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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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Form 10-Q

|(Mark One)                                    |  |                                                                                         
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------
|ý                                             |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2004
|OR                                           
|o                                             |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission file number 333-112279

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

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

500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700(Address of principal executive offices and telephone number)

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

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

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

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

On May 17, 2004, 10,000,000 units of membership interest of the registrant were outstanding. There is no established trading market for registrant's units
of membership interest. All of registrant's units of membership interest are held by an affiliate.



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HUNTSMAN LLC

FORM 10-Q FOR THE QUARTERLY PERIOD

ENDED MARCH 31, 2004

TABLE OF CONTENTS



|                                |         |                                                                          
|------------------------------- | ------- | -------------------------------------------------------------------------
|PART I    FINANCIAL INFORMATION
|                                | ITEM 1. |                                                                          
|                                |         | Consolidated Balance Sheets                                              
|                                |         | Consolidated Statements of Operations and Comprehensive Loss             
|                                |         | Consolidated Statement of Member's Equity                                
|                                |         | Consolidated Statements of Cash Flows                                    
|                                |         | Notes to Consolidated Financial Statements                               
|                                | ITEM 2. |                                                                          
|                                |         | Supplemental Discussion of Results of Operations for the Restricted Group
|                                | ITEM 3. |                                                                          
|                                | ITEM 4. |                                                                          
|PART II    OTHER INFORMATION   
|                                | ITEM 5. |                                                                          
|                                | ITEM 6. |                                                                          

2

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PART I.    FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

|                                          |                                                                                                          | March 31,
2004                                  |         | December 31,
2003 |        
|----------------------------------------- | -------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ----------------- | -------
|ASSETS                                    |                                                                                                          |                                                 |         |                   |        
|Current assets:                           |                                                                                                          |                                                 |         |                   |        
|                                          | Cash and cash equivalents                                                                                |                                                 | $       | 104.8             |        
|                                          | Restricted cash                                                                                          |                                                 |         | 8.7               |        
|                                          | Accounts and notes receivables (net of allowance for doubtful accounts of $22.0 and $19.7, respectively) |                                                 |         | 1,081.1           |        
|                                          | Inventories                                                                                              |                                                 |         | 820.5             |        
|                                          | Prepaid expenses                                                                                         |                                                 |         | 35.6              |        
|                                          | Deferred income taxes                                                                                    |                                                 |         | 3.0               |        
|                                          | Other current assets                                                                                     |                                                 |         | 77.7              |        
|                                          |                                                                                                          |                                                 |         |                   |        
|                                          |                                                                                                          | Total current assets                            |         |                   | 2,131.4
|Property, plant and equipment, net        |                                                                                                          |                                                 | 4,526.7 |                   |        
|Investment in unconsolidated affiliates   |                                                                                                          |                                                 | 168.5   |                   |        
|Intangible assets, net                    |                                                                                                          |                                                 | 272.5   |                   |        
|Goodwill                                  |                                                                                                          |                                                 | 3.3     |                   |        
|Deferred income taxes                     |                                                                                                          |                                                 | 12.0    |                   |        
|Other noncurrent assets                   |                                                                                                          |                                                 | 609.6   |                   |        
|                                          |                                                                                                          |                                                 |         |                   |        
|                                          |                                                                                                          | Total assets                                    |         | $                 | 7,724.0
|                                          |                                                                                                          |                                                 |         |                   |        
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT) |                                                                                                          |                                                 |         |                   |        
|Current liabilities:                      |                                                                                                          |                                                 |         |                   |        
|                                          | Accounts payable, including overdraft of $12.4 and $7.5, respectively                                    |                                                 | $       | 784.2             |        
|                                          | Accrued liabilities                                                                                      |                                                 |         | 495.9             |        
|                                          | Deferred income taxes                                                                                    |                                                 |         | 14.5              |        
|                                          | Current portion of long-term debt                                                                        |                                                 |         | 96.2              |        
|                                          |                                                                                                          |                                                 |         |                   |        
|                                          |                                                                                                          | Total current liabilities                       |         |                   | 1,390.8
|Long-term debt                            |                                                                                                          |                                                 | 5,219.3 |                   |        
|Long-term debtaffiliates                 |                                                                                                          |                                                 | 408.9   |                   |        
|Deferred income taxes                     |                                                                                                          |                                                 | 236.7   |                   |        
|Other noncurrent liabilities              |                                                                                                          |                                                 | 461.1   |                   |        
|                                          |                                                                                                          |                                                 |         |                   |        
|                                          |                                                                                                          | Total liabilities                               |         |                   | 7,716.8
|                                          |                                                                                                          |                                                 |         |                   |        
|Minority interests                        |                                                                                                          |                                                 | 111.3   |                   |        
|                                          |                                                                                                          |                                                 |         |                   |        
|Commitments and contingencies (Note 15)   |                                                                                                          |                                                 |         |                   |        
|Member's equity (deficit):                |                                                                                                          |                                                 |         |                   |        
|                                          | Member's equity, 10,000,000 units                                                                        |                                                 |         | 1,095.2           |        
|                                          | Accumulated deficit                                                                                      |                                                 |         | (1,237.5          | )      
|                                          | Accumulated other comprehensive income                                                                   |                                                 |         | 38.2              |        
|                                          |                                                                                                          |                                                 |         |                   |        
|                                          |                                                                                                          | Total member's equity (deficit)                 |         |                   | (104.1 
|                                          |                                                                                                          |                                                 |         |                   |        
|                                          |                                                                                                          | Total liabilities and member's equity (deficit) |         | $                 | 7,724.0
|                                          |                                                                                                          |                                                 |         |                   |        

See
accompanying notes to consolidated financial statements

3

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

|                                                                     |                                       | Three months ended March 31, |        
|-------------------------------------------------------------------- | ------------------------------------- | ---------------------------- | -------
|
|Revenues:                                                            |                                       |                              |        
|                                                                     | Trade sales                           |                              | $      
|                                                                     | Related party sales                   |                              |        
|                                                                     |                                       |                              |        
|                                                                     |                                       | Total revenues               |        
|Cost of goods sold                                                   |                                       |                              | 2,141.1
|                                                                     |                                       |                              |        
|Gross profit                                                         |                                       |                              | 213.5  
|Expenses:                                                            |                                       |                              |        
|                                                                     | Selling, general and administrative   |                              |        
|                                                                     | Research and development              |                              |        
|                                                                     | Other operating income                |                              |        
|                                                                     | Restructuring and plant closing costs |                              |        
|                                                                     |                                       |                              |        
|                                                                     |                                       | Total expenses               |        
|                                                                     |                                       |                              |        
|Operating income                                                     |                                       |                              | 68.9   
|Interest expense, net                                                |                                       |                              | (144.2 
|Loss on accounts receivable securitization program                   |                                       |                              | (3.5   
|Equity in income (losses) of investment in unconsolidated affiliates |                                       |                              | 0.7    
|Other expense                                                        |                                       |                              | (1.8   
|                                                                     |                                       |                              |        
|Loss before income tax benefit and minority interests                |                                       |                              | (79.9  
|Income tax expense                                                   |                                       |                              | (1.2   
|                                                                     |                                       |                              |        
|Loss before minority interest                                        |                                       |                              | (81.1  
|Minority interest in subsidiaries' loss                              |                                       |                              | 26.1   
|                                                                     |                                       |                              |        
|Net loss                                                             |                                       |                              | (55.0  
|Other comprehensive income                                           |                                       |                              | 1.4    
|                                                                     |                                       |                              |        
|Comprehensive loss                                                   |                                       | $                            | (53.6  
|                                                                     |                                       |                              |        

See
accompanying notes to consolidated financial statements

4

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HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY (DEFICIT) (UNAUDITED)        (Dollars and Units in Millions)

|                           |  | Member's equity |  | Retained
earnings/
(Accumulated
deficit) |         |  |   |          |  
|-------------------------- |  | --------------- |  | ---------------------------------------- | ------- |  | - | -------- | -
|
|
|Balance, December 31, 2003 |  | 10.0            |  |                                          | 1,095.2 |  |   | (1,182.5 | )
|Net loss                   |  |                |  |                                          |        |  |   | (55.0    | )
|Other comprehensive income |  |                |  |                                          |        |  |   |         |  
|                           |  |                 |  |                                          |         |  |   |          |  
|Balance, March 31, 2004    |  | 10.0            |  | $                                        | 1,095.2 |  | $ | (1,237.5 | )
|                           |  |                 |  |                                          |         |  |   |          |  

See
accompanying notes to consolidated financial statements

5

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

|                                                                                         |                                                  | Three months ended March 31, |      
|---------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------- | -----
|
|Cash Flows From Operating Activities:                                                    |                                                  |                              |      
|Net loss                                                                                 |                                                  | $                            | (55.0
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                  |                              |      
|Equity in losses of investment in unconsolidated affiliates                              |                                                  |                              | (0.7 
|Depreciation and amortization                                                            |                                                  |                              | 110.1
|Provision for losses on accounts receivable                                              |                                                  |                              | (1.6 
|Loss (gain) on disposal of plant and equipment                                           |                                                  |                              | 0.2  
|Noncash interest expense                                                                 |                                                  |                              | 34.3 
|Noncash interest on affiliate debt                                                       |                                                  |                              | 0.3  
|Deferred income taxes                                                                    |                                                  |                              | 2.1  
|Unrealized gain on foreign currency transactions                                         |                                                  |                              | (6.4 
|Minority interests in subsidiaries                                                       |                                                  |                              | (26.1
|Changes in operating assets and liabilities:                                             |                                                  |                              |      
|                                                                                         | Accounts and notes receivables                   |                              |      
|                                                                                         | Change in receivables sold, net of cash received |                              |      
|                                                                                         | Inventories                                      |                              |      
|                                                                                         | Prepaid expenses                                 |                              |      
|                                                                                         | Other current assets                             |                              |      
|                                                                                         | Other noncurrent assets                          |                              |      
|                                                                                         | Accounts payable                                 |                              |      
|                                                                                         | Accrued liabilities                              |                              |      
|                                                                                         | Other noncurrent liabilities                     |                              |      
|                                                                                         |                                                  |                              |      
|Net cash provided by (used in) operating activities                                      |                                                  |                              | (73.8
|                                                                                         |                                                  |                              |      
|Investing Activities:                                                                    |                                                  |                              |      
|Capital expenditures                                                                     |                                                  |                              | (54.1
|Investment in unconsolidated affiliate                                                   |                                                  |                              | (11.9
|Advances to unconsolidated affiliates                                                    |                                                  |                              | 1.2  
|                                                                                         |                                                  |                              |      
|Net cash used in investing activities                                                    |                                                  |                              | (64.8
|                                                                                         |                                                  |                              |      
|Financing Activities:                                                                    |                                                  |                              |      
|Net borrowings under revolving loan facilities                                           |                                                  |                              | 160.8
|Net borrowings on overdraft                                                              |                                                  |                              | 4.9  
|Repayment of long-term debt                                                              |                                                  |                              | (38.6
|                                                                                         |                                                  |                              |      
|Net cash provided by (used in) financing activities                                      |                                                  |                              | 127.1
|                                                                                         |                                                  |                              |      
|Effect of exchange rate changes on cash                                                  |                                                  |                              | (2.8 
|                                                                                         |                                                  |                              |      
|Increase (decrease) in cash and cash equivalents                                         |                                                  |                              | (14.3
|Cash and cash equivalents at beginning of period                                         |                                                  |                              | 127.8
|                                                                                         |                                                  |                              |      
|Cash and cash equivalents at end of period                                               |                                                  | $                            | 113.5
|                                                                                         |                                                  |                              |      
|Supplemental cash flow information:                                                      |                                                  |                              |      
|                                                                                         | Cash paid for interest                           |                              |      
|                                                                                         | Cash paid for income taxes                       |                              |      

See accompanying notes to consolidated financial statements

6

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

1.     General



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



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

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

Prior
to September 30, 2002, the Company was owned by members of the Huntsman family and by certain affiliated entities. On September 30, 2002, the Company and its
subsidiary, Huntsman Polymers Corporation ("Huntsman Polymers"), completed debt for equity exchanges (the "Restructuring"). Pursuant to the Restructuring, the Huntsman family contributed all of their
equity interests in the Company and its subsidiaries, including minority interests acquired from Consolidated Press and the interests described in the second following paragraph, to Huntsman Holdings
in exchange for equity interests in Huntsman Holdings. MatlinPatterson and Consolidated Press exchanged approximately $679 million in principal amount of the Company's outstanding subordinated
notes and Huntsman Polymers' 113/4% senior unsecured notes (the "Huntsman Polymers Notes") they held into equity interests in Huntsman Holdings. There was also approximately
$84 million in accrued interest that was cancelled as a result of the exchange. The net book value of the $763 million of principal and accrued interest exchanged for equity, after
considering debt issuance costs, was $753 million. Huntsman Holdings now indirectly owns all the equity of the Company.

7

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

As
discussed above, on September 30, 2002, the Company effectively acquired the following interests from Huntsman Holdings:



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

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

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

8

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The
following table is a summary of the net assets of HIH as of May 1, 2003 (dollars in millions):

Current assets

$
1,364.5Property, plant and equipment, net


3,082.2Other noncurrent assets


740.4Total assets

$
5,187.1Current liabilities

$
885.0Long term debt (including current portion)


3,638.1Other noncurrent liabilities


366.1Total liabilities

$
4,889.2




The unaudited consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of
America ("GAAP") and in management's opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of results of operations, financial position and cash
flows for the periods shown, have been made. Results for interim periods are not necessarily indicative of those to be expected for the full year. These consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Company's special financial report on Form 10-K
for the year ended December 31, 2003.



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

2.     Recently Issued Financial Accounting Standards

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

9

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3.     Inventories

Inventories consist of the following (dollars in millions):

March 31,
2004

December 31,
2003Raw materials and supplies

$
214.5

$
257.2Work in progress


36.7


32.7Finished goods


596.3


619.8Total


847.5


909.7LIFO reserves


(26.5
)

(15.5
)Lower of cost or market reserves


(0.5
)

(1.3
)Net

$
820.5

$
892.9


In
the normal course of operations, the Company at times exchanges raw materials and finished goods with other companies for the purpose of reducing transportation costs. The net open
exchange positions are valued at the Company's cost. Net amounts deducted from or added to inventory under open exchange agreements, which represent the net amounts payable or receivable by the
Company under open exchange agreements, were approximately $15.0 million payable and $8.2 million payable (59,446,376 and 26,910,072 pounds) at March 31, 2004 and
December 31, 2003, respectively.

4.     Property, Plant and Equipment

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

March 31,
2004

December 31,
2003Land

$
101.2

$
100.7Buildings


382.9


383.4Plant and equipment


6,059.0


6,004.2Construction in progress


240.0


249.0Total


6,783.1


6,737.3Less accumulated depreciation


(2,256.4
)

(2,165.2
)Net

$
4,526.7

$
4,572.1


10

---



5.     Investments in Unconsolidated Affiliates

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

Equity Method:

March 31,
2004

December 31,
2003Polystyrene Australia Pty Ltd.

$
3.9

$
3.6Sasol-Huntsman GmbH and Co. KG (50%)


13.3


13.2Louisiana Pigment Company, L.P. (50%)


128.6


130.4Rubicon, LLC (50%)


1.1


1.0BASF Huntsman Shanghai Isocyanate Inventment BV (50%)(1)


17.9


6.1Others


1.2


1.2Total

$
166.0

$
155.5Cost Method:Gulf Advanced Chemicals Industry Corporation (4%)

$
2.5

$
2.5


---

6.     Intangible Assets

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

|                                    |  | March 31, 2004 |       | December 31, 2003
|----------------------------------- |  | -------------- | ----- | -----------------
|
|Patents, trademarks, and technology |  | $              | 409.6 |                  
|Licenses and other agreements       |  |                | 18.3  |                  
|Non-compete agreements              |  |                | 49.6  |                  
|Other intangibles                   |  |                | 2.4   |                  
|                                    |  |                |       |                  
|Total                               |  | $              | 479.9 |                  
|                                    |  |                |       |                  

Amortization
expense for intangible assets for the three month period ended March 31, 2004 and 2003 is $10.1 million and $1.0 million, respectively. Estimated future
amortization expense for intangible assets over the next five years is as follows (dollars in millions):

Year Ended December 31:2004

$
38.02005


37.52006


29.32007


29.32008


29.3


11

---



7.     Other Noncurrent Assets

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

March 31,
2004

December 31,
2003Prepaid pension assets

$
256.1

$
254.4Debt issuance costs


79.0


83.5Capitalized turnaround expense


92.7


83.9Receivables from affiliates


28.9


25.2Spare parts inventory


96.5


100.5Other noncurrent assets


56.4


64.0Total

$
609.6

$
611.5


8.     Accrued Liabilities

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

March 31,
2004

December 31,
2003Payroll, severance and related costs

$
110.3

$
124.1Interest


74.7


103.9Volume and rebates accruals


67.2


89.5Income taxes


23.5


51.7Taxes (property and VAT)


49.1


61.8Pension liabilities


23.6


21.3Restructuring and plant closing costs


21.4


22.6Environmental accruals


8.4


8.6Interest and commodity hedging accruals


6.3


11.3Other miscellaneous accruals


111.4


90.9Total

$
495.9

$
585.7


9.     Other Noncurrent Liabilities

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

March 31,
2004

December 31,
2003Pension liabilities

$
260.6

$
246.5Other postretirement benefits


79.6


78.8Environmental accruals


25.6


26.3Restructuring on plant closing costs


2.4


2.7Fair value of interest derivative


31.9


9.5Other noncurrent liabilities


61.0


92.4Total

$
461.1

$
456.2


12

---



10.   Restructuring and Plant Closing Charges

As of March 31, 2004 and December 31, 2003, the Company had reserves for restructuring and plant closing costs of $23.8 million and
$25.3 million, respectively. During the three months ended March 31, 2004, the Company, on a consolidated basis, recorded additional reserves of $8.7 million, including
reserves for workforce reductions. During the 2004 period, the Company made cash payments against these reserves of $10.2 million..

As
of March 31, 2004, accrued restructuring and plant closing costs by type of cost consist of the following (dollars in millions):

Workforce
reductions

Demolition and
decommisioning

Non-cancelable
lease costs

TotalAccrued liabilities as of December 31, 2003

$
22.5

$
2.6

$
0.2

$
25.3Charges


8.7








8.7Payments


(9.8
)

(0.2
)

(0.2
)

(10.2
)Accrued liabilities as of March 31, 2004

$
22.5

$
2.4

$


$
23.8


Detail
of these reserves by segment are as follows (dollars in millions):

Polyurethanes

Performance
Products

Pigments

Polymers

TotalAccrued liability as of December 31, 2003

$
15.8

$
2.4

$
4.3

$
2.8

$
25.3Charges


4.8





3.9





8.7Payments


(6.5
)

(0.1
)

(3.2
)

(0.4
)

(10.2
)Accrued liability as of March 31, 2004

$
14.1

$
2.3

$
5.0

$
2.4

$
23.8


As
of March 31, 2004 and December 31, 2003, the Polyurethanes segment reserve consisted of $9.7 million and $8.2 million, respectively, related to
restructuring activities at the Rozenberg, Netherlands site announced in 2003, $2.2 million and $5.2 million, respectively, related to the workforce reductions throughout the
Polyurethanes segment announced in 2003, and $1.9 million and $2.4 million, respectively, related to the closure of the Shepton Mallet, U.K. site announced in 2002. During the three
months ended March 31, 2004, the Polyurethanes segment recorded additional restructuring charges of $4.8 million and made cash payments of $6.5 million related to these
restructuring activities. Additional charges of approximately $7.7 million related to these restructuring activities are expected to be recorded through 2005, resulting from additional
workforce reductions of approximately 36 employees.

As
of December 31, 2003, the Performance Products segment reserve consisted of $2.4 million related to the closure of a number of plants at its Whitehaven, U.K. facility,
the closure of an administrative office in London, U.K., the rationalization of its surfactants technical center in Oldbury, U.K., and the restructuring of its facility in Barcelona, Spain. During the
three months ended March 31, 2004, the Performance Products segment made cash payments of $0.1 million related to these restructuring activities. There are no material additional charges
expected related to these restructuring activities.

13

---



As of December 31, 2003, the Polymers segment reserve consisted of $2.8 million related to its demolition and decommissioning of the Company's Odessa, Texas styrene
manufacturing facility and noncancelable lease costs. During the three months ended March 31, 2004, the Polymers segment made cash payments of $0.4 million related to these restructuring
activities.

As
of December 31, 2003, the Pigments segment reserve consisted of $4.3 million related to its global workforce reductions. During the three months ended March 31,
2004, the Pigments segment recorded additional restructuring charges of $3.9 million and made cash payments of $3.2 million related to these restructuring activities. Additional charges
of approximately $13 million related to these restructuring activities are expected to be recorded through 2005, resulting from additional workforce reductions of approximately 150 employees.

The
Company continuously evaluates the effectiveness of all of its manufacturing facilities in serving its markets. The Company has been engaged in a detailed review of its Pigments
business to improve its competitive position and financial performance. In connection with this review, the Company announced in April 2004 that it will idle approximately 55,000 tonnes, or
about 10% of its total TiO2 production capacity. This action is expected to result in approximately $40 million of annual fixed cost savings, and will involve approximately
$100 million of accelerated depreciation and non-cash charges and the payment of cash restructuring costs of approximately $20 million in 2004 and 2005.

14

---



11.   Debt

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

|                                              |                                                                  | March 31,
2004 |         | December 31,
2003
|--------------------------------------------- | ---------------------------------------------------------------- | -------------- | ------- | -----------------
|Huntsman LLC Debt, excluding HIH and HI:      |                                                                  |                |         |                  
|Senior secured credit facilities:             |                                                                  |                |         |                  
|                                              | Term Loan A                                                      |                | $       | 606.3            
|                                              | Term Loan B                                                      |                |         | 459.0            
|                                              | Revolving facility                                               |                |         | 85.0             
|Other debt:                                   |                                                                  |                |         |                  
|                                              | Huntsman LLC senior secured notes                                |                |         | 450.8            
|                                              | Huntsman Polymers senior unsecured notes                         |                |         |                 
|                                              | Huntsman LLC senior subordinated fixed rate notes                |                |         | 44.2             
|                                              | Huntsman LLC senior subordinated floating rate notes             |                |         | 15.1             
|                                              | Huntsman Specialty Chemicals Corporation subordinated note       |                |         | 100.0            
|                                              | Huntsman Australia Holdings Corporation (HAHC) credit facilities |                |         | 44.8             
|                                              | Huntsman Chemical Company Australia (HCCA) credit facilities     |                |         | 48.2             
|                                              | Subordinated note and accrued interestaffiliate                 |                |         | 36.8             
|                                              | Term note payable to a bank                                      |                |         | 9.5              
|                                              | Other                                                            |                |         | 4.4              
|                                              |                                                                  |                |         |                  
|Total Huntsman LLC Debt, excluding HIH and HI |                                                                  |                | 1,904.1 |                  
|HI:                                           |                                                                  |                |         |                  
|Senior secured credit facilities:             |                                                                  |                |         |                  
|                                              | Term B loan                                                      |                |         | 620.1            
|                                              | Term C loan                                                      |                |         | 620.1            
|                                              | Revolving facility                                               |                |         | 110.0            
|Other debt:                                   |                                                                  |                |         |                  
|                                              | Senior unsecured notes                                           |                |         | 456.8            
|                                              | Senior subordinated notes                                        |                |         | 1,154.4          
|                                              | Other debt                                                       |                |         | 37.6             
|                                              |                                                                  |                |         |                  
|Total HI debt                                 |                                                                  |                | 2,999.0 |                  
|HIH:                                          |                                                                  |                |         |                  
|                                              | Senior discount notes                                            |                |         | 449.2            
|                                              | Senior subordinated discount notesaffiliate                     |                |         | 372.1            
|                                              |                                                                  |                |         |                  
|Total HIH debt                                |                                                                  |                | 821.3   |                  
|Total HIH consolidated debt                   |                                                                  |                | 3,820.3 |                  
|                                              |                                                                  |                |         |                  
|Total debt                                    |                                                                  | $              | 5,724.4 |                  
|                                              |                                                                  |                |         |                  
|Current portion                               |                                                                  | $              | 96.2    |                  
|Long-term portion                             |                                                                  |                | 5,219.3 |                  
|                                              |                                                                  |                |         |                  
|Total long-term debtexcluding affiliate      |                                                                  |                | 5,315.5 |                  
|Long-term debtaffiliate                      |                                                                  |                | 408.9   |                  
|                                              |                                                                  |                |         |                  
|Total debt                                    |                                                                  | $              | 5,724.4 |                  
|                                              |                                                                  |                |         |                  

15

---



Huntsman LLC Debt (Excluding HIH and HI)



The Company's senior secured credit facilities (the "HLLC Credit Facilities") consist of a $275 million revolving credit facility maturing in 2006 (the
"HLLC Revolving Facility") and two term loan facilities maturing in 2007, initially in the amount of $938 million ("Term Loan A") and $450 million ("Term Loan B" and, collectively with
Term Loan A, the "HLLC Term Facilities"). On May 31, 2003, the principal amount of Term Loan B was increased to $459 million; the additional $9 million was a supplemental fee
imposed because $350 million of Term Loan B was not repaid on May 31, 2003. Upon application of certain proceeds from the September 2003 Offering (defined below) and the
December 2003 Offering (defined below), the outstanding balance of Term Loan A is $606.3 million. The HLLC Revolving Facility is secured by a first lien on substantially all the assets
of the Company, HSCHC, Huntsman Specialty and the Company's domestic restricted subsidiaries, which does not include HIH or HI. The HLLC Term Facilities are secured by a second lien on substantially
the same assets that secure the HLLC Revolving Facility. The HLLC Credit Facilities are also guaranteed by HSCHC and Huntsman Specialty and by the Company's domestic restricted subsidiaries
(collectively, the "Guarantors"). Neither HIH nor HI are Guarantors. As of March 31, 2004 and December 31, 2003, the weighted average interest rates on the HLLC Credit Facilities were
7.2% and 7.3%, respectively, excluding the impact of interest rate hedges.

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

As
of March 31, 2004, borrowings under the HLLC Term Facilities bear interest, at the Company's option, at a rate equal to (i) a LIBOR-based eurocurrency rate plus an
applicable margin of 4.75% and 8.25% for Term Loan A and Term Loan B, respectively, or (ii) a prime-based rate plus an applicable margin of 3.75% and 7.25% for Term Loan A and Term Loan B,
respectively. This agreement also provides for quarterly escalating interest rates on Term Loan B of up to maximum LIBOR and prime based margins of 9.75% and 8.75%, respectively by July 2004.

The
HLLC Credit Facilities contain financial covenants including a minimum interest coverage ratio, a minimum fixed charge ratio and maximum debt to EBITDA ratio, as defined, and limits
on capital expenditures, in addition to restrictive covenants customary to financings of these types, including limitations on liens, debt and the sale of assets. Management believes that the Company
is in compliance with the covenants of the HLLC Credit Facilities as of March 31, 2003.

On
September 30, 2003, the Company sold $380 million aggregate principal amount of 115/8% senior secured notes due 2010 at a discount to yield
117/8% in a private offering (the "September 2003 Offering"). The proceeds from the offering were used to repay $65.0 million on the HLLC Revolving Facility, without
reducing commitments, and $296.6 million on Term Loan A. On December 3, 2003 the Company sold an additional $75.4 million aggregate principal amount of its senior secured notes
(collectively with the notes sold in the September 2003 Offering, the "2003 Secured Notes") at a discount to yield 11.72% (the "December 2003 Offering"). The proceeds of this offering
were used to repay $35.2 million on Term Loan A. The combined total repayment on Term Loan A included a prepayment of $165.2 million of scheduled amortization payments in the direct
order of maturity such that the next scheduled quarterly amortization payment under the HLLC Credit Facilities is due March 2006. The remaining proceeds of the December 2003 Offering
were temporarily applied to reduce outstanding borrowings under the HLLC Revolving Facility, and the Company, on January 28,

16

---



2004,
used $37.5 million of the net cash proceeds to redeem the Huntsman Polymers Notes (representing principal of $36.8 million plus accrued interest). The Huntsman Polymers Notes would
have been due in December 2004 and were redeemed at 100% of their aggregate principal amount.

On
May 6, 2004, the Company amended certain financial covenants in the HLLC Credit Facilities. The amendment applies to both the HLLC Revolving Facility and the HLLC Term
Facilities and provides for, among other things, the amendment of certain financial covenants through the fourth quarter 2005. The amendment provided for an increase in the maximum leverage ratio, and
a decrease in the minimum interest coverage ratio and the fixed charge coverage ratio. The amendment also amends the mandatory prepayment provisions contained in the HLLC Credit Facilities to permit
the Company, after certain levels of repayment of Term Loan B, to use subordinate debt or equity proceeds to repay a portion of the outstanding indebtedness of certain of its Australian subsidiaries.



The 2003 Secured Notes bear interest at a rate of 115/8% per annum and interest is payable semi-annually on April 15 and
October 15. The 2003 Secured Notes mature on October 15, 2010 and are secured by a second lien on substantially all the assets of the Company, HSCHC, Huntsman Specialty and the Company's
domestic restricted subsidiaries (which do not include HIH or HI). The 2003 Secured Notes are effectively subordinated to all the Company's obligations under the HLLC Revolving Facility and rank pari passuwith the HLLC Term Facilities. The 2003 Secured Notes are also guaranteed by the Guarantors. In accordance with the Company's contractual
obligation to register the 2003 Secured Notes, the Company's registration statement on Form S-4/A filed with the U.S. Securities and Exchange Commission became effective on
February 13, 2004 and the exchange offer of unregistered 2003 Secured Notes for registered 2003 Secured Notes was completed on March 29, 2004.

The
2003 Secured Notes are redeemable



The
indenture governing the 2003 Secured Notes contains covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other
things. The indenture also requires the Company to offer to repurchase the 2003 Secured Notes upon a change of control. Management believes that the Company is in compliance with the covenants of the
2003 Secured Notes as of March 31, 2004.



The
Company's 9.5% fixed and variable subordinated notes due 2007 (the "HLLC Notes") with an outstanding principal balance of $59.3 million as of March 31, 2004 are
unsecured subordinated obligations of the Company and are junior in right of payment to all existing and future secured or unsecured senior indebtedness of the Company and effectively junior to any
secured indebtedness of the Company to the extent of the collateral securing such indebtedness. Interest is payable on the HLLC Notes semiannually on January 1 and July 1 at an annual
rate of 9.5% on the fixed rate notes and LIBOR plus 3.25% on the floating rate notes. The HLLC Notes are redeemable at the option of the Company after July 2002 at a price declining from
104.75% to 100% of par value as of July 1,

17

---



2005.
The weighted average interest rate on the floating rate notes was 4.5% and 4.4% as of March 31, 2004 and December 31, 2003, respectively.

The
Huntsman Polymers Notes were unsecured senior obligations of Huntsman Polymers; they had an original maturity of December 2004, a fixed rate coupon of 113/4%,
and an outstanding balance of $36.8 million as of December 31, 2003. On January 28, 2004, the Huntsman Polymers Notes were redeemed in full.

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



Huntsman Specialty's subordinated note in the aggregate principal amount of $75.0 million accrued interest until April 15, 2002 at 7% per annum.
Pursuant to the note agreement, effective April 15, 2002, all accrued interest was added to the principal of the note for a total principal amount of $106.6 million. Such principal
balance will be payable in a single installment on April 15, 2008. Interest has been payable quarterly in cash, commencing July 15, 2002. For financial reporting purposes, the note was
initially recorded at its estimated fair value of $58.2 million, based on prevailing market rates as of the effective date. As of March 31, 2004 and December 31, 2003, the
unamortized discount on the note is $6.6 million and $6.9 million, respectively.

Certain
of the Company's Australian subsidiaries maintain credit facilities that are non-recourse to the Company. The Australian subsidiaries are currently not in compliance
with covenants contained in these credit facilities. The outstanding debt balances of our Australian subsidiaries have been classified in current portion of long-term debt.

Huntsman
Chemical Company Australia Pty. ("HCCA"), a subsidiary that holds the Company's Australian styrenics assets, maintains a facility consisting of a term facility and a working
capital facility (collectively, the "HCCA Facilities"). The term facility (A$54 million, or $40.7 million as of March 31, 2004) has semiannual scheduled amortization payments with
a balloon payment due at maturity in July 2005. The working capital facility (A$10 million, or $7.5 million as of March 31, 2004) is fully drawn and renews annually.
Borrowings under the HCCA Facilities bear interest at a base rate plus a spread of 1.25%, plus an additional 0.5% line use fee. As of March 31, 2004, the weighted average interest rate for the
HCCA Facilities was 6.8%. The HCCA Facilities are secured by effectively all the assets of HCCA, including a floating lien on inventory and receivables. As of March 31, 2004, there were no
financial covenants in place. Such covenants are currently being negotiated. HCCA failed to make its semiannual scheduled amortization payments of A$5 million (approximately $3.8 million
as of March 31, 2004) each due in July 2003 and January 2004 under its term facility. An A$1 million payment was made by HCCA on the term facility in the three months ended
March 31, 2004. Short term cash flows generated by HCCA will likely not be sufficient to bring current its missed payments or to meet its next scheduled amortization payment of
A$5 million due in July 2004. Management of HCCA continues its efforts to renegotiate the terms of the HCCA Facilities. The Company has reached an agreement in principle with the lender
under the HCCA Facilities that will provide for a period of time during which HCCA and the lender will evaluate various alternatives for restructuring the HCCA Facilities.

Huntsman
Australia Holdings Corporation ("HAHC") and certain of its subsidiaries hold the Company's Australian surfactants assets. HAHC and certain of its subsidiaries are parties to
credit facilities established in December 1998 (the "HAHC Facilities"). As of March 31, 2004, borrowings under the HAHC Facilities total A$59.5 million, or $44.8 million,
and bear interest at a base rate plus a spread of 2%. As of March 31, 2004, the weighted average interest rate for the HAHC Facilities was

18

---



7.5%.
Principal payments are due semiannually through December 2005. The HAHC Facilities are collateralized by effectively all of the assets of the HAHC subsidiaries in addition to a U.S. stock
pledge of the shares of one of its U.S. subsidiaries. The HAHC Facilities are subject to financial covenants, including leverage ratio, interest coverage ratio and limits on capital expenditures, in
addition to restrictive covenants customary to financings of this type, including limitations on liens, debt and the sale of assets. As of March 31, 2004, HAHC was current on all scheduled
amortization and interest payments under the HAHC Facilities but was not in compliance with certain financial covenants in the agreements governing the HAHC Facilities. Management believes that HAHC
will be able to renegotiate the terms of the HAHC Facilities.

On
July 2, 2001, the Company entered into a 15% note payable with an affiliated entity in the amount of $25.0 million. The note is due and payable on the earlier of the
tenth anniversary of the issuance date or the date of the repayment in full in cash of all indebtedness of the Company under its senior secured credit facilities. Interest is not paid in cash, but is
accrued at a designated rate of 15% per annum, compounded annually. As of March 31, 2004 and December 31, 2003, accrued interest added to the principal balance was $11.8 million
and $10.5 million, respectively.

HI Debt

The HIH and HI debt transactions and balances prior to the HIH Consolidation Transaction, effective May 1, 2003, are not included in the accompanying
financial statements.



As of March 31, 2004, HI had senior secured credit facilities (the "HI Credit Facilities") which consisted of a revolving loan facility of up to
$400 million that matures on June 30, 2005 (the "HI Revolving Facility"), a term B loan facility that matures on June 30, 2007, and a term C loan facility that matures on
June 30, 2008. HI has commenced discussions with financial institutions for the renewal or replacement of the HI Revolving Facility and expect to address the pending maturity within the next
three months. On October 22, 2003, HI issued $205 million of additional term B and term C loans, the net proceeds of which were applied to pay down the HI Revolving Facility by
approximately $53 million, and the remainder of the net proceeds, net of fees, were applied to repay, in full, the term A loan which had an initial maturity of June 2005. Principal
payments on the term B and term C loans begin in 2005.

Interest
rates for the HI Credit Facilities are based upon, at HI's option, either a eurocurrency rate (LIBOR) or a base rate (prime) plus the applicable spread. The applicable spreads
vary based on a pricing grid, in the case of eurocurrency based loans, from 1.50% to 4.50% per annum depending on the loan facility and whether specified conditions have been satisfied, and, in the
case of base rate loans, from 0.25% to 3.25% per annum. As of March 31, 2004 and December 31, 2003, the average interest rates on the HI Credit Facilities were 5.2% and 5.6%,
respectively, excluding the impact of interest rate hedges.

HI's
obligations under the HI Credit Facilities are supported by guarantees of HIH and HI's domestic and certain foreign subsidiaries (collectively, the "HI Guarantors"), as well as
pledges of substantially all their assets, including 65% of the voting stock of certain non-U.S. subsidiaries.

The
HI Credit Facilities contain covenants relating to the incurrence of debt, purchase and sale of assets, limitations on investments, affiliate transactions, change in control
provisions and maintenance of certain financial ratios. The financial covenants include a leverage ratio, interest coverage ratio, minimum consolidated net worth level and a limit on capital
expenditures. The HI Credit Facilities also limit the payment of dividends generally to the amount required by the members to pay income taxes. Management believes that, as of March 31, 2004,
HI is in compliance with the covenants of the HI Credit Facilities.

19

---





In March 2002, HI issued $300 million 97/8% Senior Notes (collectively with the HI 2003 Senior Notes (defined below), the "HI Senior
Notes"). Interest on the HI Senior Notes is payable semi-annually and the HI Senior Notes mature on March 1, 2009. The HI Senior Notes are unsecured and are fully and
unconditionally guaranteed on a joint and several basis by the HI Guarantors. The HI Senior Notes are redeemable, in whole or in part, at any time by HI on or prior to March 1, 2006 at 100% of
the face value plus a "make whole" premium, as defined in the applicable indenture. After March 1, 2006, the HI Senior Notes may be redeemed, in whole or in part, at a redemption price that
declines from 104.937% to 100% after March 1, 2008. On April 11, 2003, HI sold an additional $150 million in aggregate principal amount of 97/8% Senior Notes due
2009 (the "HI 2003 Senior Notes"). The HI 2003 Senior Notes were priced at 105.25%.

HI
also has outstanding $600 million and €450 million ($554.4 million as of March 31, 2004) 101/8% Senior Subordinated Notes
(the "HI Subordinated Notes"). Interest on the HI Subordinated Notes is payable semi-annually and the HI Subordinated Notes mature on July 1, 2009. The HI Subordinated Notes are
unsecured and are fully and unconditionally guaranteed on a joint and several basis by the HI Guarantors. The HI Subordinated Notes are redeemable, in whole or in part, at any time by HI prior to
July 1, 2004 at 100% of the face value plus a "make whole" premium, as defined in the applicable indenture. On or after July 1, 2004 the HI Subordinated Notes may be redeemed at 105.063%
of the principal amount thereof, declining ratably to par on and after July 1, 2007

The
HI Senior Notes and the HI Subordinated Notes contain covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other
things. They also contain a change of control provision requiring HI to offer to repurchase the HI Senior Notes and the HI Subordinated Notes upon a change of control. Management believes that HI is
in compliance with the covenants of the HI Senior Notes and the HI Subordinated Notes as of March 31, 2004.



HI maintains a $25 million multicurrency overdraft facility for its European subsidiaries (the "European Overdraft Facility"). As of March 31, 2004,
HI had approximately $12.4 million outstanding under the European Overdraft Facility included within accounts payable. The European Overdraft Facility is used for daily working capital needs.

Included
within other debt is debt associated with HI's China MDI project. In January 2003, HI entered into two related joint venture agreements to build MDI production facilities
near Shanghai, China. HI owns 70% (a consolidating interest) of one of the joint ventures, Huntsman Polyurethanes Shanghai Ltd. ("HPS"), with Shanghai Chlor-Alkali Chemical Company, Ltd.
On September 19, 2003, HPS obtained secured financing for the construction of the production facilities. HPS obtained term loans for the construction of its plant in the maximum principal
amount of approximately $82.4 million, a working capital credit line in the amount of approximately $35.1 million, and a facility for funding VAT payments in the amount of approximately
$0.6 million. As of March 31, 2004, there were $4.0 million outstanding in U.S. dollar borrowings and 10.0 million in RMB borrowings ($1.2 million U.S. dollar
equivalents) under these facilities. The interest rate on these facilities is LIBOR plus 0.48% for U.S. dollar borrowings and 90% of the Peoples Bank of China rate for RMB borrowings. As of
March 31, 2004 the interest rate for U.S. dollar borrowings was 1.7% and 5.2% for RMB borrowings. The loans are secured by substantially all the assets of HPS and will be repaid in 16
semi-annual installments, beginning no later than June 30, 2007. The financing is non-recourse to our Company, but is guaranteed during the construction phase by
affiliates of HPS, including Huntsman Holdings. Huntsman Holdings unconditionally guarantees 70% of any amounts due and unpaid by HPS under the loans described above (except for the VAT facility which
is not guaranteed). Huntsman Holdings'

20

---



guarantees
remain in effect until HPS has (i) commenced production at least 70% of capacity for at least 30 days, and (ii) achieved a debt service cover ratio of at least 1:1.

HIH Debt



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

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

The
HIH Senior Subordinated Discount Notes have a stated rate of 8% that originally was to reset to a market rate in June 2002 and can be redeemed at 100% of accreted value at any
time until June 30, 2004. On December 21, 2001, the terms of the HIH Senior Subordinated Discount Notes were modified, including deferring the reset date until September 2004, at
which time the interest rate will reset to a market rate. For financial reporting purposes, the HIH Senior Subordinated Discount Notes were initially recorded at their estimated fair value of
$223 million based upon prevailing market rates at June 30, 1999. The modification of the terms resulted in a significant decrease in the present value of the debt and, as a result, the
debt was treated effectively as an extinguishment and reissuance of the debt. The debt was recorded using a 16% interest rate, the estimated market rate for the debt as of December 20, 2001.

As
of March 31, 2004 and December 31, 2003, the HIH Senior Discount Notes included $206.4 million and $191.9 million of accrued interest, respectively. As of
March 31, 2004 and December 31, 2003, the HIH Senior Subordinated Discount Notes included $119.9 million and $112.3 million of accrued interest, respectively, and
$13.0 million and $19.2 million of discount, respectively.

In
connection with the Restructuring, on September 30, 2002, MatlinPatterson contributed its interest in the HIH Senior Subordinated Discount Notes to HMP. On May 9, 2003,
HMP completed the purchase of the HIH Senior Subordinated Discount Notes from ICI. As of March 31, 2004, the HIH Senior Subordinated Discount Notes are held by HMP.

12.   Derivatives and Hedging Activities



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

21

---



As
of March 31, 2004 and December 31, 2003, the Company had entered into various types of interest rate contracts to manage its interest rate risk on its
long-term debt as indicated below (dollars in millions):

March 31, 2004

December 31, 2003Interest rate swapsNotional amount

$
445.6

$
447.5Fair value


(12.5
)

(14.4
)Weighted average pay rate


5.49
%

5.49
%Maturing


2004-2007


2004-2007Interest rate collarsNotional amount

$
150.0

$
150.0Fair value


(3.0
)

(4.8
)Weighted average cap rate


7.00
%

7.00
%Weighted average floor rate


6.25
%

6.25
%Maturing


2004


2004


Under
interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest
amounts calculated by reference to an agreed notional principal amount.

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

The
majority of the interest rate contracts have been designated as cash flow hedges of future interest payments on its variable rate debt. The fair value of these interest rate
contracts designated as hedges as of March 31, 2004 and December 31, 2003 was a loss of approximately $10.0 million and $13.0 million, respectively, which is recorded in
other accrued liabilities and in accumulated other comprehensive income (loss) to the extent of the effective portions of the hedging instruments. Gains and losses related to these contracts will be
reclassified from other comprehensive income (loss) into earnings in the periods in which the related hedged interest payments are made. As of March 31, 2004, losses of approximately
$7.4 million are expected to be reclassified into earnings over the remainder of 2004. Gains and losses on these agreements, including amounts recorded related to hedge ineffectiveness, are
reflected as interest expense in the statement of operations. A net loss of $0.4 million and income of $2.2 million was recorded in interest expense in the three months ended
March 31, 2004 and 2003, respectively.

As
of March 31, 2004 and December 31, 2003, swap agreement liabilities with a fair value of $5.5 million and $6.2 million, respectively, have not been
designated as hedges for financial reporting purposes. The change in the liability resulted in income of $0.2 million and $2.1 million for the three months ended March 31, 2004
and 2003, respectively, has been recognized in interest expense.

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

22

---







As of March 31, 2004 and December 31, 2003, there were no cash flow commodity price hedging contracts recorded in other current assets and other
comprehensive income.

As
of March 31, 2004 commodity price hedging contracts designated as fair value hedges are included in the balance sheet as $0.4 million in accrued liabilities and a credit
of $0.3 million in inventory. As of December 31, 2003 commodity price hedging contracts designated as fair value hedges are included in the balance sheet as $0.8 million in
accrued liabilities and $0.5 million in inventory.

Commodity
price contracts not designated as hedges as defined by SFAS No. 133 are reflected in the balance sheet as $1.4 million and $0.2 million in other current
assets and accrued liabilities, respectively, as of March 31, 2004, and as $0.5 million and $0.3 million in other current assets and accrued liabilities, respectively, as of
December 31, 2003.

During
the three months ended March 31, 2004, the Company recorded an increase of $2.6 million in cost of goods sold related to net gains and losses from settled contracts,
net gains and losses in fair value price hedges, and the change in fair value on commodity price hedging contracts not designated as hedges as defined in SFAS No. 133. During the three months
ended March 31, 2003, the Company recorded a reduction of $0.9 million in cost of goods sold related to net gains and losses from settled contracts, net gains and losses in fair value
price hedges, and the change in fair value on commodity price hedging contracts not designated as hedges as defined in SFAS No. 133.



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



Currency effects of net investment hedges produced a gain of $15.2 million and a loss of $18.4 million in other comprehensive income (loss) (foreign
currency translation adjustments) for the three months ended March 31, 2004 and 2003, respectively. As of March 31, 2004 and December 31, 2003, there was a cumulative net loss of
approximately $111.1 million and $126.3 million, respectively.

13.   Securitization of Accounts Receivable

On December 21, 2000, HI initiated an accounts receivable securitization program under which it grants an undivided interest in certain of its trade
receivables to a qualified off-balance sheet entity (the "Receivables Trust") at a discount. This undivided interest serves as security for the issuance of commercial paper and medium term
notes by the Receivables Trust. At March 31, 2004, the Receivables Trust had outstanding approximately $195 million in U.S. dollar equivalents in medium term notes and approximately
$115 million in commercial paper. Under the terms of the agreements, HI and its subsidiaries continue to service the receivables in exchange for a 1% fee of the outstanding receivables, and HI
is subject to recourse provisions.

HI's
retained interest in receivables (including servicing assets) subject to the program was approximately $148.7 and $154.4 million as of March 31, 2004 and
December 31, 2003, respectively. The value of the retained interest is subject to credit and interest rate risk. For the three months ended March 31, 2004 and 2003, new sales of accounts
receivable sold into the program totaled approximately $1,095.6 million and $1,002.0 million, respectively, and cash collections from receivables sold into the program that were
reinvested totaled approximately $1,086.8 million and $892.0 million, respectively.

23

---



Servicing
fees received during the three months ended March 31, 2004 and 2003 were approximately $1.2 million and $1.2 million, respectively.

HI
incurs losses on the accounts receivable securitization program for the discount on receivables sold into the program and fees and expenses associated with the program. HI also
retains responsibility for the economic gains and losses on forward contracts mandated by the terms of the program to hedge the currency exposures on the collateral supporting the
off-balance sheet debt issued.
Gains and losses on forward contracts included as a component of the loss on accounts receivable securitization program are a loss of $1.4 million and a loss of $7.6 million for the
three months ended March 31, 2004 and 2003, respectively. As of March 31, 2004 and December 31, 2003, the fair value of the open forward currency contracts is $0.9 million
and $6.8 million, respectively, which is included as a component of the residual interest reflected on HI's balance sheet. On April 16, 2004, HI amended the commercial paper facility.
Pursuant to the amendment, the maturity of the commercial paper facility was extended to March 31, 2007. In addition, the amendment permits the issuance of euro-denominated
commercial paper.

The
key economic assumptions used in valuing the residual interest at March 31, 2004 are presented below:

Weighted average life (in months)

3Credit losses (annual rate)

Less than 1%Discount rate (annual rate)

2%


A
10% and 20% adverse change in any of the key economic assumptions would not have a material impact on the fair value of the retained interest. Total receivables over 60 days
past due as of March 31, 2004 and December 31, 2003 were $9.8 million and $15.6 million, respectively.

14.   Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) consist of the following (dollars in millions):

Accumulated income (loss)

Income (loss)March 31,
2004

December 31,
2003

March 31,
2004

March 31,
2003Foreign currency translation adjustments

$
167.6

$
171.6

$
(4.0
)
$
2.5Unrealized loss on nonqualified plan investments


0.6


0.6





Unrealized loss on derivative instruments


(12.2
)

(15.7
)

3.5


1.7Minimum pension liability, net of tax


(92.5
)

(95.2
)

2.7


Minimum pension liability unconsolidated affiliate


(5.6
)

(5.6
)




Unrealized loss on securities


0.1


0.2


(0.1
)

Other comprehensive income (loss) of minority interest


(29.0
)

(28.3
)

(0.7
)

0.1Other comprehensive income (loss) of unconsolidated affiliates


9.2



9.2





3.1Total

$
38.2

$
36.8

$
1.4

$
7.4


24

---



15.   Environmental Matters



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



The Company may incur future costs for capital improvements and general compliance under environmental and safety laws, including costs to acquire, maintain and
repair pollution control equipment. The Company estimates that, on a consolidated basis, capital expenditures for environmental and safety matters during 2004 will be approximately
$69.1 million, including approximately $38.5 million for HIH. However, since capital expenditures for these matters are subject
to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, we cannot provide assurance that material capital expenditures beyond
those currently anticipated will not be required under environmental and safety laws.

The
Company has established financial reserves relating to anticipated environmental restoration and remediation programs, as well as certain other anticipated environmental liabilities.
Management believes these reserves are sufficient for known requirements. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated.
The Company's liability estimates are based upon available facts, existing technology and past experience. On a consolidated basis, a total of approximately $34.0 million has been accrued
related to environmental related liabilities as of March 31, 2004, including approximately $16.5 million related to HIH. However, no assurance can be given that all potential liabilities
arising out of the Company's present or past operations have been identified or fully assessed or that future environmental liabilities will not be material to the Company.



Given the nature of the Company's business, violations of environmental laws may result in restrictions imposed on its operating activities, substantial fines,
penalties, damages or other costs, any of which could have a material adverse effect on its business, financial condition, results of operations or cash flows. The Company is aware of the following
matters and believes (1) the reserves related to these matters to be sufficient for known requirements, and (2) the ultimate resolution of these matters will not have a material impact
on its results of operations or financial position:

On
October 1, 2003, the U.S. Environmental Protection Agency ("EPA") sent the Company an information request under section 114 of the federal Clean Air Act. The request
seeks information regarding all upset releases of air contaminants from the Port Arthur plant for the period from August 1999 to August 2003. Four other companies with plants located in
Port Arthur also received

25

---



similar
requests. The Company responded in a timely manner to the request. Whether this request will result in an enforcement action being initiated against the Company is unknown at this time.

On
June 27, 2003, the Company received a Notice of Enforcement from the Texas Commission on Environmental Quality (the "TCEQ," formerly the Texas Natural Resource Conservation
Commission or TNRCC) with respect to its aromatics and olefins plant in Port Arthur, Texas for alleged violations identified by the agency during an April 2003 air quality inspection. No
penalty demand has yet been made by the TCEQ, although a penalty is possible.

On
June 25, 2003, a group of more than 500 plaintiffs filed a lawsuit in state district court in Beaumont, Texas against six local chemical plants and refineries, including the
Company. The lawsuit alleges that the refineries and chemical plants discharge chemicals that cause health problems for area residents. The claim does not specify a dollar amount, but seeks damages
for heath impacts as well as property value losses. The suit is based on emissions data from reports that these plants filed with the TCEQ.

On
October 6, 2002, a leak of sulphuric acid from two tanks located near the Company's Whitehaven, U.K. plant was discovered. About 342 to 347 tonnes of acid were released onto
the ground and into the soil near the tanks. Although the Company took immediate steps to contain the spillage and recover acid, a quantity of acid reached a nearby beach via a geological fault. The
Company believes that it did not own the tanks from which the acid leaked; however, the Company did own the acid in the tanks. The U.K. Health and Safety Executive has issued three Improvement Notices
requiring corrective action with which the Company is complying. The U.K. Environment Agency ("EA") on or about April 27, 2004, served a summons providing notice to Huntsman Surface Sciences UK
Limited that a criminal prosecution is being initiated against it as a result of the spill based on alleged violations of the Water Resources Act and Environmental Protection Act. Although the Company
can give no assurances, based on currently available information and its understanding of similar investigations and penalties in the past, the Company believes that if it is ultimately found to be
legally responsible for the spill, the probable penalties or the cost of any additional corrective action would not be material to its business, financial position, results of operations or cash
flows.

By
letter dated February 27, 2004, the U.S. Forest Service provided notice to the Company that it is considered to be a potentially responsible party ("PRP") under the federal
Superfund law for the release of hazardous substances at the North Maybe Mine, located about 13 miles northeast of Soda Springs, Idaho. The mining site includes an inactive open pit phosphorus mine,
associated overburden piles and affected downstream lands. The Company has been identified as a PRP because Huntsman Polymers is viewed by the Forest Service as the successor to El Paso Products
Company, which is alleged to have leased the site from 1964-1972 and mined the site from 1965-1967. In its letter, the Forest Service requests that the Company "participate in
the development and funding of a Site Investigation (SI) and Engineering Evaluation/Cost Analysis (EE/CA) under an Administrative Order of Consent (AOC)." The Company has communicated with the U.S.
Forest Service, it is in the process of investigating the matter and it is continuing to evaluate its options.

By
letter of March 8, 2004, Kraft Foods Inc. ("Kraft") notified the Company that "Rexene Polyolefins, a Division of Dart Industries, Inc." had been included among
about 90 corporate defendants in a private lawsuit seeking damages from former users of the Malone Services hazardous waste disposal facility in Texas City, Texas. The plaintiffs are the current
owners of the site; they purchased the site out of bankruptcy in 1999 to operate it as a hazardous waste site. They complain that they are now unable to do so because it has been declared a Superfund
site. Kraft is the successor in interest to Dart Industries, Inc. ("Dart"). Dart was a joint venturer with El Paso Products Company in Rexene Polyolefins ("Rexene") which, for a period of
years, operated a plant in Bayport, Texas. That plant was sold to Lyondell Chemical Company in 1990. From a preliminary review of EPA records, Kraft indicates that Rexene shipped waste to the Malone
Services site from September 1976 to

26

---



November 1980;
EPA estimates Rexene's volumetric percentage for waste shipped to the site as 0.37893%. Kraft is seeking a joint cost-sharing arrangement with us regarding this case.
We already have a 50/50 cost-sharing arrangement with Kraft regarding the Turtle Bayou Superfund site. Waste shipped prior to August 31, 1979, is potentially subject to a 50/50
arrangement with Kraft. We are evaluating the documentary evidence and will provide a formal response to Kraft's letter in due course. It is currently unclear what the potential liability for the
Company might be in this matter.

The
Company has been named as a "premises defendant" in a number of asbestos exposure lawsuits. These suits often involve multiple plaintiffs and multiple defendants, and, generally, the
complaint in the action does not indicate which plaintiffs are making claims against a specific defendant, where the alleged injuries were incurred or what injuries each plaintiff claims. These facts
must be learned through discovery. There are currently 43 asbestos exposure cases pending against the Company. Among the cases currently pending, management is aware of one claim of mesothelioma. The
Company does not have sufficient information at the present time to estimate any liability in these cases. Although the Company cannot provide specific assurances, based on its understanding of
similar cases, management believes that the Company's ultimate liability in these cases will not be material to its financial position or results of operations.

The
Company has incurred, and may in the future incur, liability to investigate and clean up waste or contamination at its current or former facilities or facilities operated by third
parties at which it may have disposed of waste or other materials. Similarly, the Company may incur costs for the cleanup of wastes that were disposed of prior to the purchase of its businesses. Under
some environmental laws, the Company may be jointly and severally liable for the costs of environmental contamination on or from its properties and at off-site locations where it disposed
of or arranged for the disposal or treatment of hazardous wastes and may incur liability for damages to natural resources. For example, under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and similar state laws, a current owner or operator of real property may be liable for such costs regardless of whether the owner or operator owned or
operated the real property at the time of the release of the hazardous substances and regardless of whether the release or disposal was in compliance with law at the time it occurred. In addition,
under the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar state laws, as the holder of permits to treat or store hazardous wastes, we may, under some circumstances, be
required to remediate contamination at or from its properties regardless of when the contamination occurred. For example, the Company's Odessa, Port Arthur, and Port Neches facilities in Texas are the
subject of ongoing RCRA remediation.
Based on current information and past costs relating to these matters, the Company does not believe such matters will have a material adverse effect. There can be no assurance, however, that any such
matters will not have a material adverse effect on the Company.

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

In
addition, the Company has been notified by third parties of claims against it or its subsidiaries for cleanup liabilities at certain former facilities and other third party sites,
including Belpre, Ohio (a former facility); Georgetown Canyon, Idaho (an alleged former property); Aerex Refinery, Bloomfield, New Mexico (an alleged former property); Turtle Bayou Superfund Site,
Texas (an alleged off-site disposal location); the Martin Aaron Superfund Site, Camden, New Jersey (an off-site disposal and reconditioning facility); the Gulf Nuclear Sites in
Odessa and near Houston, Texas (off-site waste

27

---



handling
sites); Fort Gratiot Sanitary Landfill near Marysville, Michigan (an off-site disposal location); Star Lake Superfund Site, Texas (located near the Port Neches facility); and the
San Angelo Electric Service Company Site, San Angelo, Texas (an alleged OCB-handling site). With respect to the first five matters, which are under investigation, the Company is unable to
determine whether such liabilities may be material to it because it does not have information sufficient to evaluate these claims. With respect to the final four matters, based on current information
and past experience, the Company does not believe such matters will have a material adverse effect on it.

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



In a March 30, 2004 Federal Register, the EPA announced that it will designate the Beaumont-Port Arthur area as in "serious"
non-attainment with the one-hour ozone national ambient air quality standard. This change may, but is not likely to, require additional controls and/or work practices to meet
the yet undefined regulatory requirements
for nitrogen oxides and volatile organic compounds. Although no assurance can be given, the Company believes that any additional capital required to comply with the new rules based on this area
reclassification, above the existing operating plans of its plants in Port Arthur and Port Neches, Texas, will not be material.

Under
the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a cross-media (air, water, waste)
environmental permitting program for individual facilities. The U.K. was the first EU member government to request IPPC permit applications from the Company. In the U.K., the Company submitted several
applications and, very recently, negotiated and received its first IPPC permits. Based upon the terms of these permits, the Company does not anticipate that it will have to make material capital
expenditures to comply. Other IPPC permits are under review by the U.K. Environment Agency. The Company is not yet in a position to know with certainty what the other U.K. IPPC permits will require,
and it is possible that the costs of compliance could be material; however, the Company believes, based upon its experience to date, that the costs of compliance with IPPC permitting in the U.K. will
not be material to its financial condition or results of operations. Additionally, the IPPC directive has recently been implemented in France, and similar to its operations in the U.K., the Company
does not anticipate having to make material capital expenditures to comply.

With
respect to the Company's facilities in EU jurisdictions other than the U.K. and France, IPPC implementing legislation is not yet in effect, or the Company has not yet been required
to seek IPPC permits. Accordingly, while the Company expects to incur additional future costs for capital improvements and general compliance under IPPC requirements in these jurisdictions, at the
present time it is unable to determine whether or not these costs will be material. Accordingly, the Company cannot provide assurance that material capital expenditures and compliance costs will not
be required in connection with IPPC requirements.

On
October 29, 2003, the European Commission adopted a proposal for a new EU regulatory framework for chemicals. Under this proposed new system called "REACH"
(Registration,Evaluation andAuthorisation of CHemicals),
enterprises that manufacture or import more than one ton of a chemical substance per year would be required to register such manufacture or
import in a central database. The REACH initiative, as proposed, would require risk assessment of chemicals, preparations (e.g., soaps and paints) and articles (e.g., consumer products) before those
materials could be manufactured or imported into EU countries. Where warranted by a risk assessment, hazardous substances would require authorizations for their use. This regulation could impose risk
control strategies that would require capital expenditures by the Company. As proposed, REACH would take

28

---



effect
in three primary stages over the eleven years following the final effective date (assuming final approval). The impacts of REACH on the chemical industry and on the Company are unclear at this
time because the parameters of the program are still being actively debated. Nevertheless, it is possible that REACH, if implemented, would be costly to the Company.



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

For
example, the California Air Resources Board adopted regulations that prohibit the addition of MTBE to gasoline as of January 1, 2004. Certain other states have also taken
actions to restrict or eliminate the current or future use of MTBE. States which have taken action to prohibit or restrict the use of MTBE accounted for over 40% of the U.S. market for MTBE prior to
the taking of such action. In connection with its ban, the State of California requested that the EPA waive the federal oxygenated fuels requirements of the federal Clean Air Act for gasoline sold in
California. The EPA denied the State's request on June 12, 2001. Certain of the state bans, including California's ban, have been challenged in court as unconstitutional (in light of the Clean
Air Act). On June 4, 2003, a federal court of appeals rejected such a challenge to California's ban, ruling that the ban is not pre-empted by the Clean Air Act.

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

In
Europe, the EU issued a final risk assessment report on MTBE on September 20, 2002. While no ban of MTBE was recommended, several risk reduction measures relating to storage
and handling of MTBE-containing fuel were recommended. Separate from EU action, Denmark entered into a voluntary agreement with refiners to reduce the sale of MTBE in Denmark. Under the
agreement, use of MTBE in 92- and 95-octane gasoline in Denmark ceased by May 1, 2002; however, MTBE is still an additive in a limited amount of 98-octane
gasoline sold in about 100 selected service stations in Denmark.

Any
phase-out or other future regulation of MTBE in other states, nationally or internationally may result in a significant reduction in demand for the Company's MTBE and
result in a material loss in revenues or material costs or expenditures. In the event that there should be a phase-out of MTBE in the United States, the Company believes it will be able to
export
MTBE to Europe or elsewhere or use its co-product TBA to produce saleable products other than MTBE. The Company believes that its low production costs at its PO/MTBE facility will put it
in a favorable position relative to other higher cost sources (primarily, on-purpose manufacturing). If the Company opts to produce products other than MTBE, necessary modifications to its
facilities may require significant capital expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

In
addition, while the Company has not been named as a defendant in any litigation concerning the environmental effects of MTBE, it cannot provide assurances that it will not be involved
in any

29

---



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



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

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

16.   Operating Segment Information

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

Segment

ProductsPolyurethanes

MDI, TDI, TPU, polyols, aniline, PO and MTBEPerformance Products

Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals and glycols.Polymers

Ethylene (produced at the Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymersPigments

Titanium dioxideBase Chemicals

Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, cyclohexane and paraxylene


Sales
between segments are generally recognized at external market prices.

30

---



The
Company uses EBITDA to measure the financial performance of its global business units and for reporting the results of its operating segments. This measure includes all operating
items relating to the businesses. The EBITDA of operating segments excludes items that principally apply to the Company as a whole. The Company believes that EBITDA is useful in helping investors
assess the results of its business operations. The revenues and EBITDA for each of the Company's reportable operating segments are as follows (dollars in millions):

Three Months Ended March 31,2004

2003(3)Revenues:Polyurethanes

$
639.6

$
Performance Products


454.9


278.9Polymers


314.5


288.8Pigments


254.9


Base Chemicals


859.1


335.2Eliminations


(168.4
)

(71.0
)Total

$
2,354.6

$
831.9Segment EBITDA(1)Polyurethanes

$
72.7

$
Performance Products


35.3


36.8Polymers


18.9


13.4Pigments


7.7


Base Chemicals


53.3


(8.2
)Corporate and other(2)


12.6


(43.9
)Total

$
200.5

$
(1.9
)Segment EBITDA(1)

$
200.5

$
(1.9
)Interest income (expense), net


(144.2
)

(34.5
)Income tax benefit (expense)


(1.2
)

0.0Depreciation and amortization


(110.1
)

(32.1
)Net loss

$
(55.0
)
$
(68.5
)


---

17.   Subsequent Event



On May 6, 2004, the Company amended certain financial covenants in the HLLC Credit Facilities. The amendment applies to both the HLLC Revolving Facility
and the HLLC Term Facilities and provides for, among other things, the amendment of certain financial covenants through the fourth quarter 2005. The amendment provided for an increase in the maximum
leverage ratio, and a decrease in the minimum interest coverage ratio and the fixed charge coverage ratio. The amendment also amends the mandatory prepayment provisions contained in the HLLC Credit
Facilities to permit the

31

---



Company,
after certain levels of repayment of the Term Loan B, to use subordinate debt or equity proceeds to repay a portion of the outstanding indebtedness of certain of its Australian subsidiaries.

18.   Consolidating Condensed Financial Statements

The following consolidating condensed financial statements present, in separate columns, financial information for the following: Huntsman LLC (on a parent only
basis), with its investment in subsidiaries recorded under the equity method; the guarantors, under the Company's indenture, on a combined, or where appropriate, consolidated basis, with its
investment in the non-guarantors recorded under the equity method; and the non-guarantors on a consolidated basis. Additional columns present eliminating adjustments and
consolidated totals as of March 31, 2004 and December 31, 2003. There are no contractual restrictions limiting transfers of cash from guarantor subsidiaries to the Company, other than
Huntsman Specialty. The combined guarantors are wholly-owned subsidiaries of the Company and have fully and unconditionally guaranteed the 2003 Secured Notes and the HLLC Notes on a joint and several
basis. The Company has not presented separate financial statements and other disclosures for each of the guarantors because management believes that such information is not material to investors.

32

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

|                                               |                                      | Parent Company                                  |         | Guarantors |         | Non- guarantors |        | Eliminations |         | Consolidated
Huntsman LLC |        
|---------------------------------------------- | ------------------------------------ | ----------------------------------------------- | ------- | ---------- | ------- | --------------- | ------ | ------------ | ------- | ------------------------- | -------
|ASSETS                                         |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|Current assets:                                |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               | Cash and cash equivalents            |                                                 | $       | 7.4        |         | $               | 0.5    |              | $       | 96.9                      |        
|                                               | Restricted cash                      |                                                 |         | 0.6        |         |                 | 8.1    |              |         |                          |        
|                                               | Receivablesnet                      |                                                 |         | 80.6       |         |                 | 320.4  |              |         | 736.6                     |        
|                                               | Inventories                          |                                                 |         | 38.9       |         |                 | 190.0  |              |         | 591.6                     |        
|                                               | Prepaid expenses                     |                                                 |         | 0.8        |         |                 | 12.8   |              |         | 25.3                      |        
|                                               | Deferred income tax                  |                                                 |         |           |         |                 |       |              |         | 3.0                       |        
|                                               | Other current assets                 |                                                 |         |           |         |                 |       |              |         | 77.7                      |        
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               |                                      | Total current assets                            |         |            | 128.3   |                 |        | 531.8        |         |                           | 1,531.1
|Property, plant and equipment, net             |                                      |                                                 | 101.3   |            |         | 1,056.1         |        |              | 3,347.9 |                           |        
|Investment in affiliates                       |                                      |                                                 | (583.7  | )          |         | 420.0           |        |              | 186.8   |                           |        
|Intangible assets, net                         |                                      |                                                 | 2.3     |            |         | 9.9             |        |              | 264.4   |                           |        
|Goodwill                                       |                                      |                                                 |        |            |         | 3.3             |        |              |        |                           |        
|Deferred income tax                            |                                      |                                                 | 0.7     |            |         | 13.8            |        |              |        |                           |        
|Other noncurrent assets                        |                                      |                                                 | 2,142.5 |            |         | 126.5           |        |              | 461.9   |                           |        
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               |                                      | Total assets                                    |         | $          | 1,791.4 |                 | $      | 2,161.4      |         | $                         | 5,792.1
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT)      |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|Current liabilities:                           |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               | Trade accounts payable               |                                                 | $       | 29.5       |         | $               | 179.6  |              | $       | 631.6                     |        
|                                               | Accrued liabilities                  |                                                 |         | 85.8       |         |                 | 84.6   |              |         | 328.8                     |        
|                                               | Deferred income tax                  |                                                 |         | 0.7        |         |                 | 13.8   |              |         |                          |        
|                                               | Current portion of long-term debt    |                                                 |         | 0.3        |         |                 | 1.1    |              |         | 94.8                      |        
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               |                                      | Total current liabilities                       |         |            | 116.3   |                 |        | 279.1        |         |                           | 1,055.2
|Long-term debt                                 |                                      |                                                 | 1,697.0 |            |         | 2,136.4         |        |              | 3,915.5 |                           |        
|Other noncurrent liabilities                   |                                      |                                                 | 82.2    |            |         | 148.9           |        |              | 230.6   |                           |        
|Deferred income taxes                          |                                      |                                                 |        |            |         |                |        |              | 239.2   |                           |        
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               |                                      | Total liabilities                               |         |            | 1,895.5 |                 |        | 2,564.4      |         |                           | 5,440.5
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|Minority interest in consolidated subsidiaries |                                      |                                                 |        |            |         | 60.1            |        |              | 5.8     |                           |        
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|Member's equity (deficit:)                     |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               | Member's equity                      |                                                 |         | 1,095.2    |         |                 |       |              |         | 565.5                     |        
|                                               | Subsidiary preferred stock           |                                                 |         |           |         |                 | 72.0   |              |         |                          |        
|                                               | Subsidiary common stock              |                                                 |         |           |         |                 | 270.8  |              |         | 116.3                     |        
|                                               | Accumulated deficit                  |                                                 |         | (1,237.5   | )       |                 | (848.1 | )            |         | (405.0                    | )      
|                                               | Accumulated other comprehensive loss |                                                 |         | 38.2       |         |                 | 42.2   |              |         | 69.0                      |        
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               |                                      | Total member's equity (deficit)                 |         |            | (104.1  | )               |        | (463.1       | )       |                           | 345.8  
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        
|                                               |                                      | Total liabilities and member's equity (deficit) |         | $          | 1,791.4 |                 | $      | 2,161.4      |         | $                         | 5,792.1
|                                               |                                      |                                                 |         |            |         |                 |        |              |         |                           |        

33

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HUNTSMAN LLC AND SUBSIDIARIES        CONDENSED CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 2003        (Dollars in Millions)

|                                               |                                      | Parent Company                                  |         | Guarantors |         | Non-guarantors |        | Eliminations |         | Consolidated
Huntsman LLC |        
|---------------------------------------------- | ------------------------------------ | ----------------------------------------------- | ------- | ---------- | ------- | -------------- | ------ | ------------ | ------- | ------------------------- | -------
|ASSETS                                         |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|Current assets:                                |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               | Cash and cash equivalents            |                                                 | $       | 0.8        |         | $              | 0.4    |              | $       | 116.1                     |        
|                                               | Restricted cash                      |                                                 |         | 0.9        |         |                | 9.6    |              |         |                          |        
|                                               | Receivablesnet                      |                                                 |         | 125.3      |         |                | 553.5  |              |         | 580.4                     |        
|                                               | Inventories                          |                                                 |         | 36.5       |         |                | 203.1  |              |         | 653.3                     |        
|                                               | Prepaid expenses                     |                                                 |         | 1.5        |         |                | 23.3   |              |         | 23.8                      |        
|                                               | Deferred income tax                  |                                                 |         |           |         |                |       |              |         | 3.0                       |        
|                                               | Other current assets                 |                                                 |         |           |         |                | 0.2    |              |         | 86.8                      |        
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               |                                      | Total current assets                            |         |            | 165.0   |                |        | 790.1        |         |                           | 1,463.4
|Property, plant and equipment, net             |                                      |                                                 | 104.6   |            |         | 1,064.6        |        |              | 3,381.0 |                           |        
|Investment in affiliates                       |                                      |                                                 | (523.3  | )          |         | 457.8          |        |              | 176.3   |                           |        
|Intangible assets, net                         |                                      |                                                 | 2.4     |            |         | 10.5           |        |              | 273.1   |                           |        
|Goodwill                                       |                                      |                                                 |        |            |         | 3.3            |        |              |        |                           |        
|Deferred income tax                            |                                      |                                                 | 0.7     |            |         | 13.8           |        |              |        |                           |        
|Other noncurrent assets                        |                                      |                                                 | 2,164.3 |            |         | 121.1          |        |              | 467.8   |                           |        
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               |                                      | Total assets                                    |         | $          | 1,913.7 |                | $      | 2,461.2      |         | $                         | 5,761.6
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT)      |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|Current liabilities:                           |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               | Trade accounts payable               |                                                 | $       | 22.5       |         | $              | 179.9  |              | $       | 522.8                     |        
|                                               | Accounts payableaffiliates          |                                                 |         | 153.5      |         |                | 165.1  |              |         | 42.4                      |        
|                                               | Accrued liabilities                  |                                                 |         | 81.8       |         |                | 105.7  |              |         | 406.6                     |        
|                                               | Deferred income tax                  |                                                 |         | 0.7        |         |                | 13.8   |              |         |                          |        
|                                               | Current portion of long-term debt    |                                                 |         | 1.3        |         |                | 37.7   |              |         | 95.0                      |        
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               |                                      | Total current liabilities                       |         |            | 259.8   |                |        | 502.2        |         |                           | 1,066.8
|Long-term debt                                 |                                      |                                                 | 1,622.9 |            |         | 2,157.0        |        |              | 3,812.7 |                           |        
|Other noncurrent liabilities                   |                                      |                                                 | 81.5    |            |         | 147.9          |        |              | 229.4   |                           |        
|Deferred income taxes                          |                                      |                                                 |        |            |         |               |        |              | 237.3   |                           |        
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               |                                      | Total liabilities                               |         |            | 1,964.2 |                |        | 2,807.1      |         |                           | 5,346.2
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|Minority interest in consolidated subsidiaries |                                      |                                                 |        |            |         | 60.9           |        |              | 3.6     |                           |        
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|Member's equity (deficit:)                     |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               | Member's equity                      |                                                 |         | 1,095.2    |         |                |       |              |         | 565.5                     |        
|                                               | Subsidiary preferred stock           |                                                 |         |           |         |                | 72.0   |              |         |                          |        
|                                               | Subsidiary common stock              |                                                 |         |           |         |                | 270.8  |              |         | 116.3                     |        
|                                               | Accumulated deficit                  |                                                 |         | (1,182.5   | )       |                | (790.9 | )            |         | (338.1                    | )      
|                                               | Accumulated other comprehensive loss |                                                 |         | 36.8       |         |                | 41.3   |              |         | 68.1                      |        
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               |                                      | Total member's equity (deficit)                 |         |            | (50.5   | )              |        | (406.8       | )       |                           | 411.8  
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        
|                                               |                                      | Total liabilities and member's equity (deficit) |         | $          | 1,913.7 |                | $      | 2,461.2      |         | $                         | 5,761.6
|                                               |                                      |                                                 |         |            |         |                |        |              |         |                           |        

34

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HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS        FOR THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)        (Dollars in
Millions)

|                                                                                      |                                 | Parent Company |       | Guarantors |   | Non-Guarantors |       | Eliminations |         | Consolidated
Huntsman LLC |  
|------------------------------------------------------------------------------------- | ------------------------------- | -------------- | ----- | ---------- | - | -------------- | ----- | ------------ | ------- | ------------------------- | -
|Revenues:                                                                             |                                 |                |       |            |   |                |       |              |         |                           |  
|                                                                                      | Trade sales                     |                | $     | 88.1       |   | $              | 704.4 |              | $       | 1,555.1                   |  
|                                                                                      | Related party sales             |                |       |           |   |                | 54.7  |              |         | 37.5                      |  
|                                                                                      | Expenses billed to subsidiaries |                |       | 6.7        |   |                | (6.4  | )            |         | (0.3                      | )
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Total revenues                                                                        |                                 |                | 94.8  |            |   | 752.7          |       |              | 1,592.3 |                           |  
|Cost of goods sold                                                                    |                                 |                | 80.1  |            |   | 705.9          |       |              | 1,436.6 |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Gross profit                                                                          |                                 |                | 14.7  |            |   | 46.8           |       |              | 155.7   |                           |  
|Selling, general and administrative                                                   |                                 |                | 8.7   |            |   | 20.5           |       |              | 98.7    |                           |  
|Research and development                                                              |                                 |                |      |            |   | 4.6            |       |              | 13.2    |                           |  
|Other operating income                                                                |                                 |                | (0.1  | )          |   | (1.8           | )     |              | (4.7    | )                         |  
|Restructuring and plant closing costs (credits)                                       |                                 |                |      |            |   |               |       |              | 8.7     |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Operating income (loss)                                                               |                                 |                | 6.1   |            |   | 23.5           |       |              | 39.8    |                           |  
|Interest expense, net                                                                 |                                 |                | (0.6  | )          |   | (42.8          | )     |              | (100.8  | )                         |  
|Loss on accounts receivable securitization program                                    |                                 |                |      |            |   |               |       |              | (3.5    | )                         |  
|Equity in income (losses) of investment in unconsolidated affiliates and subsidiaries |                                 |                | (60.9 | )          |   | (38.4          | )     |              | 0.7     |                           |  
|Other income (expense)                                                                |                                 |                | (1.8  | )          |   |               |       |              |        |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Loss before income taxes and minority interest                                        |                                 |                | (57.2 | )          |   | (57.7          | )     |              | (63.8   | )                         |  
|Income tax expense                                                                    |                                 |                | 2.2   |            |   |               |       |              | (3.4    | )                         |  
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Loss before minority interest                                                         |                                 |                | (55.0 | )          |   | (57.7          | )     |              | (67.2   | )                         |  
|Minority interest in subsidiaries' loss                                               |                                 |                |      |            |   | 0.8            |       |              |        |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Net income (loss)                                                                     |                                 |                | (55.0 | )          |   | (56.9          | )     |              | (67.2   | )                         |  
|Other comprehensive income                                                            |                                 |                | 1.4   |            |   | 0.9            |       |              | 0.9     |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  
|Comprehensive loss                                                                    |                                 | $              | (53.6 | )          | $ | (56.0          | )     | $            | (66.3   | )                         | $
|                                                                                      |                                 |                |       |            |   |                |       |              |         |                           |  

35

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HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS        FOR THE THREE MONTHS ENDED MARCH 31, 2003 (UNAUDITED)        (Dollars in
Millions)

|                                                                                      |                                 | Parent Company |       | Guarantors |   | Non-Guarantors |       | Eliminations |      | Consolidated
Huntsman LLC |  
|------------------------------------------------------------------------------------- | ------------------------------- | -------------- | ----- | ---------- | - | -------------- | ----- | ------------ | ---- | ------------------------- | -
|Revenues:                                                                             |                                 |                |       |            |   |                |       |              |      |                           |  
|                                                                                      | Trade sales                     |                | $     | 66.4       |   | $              | 628.3 |              | $    | 85.4                      |  
|                                                                                      | Related party sales             |                |       |           |   |                | 58.3  |              |      | 8.5                       |  
|                                                                                      | Expenses billed to subsidiaries |                |       | 15.4       |   |                | (13.5 | )            |      | (1.9                      | )
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  
|Total revenues                                                                        |                                 |                | 81.8  |            |   | 673.1          |       |              | 92.0 |                           |  
|Cost of goods sold                                                                    |                                 |                | 70.0  |            |   | 659.8          |       |              | 84.1 |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  
|Gross profit                                                                          |                                 |                | 11.8  |            |   | 13.3           |       |              | 7.9  |                           |  
|Selling, general and administrative                                                   |                                 |                | 5.3   |            |   | 22.5           |       |              | 3.2  |                           |  
|Research and development                                                              |                                 |                |      |            |   | 5.1            |       |              | 0.6  |                           |  
|Other operating income                                                                |                                 |                | (1.0  | )          |   | (3.8           | )     |              | 0.8  |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  
|Operating income (loss)                                                               |                                 |                | 7.5   |            |   | (10.5          | )     |              | 3.3  |                           |  
|Interest expense, net                                                                 |                                 |                | 2.9   |            |   | (34.9          | )     |              | (2.5 | )                         |  
|Other income (expense)                                                                |                                 |                |      |            |   |               |       |              | (0.5 | )                         |  
|Equity in income (losses) of investment in unconsolidated affiliates and subsidiaries |                                 |                | (79.1 | )          |   | (34.0          | )     |              | 0.6  |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  
|Loss before income taxes and minority interest                                        |                                 |                | (68.7 | )          |   | (79.4          | )     |              | 0.9  |                           |  
|Income tax expense                                                                    |                                 |                |      |            |   |               |       |              |     |                           |  
|Minority interest in subsidiaries' loss                                               |                                 |                |      |            |   | (0.4           | )     |              |     |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  
|Net income (loss)                                                                     |                                 |                | (68.7 | )          |   | (79.8          | )     |              | 0.9  |                           |  
|Other comprehensive income                                                            |                                 |                | 7.4   |            |   | 5.6            |       |              | 2.6  |                           |  
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  
|Comprehensive loss                                                                    |                                 | $              | (61.3 | )          | $ | (74.2          | )     | $            | 3.5  |                           | $
|                                                                                      |                                 |                |       |            |   |                |       |              |      |                           |  

36

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

|                                                                            |                                                                      | Parent Company                  |       | Guarantors |        | Non-Guarantors |      | Eliminations |       | Consolidated
Huntsman LLC |       
|--------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------- | ----- | ---------- | ------ | -------------- | ---- | ------------ | ----- | ------------------------- | ------
|Cash flows from operating activities:                                       |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Net loss                                                                    |                                                                      | $                               | (55.0 | )          | $      | (56.9          | )    | $            | (67.2 | )                         | $     
|Adjustments to reconcile net loss to net cash from operating activities:    |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|                                                                            | Equity in (income) losses of investment in unconsolidated affiliates |                                 |       | 60.9       |        |                | 38.4 |              |       | (0.7                      | )     
|                                                                            | Depreciation and amortization                                        |                                 |       | 3.8        |        |                | 23.5 |              |       | 82.3                      |       
|                                                                            | Provision for losses on accounts receivable                          |                                 |       | (0.5       | )      |                | (1.4 | )            |       | 0.3                       |       
|                                                                            | Loss on disposal of plant and equipment                              |                                 |       |           |        |                | 0.2  |              |       |                          |       
|                                                                            | Non-cash interest expense                                            |                                 |       | 1.4        |        |                | 0.3  |              |       | 32.6                      |       
|                                                                            | Non-cash interest on affiliate debt                                  |                                 |       |           |        |                |     |              |       | 0.3                       |       
|                                                                            | Deferred income taxes                                                |                                 |       |           |        |                |     |              |       | 2.1                       |       
|                                                                            | Loss on foreign currency transactions                                |                                 |       |           |        |                |     |              |       | (6.4                      | )     
|                                                                            | Minority interest in subsidiaries                                    |                                 |       |           |        |                | (0.8 | )            |       |                          |       
|                                                                            | Net changes in operating assets and liabilities:                     |                                 |       |            |        |                |      |              |       |                           |       
|                                                                            |                                                                      | Accounts and notes receivables  |       |            | 45.2   |                |      | 234.6        |       |                           | (169.7
|                                                                            |                                                                      | Change in receivables sold, net |       |            |       |                |      |             |       |                           | 8.8   
|                                                                            |                                                                      | Inventories                     |       |            | (2.4   | )              |      | 13.1         |       |                           | 62.7  
|                                                                            |                                                                      | Prepaid expenses                |       |            | 0.7    |                |      | 10.2         |       |                           | (0.7  
|                                                                            |                                                                      | Other current assets            |       |            |       |                |      | 0.4          |       |                           | (15.0 
|                                                                            |                                                                      | Other noncurrent assets         |       |            | 2.2    |                |      | (7.9         | )     |                           | (1.4  
|                                                                            |                                                                      | Accounts payable                |       |            | (146.5 | )              |      | (165.4       | )     |                           | 65.4  
|                                                                            |                                                                      | Accrued liabilities             |       |            | 3.9    |                |      | (20.9        | )     |                           | (51.0 
|                                                                            |                                                                      | Other noncurrent liabilities    |       |            | 1.6    |                |      | 1.0          |       |                           | 0.1   
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Net cash provided by (used in) operating activities                         |                                                                      |                                 | (84.7 | )          |        | 68.4           |      |              | (57.5 | )                         |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Investing activities:                                                       |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Capital expenditures for plant and equipment                                |                                                                      |                                 | (0.4  | )          |        | (12.9          | )    |              | (40.8 | )                         |       
|Investment in affiliate                                                     |                                                                      |                                 |      |            |        |               |      |              | (11.9 | )                         |       
|Net borrowings (repayments) of intercompany debt                            |                                                                      |                                 | 19.4  |            |        | (20.8          | )    |              | 1.4   |                           |       
|Repayment of advances from unconsolidated affiliates                        |                                                                      |                                 |      |            |        |               |      |              | 1.2   |                           |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Net cash provided by (used in) investing activities                         |                                                                      |                                 | 19.0  |            |        | (33.7          | )    |              | (50.1 | )                         |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Financing activities:                                                       |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Net borrowings on revolving loan facilities                                 |                                                                      |                                 | 72.8  |            |        |               |      |              | 88.0  |                           |       
|Net borrowings on overdraft                                                 |                                                                      |                                 |      |            |        |               |      |              | 4.9   |                           |       
|Repayment of long-term debt                                                 |                                                                      |                                 | (0.9  | )          |        | (36.9          | )    |              | (0.8  | )                         |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Net cash provided by (used in) financing activities                         |                                                                      |                                 | 71.9  |            |        | (36.9          | )    |              | 92.1  |                           |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Effect of exchange rate changes on cash                                     |                                                                      |                                 | 0.1   |            |        | 0.8            |      |              | (3.7  | )                         |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Increase (decrease) in cash and cash equivalents                            |                                                                      |                                 | 6.3   |            |        | (1.4           | )    |              | (19.2 | )                         |       
|Cash and cash equivalents, including restricted cash at beginning of period |                                                                      |                                 | 1.7   |            |        | 10.0           |      |              | 116.1 |                           |       
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       
|Cash and cash equivalents, including restricted cash at end of period       |                                                                      | $                               | 8.0   |            | $      | 8.6            |      | $            | 96.9  |                           | $     
|                                                                            |                                                                      |                                 |       |            |        |                |      |              |       |                           |       

37

---





HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED        MARCH 31, 2003 (UNAUDITED) (Dollars in Millions)

|                                                                            |                                                                      | Parent
Company                 |       | Guarantors |       | Non-
Guarantors |      | Eliminations |      | Consolidated
Huntsman
LLC |      
|--------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------ | ----- | ---------- | ----- | --------------- | ---- | ------------ | ---- | ------------------------- | -----
|Cash flows from operating activities:                                       |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Net loss                                                                    |                                                                      | $                              | (68.7 | )          | $     | (79.8           | )    | $            | 0.9  |                           | $    
|Adjustments to reconcile net loss to net cash from operating activities:    |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|                                                                            | Equity in (income) losses of investment in unconsolidated affiliates |                                |       | 79.1       |       |                 | 34.0 |              |      | (0.6                      | )    
|                                                                            | Depreciation and amortization                                        |                                |       | 3.4        |       |                 | 24.1 |              |      | 4.6                       |      
|                                                                            | Provision for losses on accounts receivable                          |                                |       |           |       |                 | (0.3 | )            |      |                          |      
|                                                                            | Non-cash interest expense                                            |                                |       | 1.1        |       |                 | 0.4  |              |      |                          |      
|                                                                            | Minority interest in subsidiaries                                    |                                |       |           |       |                 | 0.4  |              |      |                          |      
|                                                                            | Net changes in operating assets and liabilities:                     |                                |       |            |       |                 |      |              |      |                           |      
|                                                                            |                                                                      | Accounts and notes receivables |       |            | (74.5 | )               |      | 44.1         |      |                           | (32.9
|                                                                            |                                                                      | Inventories                    |       |            | (2.6  | )               |      | (8.0         | )    |                           | (3.6 
|                                                                            |                                                                      | Prepaid expenses               |       |            | 0.8   |                 |      | 11.7         |      |                           |     
|                                                                            |                                                                      | Other current assets           |       |            |      |                 |      | (0.2         | )    |                           | (0.4 
|                                                                            |                                                                      | Other noncurrent assets        |       |            | (0.9  | )               |      |             |      |                           | 0.8  
|                                                                            |                                                                      | Accounts payable               |       |            | 5.7   |                 |      | 27.7         |      |                           | 27.5 
|                                                                            |                                                                      | Accrued liabilities            |       |            | (16.1 | )               |      | (36.7        | )    |                           | 0.1  
|                                                                            |                                                                      | Other noncurrent liabilities   |       |            | (3.7  | )               |      | 2.0          |      |                           | 0.8  
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Net cash provided by (used in) operating activities                         |                                                                      |                                | (76.4 | )          |       | 19.4            |      |              | (2.8 | )                         |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Investing activities:                                                       |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Capital expenditures for plant and equipment                                |                                                                      |                                | (2.9  | )          |       | (8.2            | )    |              | (1.6 | )                         |      
|Net borrowings (repayments) of intercompany debt                            |                                                                      |                                | 3.8   |            |       | (8.0            | )    |              | 4.2  |                           |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Net cash provided by (used in) investing activities                         |                                                                      |                                | 0.9   |            |       | (16.2           | )    |              | 2.6  |                           |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Financing activities:                                                       |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Net borrowings on revolving loan facilities                                 |                                                                      |                                | 72.9  |            |       |                |      |              |     |                           |      
|Repayment of long-term debt                                                 |                                                                      |                                | (0.5  | )          |       | (0.3            | )    |              |     |                           |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Net cash provided by (used in) financing activities                         |                                                                      |                                | 72.4  |            |       | (0.3            | )    |              |     |                           |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Effect of exchange rate changes on cash                                     |                                                                      |                                |      |            |       | 2.0             |      |              | 1.1  |                           |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Increase (decrease) in cash and cash equivalents                            |                                                                      |                                | (3.1  | )          |       | 4.9             |      |              | 0.9  |                           |      
|Cash and cash equivalents, including restricted cash at beginning of period |                                                                      |                                | 6.3   |            |       | 10.1            |      |              | 15.0 |                           |      
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      
|Cash and cash equivalents, including restricted cash at end of period       |                                                                      | $                              | 3.2   |            | $     | 15.0            |      | $            | 15.9 |                           | $    
|                                                                            |                                                                      |                                |       |            |       |                 |      |              |      |                           |      

38

---





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

Forward-looking Statements

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

Certain Defined Terms

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

In
the "Supplemental Discussion of Results of Operations for the Restricted Group for the Three Months Ended March 31, 2004" below and in certain other places in this report that
deal with our restricted group, the terms "we," "our," "us," "HLLC" and "Huntsman LLC" refer to Huntsman LLC and its restricted subsidiaries (and not its unrestricted subsidiaries).

Explanatory Note

In order to present data that is useful for comparative purposes, the information set forth below under the heading "Results of Operations (Pro Forma)" has been
prepared as if HIH was a consolidated subsidiary as of January 1, 2003. HIH became a consolidated subsidiary as of May 1, 2003. To complete the pro forma information, we have
consolidated the operations and elimination entries of related parties for HIH for the three months ended March 31, 2003. We believe the use of pro forma results for the periods covered in this
report provides a more meaningful comparison of our results between the applicable periods. These results do not necessarily reflect the results that would have been obtained if we had consolidated on
the date indicated or that may be expected in the future.

This
Management's Discussion and Analysis of Financial Condition and Results of Operations is followed by a supplemental discussion captioned "Supplemental Discussion of Results of
Operations for the Restricted Group for the Three Months Ended March 31, 2004" that provides information with respect to our restricted group, excluding HIH.

39

---



Overview

We are a global manufacturer and marketer of differentiated and commodity chemicals. We produce a wide range of products for a variety of global industries,
including the chemical, plastics, automotive, aviation, footwear, paints and coatings, construction, technology, agriculture, healthcare, consumer products, textile, furniture, appliance and packaging
industries. We operate at facilities located in North America, Europe, Asia, Australia, South America and Africa. We report our operations through five segments: Polyurethanes, Performance Products,
Polymers, Pigments and Base Chemicals. The major products of each reportable operating segment are as follows:

Segment

ProductsPolyurethanes

MDI, TDI, TPU, polyols, aniline, PO and MTBEPerformance Products

Amines, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals and glycols.Polymers

Ethylene (produced at our Odessa, Texas facilities primarily for internal use), polyethylene, polypropylene, expandable polystyrene, styrene and other polymersPigments

Titanium dioxideBase Chemicals

Olefins (primarily ethylene and propylene), butadiene, MTBE, benzene, paraxylene and cyclohexane


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

Historically,
the demand for many of our Polyurethanes products, which accounted for 27% of our revenue in the three months ended March 31, 2004, has been relatively resistant to
changes in global economic conditions as industry growth in product demand has been strongly influenced by continuing product substitution, innovation and new product development. The stability of
demand has also benefited from the wide variety of end markets for our Polyurethanes products. Historically, sales volumes of MDI, a Polyurethanes segment product, have grown at rates in excess of
global GDP growth and margins for MDI have been relatively stable. However, in 2003, volatile feedstock pricing negatively impacted overall margins. The global market for PO, also a Polyurethanes
product, is influenced by supply and demand imbalances. PO demand is largely driven by growth in the polyurethane industry, and, as a result, growth rates for PO have generally exceeded GDP growth
rates. As a co-product of our PO manufacturing process, we also produce MTBE. MTBE is an oxygenate that is blended with gasoline to reduce harmful vehicle emissions and to enhance the
octane rating of gasoline. See "Liquidity and Capital ResourcesEnvironmental MattersMTBE Developments"

40

---



below
for more information on the legal and regulatory developments that may curtail or eliminate the use of MTBE in gasoline in the future.

In
comparison to our commodity businesses, the demand for many of the products we produce in our Performance Products segment historically has also been relatively resistant to changes
in global economic conditions. Like our Polyurethanes segment, Performance Products growth in general is strongly influenced by product substitution, innovation and new product development. Also,
demand stability benefits from a broad range of end markets. A significant portion of our Performance Products is sold into consumer end use applications including household detergents, personal care
products and cosmetics. As such, historically, demand for these products has been relatively stable and tends to be less susceptible to changes in global economic conditions. In the past year, weak
economic conditions in Europe, high raw material and energy costs, significant overcapacity in surfactants and the strength of the major European currencies versus the U.S. dollar (which negatively
impacts the competitiveness of European exports), has had a negative impact on the surfactants portion of our Performance Products segment.

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

Historically,
growth in demand for TiO2 pigments has generally been linked with GDP growth rates and has trended somewhat below overall GDP growth rates as strong growth in
the developing world economies has been tempered by modest growth in the developed world economies. Our Pigments segment accounted for 11% of our revenues in the three months ended March 31,
2004. Pigment prices
have historically reflected industry-wide operating rates, but have typically lagged behind movements in these rates by up to twelve months due to the effects of product stocking and
destocking by customers and suppliers, contract arrangements and cyclicality. The industry experiences some seasonality in its sales because sales of paints in Europe and North America, the largest
end use for TiO2, are generally highest in the spring and summer months in those regions. This results in greater sales volumes in the first half of the year because the proportion of our
TiO2 products sold in Europe and North America is greater than that sold in the southern hemisphere. Profitability in our Pigments segment has been negatively impacted by the strength of
the major European currencies versus the U.S. dollar because with over 70% of our Pigments' production capacity located in Europe, approximately 60% of our production costs are denominated in European
currencies, while only approximately 40-50% of our products are sold in European currencies.

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

41

---



Many
of the markets for Base Chemicals products, particularly ethylene, propylene, paraxylene and cyclohexane, and Polymers products, particularly polyethylene, polypropylene and
styrene, are cyclical and sensitive to changes in the balance between supply and demand, the price of raw materials, and the level of general economic activity. Historically, these markets have
experienced alternating periods of tight supply and rising prices and profit margins, followed by periods of capacity additions resulting in over-capacity and falling prices and profit
margins. Demand for the majority of our commodity chemicals products has generally grown at rates that are approximately equal to or slightly greater than GDP growth. Market conditions during recent
years generally have been characterized by a broad-based weakening in demand, overcapacity, volatile raw material costs and periods of reduced profit margins. We believe that weak economic conditions
have resulted in a contraction in production capacity. If this contraction in industry capacity is sustained and if demand growth returns to the rates which have been achieved historically, we believe
that industry profitability will improve.

Recent Developments

HLLC Credit Facilities Amendment

On May 6, 2004, we amended certain financial covenants in our senior secured credit facilities (the "HLLC Credit Facilities"). The amendment applies to
both our revolving facility ("HLLC Revolving Facility") and our term loan facilities (the "HLLC Term Facilities") and provides for, among other things, the amendment of certain financial covenants
through the fourth quarter 2005. The amendment provided for an increase in the maximum leverage ratio, and a decrease in the minimum interest coverage ratio and the fixed charge coverage ratio. The
amendment also amends the mandatory prepayment provisions contained in the HLLC Credit Facilities to permit us, after certain levels of repayment of our term loan B, to use subordinate debt or equity
proceeds to repay a portion of the outstanding indebtedness of certain of our Australian subsidiaries. For more information, see "Liquidity and Capital ResourcesDebt" below.

Idling of TiO2 Capacity

We continuously evaluate the effectiveness of all of our manufacturing facilities in serving our markets. We have been engaged in a detailed review of our
Pigments business to improve its competitive position and financial performance. In connection with this review, we announced in April 2004 that we will idle approximately 55,000 tonnes, or
about 10% of our total TiO2 production capacity. This action is expected to result in approximately $40 million of annual fixed cost savings, and will involve approximately
$100 million of accelerated depreciation and non-cash charges and the payment of cash restructuring costs of approximately $20 million in 2004 and 2005.

42

---





Results of Operations (Historical)

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 (Unaudited) (Dollars in Millions)

|                                                                                                      |  | Three months ended
March 31, |        
|----------------------------------------------------------------------------------------------------- |  | ---------------------------- | -------
|
|Revenues                                                                                              |  | $                            | 2,354.6
|Cost of goods sold                                                                                    |  |                              | 2,141.1
|                                                                                                      |  |                              |        
|Gross profit                                                                                          |  |                              | 213.5  
|Expenses of selling, general and administrative, research and development, and other operating income |  |                              | 135.9  
|Restructuring and plant closing costs                                                                 |  |                              | 8.7    
|                                                                                                      |  |                              |        
|Operating income                                                                                      |  |                              | 68.9   
|Interest expense, net                                                                                 |  |                              | (144.2 
|Loss on accounts receivable securitization program                                                    |  |                              | (3.5   
|Equity in income (losses) of investment in unconsolidated affiliates                                  |  |                              | 0.7    
|Other expense                                                                                         |  |                              | (1.8   
|                                                                                                      |  |                              |        
|Loss before income tax benefit and minority interests                                                 |  |                              | (79.9  
|Income tax expense                                                                                    |  |                              | (1.2   
|Minority interests in subsidiaries' loss                                                              |  |                              | 26.1   
|                                                                                                      |  |                              |        
|Net loss                                                                                              |  | $                            | (55.0  
|                                                                                                      |  |                              |        
|Interest expense, net                                                                                 |  |                              | 144.2  
|Income tax expense                                                                                    |  |                              | 1.2    
|Depreciation and amortization                                                                         |  |                              | 110.1  
|                                                                                                      |  |                              |        
|EBITDA(1)                                                                                             |  | $                            | 200.5  
|                                                                                                      |  |                              |        

---

43

---



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

Three months ended
March 31,2004

2003Foreign exchange gainsunallocated

$
13.5

$
2.8Loss on accounts receivable securitization program


(3.5
)

Early extinguishment of debt


(1.9
)

Restructuring and reorganization:Polyurethanes


(4.8
)

Pigments


(3.9
)

Total restructuring and reorganization

$
(8.7
)
$



Pro Forma Financial Information

In order to present data that is useful for comparative purposes, the following has been prepared as if HIH was a consolidated subsidiary as of January 1,
2003. HIH became a consolidated subsidiary as of May 1, 2003. To complete the pro forma information we have consolidated the additional operations and elimination entries of related parties for
HIH for the three months ended March 31, 2003. We believe the use of pro forma results for the periods covered in this report provides a more meaningful comparison of our results between the
applicable periods. These results do not necessarily reflect the results that would have been obtained if we had consolidated HIH on the date indicated or that may be expected in the future.

44

---



Results of Operations (Pro Forma)

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 (Pro Forma) (Unaudited) (Dollars in
Millions)

|                                                                                                                |  | Three months ended
March 31, |        
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | -------
|
|
|Revenues                                                                                                        |  | $                            | 2,354.6
|Cost of goods sold                                                                                              |  |                              | 2,141.1
|                                                                                                                |  |                              |        
|Gross profit                                                                                                    |  |                              | 213.5  
|Expenses of selling, general and administrative, research and development, and other operating income (expense) |  |                              | 135.9  
|Restructuring and plant closing costs                                                                           |  |                              | 8.7    
|                                                                                                                |  |                              |        
|Operating income                                                                                                |  |                              | 68.9   
|Interest expense, net                                                                                           |  |                              | (144.2 
|Loss on accounts receivable securitization program                                                              |  |                              | (3.5   
|Equity income on investments in unconsolidated affiliates                                                       |  |                              | 0.7    
|Other expense                                                                                                   |  |                              | (1.8   
|                                                                                                                |  |                              |        
|Loss before income tax benefit, and Minority interests                                                          |  |                              | (79.9  
|Income tax benefit (expense)                                                                                    |  |                              | (1.2   
|Minority interests in subsidiaries' loss                                                                        |  |                              | 26.1   
|                                                                                                                |  |                              |        
|Net loss                                                                                                        |  | $                            | (55.0  
|                                                                                                                |  |                              |        
|Interest expense, net                                                                                           |  |                              | 144.2  
|Income tax (benefit) expense                                                                                    |  |                              | 1.2    
|Depreciation and amortization                                                                                   |  |                              | 110.1  
|                                                                                                                |  |                              |        
|EBITDA(1)                                                                                                       |  | $                            | 200.5  
|                                                                                                                |  |                              |        

---

45

---





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

Three months ended
March 31,2004

2003Foreign exchange gainsunallocated

$
13.5

$
17.3Gain (loss) on accounts receivable securitization program


(3.5
)

(9.2
)Early extinguishment of debt


(1.9
)

Asset write-down





(2.8
)Restructuring and reorganization:Polyurethanes


(4.8
)

(17.1
)Pigments


(3.9
)

Total restructuring and reorganization

$
(8.7
)
$
(17.1
)


Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 (Pro Forma)

For
the three months ended March 31, 2004, we had a net loss of $55.5 on revenues of $2,354.6 compared to a net loss of $69.2 million on revenues of $2,064.7 million
for the same period in 2003. The decrease of $13.7 million in net loss was the result of the following items:



46

---





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

Three months ended
March 31,
2004

Three months ended
March 31,
2003RevenuesPolyurethanes

$
639.6

$
554.9Performance Products


454.9


421.3Polymers


314.5


288.8Pigments


254.9


246.1Base Chemicals


859.1


692.4Eliminations


(168.4
)

(138.8
)Total

$
2,354.6

$
2,064.7Segment EBITDAPolyurethanes

$
72.7

$
40.2Performance Products


35.3


39.1Polymers


18.9


13.4Pigments


7.7


28.9Base Chemicals


53.3


18.3Corporate and other


12.6


8.3Total

$
200.5

$
148.2


Polyurethanes

For the three months ended March 31, 2004, Polyurethanes revenues increased by $84.7 million, or 15%, to $639.6 million from
$554.9 million for the same period in 2003. MDI sales revenue increased by 27%, due to 9% higher average selling prices supported by 17% higher sales volumes. MDI sales volumes rose by 57%, 2%
and 16% in Asia, the Americas and Europe, respectively. Our spot sales to co-producers were flat compared to first quarter 2003. Accordingly, higher MDI volumes reflect significantly
improved market demand. A strong rigid polyurethane market, coupled with tight supply, gave rise to strong volume gains in Asia. MDI overall average selling prices increased by 9%, of which 6% was due
to the strength of the major European currencies versus the U.S. dollar and 3% was due to our continued efforts to increase selling prices in response to higher raw material and energy costs.

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Polyol
sales revenue increased by 14% as average selling prices increased by 12% and sales volumes increased by 2%. PO sales revenues decreased by 3%, primarily due to the planned turnaround and
inspection ("T&I") at our Port Neches, Texas PO facility. MTBE sales revenue decreased by 28% due to a 32% decrease in volumes, resulting primarily from the loss of co-product volume due
to the planned T&I at our Port Neches PO facility, partially offset by a 5% increase in average selling prices. Average selling prices for MTBE were higher in response to higher gasoline prices.

For
the three months ended March 31, 2004, Polyurethanes segment EBITDA increased by $32.5 million to $72.7 million from $40.2 million for the same period in
2003. Increased EBITDA resulted mainly from increased volumes and higher average selling prices totaling $54.6 million, partially offset by increased raw material and energy costs of
$30.4 million. For the three months ended March 31, 2004, we recorded $4.8 million in restructuring charges in connection with the cost reduction efforts at our Rozenburg,
Netherlands site and the further restructuring of our sites across the world as announced in December 2003. Restructuring charges for the three months ended March 31, 2004 were
$4.8 million, lower by $12.3 million compared to $17.1 million in the comparable period in 2003. Fixed manufacturing costs increased by $4.3 million, as lower costs of
$3.9 million, as measured in local currencies, were offset by a $5.8 million increase that resulted from the strength of the major European currencies versus the U.S. dollar and a
$2.4 million increase due to a reduction in the amount of fixed costs absorbed in inventories. SG&A and other operating expenses were relatively flat.

Performance Products

For the three months ended March 31, 2004, Performance Products revenues increased by $33.6 million, or 8%, to $454.9 million from
$421.3 million for the same period in 2003. Overall, average selling prices increased by 14%, while sales volumes fell by 5%. Ethylene glycol revenues fell by 16% over the same period in 2003.
While ethylene glycol average selling prices rose by 18% in response to higher raw material and energy costs and higher industry operating rates, sales volumes decreased by 29% due to
reduced feedstock availability in response to the planned T&I at one of our ethylene oxide units located in Port Neches, Texas. MAn revenues increased by 28% compared to the same period in 2003, as
volumes rose by 15% and average selling prices increased by 14% due to a greater mix of higher-priced catalyst sales. Surfactants revenues increased by 9% over the same period in 2003, resulting from
a 14% increase in average selling prices, partially offset by a decrease of 4% in volumes. Average selling prices for our surfactants in Europe and Australia remained relatively constant in local
currencies; however, because of the strength of the major European currencies and the Australian dollar versus the U.S. dollar, average selling prices for surfactants in Europe and Australia increased
by 21%. In the U.S., average selling prices for our surfactants rose by 6% in response to higher raw material and energy costs. Surfactants volumes decreased due to a market shift away from nonyl
phenol ethoxylates to alternative products, softer European demand, competitive activity and decreased export business as a result of the strength of the major European currencies versus the U.S.
dollar. Amine revenues increased by 17% over the same period in 2003, resulting from an 6% increase in average selling prices in response to higher raw material and energy costs and due to an improved
product mix, while volumes increased 8% as a result of favorable demand conditions and the expansion of our customer base.

For
the three months ended March 31, 2004, Performance Products segment EBITDA decreased by $3.8 million from $39.1 million for the first quarter 2003 to
$35.3 million. Lower EBITDA resulted mainly from the $8.6 million impact of lower sales volumes caused by the planned T&I of one of our Port Neches, Texas ethylene oxide units and weak
sales of our surfactants products. The $47.7 million increase in raw material and energy costs was more than offset by a $51.7 million improvement in average selling prices.
Manufacturing costs increased by $4.7 million, of which $3.5 million was due to foreign exchange movements, with the remainder due to additional maintenance costs offsetting the impact
of cost reduction measures. Overall, SG&A and other operating expenses decreased by

48

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$0.8 million,
with $2.0 million of foreign exchange movements, offset by cost reductions in our surfactants operations.

Polymers

For the three months ended March 31, 2004, Polymers revenues increased by $25.7 million, or 9%, to $314.5 million from $288.8 million
for the same period in 2003. Overall, sales volumes increased by 4% and average selling prices increased by 5%. Polyethylene revenues decreased by 1%, resulting from a 9% decrease in sales volumes,
partially offset by an 8% increase in average selling prices. Lower polyethylene sales volumes were largely the result of weaker demand but were also impacted by our efforts to build inventory in
preparation for the planned T&I at our Odessa, Texas facility. Polyethylene prices increased primarily in response to higher underlying raw material and energy costs. Polypropylene revenue increased
by 18%, resulting from a 13% increase in average selling prices, primarily as a result of higher raw material and energy costs, and a sales volume increase of 5% on stronger demand. APAO revenues
increased by 19%, as sales volumes increase 19%, largely as a result of increased sales in the export market, and in response to an improved product mix. Expandable polystyrene revenue decreased by
6%, resulting from a 14% decrease in sales volumes, primarily due to
higher demand in the 2003 period as a result of customer pre-buying in anticipation of price increases expected in the second quarter 2003, partially offset by an 8% increase in average
selling prices, primarily in response to higher underlying raw material and energy costs. Australian styrenics revenues increased by 10%, resulting from a 17% increase in average selling prices that
was attributable to the strength of the Australian dollar versus the U.S. dollar, partially offset by a 6% decrease in sales volumes.

For
the three months ended March 31, 2004, Polymers segment EBITDA increased by $5.5 million to $18.9 million from $13.4 million for the same period in 2003.
The increase in EBITDA is primarily the result of increases in selling prices of $23.9 million, which were offset by increases in raw material and energy costs of $12.9 million. In
addition, manufacturing fixed costs were higher by $5.0 million, primarily due to the strength of the Australian dollar versus the U.S. dollar.

Pigments

For the three months ended March 31, 2004, Pigments revenues increased by $8.8 million, or 4%, to $254.9 million from $246.1 million
for the same period of 2003. Average selling prices increased by 4% primarily due to the strength of the major European currencies against the U.S. dollar. Average selling prices as measured in local
currency decreased by 8% and 2% in Europe and North America, respectively, due to on-going industry oversupply conditions, and increased by 1% in Asia-Pacific. Sales volumes
for the three months ended March 31, 2004 were essentially unchanged from the comparable period in 2003.

For
the three months ended March 31, 2004, Pigments segment EBITDA decreased by $21.2 million, or 73%, to $7.7 million from $28.9 million in the same period
in 2003. A $22.0 million increase in revenues due to the strength of the major European currencies versus the U.S. dollar was offset by a $25.3 million increase in manufacturing costs, a
$13.1 million reduction in local currency selling prices, and a $4.6 million increase in SG&A and other operating expenses. Manufacturing costs increased by $19.6 million due to
the strength of the major European currencies against the U.S. dollar and by $6.5 million due to a reduction in the amount of fixed costs absorbed in inventories as compared to the same period
in 2003, offset by a reduction of fixed costs as a result of cost reduction initiatives. SG&A and other operating expenses increased due to restructuring charges of $3.8 million and by
$1.6 million due to the strength of the major European currencies against the U.S. dollar.

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Base Chemicals

For the three months ended March 31, 2004, Base Chemicals revenues increased by $166.7 million, or 24%, to $859.1 million from
$692.4 million for the same period in 2003. Overall sales volumes increased by 9% and average selling prices increased by 14%. The 9% increase in sales volume is a weighted average of a 15%
increase in volumes in Europe and a 3% increase in volumes in the U.S. The European volume increase includes a 10% rise in ethylene volume due in part to increased demand in the PVC and ethylene oxide
derivatives markets. Additional European volume increases in paraxylene and benzene of 8% and 7%, respectively, were due to a general increase in demand. While sales volumes in the U.S. remained
relatively stable with only a 3% rise, U.S. selling prices increased by 12% from the comparable period in 2003. This increase in average U.S. selling prices is largely in response to higher raw
material and energy costs. European sales prices increased 11%, due mainly to the strength of the European currencies versus the U.S. dollar.

For
the three months ended March 31, 2004, Base Chemicals segment EBITDA increased by $35.0 million to $53.3 million from $18.3 million for the same period in
2003. Increased EBITDA resulted mainly from growth in demand, generating stronger revenues comprised of selling price and volume increases of $88.7 million and $9.7 million,
respectively. Revenue increases were partially offset by higher raw material and energy costs of $46.2 million and increases in fixed manufacturing costs, SG&A and other operating expenses.
Fixed manufacturing costs increased $10.2 million, of which $5.7 million was due to foreign currency movements. SG&A and other operating expenses increased $9.2 million primarily
due to higher expenses in Europe, of which $4.2 million was due to foreign currency movements, and as a result of nonrecurring other income in the comparable period in 2003, including a
$1.0 million insurance claim recovery and $3.0 million in sales of precious metals previously used as process catalysts.

Corporate and Other

Corporate and other items includes unallocated corporate overhead, unallocated foreign exchange gains and losses, loss on the sale of accounts receivable, and
other non-operating income and expense. For the three months ended March 31, 2004, EBITDA from unallocated items increased by $4.3 million to $12.6 million from
$8.3 million for the same period in 2003. Increased EBITDA resulted primarily from reduced losses on our accounts receivable securitization program, which decreased by $5.7 million to a
loss of $3.5 million in the three months ended March 31, 2004 as compared to a loss of $9.2 million in the same period of 2003. Losses on the accounts receivable securitization
program include the discount on receivables sold into the program, fees and expenses associated with the program and gains (losses) on foreign currency hedge contracts mandated by the terms of the
program to hedge currency exposures on the collateral supporting the off-balance sheet debt issued. The decreased loss on the accounts receivable securitization program was primarily due
to reduced losses on foreign exchange hedge contracts mandated by our accounts receivable securitization program. EBITDA from corporate and other items also increased as the result of an asset
valuation adjustment of $2.8 million in the first quarter of 2003. This increase was partially offset by a $3.8 million decrease in unallocated foreign currency gains and a
$1.9 million loss on early extinguishment of debt. Other items of unallocated corporate overhead remained relatively flat compared with the prior period.

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Liquidity and Capital Resources (Pro Forma)        Pro Forma Statement of Cash Flows (Dollars in Millions)

|                                                                            |                                                 | Three months ended March 31, |      
|--------------------------------------------------------------------------- | ----------------------------------------------- | ---------------------------- | -----
|
|
|Cash flows from operating activities:                                       |                                                 |                              |      
|Net loss                                                                    |                                                 | $                            | (55.0
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                 |                              |      
|                                                                            | Depreciation and amortization                   |                              |      
|                                                                            | Noncash interest expense                        |                              |      
|                                                                            | Gain on foreign currency transactions           |                              |      
|                                                                            | Other adjustments to reconcile net loss         |                              |      
|                                                                            | Net changes in operating assets and liabilities |                              |      
|                                                                            |                                                 |                              |      
|Net cash used in operating activities                                       |                                                 |                              | (73.8
|                                                                            |                                                 |                              |      
|Investing activities:                                                       |                                                 |                              |      
|Capital expenditures                                                        |                                                 |                              | (54.1
|Other investing activities                                                  |                                                 |                              | (10.7
|                                                                            |                                                 |                              |      
|Net cash used in investing activities                                       |                                                 |                              | (64.8
|                                                                            |                                                 |                              |      
|Financing activities:                                                       |                                                 |                              |      
|Net borrowings under revolving loan facilities                              |                                                 |                              | 160.8
|Net borrowings on overdraft                                                 |                                                 |                              | 4.9  
|Repayment of long term debt                                                 |                                                 |                              | (38.6
|                                                                            |                                                 |                              |      
|Net cash provided by financing activities                                   |                                                 |                              | 127.1
|                                                                            |                                                 |                              |      
|Effect of exchange rate changes on cash                                     |                                                 |                              | (2.8 
|                                                                            |                                                 |                              |      
|Increase (decrease) in cash and cash equivalents                            |                                                 |                              | (14.3
|Cash and cash equivalents at beginning of period                            |                                                 |                              | 127.8
|                                                                            |                                                 |                              |      
|Cash and cash equivalents at end of period                                  |                                                 | $                            | 113.5
|                                                                            |                                                 |                              |      

Cash

Net cash used in operating activities for the three months ended March 31, 2004 decreased to $73.8 million from $193.8 million for the same
period in 2003. The variance is primarily attributable to a smaller increase in net working capital in addition to increased operating income in the 2004 period.

Net
cash used in investing activities for the three months ended March 31, 2004 increased to $64.8 million from $35.3 million for the 2003 period. The increase in
cash used in the first quarter 2004 was largely attributable to increased capital expenditures related to the planned turnaround and inspections at our PO and ethylenamines facilities and capital
expenditures associated with our Chinese MDI joint ventures. In addition, we made an investment of $11.9 million in our Chinese MDI joint venture during the three months ended March 31,
2004.

Net
cash provided by financing activities for the three months ended March 31, 2004 decreased to $127.1 million, as compared to $205.7 million for the same period in
2003. The decrease in cash provided by financing activities is mainly a result of reduced borrowings to fund operating cash requirements as explained above.

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Debt and Liquidity

Because HIH is financed separately, it is not included in our restricted group, its debt is non-recourse to our restricted group and it is not a
guarantor of our debt. The following discussion of our debt and liquidity contains separate discussions with respect to our restricted group and HIH. We have included this disaggregated information
because we believe it provides investors with material and meaningful information with respect to our liquidity position and debt obligations.



The HLLC Credit Facilities consist of the HLLC Revolving Facility of up to $275 million that matures on June 30, 2006, the term loan A facility of
$606.3 million as of March 31, 2004 ("Term Loan A") and the term loan B facility of $459.0 million as of March 31, 2004 ("Term Loan B"). As of March 31, 2004, our
restricted group had outstanding variable rate borrowings of approximately $1.3 billion. The weighted average interest rate of these borrowings was 7.2%. This weighted average rate does not
consider the effects of interest rate hedging activities. With respect to Term Loan A, as of March 3, 2004 the interest rate margin was 4.75% for eurocurrency loans. With respect to Term Loan
B, the interest rate margin for eurocurrency loans increased 50 basis points on January 1, 2004 to 8.25%. On April 1, 2004 the interest rate margin for eurocurrency loans increased by an
additional 75 basis points to 9.00%. On July 1, 2004, the interest rate margin will increase by 75 basis points to 9.75%. The next scheduled quarterly amortization payment under the HLLC Credit
Facilities is due March 2006.

We
depend upon the HLLC Revolving Facility to provide liquidity for our operations and working capital needs. As of March 31, 2004, our restricted group had $85.0 million
of outstanding borrowings and approximately $16 million of outstanding letters of credit under our $275 million HLLC Revolving Facility, and, at our restricted group, we had
$33.0 million of cash on our balance sheet. Accordingly, as of March 31, 2004, our restricted group had cash and unused borrowing capacity of approximately $207 million. On
January 28, 2004, we borrowed $37.5 million under the HLLC Revolving Facility to redeem, in full, the Huntsman Polymers Notes (representing principal of $36.8 million plus accrued
interest). The Huntsman Polymers Notes would have been due in December 2004 and bore interest at 113/4%.

The
HLLC Credit Facilities contain financial covenants, including a minimum interest coverage ratio, a minimum fixed charge ratio and a maximum debt to EBITDA ratio, as defined therein,
and limits on capital expenditures, in addition to restrictive covenants customary to financings of this type, including limitations on liens, debt and the sale of assets. On May 6, 2004, we
amended certain financial covenants in the HLLC Credit Facilities. The amendment applies to both the HLLC Revolving Facility and the HLLC Term Facilities and provides for, among other things, the
amendment of certain financial covenants through the fourth quarter 2005. The amendment provided for an increase in the maximum leverage ratio, and a decrease in the minimum interest coverage ratio
and the fixed charge coverage ratio. The amendment also amends the mandatory prepayment provisions contained in the HLLC Credit Facilities to permit us, after certain levels of repayment of our Term
Loan B, to use subordinate debt or equity proceeds to repay a portion of the outstanding indebtedness of certain of our Australian subsidiaries.

On
September 30, 2003, we sold $380 million aggregate principal amount of our 115/8% senior secured notes due 2010 (the "2003 Senior Secured Notes") at a
discount to yield 11.875% in a private offering. On December 3, 2003 we sold an additional $75.4 million aggregate principal amount of the 2003 Secured Notes at a discount to yield
11.72%.

Certain
of our Australian subsidiaries maintain credit facilities that are non-recourse to us. Our Australian subsidiaries are currently not in compliance with covenants
contained in these credit facilities. The outstanding debt balances of our Australian subsidiaries have been classified in current

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portion
of long-term debt. Huntsman Chemical Company Australia Pty. Ltd. ("HCCA"), our subsidiary that holds our Australian styrenics assets, maintains a facility consisting of a
term facility and a working capital facility (collectively, the "HCCA Facilities"). As of March 31, 2004, there were no financial covenants in place. Such covenants are currently being
negotiated. HCCA failed to make its semiannual scheduled amortization payments of A$5 million (approximately $3.7 million) each due in July 2003 and January 2004 under its
term facility. An A$1 million payment was made by HCCA on the term facility during the three months ended March 31, 2004. Short term cash flows generated by HCCA will likely not be
sufficient to bring current its missed payments, as well as meet its next scheduled amortization payment of A$5 million (approximately $3.7 million) due in July 2004. Management
of HCCA continues its efforts to renegotiate the terms of the HCCA Facilities. We have reached an agreement in principle with the lender under the HCCA Facilities that will provide for a period of
time during which HCCA and the lender will evaluate various alternatives for restructuring the HCCA Facilities.

HAHC
and certain of its subsidiaries that hold our Australian surfactants assets are parties to credit facilities established in December 1998 (the "HAHC Facilities"). The HAHC
Facilities are subject to financial covenants, including leverage ratio, interest coverage ratio and limits on capital expenditures, in addition to restrictive covenants customary to financings of
this type, including limitations on liens, debt and the sale of assets. As of March 31, 2004, HAHC was not in compliance with certain provisions of the HAHC Facilities agreements. Management of
HAHC believes that HAHC will be able to renegotiate the terms of the HAHC Facilities.

We
believe the current liquidity of our restricted group, together with funds generated by our businesses, is sufficient to meet the short-term and long-term
needs of our businesses, including funding operations, making capital expenditures and servicing our debt obligations in the ordinary course. Except as noted above regarding our
non-recourse Australian credit facilities, we believe that we are currently in compliance with the covenants contained in the agreements governing all of our other debt obligations. We
review our financial covenants on a regular basis and will seek amendments to such covenants if necessary.



HI's senior secured credit facilities (the "HI Credit Facilities") consist of a revolving loan facility of up to $400 million that matures on
June 30, 2005 (the "HI Revolving Facility"), a term B loan facility of $620.1 million as of March 31, 2004 that matures on June 30, 2007, and a term C loan facility of
$620.1 million as of March 31, 2004 that matures on June 30, 2008. HI's obligations under the HI Credit Facilities are supported by guarantees of HIH and HI's domestic and certain
foreign subsidiaries (collectively, the "HI Guarantors"), as well as pledges of substantially all their assets, including 65% of the voting stock of certain non-U.S. subsidiaries. As of
March 31, 2004, HI had outstanding variable rate borrowings of approximately $1.3 billion and the weighted average interest rate of these borrowings was approximately 5.2%. This weighted
average rate does not consider the effects of interest rate hedging activities.

HI
depends upon the $400 million HI Revolving Facility to provide liquidity for its operations and working capital needs. As of March 31, 2004, HI had $110.0 million
of outstanding borrowings and approximately $7 million of outstanding letters of credit under the HI Revolving Facility, and HI had $80.5 million in cash. HI also maintains
$25.0 million of short-term overdraft facilities, of which $12.6 million was available at March 31, 2004. Total cash and unused borrowing capacity as of
March 31, 2004 was approximately $376 million. The HI Revolving Facility matures in June 2005. HI has commenced discussions with financial institutions for the renewal or
replacement of the HI Revolving Facility and expects to address the pending maturity within the next three months.

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In
March 2002, HI issued $300 million 97/8% senior notes due 2009 (collectively with the senior notes discussed in the following sentence, the "HI Senior
Notes"). On April 11, 2003, HI sold an additional $150 million in aggregate principal amount of HI Senior Notes. The HI Senior Notes are unsecured and are fully and unconditionally
guaranteed on a joint and several basis by the HI Guarantors. HI also has outstanding $600 million and €450 million 101/8% senior subordinated notes due
2009 (the "HI Subordinated Notes"). The HI Subordinated Notes are unsecured and are fully and unconditionally guaranteed on a joint and several basis by the HI Guarantors.

HI
also depends upon an accounts receivable securitization program arranged by JP Morgan, under which interests in certain of its trade receivables are transferred to a qualified
off-balance sheet entity (the "Receivables Trust"). The Receivables Trust is not an affiliate of HI or our Company. The acquisitions of these receivables by the Receivables Trust are
financed through the issuance of commercial paper and/or medium term notes. The debt associated with the commercial paper and medium term notes is not reflected on our balance sheet. The accounts
receivable securitization program is an important source of liquidity to HI.

A
portion of the medium term notes (€90.5 million) is denominated in euros and is subject to fluctuation in currency rates against the U.S. dollar. The total
outstanding balance of medium term notes is approximately $195 million in U.S. dollar equivalents as of March 31, 2004. In addition to medium term notes, the Receivables Trust also
maintains an annual commitment with a third party to issue commercial paper for an amount up to $125 million. As of March 31, 2004, the total outstanding balance of such commercial paper
was approximately $115 million. On April 16, 2004 HI amended the commercial paper facility. Pursuant to the amendment, the maturity of the commercial
paper facility was extended to March 31, 2007. In addition, the amendment permits the issuance of euro-denominated commercial paper.

Subject
to the annual seasonality of its accounts receivable, HI estimates that the total liquidity resources from the accounts receivable securitization program may range between
$270 million to $310 million at certain periods during a calendar year. As of March 31, 2004, the Receivables Trust had approximately $464 million of total assets
(consisting of cash and accounts receivable), and $195 million of medium term notes and $115 million of commercial paper outstanding. The weighted average interest rates on the medium
term notes and commercial paper was approximately 2.1% as of March 31, 2004. Losses on the accounts receivable securitization program in the three months ended March 31, 2004 were
$3.5 million. Losses on the accounts receivable securitization program include the discount on receivables sold into the program, fees and expenses associated with the program and gains
(losses) on foreign currency hedge contracts mandated by the terms of the program to hedge currency exposures on the collateral supporting the off-balance sheet debt issued. For the three
months ended March 31, 2004, losses on the accounts receivable securitization program include losses of $1.4 million on foreign currency hedge contracts mandated by the accounts
receivable securitization program. HI believes that the multicurrency commercial paper facility discussed above will enable it to better naturally hedge the off-balance sheet debt to the
underlying collateral supporting such debt and thereby reduce the impact on, and need for, foreign currency hedges as experienced in prior periods under the accounts receivable securitization program.

The
HI Credit Facilities require a mandatory prepayment to the extent that the proceeds from the securitization program exceed $310 million. To date, proceeds from the accounts
receivable securitization program have not exceeded this limit. While HI does not anticipate it, if at any time it was unable to sell sufficient receivables into the program to support the volume of
commercial paper and medium term notes issued under the program, HI would be required to inject cash into the program as collateral. Under such circumstance, and depending on the timing of such
circumstance, the requirement to provide cash collateral to the program could have a negative effect on HI's liquidity.

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On June 30, 1999, HIH issued senior discount notes ("HIH Senior Discount Notes") and the HIH Senior Subordinated Discount Notes (collectively with the HIH Senior Discount Notes,
the "HIH Discount Notes") to ICI with initial stated values of $242.7 million and $265.3 million, respectively. The HIH Discount Notes are due December 31, 2009. Interest on the
HIH Discount Notes is paid in kind. Interest on the HIH Senior Discount Notes accrues at 133/8% per annum. The HIH Senior Subordinated Discount Notes have a stated rate of 8% that
originally was to reset to a market rate in June 2002 and can be redeemed at 100% of accreted value at any time until June 30, 2004. On December 21, 2001, the terms of the HIH
Senior Subordinated Discount Notes were modified, including deferring the reset date until September 2004, at which time the interest rate will reset to a market rate. The HIH Discount Notes
contain limits on the incurrence of debt, restricted payments, liens, transactions with affiliates, and merger and sales of assets. Management believes that HIH is in compliance with the covenants of
the HIH Discount Notes as of March 31, 2004.

As
of March 31, 2004 and December 31, 2003, the HIH Senior Discount Notes included $206.4 million and $191.9 million of accrued interest, respectively. As of
March 31, 2004 and December 31, 2003, the HIH Senior Subordinated Discount Notes included $119.9 million and $112.3 million of accrued interest, respectively, and
$13.0 million and $19.2 million of discount, respectively.

We
believe HIH's current liquidity, together with funds generated by its operations, is sufficient to meet the short-term and long-term needs of its businesses,
including funding operations, making capital expenditures and servicing its debt obligations in the ordinary course. We believe that HIH is currently in compliance with the covenants contained in the
agreements governing its debt obligations.



We believe our current liquidity, together with funds generated by our businesses, is sufficient to meet the short-term and long-term
needs of our businesses, including funding operations, making capital expenditures and servicing our debt obligations in the ordinary course. Except as noted above regarding our
non-recourse Australian credit facilities, we believe that we are currently in compliance with the covenants contained in the agreements governing all of our other debt obligations. We
review our financial covenants on a regular basis and will seek amendments to such covenants if necessary.

Certain Credit Support Issues

HIH and HI, which are unrestricted subsidiaries, have not guaranteed or provided any other credit support to our restricted group's obligations under the HLLC
Credit Facilities, the HLLC Notes or the 2003 Secured Notes, and Huntsman LLC has not guaranteed or provided any other credit support to the obligations of HI under the HI Credit Facilities, or to the
obligations of HI and HIH under their outstanding high-yield notes. Because of restrictions contained in the financing arrangements of HIH and HI, these subsidiaries are presently unable
to make any "restricted payments" to our Company, including dividends, distributions or other payments in respect of equity interests or payments to purchase, redeem or otherwise acquire or retire for
value any of their equity interests, subject to exceptions contained in such financing arrangements. Events of default under the HI Credit Facilities, or under the high-yield notes of HIH
and HI or the exercise of any remedy by the lenders thereunder will not cause any cross-defaults or cross-accelerations under the HLLC Credit Facilities, the HLLC Notes or the 2003 Secured Notes.
Additionally, any events of default under the HLLC Credit Facilities, the HLLC Notes or the 2003 Secured Notes, or the exercise of any remedy by the lenders thereunder, will not cause any
cross-defaults or cross-accelerations under the outstanding high-yield notes of HIH or HI or the HI Credit Facilities, except insofar as foreclosure on the stock of Huntsman Specialty
Chemical Holdings Corporation, the stock of Huntsman Specialty or the HIH Membership Interests pledged to secure our obligations under the HLLC Credit Facilities or the 2003 Secured Notes, would

55

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constitute
a "change of control" and an event of default under the HI Credit Facilities and would give certain put rights to the holders of the high-yield notes of HI or HIH.

On
May 9, 2003, HMP issued 15% senior secured discount notes due 2008 with an accreted value of $423 million (the "HMP Senior Discount Notes"). Interest is paid in kind.
The HMP Senior Discount Notes are secured by a first priority lien on the HIH Senior Subordinated Discount Notes acquired by HMP in connection with the HIH Consolidation Transaction, the 10% direct
and 30% indirect equity interests held by HMP in HIH, HMP's common stock outstanding as of May 9, 2003, and HMP's 100% equity interest in the Company. A payment default under the HMP Senior
Discount Notes or any other default that would permit the holders to accelerate the unpaid balance thereunder would also constitute a default under the HLLC Credit Facilities. Foreclosure on the stock
of HMP or the equity interest in the Company would constitute a "change of control" and an event of default under the HLLC Credit Facilities and the HI Credit Facilities, and would give certain put
rights to the holders of the HLLC Notes, the 2003 Secured Notes, and the high-yield notes of HI and HIH.

Restructuring and Plant Closing Costs

As of March 31, 2004 and December 31, 2003, we had reserves for restructuring and plant closing costs of $23.8 million and
$25.3 million, respectively. During the three months ended March 31, 2004, our
Company, on a consolidated basis, recorded additional reserves of $8.7 million, including reserves for workforce reductions. During the 2004 period, we made cash payments against these reserves
of $10.2 million.

As
of March 31, 2004, accrued restructuring and plant closing costs by type of cost consist of the following (dollars in millions):

Workforce
reductions

Demolition and
decommisioning

Non-cancelable
lease costs

TotalAccrued liabilities as of December 31, 2003

$
22.5

$
2.6

$
0.2

$
25.3Charges


8.7








8.7Payments


(9.8
)

(0.2
)

(0.2
)

(10.2
)Accrued liabilities as of March 31, 2004

$
22.5

$
2.4

$


$
23.8


Detail
of these reserves by segment are as follows (dollars in millions):

Polyurethanes

Perfomance
Products

Pigments

Polymers

TotalAccrued liability as of December 31, 2003

$
15.8

$
2.4

$
4.3

$
2.8

$
25.3Charges


4.8





3.9





8.7Payments


(6.5
)

(0.1
)

(3.2
)

(0.4
)

(10.2
)Accrued liability as of March 31, 2004

$
14.1

$
2.3

$
5.0

$
2.4

$
23.8


As
of March 31, 2004 and December 31, 2003, our Polyurethanes segment reserve consisted of $9.7 million and $8.2 million, respectively, related to
restructuring activities at our Rozenberg, Netherlands site announced in 2003, $2.2 million and $5.2 million, respectively, related to the workforce reductions throughout our
Polyurethanes segment announced in 2003, and $1.9 million and $2.4 million, respectively, related to the closure of our Shepton Mallet, U.K. site announced in 2002. During the three
months ended March 31, 2004, our Polyurethanes segment recorded additional restructuring charges of $4.8 million and made cash payments of $6.5 million related to these
restructuring activities. Additional charges of approximately $7.7 million related to these restructuring

56

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activities
are expected to be recorded through 2005, resulting from additional workforce reductions of approximately 36 employees.

As
of December 31, 2003, our Performance Products segment reserve consisted of $2.4 million related to the closure of a number of plants at our Whitehaven, U.K. facility,
the closure of an administrative office in London, U.K., the rationalization of our surfactants technical center in Oldbury, U.K., and the restructuring of our facility in Barcelona, Spain. During the
three months ended March 31, 2004, our Performance Products segment made cash payments of $0.1 million related to these restructuring activities. There are no material additional charges
expected related to these restructuring activities.

As
of December 31, 2003, our Polymers segment reserve consisted of $2.8 million related to the demolition and decommissioning of our Odessa, Texas styrene manufacturing
facility and noncancelable lease costs. During the three months ended March 31, 2004, our Polymers segment made cash payments of $0.4 million related to these restructuring activities.

As
of December 31, 2003, our Pigments segment reserve consisted of $4.3 million related to global workforce reductions. During the three months ended March 31, 2004,
our Pigments segment recorded additional restructuring charges of $3.9 million and made cash payments of $3.2 million related to these restructuring activities. Additional charges of
approximately $13 million related to these restructuring activities are expected to be recorded through 2005, resulting from additional workforce reductions of approximately 150 employees.

We
continuously evaluate the effectiveness of all of our manufacturing facilities in serving our markets. We have been engaged in a detailed review of our Pigments business to improve
our competitive position and financial performance. In connection with this review, we announced in April 2004 that we will idle approximately 55,000 tonnes, or about 10% of our total
TiO2 production capacity. This action is expected to result in approximately $40 million of annual fixed cost savings, and will involve approximately $100 million of
accelerated depreciation and non-cash charges and the payment of cash restructuring costs of approximately $20 million in 2004 and 2005.

Securitization of Accounts Receivable

On December 21, 2000, HI initiated an accounts receivable securitization program under which it grants an undivided interest in certain of its trade
receivables to a qualified off-balance sheet entity (the "Receivables Trust") at a discount. This undivided interest serves as security for the issuance of commercial paper and medium term
notes by the Receivables Trust. At March 31, 2004, the Receivables Trust had outstanding approximately $195 million in U.S. dollar equivalents in medium term notes and approximately
$115 million in commercial paper. Under the terms of the agreements, HI and its subsidiaries continue to service the receivables in exchange for a 1% fee of the outstanding receivables, and HI
is subject to recourse provisions.

HI's
retained interest in receivables (including servicing assets) subject to the program was approximately $148.7 and $154.4 million as of March 31, 2004 and
December 31, 2003, respectively. The value of the retained interest is subject to credit and interest rate risk. For the three months ended March 31, 2004 and 2003, new sales of accounts
receivable sold into the program totaled approximately $1,095.6 million and $1,002.0 million, respectively, and cash collections from receivables sold into the program that were
reinvested totaled approximately $1,086.8 million and $990.6 million, respectively. Servicing fees received during the three months ended March 31, 2004 and 2003 were
approximately $1.2 million and $1.2 million, respectively.

HI
incurs losses on the accounts receivable securitization program for the discount on receivables sold into the program and fees and expenses associated with the program. HI also
retains responsibility for the economic gains and losses on forward contracts mandated by the terms of the program to hedge

57

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the
currency exposures on the collateral supporting the off-balance sheet debt issued. Gains and losses on forward contracts included as a component of the loss on accounts receivable
securitization program are a loss of $1.4 million and a loss of $7.6 million for the three months ended March 31, 2004 and 2003, respectively. As of March 31, 2004 and
December 31, 2003, the fair value of the open forward currency contracts is $0.9 million and $6.8 million, respectively, which is included as a component of the residual interest
reflected on HI's balance sheet. On April 16, 2004, HI amended the commercial paper facility. Pursuant to the amendment, the maturity of the commercial paper facility was extended to
March 31, 2007. In addition, the amendment permits the issuance of euro-denominated commercial paper.

The
key economic assumptions used in valuing the residual interest at March 31, 2004 are presented below:

Weighted average life (in months)

3Credit losses (annual rate)

Less than 1%Discount rate (annual rate)

2%


A
10% and 20% adverse change in any of the key economic assumptions would not have a material impact on the fair value of the retained interest. Total receivables over 60 days
past due as of March 31, 2004 and December 31, 2003 were $9.8 million and $15.6 million, respectively.

Investing Activities

Capital expenditures for the three months ended March 31, 2004 were $54.1 million, an increase of approximately $19.6 million as compared to
the same period in 2003. The increase was largely attributable to increased capital expenditures related to the planned T&Is at our PO and ethlyeneamines facilities and increased capital expenditures
associated with our Chinese MDI joint venture. In addition, we made an investment of $11.9 million in our Chinese MDI joint venture during the three months ended March 31, 2004. We
expect to spend approximately $260 million during 2004 on capital projects, which would include any expenditures for the proposed LDPE facility at Wilton, U.K. in the event board and other
approvals are sought and obtained in connection with this project. In addition, we expect to spend approximately $25 million (approximately $13 million of which will be recorded as
capital expenditures and approximately $12 million of which has been recorded as an investment) during 2004 to fund our Chinese MDI joint ventures. We expect to fund up to a total of
approximately $85 million to the Chinese MDI joint venture over the next several years (approximately $35 million to be recorded as capital expenditures and approximately
$50 million to be recorded as investments).

We
believe that the cost position of our Wilton, U.K. olefins facility uniquely positions it to be the site of a polyethylene production facility. While we export approximately
one-third of our ethylene production each year to continental Europe, incurring significant shipping and handling costs, the U.K. annually imports approximately 1.9 billion pounds
of polyethylene. We believe this provides an opportunity to capitalize on the low-cost operating environment and extensive petrochemical infrastructure and logistics at Wilton, and we are
engaged in a feasibility study with respect to the possible construction of a world-scale LDPE facility at our Wilton site. The potential LDPE facility under study would have the capacity to produce
approximately 900 million pounds of LDPE annually and is estimated to cost $300 million to construct. We have had preliminary discussions with governmental authorities concerning
potential assistance and other matters in connection with the
potential project, and we may seek the necessary board and other approvals for the project this year. If such approvals are granted this year, the facility could be operational in late 2006.

In
connection with our agreements with our Rubicon and Louisiana Pigment joint ventures, we are obligated to fund our proportionate share of capital expenditures. During the three months
ended

58

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March 31,
2004 and 2003, we invested $0.6 million and $0.7 million, respectively, in Rubicon. With respect to Louisiana Pigment, during the three months ended March 31,
2004 and 2003, we received $1.8 million and invested $1.3 million, respectively.

Environmental Matters



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



We may incur future costs for capital improvements and general compliance under environmental and safety laws, including costs to acquire, maintain and repair
pollution control equipment. We estimate that, on a consolidated basis, capital expenditures for environmental and safety matters during 2004 will be approximately $69.1 million, including
approximately $38.5 million for HIH. However, since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and
enforcement of specific requirements, we cannot provide assurance that material capital expenditures beyond those currently anticipated will not be required under environmental and safety laws.

We
have established financial reserves relating to anticipated environmental restoration and remediation programs, as well as certain other anticipated environmental liabilities.
Management believes these reserves are sufficient for known requirements. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated.
Our liability estimates are based upon available facts, existing technology and past experience. On a consolidated basis, a total of approximately $34.0 million has been accrued related to
environmental related liabilities as of March 31, 2004, including approximately $16.5 million related to HIH. However, no assurance can be given that all potential liabilities arising
out of our present or past operations have been identified or fully assessed or that future environmental liabilities will not be material to our Company.



Given the nature of our business, violations of environmental laws may result in restrictions imposed on our operating activities, substantial fines, penalties,
damages or other costs, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows. We are aware of the following matters and believe
(1) the reserves related to these matters to be

59

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sufficient
for known requirements, and (2) the ultimate resolution of these matters will not have a material impact on our results of operations or financial position:

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

On
June 27, 2003, we received a Notice of Enforcement from the Texas Commission on Environmental Quality (the "TCEQ," formerly the Texas Natural Resource Conservation Commission
or TNRCC) with respect to our aromatics and olefins plant in Port Arthur, Texas for alleged violations identified by the agency during an April 2003 air quality inspection. No penalty demand
has yet been made by the TCEQ, although a penalty is possible.

On
June 25, 2003, a group of more than 500 plaintiffs filed a lawsuit in state district court in Beaumont, Texas against six local chemical plants and refineries, including our
Company. The lawsuit alleges that the refineries and chemical plants discharge chemicals that cause health problems for area residents. The claim does not specify a dollar amount, but seeks damages
for heath impacts as well as property value losses. The suit is based on emissions data from reports that these plants filed with the TCEQ.

On
October 6, 2002, a leak of sulphuric acid from two tanks located near our Whitehaven, U.K. plant was discovered. About 342 to 347 tonnes of acid were released onto the ground
and into the soil near the tanks. Although we took immediate steps to contain the spillage and recover acid, a quantity of acid reached a nearby beach via a geological fault. We believe that we did
not own the tanks from which the acid leaked; however, we did own the acid in the tanks. The U.K. Health and Safety Executive has issued three Improvement Notices requiring corrective action with
which we are complying. The U.K. Environment Agency ("EA") on or about April 27, 2004, served a summons providing notice to Huntsman Surface Sciences UK Limited that a criminal prosecution is
being initiated against us as a result of the spill based on alleged violations of the Water Resources Act and Environmental Protection Act. Although we can give no assurances, based on currently
available information and our understanding of similar investigations and penalties in the past, we believe that if we are ultimately found to be legally responsible for the spill, the probable
penalties or the cost of any additional corrective action would not be material to our business, financial position, results of operations or cash flows.

By
letter dated February 27, 2004, the U.S. Forest Service provided notice to us that we are considered to be a potentially responsible party ("PRP") under the federal Superfund
law for the release of hazardous substances at the North Maybe Mine, located about 13 miles northeast of Soda Springs, Idaho. The mining site includes an inactive open pit phosphorus mine, associated
overburden piles and affected downstream lands. We have been identified as a PRP because Huntsman Polymers is viewed by the Forest Service as the successor to El Paso Products Company, which is
alleged to have leased the site from 1964-1972 and mined the site from 1965-1967. In its letter, the Forest Service requests that we "participate in the development and funding
of a Site Investigation (SI) and Engineering Evaluation/Cost Analysis (EE/CA) under an Administrative Order of Consent (AOC)." We have communicated with the U.S. Forest Service, we are in the process
of investigating the matter and we are continuing to evaluate our options.

By
letter of March 8, 2004, Kraft Foods Inc. ("Kraft") notified us that "Rexene Polyolefins, a Division of Dart Industries, Inc." had been included among about 90
corporate defendants in a private lawsuit seeking damages from former users of the Malone Services hazardous waste disposal facility in Texas City, Texas. The plaintiffs are the current owners of the
site; they purchased the site out of

60

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bankruptcy
in 1999 to operate it as a hazardous waste site. They complain that they are now unable to do so because it has been declared a Superfund site. Kraft is the successor in interest to Dart
Industries, Inc. ("Dart"). Dart was a joint venturer with El Paso Products Company in Rexene Polyolefins ("Rexene") which, for a period of years, operated a plant in Bayport, Texas. That plant
was sold to Lyondell Chemical Company in 1990. From a preliminary review of EPA records, Kraft indicates that Rexene shipped waste to the Malone Services site from September 1976 to
November 1980; EPA estimates Rexene's volumetric percentage for waste shipped to the site as 0.37893%. Kraft is seeking a joint cost-sharing arrangement with us regarding this case.
We already have a 50/50 cost-sharing arrangement with Kraft regarding the Turtle Bayou Superfund site. Waste shipped prior to August 31, 1979, is potentially subject to a 50/50
arrangement with Kraft. We are evaluating the documentary evidence and will provide a formal response to Kraft's letter in due course. It is currently unclear what the potential liability for our
Company might be in this matter.

We
have been named as a "premises defendant" in a number of asbestos exposure lawsuits. These suits often involve multiple plaintiffs and multiple defendants, and, generally, the
complaint in the action does not indicate which plaintiffs are making claims against a specific defendant, where the alleged injuries were incurred or what injuries each plaintiff claims. These facts
must be learned through discovery. There are currently 43 asbestos exposure cases pending against us. Among the cases currently pending, management is aware of one claim of mesothelioma. We do not
have sufficient information at the present time to estimate any liability in these cases. Although we cannot provide specific assurances, based on our understanding of similar cases, our management
believes that our ultimate liability in these cases will not be material to our financial position or results of operations.

We
have incurred, and may in the future incur, liability to investigate and clean up waste or contamination at our current or former facilities or facilities operated by third parties at
which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of wastes that were disposed of prior to the purchase of our businesses. Under some environmental
laws, we may be jointly and severally liable for the costs of environmental contamination on or from our properties and at off-site locations where we disposed of or arranged for the
disposal or treatment of hazardous wastes and may incur liability for damages to natural resources. For example, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), and similar state laws, a current owner or operator of real property may be liable for such costs regardless of whether the owner or operator owned or operated the real property
at the time of the release of the hazardous substances and regardless of whether the release or disposal was in compliance with law at the time it occurred. In addition, under the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar state laws, as the holder of permits to treat or store hazardous wastes, we may, under some circumstances, be required to
remediate contamination at or from our properties regardless of when the contamination occurred. For example, our Odessa, Port Arthur, and Port Neches facilities in Texas are the subject of ongoing
RCRA remediation. Based on current information and past costs relating to these matters, we do not believe such matters will
have a material adverse effect. There can be no assurance, however, that any such matters will not have a material adverse effect on us.

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

61

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In
addition, we have been notified by third parties of claims against us or our subsidiaries for cleanup liabilities at certain former facilities and other third party sites, including
Belpre, Ohio (a former facility); Georgetown Canyon, Idaho (an alleged former property); Aerex Refinery, Bloomfield, New Mexico (an alleged former property); Turtle Bayou Superfund Site, Texas (an
alleged off-site disposal location); the Martin Aaron Superfund Site, Camden, New Jersey (an off-site disposal and reconditioning facility); the Gulf Nuclear Sites in Odessa
and near Houston, Texas (off-site waste handling sites); Fort Gratiot Sanitary Landfill near Marysville, Michigan (an off-site disposal location); Star Lake Superfund Site,
Texas (located near the Port Neches facility); and the San Angelo Electric Service Company Site, San Angelo, Texas (an alleged OCB-handling site). With respect to the first five matters,
which are under investigation, we are unable to determine whether such liabilities may be material to us because we do not have information sufficient to evaluate these claims. With respect to the
final four matters, based on current information and our past experience, we do not believe such matters will have a material adverse effect on us.

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



In a March 30, 2004 Federal Register, the EPA announced that it will designate the Beaumont-Port Arthur area as in "serious"
non-attainment with the one-hour ozone national ambient air quality standard. This change may, but is not likely to, require additional controls and/or work practices to meet
the yet undefined regulatory requirements for nitrogen oxides and volatile organic compounds. Although no assurance can be given, we believe
that any additional capital required to comply with the new rules based on this area reclassification, above the existing operating plans of our plants in Port Arthur and Port Neches, Texas, will not
be material.

Under
the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a cross-media (air, water, waste)
environmental permitting program for individual facilities. The U.K. was the first EU member government to request IPPC permit applications from us. In the U.K., we have submitted several applications
and, very recently, negotiated and received our first IPPC permits. Based upon the terms of these permits, we do not anticipate that we will have to make material capital expenditures to comply. Other
IPPC permits are under review by the U.K. Environment Agency. We are not yet in a position to know with certainty what the other U.K. IPPC permits will require, and it is possible that the costs of
compliance could be material; however, we believe, based upon our experience to date, that the costs of compliance with IPPC permitting in the U.K. will not be material to our financial condition or
results of operations. Additionally, the IPPC directive has recently been implemented in France, and similar to our operations in the U.K., we do not anticipate having to make material capital
expenditures to comply.

With
respect to our facilities in EU jurisdictions other than the U.K and France, IPPC implementing legislation is not yet in effect, or we have not yet been required to seek IPPC
permits. Accordingly, while we expect to incur additional future costs for capital improvements and general compliance under IPPC requirements in these jurisdictions, at the present time we are unable
to determine whether or not these costs will be material. Accordingly, we cannot provide assurance that material capital expenditures and compliance costs will not be required in connection with IPPC
requirements.

On
October 29, 2003, the European Commission adopted a proposal for a new EU regulatory framework for chemicals. Under this proposed new system called "REACH"
(Registration,Evaluation andAuthorisation of CHemicals),
enterprises that manufacture or import more than one ton of a

62

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



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

For
example, the California Air Resources Board adopted regulations that prohibit the addition of MTBE to gasoline as of January 1, 2004. Certain other states have also taken
actions to restrict or eliminate the current or future use of MTBE. States which have taken action to prohibit or restrict the use of MTBE accounted for over 40% of the U.S. market for MTBE prior to
the taking of such action. In connection with its ban, the State of California requested that the EPA waive the federal oxygenated fuels requirements of the federal Clean Air Act for gasoline sold in
California. The EPA denied the State's request on June 12, 2001. Certain of the state bans, including California's ban, have been challenged in court as unconstitutional (in light of the Clean
Air Act). On June 4, 2003, a federal court of appeals rejected such a challenge to California's ban, ruling that the ban is not pre-empted by the Clean Air Act.

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

In
Europe, the EU issued a final risk assessment report on MTBE on September 20, 2002. While no ban of MTBE was recommended, several risk reduction measures relating to storage
and handling of MTBE-containing fuel were recommended. Separate from EU action, Denmark entered into a voluntary agreement with refiners to reduce the sale of MTBE in Denmark. Under the
agreement, use of MTBE in 92- and 95-octane gasoline in Denmark ceased by May 1, 2002; however, MTBE is still an additive in a limited amount of 98-octane
gasoline sold in about 100 selected service stations in Denmark.

Any
phase-out or other future regulation of MTBE in other states, nationally or internationally may result in a significant reduction in demand for our MTBE and result in a
material loss in revenues or material costs or expenditures. In the event that there should be a phase-out of MTBE in the United States, we believe we will be able to export MTBE to Europe
or elsewhere or use its co-product TBA to produce saleable products other than MTBE. We believe that our low production

63

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costs
at the PO/MTBE facility will put us in a favorable position relative to other higher cost sources (primarily, on-purpose manufacturing). If we opt to produce products other than
MTBE, necessary modifications to our facilities may require significant capital expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

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



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

The
State of Texas settled an air enforcement case with us relating to our Port Arthur plant on May 13, 2003. Under the settlement, we are required to pay a civil penalty of
$7.5 million over more than four years, undertake environmental monitoring projects totaling about $1.5 million in costs, and pay $375,000 in attorney's fees to the Texas Attorney
General. Thus, as of May 17, 2004, we have paid $1.8 million toward the penalty and $375,000 for the attorney's fees; the monitoring projects are underway and on schedule. It is not
anticipated that this settlement will have a material adverse effect on our financial position.

Recently Issued Financial Accounting Standards

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

Critical Accounting Policies

There have been no changes in the first quarter 2004 with respect to our critical accounting policies as presented in our 2003 special financial report on
Form 10-K.

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Changes in Financial Condition

The following information summarizes our working capital position as of March 31, 2004 and December 31, 2003 (dollars in millions):

|                     |                                   | March 31,
2004            |       | December 31,
2003 |         | Difference |      
|-------------------- | --------------------------------- | ------------------------- | ----- | ----------------- | ------- | ---------- | -----
|Current assets:      |                                   |                           |       |                   |         |            |      
|                     | Cash and cash equivalents         |                           | $     | 113.5             |         | $          | 127.8
|                     | Accounts and notes receivables    |                           |       | 1,081.1           |         |            | 925.1
|                     | Inventories                       |                           |       | 820.5             |         |            | 892.9
|                     | Prepaid expenses                  |                           |       | 35.6              |         |            | 40.3 
|                     | Deferred income taxes             |                           |       | 3.0               |         |            | 3.0  
|                     | Other current assets              |                           |       | 77.7              |         |            | 87.0 
|                     |                                   |                           |       |                   |         |            |      
|                     |                                   | Total current assets      |       |                   | 2,131.4 |            |      
|                     |                                   |                           |       |                   |         |            |      
|Current liabilities: |                                   |                           |       |                   |         |            |      
|                     | Accounts payable                  |                           |       | 784.2             |         |            | 752.1
|                     | Accrued liabilities               |                           |       | 495.9             |         |            | 585.7
|                     | Deferred income taxes             |                           |       | 14.5              |         |            | 14.5 
|                     | Current portion of long-term debt |                           |       | 96.2              |         |            | 134.0
|                     |                                   |                           |       |                   |         |            |      
|                     |                                   | Total current liabilities |       |                   | 1,390.8 |            |      
|                     |                                   |                           |       |                   |         |            |      
|Working capital      |                                   | $                         | 740.6 |                   | $       | 589.8      |      
|                     |                                   |                           |       |                   |         |            |      

As
of March 31, 2004, our working capital increased by $150.8 million as a result of the net impact of the following significant changes:



Cautionary Statement for Forward-Looking Information

Certain information set forth in this report contains "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements
include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to
acquisitions and other information that is not historical

65

---



information.
In some cases, forward-looking statements can be identified by terminology such as "believes," "expects," "may," "will," "should," or "anticipates," or the negative of such terms or other
comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or
oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

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

There
are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report.
The following are among the factors that could cause actual results to differ materially from the forward-looking statements. There may be other factors, including those discussed elsewhere in this
report, that may cause our actual results to differ materially from the forward-looking statements. Any forward-looking statements should be considered in light of the risk factors specified in our
2003 special financial report on Form 10-K, some of which are summarized below.



66

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SUPPLEMENTAL DISCUSSION OF RESULTS OF OPERATIONS FOR THE RESTRICTED GROUP FOR THE THREE MONTHS ENDED MARCH 31, 2004

Explanatory Note

Notwithstanding that HIH is a consolidated subsidiary for U.S. GAAP purposes, it is financed separately from Huntsman LLC, its debt is non-recourse to
Huntsman LLC and it is not a guarantor of Huntsman LLC's debt. The indentures and other agreements governing Huntsman LLC's outstanding notes and the HLLC Credit Facilities contain financial covenants
and other provisions that relate to Huntsman LLC's restricted group and exclude HIH. Accordingly, the following section contains certain supplemental non-GAAP information with respect to
Huntsman LLC and its subsidiaries, excluding HIH and its subsidiaries. We believe this supplemental non-GAAP information provides investors with material and meaningful information with
respect to the financial results of the business and operations which provide the primary source of cash flow to meet our debt obligations and which are subject to the restrictive covenants in the
agreements governing our debt.

The
following consolidating financial statements present, in separate columns, financial information of the following: Huntsman LLC (on a consolidated basis as if Huntsman LLC did not
have operational control of HIH as of March 31, 2004); HIH (on a consolidated basis).

67

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

|                                          |                                         | Huntsman LLC
(excluding
HIH)                    |      | HIH      |         | Eliminations |         | Consolidated
Huntsman LLC |      
|----------------------------------------- | --------------------------------------- | ----------------------------------------------- | ---- | -------- | ------- | ------------ | ------- | ------------------------- | -----
|ASSETS                                    |                                         |                                                 |      |          |         |              |         |                           |      
|Current Assets:                           |                                         |                                                 |      |          |         |              |         |                           |      
|                                          | Cash and cash equivalents               |                                                 | $    | 33.0     |         | $            | 80.5    |                           | $    
|                                          | Accounts and notes receivables, net     |                                                 |      | 475.8    |         |              | 666.1   |                           |      
|                                          | Inventories                             |                                                 |      | 284.7    |         |              | 535.8   |                           |      
|                                          | Prepaid expenses                        |                                                 |      | 13.8     |         |              | 25.1    |                           |      
|                                          | Deferred income taxes                   |                                                 |      |         |         |              | 3.0     |                           |      
|                                          | Other current assets                    |                                                 |      | 4.9      |         |              | 72.8    |                           |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|                                          |                                         | Total current Assets                            |      |          | 812.2   |              |         | 1,383.3                   |      
|                                          | Property, plant and equipment, net      |                                                 |      | 1,282.7  |         |              | 3,222.6 |                           |      
|                                          | Investment in unconsolidated affiliates |                                                 |      | 197.3    |         |              | 148.8   |                           |      
|                                          | Intangible assets, net                  |                                                 |      | 33.7     |         |              | 238.8   |                           |      
|                                          | Goodwill                                |                                                 |      | 3.3      |         |              |        |                           |      
|                                          | Deferred income tax                     |                                                 |      | 12.0     |         |              |        |                           |      
|                                          | Other noncurrent assets                 |                                                 |      | 171.5    |         |              | 438.7   |                           |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|                                          |                                         | Total Assets                                    |      | $        | 2,512.7 |              | $       | 5,432.2                   |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT) |                                         |                                                 |      |          |         |              |         |                           |      
|Current Liabilities:                      |                                         |                                                 |      |          |         |              |         |                           |      
|                                          | Accounts payable                        |                                                 | $    | 259.5    |         | $            | 585.5   |                           | $    
|                                          | Accrued liabilities                     |                                                 |      | 200.8    |         |              | 298.4   |                           |      
|                                          | Deferred income taxes                   |                                                 |      | 14.5     |         |              |        |                           |      
|                                          | Current portion of long-term debt       |                                                 |      | 94.4     |         |              | 1.8     |                           |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|                                          |                                         | Total current liabilities                       |      |          | 569.2   |              |         | 885.7                     |      
|                                          | Long-term debt                          |                                                 |      | 1,772.9  |         |              | 3,446.4 |                           |      
|                                          | Long-term debt affiliate                |                                                 |      | 36.8     |         |              | 372.1   |                           |      
|                                          | Deferred income taxes                   |                                                 |      |         |         |              | 236.7   |                           |      
|                                          | Other noncurrent liabilities            |                                                 |      | 236.3    |         |              | 225.4   |                           |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|                                          |                                         | Total liabilities                               |      |          | 2,615.2 |              |         | 5,166.3                   |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|Minority interests                        |                                         |                                                 | (0.4 | )        |         | 6.2          |         |                           | 105.5
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|Member's equity (deficit):                |                                         |                                                 |      |          |         |              |         |                           |      
|                                          | Member's equity                         |                                                 |      | 1,095.2  |         |              |        |                           |      
|                                          | Subsidiary members' equity              |                                                 |      |         |         |              | 565.5   |                           |      
|                                          | Accumulated deficit                     |                                                 |      | (1,235.5 | )       |              | (379.6  | )                         |      
|                                          | Accumulated other comprehensive loss    |                                                 |      | 38.2     |         |              | 73.8    |                           |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|                                          |                                         | Total member's equity (deficit)                 |      |          | (102.1  | )            |         | 259.7                     |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      
|                                          |                                         | Total liabilities and member's equity (deficit) |      | $        | 2,512.7 |              | $       | 5,432.2                   |      
|                                          |                                         |                                                 |      |          |         |              |         |                           |      

68

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HUNTSMAN LLC AND SUBSIDIARIES        CONSOLIDATING CONDENSED BALANCE SHEETS DECEMBER 31, 2003        (Dollars in Millions)

|                                          |                                         | Huntsman LLC
(excluding HIH)                    |   | HIH      |         | Eliminations |         | Consolidated
Huntsman LLC |      
|----------------------------------------- | --------------------------------------- | ----------------------------------------------- | - | -------- | ------- | ------------ | ------- | ------------------------- | -----
|ASSETS                                    |                                         |                                                 |   |          |         |              |         |                           |      
|Current Assets:                           |                                         |                                                 |   |          |         |              |         |                           |      
|                                          | Cash and cash equivalents               |                                                 | $ | 30.0     |         | $            | 97.8    |                           | $    
|                                          | Accounts and notes receivables, net     |                                                 |   | 428.7    |         |              | 564.4   |                           |      
|                                          | Inventories                             |                                                 |   | 296.0    |         |              | 596.9   |                           |      
|                                          | Prepaid expenses                        |                                                 |   | 25.0     |         |              | 23.6    |                           |      
|                                          | Deferred income taxes                   |                                                 |   |         |         |              | 3.0     |                           |      
|                                          | Other current assets                    |                                                 |   | 3.4      |         |              | 83.6    |                           |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|                                          |                                         | Total current Assets                            |   |          | 783.1   |              |         | 1,369.3                   |      
|                                          | Property, plant and equipment, net      |                                                 |   | 1,294.0  |         |              | 3,256.2 |                           |      
|                                          | Investment in unconsolidated affiliates |                                                 |   | 235.0    |         |              | 138.7   |                           |      
|                                          | Intangible assets, net                  |                                                 |   | 34.9     |         |              | 247.0   |                           |      
|                                          | Goodwill                                |                                                 |   | 3.3      |         |              |        |                           |      
|                                          | Deferred income tax                     |                                                 |   | 12.0     |         |              |        |                           |      
|                                          | Other noncurrent assets                 |                                                 |   | 168.4    |         |              | 445.7   |                           |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|                                          |                                         | Total Assets                                    |   | $        | 2,530.7 |              | $       | 5,456.9                   |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|LIABILITIES AND MEMBER'S EQUITY (DEFICIT) |                                         |                                                 |   |          |         |              |         |                           |      
|Current Liabilities:                      |                                         |                                                 |   |          |         |              |         |                           |      
|                                          | Accounts payable                        |                                                 | $ | 258.8    |         | $            | 561.3   |                           | $    
|                                          | Accrued liabilities                     |                                                 |   | 204.6    |         |              | 389.5   |                           |      
|                                          | Deferred income taxes                   |                                                 |   | 14.5     |         |              |        |                           |      
|                                          | Current portion of long-term debt       |                                                 |   | 132.2    |         |              | 1.8     |                           |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|                                          |                                         | Total current liabilities                       |   |          | 610.1   |              |         | 952.6                     |      
|                                          | Long-term debt                          |                                                 |   | 1,699.9  |         |              | 3,359.9 |                           |      
|                                          | Long-term debt affiliate                |                                                 |   | 35.5     |         |              | 358.3   |                           |      
|                                          | Deferred income taxes                   |                                                 |   |         |         |              | 234.8   |                           |      
|                                          | Other noncurrent liabilities            |                                                 |   | 234.3    |         |              | 224.5   |                           |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|                                          |                                         | Total liabilities                               |   |          | 2,579.8 |              |         | 5,130.1                   |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|Minority interests                        |                                         |                                                 |  |          |         | 3.6          |         |                           | 130.9
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|Member's equity (deficit):                |                                         |                                                 |   |          |         |              |         |                           |      
|                                          | Member's equity                         |                                                 |   | 1,095.2  |         |              |        |                           |      
|                                          | Subsidiary members' equity              |                                                 |   |         |         |              | 565.5   |                           |      
|                                          | Accumulated deficit                     |                                                 |   | (1,181.1 | )       |              | (314.3  | )                         |      
|                                          | Accumulated other comprehensive loss    |                                                 |   | 36.8     |         |              | 72.0    |                           |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|                                          |                                         | Total member's equity (deficit)                 |   |          | (49.1   | )            |         | 323.2                     |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      
|                                          |                                         | Total liabilities and member's equity (deficit) |   | $        | 2,530.7 |              | $       | 5,456.9                   |      
|                                          |                                         |                                                 |   |          |         |              |         |                           |      

69

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

|                                                          |                                       | Huntsman LLC
(excluding HIH) |       | HIH   |       | Eliminations |         | Consolidated Huntsman LLC |      
|--------------------------------------------------------- | ------------------------------------- | ---------------------------- | ----- | ----- | ----- | ------------ | ------- | ------------------------- | -----
|Revenues:                                                 |                                       |                              |       |       |       |              |         |                           |      
|                                                          | Trade sales                           |                              | $     | 886.1 |       | $            | 1,461.5 |                           | $    
|                                                          | Related party sales                   |                              |       | 53.6  |       |              | 36.6    |                           |      
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|                                                          |                                       | Total revenues               |       |       | 939.7 |              |         | 1,498.1                   |      
|Cost of goods sold                                        |                                       |                              | 870.7 |       |       | 1,350.0      |         |                           | (79.6
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|Gross profit                                              |                                       |                              | 69.0  |       |       | 148.1        |         |                           | (3.6 
|Expenses:                                                 |                                       |                              |       |       |       |              |         |                           |      
|                                                          | Selling, general and administrative   |                              |       | 34.7  |       |              | 93.0    |                           |      
|                                                          | Research and development              |                              |       | 5.6   |       |              | 12.2    |                           |      
|                                                          | Other operating income                |                              |       | (1.4  | )     |              | (5.2    | )                         |      
|                                                          | Restructuring and plant closing costs |                              |       |      |       |              | 8.7     |                           |      
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|Total expenses                                            |                                       |                              | 38.9  |       |       | 108.7        |         |                           | (3.0 
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|Operating income                                          |                                       |                              | 30.1  |       |       | 39.4         |         |                           | (0.6 
|Interest expense, net                                     |                                       |                              | (46.8 | )     |       | (97.4        | )       |                           |     
|Gain (loss) on accounts receivable securitization program |                                       |                              |      |       |       | (3.5         | )       |                           |     
|Equity in earnings (losses) of unconsolidated affiliates  |                                       |                              | (38.5 | )     |       |             |         |                           | 39.2 
|Other income (expense)                                    |                                       |                              | (1.6  | )     |       | (0.2         | )       |                           |     
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|Loss before income tax benefit, and minority interests    |                                       |                              | (56.8 | )     |       | (61.7        | )       |                           | 38.6 
|Income tax benefit (expense)                              |                                       |                              | 2.4   |       |       | (3.6         | )       |                           |     
|Minority interest in subsidiaries' loss                   |                                       |                              |      |       |       |             |         |                           | 26.1 
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|Net loss                                                  |                                       |                              | (54.4 | )     |       | (65.3        | )       |                           | 64.7 
|Other comprehensive income                                |                                       |                              | 1.4   |       |       | 1.8          |         |                           | (1.8 
|                                                          |                                       |                              |       |       |       |              |         |                           |      
|Comprehensive loss                                        |                                       | $                            | (53.0 | )     | $     | (63.5        | )       | $                         | 62.9 
|                                                          |                                       |                              |       |       |       |              |         |                           |      

70

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

|                                                                         |                                                                      | Huntsman LLC
(excluding HIH)    |       | HIH  |       | Eliminations |      | Consolidated Huntsman LLC |     
|------------------------------------------------------------------------ | -------------------------------------------------------------------- | ------------------------------- | ----- | ---- | ----- | ------------ | ---- | ------------------------- | ----
|Cash flows from operating activities:                                    |                                                                      |                                 |       |      |       |              |      |                           |     
|Net loss                                                                 |                                                                      | $                               | (54.4 | )    | $     | (65.3        | )    | $                         | 64.7
|Adjustments to reconcile net loss to net cash from operating activities: |                                                                      |                                 |       |      |       |              |      |                           |     
|                                                                         | Equity in losses (income) of investment in unconsolidated affiliates |                                 |       | 38.5 |       |              |     |                           |     
|                                                                         | Depreciation and amortization                                        |                                 |       | 32.6 |       |              | 77.0 |                           |     
|                                                                         | Provision for losses on accounts receivable                          |                                 |       | (1.9 | )     |              | 0.3  |                           |     
|                                                                         | Noncash restructuring and plant closing costs                        |                                 |       |     |       |              |     |                           |     
|                                                                         | Non cash interest on affiliate debt                                  |                                 |       | 0.3  |       |              |     |                           |     
|                                                                         | Loss on disposal of plant and equipment                              |                                 |       | 0.2  |       |              |     |                           |     
|                                                                         | Noncash interest expense                                             |                                 |       | 1.7  |       |              | 32.6 |                           |     
|                                                                         | Deferred income taxes                                                |                                 |       | (0.9 | )     |              | 3.0  |                           |     
|                                                                         | Gain on foreign currency transactions                                |                                 |       |     |       |              | (6.4 | )                         |     
|                                                                         | Minority interest in subsidiaries loss                               |                                 |       |     |       |              |     |                           |     
|                                                                         | Net changes in operating assets and liabilities:                     |                                 |       |      |       |              |      |                           |     
|                                                                         |                                                                      | Receivables                     |       |      | (45.0 | )            |      | (115.4                    | )   
|                                                                         |                                                                      | Change in receivables sold, net |       |      |      |              |      | 8.8                       |     
|                                                                         |                                                                      | Inventories                     |       |      | 11.4  |              |      | 62.0                      |     
|                                                                         |                                                                      | Prepaid expenses                |       |      | 11.0  |              |      | (0.8                      | )   
|                                                                         |                                                                      | Other current assets            |       |      | (1.5  | )            |      | (13.1                     | )   
|                                                                         |                                                                      | Other noncurrent assets         |       |      | (6.2  | )            |      | (0.8                      | )   
|                                                                         |                                                                      | Accounts payable                |       |      | 0.7   |              |      | 23.3                      |     
|                                                                         |                                                                      | Accrued liabilities             |       |      | (3.8  | )            |      | (64.3                     | )   
|                                                                         |                                                                      | Other noncurrent liabilities    |       |      | 2.7   |              |      | (0.1                      | )   
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Net cash provided by operating activities                                |                                                                      |                                 | (14.6 | )    |       | (59.2        | )    |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Investing activities:                                                    |                                                                      |                                 |       |      |       |              |      |                           |     
|Capital expenditures                                                     |                                                                      |                                 | (15.9 | )    |       | (38.2        | )    |                           |    
|Investment in unconsolidated affiliate                                   |                                                                      |                                 |      |      |       | (11.9        | )    |                           |    
|Net cash received from unconsolidated affiliates                         |                                                                      |                                 |      |      |       | 1.2          |      |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Net cash used in investing activities                                    |                                                                      |                                 | (15.9 | )    |       | (48.9        | )    |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Financing activities:                                                    |                                                                      |                                 |       |      |       |              |      |                           |     
|Net borrowings under revolving loan facilities                           |                                                                      |                                 | 72.8  |      |       | 88.0         |      |                           |    
|Net borrowings on overdraft                                              |                                                                      |                                 |      |      |       | 4.9          |      |                           |    
|Repayment of long term debt                                              |                                                                      |                                 | (38.6 | )    |       |             |      |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Net cash provided by financing activities                                |                                                                      |                                 | 34.2  |      |       | 92.9         |      |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Effect of exchange rate changes on cash                                  |                                                                      |                                 | (0.7  | )    |       | (2.1         | )    |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Increase (decrease) in cash and cash equivalents                         |                                                                      |                                 | 3.0   |      |       | (17.3        | )    |                           |    
|Cash and cash equivalents at beginning of period                         |                                                                      |                                 | 30.0  |      |       | 97.8         |      |                           |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     
|Cash and cash equivalents at end of period                               |                                                                      | $                               | 33.0  |      | $     | 80.5         |      | $                         |    
|                                                                         |                                                                      |                                 |       |      |       |              |      |                           |     

71

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Results of Operations (Excluding HIH)

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 (Unaudited) (Dollars in Millions)

|                                                                                                                |  | Three months ended March 31, |      
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | -----
|
|Revenues                                                                                                        |  | $                            | 939.7
|Cost of goods sold                                                                                              |  |                              | 870.7
|                                                                                                                |  |                              |      
|Gross profit                                                                                                    |  |                              | 69.0 
|Expenses of selling, general and administrative, research and development, and other operating income (expense) |  |                              | 38.9 
|                                                                                                                |  |                              |      
|Operating income                                                                                                |  |                              | 30.1 
|Interest expense, net                                                                                           |  |                              | (46.8
|Equity income (loss) on investments in unconsolidated affiliates                                                |  |                              | 0.7  
|Other expense                                                                                                   |  |                              | (1.6 
|                                                                                                                |  |                              |      
|Loss before income tax benefit and minority interests                                                           |  |                              | (17.6
|Income tax benefit                                                                                              |  |                              | 2.4  
|                                                                                                                |  |                              |      
|Net loss                                                                                                        |  | $                            | (15.2
|                                                                                                                |  |                              |      
|Net loss                                                                                                        |  | $                            | (15.2
|Interest expense, net                                                                                           |  |                              | 46.8 
|Income tax benefit (expense)                                                                                    |  |                              | (2.4 
|Depreciation and amortization                                                                                   |  |                              | 32.6 
|                                                                                                                |  |                              |      
|EBITDA(1)                                                                                                       |  | $                            | 61.8 
|                                                                                                                |  |                              |      

---

72

---



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

Three months ended March 31,2004

2003Foreign exchange gainsunallocated

$
0.1

$
2.8Early extinguishment of debt


(1.9
)




Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 (Excluding HIH)

For the three months ended March 31, 2004 we had a net loss of $15.2 million on revenues of $939.7 million, compared to a net loss of
$34.1 million on revenues of $831.9 million for the three months ended March 31, 2003. The decrease of $18.9 million in net loss was the result of the following items:



73

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The
following table sets forth the sales and EBITDA for each of our operating segments:

Huntsman LLC (Excluding HIH)

Three Months Ended March 31,2004

2003RevenuesPerformance Products

$
301.5

$
278.9Polymers


314.5


288.8Base Chemicals


385.3


335.2Eliminations


(61.6
)

(71.0
)Total

$
939.7

$
831.9Segment EBITDAPerformance Products

$
33.5

$
36.8Polymers


18.9


13.4Base Chemicals


21.9


(8.2
)Corporate and other


(12.5
)

(9.5
)Total

$
61.8

$
32.5


Performance Products

For the three months ended March 31, 2004, Performance Products revenues increased by $22.6 million, or 8%, to $301.5 million from
$278.9 million in the same period in 2003. Overall, segment sales volumes fell by 4% and average selling prices increased by 11%. Ethylene glycol revenues fell by 16% over the same period in
2003. While ethylene glycol average selling prices rose by 18% in response to higher raw material and energy costs and higher industry operating rates, sales volumes decreased by 29% due to reduced
feedstock availability during a catalyst change on one of our ethylene oxide units. MAn revenues increased by 28% compared to the same period in 2003, as volumes rose by 15% and average selling prices
increased by 14%. The increase in average selling prices was mainly due to increased sales of higher-priced catalyst. In Australia, our surfactants revenues increased 35% over the same period in 2003,
as volumes increased by 5%, and average selling prices rose by 28% due to the strength of the Australian dollar versus the U.S. dollar, partially offset by pricing pressures from imported competitive
products. In the U.S., surfactants revenues rose by 3% as compared to the same period in 2003. U.S. surfactants volumes fell by 6%, primarily due to a market shift away from nonyl phenol ethoxylates
to alternative products, but also as a result of our strategic decision to discontinue sales to certain customers in response to unattractive pricing. In the U.S., surfactants prices increased by 9%,
primarily in response to higher raw material and energy costs and an improved product mix. In an effort to reduce costs and better serve our customers, we entered into an arrangement with HI during
2003 pursuant to which HI performs all sales activities with respect to our performance chemicals in Europe and in the Asia Pacific region ("APAC"). While performance chemicals revenues increased by
only 1% over the same period in 2003, other sales income increased $5.4 million in the first three months of 2004, mainly due to the revenues received from HI in connection with a related toll
manufacturing agreement. Performance chemicals sales volumes were 16% lower as European and APAC sales activity for these products was transferred to HI during 2003. Ethanolamines revenues increased
45%, as volumes increased by 30% primarily due to increased sales in the wood preservative market where ethanolamines are favored over traditional materials due to better environmental performance.
Ethanolamines average selling prices increased 11%, primarily in response to higher raw material and energy costs. LAB revenues increased 10% over the same period in 2003, as volumes

74

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improved
by 11% due to increased volumes at existing customers, while prices fell by 1% due to competitive pressures.

For
the three months ended March 31, 2004, Performance Products segment EBITDA decreased by $3.3 million from $36.8 million for the three months ended
March 31, 2003 to $33.5 million. Lower EBITDA resulted mainly from the $7.7 million impact of lower sales volumes. A $30.2 million improvement in selling prices and a
$5.4 million increase in revenues received from HI as part of the previously discussed sales and toll manufacturing arrangements more than offset the $31.1 million increase in raw
material and energy costs. Manufacturing costs increased by $6.2 million, of which $1.3 million was due to foreign currency movements, with the remainder mainly due to higher maintenance
and waste disposal costs. Overall, SG&A and other operating expenses decreased by $2.0 million, due mainly to commissions received from HI in connection with the implementation of the toll
processing arrangement.

Polymers

For the three months ended March 31, 2004, Polymers revenues increased by $25.7 million, or 9%, to $314.5 million from $288.8 million
for the same period in 2003. Overall, sales volumes increased by 4% and average selling prices increased by 5%. Polyethylene revenues decreased by 1%, resulting from a 9% decrease in sales volumes,
partially offset by an 8% increase in average selling prices. Lower polyethylene sales volumes were largely the result of weaker demand but were also impacted by our efforts to build inventory in
preparation for the planned T&I at our Odessa, Texas facility. Polyethylene prices increased primarily in response to higher underlying raw material and energy costs. Polypropylene revenue increased
by 18%, resulting from a 13% increase in average selling prices, primarily as a result of higher raw material and energy costs, and a sales volume increase of 5% on stronger demand. APAO revenues
increased by 19%, as sales volumes increase 19%, largely as a result of increased sales in the export market, and in response to an improved product mix. Expandable polystyrene revenue decreased by
6%, resulting from a 14% decrease in sales volumes, primarily due to higher demand in the 2003 period as a result of customer pre-buying in anticipation of price increases expected in the
second quarter 2003, partially offset by an 8% increase in average selling prices, primarily in response to higher underlying raw material and energy costs. Australian styrenics revenues increased by
10%, resulting from a 17% increase in average selling prices that was attributable to the strength of the Australian dollar versus the U.S. dollar, partially offset by a 6% decrease in sales volumes.

For
the three months ended March 31, 2004, Polymers segment EBITDA increased by $5.5 million to $18.9 million from $13.4 million for the same period in 2003.
The increase in EBITDA is primarily the result of increases in selling prices of $23.9 million, which were offset by increases in raw material and energy costs of $12.9 million. In
addition, manufacturing fixed costs were higher by $5.0 million, primarily due to the strength of the Australian dollar versus the U.S. dollar.

Base Chemicals

For the three months ended March 31, 2004, Base Chemicals revenues increased by $50.1 million, or 15%, to $385.3 million from
$335.2 million for the same period in 2003. Overall, sales volumes increased by 3% and average selling prices increased by 12%. Volumes in our olefins products were relatively flat while prices
increased 18% in response to higher raw material and energy costs. Butadiene sales volumes increased 7%, while sales prices remained relatively flat. MTBE volumes increased 25% due to the planned T&I
at our Port Neches, Texas facility in March 2003, better production yields, and additional sales to HI in February 2004 to meet customer demand during its planned T&I. MTBE sales prices
increased 24% in response to higher raw material and energy costs. Cyclohexane volumes decreased by 6% while prices increased 18% in response to higher raw material and energy costs.

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Base
Chemicals segment EBITDA for the three months ended March 31, 2004 increased by $30.1 million to $21.9 million from a loss of $8.2 million for the same
period in 2003. The increase in EBITDA is primarily the result of a $44.7 million increase in average selling prices, which was partially offset by a $16.5 million increase in raw
material and energy costs, a $0.6 million overall decrease in sales volume due to fluctuations in customer and product mix, and a $0.2 million increase in fixed manufacturing expenses.
SG&A and other operating costs were relatively flat as compared to the comparable period in 2003.

Unallocated and Other

Corporate and other items includes unallocated corporate overhead, unallocated foreign exchange gains and losses and other non-operating income and
expense. For the three months ended March 31, 2004, EBITDA from unallocated items decreased by $3.0 million to a loss of $12.5 million from a loss of $9.5 million for the
same period in 2003. This decrease is primarily due to a $2.7 million decrease in unallocated foreign currency gains and a $1.9 million loss on early extinguishment of debt, partially
offset by an increase in management fees to HI of $1.8 million.

Liquidity and Capital Resources (Excluding HIH)

Cash

Net cash used in operating activities for the three months ended March 31, 2004 was $14.6 million as compared to a use of cash of
$60.6 million for the comparable period ended March 31, 2003. The decrease in cash used in operating activities is primarily attributable to increased operating income as described above
and a smaller increase in net working capital in the 2004 period.

Capital
expenditures for the three months ended March 31, 2004 were $15.9 million as compared to approximately $12.7 million for the same period in 2003.

Net
cash provided by financing activities for the three months ended March 31, 2004 was $34.2 million as compared to $72.1 million in the comparable period ended
March 31, 2003. This decrease is primarily attributable to reduced net borrowings to fund operating cash needs as explained above.

Debt and Liquidity

The HLLC Credit Facilities consist of the HLLC Revolving Facility of up to $275 million that matures on June 30, 2006, the Term Loan A facility of
$606.3 million as of March 31, 2004 and the Term Loan B facility of $459.0 million as of March 31, 2004. As of March 31, 2004, our restricted group had outstanding
variable rate borrowings of approximately $1.3 billion. The weighted average interest rate of these borrowings was 7.2%. This weighted average rate does not consider the effects of interest
rate hedging activities. With respect to Term Loan A, as of March 3, 2004 the interest rate margin was 4.75% for eurocurrency loans. With respect to Term Loan B, the interest rate margin for
eurocurrency loans increased 50 basis points on January 1, 2004 to 8.25%. On April 1, 2004 the interest rate margin for eurocurrency loans increased by an additional 75 basis points to
9.00%. On July 1, 2004, the interest rate margin will increase by 75 basis points to 9.75%. The next scheduled quarterly amortization payment under the HLLC credit facilities is due
March 2006.

We
depend upon the HLLC Revolving Facility to provide liquidity for our operations and working capital needs. As of March 31, 2004, our restricted group had $85.0 million
of outstanding borrowings and approximately $16 million of outstanding letters of credit under our $275 million HLLC Revolving Facility, and, at our restricted group, we had
$33.0 million of cash on our balance sheet. Accordingly, as of March 31, 2004, our restricted group had cash and unused borrowing capacity of approximately $207 million. On
January 28, 2004, we borrowed $37.5 million under the HLLC Revolving Facility to

76

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redeem,
in full, the Huntsman Polymers Notes (representing principal of $36.8 million plus accrued interest). The Huntsman Polymers Notes would have been due in December 2004 and bore
interest at 113/4%.

The
HLLC Credit Facilities contain financial covenants, including a minimum interest coverage ratio, a minimum fixed charge ratio and a maximum debt to EBITDA ratio, as defined therein,
and limits on capital expenditures, in addition to restrictive covenants customary to financings of this type, including limitations on liens, debt and the sale of assets. On May 6, 2004, we
amended certain financial covenants in the HLLC Credit Facilities. The amendment applies to both the HLLC Revolving Facility and the HLLC Term Facilities and provides for, among other things, the
amendment of certain financial covenants through the fourth quarter 2005. The amendment provided for an increase in the maximum leverage ratio, and a decrease in the minimum interest coverage ratio
and the fixed charge coverage ratio. The amendment also amends the mandatory prepayment provisions contained in the HLLC Credit Facilities to permit us, after certain levels of repayment of our Term
Loan B, to use subordinate debt or equity proceeds to repay a portion of the outstanding indebtedness of certain of our Australian subsidiaries.

On
September 30, 2003, we sold $380 million aggregate principal amount of the 2003 Senior Secured Notes at a discount to yield 11.875% in a private offering. On
December 3, 2003 we sold an additional $75.4 million aggregate principal amount of the 2003 Secured Notes at a discount to yield 11.72%.

Certain
of our Australian subsidiaries maintain credit facilities that are non-recourse to us. Our Australian subsidiaries are currently not in compliance with covenants
contained in these credit facilities. The outstanding debt balances of our Australian subsidiaries have been classified in current portion of long-term debt. HCCA, our subsidiary that
holds our Australian styrenics assets, maintains the HCCA Facilities, consisting of a term facility and a working capital facility. As of March 31, 2004, there were no financial covenants in
place. Such covenants are currently being negotiated. HCCA failed to make its semiannual scheduled amortization payments of A$5 million (approximately $3.7 million) each due in
July 2003 and January 2004 under its term facility. An A$1 million payment was made by HCCA on the term facility during the three months ended March 31, 2004. Short term
cash flows generated by HCCA will likely not be sufficient to bring current its missed payments, as well as meet its next scheduled amortization payment of A$5 million (approximately
$3.7 million) due in July 2004. Management of HCCA continues its efforts to renegotiate the terms of the HCCA Facilities. We have reached an agreement in principle with the lender under
the HCCA Facilities that will provide for a period of time during which HCCA and the lender will evaluate various alternatives for restructuring the HCCA Facilities.

HAHC
and certain of its subsidiaries that hold our Australian surfactants assets are parties to the HAHC Facilities established in December 1998. The HAHC Facilities are subject
to financial covenants, including leverage ratio, interest coverage ratio and limits on capital expenditures, in addition to restrictive covenants customary to financings of this type, including
limitations on liens, debt and the sale of assets. As of March 31, 2004, HAHC was not in compliance with certain provisions of the HAHC Facilities agreements. Management of HAHC believes that
HAHC will be able to renegotiate the terms of the HAHC Facilities.

We
believe the current liquidity of our restricted group, together with funds generated by our businesses, is sufficient to meet the short-term and long-term
needs of our businesses, including funding operations, making capital expenditures and servicing our debt obligations in the ordinary course. Except as noted above regarding our
non-recourse Australian credit facilities, we believe that we are currently in compliance with the covenants contained in the agreements governing all of our other debt obligations. We
review our financial covenants on a regular basis and will seek amendments to such covenants if necessary.

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Certain Credit Support Issues

HIH and HI, which are unrestricted subsidiaries, have not guaranteed or provided any other credit support to our restricted group's obligations under the HLLC
Credit Facilities, the HLLC Notes or the 2003 Secured Notes, and Huntsman LLC has not guaranteed or provided any other credit support to the obligations of HI under the HI Credit Facilities, or to the
obligations of HI and HIH under their outstanding high-yield notes. Because of restrictions contained in the financing arrangements of HIH and HI, these subsidiaries are presently unable
to make any "restricted payments" to our Company, including dividends, distributions or other payments in respect of equity interests or payments to purchase, redeem or otherwise acquire or retire for
value any of their equity interests, subject to exceptions contained in such financing arrangements. Events of default under the HI Credit Facilities, or under the high-yield notes of HIH
and HI or the exercise of any remedy by the lenders thereunder will not cause any cross-defaults or cross-accelerations under the HLLC Credit Facilities, the HLLC Notes or the 2003 Secured Notes.
Additionally, any events of default under the HLLC Credit Facilities, the HLLC Notes or the 2003 Secured Notes, or the exercise of any remedy by the lenders thereunder, will not cause any
cross-defaults or cross-accelerations under the outstanding high-yield notes of HIH or HI or the HI Credit Facilities, except insofar as foreclosure on the stock of Huntsman Specialty
Chemical Holdings Corporation, the stock of Huntsman Specialty or the HIH Membership Interests pledged to secure our obligations under the HLLC Credit Facilities or the 2003 Secured Notes, would
constitute a "change of control" and an event of default under the HI Credit Facilities and would give certain put rights to the holders of the high-yield notes of HI or HIH.

On
May 9, 2003, HMP issued the HMP Senior Discount Notes. Interest is paid in kind. The HMP Senior Discount Notes are secured by a first priority lien on the HIH Senior
Subordinated Discount Notes acquired by HMP in connection with the HIH Consolidation Transaction, the 10% direct and 30% indirect equity interests held by HMP in HIH, HMP's common stock outstanding as
of May 9, 2003, and HMP's 100% equity interest in the Company. A payment default under the HMP Senior Discount Notes or any other default that would permit the holders to accelerate the unpaid
balance thereunder would also constitute a default under the HLLC Credit Facilities. Foreclosure on the stock of HMP or the equity interest in the Company would constitute a "change of control" and an
event of default under the HLLC Credit Facilities and the HI Credit Facilities, and would give certain put rights to the holders of the HLLC Notes, the 2003 Secured Notes, and the
high-yield notes of HI and HIH.

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Changes in Financial Condition (Excluding HIH)

The following information summarizes our net working capital position as of March 31, 2004 and December 31, 2003 (dollars in millions):

|                     |                                   | March 31, 2004            |       | December 31, 2003 |       | Difference |      
|-------------------- | --------------------------------- | ------------------------- | ----- | ----------------- | ----- | ---------- | -----
|Current assets:      |                                   |                           |       |                   |       |            |      
|                     | Cash and cash equivalents         |                           | $     | 33.0              |       | $          | 30.0 
|                     | Accounts and notes receivables    |                           |       | 475.8             |       |            | 428.7
|                     | Inventories                       |                           |       | 284.7             |       |            | 296.0
|                     | Prepaid expenses                  |                           |       | 13.8              |       |            | 25.0 
|                     | Other current assets              |                           |       | 4.9               |       |            | 3.4  
|                     |                                   |                           |       |                   |       |            |      
|                     |                                   | Total current assets      |       |                   | 812.2 |            |      
|                     |                                   |                           |       |                   |       |            |      
|Current liabilities: |                                   |                           |       |                   |       |            |      
|                     | Accounts payable                  |                           |       | 259.5             |       |            | 258.8
|                     | Accrued liabilities               |                           |       | 200.8             |       |            | 204.6
|                     | Deferred income taxes             |                           |       | 14.5              |       |            | 14.5 
|                     | Current portion of long-term debt |                           |       | 94.4              |       |            | 132.2
|                     |                                   |                           |       |                   |       |            |      
|                     |                                   | Total current liabilities |       |                   | 569.2 |            |      
|                     |                                   |                           |       |                   |       |            |      
|Working capital      |                                   | $                         | 243.0 |                   | $     | 173.0      |      
|                     |                                   |                           |       |                   |       |            |      

At
March 31, 2004 our net working capital position was $243.0 million as compared to $173.0 million at December 31, 2003, resulting in an increase of
$70.0 million. The changes in working capital can be explained as follows:



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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes in interest rates, currency exchange rates and certain commodity prices. Our exposure to foreign currency market
risk is somewhat limited since our sales prices are typically denominated in euros or U.S. dollars. From time to time, we may enter into foreign currency derivative instruments to minimize the
short-term impact of movements in foreign currency rates. Our exposure to changing commodity prices is somewhat limited since the majority of our raw materials are acquired at posted or
market related prices, and sales prices for finished products are generally at market related prices which are set on a quarterly basis in line with industry practice. To manage the volatility
relating to these exposures, from time to time, we enter into various derivative transactions. We hold and issue derivative financial instruments for economic hedging purposes only.

Our
cash flows and earnings are subject to fluctuations due to exchange rate variation. Short-term exposures to changing foreign currency exchange rates at certain foreign
subsidiaries are generally first netted with exposures of other subsidiaries and the remaining exposures then, from time to time, may be managed through financial market transactions, principally
through the purchase of forward foreign exchange contracts (with maturities of nine months or less) with various financial institutions, to reflect the currency denomination of our cash flows. We do
not hedge our currency exposures in a manner that would entirely eliminate the effect of changes in exchange rates on our cash flows and earnings. As of March 31, 2004, we had no outstanding
forward foreign exchange contracts. Our hedging activity from time to time comprises selling forward surpluses of non-dollar receivables for U.S. dollars.

Under
the terms of the HLLC Credit Facilities and the HI Credit Facilities, we are required to hedge a significant portion of our floating rate debt. As of March 31, 2004, HI had
entered into approximately $361.0 million notional amount of interest rate swap, cap and collar transactions, which have remaining terms ranging from approximately three to six months. The
majority of these transactions hedge against movements in U.S. dollar interest rates. The U.S. dollar swap transactions obligate us to pay fixed amounts ranging from approximately 5.84% to
approximately 6.91%. The U.S. dollar collar transactions carry floors ranging from 5.0% to 6.25% and caps ranging from 6.75% to 7.25%. We have also entered into a euro-denominated swap
transaction that obligates us to pay a fixed rate of approximately 4.32%.

As
of March 31, 2004, Huntsman LLC (excluding HIH) had entered into approximately $234.6 million notional amount of interest rate swap, cap and collar transactions, which
have remaining terms ranging
from approximately one to thirty-nine months. The majority of these transactions hedge against movements in U.S. dollar interest rates. The U.S. dollar swap transactions obligate us to pay
fixed amounts ranging from approximately 3.78% to approximately 6.55%. We do not hedge our interest rate exposure in a manner that would eliminate the effects of changes in market interest rates on
our cash flow and earnings.

Assuming
a 1.0% (100 basis point) increase in interest rates, without giving effect to interest rate hedges, the effect on the annual interest expense would be an increase of
approximately $25 million (approximately $13 million pertaining to each of HIH and Huntsman LLC (excluding HIH)). This increase would be reduced by approximately $6 million, on an
annualized basis (approximately $4 million and $2 million pertaining to HIH and Huntsman LLC (excluding HIH), respectively), as a result of the effects of the interest rate swap, cap and
collar transactions described above.

In
order to reduce overall raw material cost volatility, from time to time we enter into various commodity contracts to hedge our purchase of commodity products. We do not hedge our
commodity exposure in a manner that would eliminate the effects of changes in commodity prices on our cash flows and earnings. At March 31, 2004, we had forward purchase contracts for 35,000
tonnes of naphtha and 20,000 tonnes of other hydrocarbons, which do not qualify for hedge accounting. Assuming a 10% increase or a 10% decrease in the price per tonne of naphtha, the impact on the
forward purchase contracts would result in losses and gains of approximately $0.3 million, respectively.

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ITEM 4.    CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of March 31, 2004. Based on this
evaluation, our chief executive officer and chief financial officer have concluded that, as of March 31, 2004, our disclosure controls and procedures were (1) designed to ensure that
material information relating to our Company, including our consolidated subsidiaries, is made known to the chief executive officer and chief financial officer by others within those entities,
particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by our Company in
the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms.

In
February 2004, we discovered an error in accounting for product exchange balances under a toll processing agreement with a customer. The error was caused by the use of an
incorrect exchange factor in our new SAP-based enterprise resource planning ("ERP") system. The use of the incorrect exchange factor resulted from the implementation of and transition to
our new SAP-based ERP system in 2003. In investigating this error, we discovered that timely reconciliation of product exchange balances maintained by certain business units was not
performed by the business unit's staff, and corporate accounting reviews of such reconciliations were not performed. In response to our discovery of this accounting error and the reconciliation
failures, we have implemented improvements to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in
February 2004. These improvements consisted of the implementation of the following policies:



In
March 2004, our management discovered that we had inappropriately calculated foreign exchange gains and losses with respect to our accounts receivable securitization program
and had incorrectly classified the foreign exchange gains and losses on the securitized receivables denominated in foreign currency in our consolidated statements of operations for each of the first
three quarters of 2003. The use of this inappropriate calculation methodology and the incorrect classification of the foreign exchange gains and losses on the receivables denominated in foreign
currency was caused by (i) our accounting group management's lack of understanding of the calculation method employed, (ii) a failure to train the accounting staff personnel responsible
for these calculations in the structure of the accounts receivable securitization program and (iii) a failure to properly supervise and review the work of the personnel making these
calculations. In response to our discovery of the use of this inappropriate calculation methodology and the management failures, we have implemented improvements to our internal control over financial
reporting (as defined in Rules 3a-15(f) and 15d-15(f) under the Exchange Act) in March 2004. These improvements consisted of the following:



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Except
as described above, no change in our internal control over financial reporting occurred during the three months ended March 31, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are a party to various proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including
various environmental, products liability and other laws. Except as otherwise disclosed in this report, and based in part on the indemnities provided to us in connection with the transfer of
businesses to us and our insurance coverage, we do not believe that the outcome of any of these matters will have a material adverse effect on our financial condition or results of operations. See
"Part IItem 2Management's Discussion and Analysis of Financial Condition and Results of OperationsEnvironmental Matters" for a discussion of environmental
proceedings.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K



83

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84

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SIGNATURE

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

|                   | HUNTSMAN LLC                                                                                                                                              
|------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|                   | /s/J. KIMO ESPLINJ. Kimo Esplin Executive Vice President and Chief Financial Officer
(Authorized Signatory and Principal Financial and Accounting Officer)
|Date: May 17, 2004 |                                                                                                                                                           

---



EXHIBIT INDEX

|Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1    |  | Indenture, dated as of September 30, 2003, among Huntsman LLC, the Guarantors party thereto and HSBC Bank USA, as Trustee, relating to the 115/8% Senior Secured Notes due 2010 (incorporated by
reference to Exhibit 4.36 to our registration statement on Form S-4 (File No. 333-112279))                                                                                                                                                                                                     
|4.2    |  | Form of unrestricted 115/8% Senior Secured Note due 2010 (included as Exhibit A-2 to Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                               
|4.3    |  | Form of guarantee relating to the 115/8% Senior Secured Notes due 2010 (included as Exhibit E to Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                   
|4.4    |  | Exchange and Registration Rights Agreement, dated as of September 30, 2003, among Huntsman LLC, the Guarantors as defined therein, and the Purchasers as defined therein, relating to $380,000,000 aggregate principal amount of the
115/8% Senior Secured Notes due 2010 (incorporated by reference to Exhibit 4.39 to our registration statement on Form S-4 (File No. 333-112279))                                                                                                           
|4.5    |  | Exchange and Registration Rights Agreement, dated as of December 12, 2003, among Huntsman LLC, the Guarantors as defined therein, and the Purchasers as defined therein, relating to $75,400,000 aggregate principal amount of the
115/8% Senior Secured Notes due 2010 (incorporated by reference to Exhibit 4.40 to our registration statement on Form S-4 (File No. 333-112279))                                                                                                             
|10.1   |  | Fifth Amendment to Revolving Credit Agreement, dated as of May 6, 2004, by and among Huntsman LLC, Huntsman Petrochemical Corporation, Huntsman Expandable Polymers Company, LC, Huntsman Polymers Corporation, Huntsman Fuels L.P., Huntsman
International Trading Corporation, certain financial institutions party thereto, including Deutsche Bank Trust Company Americas, in their capacities as lenders, and Deutsche Bank Trust Company Americas, as administrative agent for the
lenders
|10.2   |  | Fifth Amendment to Amended and Restated Credit Agreement, dated as of May 6, 2004, by and among Huntsman LLC, the financial institutions party thereto, including Deutsche Bank Trust Company Americas, in their capacities as lenders, and Deutsche
Bank Trust Company Americas, as administrative agent for the lenders                                                                                                                                                                       
|31.1   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                              
|31.2   |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                              
|32.1   |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                               
|32.2   |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                               

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