.3			—			15.0			—		89.3
Net borrowings on overdraft		—			—			(7.5	)		—		(7.5	)
Capital contribution by minority shareholder		—			—			2.7			—		2.7
Issuance of senior unsecured notes		400.0			—			—			—		400.0
Repayment of long-term debt		(351.6	)		(37.0	)		—			—		(388.6	)
Debt issuance costs		(12.1	)		—			—			—		(12.1	)
Net cash provided by (used in) financing activities		110.6			(37.0	)		10.2			—		83.8
Effect of exchange rate changes on cash		(1.2	)		(3.1	)		(36.1	)				(40.4	)
Increase (decrease) in cash and cash equivalents		(0.5	)		5.0			(16.0	)		—		(11.5	)
Cash and cash equivalents at beginning of period		1.8			10.0			116.0			—		127.8
Cash and cash equivalents at end of period	$	1.3		$	15.0		$	100.0		$	—	$	116.3

HUNTSMAN LLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) (Dollars in Millions)

	Parent company			Guarantors			Non guarantors			Eliminations			Consolidated Huntsman LLC
Net cash provided by (used in) operating activities	$	(71.9	)	$	14.3		$	47.4		$	(0.4	)	$	(10.6	)
Investing activities:
Capital expenditures for plant and equipment		(7.0	)		(25.1	)		(26.8	)		—			(58.9	)
Net cash received from unconsolidated affiliates		—			—			0.3			—			0.3
Advances to unconsolidated affiliates		—			—			(0.8	)		—			(0.8	)
Notes receivable		(24.1	)		—			—			24.1			—
Net cash used in investing activities		(31.1	)		(25.1	)		(27.3	)		24.1			(59.4	)
Financing activities:
Net borrowings on revolving loan facilities		112.3			—			4.0			—			116.3
Repayment of long-term debt		(0.7	)		(0.6	)		(20.6	)		—			(21.9	)
Capital contribution by minority shareholder		—			—			1.8			—			1.8
Net borrowings from parent		—			12.1			12.0			(24.1	)		—
Debt issuance costs		(12.8	)		—			—			—			(12.8	)
Net cash provided by (used in) financing activities		98.8			11.5			(2.8	)		(24.1	)		83.4
Effect of exchange rate changes on cash		—			—			11.4			0.4			11.8
Increase (decrease) in cash and cash equivalents		(4.2	)		0.7			28.7			—			25.2
Cash and cash equivalents, including restricted cash at beginning of period		6.3			10.1			15.0			—			31.4
Cash and cash equivalents of HIH at May 1, 2003 (date of consolidation)		—			—			62.2			—			62.2
Cash and cash equivalents at end of period	$	2.1		$	10.8		$	105.9		$	—		$	118.8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

Some of the statements contained in this report are forward-looking in nature. In some cases, you can identify forward-looking statements by terminology such as "believes," "expects," "may," "will," "should," "anticipates" or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. You are cautioned that our business and operations are subject to a variety of risks and uncertainties, and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Some of the risks and uncertainties are discussed below in "—Cautionary Statement for Forward-Looking Information" and elsewhere in this report.

Certain Defined Terms

For convenience in this report, the terms "~~HLLC," "~~Company," "our," "us" or "we" may be used to refer to Huntsman LLC and, unless the context otherwise requires, ~~its~~ its subsidiaries. In this report, ~~the term~~ "~~Huntsman Polymers~~HI" refers to Huntsman ~~Polymers~~International ~~Corporation and~~LLC, ~~unless~~"HIH" ~~the~~refers ~~context~~to ~~otherwise~~Huntsman ~~requires,~~International ~~its~~Holdings ~~subsidiaries~~LLC, ~~the term~~ "Huntsman Specialty" refers to Huntsman Specialty Chemicals Corporation, ~~the term~~ "HIHMP" refers to ~~Huntsman~~HMP ~~International~~Equity ~~LLC~~Holdings ~~and~~Corporation, ~~unless~~"Huntsman ~~the context otherwise requires, its subsidiaries, the term~~ Holdings"~~HIH"~~ refers to Huntsman ~~International~~ Holdings, LLC ~~and~~, ~~unless the context otherwise requires, its subsidiaries, the term~~ "~~HMP"~~Huntsman ~~refers to HMP Equity Holdings~~ Corporation~~, the term~~ "~~HGI"~~ refers to Huntsman ~~Group Inc., the~~Corporation ~~term~~and ~~"Huntsman~~its ~~Holdings"~~predecessors, ~~refers~~and, tounless ~~Huntsman~~the context ~~Holdings,~~otherwise ~~LLC~~requires, ~~the~~their ~~term~~subsidiaries, "AdMat" refers to Huntsman Advanced Materials LLC and, unless the context otherwise requires, its subsidiaries, ~~the~~and ~~term~~ "MatlinPatterson" refers to MatlinPatterson Global Opportunities Partners, L.P. and its affiliates~~, the term "Consolidated Press" refers to Consolidated Press Holdings Limited and its subsidiaries and the term "ICI" refers to Imperial Chemical Industries PLC and its subsidiaries~~. The term "restricted group" refers to Huntsman LLC and its restricted subsidiaries under the indentures governing Huntsman LLC's outstanding notes and under its senior secured credit facilities (the "HLLC Credit Facilities"). The restricted group does not include HIH, HI or their subsidiaries.

In the "Supplemental Discussion of Results of Operations for the Restricted Group for the Three and Six Months Ended June 30, 2004" below and in certain other places in this report that deal with our restricted group, the terms "we," "our," "us," "HLLC" and "Huntsman LLC" refer to Huntsman LLC and its restricted subsidiaries (and not its unrestricted subsidiaries).

Explanatory Note

In order to present data that is useful for comparative purposes, the information set forth below under the heading "Results of Operations (Pro Forma)" has been prepared as if HIH was a consolidated subsidiary as of January 1, 2003. HIH became a consolidated subsidiary as of May 1, 2003. To complete the pro forma information, we have consolidated the operations and elimination entries of related parties for HIH for the three and six months ended June 30, 2003. We believe the use of pro forma results for the periods covered in this report provides a more meaningful comparison of our results between the applicable periods. These results do not necessarily reflect the results that would have been obtained if we had consolidated on the date indicated or that may be expected in the future.

This Management's Discussion and Analysis of Financial Condition and Results of Operations is followed by a supplemental discussion captioned "Supplemental Discussion of Results of Operations for the Restricted Group for the Three and Six Months Ended June 30, 2004" that provides information with respect to our restricted group, excluding HIH.

Overview

We are a global manufacturer and marketer of differentiated and commodity ~~chemicals~~chemical products. WeOur ~~produce~~products are used in a wide range of ~~products for a variety of global industries~~applications, including those in the ~~chemical~~adhesives, ~~plastics,~~ automotive, ~~aviation,~~construction ~~footwear~~products, ~~paints~~durable and ~~coatings,~~non-durable ~~construction,~~consumer ~~technology~~products, ~~agriculture~~medical, ~~healthcare~~packaging, ~~consumer~~paints ~~products,~~and ~~textile~~coatings, ~~furniture~~power generation, ~~appliance~~refining and ~~packaging~~synthetic fiber industries. We operate at facilities located in North America, Europe, ~~Asia,~~and Australia,. ~~South~~Our ~~America~~business ~~and~~is ~~Africa.~~organized Wearound ~~report~~ our ~~operations~~three ~~through~~operating ~~five~~ segments: ~~Polyurethanes,~~ Performance Products, Polymers, ~~Pigments~~ and Base Chemicals. The major products of each ~~reportable~~ operating segment are as follows:

Segment		Products
Polyurethanes		MDI, TDI, TPU, polyols, aniline, PO and MTBE
Performance Products		Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals, glycols and technology licenses
Performance Products		Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals and glycols
Polymers		Ethylene (produced at our Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymers
Pigments		Titanium dioxide ("TiO2")
Base Chemicals		Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, paraxylene and cyclohexane

Our products are divided into two broad categories—differentiated and commodity chemicals. Our ~~Polyurethanes and~~ Performance Products ~~businesses~~segment ~~mainly~~produces ~~produce~~ differentiated products, and our Polymers~~, Pigments~~ and Base Chemicals ~~businesses~~segments ~~mainly~~ produce commodity chemicals. Among our commodity products, ~~our~~certain ~~Pigments business, while cyclical, tends to follow different trends and is not influenced by the same factors as our petrochemical-based commodity~~ products. ~~In addition, there are a limited number of significant competitors~~ in our ~~Pigments business, relatively high barriers to entry and strong customer loyalty. Certain products in our~~ Polymers segment ~~also~~ follow different trends than petrochemical commodities as a result of our niche marketing strategy for such products that focuses on supplying customized formulations. Nevertheless, ~~each of our five operating segments is impacted to some degree by economic conditions, prices of raw materials and global supply and demand pressures.~~

Historically, the demand for many of our Polyurethanes products has been relatively resistant to changes in global economic conditions as industry growth in product demand has been strongly influenced by continuing product substitution, innovation and new product development. The stability of demand has also benefited from the wide variety of end markets for our Polyurethanes products. Historically, sales volumes of MDI, a Polyurethanes segment product, have grown at rates in excess of global GDP growth and margins for MDI have been relatively stable. The global market for PO, also a Polyurethanes product, is influenced by supply and demand imbalances. PO demand is largely driven by growth in the polyurethane industry, and, as a result, growth rates for PO have generally exceeded GDP growth rates. As a co-product of our PO manufacturing process, we also produce MTBE. MTBE is an oxygenate that is blended with gasoline to reduce harmful vehicle emissions and to enhance the octane rating of gasoline. See "—Liquidity and Capital Resources—Environmental Matters—MTBE Developments" below for more information on the legal and regulatory developments that may curtail or eliminate the use of MTBE in gasoline in the future. 39

Ineach ~~comparison to our commodity businesses, the demand for many~~ of ~~the products we produce in~~ our ~~Performance~~three ~~Products~~operating ~~segment~~segments ~~historically~~is ~~has~~impacted ~~also been relatively resistant~~ to ~~changes in~~some ~~global~~degree by economic conditions~~. Like our Polyurethanes segment~~, ~~Performance~~prices ~~Products~~of ~~growth~~raw inmaterials ~~general~~and isglobal ~~strongly~~supply ~~influenced by product substitution, innovation~~ and ~~new product development. Also,~~ demand ~~stability benefits from a broad range of end markets~~pressures. ~~A significant portion of our Performance Products is sold into consumer end use applications including household detergents, personal care products and~~

In our Performance Products segment, demand for our performance specialties has generally continued to grow at rates in excess of gross domestic product ("GDP") growth rates as overall demand is significantly influenced by new product and application development. Overall demand for most of our performance intermediates has generally been stable. On average, maleic anhydride demand grows at a slightly higher rate than GDP; however, given its dependence on the construction market, maleic anhydride growth rates can be cyclical.

The profitability of our Polymers and Base Chemicals segments has historically been cyclical in nature. The industry has recently operated in a down cycle that resulted from significant new capacity additions, weak demand reflecting soft global economic conditions and high crude oil and natural gas-based raw material costs. Despite continued high feedstock costs, the profitability of our Base Chemicals segment has improved in 2005 as demand has strengthened and average selling prices and profit margins have increased in most of our product lines.

Recent Developments

Proposed Merger into Huntsman International LLC and Proposed New Credit Facility

The proposed merger of our Company with and into HI will help simplify the financing and reporting structure of Huntsman Corporation and is expected to facilitate other organizational efficiencies. We have recently completed the syndication of the proposed new secured credit facility for the merged company. The proposed secured credit facility is expected to be comprised of a $1.85 billion term loan due 2012 and a $650 million revolving loan facility due 2011. Initial interest rate margins under the proposed secured credit facility are contemplated to be at LIBOR plus 1.75%. Proceeds from the new credit facility will be used to repay outstanding borrowings under our existing senior secured credit facilities, HI's senior secured credit facilities and certain other debt. We expect to complete the merger and related financing in the third quarter of 2005. However, there can be no assurances that the new facility will be obtained. If the credit facility is not obtained, the proposed merger will not occur.

The following tables provide a summary of our structure before and after the proposed merger:

(1): Represents Huntsman Corporation's equity in Huntsman Advanced Materials LLC. The balance of the equity is owned by third parties, including affiliates of SISU Capital Limited.

Redemption of HLLC Senior Notes and Huntsman Specialty's Subordinate Note

On August 2, 2005, we issued a notice of redemption for our 9.5% fixed and variable subordinated notes due 2007 (the "HLLC Notes") with an outstanding principal balance of $59.3 million as of June 30, 2005 in accordance with the amended and restated indenture governing the HLLC Notes. Accordingly, at the time of the merger of the Company with and into HI, we will deliver funds to the trustee sufficient to redeem the HLCC Notes in full on September 1, 2005. We have also given notice that we intend to redeem the $106.6 million outstanding principal amount of Hunstman Specialty 's subordinated note, in full, at completion of the proposed merger of the Company with and into HI.

Results of Operations

The following sets forth the consolidated results of operations for the three and six months ended June 30, 2005 and 2004.

	Three months ended June 30,								Six months ended June 30,
	Three months ended June 30,						Percent change		Six months ended June 30,						Percent change
	2005			2004			Percent change		2005			2004			Percent change
Revenues	$	1,168.7		$	969.0		21	%	$	2,373.2		$	1,908.7		24	%
Cost of goods sold		1,054.8			916.8		15	%		2,097.9			1,787.5		17	%

Gross profit		113.9			52.2		118	%		275.3			121.2		127	%
Operating expenses		51.5			39.8		29	%		93.4			78.7		19	%
Restructuring and plant closing costs		0.9			25.6		(96	)%		4.3			25.6		(83	)%

Operating income (loss)		61.5			(13.2	)	NM			177.6			16.9		NM
Interest expense, net		(37.7	)		(42.1	)	(10	)%		(78.4	)		(88.9	)	(12	)%
Equity in income (losses) of unconsolidated affiliates		35.0			(70.8	)	NM			69.9			(109.9	)	NM
Other expense		(1.6	)		(2.1	)	(24	)%		(40.1	)		(3.7	)	NM

Income (loss) before income taxes		57.2			(128.2	)	NM			129.0			(185.6	)	NM
Income tax (expense) benefit		(0.8	)		(1.6	)	(50	)%		—			0.8		NM

Net income (loss)		56.4			(129.8	)	NM			129.0			(184.8	)	NM
Interest expense, net		37.7			42.1		(10	)%		78.4			88.9		(12	)%
Income tax expense (benefit)		0.8			1.6		(50	)%		—			(0.8	)	NM
Depreciation and amortization		32.0			34.0		(6	)%		63.0			66.6		(5	)%

EBITDA(1)	$	126.9		$	(52.1	)	NM		$	270.4		$	(30.1	)	NM

NM—Not meaningful.

Included in EBITDA are the following items of (expense) income:

		Three months ended June 30,						Six months ended June 30,
		2005			2004			2005			2004
Early extinguishment of debt		$	(0.3	)	$	(2.3	)	$	(38.6	)	$	(4.2	)
Restructuring and plant closing costs:
	Performance Products	$	(0.3	)	$	(20.5	)	$	(1.3	)	$	(20.5	)
	Polymers		(1.0	)		(5.1	)		(2.9	)		(5.1	)
	Base Chemicals		0.4			—			(0.1	)		—

	Total restructuring and plant closing costs		(0.9	)		(25.6	)		(4.3	)		(25.6	)

	Total items of (expense) income included in EBITDA	$	(1.2	)	$	(27.9	)	$	(42.9	)	$	(29.8	)

(1): EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization. We believe that EBITDA enhances an investor's understanding of our financial performance and our ability to satisfy principal and interest obligations with respect to our indebtedness. However, EBITDA should not be considered in isolation or viewed as a substitute

for net income, cash flows from operations or other measures of performance as defined by generally accepted accounting principles in the U.S. ("GAAP"). Moreover, EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the method of calculation. Our management uses EBITDA to assess financial performance and debt service capabilities. In assessing financial performance, our management reviews EBITDA as a general indicator of economic performance compared to prior periods. Because EBITDA excludes interest, income taxes, depreciation and amortization, EBITDA provides an indicator of general economic performance that is not affected by debt restructurings, fluctuations in interest rates or effective tax rates, or levels of depreciation and amortization. Accordingly, our management believes this type of measurement is useful for comparing general operating performance from period to period and making certain related management decisions. EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company's capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Our management also believes that our investors use EBITDA as a measure of our ability to service indebtedness as well as to fund capital expenditures and working capital requirements. Nevertheless, our management recognizes that there are material limitations associated with the use of EBITDA in the evaluation of our Company as compared to net income, which reflects overall financial performance, including the effects of interest, income taxes, depreciation and amortization. EBITDA excludes interest expense. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate revenue. Therefore, any measure that excludes interest expense has material limitations. EBITDA also excludes taxes. Because the payment of taxes is a necessary element of our operations, any measure that excludes tax expense has material limitations. Finally, EBITDA excludes depreciation and amortization expense. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue. Therefore, any measure that excludes depreciation and amortization expense has material limitations. Our management compensates for the limitations of using EBITDA by using it to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Our management also uses other metrics to evaluate capital structure, tax planning and capital investment decisions. For example, our management uses credit ratings and net debt ratios to evaluate capital structure, effective tax rate by jurisdiction to evaluate tax planning, and payback period and internal rate of return to evaluate capital investments. Our management also uses trade working capital to evaluate its investment in accounts receivable and inventory, net of accounts payable.

We believe that net income (loss) is the performance measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and that cash provided by (used in) operating activities is the liquidity measure calculated and presented in accordance with GAAP that

~~cosmetics.~~is Asmost ~~such,~~directly ~~historically,~~comparable ~~demand for these products has been relatively stable and tends~~ to ~~be less susceptible to changes in global economic conditions~~EBITDA. InThe ~~the~~following ~~past~~table ~~year,~~reconciles ~~weak~~EBITDA ~~economic conditions~~to inour ~~Europe,~~net ~~high~~loss ~~raw material~~ and ~~energy~~to ~~costs,~~our ~~significant~~cash ~~overcapacity~~provided inby ~~surfactants and the strength of the major European currencies versus the U.S. dollar~~ (~~which~~used ~~negatively impacts the competitiveness of European exports~~in), ~~has~~operations: ~~had a negative impact on the surfactants portion of our Performance Products segment.~~

Our Polymers business is comprised of two regionally-focused businesses, one in North America and one in Australia. In North America, we convert internally produced building block chemicals, such as ethylene and propylene, into polyethylene, polypropylene, expandable polystyrene and amorphous polyalphaolefins ("APAO"). We pursue a niche marketing strategy for certain of our Polymers products by focusing on those customers that require customized polymer formulations and that are willing to pay for customized formulations. Our Australian Polymers business produces styrene, most of which is used internally to produce polystyrene, expandable polystyrene and other associated materials. This business primarily serves the Australian and New Zealand markets.

	Six Months Ended June 30,
	Six Months Ended June 30,						Percent change
	2005			2004			Percent change
EBITDA	$	270.4		$	(30.1	)	NM
Depreciation and amortization		(63.0	)		(66.6	)	(5	)%
Interest expense, net		(78.4	)		(88.9	)	(12	)%
Income tax benefit		—			0.8		NM

Net income (loss)		129.0			(184.8	)	NM
Provision for (recovery of) losses on accounts receivable		1.4			(0.7	)	NM
Equity in (income) losses of investment in unconsolidated affiliates		(69.9	)		109.9		NM
Depreciation and amortization		63.0			66.6		(5	)%
Non-cash interest expense		4.4			3.5		26	%
Deferred income tax		—			(0.9	)	NM
Loss on early extinguishment of debt		38.6			4.2		NM
Other, net		1.8			22.5		(92	)%
Changes in operating assets and liabilities		(9.5	)		(20.9	)	(55	)%

Net cash provided by (used in) operating activites	$	158.8		$	(0.6	)	NM

~~Historically,~~NM—Not ~~growth~~meaningful in demand for TiO2 pigments has generally been linked with GDP growth rates and has trended somewhat below overall GDP growth rates as strong growth in the developing world economies has been tempered by modest growth in the developed world economies. Pigment prices have historically reflected industry-wide operating rates, but have typically lagged behind movements in these rates by up to twelve months due to the effects of product stocking and destocking by customers and suppliers, contract arrangements and cyclicality. The industry experiences some seasonality in its sales because sales of paints in Europe and North America, the largest end use for TiO2, are generally highest in the spring and summer months in those regions. This results in greater sales volumes in the first half of the year because the proportion of our TiO2 products sold in Europe and North America is greater than that sold in the southern hemisphere. Profitability in our Pigments segment has been negatively impacted by the strength of the major European currencies versus the U.S. dollar because with over 70% of our Pigments' production capacity located in Europe, approximately 60% of our production costs are denominated in European currencies, while only approximately 40-50% of our products are sold in European currencies.

~~Our Base~~Three ~~Chemicals~~months ~~business~~ended ~~produces olefins (such as ethylene and propylene)~~June 30, ~~butadiene,~~2005 ~~aromatics~~Compared (including benzene, cyclohexane and paraxylene) and MTBE. Our Base Chemicals products are largely made from a variety of crude oil and natural gas based feedstocks. Ethylene and propylene are the two most common petrochemical building blocks and are used in a wide variety of applications, including packaging film, polyester fiber, plastic containers and polyvinyl chloride, as well as carpets and cleaning compounds. Our aromatics products are used to ~~produce~~Three ~~other intermediate~~months ~~chemicals,~~ended ~~as well as in synthetic fibers~~June 30, resins and rubber. A substantial portion of our Base Chemicals product portfolio is integrated into the supply chain for our Performance Products segment where these building block materials are upgraded into higher value differentiated products and then sold to third parties. 2004

~~Many of~~For the ~~markets~~three ~~for~~months ~~Base~~ended ~~Chemicals products~~June 30, ~~particularly~~2005 ~~ethylene,~~we ~~propylene,~~had ~~paraxylene~~net ~~and~~income ~~cyclohexane,~~of ~~and~~$56.4 million ~~Polymers~~on ~~products,~~revenues ~~particularly~~of ~~polyethylene~~$1,168.7 million ~~polypropylene~~compared ~~and styrene, are cyclical and sensitive~~ to ~~changes~~a innet ~~the~~loss ~~balance between supply and demand, the price~~ of ~~raw materials, and the level of general economic activity~~ $129.8 million ~~Historically,~~on ~~these~~revenues ~~markets have experienced alternating periods~~ of ~~tight supply and rising prices and profit margins, followed by periods of capacity additions resulting in over-capacity and falling prices and profit margins~~$969.0 million ~~Demand~~ for the ~~majority~~three ofmonths ~~our~~ended ~~commodity~~June 30, ~~chemicals products has generally grown at rates that are approximately equal to or slightly greater than GDP growth~~2004. ~~Market~~The ~~conditions~~increase ~~during recent years generally have been characterized by a broad-based weakening in demand, overcapacity, volatile raw material costs and periods~~ of ~~reduced profit margins~~$186.2 million ~~We believe that weak economic conditions have resulted~~ in anet ~~contraction~~income inwas ~~production~~the ~~capacity.~~result Ifof ~~this contraction in industry capacity is sustained and if demand growth returns to~~ the ~~rates~~following ~~which~~items: ~~have been achieved historically, we believe that industry profitability will improve.~~

•: Revenues for the three months ended June 30, 2005 increased by $199.7 million, or 21%, as compared to the same period in 2004. The increase was largely attributable to higher average selling prices for products in all of our operating segments. For details regarding changes in selling prices and sales volumes, see the operating segment discussion below.
•: Gross profit for the three months ended June 30, 2005 increased by $61.7 million, or 118%, as compared to the same period in 2004, due principally to higher contribution margins for our Performance Products and Polymers segments. For details regarding changes in contribution margins by segment, see the operating segment discussion below.
•: Operating expenses for the three months ended June 30, 2005 increased by $11.7 million, or 29%, as compared to the same period in 2004, primarily as a result of higher audit, consulting and personnel costs associated with financial reporting. Higher long-term compensation costs and higher foreign currency translation losses also contributed to the increase.
•: During the three months ended June 30, 2005 and 2004, we recorded restructuring and plant closing costs of $0.9 million and $25.6 million, respectively. For further discussion of restructuring activities, see "—Liquidity and Capital Resources—Restructuring and Plant Closing Costs" below.

•: Interest expense, net for the three months ended June 30, 2005 decreased by $4.4 million, or 10%, as compared to the same period in 2004, primarily resulting from lower average debt balances during the 2005 period. Debt balances were lower in the 2005 period largely as a result of the repayment of debt obligations from a portion of the proceeds from the Huntsman Corporation initial public offering.
•: Income tax expense decreased by $0.8 million to $0.8 million for the three months ended June 30, 2005 as compared to $1.6 million for the same period in 2004. Valuation allowances have been established against our entire U.S. and certain of our non-U.S. deferred tax assets due to the uncertainty of realization. Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether a change in circumstances has occurred to provide enough positive or negative evidence to support a change in judgment about the realizability of the related deferred tax asset.
•: Equity in income from investments in unconsolidated affiliates for the three months ended June 30, 2005 increased by $105.8 million to $35.0 million from a loss of $70.8 million during the same period in 2004, primarily as a result of higher earnings from our investment in HIH.

~~Recent~~ The following ~~Developments~~ table sets forth the revenues and EBITDA for each of our operating segments:

HI Amendment and Restatement

			Three months ended June 30,
			Three months ended June 30,						Percent Change
			2005			2004			Percent Change
Revenues:
	Performance Products		$	356.2		$	284.8		25	%
	Polymers			408.2			324.2		26	%
	Base Chemicals			482.2			430.3		12	%
	Eliminations			(77.9	)		(70.3	)	11	%

		Total	$	1,168.7		$	969.0		21	%

Segment EBITDA
	Performance Products		$	60.3		$	13.6		343	%
	Polymers			32.5			0.2		NM
	Base Chemicals			20.9			23.3		(10	)%
	Corporate and other			13.2			(89.2	)	NM

		Total	$	126.9		$	(52.1	)	NM

~~On July 13, 2004, HI completed an amendment and restatement of its senior secured credit facilities (the "HI Credit Facilities"). Pursuant to the amendment~~NM—Not ~~and~~meaningful restatement, the HI revolving credit facility (the "HI Revolving Facility") was reduced from $400 million to $375 million and its maturity was extended from June 2006 to September 2008. The HI Revolving Facility includes a $50 million multicurrency revolving loan facility available in euros, GBP Sterling and U.S. dollars. In addition, HI's existing term loans B and C, totaling $1,240.2 million, were repaid and replaced with a new term loan B consisting of a $1,305 million term portion and a €50 million (approximately $61.6 million) term portion (the "HI Term Facility"). The additional proceeds from the HI Term Facility borrowings of approximately $126.6 million were applied to repay the $82.4 million outstanding borrowings as of July 13, 2004 on the HI Revolving Facility, and the remaining proceeds, net of fees incurred in the transaction, increased cash on our balance sheet. Pursuant to the amendment and restatement of the HI Credit Facilities, the additional liquidity is available for general corporate purposes and to provide a portion of the funds for the potential construction of a polyethylene production facility at our Wilton, U.K. facility. Current interest rates on the HI Revolving Facility and the HI Term Facility decreased from a LIBOR interest rate spread of 3.50% to 3.25% and 4.125% to 3.25%, respectively. Scheduled amortization of the HI Term Facility is 1% per annum, commencing June 30, 2005, with the remaining unpaid balance due at maturity. The maturity of the HI Term Facility is December 31, 2010; provided that the maturity will be accelerated to December 31, 2008 if HI has not refinanced all the outstanding HI Senior Notes (as defined below) and HI Subordinated Notes (as defined below) on or before December 31, 2008 on terms satisfactory to the administrative agent under the HI Credit Facilities.

~~The amendment~~ ~~and~~Performance restatement of the HI Credit Facilities also provides for the amendment of certain financial covenants. These amendments, among other things, included changes to the maximum leverage ratio, the minimum interest coverage ratio, and provided for an increase in the permitted amount of annual consolidated capital expenditures from $250 million to $300 million, with a provision for carryover to subsequent years. In addition, the mandatory prepayment level in connection with HI's accounts receivable securitization program was increased from $310 million to $325 million. For more information, see "—Liquidity and Capital Resources—Off-Balance Sheet Arrangements" below. Products

~~HLLC~~ For ~~Credit~~the ~~Facilities~~three ~~Amendment~~months ended June 30, 2005, Performance Products revenues increased by $71.4 million, or 25%, as compared to the same period in 2004, primarily as a result of higher average selling prices for all major product lines, offset somewhat by lower sales volumes of certain products. Overall, average selling prices increased by 31% in response to higher raw material and ~~HLLC~~energy ~~Senior~~costs ~~Unsecured~~and ~~Note~~improved ~~Offering~~ market conditions. Sales volumes decreased by 5%, principally due to lower sales of certain surfactants and continuing weak market conditions for LAB.

~~On May 6, 2004, we amended certain financial covenants in our senior secured credit facilities (the "HLLC Credit Facilities"). The amendment applies to~~For ~~both our revolving facility (~~the ~~"HLLC~~three ~~Revolving~~months ~~Facility")~~ended ~~and~~June 30, ~~our~~2005, ~~term~~Performance ~~loan~~Products ~~facilities~~segment ~~(the~~EBITDA ~~"HLLC~~increased ~~Term~~by ~~Facilities") and provides for~~$46.7 million, ~~among~~or ~~other things~~343%, ~~the~~to ~~amendment~~$60.3 million ~~and~~as ofcompared ~~certain financial~~to ~~covenants through the fourth quarter 2005~~$13.6 million ~~The amendment provides~~ for ~~an increase in~~ the ~~maximum~~same ~~leverage~~period ~~ratio, and a decrease~~ in ~~the minimum interest coverage ratio and the fixed charge coverage ratio~~2004. The ~~amendment~~increase ~~also amends the mandatory prepayment provisions contained~~ in ~~the~~segment ~~HLLC~~EBITDA ~~Credit~~resulted ~~Facilities~~primarily tofrom ~~permit~~higher ~~us,~~contribution ~~after~~margins ~~certain~~as ~~levels~~average ofselling ~~repayment~~prices ofincreased ~~our~~more ~~term~~than ~~loan B~~raw ~~("Term~~material and ~~Loan B")~~energy tocosts. ~~use~~In ~~subordinated~~addition, ~~debt~~we orrecorded ~~equity~~restructuring ~~proceeds to repay a portion of the outstanding indebtedness of our Australian subsidiaries.~~

On June 22, 2004, we sold $300 million of senior unsecured fixed rate notes that bear interest at 11.5% and mature on July 15, 2012 (the "HLLC Unsecured Fixed Rate Notes") and $100 million of senior unsecured floating rate notes that bear interest at a rate equal to LIBOR plus 7.25% and mature on July 15, 2011 (the "HLLC Unsecured Floating Rate Notes," and together with the HLLC Unsecured Fixed Rate Notes, the "HLLC Unsecured Notes"). The net proceeds from the offering were used to repay $362.9 million on Term Loan B, which as of July 1, 2004 bears an interest rate of LIBOR plus 9.75%, reducing its balance to $96.1 million, and $25 million to repay existing indebtedness at Huntsman Chemical Company Australia Pty. ("HCCA") (see "Liquidity and Capital Resources—Debt"

~~below).~~charges ~~Also, in accordance with the HLLC Term Facilities credit agreement, upon repayment~~ of ~~the~~ $~~362~~0.93 million onand ~~Term~~$20.5 million ~~Loan~~in B, the ~~applicable~~three ~~margin~~months onended ~~our~~June 30, ~~term~~2005 ~~loan~~and A2004, ~~("Term~~respectively. ~~Loan~~For ~~A") decreased~~further ~~0.75%~~discussion ~~(75~~of ~~basis~~restructuring ~~points)~~activities, ~~from~~see "—Liquidity ~~LIBOR~~and ~~plus~~Capital ~~4.75%~~Resources—Restructuring toand ~~LIBOR~~Plant ~~plus~~Closing 4Costs" below.~~00%.~~

~~Results~~ ~~of Operations (Historical)~~Polymers

~~Three~~ For ~~and~~the ~~Six~~three ~~Months~~months ~~Ended~~ended June 30, 2005, Polymers revenues increased by $84.0 million, or 26%, as compared to the same period in 2004, ~~Compared~~due mainly to ~~Three~~31% higher average selling prices, offset somewhat by 4% lower sales volumes. Average selling prices were higher primarily due to tighter market conditions and ~~Six~~in ~~Months~~response ~~Ended~~to ~~June 30,~~higher ~~2003~~raw ~~(Unaudited)~~material and ~~(Dollars~~energy costs. Sales volumes decreased principally due to lower demand for certain products and the closure of a phenol production plant in ~~Millions)~~ Australia.

	Three Months Ended June 30, 2004			Three Months Ended June 30, 2003			Six Months Ended June 30, 2004			Six Months Ended June 30, 2003
Revenues	$	2,488.0		$	1,577.2		$	4,842.7		$	2,408.9
Cost of goods sold		2,207.9			1,410.1			4,349.1			2,201.2
Gross profit		280.1			167.1			493.6			207.7
Selling, general and administrative, research and development, and other operating expense		163.2			102.9			299.1			143.3
Restructuring and plant closing costs		150.5			22.4			159.2			22.4
Operating income		(33.6	)		41.8			35.3			42.0
Interest expense, net		(133.3	)		(103.7	)		(277.5	)		(138.2	)
Loss on sale of accounts receivable		(3.0	)		(8.5	)		(6.5	)		(8.5	)
Equity income (loss) on investments in unconsolidated affiliates		1.0			(4.1	)		1.7			(38.0	)
Other income (expense)		(2.1	)		—			(3.9	)		(0.3	)
Loss before income tax benefit and minority interests		(171.0	)		(74.5	)		(250.9	)		(143.0	)
Income tax (expense) benefit		(6.4	)		6.3			(7.5	)		6.3
Minority interests in subsidiaries' loss (income)		47.5			15.8			73.6			15.8
Net loss	$	(129.9	)	$	(52.4	)	$	(184.8	)	$	(120.9	)
Interest expense, net		133.3			103.7			277.5			138.2
Income tax (benefit) expense		6.4			(6.3	)		7.5			(6.3	)
Depreciation and amortization		114.4			79.6			224.5			111.6
EBITDA(1)	$	124.2		$	124.6		$	324.7		$	122.6

For the three months ended June 30, 2005, Polymers segment EBITDA increased by $32.3 million to $32.5 million from $0.2 million for the same period in 2004. This increase resulted primarily from higher contribution margins, as average selling prices increased more than raw material and energy costs, and also from lower restructuring costs. During the three months ended June 30, 2005 and 2004, our Polymers segment recorded restructuring and plant closing charges of $1.0 million and $5.1 million, respectively. For further discussion of restructuring activities, see "—Liquidity and Capital Resources—Restructuring and Plant Closing Costs" below.

Base Chemicals

For the three months ended June 30, 2005, Base Chemicals revenues increased by $51.9 million, or 12%, as compared to the same period in 2004, due principally to a 26% increase in average selling prices, partially offset by an 11% decrease in sales volumes. Average selling prices increased primarily in response to higher raw material and energy costs. Segment sales volume decreases were driven by lower internal consumption due to planned maintenance outages at certain of our downstream derivative business units.

For the three months ended June 30, 2005, Base Chemicals segment EBITDA decreased by $2.4 million, or 10%, as compared to the same period in 2004, resulting primarily from lower contribution margins as raw material costs and turnaround and maintenance costs increased more than average selling prices. During the three months ended June 30, 2005, the Base Chemicals segment recorded restructuring and plant closing credits of $0.4 million. For further discussion of restructuring activities, see "—Liquidity and Capital Resources—Restructuring and Plant Closing Costs" below.

Corporate and Other

Corporate and other items include unallocated corporate overhead, unallocated foreign exchange gains and losses and other non-operating income and expense. For the three months ended June 30, 2005, EBITDA from corporate and other items improved by $102.4 million to income of $13.2 million from a loss of $89.2 million for the same period in 2004. The increase in EBITDA from corporate and other items was primarily as a result of a change in equity in earnings of unconsolidated affiliates of $105.8 million, partially offset by higher audit, consulting and personnel costs associated with financial reporting and increased long-term compensation costs.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

For the six months ended June 30, 2005 we had net income of $129.0 million on revenues of $2,373.2 million compared to a net loss of $184.8 million on revenues of $1,908.7 million for the six

~~rates,~~months orended ~~levels~~June 30, ~~of depreciation and amortization~~2004. ~~Our~~The ~~management~~increase ~~believes this type~~ of ~~measurement is useful for comparing general operating performance from period to period and making certain related management decisions~~$313.8 million ~~Nevertheless,~~in ~~our management recognizes that there are material limitations associated with the use of EBITDA as compared to~~ net income, ~~which~~was ~~reflects overall financial performance, including~~ the ~~effects~~result of ~~interest,~~the ~~income~~following ~~taxes,~~items: ~~depreciation and amortization.~~

•: Revenues for the six months ended June 30, 2005 increased by $464.5 million, or 24%, as compared to the same period in 2004. The increase was largely attributable to higher average selling prices for products in all of our operating segments. For details regarding changes in selling prices and sales volumes, see the operating segment discussion below.
•: Gross profit for the six months ended June 30, 2005 increased by $154.1 million, or 127%, as compared to the same period in 2004, due principally to higher contribution margins in the six months ended June 30, 2005 as average selling prices increased more than raw material and energy costs.
•: Operating expenses for the six months ended June 30, 2005 increased by $14.7 million, or 19%, as compared to the same period in 2004, primarily as a result of higher audit, consulting and personnel costs associated with financial reporting. Higher long-term compensation costs and higher foreign currency translation losses also contributed to the increased costs.
•: During the six months ended June 30, 2005 and 2004, we recorded restructuring and plant closing costs of $4.3 million and $25.6 million, respectively. For further discussion of restructuring activities, see "—Liquidity and Capital Resources—Restructuring and Plant Closing Costs" below.
•: Interest expense, net for the six months ended June 30, 2005 decreased by $10.5 million, or 12%, as compared to the same period in 2004, primarily resulting from lower average debt balances during the 2005 period. Debt balances were lower in the 2005 period largely as a result of the repayment of debt obligations from a portion of the proceeds from the Huntsman Corporation initial public offering.
•: Income tax expense increased by $0.8 million to zero expense for the six months ended June 30, 2005 as compared to a benefit of $0.8 million for the same period in 2004. Valuation allowances have been established against our entire U.S. and certain of our non-U.S. deferred tax assets due to the uncertainty of realization. Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether a change in circumstances has occurred to provide enough positive or negative evidence to support a change in judgment about the realizability of the related deferred tax asset.
•: Equity in income from investments in unconsolidated affiliates for the six months ended June 30, 2005 increased by $179.8 million to $69.9 million from a loss of $109.9 million during the same period in 2004, primarily as a result of higher earnings from our investment in HIH.
•: Other expense for the six months ended June 30, 2005 increased by $36.4 million to $40.1 million from $3.7 million during the same period in 2004, primarily as a result of a $34.4 million increase in loss on early extinguishment of debt in the six months ended June 30, 2005.

Included in EBITDA are the following items:

		Three Months Ended June 30, 2004			Three Months Ended June 30, 2003			Six Months Ended June 30, 2004			Six Months Ended June 30, 2003
Foreign exchange gains—unallocated		$	(5.4	)	$	24.3		$	8.0		$	27.1
Loss on accounts receivable securitization program			(3.0	)		(8.6	)		(6.5	)		(8.6	)
Early extinguishment of debt			(2.5	)		—			(4.2	)		—
Asset write down			—			—			—			(2.8	)
Legal settlement, net of recoveries			(14.9	)		—			(14.9	)		—
Restructuring and reorganization:
	Polyurethanes	$	(18.1	)	$	(1.4	)	$	(22.9	)	$	(1.4	)
	Performance Products		(20.9	)		(20.1	)		(20.9	)		(20.1	)
	Pigments		(104.2	)		—			(108.1	)		—
	Polymers		(5.1	)		(0.9	)		(5.1	)		(0.9	)
	Base Chemicals		(2.2	)		—			(2.2	)		—
	Total restructuring and reorganization	$	(150.5	)	$	(22.4	)	$	(159.2	)	$	(22.4	)

Pro Forma Financial Information

In order to present data that is useful for comparative purposes, the following has been prepared as if HIH was a consolidated subsidiary as of January 1, 2003. HIH became a consolidated subsidiary as of May 1, 2003. To complete the pro forma information we have consolidated the additional operations and elimination entries of related parties for HIH for the three and six months ended June 30, 2003. We believe the use of pro forma results for the periods covered in this report provides a more meaningful comparison of our results between the applicable periods. These results do not necessarily reflect the results that would have been obtained if we had consolidated HIH on the date indicated or that may be expected in the future.

~~Results~~ The following table sets forth the revenues and EBITDA for each of ~~Operations~~our ~~(Pro~~operating ~~Forma)~~ segments:

Three and Six Months Ended June 30, 2004 Compared to Three and Six Months Ended June 30, 2003 (Pro Forma) (Unaudited) (Dollars in Millions)

			Six months ended June 30,
			Six months ended June 30,						Percent Change
			2005			2004			Percent Change
Revenues:
	Performance Products		$	694.4		$	586.3		18	%
	Polymers			821.8			638.7		29	%
	Base Chemicals			1,023.0			815.6		25	%
	Eliminations			(166.0	)		(131.9	)	26	%

		Total	$	2,373.2		$	1,908.7		24	%

Segment EBITDA
	Performance Products		$	127.0		$	47.1		170	%
	Polymers			77.4			19.1		305	%
	Base Chemicals			80.3			45.2		78	%
	Corporate and other			(14.3	)		(141.5	)	(90	)%

		Total	$	270.4		$	(30.1	)	NM

	Three Months Ended June 30,								Six Months Ended June 30,
							% Change								% Change
	2004			2003					2004			2003
Revenues	$	2,488.0		$	1,984.9		25	%	$	4,842.7		$	4,049.6		20	%
Cost of goods sold		2,207.9			1,777.8		24	%		4,349.1			3,667.0		19	%
Gross profit		280.1			207.1		35	%		493.6			382.6		29	%
Selling, general and administrative, research and development, and other operating expense		163.2			118.3		38	%		299.1			241.9		24	%
Restructuring and plant closing costs		150.5			22.4		572	%		159.2			39.5		303	%
Operating income		(33.6	)		66.4		NM			35.3			101.2		(65	)%
Interest expense, net		(133.3	)		(127.7	)	4	%		(277.5	)		(251.4	)	10	%
Loss on sale of accounts receivable		(3.0	)		(11.3	)	NM			(6.5	)		(20.5	)	(68	)%
Equity income (loss) on investments in unconsolidated affiliates		1.0			0.3		233	%		1.7			0.9		89	%
Other (expense) income		(2.1	)		0.1		NM			(3.9	)		(2.5	)	56	%
Loss before income tax benefit and minority interests		(171.0	)		(72.2	)	137	%		(250.9	)		(172.3	)	46	%
Income tax benefit (expense)		(6.4	)		0.8		NM			(7.5	)		8.7		NM
Minority interests in subsidiaries' loss (income)		47.5			18.8		153	%		73.6			41.8		76	%
Net loss	$	(129.9	)	$	(52.6	)	147	%	$	(184.8	)	$	(121.8	)	52	%
Interest expense, net		133.3			127.7		4	%		277.5			251.4		10	%
Income tax (benefit) expense		6.4			(0.8	)	NM			7.5			(8.7	)	NM
Depreciation and amortization		114.4			101.2		13	%		224.5			202.8		11	%
EBITDA(1)	$	124.2		$	175.5		(29	)%	$	324.7		$	323.7		—

NM—Not meaningful

Performance Products

For the six months ended June 30, 2005, Performance Products revenues increased by $108.1 million, or 18%, as compared to the same period in 2004, primarily as a result of higher average selling prices for all major product lines, offset somewhat by lower sales volumes in certain product lines. Overall, average selling prices increased by 25% in response to higher raw material and energy costs and improved market conditions. Sales volumes declined by 6%, principally due to lower sales of certain surfactants and continuing weak market conditions for LAB.

For the six months ended June 30, 2005, Performance Products segment EBITDA increased by $79.9 million, or 170%, as compared to the same period in 2004. Increased segment EBITDA resulted primarily from higher contribution margins as average selling prices increased more than raw material and energy costs. In addition, we recorded restructuring charges of $1.3 million and $20.5 million in the six months ended June 30, 2005 and 2004, respectively. For further discussion of restructuring activities, see "—Liquidity and Capital Resources—Restructuring and Plant Closing Costs" below.

Polymers

For the six months ended June 30, 2005, Polymers revenues increased by $183.1 million, or 29%, as compared to the same period in 2004, due mainly to 36% higher average selling prices, offset somewhat by 5% lower sales volumes. Average selling prices were higher primarily due to tighter market conditions and higher raw material and energy costs. Sales volumes decreased principally due to lower demand for certain products and the closure of a phenol production plant in Australia.

For the six months ended June 30, 2005, Polymers segment EBITDA increased by $58.3 million, or 305% as compared to the same period in 2004. Increased segment EBITDA resulted primarily from higher contribution margins as average selling prices increased more than raw material and energy costs. During the six months ended June 30, 2005 and 2004, our Polymers segment recorded restructuring and plant closing charges of $2.9 million and $5.1 million, respectively. For further discussion of restructuring activities, see "—Liquidity and Capital Resources—Restructuring and Plant Closing Costs" below.

~~performance that~~ isBase not affected by debt restructurings, fluctuations in interest rates or effective tax rates, or levels of depreciation and amortization. Our management believes this type of measurement is useful for comparing general operating performance from period to period and making certain related management decisions. Nevertheless, our management recognizes that there are material limitations associated with the use of EBITDA as compared to net income, which reflects overall financial performance, including the effects of interest, income taxes, depreciation and amortization. Chemicals

~~Included~~For the six months ended June 30, 2005, Base Chemicals revenues increased by $207.4 million, or 25%, as compared to the same period in 2004, due principally to a 33% increase in ~~EBITDA~~average ~~are~~selling ~~the~~prices ~~following~~and ~~items:~~a 6% decrease in sales volumes. Average selling prices increased primarily in response to higher raw material and energy costs. Segment sales volume decreases were driven by lower internal consumption due to planned maintenance outages at certain of our downstream business units.

		Three Months Ended June 30, 2004			Three Months Ended June 30, 2003			Six Months Ended June 30, 2004			Six Months Ended June 30, 2003
Foreign exchange gains (losses)—unallocated		$	(5.4	)	$	39.7		$	8.0		$	56.9
Loss on accounts receivable securitization program			(3.0	)		(11.3	)		(6.5	)		(20.5	)
Early extinguishment of debt			(2.5	)		—			(4.2	)		—
Asset write down			—			—			—			(2.8	)
Legal settlement, net of recoveries			(14.9	)		—			(14.9	)		—
Restructuring and reorganization:
	Polyurethanes	$	(18.1	)	$	(1.4	)	$	(22.9	)	$	(18.5	)
	Performance Products		(20.9	)		(20.1	)		(20.9	)		(20.1	)
	Pigments		(104.2	)		—			(108.1	)		—
	Polymers		(5.1	)		(0.9	)		(5.1	)		(0.9	)
	Base Chemicals		(2.2	)		—			(2.2	)		—
	Total restructuring and reorganization	$	(150.5	)	$	(22.4	)	$	(159.2	)	$	(39.5	)

For the six months ended June 30, 2005, Base Chemicals segment EBITDA increased by $35.1 million, or 78%, as compared to the same period in 2004, resulting primarily from higher contribution margins as average selling prices increased more than raw material and energy costs.

~~Three~~ ~~Months~~Corporate ~~Ended~~and ~~June 30, 2004 Compared to Three Months Ended June 30, 2003 (Pro Forma)~~Other

Corporate and other items include unallocated corporate overhead, unallocated foreign exchange gains and losses and other non-operating income and expense. For the ~~three~~six months ended June 30, ~~2004~~2005, weEBITDA ~~had~~from acorporate ~~net~~and ~~loss~~other ofitems ~~$129.9~~improved onby ~~revenues of~~ $~~2,488~~127.02 million ~~compared~~ to a ~~net~~ loss of $5214.63 million onfrom ~~revenues~~a loss of $~~1,984~~141.95 million for the same period in ~~2003~~2004. ~~The~~Increased ~~increase~~EBITDA from corporate and other items improved primarily as a result of a change in equity in earnings of unconsolidated affiliates of $77179.38 million, partially inoffset ~~net~~by ~~loss~~a ~~was~~$34.4 million ~~the~~increase ~~result~~in ofloss ~~the~~on ~~following~~early ~~items:~~extinguishment of debt.

Liquidity and Capital Resources

Cash

Net cash provided by operating activities for the six months ended June 30, 2005 was $158.8 million as compared to net cash used in operating activities of $0.6 million for the six months ended June 30, 2004. This increase is primarily attributable to an increase in net income of $313.8 million and a decrease in net operating assets and liabilities of $11.4 million. In addition, we had a favorable variance of $34.4 million in loss on early extinguishment of debt, partially offset by an unfavorable variance of $179.8 million in equity in losses of investments in unconsolidated affiliates and an unfavorable variance in non-cash restructuring and plant closing costs of $21.5 million.

Capital expenditures for the six months ended June 30, 2005 were $34.5 million as compared to $29.5 million for the same period in 2004.

Net cash used in financing activities for the six months ended June 30, 2005 was $118.2 million as compared to cash provided by financing activities of $32.0 million for the six months ended June 30, 2004. This variance is primarily related to net repayments of $53.0 million on the revolving loan facilities resulting from positive cash flow from operations during the 2005 period as compared to $74.3 million of borrowings required in the comparable period in 2004 due to negative cash flow from operations in the 2004 period. Furthermore, during the second quarter of 2005, we voluntarily prepaid $50 million on our senior secured term loan. In addition, as a result of Huntsman Corporation's initial public offering, we received $333.2 million in capital contributions that were used to repay indebtedness. During the 2004 period, we issued $400 million in senior unsecured notes, the net proceeds of which were used to repay indebtedness.

Changes in Financial Condition

The following information summarizes our net working capital position as of June 30, 2005 and December 31, 2004 (dollars in millions):

			June 30, 2005		December 31, 2004		Difference			Percent Change
Current assets:
	Cash, cash equivalents, and restricted cash		$	27.7	$	20.6	$	7.1		34	%
	Accounts and notes receivables, net			573.3		604.7		(31.4	)	(5	)%
	Inventories			356.2		338.8		17.4		5	%
	Prepaid expenses			1.8		21.9		(20.1	)	(92	)%
	Deferred income taxes			0.5		0.7		(0.2	)	(29	)%
	Other current assets			1.9		1.6		0.3		19	%

		Total current assets		961.4		988.3		(26.9	)	(3	)%

Current liabilities:
	Accounts payable			335.1		340.0		(4.9	)	(1	)%
	Accrued liabilities			199.5		233.7		(34.2	)	(15	)%
	Deferred income taxes			8.3		8.2		0.1		1	%
	Current portion of long-term debt			4.6		25.3		(20.7	)	(82	)%

		Total current liabilities		547.5		607.2		(59.7	)	(10	)%

Working capital			$	413.9	$	381.1	$	32.8		9	%

At June 30, 2005 our net working capital position was $413.9 million as compared to $381.1 million at December 31, 2004, resulting in an increase of $32.8 million. The changes in working capital can be explained as follows:

•: The increase in cash, cash equivalents and restricted cash is primarily the result of matters identified in the Condensed Consolidating Statement of Cash Flows.
•: The increase in inventories of $17.4 million is due primarily to higher raw materials and energy costs.
•: The decrease in prepaid expenses of $20.1 million is principally due to reduction in prepaid insurance.
•: Accrued liabilities decreased by $34.2 million, principally due to a decrease in accrued interest and a decrease in property tax accruals.
•: The decrease of $20.7 million in current portion of long-term debt is primarily due to payments made on our insurance premium finance loans, in addition to the elimination of approximately $7 million in scheduled maturities under our HLLC Credit Facilities as a result of our $50 million voluntary prepayment made during the second quarter.

Debt and Liquidity

HLLC Credit Facilities

On October 14, 2004, we completed a $1,065 million refinancing of our senior secured credit facilities (as refinanced, the "HLLC Credit Facilities"). On June 27, 2005, we made a $50 million voluntary prepayment under the term facility portion of the HLLC Credit Facilities. Following this prepayment, the HLLC Credit Facilities consist of a $350 million revolving credit facility due October 2009 (the "HLLC Revolving Facility") and a $665 million term loan B facility due March 2010 (the "HLLC Term Facility"). Proceeds of the refinancing were used to repay in full the outstanding

borrowings ~~The~~under ~~following~~our ~~table~~prior ~~sets~~senior ~~forth~~secured ~~the~~credit ~~revenues~~facilities. ~~and~~The ~~EBITDA~~HLLC ~~for~~Term ~~each~~Facility has scheduled annual amortization payments of ~~our~~$6.7 million, ~~operating~~with ~~segments~~the ~~(dollars~~remaining inbalance ~~millions):~~due at maturity commencing December 31, 2006.

		Three months ended June 30,
		2004			2003			% Change
Revenues
Polyurethanes		$	733.9		$	565.8		30%
Performance Products			451.2			405.2		11%
Polymers			324.2			269.6		20%
Pigments			278.2			255.4		9%
Base Chemicals			911.2			641.4		42%
Eliminations			(210.7	)		(152.5	)	38%
	Total	$	2,488.0		$	1,984.9		25%
Segment EBITDA
Polyurethanes		$	100.0		$	48.1		108%
Performance Products			16.0			9.5		68%
Polymers			0.2			22.7		(99)%
Pigments			(83.4	)		30.9		NM
Base Chemicals			81.2			34.7		134%
Corporate and other			10.2			29.7		(66)%
	Total	$	124.2		$	175.6		(29)%

The HLLC Revolving Facility is secured by a first priority lien on substantially all of our current and intangible assets and those of our domestic restricted subsidiaries; and is secured by a second priority lien on substantially all of our property, plant and equipment and that of our restricted domestic subsidiaries and our indirect equity interest in HIH. The HLLC Term Facility is secured by a first priority lien on substantially all of our property, plant and equipment and that of our restricted domestic subsidiaries and our indirect equity interest in HIH; and by a second priority lien on substantially all of our current and intangible assets and those of our restricted domestic subsidiaries. The HLLC Credit Facilities are also guaranteed by Huntsman Specialty Chemicals Holdings Corporation and Huntsman Specialty and by our domestic restricted subsidiaries (collectively, the "HLLC Guarantors"). Neither HIH nor HI is our restricted subsidiary and they are not HLLC Guarantors.

~~NM—Not~~ The ~~meaningful~~HLLC Revolving Facility is subject to a borrowing base of accounts receivable and inventory and is available for general corporate purposes. Borrowings under the HLLC Revolving Facility bear interest, at our option, at a rate equal to (i) a LIBOR-based eurocurrency rate plus an applicable margin of 2.25%, or (ii) a prime-based rate plus an applicable margin of 1.25%. The HLLC Revolving Facility allows us to borrow up to $50 million secured by letters of credit; however, the $350 million revolving credit facility is reduced dollar-for-dollar by any letters of credit outstanding.

~~Polyurethanes~~ As of June 30, 2005, the weighted average interest rates on our senior credit facilities was 6.3%, excluding the impact of interest rate hedges. As of June 30, 2005, the HLLC Revolving Facility and HLLC Term Facility bear interest at LIBOR plus 2.25% per year and LIBOR plus 3.0% per year, respectively. In accordance with the HLLC Term Facility agreement, as a result of Huntsman Corporation's initial public offering of common and preferred stock and the use of offering proceeds for the permanent reduction of indebtedness by us, the HLLC Term Facility interest rate margin decreased from LIBOR plus 3.50% to LIBOR plus 3.0%. The agreements governing the HLLC Credit Facilities contain customary financial covenants; covenants relating to the incurrence of debt, the purchase and sale of assets, limitations on investments and affiliate transactions; change of control provisions; events of default provisions; and acceleration provisions. Management believes that we are in compliance with the covenants of the HLLC Credit Facilities.

~~For~~ ~~the~~HLLC ~~three~~Senior ~~months~~Secured ended June 30, 2004, Polyurethanes revenues increased by $168.0 million, or 30%, to $733.9 million from $565.8 million for the same period in 2003. MDI sales revenue increased by 27%, due to a 17% increase in sales volumes, supported by 8% higher average selling prices. MDI sales volumes increased by 38%, 18% and 10% in Asia, Europe and the Americas, respectively. Higher MDI volumes reflect recent improvement in the global economy. The increase in MDI average selling prices resulted from improved market demand and the strength of the major European currencies versus the U.S. dollar. Polyol sales revenue increased by 11% as average selling prices increased by 7% and sales volumes increased by 4%. Total PO/MTBE products sales revenues increased by 64%. However, PO revenues, excluding tolling, decreased by 3% due to a 9% decrease in volumes which was partly offset by a 6% increase in average selling prices. PO tolling revenue decreased by 9% due to a 10% reduction in average selling prices. MTBE sales revenue increased by 53% due to a 32% increase in average selling prices in response to stronger crude oil and gasoline markets, on relatively unchanged sales volumes. Notes

~~For the~~On ~~three months ended June~~September 30, ~~2004~~2003, ~~Polyurethanes~~we ~~segment~~sold ~~EBITDA increased by~~ $~~51.9~~380 million toaggregate ~~$100.0 million~~principal ~~from~~amount ~~$48~~of 11.~~1 million~~625% ~~for~~senior ~~the~~secured ~~same~~notes ~~period~~due ~~in 2003.~~October 15, ~~Increased~~2010 ~~segment~~at ~~EBITDA~~an ~~resulted~~issue ~~mainly~~price of ~~from~~98.8% ~~increased~~(the ~~sales~~"September 2003 ~~volumes~~Offering"). ~~and~~On ~~higher~~December 3, ~~average~~2003, ~~selling~~we ~~prices~~sold ~~which~~an ~~contributed~~additional $7075.84 million, ~~partly~~aggregate ~~offset~~principal byamount ~~increased raw material and energy costs~~ of ~~$7.7 million.~~senior Wesecured ~~also~~notes ~~recorded~~(collectively ~~$18.1 million~~with inthe ~~restructuring~~notes sold ~~charges~~ in ~~connection~~the ~~with~~September 2003 Offering, the ~~cost~~"HLLC ~~reduction~~Senior ~~efforts~~Secured Notes") at ~~our~~an ~~Everberg,~~issue ~~Belgium,~~price ~~West~~of ~~Deptford,~~99.5%. ~~New~~Interest ~~Jersey~~on ~~and Rozenburg,~~the ~~Netherlands~~HLLC ~~sites.~~Senior InSecured ~~the~~Notes ~~second~~is ~~quarter~~payable ofsemiannually ~~2003,~~on weApril 15 ~~recorded~~and October 15. ~~restructuring~~The ~~charges~~effective ininterest ~~the~~rate ~~amount~~is ~~of $1~~11.~~4 million~~9%. ~~SG&A~~The ~~and~~HLLC ~~fixed~~Senior ~~manufacturing~~Secured ~~costs~~Notes ~~decreased~~are ~~$3.3 million and~~effectively ~~$1.2 million,~~subordinated ~~respectively,~~to asall ~~lower~~our ~~costs~~obligations ~~resulting~~under ~~from~~the ~~our~~HLLC ~~ongoing~~Revolving ~~restructuring~~Facility ~~efforts~~and ~~were~~rank pari ~~partially~~passu ~~offset~~with by the HLLC ~~effects~~Term ofFacility. ~~the~~The ~~strength~~HLLC ofSenior ~~the~~Secured ~~major~~Notes ~~European~~are ~~currencies~~guaranteed ~~versus~~by the ~~U.S.~~ ~~dollar~~HLLC Guarantors.

The HLLC Senior Secured Notes are redeemable after October 15, 2007 at 105.813% of the principal amount thereof, declining ratably to par on and after October 15, 2009. At any time prior to October 15, 2006, we may redeem up to 35% of the original aggregate principal amount of the HLLC Senior Secured Notes at a redemption price of 111.625% with net cash proceeds of a qualified equity offering. As a result of Huntsman Corporation's initial public offering of common and preferred stock, we redeemed 35%, or approximately $159.4 million, of the aggregate principal amount of the HLLC

~~Performance~~Senior Secured ~~Products~~ Notes on February 28, 2005 and paid a call premium of approximately $18.5 million. Following this partial redemption of the HLLC Senior Secured Notes, there remain approximately $296.0 million in aggregate principal amount of the HLLC Senior Secured Notes outstanding.

~~For~~The indenture governing the ~~three~~HLLC ~~months~~Senior ~~ended~~Secured ~~June 30,~~Notes ~~2004,~~contains ~~Performance~~covenants ~~Products~~relating ~~revenues increased by $46.0 million, or 11%,~~ to ~~$451.2 million from $405.2 million for~~ the ~~same~~incurrence ~~period~~of ~~in 2003. Overall~~debt, ~~average~~limitations ~~selling~~on ~~prices increased by 11%~~distributions, ~~while~~asset sales ~~volumes~~and ~~increased~~affiliate bytransactions, ~~1%. Ethylene glycol revenues increased by 38% as average selling~~among ~~prices~~other ~~increased by 34% in response to higher raw material and energy costs and improved market conditions~~things. ~~Ethylene~~The ~~glycol~~indenture ~~sales~~also ~~volumes~~requires ~~increased~~us ~~by 3% due~~ to ~~improved~~offer ~~market demand. MAn revenues increased by 33% on an increase in sales volumes of 36%, primarily due~~ to ~~strong~~repurchase ~~demand in~~ the ~~housing~~HLLC ~~and~~Senior ~~recreational~~Secured ~~markets.~~Notes ~~Surfactants~~upon ~~revenues increased by 6%, resulting from~~ a 9%change ~~increase~~of ~~in average selling prices, partially offset by a 2% decrease in volumes~~control. ~~Average~~Management ~~selling~~believes ~~prices~~that ~~for~~we ~~our~~are ~~surfactants rose~~ in ~~response~~compliance towith ~~higher~~the ~~raw~~covenants ~~material~~of ~~and energy costs, improved product mix and~~ the HLLC ~~strength~~Senior ofSecured ~~European and Australian currencies versus the U~~Notes.S. ~~dollar.~~For ~~The~~information ~~reduction~~with inrespect ~~surfactants sales volumes was due~~ to ~~reduced~~the ~~customer~~consent ~~demand~~solicitation inof ~~certain~~holders ~~product~~of ~~lines,~~the ~~increased~~HLLC ~~competition~~Senior ~~in the~~Secured ~~marketplace~~Notes and ~~reduced~~the ~~production~~HLLC atSenior ~~our Chocolate Bayou~~Notes, ~~Texas~~see ~~facility.~~"—Recent Developments—Proposed ~~Amine~~Merger ~~revenues~~Into ~~increased~~Huntsman byInternational ~~4%,~~LLC ~~resulting from a 7% increase in average selling prices in response to higher raw material~~ and ~~energy~~Proposed ~~costs~~New ~~and~~Credit ~~due to an improved product mix, while volumes decreased by 4% following the cessation of production of intermediate material for an affiliate~~Facility."

~~For the~~ ~~three~~HLLC ~~months~~Senior ended June 30, 2004, Performance Products segment EBITDA increased by $6.5 million to $16.0 million from $9.5 million for the same period in 2003. In the three months ended June 30, 2004, we recorded a $20.3 million charge for the closure of our Guelph, Canada facility, and in the same period in 2003 we recorded a $20.1 million charge for the closure of a number of units at our Whitehaven, U.K. surfactants facility. Average selling prices increased $43.7 million, more than offsetting a $32.7 million increase in raw material and energy costs. Lower sales volumes, particularly in our surfactants business reduced EBITDA by $3.1 million. Fixed manufacturing costs increased by $4.6 million due to the strength of the major European currencies versus the U.S. dollar, partially offset by benefits from our cost reduction programs, especially in our surfactants operations. Notes

~~Polymers~~ On June 22, 2004, we sold $300 million of our senior unsecured fixed rate notes that bear interest at 11.5% and mature on July 15, 2012 (the "HLLC Unsecured Fixed Rate Notes") and $100 million of our senior unsecured floating rate notes that bear interest at a rate equal to LIBOR plus 7.25% and mature on July 15, 2011 (the "HLLC Unsecured Floating Rate Notes," and together with the HLLC Unsecured Fixed Rate Notes, the "HLLC Senior Notes"). The interest rate on the HLLC Unsecured Floating Rate Notes as of June 30, 2005 was approximately 10.4%. Interest on the HLLC Unsecured Fixed Rate Notes is paid each January 15 and July 15 and is paid on the HLLC Unsecured Floating Rate Notes on the 15th of January, April, July and October. The proceeds from the offering of the HLLC Senior Notes were used to repay $362.9 million on our prior term loan B facility and $25 million to repay indebtedness at HCCA. See "—Other Debt" below. The HLLC Senior Notes are our unsecured obligations and are guaranteed by the HLLC Guarantors.

~~For~~The HLLC ~~the~~Unsecured ~~three~~Fixed ~~months~~Rate ~~ended~~Notes ~~June 30,~~are ~~2004,~~redeemable ~~Polymers~~after ~~revenues increased by $54.6~~July ~~million~~15, or2008 ~~20%,~~at ~~to $324~~105.~~2 million~~75% ~~from~~of ~~$269.6 million for~~ the ~~same~~principal ~~period~~amount inthereof, ~~2003.~~declining ~~Overall~~ratably ~~sales~~to ~~volumes~~par ~~increased~~on ~~by 11%~~ and ~~average~~after ~~selling~~July 15, ~~prices~~2010. ~~increased~~The HLLC byUnsecured ~~9%.~~Floating ~~Polyethylene~~Rate ~~revenues~~Notes ~~increased~~are byredeemable 9%after July 15, ~~resulting~~2006 ~~from~~at ~~a 4~~104.0% ~~increase~~of inthe ~~average~~principal ~~selling prices~~amount thereof, ~~primarily~~declining inratably ~~response~~ to ~~higher~~par ~~underlying~~on ~~raw material~~ and ~~energy~~after ~~costs~~July 15, ~~and~~2008. aAt 5%any ~~increase~~time inprior ~~sales~~to July 15, ~~volumes.~~2007, ~~Polypropylene~~we ~~revenues~~may ~~increased~~redeem byup 15to 40%, ~~resulting~~of ~~from~~the aoriginal ~~11%~~aggregate ~~increase~~principal inamount ~~average selling~~of ~~prices,~~the ~~primarily~~HLLC inUnsecured ~~response~~Fixed toRate ~~higher~~Notes ~~raw~~at ~~material~~a ~~costs,~~redemption ~~and~~price aof 3111.5% ~~increase~~with inproceeds ~~sales~~of ~~volumes~~a ~~due~~qualified toequity offering. ~~improved~~At ~~customer~~any ~~demand.~~time ~~APAO~~prior ~~revenues~~to ~~increased~~July 15, ~~by 8%~~2006, aswe ~~sales~~may redeem ~~volumes~~up ~~increased~~to 940% ~~largely~~ asof the ~~result~~original ofaggregate ~~increased~~principal ~~sales~~amount inof the ~~export~~HLLC ~~market,~~Unsecured ~~offset~~Floating byRate aNotes 1%with ~~decrease~~the inproceeds ~~average~~of ~~selling~~a ~~prices~~qualified ~~due~~equity tooffering ~~product~~at ~~mix.~~a ~~Expandable~~redemption ~~polystyrene~~price ~~revenue~~equal ~~increased~~to bythe ~~47%,~~par ~~resulting~~value ~~from a~~plus ~~45%~~LIBOR ~~increase~~plus in7.25%. ~~sales~~As ~~volumes~~a ~~due~~result toof ~~stronger~~Huntsman ~~customer~~Corporation's ~~demand~~initial ~~and~~public aoffering 1%of ~~increase~~common inand ~~average~~preferred ~~selling prices~~stock, ~~primarily~~we inredeemed ~~response~~34%, toor ~~higher~~approximately ~~underlying~~$102.0 million ~~raw~~of ~~material~~combined ~~and~~aggregate ~~energy costs. Australian~~principal ~~styrenics~~amount ~~revenues~~of ~~increased~~the byHLLC ~~24%,~~Unsecured ~~resulting~~Fixed ~~from~~Rate anNotes ~~18%~~on ~~increase~~March 14 inand ~~average selling prices~~March 17, ~~primarily~~2005 ~~due~~with tocombined ~~the~~call ~~strengthening~~premiums of ~~the~~approximately ~~Australian~~$11.7 million. ~~dollar~~Following ~~and~~this inpartial ~~response~~redemption, tothere remain anapproximately ~~increase~~$198.0 million in ~~raw material~~aggregate ~~costs~~principal ~~and~~amount aof 5%the ~~increase~~HLLC inUnsecured ~~sales~~Fixed ~~volumes~~Rate Notes outstanding.

~~For~~The indenture governing the ~~three~~HLLC ~~months~~Senior ~~ended~~Notes ~~June 30,~~contains ~~2004,~~covenants ~~Polymers~~relating ~~segment~~to ~~EBITDA~~the ~~decreased~~incurrence byof ~~$22.5 million~~debt toand ~~$0.2 million~~limitations ~~from~~on ~~$22.7 million~~distributions, ~~for~~asset ~~the~~sales ~~same~~and ~~period~~affiliate intransactions, ~~2003.~~among other things. The ~~decrease~~indenture inalso ~~EBITDA~~requires isus ~~primarily~~to ~~due~~offer to ~~$48.9 million~~repurchase inthe ~~increased~~HLLC ~~raw~~Senior ~~material~~Notes ~~and~~upon ~~energy~~a ~~costs,~~change ~~partially~~of ~~offset by $26~~control.~~0 million~~ ~~resulting~~Management ~~from~~believes ~~higher~~that ~~prices~~we ~~and $7.3 million~~are ~~resulting~~in ~~from~~compliance ~~higher~~with ~~sales~~the ~~volumes.~~covenants ~~The~~of ~~turnaround~~the ~~and~~HLLC ~~inspection~~Senior ~~("T&I")~~Notes. For atinformation ~~our~~with ~~Odessa,~~respect ~~Texas~~to ~~plant~~the ~~had~~consent asolicitation ~~substantial~~of ~~unfavorable~~holders ~~impact~~of ~~on EBITDA for~~ the ~~2004~~HLLC ~~period~~Senior ~~thereby increasing~~Secured ~~both~~Notes ~~direct~~ and ~~indirect~~the ~~manufacturing~~HLLC ~~costs.~~Senior ~~In addition~~Notes, ~~fixed~~see ~~manufacturing~~"—Recent ~~costs~~Developments—Proposed ~~were~~Merger ~~higher~~Into Huntsman byInternational ~~$2.7 million,~~LLC ~~including~~and ~~$1.8 million~~Proposed ofNew ~~maintenance~~Credit ~~costs~~Facility." ~~associated~~

HLLC Notes

As of June 30, 2005, the HLLC Notes had an outstanding principal balance of $59.3 million. The HLLC Notes are our unsecured subordinated obligations and are junior in right of payment to all of

~~with~~our ~~the~~existing ~~T&I~~and atfuture secured or unsecured senior indebtedness and effectively junior to any of our ~~Odessa~~secured ~~plant~~indebtedness to the extent that collateral secures such indebtedness. ~~Also,~~Interest weis ~~recorded~~payable on athe ~~restructuring~~HLLC ~~charge~~Notes semiannually on January 1 and July 1 at an annual rate of $9.5% on the fixed rate notes and LIBOR plus 3.125% on the floating rate notes. The HLLC Notes are redeemable at our option after July ~~million~~2002 inat a price declining from 104.75% to 100% of par value as of July 1, 2005. The weighted average interest rate on the ~~three~~floating ~~months~~rate ~~ended~~notes was approximately 6.0% as of June 30, ~~2004~~2005. ~~related~~As a result of previously executed amendments to the ~~closure~~indentures, ofvirtually anall ~~Australian~~the ~~manufacturing unit~~restrictive covenants contained in the indentures have been eliminated.

~~Pigments~~ On August 2, 2005, we issued a notice of redemption for all of the outstanding HLLC Notes in accordance with the amended and restated indenture governing the HLLC Notes. Accordingly, at the time of the merger of the Company with and into HI, we will deliver funds to the trustee sufficient to redeem the HLCC Notes, in full, on September 1, 2005.

~~For~~ ~~the~~Other three months ended June 30, 2004, Pigment revenues increased by $22.8 million, or 9%, to $278.2 million from $255.4 million for the same period in 2003. Sales volumes increased by 9%, with volumes increasing by 13%, 7% and 8% in North America, Asia and Europe, respectively, due to improved customer demand. Average selling prices remained at similar levels compared to the same period in 2003, as an underlying decrease of 5% in local currency prices was largely offset by the effect of strength of the major European currencies versus the U.S. dollar. Average selling prices as measured in local currencies rose by 2% in Asia, but fell by 9% in Europe and 3% in North America. Debt

~~For the~~Huntsman ~~three~~Specialty's ~~months~~subordinated ~~ended June 30~~note, ~~2004,~~in ~~Pigments~~the ~~segment~~aggregate ~~EBITDA~~principal ~~decreased~~amount byof $~~114~~75.30 million, toaccrued ainterest ~~loss~~until ~~of $83.4~~April ~~million~~15, ~~from~~2002 ~~income~~at of7% ~~$30~~per annum.~~9 million~~ Pursuant ~~for~~to the ~~same~~ ~~period~~note inagreement, ~~2003.~~effective ~~The~~April 15, ~~decrease~~2002, inall ~~segment~~accrued ~~EBITDA~~interest iswas ~~mainly~~added ~~due~~ to ~~restructuring~~the ~~and~~principal ~~plant~~of ~~closing~~the ~~costs~~note offor ~~$104.2 million~~a ~~and~~total ~~charges~~principal amount of $14106.96 million. ~~relating~~Such toprincipal balance ~~the~~will ~~payment~~be ofpayable ~~costs and~~in ~~settlement~~a ~~amounts~~single ~~for~~installment ~~Discoloration~~on ~~Claims~~April 15, ~~recorded~~2008. Interest has been payable quarterly in ~~the~~cash, ~~2004~~commencing ~~period~~July 15, 2002. ~~EBITDA~~For ~~was~~financial ~~impacted~~reporting bypurposes, ~~$9.9 million~~the ~~due~~note ~~primarily~~was initially torecorded ~~higher~~at ~~sales~~its ~~volumes,~~estimated ~~offset~~fair byvalue of $1058.12 million, inbased ~~higher raw~~on ~~material~~prevailing ~~and~~market ~~energy~~rates ~~costs,~~as ~~primarily~~of ~~due~~the toeffective ~~the~~date. ~~strength~~As of ~~the~~June 30, ~~major~~2005 ~~European~~and ~~currencies~~December 31, ~~versus~~2004, the unamortized ~~U.S.~~discount ~~dollar.~~on Inthe ~~addition,~~note ~~manufacturing~~was ~~costs~~$4.6 million ~~were~~and $35.94 million ~~lower~~, ~~mainly~~respectively. ~~due~~We tohave ~~an increase~~given innotice ~~the~~that ~~amount~~we ofintend ~~manufacturing~~to ~~costs~~redeem ~~absorbed~~these notes, in ~~inventories~~full, ~~partially~~at ~~offset~~completion byof the ~~strength~~proposed merger of the ~~major~~Company ~~European~~with ~~currencies~~and ~~versus~~into ~~the U~~HI.S. ~~dollar. SG&A costs were $1.0 million lower mainly as a result of ongoing cost reduction initiatives.~~

~~Base~~ Huntsman Corporation ~~Chemicals~~ Australia Pty Ltd. ("HCA"), our indirect Australian subsidiary that holds its Australian surfactants assets, maintains credit facilities (the "HCA Facilities"). As of June 30, 2005, borrowings under the HCA Facilities totaled A$62.4 million ($47.2 million), which include A$41.0 million ($31.1 million) on the term loan facility and A$21.4 million ($16.1 million) on the revolving credit line. On August 31, 2004, HCA refinanced the previously existing debt facilities with an A$30.0 million ($23.1 million) revolving credit line supported by a borrowing base of eligible accounts receivable and inventory and an A$44.0 million ($33.9 million) term facility.

~~For~~Huntsman Chemical ~~the~~Company ~~three~~Australia ~~months ended June~~Pty ~~30,~~Ltd. ~~2004,~~("HCCA") ~~Base~~and ~~Chemicals~~certain ~~revenues~~Australian ~~increased~~affiliates ~~$269.8 million,~~hold orour ~~42%,~~Australian tostyrenics ~~$911~~assets.~~2 million~~ ~~from $641.4~~On August ~~million~~31, ~~for the same period in 2003. Overall~~2004, ~~average~~HCCA ~~selling~~refinanced ~~prices increased by 21% and sales volumes increased by 17%. Ethylene revenues increased by 36% due to a 19% increase in~~the ~~average~~previously ~~selling~~existing ~~prices~~debt ~~and~~facilities aof ~~15%~~HCCA ~~increase~~with ~~in sales volumes. Propylene revenues increased by 25% due to a 16% increase in average selling prices and~~ an ~~8% increase in sales volumes~~A$30.0 million ~~Cyclohexane revenues increased by 53% as average selling prices increased 27% and sales volumes increased 20%~~($23.1 million) ~~Benzene~~revolving ~~revenues~~credit ~~were~~line ~~56%~~supported ~~higher~~by ~~due to~~ a ~~27%~~borrowing ~~increase~~base ~~in sales volume and a 24% increase in average selling prices. Sales volumes were higher on stronger demand in Europe and in the U.S. A T&I at our U.S. olefins facility in the second quarter~~ of ~~2003~~eligible ~~negatively~~accounts ~~impacted~~receivable ~~sales volumes for~~ (the ~~2003~~"HCCA ~~period~~Facility"). ~~Average~~As ~~selling~~of ~~prices~~June 30, ~~increased mainly in response to improved market conditions~~2005, ~~higher~~borrowings ~~raw~~under ~~material prices and~~ the ~~strength~~HCCA ofFacility ~~the~~totaled ~~major~~A$24.9 million ~~European currencies versus the U~~($19.S0 million). ~~dollar.~~

~~For~~The ~~the~~HCA ~~three~~Facilities ~~months~~and ~~ended~~the ~~June 30,~~HCCA ~~2004,~~Facility ~~Base~~are ~~Chemicals~~secured ~~segment EBITDA increased~~ by ~~$46.5 million~~a tolien ~~$81.2 million~~on ~~from~~substantially ~~$34.7 million~~all ~~for~~their ~~the~~respective ~~same~~assets, ~~period~~bear ~~in 2003.~~interest ~~Increased~~at ~~EBITDA~~a israte ~~primarily the result~~ of ~~a $168~~2.~~5 million~~9% ~~increase~~above ~~resulting~~the ~~from~~Australian ~~higher~~base ~~average~~rate, ~~selling~~mature ~~prices~~in August 2007 and aare ~~$7.8 million~~non-recourse ~~increase~~to ~~resulting~~us. ~~from~~As ~~increased~~of ~~sales volumes~~June 30, ~~partially~~2005, ~~offset~~the byinterest arate ~~$132.9 million~~on ~~increase~~the inHCA ~~raw~~Facilities ~~material~~ and ~~energy~~the ~~costs.~~HCCA ~~EBITDA~~Facility ~~also~~was ~~increased~~approximately ~~due~~8.6%. toOn aJune 24, 2004, we used $~~3.5~~25 million ~~decrease~~of inproceeds ~~SG&A~~from ~~costs.~~the ~~SG&A~~offering ~~was~~of ~~lower~~the asHLLC aSenior ~~result~~Unsecured ~~of a~~Notes ~~$2.8 million~~to ~~benefit~~repay ~~from~~a ~~cost~~portion ~~savings~~of ~~initiatives, $1.8 million from~~ the ~~non-recurring~~previously ~~write~~existing ~~off~~debt facilities of ~~customer~~HCCA. ~~debt~~Management inbelieves ~~the~~that ~~2003~~HCA ~~period~~ and ~~$1.4 million~~HCCA are in ~~foreign currency~~compliance ~~gains,~~with ~~offset~~the bycovenants ~~$2.2 million~~of inthe ~~restructuring~~HCA Facilities and ~~plant~~the ~~closing~~HCCA ~~costs spent in 2004~~Facility.

~~Corporate~~ On July 2, ~~and~~2001, ~~Other~~ we entered into a 15% note payable (the "Affiliate Note") with an affiliated entity in the amount of $25.0 million. Interest on the Affiliate Note was not paid in cash, but accrued at a designated effective rate of 15% per annum, compounded annually. On February 16, 2005, the Affiliate Note was satisfied in full from proceeds of Huntsman Corporation's initial public offering. As of

Corporate and other items includes unallocated corporate overhead, unallocated foreign exchange gains and losses, loss on the sale of accounts receivable, other non-operating income and expense and minority interest in subsidiaries' loss. For the three months ended June 30, 2004, EBITDA from corporate and other items decreased by $19.5 million to income of $10.2 million from income of $29.7 million for the same period in 2003. Lower EBITDA resulted primarily from a $45.1 million

~~negative impact from unallocated foreign currency gains and losses in the three months ended June~~December 3031, 2004 ~~as compared to the comparable period in 2003. This decrease was partially offset by a decrease of $28.7 million in minority interest in subsidiaries' loss~~ and ~~reduced losses on our accounts receivable securitization program, which decreased by $8.3~~February ~~million to a loss of $3.0 million in the three months ended June 30~~16, ~~2004 as compared to a loss of $11.3 million in the same period of 2003. Losses on the accounts receivable securitization program include the discount on receivables sold into the program~~2005, ~~fees~~accrued ~~and~~interest ~~expenses~~added ~~associated with the program and gains (losses) on foreign currency hedge contracts mandated by the terms of the program~~ to ~~hedge~~ ~~currency exposures on~~ the ~~collateral~~principal ~~supporting the off-~~balance ~~sheet debt issued. The decreased loss on the accounts receivable securitization program~~ was ~~primarily due to reduced losses on foreign exchange hedge contracts mandated by our accounts receivable securitization program~~$15.9 million ~~EBITDA from corporate~~ and ~~other items also decreased by~~ $216.56 million, ~~as a result of net losses on early extinguishment of debt~~respectively.

~~Six~~ ~~Months~~Short-Term ~~Ended~~and ~~June 30,~~Long-Term ~~2004~~Liquidity; ~~Compared~~Compliance towith ~~Six Months Ended June 30, 2003 (Pro Forma)~~Covenants

~~For~~We depend upon the ~~six~~HLLC ~~months~~Revolving ~~ended~~Facility to provide liquidity for our operations and working capital needs. As of June 30, ~~2004~~2005, we had $63.0 million aof ~~net~~outstanding ~~loss~~borrowings ofand approximately $~~184~~16.8 million onof ~~revenues~~outstanding letters of ~~$4,842.7~~credit ~~compared~~under toour a$350 million ~~net~~HLLC ~~loss~~Revolving ofFacility. We had $~~121~~27.97 million of cash on ~~revenues~~our balance sheet as of $4 June 30,~~049~~ 2005.6 As of June ~~million~~30, ~~for~~2005, ~~the~~we ~~same~~had ~~period~~cash inand ~~2003.~~unused ~~The~~borrowing ~~increase~~capacity of approximately $298 million. During the six months ended June 30, 2005, we repaid $62.91 million inon ~~net~~the ~~loss~~HLLC ~~was~~Revolving ~~the~~Facility ~~result~~and of$50.0 million on the ~~following~~HLLC ~~items:~~Term Facility from operating cash flows.

We believe our current liquidity, together with funds generated by our businesses, is sufficient to meet the short-term and long-term needs of our businesses, including funding operations, making capital expenditures and servicing our debt obligations in the ordinary course. We believe that we are in compliance with the covenants contained in our credit agreements and the indentures governing our notes.

Off-Balance Sheet Arrangements

We issue certain letters of credit and guarantees of certain short-term debt facilities and other obligations for some of our consolidated subsidiaries. The maximum exposure under these letters of credit and guarantees is $16.8 million as of June 30, 2005. We do not expect any material amounts to be drawn on these instruments.

Other than certain operating leases that are material, which have been entered into in the normal course of business, we do not have any off-balance sheet financing arrangements such as synthetic leases or securitization agreements. As such, we are not materially exposed to any financing, liquidity, market or credit risk that may arise if we had engaged in such financing arrangements.

Restructuring

As of June 30, 2005, accrued restructuring and plant closing costs by type of cost and activity consisted of the following (dollars in millions):

	Workforce reductions(1)			Demolition and decommissioning			Non-cancelable lease costs			Other restructuring costs			Total(2)
Accrued liabilities as of December 31, 2004	$	11.0		$	2.5		$	—		$	—		$	13.5
2005 charges for 2004 activities		0.3			0.1			—			4.4			4.8
Reversal of reserves no longer required		—			—			—			(0.5	)		(0.5	)
2005 payments for 2004 activities		(3.9	)		(0.1	)		(0.5	)		(3.3	)		(7.8	)
Foreign currency effect on reserve balance		(0.1	)		—			—			—			(0.1	)

Accrued liabilities as of June 30, 2005	$	7.3		$	2.5		$	(0.5	)	$	0.6		$	9.9

(1): Substantially all of the positions terminated in connection with the restructuring programs were terminated under ongoing termination benefit arrangements. Accordingly, the related liabilities

~~restructuring~~were ~~and~~accrued ~~plant~~as ~~closing~~a ~~costs~~one-time ~~for~~charge ~~the~~to ~~six~~earnings ~~months~~in ~~ended~~accordance ~~June 30,~~with ~~2004,~~SFAS ~~$58~~No.7 ~~million~~112, ~~are~~"Employers' ~~charges~~Accounting ~~payable~~for inPostemployment ~~cash and $100~~Benefits.~~5 million are non-cash charges.~~ "

(2): Accrued liabilities by activities were as follows:

The following table sets forth the revenues and EBITDA for each of our operating segments (dollars in millions):

	June 30, 2005		December 31, 2004
Accrued liabilities by activities were as follows:
2001 activities	$	2.8	$	2.8
2004 activities		6.5		10.0
Foreign currency effect on reserve balance		0.6		0.7

Total	$	9.9	$	13.5

		Six months ended June 30,
								% Change
		2004			2003
Revenues
Polyurethanes		$	1,373.4		$	1,120.7		23	%
Performance Products			906.0			826.5		10	%
Polymers			638.7			558.4		14	%
Pigments			533.1			501.5		6	%
Base Chemicals			1,770.3			1,338.8		32	%
Eliminations			(378.8	)		(296.3	)	28	%
	Total	$	4,842.7		$	4,049.6		20	%
Segment EBITDA
Polyurethanes		$	172.8		$	88.3		96	%
Performance Products			51.4			48.7		6	%
Polymers			19.1			36.1		(47	)%
Pigments			(75.8	)		59.8		NM
Base Chemicals			134.5			53.0		154	%
Corporate and other			22.7			37.8		(40	)%
	Total	$	324.7		$	323.7		0	%

Details with respect to our reserves for restructuring and plant closing costs are provided below by segments and activity (dollars in millions):

NM—Not meaningful

	Performance Products		Polymers			Base Chemicals			Total
Accrued liabilities as of December 31, 2004	$	7.7	$	5.8		$	—		$	13.5
2005 charges for 2004 activities		1.4		2.9			0.5			4.8
Reversal of reserves no longer required		(0.1)		—			(0.4	)		(0.5	)
2005 payments for 2004 activities		(3.4)		(4.4	)		—			(7.8	)
Foreign currency effect on reserve balance		(0.1)		—			—			(0.1	)

Accrued liabilities as of June 30, 2005	$	5.5	$	4.3		$	0.1		$	9.9
Current portion of restructuring reserve	$	5.2	$	1.9		$	0.1		$	7.2
Long-term portion of restructuring reserve		0.3		2.4			—			2.7
Estimated additional future cash charges for current restructuring projects:
Estimated additional charges within one year	$	5.6	$	—		$	—		$	5.6
Estimated additional charges beyond one year	$	—	$	—		$	—		$	—

As of June 30, 2005 and December 31, 2004, we had reserves for restructuring and plant closing costs of $9.9 million and $13.5 million, respectively. During the six months ended June 30, 2005 we recorded net charges of $4.3 million (all of which is payable in cash) for workforce reductions, non-cancelable lease costs, and other restructuring costs associated with closure or curtailment of activities at our smaller, less efficient manufacturing facilities. During the first six months of 2005, we made cash payments against these reserves of $7.8 million.

As of December 31, 2004, our Performance Products segment reserve consisted of $7.7 million related to various restructuring programs, mainly in connection with the closure of our Guelph, Ontario, St. Louis, Missouri and Austin, Texas facilities. During the six months ended June 30, 2005, our Performance Products segment recorded net restructuring charges of $1.3 million related to 2004 activities and made cash payments of $3.4 million. These restructuring activities are expected to result in additional charges of approximately $6 million through 2006.

As of December 31, 2004, our Polymers segment reserve consisted of $5.8 million related primarily to the closure of a phenol manufacturing unit in Australia and restructuring activities at our Odessa, Texas and Mansonville, Canada facilities. During the six months ended June 30, 2005, our Polymers segment recorded restructuring charges of $2.9 million related to these activities, all of which are payable in cash, and made cash payments of $4.4 million. These restructuring activities are not expected to result in any material additional restructuring charges. During the six months ended June 30, 2005, our Polymers segment made workforce reductions of 7 positions.

~~Polyurethanes~~ During the six months ended June 30, 2005, our Base Chemicals segment recorded restructuring charges of $0.5 million and reversed $0.4 million of accruals related to the relocation of our corporate offices to The Woodlands, Texas and the consolidation of our U.S. purchasing functions which were no longer required.

~~For~~Capital the six months ended June 30, 2004, Polyurethanes revenues increased by $252.8 million, or 23%, to $1,373.5 million from $1,120.7 million for the same period in 2003. MDI sales revenue increased by 27%, due to a 17% increase in sales volumes, and a 9% increase in average selling prices. MDI sales volumes rose by 49%, 30% and 11% in Asia, Europe and the Americas, respectively, due to improved customer demand resulting from stronger global economic conditions. MDI average selling prices increased by 9% as a result of improved market conditions and in response to increased raw material costs and the strength of the major European currencies versus the U.S. dollar. Polyol sales revenue increased by 12% as average selling prices increased by 9% and sales volumes increased by 3%. PO/MTBE product sales revenues increased by 27%. PO revenues, excluding tolling, decreased 1% on a 4% decrease in volumes due to a T&I which took place in the first quarter 2004, partly offset by a 3% increase in average selling prices. MTBE sales revenue increased by 14% due to a 13% increase in selling prices due to stronger crude oil and gasoline markets and a 1% increase in sales volumes. Expenditures

~~For~~ Capital expenditures for the six months ended June 30, ~~2004,~~2005 ~~Polyurethanes~~were ~~segment EBITDA increased by~~ $8434.5 million tocompared ~~$172.8 million~~with ~~from~~ $8829.35 million ~~for~~in the ~~same~~comparable period ~~in 2003.~~of ~~Increased segment EBITDA resulted mainly from a $127~~2004.~~0 million increase in revenue due to higher sales volumes and higher average selling prices, partly offset by $39.3 million in~~ ~~increased~~During ~~raw material and energy costs. We also recorded $22.9 million in restructuring charges in 2004 in connection with cost reduction efforts at our Everberg~~2005, ~~Belgium, West Deptford, New Jersey and Rozenburg, Netherlands sites. In the first half of 2003,~~ we ~~recorded~~expect ~~restructuring~~to ~~charges~~spend inapproximately ~~the amount of~~ $~~18.5~~100 million. ~~For~~on ~~the~~capital ~~six months ended June 30, 2004, fixed manufacturing costs increased $1~~expenditures.~~2 million~~ and SG&A costs decreased $2.7 million, as savings from our ongoing restructuring activities were more than sufficient to offset the impact of the strength of the major European currencies versus the U.S. dollar.

Performance Products

For the six months ended June 30, 2004, Performance Products revenues increased by $79.5 million, or 10%, to $906.0 million from $826.5 million for the same period in 2003. Overall, average selling prices increased by 13%, while sales volumes fell by 2%. Ethylene glycol revenues increased by 4% as average selling prices rose by 24% in response to higher raw material and energy costs and improved market conditions, partially offset by a 17% decrease in sales volumes due to reduced production in the first quarter 2004 attributable to maintenance activities at one of our ethylene oxide units. MAn revenues increased by 30%, mainly due to a 25% increase in sales volumes, primarily due to strong demand in the housing and recreational markets. Surfactants revenues increased by 8%, resulting from an 11% increase in average selling prices, partially offset by a decrease of 3% in sales volumes. Average selling prices for our surfactants rose in response to higher raw material and energy costs, improved product mix and the strength of European and Australian currencies versus the U.S. dollar. The reduction in surfactants sales volumes was primarily due to reduced customer demand in certain product lines, increased competition in the marketplace and reduced production at our Chocolate Bayou, Texas facility and decreased export business as a result of the strength of the major European currencies versus the U.S. dollar. Amine revenues increased by 10%, resulting from a 6% increase in average selling prices in response to higher raw material and energy costs and due to an improved product mix, while sales volumes increased by 1%, mainly due to an increase in ethanolamines sales volumes.

For the six months ended June 30, 2004, Performance Products segment EBITDA increased by $2.7 million to $51.4 million from $48.7 million for the same period in 2003. In the six months ended June 30, 2004, we recorded a $20.3 million charge for the closure of our Guelph, Canada facility, and in the same period in 2003 we recorded a $20.1 million charge for the closure of a number of units at our Whitehaven, U.K. facility. Average selling prices increased EBITDA by $95.3 million, more than offsetting a $78.8 million increase in raw material and energy costs. Lower sales volumes, particularly in our surfactants business, reduced EBITDA by $11.7 million. Fixed manufacturing costs increased by

~~$1.6 million~~Environmental, as ~~additional~~Health ~~maintenance expenditures, particularly at our Jefferson County~~ and ~~Chocolate~~Safety Bayou, Texas facilities, and $7.2 million of additional expense resulting from the strength of the major European currencies versus the U.S. dollar largely offset by cost reduction programs, especially in our surfactants operations. Matters

~~Polymers~~ General

~~For~~We ~~the~~are ~~six~~subject ~~months~~to ~~ended~~extensive ~~June 30~~federal, ~~2004~~state, ~~Polymers~~local ~~revenues~~and ~~increased~~foreign bylaws, ~~$80.3 million~~regulations, orrules ~~14%,~~and ordinances relating to ~~$638.7 million~~pollution, ~~from~~protection ~~$558.4 million for~~of the ~~same~~environment ~~period~~and inthe generation, ~~2003.~~storage, ~~Overall~~handling, ~~Polymers~~transportation, ~~segment~~treatment, ~~average~~disposal ~~selling~~and ~~prices~~remediation ~~increased~~of byhazardous 7%substances and ~~sales~~waste ~~volumes increased by 7%~~materials. ~~Polyethylene~~In ~~revenues~~the ~~increased~~ordinary bycourse ~~4%,~~of ~~resulting from a 6% increase in average selling prices~~business, ~~primarily~~we inare ~~response~~subject to ~~higher~~frequent environmental ~~underlying~~inspections ~~raw material~~ and ~~energy~~monitoring ~~costs,~~ and aoccasional 2%investigations ~~decrease~~by ingovernmental ~~sales~~enforcement ~~volumes~~authorities. ~~Lower~~In ~~sales volumes largely resulted from lower polyethylene sales in the first quarter 2004 to build inventory for the planned T&I at our Odessa facility~~addition, ~~as well as the delayed restart of~~ our ~~LLDPE~~production ~~plant.~~facilities ~~Polypropylene~~require ~~revenue~~operating ~~increased~~permits bythat ~~16%,~~are ~~resulting~~subject ~~from a 12%~~to ~~increase in average selling prices~~renewal, ~~primarily~~modification ~~in response to higher underlying raw material~~ and ~~energy costs~~, ~~and a 4% increase~~ in ~~sales~~certain ~~volumes~~circumstances, ~~as demand strengthened in this market~~revocation. ~~APAO~~Actual ~~revenues increased~~or byalleged ~~13%,~~violations asof ~~sales~~environmental ~~volumes~~laws ~~increased~~or ~~14%~~permit ~~largely~~requirements ascould ~~the~~ result ~~of increased sales~~ in ~~the~~restrictions ~~export~~or ~~market,~~prohibitions ~~offset~~on ~~by a 1% decrease in average selling prices due to product mix. Expandable~~plant ~~polystyrene revenue increased by 16%~~operations, ~~resulting~~substantial ~~from~~civil aor 7%criminal ~~increase~~sanctions, inas ~~average~~well ~~selling prices~~as, ~~primarily~~under <

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