Use these links to rapidly review the documentHUNTSMAN ADVANCED MATERIALS LLC QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005 TABLE OF CONTENTS



SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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Form 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2005                
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number 333-115344

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

|Delaware(State or other jurisdiction of
incorporation or organization) |  | 92-0194012(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)

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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 o    NO ý

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

On May 9, 2005, 4,672,047 units of membership interest of the registrant were outstanding. There is no established trading market for the registrant's
units of membership interest. All of the registrant's units of membership interest are held by affiliates.



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HUNTSMAN ADVANCED MATERIALS LLC  QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD  ENDED MARCH 31, 2005  TABLE OF CONTENTS



|        |         |                                                                                            
|------- | ------- | -------------------------------------------------------------------------------------------
|PART I  |         | FINANCIAL INFORMATION                                                                      
|        | ITEM 1. |                                                                                            
|        |         | Condensed Consolidated Balance Sheets (Unaudited)                                          
|        |         | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
|        |         | Condensed Consolidated Statements of Members' Equity (Unaudited)                           
|        |         | Condensed Consolidated Statements of Cash Flows (Unaudited)                                
|        |         | Notes to Condensed Consolidated Financial Statements (Unaudited)                           
|        | ITEM 2. |                                                                                            
|        | ITEM 3. |                                                                                            
|        | ITEM 4. |                                                                                            
|PART II |         | OTHER INFORMATION                                                                          
|        | ITEM 1. |                                                                                            
|        | ITEM 6. |                                                                                            

2

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

|                                              |                                                                                                   | March 31,
2005                        |       | December 31,
2004 |      
|--------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------- | ----- | ----------------- | -----
|ASSETS                                        |                                                                                                   |                                       |       |                   |      
|Current assets:                               |                                                                                                   |                                       |       |                   |      
|                                              | Cash and cash equivalents                                                                         |                                       | $     | 94.4              |      
|                                              | Trade accounts receivable (net of allowance for doubtful accounts of $7.1 and $7.3, respectively) |                                       |       | 223.9             |      
|                                              | Inventories, net                                                                                  |                                       |       | 188.7             |      
|                                              | Deferred income taxes                                                                             |                                       |       | 1.0               |      
|                                              | Other current assets                                                                              |                                       |       | 11.7              |      
|                                              |                                                                                                   |                                       |       |                   |      
|                                              |                                                                                                   | Total current assets                  |       |                   | 519.7
|Property, plant and equipment, net            |                                                                                                   |                                       | 359.4 |                   |      
|Intangible assets                             |                                                                                                   |                                       | 0.7   |                   |      
|Deferred income taxes                         |                                                                                                   |                                       | 33.0  |                   |      
|Other noncurrent assets                       |                                                                                                   |                                       | 18.5  |                   |      
|                                              |                                                                                                   |                                       |       |                   |      
|                                              |                                                                                                   | Total assets                          |       | $                 | 931.3
|                                              |                                                                                                   |                                       |       |                   |      
|LIABILITIES AND MEMBERS' EQUITY               |                                                                                                   |                                       |       |                   |      
|Current liabilities:                          |                                                                                                   |                                       |       |                   |      
|                                              | Accounts payable                                                                                  |                                       | $     | 94.4              |      
|                                              | Accrued liabilities                                                                               |                                       |       | 94.3              |      
|                                              | Deferred income taxes                                                                             |                                       |       | 6.2               |      
|                                              | Short-term debt                                                                                   |                                       |       | 0.4               |      
|                                              |                                                                                                   |                                       |       |                   |      
|                                              |                                                                                                   | Total current liabilities             |       |                   | 195.3
|Long-term debt, net                           |                                                                                                   |                                       | 348.8 |                   |      
|Other noncurrent liabilities                  |                                                                                                   |                                       | 135.8 |                   |      
|                                              |                                                                                                   |                                       |       |                   |      
|                                              |                                                                                                   | Total liabilities                     |       |                   | 679.9
|                                              |                                                                                                   |                                       |       |                   |      
|Commitments and contingencies (Notes 14 & 15) |                                                                                                   |                                       |       |                   |      
|Minority interests                            |                                                                                                   |                                       | 2.6   |                   |      
|Members' equity:                              |                                                                                                   |                                       |       |                   |      
|                                              | Members' equity, 4,672,047 units                                                                  |                                       |       | 222.1             |      
|                                              | Retained earnings                                                                                 |                                       |       | 36.1              |      
|                                              | Accumulated other comprehensive loss                                                              |                                       |       | (9.4              | )    
|                                              |                                                                                                   |                                       |       |                   |      
|                                              |                                                                                                   | Total members' equity                 |       |                   | 248.8
|                                              |                                                                                                   |                                       |       |                   |      
|                                              |                                                                                                   | Total liabilities and members' equity |       | $                 | 931.3
|                                              |                                                                                                   |                                       |       |                   |      

See
accompanying notes to unaudited condensed consolidated financial statements.

3

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

|                                                 |                                       | Three Months
Ended
March 31, 2005 |       | Three Months
Ended
March 31, 2004 |     
|------------------------------------------------ | ------------------------------------- | --------------------------------- | ----- | --------------------------------- | ----
|Revenues                                         |                                       | $                                 | 311.5 |                                   | $   
|Cost of goods sold                               |                                       |                                   | 233.5 |                                   |     
|                                                 |                                       |                                   |       |                                   |     
|Gross profit                                     |                                       |                                   | 78.0  |                                   |     
|Expenses:                                        |                                       |                                   |       |                                   |     
|                                                 | Selling, general and administrative   |                                   |       | 35.4                              |     
|                                                 | Research and development              |                                   |       | 8.7                               |     
|                                                 | Legal and contract settlement charges |                                   |       |                                  |     
|                                                 | Foreign exchange losses (gains)       |                                   |       | 12.9                              |     
|                                                 |                                       |                                   |       |                                   |     
|                                                 |                                       | Total expenses                    |       |                                   | 57.0
|                                                 |                                       |                                   |       |                                   |     
|Operating income                                 |                                       |                                   | 21.0  |                                   |     
|Interest expense, net                            |                                       |                                   | (10.2 | )                                 |     
|                                                 |                                       |                                   |       |                                   |     
|Income before income taxes and minority interest |                                       |                                   | 10.8  |                                   |     
|Income tax expense                               |                                       |                                   | (13.4 | )                                 |     
|Minority interests in subsidiaries' income       |                                       |                                   | (0.2  | )                                 |     
|                                                 |                                       |                                   |       |                                   |     
|Net loss                                         |                                       |                                   | (2.8  | )                                 |     
|Other comprehensive loss                         |                                       |                                   | (4.0  | )                                 |     
|                                                 |                                       |                                   |       |                                   |     
|Comprehensive loss                               |                                       | $                                 | (6.8  | )                                 | $   
|                                                 |                                       |                                   |       |                                   |     

See
accompanying notes to unaudited condensed consolidated financial statements.

4

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (UNAUDITED)        (Dollars and Units in Millions)

|                           |  | Share Capital/
Members' Equity |  |   |       |  |   |      |  
|-------------------------- |  | ------------------------------ |  | - | ----- |  | - | ---- | -
|
|
|
|Balance, December 31, 2004 |  | 4.7                            |  | $ | 222.1 |  | $ | 38.9 |  
|Net loss                   |  |                                |  |   |      |  |   | (2.8 | )
|Other comprehensive loss   |  |                                |  |   |      |  |   |     |  
|                           |  |                                |  |   |       |  |   |      |  
|Balance, March 31, 2005    |  | 4.7                            |  | $ | 222.1 |  | $ | 36.1 |  
|                           |  |                                |  |   |       |  |   |      |  

See
accompanying notes to unaudited condensed consolidated financial statements.

5

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)        (Dollars in Millions)

Three Months
Ended
March 31, 2005

Three Months
Ended
March 31, 2004Cash Flows From Operating Activities:Net loss

$
(2.8
)
$
(1.6
)Adjustments to reconcile net loss to net cash from operating activities:Depreciation and amortization


12.2


14.9Noncash interest expense


0.6


0.7Unrealized loss on foreign currency transactions


10.9


0.8Other


0.2


(1.0
)Loss (gain) on sale of fixed assets


0.3


(0.9
)Deferred income taxes


5.5


9.5Minority interests in subsidiaries income


0.2


0.4Changes in operating assets and liabilities:Accounts receivable, net


4.3


(23.7
)Inventories, net


(14.6
)

(8.2
)Accounts payable


15.8


7.8Other operating assets and liabilities


(24.8
)

(6.5
)Net cash provided by (used in) operating activities


7.8


(7.8
)Investing Activities:Capital expenditures


(5.6
)

(1.7
)Other assets





0.2Proceeds from sale of fixed assets


0.1


1.2Net cash used in investing activities


(5.5
)

(0.3
)Financing Activities:Decrease in short-term debt, net


(1.3
)

(0.9
)Net cash used in financing activities


(1.3
)

(0.9
)Effect of exchange rate changes on cash


(0.4
)

(1.0
)Increase (decrease) in cash and cash equivalents


0.6


(10.0
)Cash and cash equivalents at beginning of period


93.8


73.2Cash and cash equivalents at end of period

$
94.4

$
63.2Supplemental cash flow information:Cash paid for interest

$
(19.4
)
$
(20.3
)Cash paid for income taxes

$
(2.3
)
$



See
accompanying notes to unaudited condensed consolidated financial statements.

6

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.     General



Huntsman Advanced Materials LLC (including its subsidiaries, unless the context otherwise requires, the "Company", "our", "us", or "we") is a global producer and
marketer of technologically advanced specialty chemicals used in a wide variety of industrial and consumer applications. We provide our customers with:



Our
products are used to address customer-specific application needs and are utilized in a wide variety of end markets, such as adhesives, electrical and electronic materials, structural composites
and surface technologies. We operate 13 manufacturing facilities worldwide, including facilities in North America, South America, Europe, Asia and Africa. We operate in one reportable business
segment.



We are a Delaware limited liability company, 90.3% of our membership interests are indirectly owned by Huntsman Corporation through Huntsman Advanced Materials
Holdings LLC, a Delaware limited liability company ("AdMat Holdings") and Huntsman Advanced Materials Investment LLC, a Delaware limited liability company ("AdMat Investment") and the balance of the
membership interests are held indirectly by third parties, including SISU Capital Limited ("SISU"), a private investment firm based in London, U.K.

On
June 30, 2003, a predecessor of Huntsman Corporation, Huntsman Holdings LLC ("Huntsman Holdings") and other equity affiliates of Huntsman Holdings completed a restructuring and
business combination involving Vantico Group S.A. (collectively with its subsidiaries, unless the context otherwise requires, "Vantico" or the "Predecessor Company"), whereby ownership of the equity
of Vantico was transferred to us (the "AdMat Transaction").

We
accounted for the AdMat Transaction as a purchase business combination.



On February 16, 2005, Huntsman Corporation, our parent corporation, completed initial public offerings of (i) 55,681,819 shares of its common stock
sold by Huntsman Corporation and 13,579,546 shares of its common stock sold by a selling stockholder, in each case at a price to the public of $23 per share, and (ii) 5,750,000 shares of its 5%
Mandatory Convertible Preferred Stock sold by Huntsman Corporation at a price to the public of $50 per share. 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 Equity Holdings Corporation, Huntsman
LLC and Huntsman International Holdings LLC.



Our consolidated financial statements include the accounts of our majority-owned subsidiaries for which we are the primary beneficiary.

7

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Our unaudited interim condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States
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 presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in our Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on April 5, 2005 (File No. 333-115344).



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.



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

2.     Recently Issued Accounting Standards

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. We adopted this financial interpretation on January 1,
2005. The adoption of the standard had no impact on the financial statements.

In
November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costsan amendment of ARB
No. 43." SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material to be recognized as current-period charges.
It also requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The requirements of the standard will be
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are reviewing SFAS No. 151 to determine the statement's impact on our consolidated financial
statements.

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.

8

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In
December 2004, the FASB issued SFAS No. 123R, "Share Based Payment." SFAS No. 123R requires entities to measure
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during
which the employee is required to provide services in exchange for the award. This standard eliminates the alternative to use the intrinsic value method of accounting for share based payments as
previously provided in APB Opinion No. 25, "Accounting for Stock Issued to Employees." We adopted SFAS No. 123R effective
January 1, 2005, and have applied this standard prospectively to share-based awards issued to our employees in connection with Huntsman Corporation's initial public offering. In connection with
Huntsman Corporation's initial public offering of common stock on February 16, 2005, certain of our employees received Huntsman Corporation stock options and restricted stock. Accordingly, we
were allocated share-based compensation expense of $0.1 million during the three months ended March 31, 2005. We did not have share-based awards prior to the awards issued in connection
with Huntsman Corporation's initial public offering.

In
March 2005, the FASB issued FIN 47,"Accounting for Conditional Asset Retirement Obligations."FIN 47 clarifies the term conditional asset retirement
obligationused in 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.

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 adopted, 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.

3.     Inventories

Inventories consist of the following (dollars in millions):

March 31,
2005

December 31,
2004Raw materials and supplies

$
38.4

$
34.6Work in process


22.9


29.4Finished goods


137.9


126.5Total


199.2


190.5Allowance for obsolete and slow moving inventories


(10.5
)

(11.0
)Inventories, net

$
188.7

$
179.5


9

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4.     Property, Plant and Equipment

The cost and accumulated depreciation of property, plant and equipment are as follows (dollars in millions):

March 31,
2005

December 31,
2004Land

$
18.6

$
19.5Buildings


138.8


142.7Plant and equipment


273.3


279.8Construction in progress


15.4


12.7Total


446.1


454.7Less accumulated depreciation


(86.7
)

(76.1
)Property, Plant and Equipment, net

$
359.4

$
378.6


Depreciation
expense for the three months ended March 31, 2005 and 2004, was $12.2 million and $13.9 million respectively.

5.     Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets were as follows (dollars in millions):

|              |  | March 31, 2005 |     | December 31, 2004
|------------- |  | -------------- | --- | -----------------
|
|Pension asset |  |                | 0.7 |                  
|              |  |                |     |                  
|Total         |  | $              | 0.7 |                  
|              |  |                |     |                  

Amortization
expense for intangible assets for the three month periods ended March 31, 2005 and 2004, was nil and $1.0 million.

6.     Other Current Assets

Other current assets consist of the following (dollars in millions):

March 31,
2005

December 31,
2004Prepaid expenses

$
2.5

$
3.2Other current assets


9.2


10.2Total

$
11.7

$
13.4


10

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7.     Other Noncurrent Assets

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

March 31,
2005

December 31,
2004Debt issuance costs, net

$
12.5

$
13.1Other noncurrent assets


6.0


3.6Total

$
18.5

$
16.7


In
connection with the issuance of certain long-term debt and other obligations, certain direct fees and expenses were incurred. These financing costs have been capitalized
and are amortized as interest expense through the consolidated statements of operations over the term of the associated debt using the effective interest method. The amortization expense related to
capitalized financing costs amortization included in interest expense was $0.6 million and $0.7 million for the three months ended March 31, 2005 and 2004, respectively.

8.     Accrued Liabilities

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

March 31,
2005

December 31,
2004Payroll, severance and related costs

$
25.6

$
25.8Taxes other than income taxes


7.0


19.0Interest


8.4


17.8Income taxes payable


12.4


6.5Restructuring and plant closing costs


17.2


21.1Other miscellaneous accruals


23.7


23.3Total

$
94.3

$
113.5


9.     Other Noncurrent Liabilities

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

March 31,
2005

December 31,
2004Pension and postretirement liabilities

$
103.6

$
112.0Loss contingencies


10.5


11.7Other noncurrent liabilities


6.2


6.1Restructuring reserves


9.0


11.9Deferred tax liability


6.5


0.5Total

$
135.8

$
142.2


10.   Restructuring Charges

As of December 31, 2004, our restructuring reserves consisted of $33.0 million related to the restructuring programs implemented in association with
the AdMat transaction, the realignment and simplification of the commercial and technical organization and the closure of the Kaohsiung, Taiwan production facility.

11

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As
of March 31, 2005, activity in our restructuring reserves consisted of the following (dollars in millions):

|                                        |                                            | Workforce
Reductions |      | Plant
Closure Costs |   | Other |   | Total |    
|--------------------------------------- | ------------------------------------------ | -------------------- | ---- | ------------------- | - | ----- | - | ----- | ---
|Accrued liability as of January 1, 2005 |                                            | $                    | 28.1 |                     | $ | 1.1   |   | $     | 3.8
|                                        | Paymentsopening balance sheet initiatives |                      |      | (3.0                | ) |       |  |       |    
|                                        | Payments2004 initiatives                  |                      |      | (2.5                | ) |       |  |       |    
|                                        | Impact of foreign currency translation     |                      |      | (0.6                | ) |       |  |       |    
|                                        |                                            |                      |      |                     |   |       |   |       |    
|Accrued liability as of March 31, 2005  |                                            | $                    | 22.0 |                     | $ | 1.1   |   | $     | 3.1
|                                        |                                            |                      |      |                     |   |       |   |       |    

11.   Debt

Outstanding debt consists of the following (dollars in millions):

March 31,
2005

December 31,
2004Debt:AdMat Senior Secured Notes

$
348.7

$
348.6Vantico Senior Notes


0.1


0.1Other debt


0.4


1.7Total


349.2


350.4Less short-term debt


(0.4
)

(1.7
)Total long-term debt

$
348.8

$
348.7




On June 30, 2003, we entered into the AdMat Revolving Credit Facility that provides up to $60 million of borrowings and is secured by a first lien
on substantially all of our assets and those of certain of our subsidiaries. The collateral includes substantially all real property and equipment relating to our manufacturing plants located at
Bergkamen, Germany; Monthey, Switzerland; McIntosh, Alabama; and Duxford, U.K. The collateral also includes certain capital stock and intercompany notes of certain of our subsidiaries, and certain
other assets, principally including inventory and accounts receivable. Our obligations under the AdMat Revolving Credit Facility have been initially guaranteed by all of our U.S. subsidiaries and
certain of our non-U.S. subsidiaries (collectively, the "AdMat Guarantors"). The agent for the lenders under the AdMat Revolving Credit Facility and the trustee under the indenture
governing the Senior Secured Notes are parties to an intercreditor agreement (the "AdMat Intercreditor Agreement").

The
AdMat Revolving Credit Facility matures on June 30, 2007. Interest rates, at our option, are based upon either a eurocurrency rate (LIBOR) or a base rate (prime), plus an
applicable spread. The applicable spreads vary based on a pricing grid. In the case of the eurocurrency-based loans, spreads range from 3.0% to 4.5% per annum, depending on whether specified
conditions have been satisfied, and, in the case of base rate loans, from 2.0% to 3.5% per annum. As of March 31, 2005, we had no amounts drawn on the AdMat Revolving Credit Facility and had
approximately $10.1 million of letters of credit issued and outstanding under the AdMat Revolving Credit Facility. The AdMat Revolving Credit Facility allows us to borrow up to
$20 million secured by letters of credit; however, the $60 million revolving credit facility is reduced dollar-for-dollar by any letters of credit outstanding.
There are no scheduled debt amortization payments on the AdMat Revolving Credit Facility until its maturity date.

12

---



The
agreement governing the AdMat Revolving Credit Facility contain customary financial covenants; covenants relating to the incurrence of debt, the purchase and sale of assets,
limitations on investments and affiliate transactions; change in control provisions; events of default provisions; and acceleration provisions. Management believes that we were in compliance with the
covenants of the AdMat Revolving Credit Facility as of March 31, 2005.



In connection with the AdMat Transaction, on June 30, 2003, we issued $250 million of Fixed Rate Notes due 2010 and $100 million of Floating
Rate Notes due 2008. The $250 million Fixed Rate Notes bear a fixed rate of interest of 11%, and the Floating Rate Notes bear interest at a rate per annum equal to LIBOR plus 8.0%, subject to a
floor with respect to LIBOR of 2.0%. As of March 31, 2005, the interest rate on the Floating Rate Notes was 10.89%, excluding additional interest discussed below. Interest on the Floating Rate
Notes resets semiannually. The $100 million Floating Rate Notes were issued with an original issue discount of 2.0%, or for $98 million. The $2 million discount is being amortized
to interest expense over the term of the Floating Rate Notes. Interest is payable on the Senior Secured Notes semiannually on January 15 and July 15 of each year. The effective interest
rate on the Floating Rate Notes was 11.14% as of March 31, 2005, excluding the impact of additional interest discussed below.

The
Senior Secured Notes are secured by a second lien, subject to the AdMat Intercreditor Agreement, on substantially all of the assets that secure the AdMat Revolving Credit Facility.
The Senior Secured Notes effectively rank senior in right of payment to all existing and future obligations of our company that are unsecured or secured by liens on the collateral junior to the liens
securing the Senior Secured Notes. The Senior Secured Notes are initially guaranteed on a senior basis by the AdMat Guarantors and are also supported by liens on substantially all of the assets of the
AdMat Guarantors.

The
Fixed Rate Notes are redeemable on or after July 15, 2007 at our option at a price declining ratably from 105.5% to 100.0% of par value by the year 2009. The Floating Rate
Notes are redeemable on or after July 15, 2005 at our option at a price declining ratably from 105.0% to 100.0% of par value by the year 2007. At any time prior to July 15, 2007 for the
Fixed Rate Notes and July 15, 2005 for the Floating Rate Notes, we may redeem all or part of such notes at 100% of their principal amount, plus a "make whole" premium, as defined in the
indenture. In addition, at any time prior to July 15, 2006 for the Fixed Rate Notes and July 15, 2005 for the Floating Rate Notes, we may redeem up to 35% of the aggregate principal
amount of the Senior Secured Notes at a redemption price of 111% of the principal thereof with the net cash proceeds of one or more qualified equity offerings, subject to certain conditions and
limitations. There are no scheduled debt amortization payments on the Senior Secured Notes until their maturity date.

The
indenture governing the Senior Secured Notes contains covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other
things. The indenture also contains a change of control provision requiring us to offer to repurchase the Senior Secured Notes upon a change of control. Management believes that we were in compliance
with the covenants of the indenture as of March 31, 2005.

Under
the terms of a registration rights agreement among us, the AdMat Guarantors and the initial purchasers of the Senior Secured Notes, we were required to cause a registration
statement relating to an exchange offer for the Senior Secured Notes to become effective on or before July 9, 2004 (the "Effectiveness Date") and to complete the exchange offer on or before
August 23, 2004 (the "Completion Date"). Due to a delay in the completion of predecessor period audited financial statements for certain of our subsidiaries, the registration statement did not
become effective by the Effectiveness Date and the exchange offer was not completed by the Completion Date. Accordingly,

13

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under
the registration rights agreement, we were required to pay additional interest on the Senior Secured Notes. We are currently paying additional interest at a rate of 0.75% per year and this rate
will increase to 1.00% per year on May 21, 2005 until the exchange offer is completed. We expect that the exchange offer will be completed in June 2005.



On August 1, 2000, the Predecessor Company issued the €250 million Vantico Senior Notes. The Vantico Senior Notes bear interest at
12%, become due during 2010 and are unsecured subordinated debt obligations. In connection with the AdMat Transaction, approximately 99.6% of the Vantico Senior Notes were converted to equity and the
Predecessor Company entered into a supplemental indenture that provided for the elimination of most of the covenants previously contained in the indenture. On September 10, 2003, pursuant to a
change of control provision in the supplemental indenture, substantially all of the remaining approximately 0.4% of the Vantico Senior Notes were purchased at 101% of par value plus accrued interest
and were cancelled. Less than $0.1 million of the Vantico Senior Notes were outstanding as of March 31, 2005.

12.   Employee Benefit Plans

Components of the net periodic benefit costs for the three months ended March 31, 2005 and 2004 were as follows (dollars in millions):

|                                        |                                 | Defined Benefit Plans |   | Other Postretirement
Benefit Plans
|--------------------------------------- | ------------------------------- | --------------------- | - | ----------------------------------
|
|Components of net periodic benefit cost |                                 |                       |   |                                   
|                                        | Service cost                    |                       | $ | 3.1                               
|                                        | Interest cost                   |                       |   | 4.1                               
|                                        | Expected return on assets       |                       |   | (4.0                              
|                                        | Prior service cost amortization |                       |   | (0.8                              
|                                        | Actuarial gain amortization     |                       |   | 0.1                               
|                                        |                                 |                       |   |                                   
|                                        | Net periodic benefit cost       |                       | $ | 2.5                               
|                                        |                                 |                       |   |                                   

14

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13.   Other Comprehensive Loss

The components of other comprehensive loss are as follows (dollars in millions):

|                                                                                                                            |  | Accumulated other
comprehensive loss |      | Other
comprehensive loss |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---- | ------------------------ | -
|
|Foreign currency translation adjustments, net of tax of $5.0 million as of each of March 31, 2005 and December 31, 2004     |  | $                                    | (8.0 | )                        | $
|Additional minimum pension liability, net of tax benefit of $0.3 million as of each of March 31, 2005 and December 31, 2004 |  |                                      | (1.4 | )                        |  
|                                                                                                                            |  |                                      |      |                          |  
|Total                                                                                                                       |  | $                                    | (9.4 | )                        | $
|                                                                                                                            |  |                                      |      |                          |  

Items
of other comprehensive income have been recorded net of deferred tax, with the exception of income permanently reinvested, based upon the jurisdiction where the income or losses
were realized.

14.   Commitments and Contingencies



We have various purchase commitments extending through 2012 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 shut down of a
facility. The contractual purchase price for substantially all of these contracts is variable based upon market prices, subject to annual negotiations.

We
are indemnified by Ciba against certain liabilities arising on supply contracts. The indemnification covers the first CHF 50 million ($41.9 million at the
March 31, 2005 exchange rate), and 50% of an additional CHF 50 million, thereby providing CHF 75 million ($62.8 million) of coverage against the first CHF
100 million ($83.7 million), of costs arising from onerous supply contracts.



Vantico concluded that certain of the products of its former Electronics division may have infringed patents owned by Taiyo and it entered into a license
agreement in October 2001 with Taiyo to obtain the right to use the Taiyo patents. This license agreement required payment of approximately $4.2 million in back royalties and agreement
to pay periodic royalties for future use. We believe that Ciba Specialty Chemicals Holdings Inc. ("Ciba") is liable under the indemnity provisions of certain agreements in connection with the
leveraged buy out transaction in 2000 involving Ciba and Vantico for certain payments made under the license agreement and related costs and expenses, and we initiated an arbitration proceeding
against Ciba. In July 2004, we entered into a settlement agreement with Ciba with respect to this matter. In general, the settlement agreement provided that Ciba would pay us
$11.1 million in 2004 and provide us with approximately $11 million of credits over the next five years against payments for certain services provided by Ciba at one of our facilities.
We received additional consideration in the form of modifications to certain agreements between us and Ciba. In August 2004, we received payment of the $11.1 million settlement. As of
March 31, 2005, we have incurred approximately $2.6 million in costs in connection with the arbitration proceedings against Ciba.

15

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We
are 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 laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material adverse effect on our
financial condition, results of operations or liquidity. See "Environmental, Health and Safety Matters" for a discussion of environmental proceedings.

15.   Environmental, Health and Safety Matters



We are 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, we are subject to frequent environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, our 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 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.



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.



We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control
equipment. For the three months ended March 31, 2005 and 2004, our capital expenditures for EHS matters totaled $0.1 million and $0.3 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.



On occasion, we receive notices of violation, enforcement and other complaints from regulatory agencies alleging non-compliance with applicable EHS
law. By way of example, we are aware of the individual matters set out below, which we believe to be the most significant presently pending matters and unasserted claims. Although we may incur costs
or penalties in connection with the governmental proceedings discussed below, based on currently available information and our past experience, we

16

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believe
that the ultimate resolution of these matters will not have a material impact on our results of operations, financial position or liquidity.

Our
subsidiary Huntsman Advanced Materials (U.K.) Ltd is tentatively scheduled to appear in Magistrates Court in the U.K. in July 2005 with regard to charges filed
following an investigation by the U.K. Health and Safety Executive. The charges arise from alleged failures to follow applicable regulations for the management of asbestos contamination caused by
construction activity at our Duxford, U.K. facility between November 2002 and January 2003. We believe that some or all of the alleged violations arise from conduct by a third-party
contractor occurring before we assumed responsibility for the Duxford facility. Our subsidiary has been in discussions with the prosecution in an effort to settle this matter. As a result, our
subsidiary has entered pleas of guilty to two of the five charges, and the prosecution has agreed to drop the remaining three. We expect that a monetary fine will be imposed with regard to the two
charges on which pleas were entered. Based on penalties imposed in the U.K. for similar alleged violations by other companies, we do not believe this matter will result in the imposition of costs
material to our results of operations, financial position or liquidity.



We have incurred, and we may in the future incur, liability to investigate and clean up waste or contamination at our current or former facilities or facilities
operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of wastes that were disposed of prior to the purchase of our
businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources.

Some
of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal. We are aware of soil, groundwater and
surface water contamination from past operations at some of our sites, and we may find contamination at other
sites in the future. For example, we are aware that there is significant contamination, largely related to a landfill and lagoons, at our McIntosh, Alabama plant site. Further, soil and groundwater
contamination have been identified at our plants in Duxford, U.K. and Monthey, Switzerland. Pursuant to certain agreements with respect to these sites, we expect that Ciba will have primary financial
responsibility for such matters, although we may be required to contribute to the costs of remediation in certain instances, and we believe that Ciba has the intention and ability to honor these
agreements. Based on available information and the indemnification rights we believe are likely to be available, we believe that the costs to investigate and remediate known contamination will not
have a material adverse effect on our financial condition, results of operations or cash flows, and therefore we have made no accrual for such liabilities as of March 31, 2005. However, if such
indemnities are unavailable or do not fully cover the costs of investigation and remediation or we are required to contribute to such costs, and if such costs are material, then such expenditures may
have a material adverse effect on our financial condition, results of operations or cash flows. At the current time, we are unable to estimate the full cost, exclusive of indemnification benefits, to
remediate known contamination sites.



Under the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a
cross-media (air, water and waste) environmental permitting program for individual facilities. While the EU countries are at varying stages in their respective implementation of the IPPC permit
program, we have submitted all necessary IPPC permit applications required to date, and in some cases received completed permits from the applicable government agency. We expect to submit all other
IPPC applications and related documents on a timely basis as the various countries implement the IPPC permit program. Although we do not know with certainty what each IPPC permit will require, we
believe, based upon our

17

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experience
with the permits received to date, that the costs of compliance with the IPPC permit program will not be material to our results of operations, financial position or liquidity.

In
October 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 Authorization of Chemicals), companies 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 us. 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 us are unclear at this time because the parameters of the program are still being actively debated.

16.   Income Taxes

Income tax expense was $13.4 million for the three months ended March 31, 2005 and was $10.0 million for the three months ended
March 31, 2004. Substantially all non-U.S. operations are treated as branches of our company for U.S. income tax purposes and are, therefore, subject to both U.S. and
non-U.S. income tax. In addition, our tax obligations are affected by the mix of income and losses in the tax jurisdictions in which we operate. Tax expense was a result of losses in
jurisdictions where no tax benefit was provided and income in other jurisdictions where tax expense was recorded.

Our
effective income tax rate was 124% for the first quarter of 2005 as compared to 114% for the same period in 2004. Excluding the impact of foreign exchange losses of
$12.9 million, which did not provide a benefit for tax purposes, our effective income tax rate would have been 56.6% for the three months ended March 31, 2005. Tax expense above the U.S.
statutory rate of 35% was primarily a result of losses in jurisdictions where no tax benefit was provided, and income earned in non-U.S. jurisdictions subject to incremental U.S. tax.

We
use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the 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 that they will be realized. Valuation allowances
have been established against the entire U.S. and a material portion of the 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 there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred
tax asset.

17.   Condensed Consolidating Financial Statements

The following condensed consolidating financial statements present, in separate columns, financial information for the following: our company (on a parent only
basis), with our investment in subsidiaries recorded under the equity method; the Guarantors on a combined, and where appropriate, consolidated basis and the non-guarantors on a combined,
and where appropriate, consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of March 31, 2005 and December 31, 2004 and for the three months
ended March 31, 2005 and March 31, 2004. There are no contractual restrictions limiting transfers of cash from guarantor subsidiaries to us. Each of the Guarantors is 100% owned by us
and has fully and unconditionally guaranteed the Senior Secured Notes on a joint and several basis. We have not presented separate financial statements and other disclosures for each of the Guarantors
because we believe that such information is not material to investors.

18

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)        AS OF MARCH 31, 2005 (Dollars in Millions)

|                       |                                               | Parent Only                  |   | Guarantors |       | Non-
Guarantors |       | Eliminations |   | Consolidated
Advanced
Materials LLC |      
|---------------------- | --------------------------------------------- | ---------------------------- | - | ---------- | ----- | --------------- | ----- | ------------ | - | ----------------------------------- | -----
|ASSETS                 |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|Current Assets:        |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       | Cash and cash equivalents                     |                              | $ | 25.8       |       | $               | 52.1  |              | $ | 16.5                                |      
|                       | Trade accounts receivable, net                |                              |   | 46.3       |       |                 | 242.8 |              |   | 201.2                               |      
|                       | Inventories, net                              |                              |   |           |       |                 | 49.8  |              |   | 140.0                               |      
|                       | Deferred income taxes                         |                              |   |           |       |                 |      |              |   | 1.0                                 |      
|                       | Other current assets                          |                              |   | 0.1        |       |                 | 5.2   |              |   | 6.4                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total current assets         |   |            | 72.2  |                 |       | 349.9        |   |                                     | 365.1
|                       | Property, plant and equipment, net            |                              |   |           |       |                 | 311.6 |              |   | 47.8                                |      
|                       | Investment in unconsolidated affiliates       |                              |   | 423.7      |       |                 | 33.4  |              |   | 0.1                                 |      
|                       | Other intangible assets, net                  |                              |   | (21.1      | )     |                 | 21.7  |              |   | 0.1                                 |      
|                       | Deferred income taxes                         |                              |   | 5.3        |       |                 | 27.1  |              |   | 0.6                                 |      
|                       | Other noncurrent assets                       |                              |   | 424.9      |       |                 | 338.0 |              |   | 3.3                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total assets                 |   | $          | 905.0 |                 | $     | 1,081.7      |   | $                                   | 417.0
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|LIABILITIES AND EQUITY |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|Current liabilities:   |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       | Accounts payable                              |                              | $ | 39.2       |       | $               | 99.7  |              | $ | 221.9                               |      
|                       | Accrued liabilities                           |                              |   | 25.8       |       |                 | 43.8  |              |   | 24.7                                |      
|                       | Deferred income taxes                         |                              |   | 5.2        |       |                 | 0.9   |              |   | 0.1                                 |      
|                       | Short-term debt                               |                              |   | 0.2        |       |                 |      |              |   | 0.2                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total current liabilities    |   |            | 70.4  |                 |       | 144.4        |   |                                     | 246.9
|                       | Long-term debt, net                           |                              |   | 585.5      |       |                 | 406.7 |              |   | 104.5                               |      
|                       | Other noncurrent liabilities                  |                              |   | 0.3        |       |                 | 117.4 |              |   | 18.1                                |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total liabilities            |   |            | 656.2 |                 |       | 668.5        |   |                                     | 369.5
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|Minority Interest      |                                               |                              |  |            |       |                |       |              |  |                                     |      
|Equity:                |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       | Members' equity                               |                              |   | 222.1      |       |                 | 351.4 |              |   | 23.4                                |      
|                       | Retained earnings                             |                              |   | 36.1       |       |                 | 64.2  |              |   | 24.0                                |      
|                       | Accumulated other comprehensive (loss) income |                              |   | (9.4       | )     |                 | (2.4  | )            |   | 0.1                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total equity                 |   |            | 248.8 |                 |       | 413.2        |   |                                     | 47.5 
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total liabilities and equity |   | $          | 905.0 |                 | $     | 1,081.7      |   | $                                   | 417.0
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      

19

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)        AS OF DECEMBER 31, 2004 (Dollars in Millions)

|                       |                                               | Parent Only                  |   | Guarantors |       | Non-
Guarantors |       | Eliminations |   | Consolidated
Advanced
Materials LLC |      
|---------------------- | --------------------------------------------- | ---------------------------- | - | ---------- | ----- | --------------- | ----- | ------------ | - | ----------------------------------- | -----
|ASSETS                 |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|Current Assets:        |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       | Cash and cash equivalents                     |                              | $ | 4.6        |       | $               | 70.8  |              | $ | 18.4                                |      
|                       | Trade accounts receivable, net                |                              |   | 76.7       |       |                 | 280.8 |              |   | 359.0                               |      
|                       | Inventories, net                              |                              |   |           |       |                 | 47.1  |              |   | 133.4                               |      
|                       | Deferred income taxes                         |                              |   |           |       |                 |      |              |   | 1.0                                 |      
|                       | Other current assets                          |                              |   | 0.1        |       |                 | 8.9   |              |   | 4.4                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total current assets         |   |            | 81.4  |                 |       | 407.6        |   |                                     | 516.2
|                       | Property, plant and equipment, net            |                              |   |           |       |                 | 329.9 |              |   | 48.7                                |      
|                       | Investment in unconsolidated affiliates       |                              |   | 416.4      |       |                 | 29.4  |              |   | 0.1                                 |      
|                       | Other intangible assets, net                  |                              |   | (23.0      | )     |                 | 23.6  |              |   | 0.1                                 |      
|                       | Deferred income taxes                         |                              |   | 5.2        |       |                 | 28.6  |              |   | 0.7                                 |      
|                       | Other noncurrent assets                       |                              |   | 438.7      |       |                 | 355.2 |              |   | 3.3                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total assets                 |   | $          | 918.7 |                 | $     | 1,174.3      |   | $                                   | 569.1
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|LIABILITIES AND EQUITY |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|Current liabilities:   |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       | Accounts payable                              |                              | $ | 33.6       |       | $               | 172.3 |              | $ | 358.4                               |      
|                       | Accrued liabilities                           |                              |   | 25.8       |       |                 | 51.0  |              |   | 36.7                                |      
|                       | Deferred income taxes                         |                              |   | 5.3        |       |                 | 1.0   |              |   |                                    |      
|                       | Short-term debt                               |                              |   | 0.7        |       |                 |      |              |   | 1.0                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total current liabilities    |   |            | 65.4  |                 |       | 224.3        |   |                                     | 396.1
|                       | Long-term debt, net                           |                              |   | 597.7      |       |                 | 420.6 |              |   | 111.3                               |      
|                       | Other noncurrent liabilities                  |                              |   |           |       |                 | 123.7 |              |   | 18.5                                |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total liabilities            |   |            | 663.1 |                 |       | 768.6        |   |                                     | 525.9
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|Minority Interest      |                                               |                              |  |            |       |                |       |              |  |                                     |      
|Equity:                |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       | Members' equity                               |                              |   | 222.1      |       |                 | 351.4 |              |   | 23.4                                |      
|                       | Retained earnings                             |                              |   | 38.9       |       |                 | 54.0  |              |   | 19.7                                |      
|                       | Accumulated other comprehensive (loss) income |                              |   | (5.4       | )     |                 | 0.4   |              |   | 0.1                                 |      
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total equity                 |   |            | 255.6 |                 |       | 405.8        |   |                                     | 43.2 
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      
|                       |                                               | Total liabilities and equity |   | $          | 918.7 |                 | $     | 1,174.4      |   | $                                   | 569.1
|                       |                                               |                              |   |            |       |                 |       |              |   |                                     |      

20

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)        THREE MONTHS ENDED MARCH 31, 2005
(Dollars in Millions)

|                                                |                                     | Parent Only |      | Guarantors |   | Non-
Guarantors |       | Eliminations |       | Consolidated
Advanced
Materials LLC |      
|----------------------------------------------- | ----------------------------------- | ----------- | ---- | ---------- | - | --------------- | ----- | ------------ | ----- | ----------------------------------- | -----
|Revenues:                                       |                                     |             |      |            |   |                 |       |              |       |                                     |      
|                                                | Trade sales and services            |             | $    |           |   | $               | 104.7 |              | $     | 240.2                               |      
|                                                | Intercompany sales                  |             |      |           |   |                 | 4.7   |              |       | 9.4                                 |      
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|                                                |                                     | Revenue     |      |            |  |                 |       | 109.4        |       |                                     | 249.6
|Cost of goods sold                              |                                     |             |     |            |   | 87.1            |       |              | 193.8 |                                     |      
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|Gross profit                                    |                                     |             |     |            |   | 22.3            |       |              | 55.8  |                                     |      
|Expenses:                                       |                                     |             |      |            |   |                 |       |              |       |                                     |      
|                                                | Selling, general and administrative |             |      | (0.4       | ) |                 | (9.6  | )            |       | 45.4                                |      
|                                                | Research and development            |             |      |           |   |                 | 7.9   |              |       | 0.8                                 |      
|                                                | Foreign exchange losses (gains)     |             |      | 0.1        |   |                 | 14.4  |              |       | (1.6                                | )    
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|Total expenses                                  |                                     |             | (0.3 | )          |   | 12.7            |       |              | 44.6  |                                     |      
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|Operating income                                |                                     |             | 0.3  |            |   | 9.6             |       |              | 11.2  |                                     |      
|Interest expense, net                           |                                     |             | (5.1 | )          |   | (0.4            | )     |              | (4.7  | )                                   |      
|Equity in earnings of unconsolidated affiliates |                                     |             | 10.1 |            |   | 4.1             |       |              |      |                                     |      
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|Income before income taxes                      |                                     |             | 5.3  |            |   | 13.3            |       |              | 6.5   |                                     |      
|Income tax expense                              |                                     |             | (8.2 | )          |   | (3.0            | )     |              | (2.3  | )                                   |      
|Minority interest in subsidiaries' income       |                                     |             |     |            |   |                |       |              |      |                                     |      
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|Net (loss) income                               |                                     |             | (2.9 | )          |   | 10.3            |       |              | 4.2   |                                     |      
|Other comprehensive loss                        |                                     |             | (4.0 | )          |   | (2.7            | )     |              | (0.1  | )                                   |      
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      
|Comprehensive (loss) income                     |                                     | $           | (6.9 | )          | $ | 7.6             |       | $            | 4.1   |                                     | $    
|                                                |                                     |             |      |            |   |                 |       |              |       |                                     |      

21

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)        THREE MONTHS ENDED MARCH 31, 2004
(Dollars in Millions)

|                                                         |                                       | Parent Only |      | Guarantors |   | Non-
Guarantors |      | Eliminations |       | Consolidated
Advanced
Materials LLC |      
|-------------------------------------------------------- | ------------------------------------- | ----------- | ---- | ---------- | - | --------------- | ---- | ------------ | ----- | ----------------------------------- | -----
|Revenues:                                                |                                       |             |      |            |   |                 |      |              |       |                                     |      
|                                                         | Trade sales and services              |             | $    |           |   | $               | 89.0 |              | $     | 225.4                               |      
|                                                         | Intercompany sales                    |             |      |           |   |                 | 85.4 |              |       | 7.0                                 |      
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|                                                         |                                       | Revenue     |      |            |  |                 |      | 174.4        |       |                                     | 232.4
|Cost of goods sold                                       |                                       |             |     |            |   | 154.3           |      |              | 186.6 |                                     |      
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|Gross profit                                             |                                       |             |     |            |   | 20.1            |      |              | 45.8  |                                     |      
|Expenses:                                                |                                       |             |      |            |   |                 |      |              |       |                                     |      
|                                                         | Selling, general and administrative   |             |      | 1.6        |   |                 | (3.8 | )            |       | 43.7                                |      
|                                                         | Research and development              |             |      |           |   |                 | 8.1  |              |       | 0.6                                 |      
|                                                         | Legal and contract settlement charges |             |      |           |   |                 | 1.8  |              |       |                                    |      
|                                                         | Foreign exchange losses (gains)       |             |      | 0.6        |   |                 | (2.9 | )            |       | (0.5                                | )    
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|Total expenses                                           |                                       |             | 2.2  |            |   | 3.2             |      |              | 43.8  |                                     |      
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|Operating (loss) income                                  |                                       |             | (2.2 | )          |   | 16.9            |      |              | 2.0   |                                     |      
|Interest expense, net                                    |                                       |             | (2.2 | )          |   | (5.5            | )    |              | (2.6  | )                                   |      
|Equity in earnings (losses) of unconsolidated affiliates |                                       |             | 4.2  |            |   | (5.4            | )    |              |      |                                     |      
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|(Loss) income before income taxes                        |                                       |             | (0.2 | )          |   | 6.0             |      |              | (0.6  | )                                   |      
|Income tax (expense) benefit                             |                                       |             | (1.5 | )          |   | (8.7            | )    |              | 0.2   |                                     |      
|Minority interest in subsidiaries' income                |                                       |             |     |            |   |                |      |              |      |                                     |      
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|Net loss                                                 |                                       |             | (1.7 | )          |   | (2.7            | )    |              | (0.4  | )                                   |      
|Other comprehensive (loss) income                        |                                       |             | (4.4 | )          |   | (21.7           | )    |              | 1.4   |                                     |      
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      
|Comprehensive (loss) income                              |                                       | $           | (6.1 | )          | $ | (24.4           | )    | $            | 1.0   |                                     | $    
|                                                         |                                       |             |      |            |   |                 |      |              |       |                                     |      

22

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)        THREE MONTHS ENDED MARCH 31, 2005 (Dollars in Millions)

|                                                    |  | Parent Only |      | Guarantors |   | Non-
Guarantors |   | Eliminations |      | Consolidated
Advanced
Materials LLC |  
|--------------------------------------------------- |  | ----------- | ---- | ---------- | - | --------------- | - | ------------ | ---- | ----------------------------------- | -
|Net cash provided by (used in) operating activities |  | $           | 21.7 |            | $ | (17.3           | ) | $            | 3.3  |                                     | $
|Investing activities:                               |  |             |      |            |   |                 |   |              |      |                                     |  
|Capital expenditures                                |  |             |     |            |   | (4.0            | ) |              | (1.6 | )                                   |  
|Proceeds from sale of fixed assets                  |  |             |     |            |   |                |   |              | 0.1  |                                     |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Net cash used in investing activities               |  |             |     |            |   | (4.0            | ) |              | (1.5 | )                                   |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Financing activities:                               |  |             |      |            |   |                 |   |              |      |                                     |  
|Decrease in short-term debt, net                    |  |             | (0.5 | )          |   |                |   |              | (0.8 | )                                   |  
|Net borrowings (repayments) of intercompany debt    |  |             |     |            |   | 2.6             |   |              | (2.5 | )                                   |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Net cash (used in) provided by financing activities |  |             | (0.5 | )          |   | 2.6             |   |              | (3.3 | )                                   |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Effect of exchange rate changes on cash             |  |             |     |            |   |                |   |              | (0.4 | )                                   |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Increase (decrease) in cash and cash equivalents    |  |             | 21.2 |            |   | (18.7           | ) |              | (1.9 | )                                   |  
|Cash and cash equivalents at beginning of period    |  |             | 4.6  |            |   | 70.8            |   |              | 18.4 |                                     |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Cash and cash equivalents at end of period          |  | $           | 25.8 |            | $ | 52.1            |   | $            | 16.5 |                                     | $
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  

23

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HUNTSMAN ADVANCED MATERIALS LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)        THREE MONTHS ENDED MARCH 31, 2004 (Dollars in Millions)

|                                                    |  | Parent Only |      | Guarantors |   | Non-
Guarantors |   | Eliminations |      | Consolidated
Advanced
Materials LLC |  
|--------------------------------------------------- |  | ----------- | ---- | ---------- | - | --------------- | - | ------------ | ---- | ----------------------------------- | -
|Net cash used in operating activities               |  | $           | (4.9 | )          | $ | (1.7            | ) | $            | (1.2 | )                                   | $
|Investing activities:                               |  |             |      |            |   |                 |   |              |      |                                     |  
|Capital expenditures                                |  |             |     |            |   | (1.6            | ) |              | (0.1 | )                                   |  
|Other assets                                        |  |             |     |            |   |                |   |              | 0.2  |                                     |  
|Proceeds from sale of fixed assets                  |  |             |     |            |   |                |   |              | 1.2  |                                     |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Net cash (used in) provided by investing activities |  |             |     |            |   | (1.6            | ) |              | 1.3  |                                     |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Financing activities:                               |  |             |      |            |   |                 |   |              |      |                                     |  
|Decrease in short-term debt, net                    |  |             |     |            |   |                |   |              | (0.9 | )                                   |  
|Net borrowings (repayments) of intercompany debt    |  |             |     |            |   | 1.5             |   |              | (1.5 | )                                   |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Net cash provided by (used in) financing activities |  |             |     |            |   | 1.5             |   |              | (2.4 | )                                   |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Effect of exchange rate changes on cash             |  |             |     |            |   | (1.1            | ) |              | 0.1  |                                     |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Decrease in cash and cash equivalents               |  |             | (4.9 | )          |   | (2.9            | ) |              | (2.2 | )                                   |  
|Cash and cash equivalents at beginning of period    |  |             | 9.8  |            |   | 45.8            |   |              | 17.6 |                                     |  
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  
|Cash and cash equivalents at end of period          |  | $           | 4.9  |            | $ | 42.9            |   | $            | 15.4 |                                     | $
|                                                    |  |             |      |            |   |                 |   |              |      |                                     |  

24

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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 "Company," "our," "us" or "we" may be used to refer to Huntsman Advanced Materials LLC and, unless the context otherwise
requires, its subsidiaries. In this report, "Vantico" or "Predecessor Company" refers to Vantico Group S.A. and, unless the context otherwise requires, its subsidiaries, and "Ciba" refers to Ciba
Specialty Chemicals Holdings Inc.

Overview

We are a leading global manufacturer and marketer of technologically advanced epoxy, acrylic and polyurethane-based polymer products. We focus on formulations and
systems that are used to address customer-specific needs in a wide variety of specialized industrial and consumer applications. Our products are used either as replacements for traditional materials
such as metal, wood, clay, glass, stone
and ceramics, or in applications where traditional materials do not meet demanding engineering specifications. Our business is characterized by the breadth of our product offering, our expertise in
complex chemistry, our long-standing relationships with our customers and our ability to develop and adapt our technology and our applications expertise for new markets and new
applications. We operate 13 facilities in North America, Europe, Asia, South America and Africa. During the quarter we restructured our marketing organization, reducing our total market groups from
five to three. We currently market over 6,000 products to more than 5,000 customers in the following market groups: Coatings, Construction and Adhesives; Power and Electronics; Design and Composites
Engineering, as described below. Our operations have one reportable business segment.



We produce formulated polymer systems, additives, basic and advanced epoxy resin compounds to provide structural stability and broad application functionality,
combined with overall economic efficiency, for a broad range of industrial coatings, construction and consumer applications. These products are used to make coatings for the protection of steel and
concrete substrates, such as floorings, metal furniture and appliances, buildings, linings of storage tanks and food and beverage cans, and the primer coat of automobile bodies and ships, among other
applications. We are a leading producer of basic liquid-epoxy resin and its basic derivatives, the building blocks for epoxy-based products in coating applications. In addition, we are a leading
manufacturer of complex chemicals and additives, such as curing agents, matting agents, accelerators, cross-linkers, reactive diluents and thermoplastic polyamides, which are used in combination with
epoxy resins to impart properties such as chemical and abrasion resistance and improved surface appearance.

We
produce innovative formulated polymer systems used as industrial and consumer adhesives based upon epoxy, polyurethane, acrylic and other materials, primarily marketed under the Araldite®brand
name. Our adhesives are used to bond materials such as steel, aluminum, and engineering plastics. The sales of our adhesive
systems have experienced rapid growth due to the continued

25

---



substitution
of adhesives for traditional joining techniques, such as welding and soldering, and the use of metal fasteners and clamps. We sell our adhesive products into industry-specific markets,
the general industrial bonding market and the consumer do-it-yourself market. Our primary industry-specific markets are DVD, printing inks, engineering adhesives, and liquefied
natural gas transport markets.



We produce formulated polymer systems based on epoxy and polyurethane resins which are used to insulate, protect or shield either the environment from electrical
current or electrical devices from the environment, such as temperature or humidity. We primarily sell our electrical products to customers in the electric power generation, transmission and
distribution, consumer and industrial electronics, automotive and appliance markets. We believe we have a leading market position globally in epoxy-based electrical insulating materials.

We
produce liquid formulated polymer systems used in the manufacture of electrolaminates, soldermasks, inner layer resists and dielectric materials for printed circuit boards.
Soldermasks are permanent coatings, resistant to heat, chemicals and the environment, that allow various components and circuitry to be soldered to the surface of a printed circuit board. Inner layer
resists are temporary photo-imageable materials that enable the generation of circuitry on the inner layers of printed circuit boards. Dielectric materials are materials with electrical insulation
properties that constitute an insulating layer in high-density, multi-layer printed circuit boards.

We
also produce electronic adhesive products for printed circuit board component assembly, hard disk drive gaskets and LED applications.



We produce formulated polymer systems, complex chemicals and additives and basic and advanced epoxy resin compounds which are used to manufacture a variety of
fiber-reinforced materials with enhanced structural properties, known as structural composites. Structural composites are lightweight, high-strength, rigid materials with high resistance
to chemicals, moisture and high temperatures. We primarily sell our products to customers in the aerospace, automotive, wind power generation, and recreational sports equipment markets.

We
produce and market mainly polyurethane-based and epoxy formulated polymer systems used in the production of models, prototypes, patterns, molds and a variety of related products for
design, prototyping and short-run manufacture. Our products are used in the automotive, aerospace and industrial markets as productivity tools to quickly and efficiently create accurate
prototypes and develop experimental models, and to lower the cost of manufacturing items in limited quantities primarily using computer-aided-design techniques. These products are valued for their
strength, resilience, heat resistance, dimensional stability, low shrinkage, ease of curing and ability to simulate the look and feel of a variety of materials. These characteristics have allowed our
tooling and modeling materials to replace other materials traditionally used in these applications, such as wood,
clay and engineering thermoplastics. Our products include photopolymers used in stereolithography, a process that combines computer-aided-design, laser technology and chemistry to permit a complex
three-dimensional design to be rapidly replicated in finely-finished solid form.

Recent Developments



On June 30, 2004, we issued $250 million of 11% Senior Secured Fixed Rate Notes due 2010 and $100 million of Senior Secured Floating Rate
Notes due 2008 (the "Senior Secured Notes"). Our registration statement on Form S-4 with respect to the Senior Secured Notes was declared effective by

26

---



the
SEC on April 28, 2005. We except to complete an exchange offer for the Senior Secured Notes in June 2005.

Results of Operations

The following sets forth the consolidated results of operations for the three months ended March 31, 2005 and 2004.

Three Months
Ended
March 31, 2005

Three Months
Ended
March 31, 2004Revenues

$
311.5

$
284.7Cost of goods sold


233.5


216.4Gross profit


78.0


68.3Expenses:Operating expenses


57.0


49.3Total expenses


57.0


49.3Operating income


21.0


19.0Interest expense, net


(10.2
)

(10.2
)Income before income taxes and minority interest


10.8


8.8Income tax expense


(13.4
)

(10.0
)Minority interests in subsidiaries' income


(0.2
)

(0.4
)Net loss


(2.8
)

(1.6
)Interest expense, net


10.2


10.2Income tax expense


13.4


10.0Depreciation and amortization


12.2


14.9EBITDA(1)

$
33.0

$
33.5


Included
in EBITDA is the following unusual item of expense:

Three Months
Ended
March 31, 2005

Three Months
Ended
March 31, 2004Legal and contract settlement charges

$


$
1.8


---

27

---





28

---





Three Months
Ended
March 31, 2005

Three Months
Ended
March 31, 2004EBITDA

$
33.0

$
33.5Depreciation and amortization expense


(12.2
)

(14.9
)Interest expense, net


(10.2
)

(10.2
)Income tax expense


(13.4
)

(10.0
)Net loss


(2.8
)

(1.6
)Depreciation and amortization expense


12.2


14.9Non-cash interest


0.6


0.7Deferred income taxes


5.5


9.5Unrealized loss on foreign currency transactions


10.9


0.8Other, net


0.7


(1.5
)Changes in operating assets and liabilities


(19.3
)

(30.6
)Net cash provided by (used in) operating activities


7.8


(7.8
)


Three months ended March 31, 2005 Compared to Three months ended March 31, 2004

Revenues for the three months ended March 31, 2005 increased by $26.8 million to $311.4 million from $284.7 million, or 9%, as
compared to the same period in 2004, primarily attributable to an 8% increase in average selling prices, with sales volumes up 1%. Average selling prices were higher due to price increase initiatives
in certain markets in response to improved demand and higher raw material costs, and to offset the effect of the strengthening of the major European and Asian currencies versus the U.S. dollar. Our
ongoing portfolio re-alignment activities resulted in higher sales volumes in some of our markets, largely offset by lower sales volumes of basic epoxy resins in Coatings, Construction and
Adhesives and strongly reduced volumes of electronic laminates products in Power and Electronics. By market group, our revenues are as follows:



CCA (Coatings, Construction and Adhesives)

$160.8 million, up $22.7 million or 16%

P&E (Power and Electronics)

$64.3 million, down $8.6 million or (12%)

DCE (Design and Composite Engineering)

$86.4 million, up $12.6 million or 17%


Gross
profit for the three months ended March 31, 2005 increased by $9.7 million, or 14%, as compared to the same period in 2004. The increase mainly resulted from stronger
contribution margins in first
quarter 2005. Margins improved on higher revenues, and improved product mix resulting from increased sales volumes of higher margin Adhesives, Power and DCE applications, which more than offset higher
raw material and manufacturing costs.

Operating
expenses for the three months ended March 31, 2005 increased by $7.7 million, or 16%, as compared to the same period in 2004, primarily as a result of foreign
currency exchange losses in first quarter 2005, partially offset by our cost reduction initiatives.

Income
tax expense increased by $3.4 million to $13.4 million for the three months ended March 31, 2005 as compared to $10.0 million in the same period in
2004. Increased income tax expense was primarily due to increases in pre-tax income. Substantially all of our non-U.S. operations are treated as branches of the Company for
U.S. income tax purposes and are, therefore, subject to both U.S. and non-U.S. income tax. In addition, our tax obligations are affected by the mix of income and

29

---



losses
in the tax jurisdictions in which we operate. Tax expense was significantly a result of losses in jurisdictions where little or no tax benefit was provided and income in other jurisdictions
where tax expense was recorded.

Our
effective income tax rate was 124% for the first quarter of 2005 as compared to 114% for the same period in 2004. Excluding the impact of foreign exchange losses of
$12.9 million, which did not provide a benefit for tax purposes, our effective income tax rate would have been 56.6% for the three months ended March 31, 2005. Tax expense above the U.S.
statutory rate of 35% was primarily a result of losses in jurisdictions where no tax benefit was provided, and income earned in non-U.S. jurisdictions subject to incremental U.S. tax.

Liquidity and Capital Resources

Cash

Net cash provided by operating activities for the three months ended March 31, 2005 was $7.8 million as compared to $7.8 million used in
operating activities during the comparable period in 2004. The increase of $15.6 million in cash flow from operating activities during the 2005 period was primarily attributable to a net
decrease in changes in operating assets and liabilities of $11.3 million and a
favorable variance in adjustments to reconcile net income (loss) to net cash from operating activities attributed to unrealized loss on foreign currency transactions of $10.1 million, which was
partially offset by an unfavorable variance in deferred income taxes of $4.0 million.

Net
cash used in investing activities for the three months ended March 31, 2005 was $5.5 million as compared with $0.3 million used in investing activities during
the comparable period in 2004. Capital expenditures increased $3.9 million from $1.7 million in the three months ended March 31, 2004 to $5.6 million in the comparable
period in 2005 largely due to increased capital spending on projects associated with our restructuring activities.

Net
cash used in financing activities for the three months ended March 31, 2005 was $1.3 million as compared with $0.9 million used in financing activities during
the comparable period in 2004, related to a net reduction in short-term debt.

Changes in Financial Condition

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

|                     |                           | March 31,
2005            |       | December 31,
2004 |       | Difference |       | Percentage
Change |    
|-------------------- | ------------------------- | ------------------------- | ----- | ----------------- | ----- | ---------- | ----- | ----------------- | ---
|Current assets:      |                           |                           |       |                   |       |            |       |                   |    
|                     | Cash and cash equivalents |                           | $     | 94.4              |       | $          | 93.8  |                   | $  
|                     | Accounts receivable, net  |                           |       | 223.9             |       |            | 235.1 |                   |    
|                     | Inventories, net          |                           |       | 188.7             |       |            | 179.5 |                   |    
|                     | Deferred income taxes     |                           |       | 1.0               |       |            | 1.0   |                   |    
|                     | Other current assets      |                           |       | 11.7              |       |            | 13.4  |                   |    
|                     |                           |                           |       |                   |       |            |       |                   |    
|                     |                           | Total current assets      |       |                   | 519.7 |            |       | 522.8             |    
|                     |                           |                           |       |                   |       |            |       |                   |    
|Current liabilities: |                           |                           |       |                   |       |            |       |                   |    
|                     | Accounts payable          |                           |       | 94.4              |       |            | 82.9  |                   |    
|                     | Accrued liabilities       |                           |       | 94.3              |       |            | 113.5 |                   |    
|                     | Deferred income taxes     |                           |       | 6.2               |       |            | 6.3   |                   |    
|                     | Short-term debt           |                           |       | 0.4               |       |            | 1.7   |                   |    
|                     |                           |                           |       |                   |       |            |       |                   |    
|                     |                           | Total current liabilities |       |                   | 195.3 |            |       | 204.4             |    
|                     |                           |                           |       |                   |       |            |       |                   |    
|Working capital      |                           | $                         | 324.4 |                   | $     | 318.4      |       | $                 | 6.0
|                     |                           |                           |       |                   |       |            |       |                   |    

30

---



As
of March 31, 2005, our working capital increased by $6.0 million as a result of the net impact of the following significant changes:



Debt and Liquidity



On June 30, 2003, we entered into the AdMat Revolving Credit Facility that provides up to $60 million of borrowings and is secured by a first lien
on substantially all of our assets and those of certain of our subsidiaries. The collateral includes substantially all real property and equipment relating to our manufacturing plants located at
Bergkamen, Germany; Monthey, Switzerland; McIntosh, Alabama; and Duxford, U.K. The collateral also includes certain capital stock and intercompany notes of certain of our subsidiaries, and certain
other assets, principally including inventory and accounts receivable. Our
obligations under the AdMat Revolving Credit Facility have been initially guaranteed by all of our U.S. subsidiaries and certain of our non-U.S. subsidiaries (collectively, the "AdMat
Guarantors"). The agent for the lenders under the AdMat Revolving Credit Facility and the trustee under the indenture governing the Senior Secured Notes are parties to an intercreditor agreement (the
"AdMat Intercreditor Agreement").

The
AdMat Revolving Credit Facility matures on June 30, 2007. Interest rates, at our option, are based upon either a eurocurrency rate (LIBOR) or a base rate (prime), plus an
applicable spread. The applicable spreads vary based on a pricing grid. In the case of the eurocurrency-based loans, spreads range from 3.0% to 4.5% per annum, depending on whether specified
conditions have been satisfied, and, in the case of base rate loans, from 2.0% to 3.5% per annum. As of March 31, 2005, we had no amounts drawn on the AdMat Revolving Credit Facility and had
approximately $10.1 million of letters of credit issued and outstanding under the AdMat Revolving Credit Facility. The AdMat Revolving Credit Facility allows us to borrow up to
$20 million secured by letters of credit; however, the $60 million revolving credit facility is reduced dollar-for-dollar by any letters of credit outstanding.
There are no scheduled debt amortization payments on the AdMat Revolving Credit Facility until its maturity date.

The
agreement governing the AdMat Revolving Credit Facility contain customary financial covenants; covenants relating to the incurrence of debt, the purchase and sale of assets,
limitations on investments and affiliate transactions; change in control provisions; events of default provisions; and acceleration provisions. Management believes that we were in compliance with the
covenants of the AdMat Revolving Credit Facility as of March 31, 2005.



In connection with the AdMat Transaction, on June 30, 2003, we issued $250 million of Fixed Rate Notes due 2010 and $100 million of Floating
Rate Notes due 2008. The $250 million Fixed Rate Notes bear a fixed rate of interest of 11%, and the Floating Rate Notes bear interest at a rate per annum

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equal
to LIBOR plus 8.0%, subject to a floor with respect to LIBOR of 2.0%. As of March 31, 2005, the interest rate on the Floating Rate Notes was 10.89%, excluding additional interest
discussed below. Interest on the Floating Rate Notes resets semiannually. The $100 million Floating Rate Notes were issued with an original issue discount of 2.0%, or for $98 million.
The $2 million discount is being amortized to interest expense over the term of the Floating Rate Notes. Interest is payable on the Senior Secured Notes semiannually on January 15 and
July 15 of each year. The effective interest rate on the Floating Rate Notes was 11.14% as of March 31, 2005, excluding the impact of additional interest discussed below.

The
Senior Secured Notes are secured by a second lien, subject to the AdMat Intercreditor Agreement, on substantially all of the assets that secure the AdMat Revolving Credit Facility.
The Senior Secured Notes effectively rank senior in right of payment to all existing and future obligations of our company that are unsecured or secured by liens on the collateral junior to the liens
securing the Senior Secured Notes. The Senior Secured Notes are initially guaranteed on a senior basis by the AdMat Guarantors and are also supported by liens on substantially all of the assets of the
AdMat Guarantors.

The
Fixed Rate Notes are redeemable on or after July 15, 2007 at our option at a price declining ratably from 105.5% to 100.0% of par value by the year 2009. The Floating Rate
Notes are redeemable on or after July 15, 2005 at our option at a price declining ratably from 105.0% to 100.0% of par value by the year 2007. At any time prior to July 15, 2007 for the
Fixed Rate Notes and July 15, 2005 for the Floating Rate Notes, we may redeem all or part of such notes at 100% of their principal amount, plus a "make whole" premium, as defined in the
indenture. In addition, at any time prior to July 15, 2006 for the Fixed Rate Notes and July 15, 2005 for the Floating Rate Notes, we may redeem up to 35% of the aggregate principal
amount of the Senior Secured Notes at a redemption price of 111% of the principal thereof with the net cash proceeds of one or more qualified equity offerings, subject to certain conditions and
limitations. There are no scheduled debt amortization payments on the Senior Secured Notes until their maturity date.

The
indenture governing the Senior Secured Notes contains covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other
things. The indenture also contains a change of control provision requiring us to offer to repurchase the Senior Secured Notes upon a change of control. Management believes that we were in compliance
with the covenants of the indenture as of March 31, 2005.

Under
the terms of a registration rights agreement among us, the AdMat Guarantors and the initial purchasers of the Senior Secured Notes, we were required to cause a registration
statement relating to an exchange offer for the Senior Secured Notes to become effective on or before July 9, 2004 (the "Effectiveness Date") and to complete the exchange offer on or before
August 23, 2004 (the "Completion Date"). Due to a delay in the completion of predecessor period audited financial statements for certain of our subsidiaries, the registration statement did not
become effective by the Effectiveness Date and the exchange offer was not completed by the Completion Date. Accordingly, under the registration rights agreement, we were required to pay additional
interest on the Senior Secured Notes. We are currently paying additional interest at a rate of 0.75% per year and this rate will increase to 1.00% per year on May 21, 2005 until the exchange
offer is completed. We expect that the exchange offer will be completed in June 2005.



As of March 31, 2005, we had $144.3 million of cash and unused borrowing capacity, including $94.4 million of cash and $49.9 million
in undrawn commitments on the AdMat Revolving Credit Facility. We believe our current available liquidity, together with funds generated by our businesses, will be sufficient to meet the
short-term and long-term needs of our businesses, including the funding of

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our
operations and capital expenditures and the servicing of our debt obligations in the ordinary course. We believe that we are currently 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 approximately $10.1 million as of March 31, 2005. We do not expect any material amounts to be drawn on
these instruments.

Other
than certain operating leases that are not material and the letter of credit arrangements noted above, all of 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 agreements.

Restructuring and Plant Closing Costs

As of December 31, 2004, our restructuring reserves consisted of $33.0 million related to the restructuring programs implemented in association with
the AdMat transaction, the realignment and simplification of the commercial and technical organization and the closure of the Kaohsiung, Taiwan production facility.

As
of March 31, 2005, activity in our restructuring reserves consisted of the following (dollars in millions):

|                                        |                                            | Workforce
Reductions |      | Plant
Closure Costs |   | Other |   | Total |    
|--------------------------------------- | ------------------------------------------ | -------------------- | ---- | ------------------- | - | ----- | - | ----- | ---
|Accrued liability as of January 1, 2005 |                                            | $                    | 28.1 |                     | $ | 1.1   |   | $     | 3.8
|                                        | Paymentsopening balance sheet initiatives |                      |      | (3.0                | ) |       |  |       |    
|                                        | Payments2004 initiatives                  |                      |      | (2.5                | ) |       |  |       |    
|                                        | Impact of foreign currency translation     |                      |      | (0.6                | ) |       |  |       |    
|                                        |                                            |                      |      |                     |   |       |   |       |    
|Accrued liability as of March 31, 2005  |                                            | $                    | 22.0 |                     | $ | 1.1   |   | $     | 3.1
|                                        |                                            |                      |      |                     |   |       |   |       |    

Capital Expenditures

Capital expenditures for the three months ended March 31, 2005 were $5.6 million. We expect to spend approximately $37 million in 2005 on
capital expenditures, including approximately $18 million in capital projects associated with our restructuring efforts.

Environmental, Health and Safety Matters



We are 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, we are subject to frequent
environmental inspections and monitoring and occasional investigations by governmental enforcement authorities. In addition, our 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 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.

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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.



We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control
equipment. For the three months ended March 31, 2005 and 2004, our capital expenditures for EHS matters totaled $0.1 million and $0.3 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.



On occasion, we receive notices of violation, enforcement and other complaints from regulatory agencies alleging non-compliance with applicable EHS
law. By way of example, we are aware of the individual matters set out below, which we believe to be the most significant presently pending matters and unasserted claims. Although we may incur costs
or penalties in connection with the governmental proceedings discussed below, based on currently available information and our past experience, we believe that the ultimate resolution of these matters
will not have a material impact on our results of operations, financial position or liquidity.

Our
subsidiary Huntsman Advanced Materials (U.K.) Ltd is tentatively scheduled to appear in Magistrates Court in the U.K. in July 2005 with regard to charges filed
following an investigation by the U.K. Health and Safety Executive. The charges arise from alleged failures to follow applicable regulations for the management of asbestos contamination caused by
construction activity at our Duxford, U.K. facility between November 2002 and January 2003. We believe that some or all of the alleged violations arise from conduct by a third-party
contractor occurring before we assumed responsibility for the Duxford facility. Our subsidiary has been in discussions with the prosecution in an effort to settle this matter. As a result, our
subsidiary has entered pleas of guilty to two of the five charges, and the prosecution has agreed to drop the remaining three. We expect that a monetary fine will be imposed with regard to the two
charges on which pleas were entered. Based on penalties imposed in the U.K. for similar alleged violations by other companies, we do not believe this matter will result in the imposition of costs
material to our results of operations, financial position or liquidity.



We have incurred, and we may in the future incur, liability to investigate and clean up waste or contamination at our current or former facilities or facilities
operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of wastes that were disposed of prior to the purchase of our
businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources.

Some
of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal. We are aware of soil, groundwater and
surface water

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contamination
from past operations at some of our sites, and we may find contamination at other sites in the future. For example, we are aware that there is significant contamination, largely related
to a landfill and lagoons, at our McIntosh, Alabama plant site. Further, soil and groundwater contamination have been identified at our plants in Duxford, U.K. and Monthey, Switzerland. Pursuant to
certain agreements with respect to these sites, we expect that Ciba will have primary financial responsibility for such matters, although we may be required to contribute to the costs of remediation
in certain instances, and we believe that Ciba has the intention and ability to honor these agreements. Based on available information and the indemnification rights we believe are likely to be
available, we believe that the costs to investigate and remediate known contamination will not have a material adverse effect on our financial condition, results of operations or cash flows, and
therefore we have made no accrual for such liabilities as of March 31, 2005. However, if such indemnities are unavailable or do not fully cover the costs of investigation and remediation or we
are required to contribute to such costs, and if such costs are material, then such expenditures may have a material adverse effect on our financial condition, results of operations or cash flows. At
the current time, we are unable to estimate the full cost, exclusive of indemnification benefits, to remediate known contamination sites.



Under the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a
cross-media (air, water and waste) environmental permitting program for individual facilities. While the EU countries are at varying stages in their respective implementation of the IPPC permit
program, we have submitted all necessary IPPC permit applications required to date, and in some cases received completed permits from the applicable government agency. We expect to submit all other
IPPC applications and related documents on a timely basis as the various countries implement the IPPC permit program. Although we do not know with certainty what each IPPC permit will require, we
believe, based upon our experience with the permits received to date, that the costs of compliance with the IPPC permit program will not be material to our results of operations, financial position or
liquidity.

In
October 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 Authorization of Chemicals), companies 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 us. 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 us are unclear at this time because the parameters of the program are still being actively debated.

Recently Issued Financial Accounting Standards

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. We were required to adopt this
financial interpretation on January 1, 2005. The adoption of the standard had no impact on the financial statements.

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In
November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costsan amendment of ARB
No. 43." SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material to be recognized as current-period charges.
It also requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The requirements of the standard will be
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are reviewing SFAS No. 151 to determine the statement's impact on our consolidated financial
statements.

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.

In
December 2004, the FASB issued SFAS No. 123R, "Share Based Payment." SFAS No. 123R requires entities to measure
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during
which the employee is required to provide services in exchange for the award. This standard eliminates the alternative to use the intrinsic value method of accounting for share based payments as
previously provided in APB Opinion No. 25, "Accounting for Stock Issued to Employees." We adopted SFAS No. 123R effective
January 1. 2005, and have applied this standard prospectively to share-based awards issued to our employees in connection with Huntsman Corporation's initial public offering. In connection with
Huntsman Corporation's initial public offering of common stock on February 16, 2005, certain of our employees received Huntsman Corporation stock options and restricted stock. Accordingly, we
were allocated share-based compensation expense of $0.1 million during the three months ended March 31, 2005. We did not have share-based awards prior to the awards issued in connection
with Huntsman Corporation's initial public offering.

In
March 2005, the FASB issued FIN 47,"Accounting for Conditional Asset Retirement Obligations."FIN 47 clarifies
the termconditional asset retirement obligationused in 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 31, 2005. We are reviewing FIN 47 to determine its impact on our financial statements.

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 adopted, 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.

Critical Accounting Policies

There have been no changes in the first quarter of 2005 with respect to our critical accounting policies as presented in the notes to our financial statements for
the year ended December 31, 2004 included in our Registration Statement on Form S-4 filed with the SEC on April 5, 2005 (File No. 333-115344).

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Cautionary Statement for Forward-Looking Information

Certain information set forth in this report contains "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements
include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to
acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified 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. We may also make additional forward-looking statements from time to
time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

All
forward-looking statements, including without limitation, management's examination of historical operating trends, are based upon our current expectations and various assumptions.
Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but, there can be no assurance that management's expectations, beliefs and
projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be
made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There
are a number of risks and uncertainties, including those discussed elsewhere in this report, that could cause our actual results to differ materially from the forward-looking
statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of all such factors and the risks specified in our Registration Statement on
Form S-4 filed with the SEC on April 5, 2005 (File No. 333-115344).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes in currency exchange rates, interest rates and certain commodity prices. To manage the volatility relating to
these exposures, from time to time, we enter into various derivative transactions. We hold and issue derivative financial instruments for economic hedging purposes only.

Currency Exchange Rates

Our cash flows and earnings are subject to fluctuations due to exchange rate variation. Our sales prices are typically denominated in euros or U.S. dollars. From
time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Short-term exposures to
changing foreign currency exchange rates at certain foreign subsidiaries are generally netted where practicable with exposures of other subsidiaries and the remaining exposures that, from time to
time, may be managed through financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (with maturities of nine months or less) with various
financial institutions, to reflect the currency denomination of our cash flows. We do not hedge our currency exposures in a manner that would entirely eliminate the effect of changes in exchange rates
on our cash flows and earnings. As of March 31, 2005, we had no outstanding forward foreign exchange contracts.

We
finance certain of our non-U.S. subsidiaries with intercompany loans. In some cases, these loans are denominated in currencies other than the subsidiaries' functional
currency. Foreign currency transaction gains and losses on intercompany loans that are expected to be repaid in the foreseeable future are recorded in earnings. Foreign currency transaction gains and
losses on intercompany loans that are not expected to be repaid in the foreseeable future ("Permanent Loans") are recorded in other comprehensive income. As a result of our review of certain of our
intercompany loans in the first

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quarter
of 2005, we have increased the amount of our Permanent Loans. We expect that this will result in less foreign currency transaction gains and losses reflected in earnings.

Interest Rates

As of March 31, 2005, we have outstanding $250 million aggregate principal amount of 11% Fixed Rate Notes due 2010 and we have $100 million
aggregate principal amount (issued with an original issue discount of 2%, or for $98 million) of Floating Rate Notes due 2008 that bear an annual interest rate equal to LIBOR plus 8%, with a
LIBOR floor of 2%. The undrawn AdMat Revolving Credit Facility due in 2007 is subject to variable rates of interest based upon either a eurocurrency rate (LIBOR) or a base rate (prime), plus an
applicable spread. As of March 31, 2005, we had not entered into any interest rate agreements and we do not hedge our interest rate exposure in a manner that would eliminate the effects of
changes in market interest rates on our cash flow and earnings. Assuming a 1.0% (100 basis points) increase in interest rates, the effect on the annual interest expense relative to the Floating Rate
Notes would be an increase of approximately $1 million.

As
of March 31, 2005, the estimated fair value of our consolidated debt was approximately $391.5 million, and the weighted average interest rate, excluding additional
interest as discussed in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of OperationsDebt and Liquidity" above, of our combined borrowings was
approximately 10.96%.

Commodity Prices

We do not hedge our commodity exposure in a manner that would entirely eliminate the effects of changes in commodity prices on our cash flows and earnings. At
March 31, 2005, we had no outstanding forward purchase contracts. For further information regarding our financial and debt instruments, see Item 2, "Management's Discussion and Analysis
of Financial Condition and Results of OperationsDebt and Liquidity."

ITEM 4. CONTROLS AND PROCEDURES

In connection with the audit of the financial statements of our parent and its subsidiaries (the "Huntsman Companies" or "Group") for the six months ended
December 31, 2003, the Group's independent registered public accounting firm, or auditors, identified several matters that they deemed to be "material weaknesses" in the Group's internal
controls as defined in standards established by the American Institute of Certified Public Accountants. The principal material weakness identified by the auditors was that the Group's controllership
function did not have an adequate formal process in place to gather the data required to prepare the financial statements and disclosures required for the numerous financial reporting requirements of
the Huntsman Companies. The auditors noted that these
material weaknesses had led to restatements of the financial statements of certain of the Huntsman Companies, including us, in recent periods.

In
connection with the audit of the Group's financial statements for the year ended December 31, 2004, the auditors did not identify any matters that they deemed to be material
weaknesses. In conducting their audit, however, the auditors did not undertake to audit the Group's internal controls, and thus we cannot give any assurance that they would not have noted additional
material weaknesses, or reiterated the material weaknesses described above, had they done so. Nor can we give any assurance that the auditors will not note additional material weaknesses, or reiterate
the material weaknesses described above, in future audits of the Group's financial statements. Any such material weaknesses could cause the Group to fail to meet its reporting obligations or result in
material misstatements in the Group's financial statements.

Our
management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e)

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and
15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of March 31, 2005. Based on this evaluation, our chief executive officer and chief financial officer
have concluded that, as of March 31, 2005, our disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by our
Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms.

No
change in our internal control over financial reporting occurred during the three months ended March 31, 2005 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Group has engaged
Ernst & Young LLP to assist the Group's management in its evaluation of the Group's internal controls in preparation for the periodic management evaluations and annual auditor attestation
reports regarding the effectiveness of its "internal control over financial reporting" that will be required when the SEC's rules under Section 404 of the Sarbanes-Oxley Act of 2002 become
applicable to the Group beginning with its Annual Reports on Form 10-K for the year ending December 31, 2006 to be filed in the first quarter of 2007. We cannot give any
assurance, however, that the Group's internal controls will be effective when Section 404 becomes applicable to it. Ineffective internal controls could cause investors to lose confidence in the
Group's reported financial information and could result in a lower trading price for the Group's securities.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Vantico concluded that certain of the products of its former Electronics division may have infringed patents owned by Taiyo and it entered into a license
agreement in October 2001 with Taiyo to obtain the right to use the Taiyo patents. This license agreement required payment of approximately $4.2 million in back royalties and agreement
to pay periodic royalties for future use. We believe that Ciba Specialty Chemicals Holdings Inc. ("Ciba") is liable under the indemnity provisions of certain agreements in connection with the
leveraged buy out transaction in 2000 involving Ciba and Vantico for certain payments made under the license agreement and related costs and expenses, and we initiated an arbitration proceeding
against Ciba. In July 2004, we entered into a settlement agreement with Ciba with respect to this matter. In general, the settlement agreement provided that Ciba would pay us
$11.1 million in 2004 and provide us with approximately $11 million of credits over the next five years against payments for certain services provided by Ciba at one of our facilities.
We received additional consideration in the form of modifications to certain agreements between us and Ciba. In August 2004, we received payment of the $11.1 million settlement. As of
March 31, 2005, we have incurred approximately $2.6 million in costs in connection with the arbitration proceedings against Ciba.

We
are 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 laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material adverse effect on our
financial condition, results of operations or liquidity. See Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of OperationsEnvironmental,
Health and Safety Matters" for a discussion of environmental proceedings.

ITEM 5. OTHER INFORMATION

On May 5, 2005, each of James A. Huffman, David J. Matlin and Christopher R. Pechock resigned as a member of our board of directors.
On May 10, 2005, J. Kimo Esplin and Samuel D. Scruggs were elected to serve as directors. Messrs. Esplin and Scruggs will also serve as members of the audit committee of
our board of directors.

ITEM 6. EXHIBITS

|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|---- |  | ---------------------------------------------------------------------------------------------------
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|32.1 |  | Certifications of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2 |  | Certifications of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated:
May 11, 2005

| |  | HUNTSMAN ADVANCED MATERIALS LLC
| |  | -------------------------------
| |  | By:                            
| |  | By:                            

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EXHIBIT INDEX

|Number |  | Description                                                                                        
|------ |  | ---------------------------------------------------------------------------------------------------
|31.1   |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|31.2   |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|32.1   |  | Certifications of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2   |  | Certifications of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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