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

                                  FORM 10-Q

(Mark One)
  /X/           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended JUNE 29, 2003

                                      OR

  / /          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934

                      Commission File Number 333-17827-01

                                ISP CHEMCO INC.
            (Exact name of registrant as specified in its charter)


        Delaware                                         51-0382622
(State or Other Jurisdiction of                         (IRS Employer
Incorporation or Organization)                       Identification No.)


 300 DELAWARE AVENUE, SUITE 303, WILMINGTON, DELAWARE            19801
(Address of principal executive offices)                       (Zip Code)

                            (302) 427-5818
             (Registrant's telephone number, including area code)

                                     NONE
            (Former Name, Former Address and Former Fiscal Year,
                        if Changed Since Last Report)

                     -----------------------------------
                     SEE TABLE OF ADDITIONAL REGISTRANTS

     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 /X/ No / /

     Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act).   Yes  / /   No  /X/

     As of August 12,  2003,  100 shares of the  registrant's  common stock (par
value  $.01 per share)  were  outstanding.  There is no  trading  market for the
common stock of the  registrant.  As of August 12, 2003,  each of the additional
registrants  had the  number of shares  outstanding  which is shown on the table
below.  There is no  trading  market  for the  common  stock  of the  additional
registrants. No shares of the registrant or the additional registrants were held
by non-affiliates.

<PAGE>

     THE REGISTRANT AND THE ADDITIONAL REGISTRANTS MEET THE CONDITIONS SET FORTH
IN GENERAL  INSTRUCTION  H(1)(a) AND (b) OF FORM 10-Q AND ARE  THEREFORE  FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

                     ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>

                                                                                                  Address, including zip
                                                                            Commission File       code and telephone
Exact name of registrant as     State or other               No. of         No./ I.R.S.           number, including area
specified in its charter        jurisdiction of              Shares         Employer              code, of registrant's
                                incorporation or             Outstanding    Identification No.    principal executive
                                organization                                                      offices
---------------------------     ----------------             -----------    -----------------     -------------------------
<S>                             <C>                          <C>            <C>                   <C>
ISP Chemicals Inc.              Delaware                     10             333-70144-08/         Route 95 Industrial Area,
                                                                            22-3807357            P.O. Box 37
                                                                                                  Calvert City, KY 42029
                                                                                                  (270) 395-4165
ISP Minerals Inc.               Delaware                     10             333-70144-07/         34 Charles Street
                                                                            22-3807370            Hagerstown, MD 21740
                                                                                                  (301) 733-4000
ISP Technologies                Delaware                     10             333-70144-09/         4501 Attwater Avenue
Inc.                                                                        22-3807372            and State Highway 146
                                                                                                  Texas City, TX 77590
                                                                                                  (409) 945-3411
ISP  Management                 Delaware                     10             333-70144-13/         1361 Alps Road
  Company, Inc.                                                             22-3807364            Wayne, NJ  07470
                                                                                                  (973) 628-4000
Bluehall Incorporated           Delaware                      1             033-44862-15/         c/o ISP Management
                                                                            13-3335905            Company, Inc.
                                                                                                  1361 Alps Road
                                                                                                  Wayne, NJ 07470
                                                                                                  (973) 628-4000
Verona Inc.                     Delaware                     100            033-44862-16/         1361 Alps Road
                                                                            22-3036319            Wayne, NJ  07470
                                                                                                  (973) 628-4000
ISP Real Estate Company,        Delaware                     2              033-44862-12/         1361 Alps Road
    Inc.                                                                    22-2886551            Wayne, NJ  07470
                                                                                                  (973) 628-4000
ISP Freetown Fine               Delaware                     10             033-70144-12/         238 South Main Street
  Chemicals Inc.                                                            52-2069636            Assonet, MA  02702
                                                                                                  (508) 672-0634
ISP International Corp.         Delaware                     10             033-44862-07/         300 Delaware Avenue
                                                                            51-0333734            Suite 303
                                                                                                  Wilmington, DE  19801
                                                                                                  (302) 427-5715
ISP (Puerto Rico) Inc.          Delaware                     10             033-44862-03/         Mirador de Bairoa
                                                                            22-2934561            Calle 27 ST-14
                                                                                                  HC01 Box 29030
                                                                                                  PMB 15
                                                                                                  Caguas, PR 00725-8900
                                                                                                  (787) 744-3188
ISP Alginates Inc.              Delaware                     10             333-70144-11/         2145 East Belt Street
                                                                            22-3676745            San Diego, CA 92113
                                                                                                  (619) 557-3100
ISP Environmental               Delaware                     10             033-44862-04/         1361 Alps Road
  Services Inc.                                                             51-0333801            Wayne, NJ  07470
                                                                                                  (973) 628-4000
ISP Global                      Delaware                     10             333-70144-10/         300 Delaware Avenue
  Technologies Inc.                                                         22-3807358            Suite 303
                                                                                                  Wilmington, DE  19801
                                                                                                  (302) 427-5852
ISP Investments Inc.            Delaware                     10             033-44862-08/         300 Delaware Avenue
                                                                            22-3807361            Suite 303
                                                                                                  Wilmington, DE  19801
                                                                                                  (302) 427-5822

</TABLE>


<PAGE>


                     ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>

                                                                                                   Address, including zip
                                                                            Commission File No./   code and telephone
Exact name of registrant as     State or other               No. of         I.R.S. Employer        number, including area
specified in its charter        jurisdiction of              Shares         Identification No.     code, of registrant's
                                incorporation or             Outstanding                           principal executive
                                organization                                                       offices
---------------------------     ----------------             -----------    --------------------  --------------------------
<S>                             <C>                          <C>            <C>                   <C>
ISP Chemicals LLC               Delaware                     N/A            333-70144-04/         Route 95 Industrial Area,
                                                                            22-3807378            P.O. Box 37
                                                                                                  Calvert City, KY 42029
                                                                                                  (270) 395-4165
ISP Management LLC              Delaware                     N/A            333-70144-05/         1361 Alps Road
                                                                            22-3807385            Wayne, NJ  07470
                                                                                                  (973) 628-4000
ISP Minerals LLC                Delaware                     N/A            333-70144-01/         34 Charles Street
                                                                            22-3807387            Hagerstown, MD 21740
                                                                                                  (301) 733-4000
ISP Technologies                Delaware                     N/A            333-70144-06/          4501 Attwater Avenue and
   LLC                                                                      22-3807390            State Highway 146
                                                                                                  Texas City, TX 77590
                                                                                                  (409) 945-3411
ISP Investments                 Delaware                     N/A            333-70144-03/         300 Delaware Avenue
   LLC                                                                      22-3807381            Suite 303
                                                                                                  Wilmington, DE 19801
                                                                                                  (302) 427-5822
ISP Global                      Delaware                     N/A            333-70144-02/         300 Delaware Avenue
   Technologies                                                             22-3807380            Suite 303
LLC                                                                                               Wilmington, DE 19801
                                                                                                  (302) 427-5852

</TABLE>



<PAGE>




                        PART I - FINANCIAL INFORMATION
                        ITEM 1 - FINANCIAL STATEMENTS


                                ISP CHEMCO INC.

              CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                      SECOND QUARTER ENDED     SIX MONTHS ENDED
                                      --------------------    ------------------
                                       JUNE 30,    JUNE 29,   JUNE 30,  JUNE 29,
                                         2002        2003       2002      2003
                                      --------    ---------   --------  --------
                                                         (THOUSANDS)
<S>                                   <C>         <C>        <C>        <C>
Net sales............................ $ 214,724   $ 229,528  $ 433,848  $ 462,104
Cost of products sold................  (138,655)   (147,215)  (284,032)  (299,808)
Selling, general and administrative..   (43,812)    (45,121)   (86,282)   (88,914)
Other operating gains and
  (charges), net.....................     9,396           -     12,228     (1,451)
Amortization of intangible assets....      (153)       (144)      (555)      (288)
                                      ---------   ---------  ---------  ---------
Operating income.....................    41,500      37,048     75,207     71,643
Interest expense.....................   (15,276)    (13,229)   (31,797)   (26,650)
Charge for early retirement of debt..         -           -     (4,294)         -
Other income (expense), net..........       (85)      1,412     (1,956)        75
                                      ---------   ---------  ---------  ---------
Income before income taxes and
  cumulative effect of changes in
  accounting principles..............    26,139      25,231     37,160     45,068
Income taxes.........................    (8,933)     (9,190)   (12,821)   (15,793)
                                      ---------   ---------  ---------  ---------
Income before cumulative effect of
  changes in accounting principles...    17,206      16,041     24,339     29,275

Cumulative effect of changes in
  accounting principles, net of
  income tax benefit of $600 in 2003.         -           -   (155,400)    (1,021)
                                      ---------   ---------  ---------  ---------
Net income (loss).................... $  17,206   $  16,041  $(131,061) $  28,254
                                      =========   =========  =========  =========
</TABLE>














      The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.

                                       1
<PAGE>

                                ISP CHEMCO INC.

                    CONSOLIDATED BALANCE SHEETS (UNAUDITED)


                                                  DECEMBER 31,    JUNE 29,
                                                      2002          2003
                                                  ------------ -----------
                                                         (THOUSANDS)
ASSETS
Current Assets:
  Cash and cash equivalents...................... $   33,291   $   42,045
  Accounts receivable, trade, less allowance of
    $6,022 and $6,218 at December 31, 2002 and
    June 29, 2003, respectively..................     79,780      102,680
  Accounts receivable, other.....................     15,371       18,510
  Receivables from related parties...............     12,412       19,449
  Inventories....................................    176,217      173,735
  Deferred income taxes..........................     34,687       37,858
  Prepaid expenses...............................      9,822        9,328
                                                  ----------   ----------
    Total Current Assets.........................    361,580      403,605
Property, plant and equipment, net...............    565,441      568,635
Goodwill, net of accumulated amortization
  of $180,486....................................    325,706      330,957
Intangible assets, net...........................      9,442        9,154
Long-term receivable from related party..........     30,298       31,207
Other assets.....................................     43,016       48,075
                                                  ----------   ----------
Total Assets..................................... $1,335,483   $1,391,633
                                                  ==========   ==========


LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
  Short-term debt................................ $      144   $       67
  Current maturities of long-term debt...........      2,732        2,722
  Accounts payable...............................     53,205       59,011
  Accrued liabilities............................     89,902       82,060
  Income taxes payable...........................     34,201       36,221
                                                  ----------   ----------
    Total Current Liabilities....................    180,184      180,081
                                                  ----------   ----------
Long-term debt less current maturities...........    623,008      622,269
                                                  ----------   ----------
Deferred income taxes............................    100,715      111,590
                                                  ----------   ----------
Other liabilities................................    103,678      110,493
                                                  ----------   ----------
Shareholder's Equity:
   Common stock, $.01 par value per share;
    1,000 shares authorized; 100 shares issued
    and outstanding .............................          -            -
  Additional paid-in capital.....................    398,023      399,474
  Accumulated deficit............................    (51,126)     (22,872)
  Accumulated other comprehensive loss...........    (18,999)      (9,402)
                                                  ----------   ----------
    Total Shareholder's Equity...................    327,898      367,200
                                                  ----------   ----------
Total Liabilities and Shareholder's Equity....... $1,335,483   $1,391,633
                                                  ==========   ==========


      The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.


                                       2
<PAGE>

                                ISP CHEMCO INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                            SIX MONTHS ENDED
                                                           --------------------
                                                            JUNE 30,   JUNE 29,
                                                              2002       2003
                                                            --------  ---------
                                                                (THOUSANDS)

Cash and cash equivalents, beginning of period............. $  10,830  $ 33,291
                                                            ---------  --------
Cash provided by (used in) operating activities:
  Net income (loss)........................................  (131,061)   28,254
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
      Cumulative effect of changes in accounting principles   155,400     1,021
      Gain on sale of assets...............................    (5,468)        -
      Depreciation.........................................    27,678    29,723
      Amortization of intangible assets....................       555       288
      Deferred income taxes................................     4,205     8,304
  (Increase) decrease in working capital items.............     5,229   (22,269)
  Proceeds (repayments) from sale of accounts receivable...    (3,883)     (688)
  Increase in receivable from related parties..............    (5,379)   (7,946)
  Change in cumulative translation adjustment..............    10,584     7,177
  Other, net...............................................    (1,849)   (5,020)
                                                             --------  --------
Net cash provided by operating activities..................    56,011    38,844
                                                             --------  --------
Cash provided by (used in) investing activities:
  Capital expenditures and acquisitions....................   (30,610)  (33,005)
  Net proceeds from sale of assets.........................    27,271         -
                                                             --------  --------
Net cash used in investing activities......................    (3,339)  (33,005)
                                                             --------  --------
Cash provided by (used in) financing activities:
  Increase (decrease) in short-term debt...................         6       (77)
  Decrease in borrowings under revolving credit facility...   (56,850)        -
  Repayments of long-term debt.............................  (183,464)     (879)
  Call premium on redemption of debt.......................    (2,734)        -
  Decrease in restricted cash..............................   182,130         -
  Debt issuance costs......................................      (797)        -
  Capital contribution from parent company.................     6,891     1,451
                                                             --------  --------
Net cash provided by (used in) financing activities........   (54,818)      495
                                                             --------  --------
Effect of exchange rate changes on cash....................       554     2,420
                                                             --------  --------
Net change in cash and cash equivalents....................    (1,592)    8,754
                                                             --------  --------
Cash and cash equivalents, end of period...................  $  9,238  $ 42,045
                                                             ========  ========







      The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.


                                       3
<PAGE>

                                ISP CHEMCO INC.

       CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- (CONTINUED)


                                                              SIX MONTHS ENDED
                                                            --------------------
                                                             JUNE 30,   JUNE 29,
                                                               2002       2003
                                                            ---------  ---------
                                                                 (THOUSANDS)

Supplemental Cash Flow Information:

  Cash paid during the period for:
    Interest (net of amount capitalized).................   $ 32,425    $ 26,202
    Income taxes (including taxes paid pursuant to the
       Tax Sharing Agreement)............................      4,012       5,774


Acquisition of mineral products facility:
    Fair market value of assets acquired.................   $ 11,421
    Purchase price of acquisition........................     11,421
                                                            --------
    Liabilities assumed..................................   $      -
                                                            ========

Acquisition of Germinal S.A., net of $436
    cash acquired:
    Fair market value of assets acquired.................               $  7,685
    Purchase price of acquisition........................                  7,252
                                                                        --------
    Liabilities assumed..................................               $    433
                                                                        ========
























      The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.

                                       4
<PAGE>


                                ISP CHEMCO INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



     The consolidated  financial  statements for ISP Chemco Inc. (the "Company")
reflect,  in the opinion of  management,  all  adjustments  necessary to present
fairly the financial  position of the Company and its consolidated  subsidiaries
at June 29, 2003, and the results of operations and cash flows for the three and
six month periods ended June 30, 2002 and June 29, 2003. All  adjustments are of
a normal recurring nature.  These  consolidated  financial  statements should be
read in conjunction with the annual consolidated  financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 (the "2002 Form 10-K").


NOTE 1.  CHARGE FOR EARLY RETIREMENT OF DEBT

     On January 14, 2002, the Company's  indirect parent company,  International
Specialty Products Inc. ("ISP"), redeemed the remaining $307.9 million aggregate
principal  amount of its 9% Senior Notes due 2003 (the "2003  Notes"),  of which
$182.1  million was  reflected on the  Company's  Consolidated  Balance Sheet at
December 31, 2001. As a result,  the Company recorded an  extraordinary  loss on
the early  retirement of debt of $2.8 million  ($4.3  million  before income tax
benefit of $1.5  million).  In April 2002,  the Financial  Accounting  Standards
Board ("FASB") issued Statement of Financial  Accounting  Standards ("SFAS") No.
145,  "Rescission  of FASB  Statements  No.  4, 44,  and 64,  Amendment  of FASB
Statement  No. 13, and  Technical  Corrections."  SFAS No.  145  eliminates  the
requirement of SFAS No. 4 that gains and losses on the early  extinguishments of
debt be recorded as an extraordinary  item unless such gains and losses meet the
criteria of Accounting  Principles  Board Opinion No. 30 for  classification  as
extraordinary.  The Company adopted SFAS No. 145 effective  January 1, 2003 and,
as a result,  the Consolidated  Statement of Operations for the first six months
of 2002 was  restated to  reclassify  the pre-tax  extraordinary  charge of $4.3
million  on the early  retirement  of debt to a  separate  line item of  pre-tax
income. The tax benefit of $1.5 million related to the extraordinary  charge has
been reclassified and is included in "Income taxes."


NOTE 2.  ASSET RETIREMENT OBLIGATIONS

     The  Company  adopted  SFAS  No.  143,  "Accounting  for  Asset  Retirement
Obligations," effective January 1, 2003. SFAS No. 143 establishes accounting and
reporting  standards for legal  obligations  associated  with the  retirement of
long-lived  assets that result from the acquisition,  construction,  development
and the normal  operation of a long-lived  asset.  The Company holds  long-lived
assets  that have legal  obligations  associated  with their  retirement.  These
assets include deep wells that require capping,  minerals  quarries that require
reclamation and other plant assets subject to certain environmental regulations.
SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation  ("ARO") be  recognized  in the period in which it is incurred.  Upon
initial  recognition  of such  liability,  an entity must  capitalize  the asset
retirement  cost by  increasing  the carrying  amount of the related  long-lived
asset and  subsequently  depreciating  the asset retirement cost over the useful
life of the related asset. Subsequent to the initial measurement of the ARO, the
obligation  will be adjusted at the end of each period to reflect the passage of
time and changes in the estimated  future cash flows  underlying the obligation.
If the  obligation  is  settled  for  other  than  the  carrying  amount  of the
liability,  the Company would then recognize a gain or loss on settlement.  As a
result of  adopting  SFAS No.  143,  effective  January  1,  2003,  the  Company
recognized an after-tax  charge of $1.0 million  ($1.6 million  before an income
tax benefit of $0.6 million) as the cumulative  effect of a change in accounting
principle, and recorded an ARO of $1.9 million and a net increase in


                                       5
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 2.  ASSET RETIREMENT OBLIGATIONS - (CONTINUED)

property, plant and equipment of $0.3 million. The ongoing expense on an annual
basis resulting from the initial adoption of SFAS No. 143 is approximately $0.2
million.

     The  change in the ARO during  the six  months  ended  June 29,  2003 is as
follows:

                                                                  (Thousands)
          ARO liability recognized as of January 1, 2003.......    $  1,871
          Liabilities incurred, quarter ended June 29, 2003....          16
          ARO liability accretion..............................          90
                                                                   --------
          ARO liability balance, June 29, 2003.................    $  1,977
                                                                   ========

     The pro forma ARO would have been $1.7  million on January 1, 2002 and $1.8
million on June 30,  2002 if SFAS No. 143 had been  applied  during all  periods
affected.

     For the six months  ended June 30,  2002,  the  reported  net loss on a pro
forma basis would have been $131.2 million, including an additional $0.1 million
due to additional depreciation and liability accretion from AROs. The net income
for the six months ended June 29, 2003 would have increased on a pro forma basis
by $1.0 million to $29.3 million due to the elimination of the cumulative effect
of the  change  in  accounting  principle  recorded  on  January  1, 2003 on the
adoption  of SFAS No.  143.  For the second  quarter of 2002,  the pro forma net
income would have been $40 thousand lower, while for the second quarter of 2003,
actual and pro forma net income are the same.


NOTE 3.  NEW ACCOUNTING STANDARDS

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities." SFAS No. 146 addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and supercedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the  liability  is  incurred,  and  concludes  that an entity's
commitment to an exit plan does not by itself create a present  obligation  that
meets the definition of a liability.  This Statement also  establishes that fair
value is the objective for initial measurement of the liability. SFAS No. 146 is
effective for exit or disposal  activities that are initiated after December 31,
2002.  As the  Company  has no  plans  at this  time  for any  exit or  disposal
activities,  the adoption of SFAS No. 146 will not have any immediate  effect on
the Company's consolidated financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure,"  an  amendment  of SFAS No.  123,
"Accounting for  Stock-Based  Compensation."  SFAS No. 148 provides  alternative
methods of transition for an entity that  voluntarily  changes to the fair value
based method of accounting for stock-based employee  compensation.  In addition,
SFAS No. 148 amends the disclosure  requirements of SFAS No. 123 for both annual
and interim reporting

                                       6
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 3.  NEW ACCOUNTING STANDARDS - (CONTINUED)

periods  by  requiring  disclosures  in a tabular  format to  reconcile  net
income as reported to pro forma net income as if the fair value method was used.
Certain of the disclosure  modifications  required for fiscal years ending after
December 15, 2002 were  disclosed in the Company's 2002 Form 10-K.  However,  as
discussed in Note 4, with the completion of the going private transaction by ISP
in February 2003, the Company's  stock-based  compensation plans were terminated
and payments  were made in  accordance  with the terms of the merger  agreement.
Therefore,  the  provisions  of SFAS No.  148 are no  longer  applicable  to the
Company  as it  relates to those  plans.  In  addition,  the  Company  currently
accounts for incentive units granted to eligible Company  employees  pursuant to
ISP's 2000 Long-Term  Incentive Plan and 2003 Executive Long-Term Incentive Plan
under the accounting  prescribed by FASB  Interpretation No. 28, "Accounting for
Stock Appreciation Rights and Other Variable Stock Option and Award Plans" ("FIN
28"),  which requires an entity to measure  compensation  as the amount by which
the Book Value of the  incentive  units  covered by the grant exceeds the option
price or value specified of such incentive units at the date of grant.  Changes,
either  increases  or  decreases,  in the Book  Value of those  incentive  units
between  the date of grant and the  measurement  date  result in a change in the
measure of compensation  for the right or award. The Company expects to continue
to account for its long-term incentive units under the accounting  prescribed by
FIN 28 and has adopted the  additional  disclosure  provisions  of SFAS No. 148.
Since  compensation  expense  related to such incentive units is included in the
actual Consolidated Statements of Operations, the Company's pro forma net income
under SFAS No. 123 would have been the same as actual net income.

     In  November  2002,  the FASB issued FASB  Interpretation  No.  ("FIN") 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect   Guarantees  of   Indebtedness   of  Others."  FIN  45  clarifies  the
requirements  for a  guarantor's  accounting  for  and  disclosures  of  certain
guarantees  issued and outstanding.  The provisions of FIN 45 apply to guarantee
contracts  that  contingently  require the  guarantor to make payments (in cash,
financial  instruments,  other assets, shares of stock or provision of services)
to the  guaranteed  party for guarantees  such as a financial  standby letter of
credit,  a market value  guarantee on either a financial or  nonfinancial  asset
owned by the guaranteed party and a guarantee of the collection of the scheduled
contractual cash flows from financial assets held by a  special-purpose  entity.
FIN 45 also applies to  indemnification  contracts  and indirect  guarantees  of
indebtedness of others.  The requirements of FIN 45 for the initial  recognition
and measurement of the liability for a guarantor's obligations are to be applied
only on a prospective  basis to guarantees issued or modified after December 31,
2002.  The  Company  currently  does not have  any  guarantees,  indemnification
contracts or indirect guarantees of indebtedness of others that would be subject
to the initial recognition and measurement provisions of FIN 45. As discussed in
Note 10, the Company's 10 1/4% Senior Subordinated Notes due 2011 are guaranteed
by all of the Company's  domestic  subsidiaries,  other than certain  immaterial
subsidiaries and the Company's accounts receivable financing subsidiary.

     In  January  2003,  the FASB  issued  FIN 46,  "Consolidation  of  Variable
Interest  Entities." In accordance with FIN 46, a variable  interest entity will
be consolidated if either the total equity  investment at risk is not sufficient
to

                                       7
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 3.  NEW ACCOUNTING STANDARDS - (CONTINUED)

permit the  entity to  finance  its  activities without  additional subordinated
financial  support from other parties,  or as a group, the holders of the equity
investment  at risk lack any one of the  following  three  characteristics  of a
controlling  financial  interest:  (1) the  direct or  indirect  ability to make
decisions  about an  entity's  activities;  (2) the  obligation  to  absorb  the
expected  losses of the  entity if they  occur;  (3) the  right to  receive  the
expected  residual  returns  of the entity if they  occur.  All  companies  with
variable  interests in variable interest entities created after January 31, 2003
shall  apply  the  provisions  of FIN 46  immediately.  A public  entity  with a
variable  interest in a variable interest entity created before February 1, 2003
shall apply the  provisions of FIN 46 to that entity no later than the beginning
of the first interim or annual  reporting  period beginning after June 15, 2003.
The Company does not have an interest in a variable interest entity.  Therefore,
FIN 46 does not currently have an impact on the Company's consolidated financial
statements.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies  financial  accounting  and reporting for derivative  instruments  and
hedging  activities  under SFAS No. 133. SFAS No. 149 is effective for contracts
entered  into or  modified  after June 30,  2003 and for  hedging  relationships
designated after June 30, 2003. The Company does not expect that the adoption of
SFAS  No.  149 will  have an  immediate  impact  on the  Company's  consolidated
financial statements.


NOTE 4.  OTHER OPERATING GAINS AND CHARGES

     On February 28, 2003,  ISP  completed a going private  transaction  whereby
stockholders  of ISP  approved  the  Agreement  and Plan of  Merger  dated as of
November 8, 2002 of International Specialty Products Holdings Inc. with and into
ISP and pursuant to which holders of ISP common stock received  $10.30 per share
in cash for each share of ISP common stock owned  (except as otherwise  provided
in  the  merger  agreement).  As a  result  of  completing  this  going  private
transaction,  the Company's  stock-based  compensation plans were terminated and
payments were made in accordance  with the terms of the merger  agreement.  As a
result, holders of approximately 2.7 million vested,  in-the-money stock options
outstanding and exercisable on February 28, 2003 received a cash amount equal to
the excess of $10.30 over the exercise price of such stock options,  aggregating
$1.5 million.  Compensation  expense of $1.5 million  related to the payment for
stock  option  terminations  was  recorded  in the first  quarter of 2003 and is
included in "Other operating gains and (charges), net." In addition, outstanding
restricted  common stock awards were replaced with long-term  incentive units of
comparable  vesting and a value  equivalent to the previous  awards based on the
buyout price of $10.30 per award.  First quarter 2002 results  included an other
operating gain of $2.8 million for a contract termination related to the sale of
the Company's  FineTech  business.  The Company  recorded an  additional  second
quarter 2002 pre-tax gain, after expenses, of $5.5 million related to this sale.
In the second quarter of 2002,  the Company  received $4.0 million in settlement
of a  manufacturing  and supply  contract with a customer of the fine  chemicals
business. After related expenses, a pre-tax gain of $3.9 million was recognized.
For  additional  information,  reference  is  made  to  Note  6 to  Consolidated
Financial Statements contained in the 2002 Form 10-K.


                                       8
<PAGE>


                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 5.  2003 EXECUTIVE LONG-TERM INCENTIVE PLAN

     In May 2003, ISP adopted the 2003 Executive  Long-Term  Incentive Plan (the
"Plan"),  which authorizes the grant of incentive units  ("Incentive  Units") to
eligible employees of the Company.  The Plan is administered by a committee (the
"Committee") appointed by the Board of Directors of ISP from among the employees
of ISP.  The  Committee,  in its  sole  discretion,  determines  the  number  of
Incentive Units to be granted to each eligible employee. The Plan will terminate
ten years after its effective date of May 15, 2003.


NOTE 6.  GOODWILL AND INTANGIBLE ASSETS

     On June 30,  2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and  Other
Intangible  Assets".  With the  adoption of SFAS No. 142,  goodwill is no longer
subject to amortization  over its estimated  useful life.  However,  goodwill is
subject to at least an annual  assessment for impairment and more  frequently if
circumstances  indicate a possible impairment.  The Company adopted SFAS No. 142
effective as of January 1, 2002. Accordingly, during the second quarter of 2002,
the Company completed a transitional impairment test, effective January 1, 2002,
and  recognized a goodwill  impairment  loss of $155.4 million as the cumulative
effect of a change in accounting principle.

     The following  schedule  reconciles  the changes in the carrying  amount of
goodwill,  by business segment, for the six months ended June 29, 2003. See Note
8 for a discussion  of a change in the  composition  of the  Company's  business
segments,  effective  January 1, 2003. Also, see Note 10 for a discussion of the
acquisition of Germinal S.A.

<TABLE>
<CAPTION>

                                                 Specialty        Industrial         Mineral       Total
                                                 Chemicals        Chemicals         Products      Goodwill
                                                ----------        ----------        ---------     ---------
                                                                         (Thousands)
   <S>                                          <C>              <C>                <C>           <C>
   Balance, December 31, 2002........           $ 274,167        $        -         $  51,539     $ 325,706
   Acquisition of Germinal S.A. .....               5,537                 -                 -         5,537
   Translation adjustment............                (286)                -                 -          (286)
                                                ---------        ----------         ---------     ---------
   Balance, June 29, 2003............           $ 279,418        $        -         $  51,539     $ 330,957
                                                =========        ==========         =========     =========
</TABLE>

     Intangible  assets at  December  31,  2002 and June 29,  2003 relate to the
Company's  biocides  business,  which was  acquired on December  31,  2001.  The
following  is  information  as of December 31, 2002 and June 29, 2003 related to
the Company's acquired intangible assets:

<TABLE>
<CAPTION>


                                                                              December 31, 2002             June 29, 2003
                                                        Range of    ----------------------------   ---------------------------
                                                      Amortizable   Gross Carrying   Accumulated   Gross Carrying  Accumulated
                                                         Lives          Amount      Amortization       Amount     Amortization
                                                      -----------   --------------  ------------   -------------- ------------
                                                                                    (Dollars in Thousands)
<S>                                                   <C>           <C>             <C>            <C>            <C>
  Intangible assets subject to amortization:
    Patents.....................................      5-20 years    $      669      $      (57)    $      669     $      (85)
    Non-compete agreements......................       2-5 years         1,571            (485)         1,571           (728)
    EPA registrations...........................         5 years           167             (33)           167            (50)
                                                                    ----------      ----------     ----------     ----------
      Total amortized intangible assets.........                         2,407            (575)         2,407           (863)
                                                                    ----------      ----------     ----------     ----------
  Intangible assets not subject to amortization:
    Trademarks..................................                         2,962               -          2,962              -
    EPA registrations...........................                         4,648               -          4,648              -
      Total unamortized intangible assets.......                         7,610               -          7,610              -
                                                                    ----------      ----------     ----------     ----------
  Total intangible assets.........................                  $   10,017      $     (575)    $   10,017     $     (863)
                                                                    ==========      ==========     ==========     ==========
</TABLE>


                                       9
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 6.  GOODWILL AND INTANGIBLE ASSETS - (CONTINUED)


        Estimated amortization expense:
        Year ended December 31,                               (Thousands)
        2003................................................ $     575
        2004................................................       290
        2005................................................       290
        2006................................................       290
        2007................................................        26


NOTE 7.  COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>

                                               Second Quarter Ended     Six Months Ended
                                               --------------------   ---------------------
                                                June 30,   June 29,   June 30,     June 29,
                                                   2002      2003        2002        2003
                                                --------   --------   --------    ---------
                                                                (Thousands)
<S>                                             <C>        <C>        <C>         <C>
Net income (loss).............................  $ 17,206   $ 16,041   $(131,061)  $  28,254
                                                --------   --------   ---------   ---------
  Change in unrealized losses on derivative
    hedging instruments - cash flow hedges:
    Net derivative losses, net of income tax
      benefit of $11, $0, $12 and $0,
      respectively............................       (20)        -          (22)          -
    Less: reclassification adjustment for
      losses included in net income, net of
      income tax benefit of $316, $0, $534
      and $0, respectively....................      (611)        -         (986)          -
                                                --------   -------    ---------   ---------
  Total change for the period.................       591         -          964           -
                                                --------   -------    ---------   ---------
Foreign currency translation adjustment.......    11,172     8,107       11,138       9,597
                                                --------   -------    ---------   ---------
Total other comprehensive income..............    11,763     8,107       12,102       9,597
                                                --------  --------    ---------   ---------
Comprehensive income (loss)...................  $ 28,969  $ 24,148    $(118,959)  $  37,851
                                                ========  ========    =========   =========
</TABLE>


     Changes in the components of "Accumulated other comprehensive loss"
for the six months ended June 29, 2003 are as follows:

                                    Cumulative     Additional
                                    Foreign        Minimum       Accumulated
                                    Currency       Pension       Other
                                    Translation    Liability     Comprehensive
                                    Adjustment     Adjustment    Loss
                                    ----------     ----------    -------------
                                                  (Thousands)
Balance, December 31, 2002.......   $  (13,595)   $  (5,404)    $ (18,999)
Change for the period............        9,597            -         9,597
                                    ----------    ---------     ---------
Balance, June 29, 2003...........   $   (3,998)   $  (5,404)    $  (9,402)
                                    ==========    =========     =========

                                       10
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 8.  BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>

                                               Second Quarter Ended      Six Months Ended
                                               ---------------------   --------------------
                                                June 30,    June 29,     June 30,  June 29,
                                                  2002        2003         2002      2003
                                               ---------   ---------    --------  ---------
                                                               (Thousands)
<S>                                            <C>         <C>          <C>        <C>
Net sales (1):
  Specialty Chemicals.......................   $ 146,711   $ 159,001    $ 306,282  $ 316,914
  Industrial Chemicals......................      42,338      44,391       77,863     93,527
  Mineral Products (2)......................      25,675      26,136       49,703     51,663
                                               ---------   ---------    ---------  ---------
Net sales...................................   $ 214,724   $ 229,528    $ 433,848  $ 462,104
                                               =========   =========    =========  =========

Operating income (1):
  Specialty Chemicals.......................   $  33,844   $  33,694    $  59,285  $  66,937
  Industrial Chemicals......................         403      (1,393)       3,064     (4,121)
  Mineral Products..........................       7,219       4,739       12,888      8,737
                                               ---------   ---------    ---------   --------
  Total segment operating income............      41,466      37,040       75,237     71,553
  Unallocated corporate office..............          34           8          (30)        90
                                               ---------   ---------    ---------  ---------
Total operating income......................      41,500      37,048       75,207     71,643
Interest expense and other, net.............     (15,361)    (11,817)     (38,047)   (26,575)
                                               ---------   ---------    ---------  ---------
Income before income taxes and cumulative
  effect of changes in accounting principles   $  26,139   $  25,231    $  37,160  $  45,068
                                              ==========   =========    =========  =========
</TABLE>


(1)  Effective January 1, 2003, the Company changed the composition of its
     reportable segments to be consistent with the current structure of the
     Company's businesses. Over the last several years, the Company has
     increased its focus on its higher margin consumer-oriented businesses.
     Consistent with that business focus, the Company now reports three business
     segments: Specialty Chemicals, Industrial Chemicals and Mineral Products.
     The Company's Specialty Chemicals segment consists of the personal care,
     pharmaceutical, food, beverage, performance chemicals and fine chemicals
     product lines. Sales and operating income by business segment for the
     second quarter and six months ended June 30, 2002 have been restated to
     conform to the 2003 presentation.

(2)  Includes sales to Building Materials Corporation of America, an affiliate,
     and its subsidiaries, of $19.7 and $20.0 million for the second quarter of
     2002 and 2003, respectively, and $38.8 and $39.7 for the first six months
     of 2002 and 2003, respectively.

NOTE 9.  INVENTORIES

     Inventories comprise the following:

                                       December 31,   June 29,
                                           2002         2003
                                       ------------   --------
                                              (Thousands)
     Finished goods................     $113,912      $116,395
     Work-in-process...............       32,407        31,034
     Raw materials and supplies....       29,898        26,306
                                        --------      --------
     Inventories...................     $176,217      $173,735
                                        ========      ========

                                       11
<PAGE>


                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 9.  INVENTORIES - (CONTINUED)

     At  December  31,  2002  and  June  29,  2003,  $62.0  and  $55.6  million,
respectively,  of domestic inventories were valued using the LIFO method. If the
FIFO  inventory  method  had  been  used for  these  inventories,  the  value of
inventories  would have been $2.8 and $3.9  million  higher at December 31, 2002
and June 29, 2003, respectively.


NOTE 10.  ACQUISITION

     In May 2003,  the Company  acquired  100% of the stock of Germinal  S.A., a
supplier of food  ingredients  to the meat and dairy  industry in southern Latin
America,  for $7.3 million in cash, net of $0.4 million cash acquired.  Germinal
has a  manufacturing  facility  at its  headquarters  in  Cabreuva,  Brazil.  In
accordance with SFAS No. 141,  "Business  Combinations,"  the purchase price was
allocated on a preliminary basis to the estimated fair value of the identifiable
assets acquired,  primarily property plant and equipment, and the excess of $5.5
million was  recorded as goodwill.  The Company is in the process of  evaluating
the fair value of the net assets  acquired and,  therefore,  the purchase  price
allocation is subject to  refinement.  The results of the Germinal  business are
included in the Company's results of operations from the date of acquisition and
are  not  expected  to  have a  material  impact  on the  Company's  results  of
operations for the year 2003.


NOTE 11. GUARANTOR FINANCIAL INFORMATION

     In 2001,  the Company and three of its wholly  owned  subsidiaries  jointly
issued,  in three separate  transactions,  a total of $405.0  million  aggregate
principal  amount of 10 1/4%  Senior  Subordinated  Notes  due 2011  (the  "2011
Notes").  The  2011  Notes  are  guaranteedby  all  of  the  Company's  domestic
subsidiaries,  other than  certain  immaterial  subsidiaries  and the  Company's
accounts   receivable   financing   subsidiary.   These   guarantees  are  full,
unconditional and joint and several.

     ISP Global  Technologies  Inc.,  which is a guarantor of the 2011 Notes, is
party to a License and Royalty Agreement with non-guarantor  foreign affiliates.
Under  this  agreement,  ISP  Global  Technologies  granted a license to certain
non-guarantor foreign affiliates for the use of the Patent Rights,  Know-how and
Trademarks in  connection  with the  manufacture,  use and sale of the Company's
products.

     Presented below is condensed  consolidating  financial  information for the
Company,  the guarantor  subsidiaries and the non-guarantor  subsidiaries.  This
financial  information  should  be read in  conjunction  with  the  Consolidated
Financial  Statements  and  other  notes  related  thereto.  Separate  financial
information  for  the  Company's   guarantor   subsidiaries  and   non-guarantor
subsidiaries is not included herein because  management has determined that such
information is not material to investors.



                                       12
<PAGE>


                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)

NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)

<TABLE>

                                ISP CHEMCO INC.
                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      SECOND QUARTER ENDED JUNE 30, 2002
                                 (THOUSANDS)

<CAPTION>
                                                                         Non-
                                             Parent      Guarantor    Guarantor
                                            Company    Subsidiaries  Subsidiaries   Eliminations   Consolidated
                                            -------    ------------  ------------   ------------   ------------
<S>                                        <C>         <C>             <C>          <C>             <C>
Net sales ................................ $      -    $  108,196      $  106,528   $        -      $  214,724
Intercompany net sales ...................        -        53,115           3,035      (56,150)              -
                                           --------    ----------      ----------   ----------      ----------
   Total net sales .......................        -       161,311         109,563      (56,150)        214,724
                                           --------    ----------      ----------   ----------      ----------
Cost of products sold ....................        -      (107,488)        (87,317)      56,150        (138,655)
Selling, general and administrative ......        -       (28,604)        (15,208)                     (43,812)
Other operating gains and (charges), net..        -         6,317           3,079                        9,396
Amortization of intangible assets.........        -          (153)              -                         (153)
                                           --------    ----------      ----------   ----------      ----------
Operating income .........................        -        31,383          10,117            -          41,500
Equity in income of subsidiaries .........   16,697             -               -      (16,697)              -
Intercompany royalty income (expense), net        -         8,017          (8,017)                           -
Interest expense .........................      910       (15,983)           (203)                     (15,276)
Other income (expense), net ..............     (126)       (3,415)          3,456                          (85)
                                           --------    ----------      ----------   ----------      ----------
Income before income taxes ...............   17,481        20,002           5,353      (16,697)         26,139
Income taxes  ............................     (275)       (7,411)         (1,247)                      (8,933)
                                           --------    ----------      ----------   ----------      ----------
Net income ............................... $ 17,206    $   12,591      $    4,106   $  (16,697)     $   17,206
                                           ========    ==========      ==========   ==========      ==========
</TABLE>



<TABLE>


                                ISP CHEMCO INC.
               CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      SECOND QUARTER ENDED JUNE 29, 2003
                                 (THOUSANDS)
<CAPTION>

                                                                        Non-
                                            Parent      Guarantor    Guarantor
                                           Company    Subsidiaries  Subsidiaries   Eliminations    Consolidated
                                           -------    ------------  ------------   ------------    ------------
<S>                                        <C>         <C>            <C>           <C>             <C>
Net sales ................................ $     -     $  109,001     $  120,527    $        -      $  229,528
Intercompany net sales ...................       -         58,669          3,805       (62,474)              -
                                           -------     ----------     ----------    ----------      ----------
   Total net sales .......................       -        167,670        124,332       (62,474)        229,528
                                           -------     ----------     ----------    ----------      ----------
Cost of products sold ....................       -       (121,243)       (88,446)       62,474        (147,215)
Selling, general and administrative ......       -        (28,590)       (16,531)                      (45,121)
Amortization of intangible assets ........       -           (144)             -                          (144)
                                           -------     ----------     ----------    ----------      ----------

Operating income .........................       -         17,693         19,355             -          37,048
Equity in income of subsidiaries .........  17,990              -              -       (17,990)              -
Intercompany royalty income (expense), net       -          8,852         (8,852)                            -
Intercompany dividend income .............       -          2,477              -        (2,477)              -
Interest expense .........................     812        (14,601)           560                       (13,229)
Other income (expense), net ..............      (1)        (1,365)         2,778                         1,412
                                           -------     ----------     ----------    ----------      ----------
Income before income taxes................  18,801         13,056         13,841       (20,467)         25,231
Income taxes .............................    (283)        (5,600)        (3,307)                       (9,190)
                                           -------     ----------     ----------    ----------      ----------
Net income ............................... $18,518     $    7,456     $   10,534    $  (20,467)     $   16,041
                                           =======     ==========     ==========    ==========      ==========
</TABLE>




                                       13
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)

<TABLE>

                                ISP CHEMCO INC.
                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                        SIX MONTHS ENDED JUNE 30, 2002
                                 (Thousands)
<CAPTION>

                                                                          Non-
                                            Parent        Guarantor    Guarantor
                                           Company      Subsidiaries  Subsidiaries    Eliminations    Consolidated
                                           -------      ------------  ------------    ------------    ------------
<S>                                        <C>           <C>            <C>           <C>             <C>
Net sales ................................ $       -     $  226,204     $  207,644    $        -      $  433,848
Intercompany net sales ...................         -        105,278          5,223      (110,501)              -
                                           ---------     ----------     ----------    ----------      ----------
   Total net sales .......................         -        331,482        212,867      (110,501)        433,848
                                           ---------     ----------     ----------    ----------      ----------
Cost of products sold ....................         -       (231,805)      (162,728)      110,501        (284,032)
Selling, general and administrative ......         -        (56,171)       (30,111)                      (86,282)
Other operating gains and (charges), net..         -          9,149          3,079                        12,228
Amortization of intangible assets.........         -           (530)           (25)                         (555)
                                           ---------     ----------     ----------    ----------      ----------

Operating income .........................         -         52,125         23,082             -          75,207
Equity in loss of subsidiaries ...........   (86,349)             -              -        86,349               -
Intercompany royalty income (expense), net         -         15,158        (15,158)                            -
Interest expense .........................     1,413        (34,075)           865                       (31,797)
Charge for early retirement of debt.......    (4,294)             -              -                        (4,294)
Other income (expense), net ..............      (128)        (3,866)         2,038                        (1,956)
                                           ---------     ----------     ----------    ----------      ----------
Income before income taxes and cumulative
  effect of change in accounting principle   (89,358)        29,342         10,827        86,349          37,160
Income taxes .............................     1,010        (10,626)        (3,205)                      (12,821)
                                           ---------     ----------     ----------    ----------      ----------
Income before cumulative effect of change
  in accounting principle.................   (88,348)        18,716          7,622        86,349          24,339
Cumulative effect of change in accounting
   principle..............................   (42,713)      (112,687)             -                      (155,400)
                                           ---------     ----------     ----------    ----------      ----------
Net income (loss) ........................ $(131,061)    $  (93,971)    $    7,622    $   86,349      $ (131,061)
                                           =========     ==========     ==========    ==========      ==========
</TABLE>


<TABLE>


                                ISP CHEMCO INC.
                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                        SIX MONTHS ENDED JUNE 29, 2003
                                 (THOUSANDS)
<CAPTION>

                                                                          Non-
                                            Parent        Guarantor    Guarantor
                                           Company      Subsidiaries  Subsidiaries     Eliminations   Consolidated
                                           -------      ------------  ------------     ------------   ------------
<S>                                        <C>           <C>            <C>             <C>           <C>
Net sales ................................ $      -      $  216,640     $  245,464      $        -    $  462,104
Intercompany net sales ...................        -         115,356          6,438        (121,794)            -
                                           --------      ----------     ----------      ----------    ----------
   Total net sales .......................        -         331,996        251,902        (121,794)      462,104
                                           --------      ----------     ----------      ----------    ----------
Cost of products sold ....................        -        (238,036)      (183,566)        121,794      (299,808)
Selling, general and administrative ......        -         (57,494)       (31,420)                      (88,914)
Other operating gains and (charges), net..        -          (1,376)           (75)                       (1,451)
Amortization of intangible assets.........        -            (288)             -                          (288)
                                           --------      ----------     ----------      ----------    ----------

Operating income .........................        -          34,802         36,841               -        71,643
Equity in income of subsidiaries .........   30,380               -              -         (30,380)            -
Intercompany royalty income (expense), net        -          18,052        (18,052)                            -
Intercompany dividend income .............        -           3,210              -          (3,210)            -
Interest expense .........................    1,669         (29,520)         1,201                       (26,650)
Other income (expense), net ..............       (3)         (3,081)         3,159                            75
                                           --------      ----------     ----------      ----------    ----------
Income before income taxes and cumulative
  effect of change in accounting principle   32,046          23,463         23,149         (33,590)       45,068
Income taxes .............................     (582)        (10,969)        (4,242)                      (15,793)
                                           --------      ----------     ----------      ----------    ----------
Income before cumulative effect of change
  in accounting principle.................   31,464          12,494         18,907         (33,590)       29,275
Cumulative effect of change in accounting
  principle, net of income tax benefit of
  $600 ...................................        -            (583)          (438)                       (1,021)
                                           --------      ----------     ----------      ----------    ----------
Net income ............................... $ 31,464      $   11,911     $   18,469      $  (33,590)   $   28,254
                                           ========      ==========     ==========      ==========    ==========
</TABLE>

                                       14
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)

<TABLE>

                                ISP CHEMCO INC.
                     CONDENSED CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 2002
                                 (THOUSANDS)
<CAPTION>

                                                                          Non-
                                              Parent     Guarantor     Guarantor
                                             Company    Subsidiaries  Subsidiaries    Eliminations   Consolidated
                                             --------   ------------  ------------    ------------   ------------
<S>                                          <C>         <C>          <C>             <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents .............   $      6    $   17,735   $  15,550       $        -      $    33,291
   Accounts receivable, trade, net .......          -         6,025      73,755                            79,780
   Accounts receivable, other ............          -         4,835      10,536                            15,371
   Receivables from related parties.......        (32)       12,875        (431)                           12,412
   Inventories ...........................          -       104,000      72,217                           176,217
   Deferred income taxes..................          -        19,313      15,374                            34,687
   Prepaid expenses ......................          -         4,948       4,874                             9,822
                                             --------    ----------   ---------       ---------       -----------
     Total current assets ................        (26)      169,731     191,875               -           361,580
Investment in subsidiaries ...............    294,505       171,977           -        (466,482)                -
Intercompany loans .......................     16,021       (16,354)        333                                 -
Due from (to) subsidiaries, net ..........          -        52,554     (52,554)                                -
Property, plant and equipment, net .......          -       497,768      67,673                           565,441
Goodwill, net ............................     89,931       235,775           -                           325,706
Intangible assets, net ...................          -         9,442           -                             9,442
Long-term receivable from related party...          -             -      30,298                            30,298
Other assets .............................          -        42,676         340                            43,016
                                             --------    ----------   ---------      ----------       -----------
Total Assets .............................   $400,431    $1,163,569   $ 237,965      $ (466,482)      $ 1,335,483
                                             ========    ==========   =========      ==========       ===========



LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
   Short-term debt .......................   $      -    $        -   $     144      $        -        $      144
   Current maturities of long-term debt ..          -         2,728           4                             2,732
   Accounts payable ......................          -        34,870      18,335                            53,205
   Accrued liabilities ...................          -        66,229      23,673                            89,902
   Income taxes payable...........             16,520         3,472      14,209                            34,201
                                             --------    ----------   ---------      ----------        ----------
     Total Current liabilities ...........     16,520       107,299      56,365               -           180,184
Long-term debt less current maturities ...          -       623,002           6                           623,008
Deferred income taxes ....................          -        91,771       8,944                           100,715
Other liabilities ........................     56,013        46,992         673                           103,678
Total Shareholder's Equity ...............    327,898       294,505     171,977        (466,482)          327,898
                                             --------    ----------   ---------      ----------        ----------
Total Liabilities and Shareholder's
   Equity ................................  $ 400,431    $1,163,569   $ 237,965      $ (466,482)      $ 1,335,483
                                            =========    ==========   =========      ==========       ===========
</TABLE>






                                       15
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)

<TABLE>

                                ISP CHEMCO INC.
                     CONDENSED CONSOLIDATING BALANCE SHEET
                                 JUNE 29, 2003
                                 (THOUSANDS)
<CAPTION>

                                                                           Non-
                                             Parent     Guarantor       Guarantor
                                            Company    Subsidiaries    Subsidiaries    Eliminations    Consolidated
                                            -------    ------------    ------------    ------------    ------------
<S>                                         <C>        <C>             <C>              <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents .............  $      6    $   23,562      $  18,477        $        -      $    42,045
   Accounts receivable, trade, net .......         -         4,098         98,582                            102,680
   Accounts receivable, other ............         -         2,287         16,223                             18,510
   Receivables from related parties.......       185        19,737           (473)                            19,449
   Inventories ...........................         -       102,843         70,892                            173,735
   Deferred income taxes..................         -        19,313         18,545                             37,858
   Prepaid expenses ......................         -         3,907          5,421                              9,328
                                            --------    ----------      ---------        ----------      -----------
     Total current assets ................       191       175,747        227,667                 -          403,605
Investment in subsidiaries ...............   334,633       198,360              -          (532,993)               -
Intercompany loans .......................    16,021        (8,576)        (7,445)                                 -
Due from (to) subsidiaries, net ..........         -        63,012        (63,012)                                 -
Property, plant and equipment, net .......         -       494,293         74,342                            568,635
Goodwill, net ............................    89,931       235,775          5,251                            330,957
Intangible assets, net ...................         -         9,154              -                              9,154
Long-term receivable from related party...         -             -         31,207                             31,207
Other assets .............................         -        47,441            634                             48,075
                                            --------   -----------      ---------        ----------      -----------
Total Assets .............................  $440,776   $ 1,215,206      $ 268,644        $ (532,993)     $ 1,391,633
                                            ========   ===========      =========        ==========      ===========



LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
   Short-term debt .......................  $      -   $         -      $      67        $        -      $        67
   Current maturities of long-term debt ..         -         2,719              3                              2,722
   Accounts payable ......................         -        34,115         24,896                             59,011
   Accrued liabilities ...................         -        63,215         18,845                             82,060
   Income taxes payable...................    17,579         3,483         15,159                             36,221
                                            --------   -----------      ---------        ----------      -----------
     Total Current liabilities ...........    17,579       103,532         58,970                 -          180,081
Long-term debt less current maturities ...         -       622,238             31                            622,269
Deferred income taxes ....................         -       101,665          9,925                            111,590
Other liabilities ........................    55,997        53,138          1,358                            110,493
Total Shareholder's Equity ...............   367,200       334,633        198,360          (532,993)         367,200
                                            --------   -----------      ---------        ----------      -----------
Total Liabilities and Shareholder's
   Equity ................................  $440,776   $ 1,215,206      $ 268,644        $ (532,993)     $ 1,391,633
                                            ========   ===========      =========        ==========      ===========
</TABLE>







                                       16
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)

<TABLE>

                                ISP CHEMCO INC.
                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
                        SIX MONTHS ENDED JUNE 30, 2002
                                 (THOUSANDS)
<CAPTION>


                                                                                             Non-
                                                              Parent       Guarantor       Guarantor
                                                             Company      Subsidiaries    Subsidiaries      Consolidated
                                                            --------     -------------  --------------    --------------
<S>                                                         <C>          <C>             <C>                 <C>
Cash and cash equivalents, beginning of period............  $      5     $    3,611      $     7,214         $   10,830
                                                            --------     ----------      -----------         ----------
Cash provided by (used in) operating activities:
  Net income (loss).......................................   (44,712)       (93,971)           7,622           (131,061)
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Cumulative effect of change in accounting principle..    42,713        112,687                -            155,400
     Gain on sale of assets...............................         -         (2,389)          (3,079)            (5,468)
     Depreciation.........................................         -         22,992            4,686             27,678
     Amortization of intangible assets....................         -            530               25                555
     Deferred income taxes................................    (1,460)        10,092           (4,427)             4,205
  (Increase) decrease in working capital items............     8,783            309           (3,863)             5,229
  Proceeds (repayments) from sale of accounts receivable..         -              -           (3,883)            (3,883)
  (Increase) decrease in receivable from related parties..        56         (4,119)          (1,316)            (5,379)
  Change in amounts due to (from) subsidiaries............         -         21,970          (21,970)                 -
  Change in investment in and advances to affiliates......    87,215       (100,627)          13,412                  -
  Change in cumulative translation adjustment.............         -              -           10,584             10,584
  Other, net..............................................     4,354           (832)          (5,371)            (1,849)
                                                            --------     ----------      -----------         ----------
Net cash provided by (used in) operating activities.......    96,949        (33,358)          (7,580)            56,011
                                                            --------     ----------      -----------         ----------
Cash provided by (used in) investing activities:
  Capital expenditures and acquisition....................         -        (27,317)          (3,293)           (30,610)
  Net proceeds from sale of assets........................         -          7,533           19,738             27,271
                                                            --------     ----------      -----------         ----------
Net cash provided by (used in) investing activities.......         -        (19,784)          16,445             (3,339)
                                                            --------     ----------      -----------         ----------
Cash provided by (used in) financing activities:
  Increase in short-term debt.............................         -              -                6                  6
  Decrease in borrowings under revolving
    credit facility.......................................         -        (56,850)               -            (56,850)
  Repayments of long-term debt............................  (182,232)        (1,210)             (22)          (183,464)
  Call premium on redemption of debt......................    (2,734)             -                -             (2,734)
  Change in net intercompany loans........................         -         11,816          (11,816)                 -
  Decrease in restricted cash.............................    81,130        101,000                -            182,130
  Debt issuance costs.....................................         -           (797)               -               (797)
  Capital contribution from parent company................     6,891              -                -              6,891
                                                            --------     ----------      -----------         ----------
Net cash provided by (used in) financing activities.......   (96,945)        53,959          (11,832)           (54,818)
                                                            --------     ----------      -----------         ----------
Effect of exchange rate changes on cash...................         -              -              554                554
                                                            --------     ----------      -----------         ----------
Net change in cash and cash equivalents...................         4            817           (2,413)            (1,592)
                                                            --------     ----------      -----------         ----------
Cash and cash equivalents, end of period..................  $      9     $    4,428      $     4,801         $    9,238
                                                            ========     ==========      ===========         ==========
</TABLE>

                                       17
<PAGE>

                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)

<TABLE>

                                ISP CHEMCO INC.
                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
                        SIX MONTHS ENDED JUNE 29, 2003
                                 (THOUSANDS)
<CAPTION>

                                                                                            Non-
                                                              Parent      Guarantor      Guarantor
                                                             Company     Subsidiaries   Subsidiaries   Consolidated
                                                            --------     ------------   ------------   ------------
<S>                                                         <C>          <C>            <C>             <C>
Cash and cash equivalents, beginning of period............  $      6     $   17,735     $    15,550     $  33,291
                                                            --------     ----------     -----------     ---------
Cash provided by (used in) operating activities:
  Net income .............................................    (2,126)        11,911          18,469        28,254
  Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Cumulative effect of change in accounting principle..         -            583             438         1,021
     Depreciation.........................................         -         24,024           5,699        29,723
     Amortization of intangible assets....................         -            288               -           288
     Deferred income taxes................................         -         10,494          (2,190)        8,304
  (Increase) decrease in working capital items............     1,059          2,537         (25,865)      (22,269)
  Proceeds (repayments) from sale of accounts receivable..         -              -            (688)         (688)
  Increase in receivable from related parties.............      (217)        (6,862)           (867)       (7,946)
  Change in amounts due to (from) subsidiaries............         -        (10,458)         10,458             -
  Change in investment in and advances to affiliates......      (151)          (643)            794             -
  Change in cumulative translation adjustment.............         -              -           7,177         7,177
  Other, net..............................................       (16)           643          (5,647)       (5,020)
                                                            --------     ----------     -----------     ---------
Net cash provided by (used in) operating activities.......    (1,451)        32,517           7,778        38,844
                                                            --------     ----------     -----------     ---------
Cash used in investing activities:
  Capital expenditures and acquisition....................         -        (20,486)        (12,519)      (33,005)
                                                            --------     ----------     -----------     ---------
Net cash used in investing activities.....................         -        (20,486)        (12,519)      (33,005)
                                                            --------     ----------     -----------     ---------
Cash provided by (used in) financing activities:
  Decrease in short-term debt.............................         -              -             (77)          (77)
  Repayments of long-term debt............................         -           (903)             24          (879)
  (Increase) decrease in intercompany loans...............         -         (7,778)          7,778             -
  Dividends and distributions to parent company...........         -          2,477          (2,477)            -
  Capital contribution from parent company................     1,451              -               -         1,451
                                                            --------     ----------     -----------     ---------
Net cash provided by (used in) financing activities.......     1,451         (6,204)          5,248           495
                                                            --------     ----------     -----------     ---------
Effect of exchange rate changes on cash...................         -              -           2,420         2,420
                                                            --------     ----------     -----------     ---------
Net change in cash and cash equivalents...................         -          5,827           2,927         8,754
                                                            --------     ----------     -----------     ---------
Cash and cash equivalents, end of period..................  $      6     $   23,562     $    18,477     $  42,045
                                                            ========     ==========     ===========     =========
</TABLE>








                                       18
<PAGE>


                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 12.  CONTINGENCIES

Environmental Litigation

     The  Company,  together  with other  companies,  is a party to a variety of
proceedings  and  lawsuits  involving   environmental  matters   ("Environmental
Claims")  under  the  Comprehensive   Environmental  Response  Compensation  and
Liability Act, Resource Conservation and Recovery Act and similar state laws, in
which  recovery  is sought  for the cost of  cleanup  of  contaminated  sites or
remedial  obligations are imposed. A number of these Environmental Claims are in
the early stages or have been dormant for protracted periods.

     While the Company cannot predict  whether  adverse  decisions or events can
occur in the future, in the opinion of the Company's management,  the resolution
of the Environmental  Claims should not be material to the business,  liquidity,
results of operations, cash flows or financial position of the Company. However,
adverse  decisions or events,  particularly  as to increases in remedial  costs,
discovery of new contamination,  assertion of natural resource damages,  and the
liability and the financial  responsibility of the Company's insurers and of the
other parties involved at each site and their insurers,  could cause the Company
to increase its estimate of its liability in respect of those matters. It is not
currently possible to estimate the amount or range of any additional liability.

     For further information regarding environmental matters,  reference is made
to Note 21 to Consolidated Financial Statements contained in the 2002 Form 10-K.

Tax Claim Against G-I Holdings Inc.

     The  predecessor  of ISP and  certain  of its  domestic  subsidiaries  were
parties to tax  sharing  agreements  with  members of a  consolidated  group for
Federal  income tax purposes  that included G-I Holdings Inc. (the "G-I Holdings
Group") in certain  prior  years.  Until  January 1, 1997,  ISP and its domestic
subsidiaries were included in the consolidated Federal income tax returns of the
G-I  Holdings  Group and,  accordingly,  would be  severally  liable for any tax
liability of the G-I Holdings  Group in respect of those prior years.  Those tax
sharing  agreements are no longer applicable with respect to the tax liabilities
of ISP for periods  subsequent to January 1, 1997,  because  neither the Company
nor any of its domestic  subsidiaries  are members of the G-I Holdings Group for
periods after January 1, 1997. In January 2001,  G-I Holdings  filed a voluntary
petition for reorganization  under Chapter 11 of the U.S. Bankruptcy Code due to
its asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber.

     On  September  15, 1997,  G-I Holdings  received a notice from the Internal
Revenue  Service  (the  "IRS") of a  deficiency  in the amount of $84.4  million
(after  taking  into  account  the use of net  operating  losses and foreign tax
credits  otherwise  available  for use in later  years) in  connection  with the
formation  in 1990 of  Rhone-Poulenc  Surfactants  and  Specialties,  L.P.  (the
"surfactants  partnership"),  a  partnership  in  which  G-I  Holdings  held  an
interest.  G-I Holdings  has advised the Company  that it believes  that it will
prevail in the tax matter arising out of the surfactants  partnership,  although
there can be no assurance in this regard. The Company believes that the ultimate
disposition  of this  matter  will not have a  material  adverse  effect  on its
business,  financial  position or results of operations.  On September 21, 2001,
the IRS  filed a proof  of  claim  with  respect  to


                                       19
<PAGE>


                                ISP CHEMCO INC.

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE  12.  CONTINGENCIES  - (CONTINUED)

such deficiency against G-I Holdings and one of its subsidiaries, ACI Inc.,
that also filed for protection  under Chapter 11 of the Bankruptcy  Code, in the
G-I Holdings bankruptcy. If such proof of claim is sustained, ISP and/or certain
of its  subsidiaries  together with G-I Holdings and several  current and former
subsidiaries of G-I Holdings would be severally liable for taxes and interest in
an amount of approximately $276 million, computed as of June 29, 2003. On May 7,
2002,  G-I Holdings  filed an objection to that proof of claim.  Such  objection
will be heard by the United States District Court for the District of New Jersey
which oversees the G-I Holdings  bankruptcy  court.  For additional  information
relating to G-I  Holdings,  reference is made to Notes 9 and 21 to  Consolidated
Financial Statements contained in the 2002 Form 10-K.






















                                       20
<PAGE>


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


     Unless  otherwise  indicated by the context,  "we," "us" and "our" refer to
ISP Chemco Inc. and its consolidated subsidiaries.


RESULTS OF OPERATIONS - SECOND QUARTER 2003 COMPARED WITH
                        SECOND QUARTER 2002

     We recorded  second quarter 2003 net income of $16.0 million  compared with
net income of $17.2 million in the second quarter of 2002. The lower results for
the second  quarter of 2003 were  attributable  to $4.5 million lower  operating
income, partially offset by $2.1 million lower interest expense and $1.5 million
higher  other  income,  net.  Operating  income in the  second  quarter  of 2002
included $9.4 million of other  operating  gains  resulting  from a $5.5 million
gain on the sale of our FineTech  business and a $3.9 million gain on a contract
settlement.

     Effective  January 1, 2003, we changed the  composition  of our  reportable
segments to be consistent with the current structure of our businesses. Over the
last  several  years,   we  have  increased  our  focus  on  our  higher  margin
consumer-oriented businesses. Consistent with that business focus, we now report
three business segments:  Specialty Chemicals,  Industrial Chemicals and Mineral
Products.  Our  Specialty  Chemicals  segment  consists  of the  personal  care,
pharmaceutical, food, beverage, performance chemicals and fine chemicals product
lines. Sales and operating income by business segment for the second quarter and
six  months  ended  June 30,  2002 have been  restated  to  conform  to the 2003
presentation.

     Net sales for the second quarter of 2003 were $229.5 million  compared with
$214.7  million for the second  quarter of 2002. The $14.8 million (7%) increase
in sales  resulted  from higher  unit  volumes in the  pharmaceutical,  food and
beverage  product lines (totaling $6.8 million) and the favorable  impact of the
weaker U.S. dollar in Europe ($11.6  million).  These sales gains were partially
offset by lower volumes in Industrial  Chemicals and the fine chemicals  product
line  (totaling  $3.5 million) and lower pricing ($2.0  million),  mainly in the
Mineral Products segment and personal care product line.

     The gross  margin for the second  quarter of 2003 was 35.9%  compared  with
35.4% in the second quarter of 2002. The improved margin resulted primarily from
the higher  volumes in the  pharmaceutical  and beverage  product  lines and the
favorable impact of the weaker U.S. dollar.  Lower gross margins for the Mineral
Products and Industrial  Chemicals  segments were  adversely  impacted by higher
energy costs.

     While  operating  income in the second  quarter  of 2003 was $37.0  million
compared with $41.5 million in the second  quarter of 2002,  excluding the other
operating gains in the second quarter of 2002 mentioned above,  operating income
increased  from $32.1 million in the second  quarter of 2002 to $37.0 million in
the  second  quarter  of 2003

                                       21
<PAGE>


 - up 15% (see  reconciliation  below  of  non-GAAP financial  measures). The
higher  comparable  operating  income for the second quarter of 2003 includes
improved results in the Specialty Chemicals business segment, partially offset
by losses in the  Industrial Chemicals segment and lower results in the Mineral
Products segment.

     On a comparable basis,  excluding the aforementioned other operating gains,
operating  income for the  Specialty  Chemicals  segment  improved  38% to $33.7
million compared with $24.4 million in last year's second quarter.  The improved
results were  primarily  attributable  to higher unit volumes and the  favorable
impact of the weaker U.S.  dollar in the  pharmaceutical  and  beverage  product
lines and, with respect to the personal care product line, the favorable  impact
of the weaker U.S. dollar and manufacturing efficiencies.

     The Industrial Chemicals segment recorded an operating loss of $1.4 million
in the second quarter of 2003 compared with operating  income of $0.4 million in
the second quarter of 2002. The Industrial  Chemicals  manufacturing  operations
are principally  based in Europe and costs for this business have been adversely
impacted by the  stronger  Euro and higher  energy  costs,  partially  offset by
manufacturing efficiencies.

     Operating  income for the Mineral Products  business  segment  decreased by
$2.5  million  (35%) to $4.7  million in the second  quarter of 2003  because of
unfavorable manufacturing costs, primarily higher energy costs, as well as lower
pricing.

     Selling, general and administrative expenses for the second quarter of 2003
increased by 3% to $45.1 million from $43.8 million in the same period last year
as a result of higher  administrative and distribution  costs, mainly due to the
weaker U.S. dollar. Selling, general and administrative expenses as a percentage
of sales  were  reduced  to 19.7%  compared  with  20.4% in last  year's  second
quarter.

     Interest  expense for the second  quarter of 2003 was $13.2 million  versus
$15.3 million for the same period last year. The $2.1 million (14%) decrease was
primarily due to lower average  interest  rates ($1.3 million  impact) and, to a
lesser extent,  lower average  borrowings ($0.8 million  impact).  Other income,
net,  for the  second  quarter  of 2003 was $1.4  million  compared  with  other
expense,  net, of $0.1 million in last year's  second  quarter,  with the higher
income due primarily to favorable foreign exchange.

Business Segment Review

     A  discussion  of  operating  results  for  each of our  business  segments
follows.  We operate our business  through three reportable  business  segments:
Specialty Chemicals;  Industrial  Chemicals;  and Mineral Products. As discussed
above, we changed the composition of our reportable segments,  effective January
1, 2003.  Sales and operating  income by business segment for the second quarter
of 2002 have been restated to conform to the 2003 presentation.  See also Note 8
to consolidated financial statements.

     The business  segment review below and the  discussion of operating  income
above contain information regarding non-GAAP financial measures contained within
the meaning of Item 10 of  Regulation  S-K  promulgated  by

                                       22
<PAGE>

the  Securities  and  Exchange  Commission.  As used herein,  "GAAP"  refers  to
accounting principles generally accepted in the United States of America. We use
non-GAAP  financial  measures to eliminate the effect of certain other operating
gains and charges on reported operating income.  Management  believes that these
financial  measures are useful to investors and financial  institutions  because
such  measures  exclude  transactions  that are unusual  due to their  nature or
infrequency  and therefore  allow  investors and financial  institutions to more
readily compare our company's performance from period to period. Management uses
this information in monitoring and evaluating our company's  performance and the
performance of individual  business  segments.  The non-GAAP  financial measures
included  herein  have been  reconciled  to the most  directly  comparable  GAAP
financial  measure as is required  under Item 10 of Regulation S-K regarding the
use of such financial measures.  These non-GAAP measures should be considered in
addition to, and not as a substitute,  or superior to, operating income or other
measures  of  financial   performance  in  accordance  with  generally  accepted
accounting principles.

                                                               Second Quarter
                                                          ---------------------
                                                             2002          2003
                                                          ---------     -------
                                                                (Millions)
Reconciliation of non-GAAP financial measures:

Operating income per GAAP...............................  $    41.5     $  37.0
Non-GAAP adjustments:
     Less: Other operating (gains) charges(1)...........       (9.4)          -
                                                          ---------     -------
Operating income, as adjusted...........................  $    32.1     $  37.0
                                                          =========     =======

Supplemental Business Segment Information:

Operating income:
     Operating income per GAAP - Specialty Chemicals....  $    33.8     $  33.7
     Non-GAAP adjustments (1)...........................       (9.4)          -
                                                          ---------     -------
     Operating income - Specialty Chemicals as adjusted.  $    24.4     $  33.7
                                                          =========     =======

     Operating income per GAAP - Industrial Chemicals...  $     0.4     $  (1.4)
     Non-GAAP adjustments...............................          -           -
                                                          ---------     -------
     Operating income - Industrial Chemicals as adjusted  $     0.4     $  (1.4)
                                                          =========     =======

     Operating income per GAAP - Mineral Products.......  $     7.2     $   4.7
     Non-GAAP adjustments...............................          -           -
                                                          ---------     -------
     Operating income - Mineral Products as adjusted....  $     7.2     $   4.7
                                                          =========     =======

(1)   Non-GAAP adjustments in the second quarter of 2002 included an other
      operating gain of $5.5 million related to the sale of our company's
      FineTech business and an other operating gain of $3.9 million related to a
      contract settlement with a customer of our fine chemicals product line,
      each of which related to the Specialty Chemicals business segment.


Specialty Chemicals

     Sales in the  second  quarter of 2003 were  $159.0  million  compared  with
$146.7  million for the same period last year,  while  operating  income for the
second  quarter of 2003 was $33.7  million  compared  with $33.8 million in last
year's second quarter.  The 8% increase in sales

                                       23
<PAGE>

was attributable  to higher  unit  volumes  in the  pharmaceutical, beverage and
food product lines  (totaling  $6.8  million),  and the favorable  effect of the
weaker U.S. dollar in Europe ($8.0 million).  Partially  offsetting  these sales
increases  were lower  unit  volumes in the fine  chemicals  product  line ($2.1
million) and lower pricing ($0.9  million),  mainly in the personal care product
line in both the skin care and hair care markets.  Higher pharmaceutical volumes
were  primarily   attributable  to  strong  growth  in  the  excipients  markets
(Plasdones for tablet binders and Polyplasdones for tablet disintegrants).

     Excluding  the  other  operating  gains  in the  second  quarter  of  2002,
discussed above,  operating income for the Specialty Chemicals segment increased
by 38% for the  second  quarter  of 2003 to $33.7  million  compared  with $24.4
million in last year's second quarter.  The improvement  resulted primarily from
the favorable  effect of the weaker U.S. dollar ($6.0 million) and the impact of
higher unit  volumes in the  pharmaceutical,  beverage  and food  product  lines
(totaling $3.7 million), partially offset by unfavorable pricing ($0.9 million).

Industrial Chemicals

     Sales in the second quarter of 2003 were $44.4 million  compared with $42.3
million in the second quarter of 2002. The 5% increase in sales was attributable
to the  favorable  effect of the weaker U.S.  dollar ($3.6  million),  partially
offset by lower volumes ($1.5 million).

     The Industrial Chemicals segment recorded an operating loss of $1.4 million
in the second quarter of 2003 compared with operating  income of $0.4 million in
the second quarter of 2002. The Industrial  Chemicals  manufacturing  operations
are principally  based in Europe and costs for this business have been adversely
impacted by the stronger  Euro.  The  unfavorable  results also included  higher
energy costs and operating expenses (totaling $3.9 million), partially offset by
manufacturing efficiencies ($6.1 million).

Mineral Products

     Sales for the Mineral  Products segment for the second quarter of 2003 were
$26.1 million  compared  with $25.7  million for the second  quarter of 2002, as
higher unit volumes ($1.0 million), mainly increased sales to Building Materials
Corporation of America, an affiliate,  which we refer to as BMCA, were offset by
lower pricing ($0.8 million).

     Operating  income for the second quarter of 2003 was $4.7 million  compared
with $7.2  million  for the  second  quarter  of 2002.  The $2.5  million  (35%)
decrease  in  operating  income  was  due to  unfavorable  manufacturing  costs,
primarily as a result of higher energy costs, as well as lower pricing.

                                       24
<PAGE>


RESULTS OF OPERATIONS - FIRST SIX MONTHS 2003 COMPARED WITH
                        FIRST SIX MONTHS 2002

     We have restated our previously issued  consolidated  financial  statements
for the  first  six  months  of  2002.  See  Note 1 and  Note 8 to  consolidated
financial statements for further information.

     For the first six months of 2003,  we recorded net income of $28.3  million
compared  with a net loss of $131.1  million  in the  first six  months of 2002.
First six months 2003 results  include a $1.0 million  after-tax  charge for the
cumulative  effect of a change in  accounting  principle  from the  adoption  of
Statement of Financial  Accounting  Standards,  which we refer to as "SFAS," No.
143,  "Accounting  for Asset  Retirement  Obligations."  First six  months  2002
results included a $155.4 million goodwill impairment charge,  effective January
1, 2002, for the cumulative  effect of a change in accounting  principle related
to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets."

     Income before the cumulative effect of changes in accounting principles was
$29.3  million for the first six months of 2003  compared  with $24.3 million in
the first six months of 2002.  The improved  results for the first six months of
2003 were  attributable to $5.1 million lower interest  expense and $2.0 million
higher other  income,  net,  partially  offset by $3.6 million  lower  operating
income.  The  results for the first six months of 2002  included a $4.3  million
pre-tax  charge for the early  retirement of debt and other  operating  gains of
$12.2 million,  while first six months 2003 results  include an other  operating
charge of $1.5  million for stock  option  payments  related to a going  private
transaction by our indirect parent  company,  International  Specialty  Products
Inc.,  which we refer to as ISP. The other  operating  gains of $12.2 million in
the first six  months  of 2002  included  a $2.8  million  gain from a  contract
termination  related  to the sale of our  company's  FineTech  business,  a $5.5
million gain on the sale of the  FineTech  business and a $3.9 million gain on a
contract settlement.

     Net sales for the first six  months of 2003 were  $462.1  million  compared
with $433.8  million for the first six months of 2002.  The $28.3 million (6.5%)
increase in sales  resulted  primarily  from higher unit  volumes in  Industrial
Chemicals and Mineral Products and the pharmaceutical, food and beverage product
lines  (totaling  $22.3  million)  and the  favorable  impact of the weaker U.S.
dollar in Europe ($23.5  million).  These sales gains were  partially  offset by
lower  pricing in  Industrial  Chemicals  and the  personal  care  product  line
(totaling $5.3 million) and lower volumes ($12.0  million) in the fine chemicals
product  line,  mainly  as a result of the loss of sales to  Polaroid,  which is
operating under bankruptcy court protection.

     The gross margin for the first six months of 2003 was 35.1%  compared  with
34.5% in the first six months of 2002. The improved  margin  resulted  primarily
from  manufacturing  efficiencies  and the  favorable  impact of the weaker U.S.
dollar in the Specialty Chemicals business segment.  Lower gross margins for the
Mineral Products and Industrial  Chemicals  segments were adversely  impacted by
higher energy costs and lower pricing.

                                       25
<PAGE>

     Operating  income  for the  first  six  months  of 2003 was  $71.6  million
compared  with $75.2  million  for the first six months of 2002.  Excluding  the
other  operating  gains and charges in each period  mentioned  above,  operating
income on a comparable  basis was $73.1  million and $63.0 million for the first
six months of 2003 and 2002,  respectively (see reconciliation below of non-GAAP
financial  measures).  The higher comparable  operating income for the first six
months of 2003 includes  improved  results in the Specialty  Chemicals  business
segment,  partially  offset by losses in the  Industrial  Chemicals  segment and
lower results in the Mineral Products segment.

     On a comparable basis,  excluding the aforementioned  other operating gains
and charges,  operating income for the Specialty  Chemicals segment improved 44%
to $68.0  million  compared  with $47.1 million in last year's first six months.
The  improved   results  were   primarily   attributable   to  higher   volumes,
manufacturing efficiencies, lower operating expenses and the favorable impact of
the weaker U.S. dollar,  partially offset by lower pricing. The improved results
in Specialty Chemicals were adversely impacted by the lack of sales to Polaroid.

     The Industrial Chemicals segment recorded an operating loss of $4.1 million
in the first six months of 2003 compared with  operating  income of $3.1 million
in the first six months of 2002. The results were mainly  attributable  to lower
pricing  and to the  adverse  impact  of the  stronger  Euro  on  European-based
manufacturing  costs and higher energy costs,  partially offset by manufacturing
efficiencies.

     Operating  income for the Mineral Products  business  segment  decreased by
$4.2  million  (33%) to $8.7  million  in the  first  six  months of 2003 due to
unfavorable manufacturing costs, primarily as a result of higher energy costs.

     Selling,  general and  administrative  expenses for the first six months of
2003 increased by 3% to $88.9 million from $86.3 million in the same period last
year as a result of higher  administrative and distribution costs, mainly due to
the weaker  U.S.  dollar.  Selling,  general  and  administrative  expenses as a
percentage  of sales were  reduced to 19.2%  compared  with 19.9% in last year's
first six months.

     Interest  expense for the first six months of 2003 was $26.7 million versus
$31.8 million for the same period last year. The $5.1 million (16%) decrease was
primarily due to lower average borrowings ($3.0 million impact) and, to a lesser
extent,  lower average interest rates ($2.1 million impact).  Other income, net,
for the first six months of 2003 was $0.1 million  compared with other  expense,
net, of $2.0 million in last year's first six months, with the higher income due
primarily to favorable foreign exchange.

Business Segment Review

     A  discussion  of  operating  results  for  each of our  business  segments
follows.  We operate our business  through three reportable  business  segments:
Specialty Chemicals;  Industrial  Chemicals;  and Mineral Products. As discussed
above, we changed the composition of our reportable segments,  effective January
1, 2003. Sales and operating income by business segment for the first six months
of 2002

                                       26
<PAGE>

have  been  restated  to conform  to the  2003 presentation.  See also Note 8 to
consolidated financial statements.

     The business  segment review below and the  discussion of operating  income
above contain information regarding non-GAAP financial measures contained within
the meaning of Item 10 of  Regulation  S-K  promulgated  by the  Securities  and
Exchange Commission. See "- Results of Operations - Second Quarter 2003 Compared
With  Second  Quarter  2002" for  additional  discussion  of our use of non-GAAP
financial measures.

                                                            First Six Months
                                                          -------------------
                                                             2002      2003
                                                          --------   --------
                                                                (Millions)
Reconciliation of non-GAAP financial measures:

Operating income per GAAP...............................  $   75.2   $   71.6
Non-GAAP adjustments:
     Less: Other operating (gains) charges(1)...........     (12.2)       1.5
                                                          --------   --------
Operating income, as adjusted...........................  $   63.0   $   73.1
                                                          ========   ========

Supplemental Business Segment Information:

Operating income:
     Operating income per GAAP - Specialty Chemicals....  $   59.3   $   66.9
     Non-GAAP adjustments (1)...........................     (12.2)       1.1
                                                          --------   --------
     Operating income - Specialty Chemicals as adjusted.  $   47.1   $   68.0
                                                          ========   ========

     Operating income per GAAP - Industrial Chemicals...  $    3.1   $   (4.1)
     Non-GAAP adjustments (1)...........................         -        0.2
                                                          --------   --------
     Operating income - Industrial Chemicals as adjusted  $    3.1   $   (3.9)
                                                          ========   ========

     Operating income per GAAP - Mineral Products.......  $   12.9   $    8.7
     Non-GAAP adjustments (1)...........................         -        0.2
                                                          --------   --------
     Operating income - Mineral Products as adjusted....  $   12.9   $    8.9
                                                          ========   ========

     Total segment operating income as adjusted.........  $   63.1   $   73.0
     Unallocated corporate office per GAAP..............      (0.1)       0.1
                                                          --------   --------
     Operating income, as adjusted......................  $   63.0   $   73.1
                                                          ========   ========

(1)  Non-GAAP adjustments in the first six months of 2003 represent an other
     operating charge of $1.5 million for stock option payments related to ISP's
     going private transaction, which is also presented by business segment. In
     the first six months of 2002, non-GAAP adjustments included other operating
     gains of $2.8 million for a contract termination related to the sale of our
     company's FineTech business, a gain of $5.5 million on the sale of the
     FineTech business and a $3.9 million gain from the settlement of a
     manufacturing and supply agreement with a customer of the fine chemicals
     product line. All non-GAAP adjustments for the first six months of 2002
     related to the Specialty Chemicals business segment.

Specialty Chemicals

     Sales in the first six months of 2003 were  $316.9  million  compared  with
$306.3  million for the same period last year,  while  operating  income for the
first six months of 2003 increased by 13% to $66.9 million from $59.3 million in
last year's first six months.  The 3% increase in sales was  attributable to the
favorable  effect of the weaker  U.S.  dollar  ($16.4  million)  and higher unit
volumes in the

                                       27
<PAGE>

pharmaceutical,  food  and  beverage  product  lines  (totaling  $9.2  million).
Partially  offsetting  these  sales  increases  were lower unit  volumes  ($12.0
million) in the fine chemicals  product line,  mainly as a result of the loss of
sales due to the termination of the supply and license  agreement with Polaroid,
and unfavorable  pricing ($3.2 million),  primarily in the personal care product
line in both the  skin  care and hair  care  markets.  Favorable  pharmaceutical
volumes were primarily  attributable to strong growth in the excipients  markets
(Plasdones for tablet binders and Polyplasdones for tablet disintegrants).

     Excluding the other operating gains and charges discussed above,  operating
income for the Specialty  Chemicals  segment  increased by 44% for the first six
months of 2003 to $68.0 million compared with $47.1 million in last year's first
six months. The improvement  resulted primarily from manufacturing  efficiencies
($10.0 million), the favorable effect of the weaker U.S. dollar ($11.1 million),
the impact of higher unit volumes in the personal care, pharmaceutical, food and
beverage  product lines  (totaling  $6.1 million) and lower  operating  expenses
($3.2 million),  partially offset by unfavorable pricing and mix ($4.8 million).
The  improved  results for this  segment  were  adversely  impacted by the lower
volumes in the fine  chemicals  product line ($5.1  million),  mainly due to the
loss of sales to Polaroid.

Industrial Chemicals

     Sales in the first six  months of 2003 were  $93.5  million  compared  with
$77.9  million in the first six months of 2002.  The 20%  increase  in sales was
attributable to higher unit volumes ($11.3 million) and the favorable  effect of
the weaker  U.S.  dollar  ($7.1  million),  partially  offset by the  continuing
adverse effect of unfavorable pricing ($2.9 million) for butanediol.

     The Industrial Chemicals segment recorded an operating loss of $4.1 million
in the first six months of 2003,  compared with operating income of $3.1 million
in the first six months of 2002. The unfavorable  results for this business have
been  adversely  impacted by the stronger Euro on  European-based  manufacturing
costs.  The unfavorable  results also included higher energy costs and operating
expenses ($6.5 million) and unfavorable pricing ($2.9 million), partially offset
by  manufacturing  efficiencies  ($4.8 million) and the impact of higher volumes
and mix ($1.7 million).

     There is ongoing  pressure on our pricing and revenue  related to commodity
type butanediol and related solvents and intermediates. A key competitor in this
market completed  construction of additional  production  capacity in Europe for
these products during the third quarter of 2002.  Another competitor is expected
to  complete  construction  of  additional  capacity  in Asia  during the fourth
quarter of 2003. With the opening of these two  facilities,  the increase in the
supply of these  products  to the  merchant  market is  resulting  in  increased
downward pressure on pricing.

Mineral Products

     Sales for the  Mineral  Products  segment  for the first six months of 2003
were $51.7 million compared with $49.7 million for the first six months of 2002.
The 4% increase was due to higher unit volumes

                                       28
<PAGE>

($1.7  million) and  included  $1.1  million (9%)  in  higher  third party sales
and $0.9 million (2%) in higher sales to BMCA.

     Operating income for the first six months of 2003 was $8.7 million compared
with $12.9  million  for the first six months of 2002.  The $4.2  million  (33%)
decrease  in  operating  income  was  due to  unfavorable  manufacturing  costs,
primarily as a result of higher energy costs.


LIQUIDITY AND FINANCIAL CONDITION

Cash Flow and Cash Position

     During the first six  months of 2003,  our net cash flow  before  financing
activities  was $5.8 million and included  $38.8 million of cash  generated from
operations and the  reinvestment  of $33.0 million for capital  programs and the
acquisition of Germinal S.A. (see Note 10 to consolidated financial statements).
Cash generated from  operations in the first six months of 2003 of $38.8 million
included a cash outflow of $7.9 million due to an increase in  receivables  from
related parties,  primarily  related to an increase in the receivable from BMCA,
resulting from the sale of mineral products. Cash invested in additional working
capital  items  totaled  $22.3  million  during  the first  six  months of 2003,
including a $24.8 million  increase in  receivables  as a result of higher sales
and a $0.8  million  decrease in payables  and  accrued  liabilities.  Partially
offsetting this increase in working capital items was a $2.9 million decrease in
inventories.

     Net cash  provided by financing  activities  during the first six months of
2003 totaled $0.5 million,  primarily a $1.5 million capital  contribution  from
ISP for the payment of stock options related to ISP's going private  transaction
in February 2003, offset by repayments of long-term debt totaling $0.9 million.

     As a result of the foregoing factors,  cash and cash equivalents  increased
by $8.8 million during the first six months of 2003 to $42.0 million.

Current Maturities of Long-Term Debt

     As of June 29, 2003, our current maturities of long-term debt, scheduled to
be repaid during the twelve month period ended June 2004,  totaled $2.7 million,
including  $2.3  million  related  to the term  loan  under  our  senior  credit
facilities.

Freetown Facility

     As part of our acquisition of our Freetown, Massachusetts plant in 1998, we
entered into a multi-year agreement to supply the imaging dyes and polymers used
by Polaroid in its instant film  business.  In October 2001,  Polaroid filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. In the third quarter of
2002,  the  majority of  Polaroid's  assets were  acquired by a new owner.  As a
result,  we no longer have a long-term  supply  contract  with  Polaroid.  These
events have  negatively

                                       29
<PAGE>

impacted  the  sale  of  our  fine  chemicals   products  and  reduced  the
utilization of our Freetown plant.

     We have an operating  lease related to equipment at the Freetown  facility,
which was entered into as part of a 1998 sale-leaseback  transaction.  The lease
had an initial  term of four  years and,  at our  option,  up to three  one-year
renewal  periods.  The first  renewal  term  commenced  during  2002.  The lease
provides for a substantial guaranteed payment by us, adjusted at the end of each
renewal period,  and includes  purchase and return options at fair market values
determined  at the  inception  of the  lease.  We have the right to  exercise  a
purchase  option with respect to the leased  equipment,  or the equipment can be
returned  to the lessor and sold to a third  party.  We are  obligated  to pay a
maximum  guaranteed  payment amount upon the return of the equipment,  currently
$32.6 million,  reduced by 50% of any proceeds from the  subsequent  sale of the
equipment  in  excess  of $4.8  million.  Under  generally  accepted  accounting
principles,   we  cannot  recognize  this  future  obligation  or  recognize  an
impairment loss relative to the Freetown equipment since, as an operating lease,
the  Freetown  equipment  is not  carried as a  long-lived  asset on our balance
sheet.  However,  given the current  utilization  of the Freetown  facility as a
result of the Polaroid bankruptcy,  if we should exercise the purchase option at
the end of any future renewal period or at the termination of the lease in 2005,
we would then perform a review for possible  impairment of the Freetown  assets.
We are working  toward  increasing  the  utilization  of the Freetown plant with
additional production of certain personal care products.

Contractual Obligations

     We have a contract  with a  multinational  supplier to supply a substantial
amount of our acetylene needs to our Texas City,  Texas facility.  This supplier
generates  this raw material as a by-product  from the  manufacture of ethylene.
Pricing  under the contract is on a fixed basis and we are obligated to purchase
a specified amount of acetylene under the contract. This supplier has closed its
operation  that was the primary source of acetylene for our Texas City facility.
The supplier has an obligation  to provide  product to us until the end of March
2004 and has confirmed  that it will meet this  obligation  through that date by
delivering  product from another of its facilities.  We have identified  several
alternative  sources of supply of acetylene  for the Texas City facility for the
period after March 2004.  The  annualized,  incremental  cost of acetylene  from
these  sources is  estimated to be less than $2.0  million.  Although we believe
that these  alternative  sources of supply will be sufficient  for our projected
needs, there can be no assurance in this regard.

     We also had a contract with another supplier for the delivery of additional
amounts of acetylene to our Texas City facility, which expired on June 30, 2003.
We have entered into a five-year contract with an alternative source under which
we are obligated to purchase specified quantities of acetylene. Pricing is fixed
with escalators tied to the Producer Price Index.

     In May 2003, we entered into a long-term  contract with BMCA to supply BMCA
and its  subsidiaries  substantially  all of their colored roofing  granules and
algae-resistant granules requirements, except for the requirements of certain of
their roofing plants that are supplied by third parties.  The contract  includes
pricing  discounts  based on volume  purchase

                                       30
<PAGE>

targets,  which, if the  highest discount  levels are  reached  over the term of
the contract, could adversely impact gross margins and operating income from the
Mineral Products segment. Our supply arrangements with BMCA and its subsidiaries
are at prices  and on terms  that we believe  are no less  favorable  to it than
could be obtained from an unaffiliated third party.

New Accounting Standards

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities." SFAS No. 146 addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and supercedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the  liability  is  incurred,  and  concludes  that an entity's
commitment to an exit plan does not by itself create a present  obligation  that
meets the definition of a liability.  This Statement also  establishes that fair
value is the objective for initial measurement of the liability. SFAS No. 146 is
effective for exit or disposal  activities that are initiated after December 31,
2002. As we have no plans at this time for any exit or disposal activities,  the
adoption of SFAS No. 146 will not have any immediate  effect on our consolidated
financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure,"  an  amendment  of SFAS No.  123,
"Accounting for  Stock-Based  Compensation."  SFAS No. 148 provides  alternative
methods of transition for an entity that  voluntarily  changes to the fair value
based method of accounting for stock-based employee  compensation.  In addition,
SFAS No. 148 amends the disclosure  requirements of SFAS No. 123 for both annual
and interim  reporting  periods by requiring  disclosures in a tabular format to
reconcile  net income as  reported  to pro forma net income as if the fair value
method was used.  Certain of the  disclosure  modifications  required for fiscal
years  ending  after  December  15, 2002 were  disclosed  in our 2002 Form 10-K.
However, as discussed in Note 4 to consolidated  financial statements,  with the
completion  of the  going  private  transaction  by ISP in  February  2003,  our
stock-based  compensation  plans  were  terminated  and  payments  were  made in
accordance with the terms of the merger agreement.  Therefore, the provisions of
SFAS No. 148 are no longer  applicable  to us as it relates to those  plans.  In
addition,  we  currently  account for  incentive  units  granted to our eligible
employees  pursuant to ISP's 2000  Long-Term  Incentive  Plan and 2003 Executive
Long-Term Incentive Plan under the accounting  prescribed by FASB Interpretation
No. 28,  "Accounting  for Stock  Appreciation  Rights and Other  Variable  Stock
Option  and Award  Plans"  ("FIN  28"),  which  requires  an  entity to  measure
compensation  as the  amount  by which  the Book  Value of the  incentive  units
covered  by the  grant  exceeds  the  option  price or value  specified  of such
incentive units at the date of grant. Changes, either increases or decreases, in
the Book  Value of  those  incentive  units  between  the date of grant  and the
measurement date result in a change in the measure of compensation for the right
or award.  We expect to continue to account for our  long-term  incentive  units
under  the  accounting  prescribed  by FIN 28 and have  adopted  the  additional
disclosure  provisions of SFAS No. 148. Since  compensation  expense  related to
such  incentive  units is  included  in the actual  consolidated  statements  of
operations, our pro forma net income under SFAS No. 123 would have been the same
as actual net income.


                                       31
<PAGE>

     In  November  2002,  the FASB issued FASB  Interpretation  No.  ("FIN") 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect   Guarantees  of   Indebtedness   of  Others."  FIN  45  clarifies  the
requirements  for a  guarantor's  accounting  for  and  disclosures  of  certain
guarantees  issued and outstanding.  The provisions of FIN 45 apply to guarantee
contracts  that  contingently  require the  guarantor to make payments (in cash,
financial  instruments,  other assets, shares of stock or provision of services)
to the  guaranteed  party for guarantees  such as a financial  standby letter of
credit,  a market value  guarantee on either a financial or  nonfinancial  asset
owned by the guaranteed party and a guarantee of the collection of the scheduled
contractual cash flows from financial assets held by a  special-purpose  entity.
FIN 45 also applies to  indemnification  contracts  and indirect  guarantees  of
indebtedness of others.  The requirements of FIN 45 for the initial  recognition
and measurement of the liability for a guarantor's obligations are to be applied
only on a prospective  basis to guarantees issued or modified after December 31,
2002.  We currently  do not have any  guarantees,  indemnification  contracts or
indirect  guarantees  of  indebtedness  of others  that  would be subject to the
initial recognition and measurement provisions of FIN 45. As discussed in Note 9
to consolidated financial statements,  our 10 1/4% Senior Subordinated Notes due
2011 are  guaranteed  by all of our  domestic  subsidiaries,  other than certain
immaterial subsidiaries and our accounts receivable financing subsidiary.

     In  January  2003,  the FASB  issued  FIN 46,  "Consolidation  of  Variable
Interest  Entities." In accordance with FIN 46, a variable  interest entity will
be consolidated if either the total equity  investment at risk is not sufficient
to permit the entity to finance its activities without  additional  subordinated
financial  support from other parties,  or as a group, the holders of the equity
investment  at risk lack any one of the  following  three  characteristics  of a
controlling  financial  interest:  (1) the  direct or  indirect  ability to make
decisions  about an  entity's  activities;  (2) the  obligation  to  absorb  the
expected  losses of the  entity if they  occur;  (3) the  right to  receive  the
expected  residual  returns  of the entity if they  occur.  All  companies  with
variable  interests in variable interest entities created after January 31, 2003
shall  apply  the  provisions  of FIN 46  immediately.  A public  entity  with a
variable  interest in a variable interest entity created before February 1, 2003
shall apply the  provisions of FIN 46 to that entity no later than the beginning
of the first interim or annual  reporting  period beginning after June 15, 2003.
We do not have an interest in a variable interest entity. Therefore, FIN 46 does
not currently have an impact on our consolidated financial statements.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies  financial  accounting  and reporting for derivative  instruments  and
hedging  activities  under SFAS No. 133. SFAS No. 149 is effective for contracts
entered  into or  modified  after June 30,  2003 and for  hedging  relationships
designated  after June 30, 2003.  We do not expect that the adoption of SFAS No.
149 will have an immediate impact on our consolidated financial statements.

     See Note 12 to Consolidated  Financial Statements for information regarding
contingencies.

                                       32
<PAGE>


                                     * * *

Forward-looking Statements

     This   Quarterly   Report  on  Form  10-Q  contains  both   historical  and
forward-looking  statements.  All statements other than statements of historical
fact are, or may be deemed to be, forward-looking  statements within the meaning
of section 27A of the  Securities  Act of 1933 and section 21E of the Securities
Exchange Act of 1934. These forward-looking  statements are only predictions and
generally can be identified  by use of statements  that include  phrases such as
"believe", "expect", "anticipate", "intend", "plan", "foresee" or other words or
phrases of similar import.  Similarly,  statements that describe our objectives,
plans or goals also are forward-looking  statements.  Our operations are subject
to certain  risks and  uncertainties  that could cause actual  results to differ
materially from those  contemplated by the relevant  forward-looking  statement.
The  forward-looking  statements included herein are made only as of the date of
this  Quarterly  Report on Form 10-Q and we undertake no  obligation to publicly
update  such   forward-looking   statements  to  reflect  subsequent  events  or
circumstances.  No assurances can be given that projected results or events will
be achieved.



               ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
                               ABOUT MARKET RISK

     Reference  is made to  Management's  Discussion  and  Analysis of Financial
Condition  and Results of  Operations  in our Annual Report on Form 10-K for the
fiscal year ended  December 31,  2002,  for a  discussion  of  "Market-Sensitive
Instruments and Risk  Management." At December 31, 2002 and June 29, 2003, there
were no  equity-related  financial  instruments  employed by us to reduce market
risk.


                        Item 4. CONTROLS AND PROCEDURES

     Disclosure Controls and Procedures: Our management,  with the participation
of the  Chief  Executive  Officer  and Chief  Financial  Officer,  conducted  an
evaluation of the  effectiveness  of our disclosure  controls and procedures (as
such term is defined  in Rules  13a-15(e)  and  15d-15(e)  under the  Securities
Exchange  Act of 1934,  as amended  (the  "Exchange  Act")) as of the end of the
period covered by this report.  Based on this  evaluation,  the Chief  Executive
Officer and Chief  Financial  Officer have concluded that, as of the end of such
period,  our  disclosure  controls and  procedures  are  effective in recording,
processing,  summarizing and reporting, on a timely basis,  information required
to be disclosed  by us in the reports  filed,  furnished or submitted  under the
Exchange Act.

     Internal Control Over Financial Reporting:  There have not been any changes
in our internal  control over financial  reporting  during the fiscal quarter to
which this report  relates  that have  materially  affected,  or are  reasonably
likely to materially affect, our internal control over financial reporting.


                                       33
<PAGE>


                                   PART II


                              OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a)  Exhibits:

     Exhibit Number
     --------------

     31.1  Certification of CEO pursuant to Section 302 of the Sarbanes-
           Oxley Act of 2002.

     31.2  Certification of CFO pursuant to Section 302 of the Sarbanes-
           Oxley Act of 2002.

     32.1  Certification of CEO and CFO pursuant to 18 U.S.C. Section
           1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
           Act of 2002.


(b)  Reports on Form 8-K filed during the current quarter:

     No reports on Form 8-K were filed during the three-month period
     ended June 29, 2003.










                                       34
<PAGE>


                                  SIGNATURES


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

                               ISP CHEMCO INC.
                               ISP CHEMICALS INC.
                               ISP MINERALS INC.
                               ISP TECHNOLOGIES INC.
                               ISP MANAGEMENT COMPANY, INC.
                               BLUEHALL INCORPORATED
                               VERONA INC.
                               ISP REAL ESTATE COMPANY, INC.
                               ISP FREETOWN FINE CHEMICALS INC.
                               ISP INTERNATIONAL CORP.
                               ISP (PUERTO RICO) INC.
                               ISP ALGINATES INC.
                               ISP ENVIRONMENTAL SERVICES INC.
                               ISP GLOBAL TECHNOLOGIES INC.
                               ISP INVESTMENTS INC.




DATE:  August 12, 2003             BY: /s/ Neal E. Murphy
       ---------------                 ------------------

                                       Neal E. Murphy
                                       Senior Vice President and
                                         Chief Financial Officer
                                       (Principal Financial Officer)


DATE:  August 12, 2003             BY: /s/Kenneth M. McHugh
       ---------------                 --------------------

                                       Kenneth M. McHugh
                                       Vice President and Controller
                                       (Principal Accounting Officer)









                                       35
<PAGE>




                                  SIGNATURES


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

                        ISP CHEMICALS LLC
                        By: ISP Chemicals Inc., its Sole Member

                        ISP MANAGEMENT LLC
                        By:  ISP Management Company, Inc., its Sole Member

                        ISP MINERALS LLC
                        By:  ISP Minerals Inc., its Sole Member

                        ISP TECHNOLOGIES LLC
                        By:  ISP Technologies Inc., its Sole Member

                        ISP INVESTMENTS LLC
                        By:  ISP Investments Inc., its Sole Member

                        ISP GLOBAL TECHNOLOGIES LLC
                        By:  ISP Global Technologies Inc., its Sole Member


DATE:  August 12, 2003             BY: /s/Neal E. Murphy
       ---------------                 -----------------

                                       Neal E. Murphy
                                       Senior Vice President and
                                         Chief Financial Officer
                                       (Principal Financial Officer)


DATE:  August 12, 2003             BY: /s/Kenneth M. McHugh
       ---------------                 --------------------

                                       Kenneth M. McHugh
                                       Vice President and Controller
                                       (Principal Accounting Officer)


                                       36
<PAGE>