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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

Form 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008ORo

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




Commission
File Number

Exact Name of Registrant as Specified in its Charter,
Principal Office Address and Telephone Number

State of
Incorporation/Organization

I.R.S. Employer Identification No.001-32427

Huntsman Corporation
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700


Delaware


42-1648585333-85141

Huntsman International LLC
500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700


Delaware


87-0630358




Securities registered pursuant to Section 12(b) of the Exchange Act:

Registrant

Title of each class

Name of each exchange on which registeredHuntsman Corporation

Common Stock, par value $0.01 per share

New York Stock ExchangeHuntsman International LLC

None

None


Securities registered pursuant to Section 12(g) of the Exchange Act:

Registrant

Title of each classHuntsman Corporation


NoneHuntsman International LLC


None




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Huntsman Corporation

YES o

NO ýHuntsman International LLC

YES o

NO ý


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Huntsman Corporation

YES o

NO ýHuntsman International LLC

YES o

NO ý


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.

Huntsman Corporation

YES ý

NO oHuntsman International LLC

YES ý

NO o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Huntsman Corporation

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer oHuntsman International LLC

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Huntsman Corporation

YES o

NO ýHuntsman International LLC

YES o

NO ý




On June 30, 2008, the last business day of the registrants' most recently completed second fiscal quarter, the aggregate market value of voting and
non-voting common equity held by nonaffiliates was as follows:

Registrant

Common Equity

Market Value Held by NonaffiliatesHuntsman Corporation

Common Stock

$
1,857,576,135
(1)Huntsman International LLC

Units of Membership Interest

$
0
(2)






On
February 13, 2009, the number of shares outstanding of each of the registrant's classes of common equity were as follows:

Registrant

Common Equity

OutstandingHuntsman Corporation

Common Stock


234,430,334Huntsman International LLC

Units of Membership Interest


2,728




This
Annual Report on Form 10-K presents information for two registrants: Huntsman Corporation and Huntsman International LLC. Huntsman
International LLC is a wholly owned subsidiary of Huntsman Corporation and is the principal operating company of Huntsman Corporation. The information reflected in this Annual Report on
Form 10-K is equally applicable to both Huntsman Corporation and Huntsman International LLC, except where otherwise indicated.

Huntsman
International LLC meets the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K and, to the extent applicable,
is therefore filing this form with a reduced disclosure format.

Documents Incorporated by Reference

Part III: Proxy Statement for the 2009 Annual Meeting of Stockholders or an amendment to this report to be filed within 120 days of
Huntsman Corporation's fiscal year ended December 31, 2008.



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HUNTSMAN CORPORATION AND SUBSIDIARIES        HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        2008 ANNUAL REPORT ON FORM 10-K
    TABLE OF CONTENTS



PagePART IITEM 1.

BUSINESS


1ITEM 1A.

RISK FACTORS


37ITEM 1B.

UNRESOLVED STAFF COMMENTS


48ITEM 2.

PROPERTIES


48ITEM 3.

LEGAL PROCEEDINGS


51ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


56EXECUTIVE OFFICERS OF THE REGISTRANT


57PART IIITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


60ITEM 6.

SELECTED FINANCIAL DATA


60ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


63ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


97ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


99ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


99ITEM 9A.

CONTROLS AND PROCEDURES


99ITEM 9B.

OTHER INFORMATION


106PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


106ITEM 11.

EXECUTIVE COMPENSATION


106ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


106ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


106ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


106PART IVITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


107


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HUNTSMAN CORPORATION AND SUBSIDIARIES    HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES    2008 ANNUAL REPORT ON FORM 10-K

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 or dispositions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as
"believes," "expects," "may," "will," "should," "anticipates" or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional
forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary
statements.

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

There
are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report.
Any forward-looking statements should be considered in light of the risks set forth in "Part I. Item 1A. Risk Factors" and elsewhere in this report.

This
report includes information with respect to market share, industry conditions and forecasts that we obtained from internal industry research, publicly available information
(including industry publications and surveys), and surveys and market research provided by consultants. The publicly available information and the reports, forecasts and other research provided by
consultants generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such
information. We have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, our internal
research and forecasts are based upon our management's understanding of industry conditions, and such information has not been verified by any independent sources.

For
convenience in this report, the terms "Company," "our," "us," or "we" may be used to refer to Huntsman Corporation and, unless the context otherwise requires, its subsidiaries and
predecessors. Any references to our "Company," "we," "us" or "our" as of a date prior to October 19, 2004 (the date of our formation) are to Huntsman Holdings, LLC and its subsidiaries
(including their respective predecessors). In this report, "Huntsman International" refers to Huntsman International LLC (our 100% owned subsidiary) and, unless the context otherwise requires,
its subsidiaries; "HPS" refers to Huntsman Polyurethanes Shanghai Ltd. (our consolidated splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd); "SLIC" refers to
Shanghai Liengheng Isocyanate Investment BV (our unconsolidated manufacturing joint venture with BASF AG and three Chinese chemical companies); "HMP Equity Trust" refers to HMP Equity Trust
(the holder of approximately 20% of our common stock); and "Hexion" refers to Hexion Specialty Chemicals, Inc., an entity owned by an affiliate of Apollo Management, L.P. ("Apollo").

In
this report, we may use, without definition, the common names of competitors or other industry participants. We may also use the common names or abbreviations for certain chemicals or
products. Many of these terms are defined in the Glossary of Chemical Terms found at the conclusion of "Part I, Item 1. Business" below.

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PART I

ITEM 1.    BUSINESS

GENERAL

Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the predecessor
to our Company in the early 1970s as a small packaging company. Since then, we have grown through a series of significant acquisitions and now own a global portfolio of businesses. In 2005, we
completed an initial public stock offering.

In
2006 and 2007, we completed a series of transactions pursuant to which we have disposed of our former commodity chemicals businesses:



We
operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999. Other
than the $250 million 7% convertible senior notes discussed in "Recent DevelopmentsSale of Notes in Connection with Settlement Agreement" below, substantially all of
our debt obligations are obligations of Huntsman International and/or its subsidiaries.

Our
principal executive offices are located at 500 Huntsman Way, Salt Lake City, Utah 84108, and our telephone number at that location is (801) 584-5700.

TERMINATION OF MERGER AGREEMENT AND SETTLEMENT OF RELATED LITIGATION

On July 12, 2007, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Hexion pursuant to which Hexion
agreed to acquire all of our outstanding common stock for $28.00 per share (plus a ticking fee) in cash (the "Merger"). On June 18, 2008, Hexion, Apollo and certain of their affiliates filed an
action for declaratory judgment against us in Delaware Chancery Court (the "Delaware Litigation"). On June 23, 2008, we sued Apollo and certain of its affiliates in the District Court of
Montgomery County, Texas (the "Texas Apollo Litigation") alleging tortious interference with our previously executed merger agreement with Basell (the "Basell Merger Agreement"). On July 2,
2008, we countersued Hexion and Apollo in the Delaware Litigation seeking specific performance of the Merger Agreement and, alternatively, damages.

Following
a six-day trial in the Delaware Chancery Court, Vice Chancellor Stephen P. Lamb issued an Opinion and an Order and Final Partial Judgment, ruling that, among
other things, we had not suffered a material adverse effect in our business and that Hexion knowingly and intentionally breached numerous of its covenants under the Merger Agreement (as a result of
which Hexion's liability for damages for failing to consummate the Merger would not be limited to the $325 million termination fee (the "Termination Fee") as provided in the Merger Agreement).
Vice Chancellor Lamb ordered Hexion to specifically perform its covenants under the Merger Agreement, including its covenants to (i) use reasonable best efforts to consummate the Merger and
financing provided under the

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commitment
letter provided to Hexion (the "Commitment Letter") by affiliates of Credit Suisse and Deutsche Bank A.G. (the "Lenders"), (ii) refrain from taking any further action that could
reasonably be expected to materially impair, delay or prevent consummation of financing, and (iii) take all actions necessary to obtain antitrust approval for the Merger by October 2,
2008. A copy of Vice Chancellor Lamb's opinion and order are attached to our current report on Form 8-K filed on September 30, 2008.

On
September 30, 2008, we filed suit in the 9th Judicial District Court in Montgomery County, Texas against the Lenders alleging, among other things, that the Lenders had
conspired with Apollo to tortiously interfere with the Basell Merger Agreement (the "Texas Bank Litigation").

As
a result of the Delaware Litigation, Hexion and our Company agreed to schedule the closing of the Merger Agreement for October 28, 2008. The Commitment Letter required that the
Lenders be provided, at closing, with either (i) a solvency opinion of a reputable valuation firm, (ii) a solvency certificate signed by the chief financial officer of Hexion or
(iii) a solvency certificate signed by our chief financial officer. This closing condition could be satisfied if any one of such opinions/certificates was delivered and was in a form customary
for transactions involving portfolio companies of Apollo.
On September 12, 2008, we announced that we had engaged a reputable valuation firm, American Appraisal Associates, Inc. ("American Appraisal"), to provide an opinion that the combined
Hexion/Huntsman entity was solvent based on traditional solvency tests. On October 23, 2008, five days prior to the anticipated closing, American Appraisal provided us with a solvency opinion
that the combined entity was solvent. On October 28, 2008, American Appraisal issued an additional opinion that the combined entity was solvent, and J. Kimo Esplin executed a certificate in his
capacity as our chief financial officer that the combined entity was solvent.

Notwithstanding
the opinions and certificate, very late on the evening of October 27, 2008, the Lenders sent a letter to Hexion stating that they did not believe that the solvency
opinion and certificate proposed to be provided met the condition of the Commitment Letter and effectively said that, as a result, the Lenders would not fund the proposed closing of the Merger
scheduled for October 28, 2008. Hexion sent the Lenders a reply letter disputing the Lenders' position and noting that both the American Appraisal opinion and the certificate of our chief
financial officer were in forms customary for transactions involving Apollo portfolio companies. Because the Lenders continued to refuse to fund, Hexion brought suit against the Lenders in the Supreme
Court of the State of New York, New York County on October 29, 2008 seeking specific performance of the Lenders' commitment under the Commitment Letter (the "New York Bank Litigation"). Hexion
also sought an order temporarily restraining the Lenders from terminating the Commitment Letter. On October 31, 2008, the Court refused to grant Hexion a preliminary injunction preventing
termination of the Commitment Letter. The Lenders have taken the position that the Commitment Letter expired by its terms on November 2, 2008.

On
December 13, 2008, we sent notice to Hexion and Apollo that, pursuant to the terms of the Merger Agreement, we had terminated the Merger Agreement. Following the termination of
the Merger Agreement, on December 14, 2008, we, together with certain of our affiliates, including Jon M. Huntsman and Peter R. Huntsman, entered into a Settlement Agreement and
Release (the "Settlement Agreement") with Hexion, Hexion's chief executive officer Craig O. Morrison, and Apollo and certain of its affiliates.

Under
the Settlement Agreement, upon full and final payment of all amounts due to us as described below, the parties agreed to take all necessary and appropriate action to obtain the
dismissal with prejudice of (i) the Delaware Litigation, (ii) the Texas Apollo Litigation and (iii) Apollo and Hexion's lawsuit against us in New York. In addition, we agreed to
promptly move to sever and dismiss Apollo from the Texas Bank Litigation and Hexion agreed to seek leave to withdraw its claims in the New York Bank Litigation. We also agreed to cooperate with Hexion
and Apollo in a stockholder

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action
brought against them in New York by certain of our stockholders, and Hexion and Apollo have agreed to cooperate with us in the Texas Bank Litigation, including by causing certain individuals to
testify at trial if we so request. The parties also agreed to release each other from all claims and actions they have or may have against each other, other than claims arising out of ordinary course
business commercial dealings and certain other specified matters.

Pursuant
to the Settlement Agreement, Hexion and certain Apollo affiliates have paid us an aggregate of $1 billion. Of the $1 billion, Apollo affiliates paid us $425
million in cash and purchased $250 million of our 7% convertible senior notes (the "Convertible Notes") in that principal amount (as described below). In addition, Hexion paid us the
$325 million Termination Fee as required under the Merger Agreement. Apollo and certain of its affiliates and Hexion and certain of its affiliates are jointly and severally liable for the
payment of the aggregate $1 billion. In the event any payment by or on behalf of Hexion or any of its affiliates is rescinded or required by any court to be returned for any reason having to do
with Hexion and its affiliates, the joint and several obligations of Apollo, Hexion and certain of their respective affiliates will continue in full force and effect.

Also
pursuant to the Settlement Agreement, we agreed to indemnify and hold harmless Hexion, Apollo and certain of their respective affiliates, officers, directors, managers, members,
employees, agents and other representatives (the "Indemnified Parties") from any claim for indemnification or contribution or any other claim asserted against the Indemnified Parties by the Lenders or
their affiliates that in any way arises out of any claims made by us and our affiliates against the Lenders, including claims for contribution asserted by the Lenders against Apollo and its affiliates
in the Texas Bank Litigation. Our indemnification obligation does not cover legal fees and expenses incurred by the Lenders or the attorneys' fees and expenses of the Indemnified Parties in defending
the Lenders' claims. The aggregate amount we must pay pursuant to indemnification will not exceed the amount of our recovery collected, if any, in the Texas Bank Litigation net of attorney fees, costs
and expenses related to the Texas Bank Litigation.

In
connection with the Settlement Agreement, on December 14, 2008, we, together with certain of our affiliates, entered into a Letter Agreement (the "Letter Agreement") with
Hexion and certain of its affiliates and Apollo and certain of its affiliates, pursuant to which we agreed to pay Apollo and certain of its affiliates an amount of cash equal to 20% of the value of
cash and non-cash consideration that is in excess of $500 million that we may obtain or receive in settlement in connection with any claims we made against the Lenders arising from
or relating to the Merger Agreement, the transactions contemplated thereby and related matters, including the Texas Bank Litigation, after we first recover our attorneys' fees, costs and expenses in
making the claim. In no circumstance will the aggregate amount of payments owed by us to the Apollo parties under the Letter Agreement exceed $425 million. Moreover, in the event trial commences in
the Texas Bank Litigation, any interest on the part of the Apollo parties will terminate immediately and we will not owe any portion of any subsequent recovery to the Apollo parties.

All
of the aggregate $1 billion in payments due under the Settlement Agreement were paid to us before December 30, 2008. As a result, the Delaware Litigation, the Texas
Apollo Litigation, and Apollo and Hexion's lawsuit against us in New York have been dismissed. Hexion has withdrawn its claims against the Lenders in the New York Bank Litigation. We used
$423 million of the $1 billion in proceeds to pay down our Revolving Facility. We intend to use the remaining amount, net of fees and expenses related to the Merger, for general
liquidity purposes and possible additional reductions of our indebtedness.

The
Texas Bank Litigation remains ongoing, and a court ordered mediation is scheduled to begin May 11, 2009, followed by a trial which is currently set for June 8, 2009.
For more information, see "Recent DevelopmentsTexas Bank Litigation" below.

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RECENT DEVELOPMENTS

SALE OF CONVERTIBLE NOTES IN CONNECTION WITH SETTLEMENT AGREEMENT

Pursuant to the Settlement Agreement, on December 23, 2008, we issued $250 million of our 7% Convertible Notes to Apollo
affiliates under a Note Purchase Agreement (the "Note Purchase Agreement"). We recorded these Convertible Notes at a fair value of $235 million. The Convertible Notes are convertible at any
time, at the holder's option, at an initial conversion rate of 127.275 shares of our common stock per $1,000 principal amount of Convertible Notes (which is equal to an initial conversion price of
$7.857 per share), subject to specified anti-dilution adjustments. The Convertible Notes bear interest at the rate of 7% per year payable semi-annually on July 1 and
January 1 of each year, beginning on July 1, 2009. Interest is payable either in cash or, at our option, in shares of our common stock having a market value at that time equal to the
interest payment. The Convertible Notes are our senior unsecured obligations and are not guaranteed by any of our subsidiaries, including Huntsman International.

The
Convertible Notes will mature on December 23, 2018. At maturity, we may, at our option, pay the principal amount of the Convertible Notes in shares of our common stock having
a market value at that time equal to the principal amount of the Convertible Notes, plus an amount equal to the underwriting spread of a nationally-recognized underwriter chosen by us that would be
paid by a seller of the shares at such time.

We
may redeem the Convertible Notes in whole, for cash, at the principal amount of the Convertible Notes plus accrued and unpaid interest, at any time on or after December 23,
2011 if the closing price of our common stock, for at least 20 consecutive trading days prior to the notice of redemption, exceeds 135% of the conversion price in effect at that time.

Upon
the occurrence of certain change of control events, the holders of the Convertible Notes may require us to redeem all or any portion of the holders' Convertible Notes at the
principal amount plus accrued and unpaid interest.

In
connection with the issuance of the Convertible Notes, we entered into a Registration Rights Agreement, dated as of December 23, 2008 (the "Registration Rights Agreement"),
with Apollo and certain of its affiliates. Pursuant to the Registration Rights Agreement, we have agreed to use our reasonable best efforts to register the resale of our common stock issuable upon
conversion of the Convertible Notes (and common stock payable as interest or principal on the Convertible Notes) under the Securities Act of 1933, as amended.

VOTING AND STANDSTILL AGREEMENT

In addition to the Note Purchase Agreement and the Registration Rights Agreement, we entered into a Voting and Standstill Agreement,
dated as of December 23, 2008 (the "Voting and Standstill Agreement") with Apollo and certain other stockholders related to Apollo that prohibits such persons from owning any of our common
stock, other than common stock paid to such persons pursuant to the Convertible Notes ("Underlying Securities") or shares of our common stock beneficially owned by such persons as of
December 23, 2008. Without our consent, persons subject to the Voting and Standstill Agreement may not transfer the Convertible Notes or the Underlying Securities, other than
(i) transfers involving Underlying Securities paid as interest, (ii) certain transfers to certain affiliates and (iii) certain bona fide pledges related to borrowings from
financial institutions. The Voting and Standstill Agreement further restricts Apollo and certain related stockholders from taking certain actions, including engaging in or participating in any proxy
solicitation relating to the election of our Board of Directors or our Board's publicly disclosed recommendation on certain matters. The shares of our common stock held by such persons must be voted,
at our election, either (i) in the manner recommended by our Board or (ii) in the same proportion as our other stockholders. The Voting and

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Standstill
Agreement terminates upon the later to occur of (i) December 31, 2010 or (ii) the date on which none of Apollo and its related stockholders beneficially or of record
own Convertible Notes or any Underlying Securities representing 3% or more of our then-outstanding common stock.

Copies
of the Note Purchase Agreement, the Registration Rights Agreement and the Voting and Standstill Agreement are filed as Exhibit 10.1, Exhibit 10.2 and
Exhibit 10.3, respectively, to our current report on Form 8-K filed on December 23, 2008.

TEXAS BANK LITIGATION

As noted above, on September 30, 2008, we filed suit in the 9th Judicial District Court in Montgomery County, Texas
against the Lenders alleging, among other things, that the Lenders had conspired with Apollo to tortiously interfere with the Basell Merger Agreement. Our petition against the Lenders includes claims
of common law fraud, civil conspiracy, tortious interference with contract and unjust enrichment. We are seeking to recover damages measured by the benefit of the bargain or the amount by which the
Lenders were unjustly enriched as a result of the injuries we believe they inflicted on us. Discovery, including depositions, has commenced. A court ordered mediation is scheduled to begin
May 11, 2009. Trial is currently set for June 8, 2009. Also pending before the same court is a motion for summary judgment by certain entities and persons affiliated with Apollo, which
seeks entry of an order barring contribution claims that have been asserted against them by the Lenders. That motion is not currently set for hearing. We intend to prosecute our claims vigorously.

OVERVIEW

We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. As of December 31,
2008, we operated in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. In a series of transactions completed in 2006 and 2007, we sold substantially all of our
Polymers and Base Chemicals operations. We report the results from these discontinued operations in our Polymers and Base Chemicals segments. For more information, see "Note 3. Discontinued
Operations" to our consolidated financial statements included elsewhere in this report.

Our
products comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide
range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints
and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants,
epoxy-based polymer formulations, textile chemicals, dyes, maleic anhydride and titanium dioxide. Our administrative, research and development and manufacturing operations are primarily conducted at
the facilities listed in "Item 2. Properties" below, which are located in 25 countries. As of December 31, 2008, we employed approximately 12,600 associates worldwide. We
had revenues for the years ended December 31, 2008, 2007 and 2006 of $10,215 million, $9,651 million and $8,731 million, respectively.

Our Products

We produce differentiated organic chemical and inorganic chemical products. Our Polyurethanes, Materials and Effects and Performance
Products segments produce differentiated organic chemical products and our Pigments segment produces inorganic chemical products. Our former Polymers and Base Chemicals operations, which have been
sold, produced commodity organic chemical products. For more information, see "Note 3. Discontinued Operations" to our consolidated financial statements included elsewhere in this report.

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Growth
in our differentiated products has been driven by the substitution of our products for other materials and by the level of global economic activity. Accordingly, the profitability
of our differentiated products has been somewhat less influenced by the cyclicality that typically impacts the petrochemical industry. Our Pigments business, while cyclical, is influenced largely by
seasonal demand patterns in the coatings industry.

GRAPHIC

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The following table identifies the key products, their principal end markets and applications and representative customers of each of our segments:

Segment

Products

End Markets and
Applications

Representative CustomersPolyurethanes

MDI, PO, polyols, PG, TPU, aniline and MTBE

Refrigeration and appliance insulation, construction products, adhesives, automotive, footwear, furniture, cushioning, specialized engineering applications and fuel additives

BMW, Electrolux, Firestone, GE, Haier, Lear, Louisiana Pacific, WeyerhauserMaterials and Effects

Epoxy resin compounds and formulations; cross-linking, matting and curing agents; epoxy, acrylic and polyurethane-based adhesives, tooling resin formulations, textile chemicals and dyes and APAO

Adhesives, aerospace, electrical power transmission, consumer electronics, civil engineering, wind power generation, automotive, apparel, home and technical textiles

ABB, Akzo, BASF, Boeing, Bosch, Cytec, Hexcel, Rohm & Haas, Russell, Sara Lee, Sherwin Williams, Wellspun, Hanesbrands, MillikenPerformance Products

Amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins and technology licenses

Detergents, personal care products, agrochemicals, lubricant and fuel additives, adhesives, paints and coatings, construction, marine and automotive products and PET fibers and resins

Chevron, Henkel, The Sun Products Corporation, Monsanto, Procter & Gamble, Unilever, Lubrizol, Reichhold, Dow, L'Oreal, AftonPigments

Titanium dioxide

Paints and coatings, plastics, paper, printing inks, fibers and ceramics

Akzo, Sigma Kalon, Clariant, Jotun, PolyOnePolymers(1)

LDPE and LLDPE, polypropylene, EPS and styrene

Flexible and rigid packaging, adhesives and automotive, medical and construction products

Ashland, Berry, Kimberly Clark, Pliant, Polymer Group, PolyOne, Sealed AirBase Chemicals(1)

Olefins and cyclohexane

Packaging film, polyester and nylon fibers, PVC and polymer resins

Ineos, Dow, DuPont, Invista, Nova, Shell, Solutia


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Polyurethanes

General

We are a leading global manufacturer and marketer of a broad range of polyurethane chemicals, including MDI products, PO, polyols, PG
and TPU. Polyurethane chemicals are used to produce rigid and flexible foams, as well as coatings, adhesives, sealants and elastomers. We focus on the higher-margin, higher-growth markets for MDI and
MDI-based polyurethane systems. Growth in our Polyurethanes segment has been driven primarily by the continued substitution of MDI-based products for other materials across a
broad range of applications. We operate five primary Polyurethanes manufacturing facilities in the U.S., Europe and China. We also operate 12 Polyurethanes formulation facilities, which are located in
close proximity to our customers worldwide.

Our
customers produce polyurethane products through the combination of an isocyanate, such as MDI or TDI, with polyols, which are derived largely from PO and EO. While the range of
TDI-based products is relatively limited, we are able to produce over 2,000 distinct MDI-based polyurethane products by varying the proportion and type of polyol used and by
introducing other chemical additives to our MDI formulations. As a result, polyurethane products, especially those derived from MDI, are continuing to replace traditional products in a wide range of
end-use markets, including insulation in construction and appliances, cushioning for automotive and furniture, adhesives, wood binders, footwear and other specialized engineering
applications.

We
are a leading North American producer of PO. We and some of our customers process PO into derivative products, such as polyols for polyurethane products, PG and various other chemical
products. End uses for these derivative products include applications in the home furnishings, construction, appliance, packaging, automotive and transportation, food, paints and coatings and cleaning
products industries. We also produce MTBE as a co-product of our PO manufacturing process. MTBE is an oxygenate that is blended with gasoline to reduce harmful vehicle emissions and to
enhance the octane rating of gasoline. See "Environmental, Health and Safety MattersMTBE Developments" below and "Part I. Item 1A. Risk Factors" for a
discussion of legal and regulatory developments that have resulted in the curtailment and potential elimination of MTBE in gasoline in the U.S. and elsewhere. Also see, "Manufacturing and
Operations" below and "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of material changes concerning sales of
MTBE. We sold our U.S. butadiene and MTBE business operated in our Base Chemicals segment in June
2006; however, the PO/MTBE operations in our Polyurethanes segment were not included in this transaction.

In
1992, we were the first global supplier of polyurethane chemicals to open a technical service center in China. We have since expanded this facility to include an integrated
polyurethanes formulation facility. In January 2003, we entered into two related joint ventures to build MDI production and finishing facilities near Shanghai, China. Production at our MDI finishing
plant near Shanghai, China operated by HPS, our consolidated subsidiary, was commissioned on June 30, 2006. Production at the MNB, aniline and crude MDI plants operated by SLIC, our
unconsolidated joint venture, commenced on September 30, 2006. These world-scale facilities strengthen our ability to service our customers in the critical Chinese market and will support the
significant demand growth that we believe this region will continue to experience.

Products and Markets

MDI is used primarily in rigid foam applications and in a wide variety of customized higher-value flexible foam and coatings,
adhesives, sealants and elastomers. Polyols, including polyether and polyester polyols, are used in conjunction with MDI and TDI in rigid foam, flexible foam and other

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non-foam
applications. PO is one of the principal raw materials for producing polyether polyols. The following chart illustrates the range of product types and end uses for polyurethane
chemicals.

GRAPHIC

Polyurethane
chemicals are sold to customers who combine the chemicals to produce polyurethane products. Depending on their needs, customers will use either commodity polyurethane
chemicals produced for mass sales or polyurethane systems tailored for their specific requirements. By varying the blend, additives and specifications of the polyurethane chemicals, manufacturers are
able to develop and produce a breadth and variety of polyurethane products.

MDI.MDI has a substantially larger market size and a higher growth rate than TDI. This is primarily because MDI can be used to
make polyurethanes
with a broader range of properties and can therefore be used in a wider range of applications than TDI. We believe that future growth of MDI is expected to be driven by the continued substitution of
MDI-based polyurethane for fiberglass and other materials currently used in rigid insulation foam for construction. We expect that other markets, such as binders for reconstituted wood
board products, specialty cushioning applications and coatings will further contribute to the continued growth of MDI.

The
U.S. and European markets currently consume the largest quantities of MDI. With the recent rapid growth of the developing Asian economies, the Asian markets have become an important
market for MDI, and we currently believe that per-capita demand for MDI in Asia will continue to increase as its less-developed economies continue to grow.

There
are four major global producers of MDI: Bayer, our Company, BASF and Dow. While there are also some regional producers in Asia and Europe, we believe it is unlikely that any new
global producers of MDI will emerge in the foreseeable future due to the substantial requirements for entry, such as the limited availability of licenses for MDI technology and the substantial capital
commitment and integration that is required to develop both the necessary technology and the infrastructure to manufacture and market MDI.

TPU.TPU is a high-quality, fully formulated thermal plastic derived from the reaction of MDI or an aliphatic isocyanate with
polyols to
produce unique qualities such as durability, flexibility, strength, abrasion-resistance, shock absorbency and chemical resistance. We can tailor the performance characteristics of TPU to meet the
specific requirements of our customers. TPU is used in injection

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molding
and small components for the automotive and footwear industries. It is also extruded into films, wires and cables for use in a wide variety of applications in the coatings, adhesives, sealants
and elastomers markets.

Polyols.Polyols are combined with MDI, TDI and other isocyanates to create a broad spectrum of polyurethane products. Demand
for specialty polyols
has been growing at approximately the same rate at which MDI consumption has grown.

Aniline.Aniline is an intermediate chemical used primarily to manufacture MDI. Generally, most aniline is either consumed
internally by the
producers of the aniline or is sold to third parties under long-term supply contracts. We believe that the lack of a significant spot market for aniline means that in order to remain
competitive, MDI manufacturers must either be integrated with an aniline manufacturing facility or have a long-term cost-competitive aniline supply contract.

PO.PO is an intermediate chemical used mainly to produce a wide range of polyols and PG. Demand for PO depends largely on
overall economic demand,
especially that of consumer durables. The following chart illustrates the primary end markets and applications for PO.

GRAPHIC

MTBE.MTBE is an oxygenate that is blended with gasoline to reduce harmful vehicle emissions and to enhance the octane rating of
gasoline. The use of
MTBE is controversial, and it has been effectively eliminated in the U.S. market. See "Environmental, Health and Safety MattersMTBE Developments" below and "Part I.
Item 1A. Risk Factors." We continue to sell MTBE for use as a gasoline additive, substantially all of which is sold for use outside the U.S. See "Manufacturing and Operations"
below and "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Sales and Marketing

We manage a global work force which sells our polyurethane chemicals to over 2,000 customers in more than 90 countries. Our sales and
technical resources are organized to support major regional markets, as well as key end-use markets which require a more global approach. These key end-use

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markets
include the appliance, automotive, footwear, furniture and coatings, construction products, adhesives, sealants and elastomers industries.

We
provide a wide variety of polyurethane solutions as components (i.e., the isocyanate or the polyol) or in the form of "systems" in which we provide the total isocyanate and
polyol formulation to our customers in ready-to-use form. Our ability to deliver a range of polyurethane solutions and technical support tailored to meet our customer's needs
is critical to our long term success. We have strategically located our polyurethane formulation facilities, commonly referred to in the chemicals industry as "systems houses," close to our customers,
enabling us to focus on customer support and technical service. We believe this customer support and technical service system contributes to customer retention and also provides opportunities for
identifying further product and service needs of customers. We manufacture polyols primarily to support our MDI customers' requirements.

We
believe that the extensive market knowledge and industry experience of our sales teams and technical experts, in combination with our strong emphasis on customer relationships, have
facilitated our ability to establish and maintain long-term customer supply positions. Due to the specialized nature of our markets, our sales force must possess technical knowledge of our
products and their applications. Our strategy is to continue to increase sales to existing customers and to attract new customers by providing innovative solutions, quality products, reliable supply,
competitive prices and superior customer service.

Manufacturing and Operations

Our MDI production facilities are located in Geismar, Louisiana, Rozenburg, Netherlands and, through our joint ventures, Shanghai,
China. These facilities receive aniline, which is a primary material used in the production of MDI, from our facilities located in Geismar, Louisiana; Wilton, U.K.; and Shanghai, China. We believe
that this relative scale and product integration of our large facilities provide a significant competitive advantage over other producers. In
addition to reducing transportation costs for our raw materials, integration helps reduce our exposure to cyclical prices.

The
following table sets forth the annual production capacity of polyurethane chemicals at each of our polyurethanes facilities:

MDI(1)

Polyols

TPU

Aniline

Nitrobenzene

PO

PG

MTBE(millions of pounds)

(millions
of gallons)Geismar, Louisiana


970


160





717
(2)

935
(2)Port Neches, Texas

















525


145


260Ringwood, Illinois








18Rozenburg, Netherlands


880


130Wilton, U.K.











715


953Osnabrück, Germany





26


57Total


1,850


316


75


1,432


1,888


525


145


260


---

At
both our Geismar and Rozenburg facilities we utilize sophisticated proprietary technology to produce our MDI. This technology, which is also used in our Chinese joint venture,
contributes to our position as a low cost MDI producer. In addition to MDI, we use a proprietary manufacturing process

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to
manufacture PO. We own or license all technology, know-how and patents developed and utilized at our PO facility. Our process combines isobutane and oxygen in proprietary oxidation
(peroxidation) reactors, thereby forming TBHP and TBA, which are further processed into PO and MTBE, respectively. Because our PO production process is less expensive relative to other technologies
and allows all of our PO co-products to be processed into saleable or useable materials, we believe that our PO production technology possesses several distinct advantages over its
alternatives.

We
also operate polyurethane systems houses in Deerpark, Australia; Shanghai, China; Cartagena, Colombia; Deggendorf, Germany; Thane (Maharashtra), India; Ternate, Italy; Tlalnepantla,
Mexico; Mississauga, Ontario; Kuan Yin, Taiwan; Samuprakam, Thailand; Osnabrück, Germany and Dammam, Saudi Arabia.

Joint Ventures

Rubicon Joint Venture.We and Chemtura Corporation own Rubicon LLC, which owns aniline, nitrobenzene and DPA manufacturing
facilities in
Geismar, Louisiana. We are entitled to approximately 78% of the nitrobenzene and aniline production capacity of Rubicon LLC, and Chemtura Corporation is entitled to 100% of the DPA production.
In addition to operating the joint venture's owned aniline, nitrobenzene and DPA facilities, Rubicon LLC also operates our wholly owned MDI and polyol facilities at Geismar and is responsible
for providing other auxiliary services to the entire Geismar complex. As a result of this joint venture, we are able to achieve greater scale and lower costs for our products than we would otherwise
have been able to obtain. Rubicon LLC is consolidated in our financial statements..

Chinese MDI Joint Ventures.In January 2003, we entered into two related joint venture agreements to build MDI production
facilities near Shanghai,
China. SLIC, our manufacturing joint venture with BASF AG and three Chinese chemical companies, built three plants that manufacture MNB, aniline and crude MDI. We effectively own 35% of SLIC and it is
our unconsolidated affiliate. HPS, our splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd, has constructed a plant to manufacture pure MDI, polymeric MDI and MDI variants.
We own 70% of HPS and it is our consolidated affiliate. These projects have been funded by a combination of equity invested by the joint venture partners and borrowed funds. SLIC and HPS commenced
operations during 2006. The total production capacity of the SLIC facilities is 530 million pounds per year of MDI and the production capacity of the HPS facility is 270 million pounds
per year of pure MDI, polymeric MDI and MDI variants.

Raw Materials

The primary raw materials for MDI-based polyurethane chemicals are benzene and PO. Benzene is a widely available commodity
that is the primary feedstock for the production of MDI and aniline. Historically, benzene has been the largest component of our raw material costs. We purchase benzene from third parties to
manufacture nitrobenzene and aniline, almost all of which we then use to produce MDI.

A
major cost in the production of polyols is attributable to the costs of PO. The integration of our PO business with our polyurethane chemicals business gives us access to a
competitively priced, strategic source of PO and the opportunity to develop polyols that enhance our range of MDI products. The primary raw materials used in our PO production process are
butane/isobutane, propylene, methanol and oxygen, which accounted for 55%, 30%, 14% and 1%, respectively, of total raw material costs in 2008. We purchase our raw materials primarily under
long-term contracts. While most of these feedstocks are commodity materials generally available to us from a wide variety of suppliers at competitive prices in the spot market, all the
propylene used in the production of our PO is produced internally and delivered through a pipeline connected to our PO facility.

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Competition

Our major competition in the polyurethane chemicals market includes BASF, Bayer, Dow and Basell. While these competitors and others
produce various types and quantities of polyurethane chemicals, we focus on MDI and MDI-based polyurethane systems. We compete based on technological innovation, technical assistance,
customer service and product reliability. Our polyurethane chemicals business competes in two basic ways: (1) where price is the dominant element of competition, our polyurethane chemicals
business differentiates itself by its high level of customer support including cooperation on technical and safety matters; and (2) elsewhere, we compete on the basis of product performance and
our ability to react quickly to changing customer needs and by providing customers with innovative solutions to their needs.

The
market in which our Polyurethanes segment operates is highly competitive. Among our competitors in this market are some of the world's largest chemical companies and major integrated
petroleum companies that have their own raw material resources. Some of these companies may be able to produce products more economically than we can. In addition, some of our competitors in this
market have greater financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development. If any of our current or future
competitors in this market develops proprietary technology that enables them to produce products at a significantly lower cost, our technology could be rendered uneconomical or obsolete.

Materials and Effects

General

Our Materials and Effects segment is a leading global manufacturer and marketer of technologically advanced epoxy, acrylic and
polyurethane-based polymer products and textile solutions, including dye and chemical products. We focus on formulations and systems that are used to address customer-specific needs in a wide variety
of industrial and consumer applications. Our products are used either as replacements for traditional materials, such as metal, wood, clay, glass, stone, ceramics and natural fibers, or in
applications where traditional materials do not meet demanding engineering specifications. For example, structural adhesives are used to replace metal rivets and advanced composites are used to
replace traditional aluminum panels in the manufacture of aerospace components. Our textile solutions enhance the color of finished textiles and improve such performance characteristics as wrinkle
resistance and the ability to repel water and stains. Our
Materials and Effects segment is characterized by the breadth of our product offering, our expertise in complex chemistry, our long-standing relationships with our customers, our ability
to develop and adapt our technology and our applications expertise for new markets and new applications.

We
operate synthesis, formulating and production facilities in North America, Europe, Asia, South America and Africa. We market over 6,000 products to more than 5,000 customers in over
20 end-markets, which are grouped as follows:

Market Groups

End MarketsAdvanced Materials

civil engineering, shipbuilding and marine maintenance, consumer appliances, food and beverage packaging, industrial appliances, consumer/do it yourself ("DIY"), aerospace, DVD, LNG transport, electrical
power transmission and distribution, printed circuit boards, consumer and industrial electronics, aerospace, wind power generation, automotive, recreational sports equipment, medical appliances, design studios and prototype manufacturers


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Market Groups

End MarketsTextile Effects

consumer fashion apparel, sportswear, career and uniform apparel, military, automotive, home textiles and furnishings, carpet and other functional textiles


In
October 2006 and December 2008, we announced restructuring programs for our textile effects operations. These restructuring programs are necessary to allow our Materials and Effects
segment to adapt to the dynamic business shifts that have occurred in the textile market. Through December 31, 2008, we have spent approximately $50 million to significantly expand
resources and capacity in Asia, while refocusing and consolidating resources in Europe and North America and to transition from a regional to a global, market-focused organization. Other elements of
our plan include simplifying global distribution networks, enhancing research and development activities and continuing investments in environmental, health and safety projects to ensure that all of
our acquired manufacturing units are operating in accordance with our standards. We expect to spend approximately $60 million over approximately the next year to complete these projects. We
have targeted approximately $100 million in annual savings when all phases of the restructuring are fully completed.

Products and Markets

Advanced Materials product range spans from basic liquid and solid resins, to specialty components like curing agents, matting agents,
accelerators, cross-linkers, reactive diluents, thermoplastic polyamides and additives. In addition to these components, which we typically sell to formulators in various industries, we also produce
and sell ready to use formulated polymer systems.

Base Resins and Specialty Component Markets.Our products are used for the protection of steel and concrete substrates, such as
flooring, metal
furniture and appliances, buildings, linings for storage tanks and food and beverage cans, and the primer coat of automobile bodies and ships. Epoxy-based surface coatings are among the most widely
used industrial coatings due to their structural stability and broad application functionality combined with overall economic efficiency.

Base
resins and specialty components are also used for composite applications. A structural composite is made by combining two or more different materials, such as fibers, resins and
other specialty additives, to create a product with enhanced structural properties. Specifically, structural composites are lightweight, high-strength, rigid materials with high resistance
to chemicals, moisture and high temperatures. Our product range comprises basic and advanced epoxy resins, curing agents and
other advanced chemicals, additives and formulated polymer systems. The four key target markets for our structural composites are aerospace, windmill blades for wind power generation, other industrial
and automotive applications, and recreational products (mainly sports equipment such as skis). Structural composites continue to substitute for traditional materials, such as metals and wood, in a
wide variety of applications due to their light weight, strength and durability.

Formulated Systems.The structural adhesives market requires high-strength "engineering" adhesives for use in the manufacture and
repair
of items to bond various engineering substrates. Our business focus is on engineering adhesives based on epoxy, polyurethane, acrylic and other technologies which are used to bond materials, such as
steel, aluminum, engineering plastics and composites in substitution of traditional joining techniques. Our Araldite brand name has considerable value in the industrial and consumer adhesives markets.
In many countries, Araldite® branded products are known as high-performance adhesives, and we generally believe that this is the value-added segment of the market where
recognition of our long-standing Araldite® brand is a key competitive advantage. Packaging is a key characteristic of our adhesives products. Our range of adhesives is sold in
a variety

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of
packs and sizes, specifically targeted to three specific end-markets and sold through specifically targeted routes to market:



Our
electrical materials are formulated polymer systems, which make up the insulation materials used in equipment for the generation, transmission and distribution of electrical power,
such as transformers, switch gears, ignition coils, sensors, motors and magnets, and for the protection of electrical and electronic devices and components. The purpose of these products is to
insulate, protect or shield either the environment from electrical current or electrical devices from the environment, such as temperature or humidity. Our electrical insulating materials target two
key market segments: the heavy electrical equipment market and the light electrical equipment market.

Products
for the heavy electrical equipment market segment are used in power plant components, devices for power grids and insulating parts and components. In addition, there are
numerous devices, such as motors and magnetic coils used in trains and medical equipment, which are manufactured using epoxy and related technologies. Products for the light electrical equipment
market segment are used in applications such as industrial automation and control, consumer electronics, car electronics and electrical components. The end customers in the electrical insulating
materials market encompass the relevant original equipment manufacturer ("OEM") as well as numerous manufacturers of components used in the final products. We also develop, manufacture and market
materials used in the production of printed circuit boards. Our products are ultimately used in industries ranging from telecommunications and personal computer mother board manufacture to automotive
electronic systems manufacture. Soldermasks are our most important product line in printed circuit board technologies, particularly in Europe. Sales are made mainly under the Probimer®,
Probimage®, and Probelec® trademarks. Our Probimer® trademark is a widely recognized brand name for soldermasks.

We
produce mainly polyurethane-based and epoxy formulated polymer systems used in the production of models, prototypes, patterns, molds and a variety of related products for design,
prototyping and short-run manufacture. Our products are used extensively in the automotive, aerospace and industrial markets as productivity tools to quickly and efficiently create
accurate prototypes and develop experimental models, and to lower the cost of manufacturing items in limited quantities primarily using computer-aided-design techniques. We separate the overall
tooling and modeling materials market into two distinct groupsstandard tooling and modeling materials and stereolithography technology.

Our
standard tooling and modeling materials are polymer-based materials used by craftsmen to make the traditional patterns, molds, models, jigs and fixtures required by the foundry,
automotive, ceramics and other such industries. Stereolithography is a technology that is used to accurately produce physical three-dimensional models directly from computer-aided-design data without
cutting, machining or tooling. The models are produced by selectively curing a light-sensitive liquid resin with a laser beam. We sell our stereolithography products to customers in the aerospace,
appliance, automotive, consumer, electronics and medical markets.

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Textile Effects.Textiles generally involve a complex matrix of fibers, effects and functionality, and the resulting products
range from fashion
apparel to bulletproof vests, home linens to air and water filters, and upholstery to automotive interiors. Our broad range of dyestuffs and chemicals enhance both the aesthetic appearance of these
products and the functionality needed to ensure that they perform in their end-use markets. Since the requirements for these markets vary dramatically, our business strategy focuses on the
two major marketsapparel and technical textiles. We work to provide the right balance of products and service to meet the technical challenges in each of these markets.

The
apparel market, which also includes our home interiors products, focuses on products that provide an aesthetic effect and/or improve the processing efficiency within the textile
mill. We offer a complete range of colors for cotton, polyester and nylon that cover the range of shades needed for sportswear, intimate apparel, towels, sheeting and casual wear. Our dyes have been
developed to ensure that they offer the highest levels of wash fastness currently available in the market. Optical brighteners and other pretreatment products provide "bright white" effects for
apparel, towels and sheeting. Pretreatment and dyeing auxiliaries ensure that these fabrics are processed efficiently and effectivelycleaning the fabrics with fewer chemicals, less energy
and less water and thereby minimizing the environmental footprint and reducing the processing costs. Silicone softeners may be used to enhance the feel of products.

Technical
textiles include automotive textiles, carpet, military fabrics, mattress ticking and nonwoven and other technical fabrics. Though the product groups may differ in their
end-uses, the articles must provide a high-level of functionality and performance in their respective markets. High-lightfast dyes and UV absorbers are used in
automotive interiors and outdoor furnishings to provide colors that don't fade when exposed to sunlight and heat. Powerful stain repellent and release technology imparts durable protection for
upholstery, military and medical fabrics, without affecting the color, breathability or feel of the fabric. Specialized dyes and prints create unique camouflage patterns for military uniforms,
backpacks and tarps that won't fade through wash and wear or during exposure to the elements.

Sales and Marketing

We maintain multiple routes to market to service our diverse customer base. These routes to market range from using our own direct
sales force for targeted, technically-oriented distribution to mass general distribution. Our direct sales force focuses on engineering solutions decision-makers at major customers who purchase
significant amounts of product from us. We use technically-oriented specialist distributors to augment our sales effort in niche markets and applications where we do not believe it is appropriate to
develop direct sales resources. We use mass general distribution channels to sell our products into a wide range of general applications where technical expertise is less important to the user of the
products to reduce our overall selling expenses. We believe our use of multiple routes to market enables us to reach a broader customer base at an efficient cost.

We
conduct sales activities for our market groups through separate dedicated regional sales teams in the Americas, Europe, Africa and the Middle East ("EAME") and Asia. Our global
customers are covered by key account managers who are familiar with the specific requirements of these clients. The management of long-standing customer relationships, some of which are 20
to 30 years old, is at the heart of the sales and marketing process. We are also supported by a strong network of distributors. We serve a highly fragmented customer base.

For
our consumer adhesives, we have entered into exclusive branding and distribution arrangements with, for example, Bostik in Europe and Shelleys in Australia. Under these arrangements,
our distribution partners fund advertising and sales promotions, negotiate and sell to major retail chains, own inventories and provide store deliveries (and sometimes shelf merchandising) in exchange
for a reliable, high-quality supply of Araldite® branded, ready-to-sell packaged products.

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For
our textile effects products, we focus on providing effect competence and process competence to our customers. Effect competencedelivering value-added effects to our
customer's productsenables us to capitalize on new and innovative technologies and to assist our customers in their efforts to differentiate themselves from competitors. Process
competenceapplying know-how and expertise to improve customers' processesallows us to utilize our technical service to reduce cost and enhance efficiency.

Manufacturing and Operations

We are a global business serving customers in three principal geographic regions: EAME; the Americas; and Asia. To service our
customers efficiently, we maintain manufacturing plants around with the world with a strategy of global, regional and local manufacturing employed to optimize the level of service and minimize the
cost to our customers. The following table summarizes the plants that we operate:

Location

Description of FacilityTaboão da Serra, Brazil

Formulating FacilityPanyu, China(1)(3)

Production FacilitySadat City, Egypt

Formulating FacilityBad Saeckingen, Germany(1)

Formulating FacilityBergkamen, Germany

Synthesis FacilityLangweid am Leich, Germany(1)

Formulating FacilityChennai, India(2)

Resins and Synthesis FacilityAtotonilquillo, Mexico

Synthesis FacilityPamplona, Spain

Resins and Synthesis FacilityBasel, Switzerland(1)

Synthesis Facility and Technology CenterMonthey, Switzerland

Resins and Synthesis FacilitySchweizerhalle, Switzerland(1)

Formulating FacilitySamutsakorn (Mahachai), Thailand(1)

Synthesis FacilityIstanbul, Turkey(1)

Formulating FacilityDuxford, U.K.

Formulating FacilityMcIntosh, Alabama, U.S.

Resins and Synthesis FacilityLos Angeles, California, U.S.

Formulating FacilityEast Lansing, Michigan, U.S.

Formulating FacilityCharlotte, North Carolina, U. S.(1)

Formulating Facility






Our
facilities in Asia are well-positioned to take advantage of the market growth that is expected in this region. Furthermore, we believe that we are the largest producer of
epoxy resin compounds in India.

Raw Materials

The principal raw materials we purchase for the manufacture of basic and advanced epoxy resins are epichlorohydrin, bisphenol A and
BLR. We also purchase amines, polyols, isocyanates, acrylic materials, hardeners and fillers for the production of our formulated polymer systems and complex chemicals and additives. The manufacture
of textile effects products requires a wide selection of raw

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materials
(approximately 3,000 different chemicals), including amines, fluorochemicals and sulfones. No one raw material represents greater than 2% of our textile effects raw material expenditures.
Raw material costs constitute a sizeable percentage of sales for certain applications. We have supply contracts with a number of suppliers, including, for example, Dow. The terms of our supply
contracts vary. In general, these contracts contain provisions that set forth the quantities of product to be supplied and purchased and formula-based pricing.

Additionally,
we produce some of our most important raw materials, such as BLR and its basic derivatives, which are the basic building blocks of many of our products. We are the fourth
largest producer of BLR in the world. Approximately 50% of the BLR we produce is consumed in the production of our formulated polymer systems. The balance of our BLR is sold as liquid or solid resin
in the merchant market, allowing us to increase the utilization of our production plants and lower our overall BLR production cost. We believe that manufacturing a substantial proportion of our
principal raw material gives us a competitive advantage over other epoxy-based polymer systems formulators, most of whom must buy BLR from third-party suppliers. This position helps protect us from
pricing pressure from BLR suppliers and aids in providing us a stable supply of BLR in difficult market conditions.

We
consume certain amines produced by our Performance Products segment and isocyanates produced by our Polyurethanes segment, which we use to formulate advanced materials products.

Competition

The market in which our Materials and Effects segment operates is highly competitive. Among our competitors in this market are some of
the world's largest chemical companies and major integrated companies that have their own raw material resources. Some of these companies may be able to produce products more economically than we can.
In addition, some of our competitors in this market have greater financial resources, which may enable them to invest significant capital into
their businesses, including expenditures for research and development. If any of our current or future competitors in this market develops proprietary technology that enables them to produce products
at a significantly lower cost, our technology could be rendered uneconomical or obsolete.

Advanced Materials.Competition in basic liquid and solid epoxy resins is primarily driven by price. There are two major
manufacturers of basic epoxy
resins used in industrial protective coatings, Dow and Hexion. Other participants in this market include BASF, Kukdo, Leuna and NanYa. Competition in coating systems is increasingly becoming more
global, with trends toward industry consolidation and the emergence of new competitors in Asia. Our competitors are considerably more fragmented in Asia than in Europe and North America.

Competition
in specialty components is primarily driven by product performance, service and customer certification. We believe that the competitive strengths of our coating systems
product lines are our strong technology base, broad range of value-added products, leading market positions, diverse customer base and reputation for customer service. Our major competitors for
formulated polymer systems and complex chemicals and additives used in coatings systems are Air Products, Arizona, Hexion, Cognis, Cray Valley and Evonics.

Competition
in structural composites applications varies but is primarily driven by technology, applications expertise, formulations expertise, product performance, customer service and
customer certification. We believe that our competitive strengths are our strong technology base, broad range of value-added products, leading market positions, diverse customer base and reputation
for customer service. Pricing dynamics differ greatly among the various end-markets, largely due to their differing structures. Pricing in the aerospace market very much reflects the
advanced technology and applications know-how which we provide to customers. Pricing is typically more competitive in the industrial and recreational markets due to the more standardized
requirements of the end-user market and higher

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sales
volumes compared to those of the aerospace market. Competition in the electrical laminates industry is largely price-driven due to the standard nature of the products supplied, the highly
price-sensitive nature of the electronics industry and the ability of customers to source globally. Our competitors in the structural composites markets include Hexion, DIC, Dow, Mitsui and Sumitomo.
In the aerospace market, we compete principally with Mitsui and Sumitomo. Our competitors in the automotive, industrial and recreational markets include Dow and Hexion. Finally, our competitors in the
laminates market include all of these companies as well as NanYa.

We
face substantial competition for the sale of our products for adhesives applications. Competition in the industry specific market segments is based on an understanding of the relevant
industry sector and the ability to provide highly reliable and tailored engineering solutions, applications expertise and ease of use with the customer's processing equipment. Competition in the
consumer market segment is
based on branding, packaging and making widely available, easy-to-use products on which our customers can rely. We believe that our competitive strengths and our focus on
defined market needs, provision of a high level of service and recognition as a quality supplier in the chosen sectors, all of which are exemplified by our strong Araldite® brand name. The
principal participants in the structural adhesives market include Henkel/Loctite, ITW, National Starch, Sika, 3M and many other regional or industry specific competitors.

Competition
for electrical insulating materials applications is based on technology, know-how, applications expertise, formulations expertise, reliability, performance and
price. Manufacturers of heavy electrical equipment place more importance on reliability and level of support, while manufacturers of light electrical equipment choose materials offering the lowest
cost, but also the required quality and performance. As a result, epoxy products, which offer a combination of price and performance superior to competing polyurethane and silicone and conventional
glass and ceramic products, are widely used in heavy electrical equipment, and both epoxy and cheaper polyurethane products are used in light electrical equipment.

We
believe that our competitive strengths in the electrical materials market are our long-standing customer relationships, product reliability and technical performance. Our
key products used in heavy electrical and light electrical applications, such as resins, hardeners and auxiliaries, are tested and certified according to industry standards established by Underwriters
Laboratories, International Electrotechnical Commission, or Cenelec, and also to customer-specific requirements. Our main competitors in the electrical insulating materials market segment include
Altana, Hexion, Schenectady, Wuxi, Dexter-Hysol, Hitachi Chemical, Nagase Chemtex and Toshiba Chemical.

Competition
in the printed circuit board materials markets is based on price, technological innovation and the ability to provide process expertise and customer support. Consolidation
among our customers has led to increased pricing pressure. We believe that our competitive strengths are our fully developed technology, our application technology center in Basel, Switzerland and our
technology center in Panyu, China, our global presence and long-standing relationships with key customers and OEMs, and the approval of our products by global OEMs. Major
competitors of our soldermask products include Coates, Goo, Peters, Taiyo Ink and Tamura.

Competition
in standard tooling and modeling solutions is based on quality of service, technical solutions, range, competitive prices and prompt supply, including 24-hour
delivery if required. This market segment is generally characterized by pricing pressure and intense competition. Competition in stereolithography is driven by the requirement for innovative
solutions. We believe that our competitive strength is our broad range of products, which we make available on a global basis, covering all of the needs of both our standard tooling and modeling and
stereolithography customers. A few large manufacturers (including Axson, DSM and Sika), as well as many small, local manufacturers provide a limited product range to local regions in the plastic
tooling and modeling solutions market but none have our breadth of product offering.

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Textile Effects.We are the leading global market share provider for textile chemicals and dyes. Competition within the textile
chemicals and dyes
markets is generally fragmented with few competitors who offer complete solutions for both markets. Our major competitors are Dystar, Clariant, BASF, Cognis and Lanxess. We believe that our
competitive strengths include our product offering, which is characterized by its broad range; high quality; significant integration between products and service; reliable technical expertise;
long-standing relationships with customers; and strong business infrastructure in Asia. We believe that we have more customer service capacity and account management capacity than any of
our competitors worldwide.

Performance Products

General

Our Performance Products segment is organized around three market groups, performance specialties, performance intermediates and maleic
anhydride and licensing, and serves a wide variety of consumer and industrial end markets. In performance specialties, we are a leading global producer of amines, carbonates and certain specialty
surfactants. Growth in demand in our performance specialties market tends to be driven by the end-performance characteristics that our products deliver to our customers. These products are
manufactured for use in a growing number of niche industrial end uses and have been characterized by growing demand, technology substitution and stable profitability. For example, we are one of two
significant global producers of polyetheramines, for which our sales volumes have grown at a compound annual rate of over 10% in the last ten years due to strong demand in a number of industrial
applications, such as epoxy curing agents, oil drilling, agrochemicals, fuel additives and civil construction materials. In performance intermediates, we consume internally produced and
third-party-sourced base petrochemicals in the manufacture of our surfactants, LAB and ethanolamines products, which are primarily used in detergency, consumer products and industrial applications. We
also produce EG, which is primarily used in the production of polyester fibers and PET packaging. We believe we are North America's largest and lowest-cost producer of maleic anhydride.
Maleic anhydride is the building block for UPRs, mainly used in the production of fiberglass reinforced resins for marine, automotive and construction products. We are the leading global licensor of
maleic anhydride manufacturing technology and are also the largest supplier of butane fixed bed catalyst used in the manufacture of maleic anhydride. Our licensing group also licenses technology on
behalf of other Huntsman businesses. We operate 15 Performance Products manufacturing facilities in North America, Europe, Asia and Australia.

We
have the annual capacity to produce approximately 1.2 billion pounds of more than 250 amines and other performance chemicals. We believe we are the largest global producer of
polyetheramines, propylene carbonates, ethylene carbonates, DGA® agent and morpholine, the second-largest global producer of ethyleneamines and the third-largest North American producer of
ethanolamines. We also produce substituted propylamines. Our products are manufactured at our Port Neches, Conroe and Freeport, Texas facilities and at our facilities in Llanelli, U.K. Petfurdo,
Hungary and Jurong Island, Singapore. We use internally produced ethylene, EO, EG and PO in the manufacture of many of our amines. Our amines are used in a wide variety of consumer and industrial
applications, including personal care products, polyurethane foam, fuel and lubricant additives, paints and coatings, composites, solvents and catalysts. Our key amines customers include Akzo,
Chevron, Cognis, Hercules, Afton, Unilever, Monsanto and PPG.

We
have the capacity to produce approximately 2.5 billion pounds of surfactant products annually at our eight facilities located in North America, Europe and Australia. We are a
leading global manufacturer of nonionic, anionic, cationic and amphoteric surfactants products and are characterized by our breadth of product offering and market coverage. Our surfactant products are
primarily used in consumer detergent and industrial cleaning applications. In addition, we manufacture and market a diversified range of mild surfactants and specialty formulations for use in baby
shampoos and other

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personal
care applications. We are also a leading European producer of components for powder and liquid laundry detergents and other cleaners. We continue to strengthen and diversify our surfactant
product offering into formulated specialty surfactant products, for use in various industrial applications such as leather and textile treatment, foundry and construction, agrochemicals, fuels and
lubricants, polymers and coatings. We are growing our global agrochemical surfactant technology and product offerings. Our key surfactants customers include The Sun Products Corp,
L'Oreal, Monsanto, Nufarm, Clorox, Henkel, Colgate, Procter & Gamble and Unilever.

We
are North America's second-largest producer of LAB, with alkylation capacity of 375 million pounds per year at our plant in Chocolate Bayou, Texas. LAB is a surfactant
intermediate which is converted into LAS, a major anionic surfactant used worldwide for the production of consumer, industrial and institutional laundry detergents. We also manufacture a
higher-molecular-weight alkylate which is used as an additive to lubricants. Our key customers for alkylates include Colgate, Lubrizol, Henkel, Procter & Gamble, Unilever and The Sun Products
Corp.

We
believe we are North America's largest producer of maleic anhydride, a highly versatile chemical intermediate that is used to produce UPRs, which are mainly used in the production of
fiberglass reinforced resins for marine, automotive and construction products. Maleic anhydride is also used in the production of lubricants, food additives and artificial sweeteners. We have the
capacity to produce approximately 240 million pounds annually at our facility located in Pensacola, Florida. We also own a 50% interest in Sasol-Huntsman GmbH & Co. KG,
which is accounted for using the equity method. This joint venture owns and operates a facility in Moers, Germany with an annual capacity of 137 million pounds. We also license our maleic
anhydride technology and supply our catalysts to licensees and to worldwide merchant customers, including supplying catalyst to two of the three other U.S. maleic anhydride producers. As a result of
our long-standing research and development efforts aided by our pilot and catalyst preparation plants, we have successfully introduced six generations of our maleic anhydride catalysts.
Patents have been recently filed for our seventh generation catalyst which should be commercially available in late 2009. Revenue from licensing and catalyst comes from new plant commissioning, as
well as current plant retrofits and catalyst change schedules. Our key maleic anhydride customers include AOC, Oronite, Cook Composites, Dixie, Lubrizol and Reichhold.

We
also have the capacity to produce approximately 945 million pounds of EG annually at our facilities in Botany, Australia and Port Neches, Texas.

Products and Markets

Performance Specialties.The following table shows the end-market applications for our performance specialties products:

Product Group

ApplicationsSpecialty Amines

liquid soaps, personal care, lubricant and fuel additives, polyurethane foams, fabric softeners, paints and coatings, refinery processing, water treatingPolyetheramines

polyurethane foams and insulation, construction and flooring, paints and coatings, lubricant and fuel additives, adhesives, epoxy composites, agrochemicals, oilfield chemicals, printing inks, pigment
dispersionEthyleneamines

lubricant and fuel additives, epoxy hardeners, wet strength resins, chelating agents, fungicidesMorpholine/DGA® agent and Gas Treating

hydrocarbon processing, construction chemicals, synthetic rubber, water treating, electronics applications, gas treatment and agriculture


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Product Group

ApplicationsCarbonates

lubricant and fuel additives, agriculture, electronics applications, textile treatment, solar panelsSpecialty Surfactants

agricultural herbicides, construction, paper de-inking, lubricants


Our
performance specialties products are organized around the following end markets: coatings, polymers and resins; process additives; resources, fuels and lubricants;
and agrochemicals.

Amines.Amines broadly refers to the family of intermediate chemicals that are produced by reacting ammonia with various ethylene and
propylene
derivatives. Generally, amines are valued for their properties as a reactive, emulsifying, dispersant, detergent, solvent or corrosion inhibiting agent. Growth in demand for amines is highly
correlated with GDP growth due to its strong links to general industrial and consumer products markets. However, certain segments of the amines market, such as polyetheramines, have grown at rates
well in excess of GDP growth due to new product development, technical innovation, and substitution and replacement of competing products. For example, polyetheramines are used by customers who demand
increasingly sophisticated performance characteristics as an additive in the manufacture of highly customized epoxy formulations, enabling the customers to penetrate new markets and substitute for
traditional curing materials. As amines are generally sold based upon the performance characteristics that they provide to customer-specific end use application, pricing does not generally fluctuate
with movements in underlying raw materials. On June 29, 2005, we signed a memorandum of understanding with the Zamil Group to form a joint venture to build an ethyleneamines
manufacturing facility in Jubail Industrial City, Saudi Arabia. This facility is now under construction and we expect it to come on line in early 2010 with annual capacity of 60 million pounds.

Morpholine/DGA® Agent.Morpholine and DGA® agent are produced as co-products by reacting ammonia with DEG.
Morpholine is used in a number of niche industrial applications including rubber curing (as an accelerator) and flocculants for water treatment. DGA® agent is primarily used in gas
treating, electronics, herbicides and metalworking end-use applications.

Carbonates.Ethylene and propylene carbonates are manufactured by reacting EO and PO with carbon dioxide. Carbonates are used as
solvents and as
reactive diluents in polymer and coating applications. They are also increasingly being used as a photo-resist solvent in the manufacture of printed circuit boards, solar panels, LCD screens and the
production of lithium batteries. Also, propylene carbonates have recently received approval by the U.S. Environmental Protection Agency for use as a solvent in certain agricultural applications. We
expect these solvents to replace traditional aromatic solvents that are increasingly subject to legislative restrictions and prohibitions.

Performance Intermediates.The following table sets forth the end markets for our performance intermediates products:

Product Group

End MarketsSurfactantsAlkoxylates

household detergents, industrial cleaners, anti-fog chemicals for glass, asphalt emulsions, shampoos, polymerization additives, de-emulsifiers for petroleum productionSulfonates/Sulfates

powdered detergents, liquid detergents, shampoos, body washes, dishwashing liquids, industrial cleaners, emulsion polymerization, concrete superplasticizers, gypsum wallboardEsters and Derivatives

shampoo, body wash, textile and leather treatment


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Product Group

End MarketsNitrogen Derivatives

bleach thickeners, baby shampoo, fabric conditioners, other personal care productsFormulated Blends

household detergents, textile and leather treatment, personal care products, pharmaceutical intermediatesEO/PO Block Co-Polymers

automatic dishwasher detergentsEthanolamines

wood preservatives, herbicides, construction, gas treatment, metalworkingLAB

consumer detergents, industrial and institutional detergents, synthetic lubricantsEG

polyester fibers and PET bottle resins, antifreeze


Surfactants.Surfactants or "surface active agents" are substances that combine a water-soluble component with a water insoluble
component in the
same molecule. While surfactants are most commonly used for their detergency in cleaning applications, they are also valued for their emulsification, foaming, dispersing, penetrating and wetting
properties in a variety of industries.

Demand
growth for surfactants is relatively stable and exhibits little cyclicality. The main consumer product applications for surfactants can demand new formulations with improved
performance characteristics which affords considerable opportunity for innovative surfactants manufacturers like us to provide surfactants and blends with differentiated specifications and properties.
For basic surfactants, pricing tends to have a strong relationship to underlying raw material prices and usually lags raw material price movements.

Ethanolamines.Ethanolamines are a range of chemicals produced by the reaction of EO with ammonia. They are used as intermediates in
the production
of a variety of industrial, agricultural and consumer products. There are a limited number of competitors due to the technical and cost barriers to entry. Growth in this sector has typically been
higher than GDP and in the last few years has benefited in particular from the conversion to ethanolamines in the formulation of wood treatment products and higher demand for agriculture products. We
believe the ethanolamines market in North America is balanced with industry operating rates currently running about of 90% of stated capacity. During 2007, we expanded the manufacturing capacity of
our Port Neches, Texas facility by 70 million pounds per year. Some of our competitors have also announced their intention to debottleneck their facilities to meet the continuing growing demand
for ethanolamines.

LAB.LAB is a surfactant intermediate which is produced through the reaction of benzene with either normal paraffins or linear alpha
olefins. Nearly
all the LAB produced globally is converted into LAS, a major anionic surfactant used worldwide for the production of consumer, industrial and institutional laundry detergents.

Four
major manufacturers lead the traditional detergency market for LAB in North America: Procter & Gamble, Henkel, The Sun Products Corp and Unilever. We believe that
two-thirds of the LAB global capacity lies in the hands of seven producers, with two or three major players in each of the three regional markets. Although the North American market for
LAB is mature, we expect Latin America and other developing countries to grow as detergent demand grows at a faster rate than GDP.

From
a competition perspective, compounds derived from alcohol can be used in certain instances as an alternative to LAB in detergent formulations. In the past several years, a
significant amount of new alcohol production capacity has come on stream resulting in lower prices for these alcohol-based compounds. Despite this threat to LAB margins, the lack of investment in new
LAB capacity and inability to fully substitute LAB in detergent formulations has resulted in a tightened supply position

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which
has bolstered profitability. In addition, we have developed a high molecular weight alkylate for the lubricants market. This has allowed us greater diversity in our portfolio and strengthened
our competitive position.

EG.We consume our internally produced EO to produce three types of EG: MEG, DEG and TEG. MEG is consumed primarily in the polyester
(fiber and
bottle resin) and antifreeze end markets and is also used in a wide variety of industrial applications including synthetic lubricants, plasticizers, solvents
and emulsifiers. DEG is consumed internally for the production of Morpholine/DGA® agent and polyols. TEG is used internally for the production of polyols and is sold into the market for
dehydration of natural gas. We continue to optimize our EO and EG operations depending on the fundamental market demand for EG.

Maleic Anhydride and Licensing.The following table sets forth the end markets for our maleic anhydride products:

Product Group

End MarketsMaleic anhydride

boat hulls, automotive, construction, lubricant and fuel additives, countertops, agrochemicals, paper, and food additivesMaleic anhydride catalyst and technology licensing

maleic anhydride, BDO and its derivatives, and PBT manufacturers


Maleic
anhydride is a chemical intermediate that is produced by oxidizing either benzene or normal butane through the use of a catalyst. The largest use of maleic anhydride in the U.S.
is in the production of UPRs, which we believe account for approximately 57% of U.S. maleic anhydride demand. UPR is the main ingredient in fiberglass reinforced resins, which are used for marine and
automotive applications and commercial and residential construction products.

Our
maleic anhydride technology is a proprietary fixed bed process with solvent recovery and is characterized by low butane consumption and an energy-efficient,
high-percentage-recovery solvent recovery system. This process competes against two other processes, the fluid bed process and the fixed bed process with water recovery. We believe that
our process is superior in the areas of feedstock and energy efficiency and solvent recovery. The maleic anhydride-based route to BDO manufacture is currently the preferred process technology and is
favored over the other routes, which include PO, butadiene and acetylene as feedstocks. As a result, the growth in demand for BDO has resulted in increased demand for our maleic anhydride technology
and catalyst.

Total
U.S. demand for maleic anhydride in 2008 was approximately 500 million pounds. Over time, demand for maleic anhydride has generally grown at rates that slightly exceed GDP
growth. However, given its dependence on the UPR market, which is heavily influenced by construction end markets, demand for this application can be cyclical. Pricing for maleic anhydride in North
America over the past several years has been increasing but has recently declined with the drop in feedstock costs. Generally, changes in price have resulted from changes in industry capacity
utilization as opposed to changes in underlying raw material costs; however in the second half of 2008 pricing was more driven by the latter.

We
are currently constructing a new 100 million pounds-per-year maleic anhydride facility at our Geismar, Louisiana site. We expect the new facility to
come on stream at the end of the first quarter of 2009. On April 1, 2008, we announced that Sasol-Huntsman GmbH KG, our 50/50 maleic anyhydride joint venture located in Moers, Germany,
would be expanding its manufacturing capacity by approximately 100 million pounds per year. The new capacity is expected to be available during 2011.

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The
joint venture has received committed nonrecourse financing that together with its cash flows from operations will be used to fund the expansion.

Sales and Marketing

We sell over 2,000 products to over 4,000 customers globally through our Performance Products marketing groups, which have extensive
market knowledge, considerable chemical industry experience and well established customer relationships.

Our
performance specialties markets are organized around end-use market applications, such as coatings, polymers and resins and agrochemical. In these end uses, our marketing
efforts are focused on how our product offerings perform in certain customer applications. We believe that this approach enhances the value of our product offerings and creates opportunities for
on-going differentiation in our development activities with our customers. Our performance intermediates and maleic anhydride markets organize their marketing efforts around their products
and geographic regions served. We also provide extensive pre-and post-sales technical service support to our customers where our technical service professionals work closely
with our research and development functions to tailor our product offerings to meet our customers unique and changing requirements. Finally, these technical service professionals interact closely with
our market managers and business leadership teams to help guide future offerings and market approach strategies.

In
addition to our focused direct sales efforts, we maintain an extensive global network of distributors and agents that also sell our products. These distributors and agents typically
promote our products to smaller end use customers who cannot be served cost effectively by our direct sales forces.

Manufacturing and Operations

Our Performance Products segment has the capacity to produce more than seven billion pounds annually of a wide variety of specialty,
intermediate and commodity products and formulations at 15 manufacturing locations in North America, Europe, Asia and Australia.

These
production capacities are as follows:

Current capacityProduct Area

North
America

Europe

Asia Pacific

Total(millions of pounds)Performance SpecialtiesAmines


634


124
(1)

33


791Specialty surfactants


100


175


70


345Carbonates


69








69Performance IntermediatesEthylene


400








400Propylene


300








300EO


1,000





100


1,100EG


890





55


945Surfactants


470


1,675


30


2,175Ethanolamines


400








400LAB


375








375Maleic anhydride


240


137
(2)




377






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Our
surfactants and amines facilities are located globally, with broad capabilities in amination, sulfonation and ethoxylation. These facilities have a competitive cost base and use
modern manufacturing units that allow for flexibility in production capabilities and technical innovation. Through the major restructuring of our surfactant operations, we have significantly improved
the competitiveness of our surfactants business.

Our
primary ethylene, propylene, EO, EG and ethanolamines facilities are located in Port Neches, Texas. The Port Neches, Texas facility benefits from extensive logistics infrastructure,
which allows for efficient sourcing of other raw materials and distribution of finished products.

Our
LAB facility in Chocolate Bayou, Texas and our maleic anhydride facility in Pensacola, Florida are both located within large, integrated petrochemical manufacturing complexes
operated by Solutia. We believe this results in greater scale and lower costs for our products than we would be able to obtain if these facilities were stand-alone operations.

Our
unconsolidated ethyleneamine joint venture is currently constructing a plant in Jubail, Saudi Arabia. The plant will have approximate capacity of 30,000 MT/yr with production
expected in the first quarter of 2010.

Raw Materials

We have the capacity to use approximately 850 million pounds of ethylene each year produced in part at our Port Neches, Texas
facility in the production of EO and ethyleneamines. We consume all of our EO in the manufacture of our EG, surfactants and amines products. We also use internally produced PO and DEG in the
manufacture of these products. We have the capacity to produce 400 million pounds of ethylene and 300 million pounds of propylene at our Port Neches, Texas facility. All of the ethylene
is used in the production of EO and substantially all of the propylene is consumed by the PO unit at Port Neches operated by our Polyurethanes business. We purchase or toll the remainder of our
ethylene and propylene requirements from third parties.

In
addition to internally produced raw materials, our performance specialties market purchases over 250 compounds in varying quantities, the largest of which includes ethylene
dichloride, caustic soda, synthetic alcohols, paraffin, nonyl phenol, ammonia, hydrogen, methylamines and acrylonitrile. The majority of these raw materials are available from multiple sources in the
merchant market at competitive prices.

In
our performance intermediates market, our primary raw materials, in addition to internally produced and third-party sourced EO and ethylene, are synthetic and natural alcohols,
paraffin, alpha olefins, benzene and nonyl phenol. All of these raw materials are widely available in the merchant market at competitive prices.

Maleic
anhydride is produced by the reaction of n-butane with oxygen using our proprietary catalyst. The principal raw material is n-butane which is purchased
pursuant to long-term contracts and delivered to our Pensacola, Florida site by barge. Our new facility in Geismar, Louisiana will receive n-butane via pipeline. Our maleic
anhydride catalyst is toll-manufactured by BASF under a long-term contract according to our proprietary methods. These raw materials are available from multiple sources at
competitive prices.

Competition

In our performance specialties market, there are few competitors for many of our products due to the considerable customization of
product formulations, the proprietary nature of many of our product

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applications
and manufacturing processes and the relatively high research and development and technical costs involved. Some of our global competitors include BASF, Air Products, Dow, Tosoh, and Akzo.
We compete primarily on the basis of product performance, new product innovation and, to a lesser extent, on the basis of price.

There
are numerous global producers of many of our performance intermediates products. Our main competitors include global companies such as Dow, Sasol, BASF, Petresa, Lyondell,
Clariant, Shell, Cognis, Stepan and Kao, as well as various smaller or more local competitors. We compete on the basis of price with respect to the majority of our product offerings and, to a lesser
degree, on the basis of product availability, performance and service with respect to certain of our more value-added products.

In
our maleic anhydride market, we compete primarily on the basis of price, customer service and plant location. Our competitors include Lanxess, Flint Hills Resources, Marathon, Polynt
and BASF. We are the leading global producer of maleic anhydride catalyst. Competitors in our maleic anhydride catalyst market include Scientific Design and Polynt. In our maleic anhydride technology
licensing market, our primary competitor is Scientific Design. We compete primarily on the basis of technological performance and service.

The
market in which our Performance Products segment operates is highly competitive. Among our competitors in this market are some of the world's largest chemical companies and major
integrated petroleum companies that have their own raw material resources. Some of these companies may be able to produce products more economically than we can. In addition, some of our competitors
in this market have greater financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development. If any of our current
or future competitors in this market develops proprietary technology that enables them to produce products at a significantly lower cost, our technology could be rendered uneconomical or obsolete.

Pigments

General

We are a leading global manufacturer and marketer of titanium dioxide, which is a white pigment used to impart whiteness, brightness
and opacity to products such as paints, plastics, paper, printing inks, fibers and ceramics. We operate eight chloride-based and sulfate-based titanium dioxide manufacturing facilities located in
North America, Europe, Asia and Africa. The global titanium dioxide market is characterized by a small number of large, global producers and a growing compliment of smaller regional producers.

We
offer an extensive range of products that are sold worldwide to approximately 1,500 customers in all major titanium dioxide end markets and geographic regions. The geographic
diversity of our manufacturing facilities allows our Pigments segment to service local customers, as well as global customers that require delivery to more than one location. Our diverse customer base
includes Ampacet, A. Schulman, Akzo Nobel, BASF, Cabot, Clariant, Jotun, PolyOne and Sigma Kalon. Our pigments business has an aggregate annual nameplate capacity of approximately 600,000 tonnes at
our eight production facilities. Five of our titanium dioxide manufacturing plants are located in Europe, one is in North America, one is in Asia, and one is in South Africa. Our North American
operation consists of a 50% interest in a manufacturing joint venture with Kronos Worldwide, Inc.

Our
Pigments segment is focused on improving our competitive position. We expanded our Greatham, U.K. chloride-based facility by 50% to 150,000 tonnes per annum capacity and on
January 22, 2009, we announced our intention to cease pigment production at our Grimsby, U.K. sulphate-based facility during the first quarter of 2009. We are also introducing a number of
innovative

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new
products to the market and carrying out a number of projects to further improve manufacturing costs at each of our facilities.

Products and Markets

Historically, global titanium dioxide demand growth rates tend to closely track global GDP growth rates. However, the demand growth
rate and its relationship with the GDP growth rate varies by region. Developed markets such as the U.S. and Western Europe exhibit higher absolute consumption but lower demand growth rates, while
emerging markets such as Asia exhibit much higher demand growth rates. The titanium dioxide industry experiences some seasonality in its sales reflecting the high exposure to seasonal coatings end use
markets. Coating sales generally peak during the spring and summer months in the northern hemisphere, resulting in greater sales volumes during the second and third quarters of the year.

There
are two manufacturing processes for the production of titanium dioxide, the sulfate process and the chloride process. Most recent capacity additions by the five major producers
have employed the chloride process technology while those by smaller producers have generally used the sulphate process technology. We currently believe that the chloride process accounts for
approximately 60% of global production capacity. However, the global distribution of sulfate- and chloride-based titanium dioxide capacity varies by region, with the sulfate process being predominant
in Europe, our primary market. The chloride process is the predominant process used in North America, and both processes are used in Asia. While most end-use applications can use pigments
produced by either process, regional market preferences typically favor products that are locally available. We believe the chloride and sulfate manufacturing processes compete effectively in the
marketplace.

The
titanium dioxide industry currently has five major producers and a large number of small regional or local producers. Titanium dioxide supply has historically kept pace with
increases in demand as producers increased capacity through low cost incremental debottlenecks and efficiency improvements. During periods of low titanium dioxide demand, the industry experiences high
stock levels and consequently reduces production to manage working capital. Pricing in the industry is driven primarily by supply/demand balance. Based upon current price levels and the long lead
times for planning, governmental approvals and construction, we do not expect significant additional greenfield capacity in the near future.

Sales and Marketing

Approximately 85% of our titanium dioxide sales are made through our direct sales and technical services network, enabling us to
cooperate more closely with our customers and to respond to our increasingly global customer base. Our concentrated sales effort and local manufacturing presence have allowed us to achieve our leading
market shares in a number of the countries where we manufacture titanium dioxide.

In
addition, we have focused on marketing products to higher growth industries. For example, we believe that our pigments business is well-positioned to benefit from the
projected growth in the plastics sector which we expect to grow faster than the overall titanium dioxide market over the next several years.

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Manufacturing and Operations

Our pigments business has eight manufacturing sites in seven countries with a total capacity of approximately 600,000 tonnes per year.
Approximately 74% of our titanium dioxide capacity is located in Western Europe. The following table presents information regarding our titanium dioxide facilities:

Region

Site

Annual
Capacity
(tonnes)

ProcessWestern Europe

Greatham, U.K.


150,000

ChlorideCalais, France


95,000

SulfateHuelva, Spain


80,000

SulfateScarlino, Italy


80,000

SulfateGrimsby, U.K.(1)


40,000

SulfateNorth America

Lake Charles, Louisiana(2)


70,000

ChlorideAsia

Teluk Kalung, Malaysia


60,000

SulfateSouthern Africa

Umbogintwini, South Africa


25,000

SulfateTotal




600,000






We
recently completed the expansion of our Greatham, U.K. facility by 50,000 tonnes. We are also well positioned to selectively invest in new plant capacity based upon our ICON chloride
technology. ICON technology allows for the construction of new capacity with world-scale economics at a minimum nameplate size of 65,000 tonnes. We believe competing chloride technologies typically
require a minimum capacity of 100,000 tonnes to achieve comparable economics. Our chloride additions can be more easily absorbed into the market, which provides higher investment returns than larger
capacity additions.

Joint Venture

We own a 50% interest in Louisiana Pigment Company L.P., a manufacturing joint venture located in Lake Charles, Louisiana. The
remaining 50% interest is held by our joint venture partner, Kronos Worldwide. We share production offtake and operating costs of the plant equally with Kronos Worldwide, though we market our share of
the production independently. The operations of the joint venture are under the direction of a supervisory committee on which each partner has equal representation. Our investment in Louisiana Pigment
Company L.P. is accounted for using the equity method.

Raw Materials

The primary raw materials used to produce titanium dioxide are titanium-bearing ores. We purchase the majority of our ore under
long-term supply contracts with a number of ore suppliers. The majority of titanium-bearing ores are sourced from Australia, South Africa and Canada. Ore accounts for approximately 40% of
pigment variable manufacturing costs, while utilities (electricity, gas and steam), sulfuric acid and chlorine collectively account for approximately 35% of our variable manufacturing costs.

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The world market for titanium bearing ores is dominated by Rio Tinto and Iluka, which account for approximately 40% of global supply. Both companies produce a
range of ores for use in chloride and sulphate processes. We purchase approximately 50% of our ore from these two producers. The choice of producers has increased in recent years with the entry into
the market of new producers based in India and Africa. We have broadened our supply base by purchasing increasing amounts of our ores from the new suppliers. Over 80% of our ore purchases are made
under agreements with terms of three or more years.

Titanium
dioxide producers extract titanium from ores and process it into pigmentary titanium dioxide using either the chloride or sulfate process. Once an intermediate titanium dioxide
pigment has been produced, it is "finished" into a product with specific performance characteristics for particular end-use applications. The finishing process is common to both the
sulfate and chloride processes and is a major determinant of the final product's performance characteristics.

The
sulfate process generally uses less-refined ores that are cheaper to purchase but produce more co-product than the chloride process. Co-products
from both processes require treatment prior to disposal in order to comply with environmental regulations. In order to reduce our disposal costs and to increase our cost competitiveness, we have
developed and marketed the co-products of our pigments business. We sell over 50% of the co-products generated by our business.

Competition

The global markets in which our pigments business operates are highly competitive. Competition is based primarily on price. In
addition, we also compete on the basis of product quality and service. The major global producers against whom we compete are DuPont, Tronox, Kronos and Cristal, each of which has a global presence
and the ability to service all global markets Some of our competitors may be able to produce products more economically than we can. In addition, some of our competitors in this market have greater
financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development. If any of our current or future competitors in this
market develops proprietary technology that enables them to produce products at a significantly lower cost, our technology could be rendered uneconomical or obsolete. Moreover, the sulphate-based
titanium dioxide technology used by our Pigments business is widely available. Accordingly, barriers to entry, apart from capital availability, may be low and the entrance of new competitors into the
industry may reduce our ability to capture improving profit margins in circumstances where capacity utilization in the industry is increasing.

Polymers and Base Chemicals

On February 15, 2007, we entered into an Asset Purchase Agreement pursuant to which Flint Hills Resources, a wholly owned
subsidiary of Koch, agreed to acquire our North American base chemicals and polymers business assets for $456 million in cash, plus the value of inventory on the date of closing. The original
agreement provided that we would retain other elements of working capital, including accounts receivable, accounts payable and certain accrued liabilities, which would then be liquidated for cash in
the ordinary course of business. On June 22, 2007, we entered into the Amended and Restated Agreement with Flint Hills Resources amending certain terms of the original agreement to provide for,
among other things, the closing of the North American Polymers Disposition on August 1, 2007 for $150 million plus the value of associated inventory on an average actual cost basis and
for the subsequent closing of the U.S. Base Chemicals Disposition for the remaining $306 million plus the value of associated inventory on an average actual cost basis, following the
re-start of our Port Arthur, Texas olefins manufacturing facility. On August 1, 2007, we closed the North American Polymers Disposition, and, on November 5, 2007, we closed
on the U.S. Base Chemicals Disposition following the successful restart of our Port Arthur, Texas facility.

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We
received total consideration for the U.S. Petrochemicals Disposition of $769 million in 2007. The net proceeds from the U.S. Petrochemicals Disposition were used to repay
borrowings under our revolving credit facility, repay other debt and reduce amounts under our accounts receivable securitization program ("A/R Securitization Program").

Prior
to the U.S. Petrochemicals Disposition, our Polymers segment produced LDPE and LLDPE, polypropylene, EPS, styrene and APAO and our Base Chemicals segment produced olefins and
cyclohexane.

RESEARCH AND DEVELOPMENT

For the years ended December 31, 2008, 2007 and 2006, we spent $154 million, $145 million and $115 million,
respectively, on research and development.

We
support our business with a major commitment to research and development, technical services and process engineering improvement. Our research and development centers are located in
The Woodlands, Texas, Everberg, Belgium, and Shanghia, China. Other regional development/technical service centers are located in Billingham, England (pigments); Auburn Hills, Michigan (polyurethanes
for the automotive industry); Derry, New Hampshire, Shanghai, China, Deggendorf, Germany and Ternate, Italy (polyurethanes); Melbourne, Australia (surfactants); Port Neches, Texas (process engineering
support); and Basel, Switzerland (textile effects).

INTELLECTUAL PROPERTY RIGHTS

Proprietary protection of our processes, apparatuses, and other technology and inventions is important to our businesses. We own
approximately 650 unexpired U.S. patents, approximately 185 patent applications (including provisionals) currently pending at the U.S. Patent and Trademark Office, and approximately 4,800 foreign
counterparts, including both issued patents and pending patent applications. While a presumption of validity exists with respect to issued U.S. patents, we cannot assure that any of our patents will
not be challenged, invalidated, circumvented or rendered unenforceable. Furthermore, we cannot assure the issuance of any pending patent application, or that if patents do issue, that these patents
will provide meaningful protection against competitors or against competitive technologies. Additionally, our competitors or other third parties may obtain patents that restrict or preclude our
ability to lawfully produce or sell our products in a competitive manner.

We
also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. There can
be no assurance, however, that confidentiality agreements into which we enter and have entered will not be breached, that they will provide meaningful protection for our trade secrets or proprietary
know-how, or that adequate remedies will be available in the event of an unauthorized use or disclosure of such trade secrets and know-how. In addition, there can be no
assurance that others will not obtain knowledge of these trade secrets through independent development or other access by legal means.

In
addition to our own patents and patent applications and proprietary trade secrets and know-how, we are a party to certain licensing arrangements and other agreements
authorizing us to use trade secrets, know-how and related technology and/or operate within the scope of certain patents owned by other entities. We also have licensed or
sub-licensed intellectual property rights to third parties.

We
have associated brand names with a number of our products, and we have approximately 175 U.S. trademark registrations (including applications for registration currently pending at the
U.S. Patent and Trademark Office), and approximately 5,350 foreign counterparts, including both registrations and applications for registration. However, there can be no assurance that the trademark
registrations will

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provide
meaningful protection against the use of similar trademarks by competitors, or that the value of our trademarks will not be diluted.

Because
of the breadth and nature of our intellectual property rights and our business, we do not believe that any single intellectual property right (other than certain trademarks for
which we intend to maintain the applicable registrations) is material to our business. Moreover, we do not believe that the termination of intellectual property rights expected to occur over the next
several years, either individually or in the aggregate, will materially adversely affect our business, financial condition or results of operations.

EMPLOYEES

As of December 31, 2008, we employed approximately 12,600 people in our operations around the world. Approximately 2,200 of
these employees are located in the U.S., while approximately 10,400 are located in other countries. We believe our relations with our employees are good. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of
OperationsRecent Developments2009 Cost Reduction Intiativies" for a discussion of our plan to reduce 1,250 positions.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

General

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

Environmental, Health and Safety Systems

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

EHS Capital Expenditures

We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and
repair pollution control equipment. For the years ended December 31, 2008 , 2007 and 2006, our capital expenditures for EHS matters totaled $58 million, $69 million and
$53 million, respectively. Since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of

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specific
requirements, we cannot provide assurance that our recent expenditures will be indicative of future amounts required under EHS laws.

Remediation Liabilities

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

Under
the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state laws, a current or former owner or operator of real
property may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator
may be liable regardless of whether it owned or operated the facility at the time of the release. We have been notified by third parties of claims against us for cleanup liabilities at approximately
10 former facilities or third party sites, including, but not limited to, sites listed under CERCLA. Based on current information and past experiences at other CERCLA sites, we do not expect any of
these third party claims to result in material liability to us.

In
addition, under the U.S. Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar state laws, we may be required to remediate contamination originating from
our properties as a condition to our hazardous waste permit. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste
disposal. We are aware of soil, groundwater or surface contamination from past operations at some of our sites, and we may find contamination at other sites in the future. For example, our Port
Neches, Texas, and
Geismar, Louisiana, facilities are the subject of ongoing remediation requirements under RCRA authority.

In
June of 2006, an agreement was reached between the local regulatory authorities and our advanced materials site in Pamplona, Spain to relocate our manufacturing operations in order to
facilitate new urban development desired by the city. Subsequently, as required by the authorities, soil and groundwater sampling was performed and followed by a quantitative risk assessment. Although
unresolved at this time, some level of remediation of site contamination may be required in the future, but the estimated cost is unknown because the remediation approach and timing has not been
determined.

By
letter dated March 7, 2006, our Base Chemicals and Polymers facility in West Footscray, Australia, was issued a clean-up notice by the Australian (Victorian) EPA.
The agency was concerned about soil and groundwater contamination emanating from the site. Although we fulfilled all initial requirements under the clean-up notice, the agency revoked the
original clean-up notice on September 4, 2007 and issued a revised clean-up notice granting an extension due to "the complexity of contamination issues" at the site. The
revised clean-up notice reflects the requirement for a more detailed program, with a deadline for the submission of a detailed site remediation action plan by March 31, 2009. We
expect to respond to the EPA addressing their revised concerns. We can provide no assurance that the EPA will agree with our proposed plan or will not seek to institute additional requirements for the
site. However, we do not believe the costs to us associated with this issue will be material.

In
many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of a business or specific facility.
In these situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully
exercised our rights under these contractual covenants for a number of sites and, where applicable, mitigated our ultimate remediation liability. We

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cannot
assure you, however, that all of such matters will be subject to indemnity, that the prior owner will honor its indemnity or that our existing indemnities will be sufficient to cover our
liabilities for such matters.

Based
on available information and the indemnification rights we believe are likely to be available, we believe that the costs to investigate and remediate known contamination will not
have a material adverse effect on our financial condition, results of operations or cash flows. However, if such indemnities are unavailable or do not fully cover the costs of investigation and
remediation or we are required to contribute to such costs, and if such costs are material, then such expenditures may have a material adverse effect on our financial condition, results of operations
or cash flows. At the current time, we are unable to estimate the full cost, exclusive of indemnification benefits, to remediate any of the known contamination sites.

Environmental Reserves

We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known
penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are based upon requirements placed upon
the company by regulators, available facts, existing technology and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. We had accrued
$7 million and $8 million for environmental liabilities as of December 31, 2008 and 2007, respectively. Of these amounts, $4 million and $5 million were classified
as accrued liabilities in our consolidated balance sheets as of December 31, 2008 and 2007, respectively, and $3 million and $3 million were classified as other noncurrent
liabilities in our consolidated balance sheets as of December 31, 2008 and December 31, 2007, respectively. In certain cases, our remediation liabilities may be payable over periods of
up to 30 years. We may incur losses for environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or range of such potential excess.

Regulatory Developments

Under the EU's integrated pollution prevention and control directive ("IPPC"), EU member governments adopted rules and implemented a
cross media (air, water and waste) environmental permitting program for individual facilities. Although the EU countries varied in their respective implementation of the IPPC permit program, we
submitted on a timely basis all necessary IPPC permit applications required and received completed permits from the applicable government agencies. Based upon a review of those permits, the costs of
compliance with the IPPC permit program are not material to our financial condition, results of operations or cash flows.

In
December 2006, the EU parliament and EU council approved a new EU regulatory framework for chemicals called "REACH" (Registration, Evaluation and Authorization of Chemicals). REACH
took effect on June 1, 2007, and the program it establishes will be phased in over 11 years. Under the regulation, companies that manufacture or import more than one ton of a chemical
substance per year will be required to register such chemical substances and isolated intermediates in a central database. Use authorizations will be granted for a specific chemical if the applicants
can show that any risk in using the chemical can be adequately controlled or, where there are no suitable alternatives available, if the applicant can demonstrate that the social and economic benefits
of using the chemical outweigh the risks. In addition, specified uses of some hazardous substances may be restricted. Furthermore, all applicants will have to study the availability of alternative
chemicals. If an alternative is available, an applicant will have to submit a "substitution" plan to the regulatory agency. The regulatory agency will only authorize persistent
bio-accumulative and toxic substances if an alternative chemical is not available. The registration, evaluation and authorization phases of the program will require expenditures and
resource commitments in order to, for example, develop information technology tools,

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generate
data, prepare and submit dossiers for substance registration, participate in consortia, obtain legal advice and reformulate products, if necessary. We have established a cross-business
European REACH team that is working closely with our businesses to identify and list all substances purchased, manufactured or imported by or for us into the EU. Our pre-registration REACH
compliance began on June 1, 2008, utilizing internal resources at nominal expense, and we met all chemical pre-registration requirements by the November 30, 2008 statutory
deadline. We are currently proceeding with the registration of the high-volume and high-priority chemicals under the program. Although the total long-term cost for
REACH compliance is not estimable at this time, we spent approximately $2 million and $3 million during the years ended December 31, 2008 and 2007, respectively, on REACH
compliance.

Greenhouse Gas Regulation

In the EU and other jurisdictions committed to compliance with the Kyoto Protocol to the United Nations Framework Convention on Climate
Change (the "Convention"), there is an increasing likelihood that our manufacturing sites will be affected in some way over the next few years by regulation or taxation of greenhouse gas ("GHG")
emissions. In addition, although the U.S. is not a signatory to the Convention, several states, including California, are implementing their own GHG regulatory programs and a federal program in the
U.S. is likely for the future. Several of our sites are subject to existing GHG legislation, but few have experienced or anticipate significant cost increases as a result, although it is likely that
GHG emission restrictions will increase over time. Potential consequences of such restrictions include capital requirements to modify assets used to meet GHG restriction and/or increases in energy
costs above the level of general inflation, as well as direct compliance costs. Currently, however, it is not possible to estimate the likely financial impact of potential future regulation on any of
our sites.

Chemical Facility Anti-terrorism Rulemaking

The Department of Homeland Security ("DHS") issued the final rule of their "Chemical Facility Anti-Terrorism Standard" in
2007. The initial phase of the rule required all chemical facilities in the U.S. to evaluate their facilities against the DHS Appendix A list of "Chemicals of Interest." Facilities which have
specified chemicals in designated quantities on the Appendix A list were required to submit a "Top Screen" to DHS in 2008. A Top Screen is a questionnaire completed by a facility having
Chemicals of Interest in designated threshold quantities. In early 2008, we submitted Top Screens from several of our facilities. After reviewing the Top Screens, DHS determined that some of our sites
were "High Risk" facilities. As a result, we were required to perform Security Vulnerability Assessments ("SVAs") at the High Risk sites. The SVAs were completed and sent to DHS during the fourth
quarter of 2008. We are currently awaiting the final risk ranking from the DHS, based on their assessment of the SVAs. Any of the sites which are still considered High Risk after the DHS assessment
will be required to develop site security plans based on a list of DHS risk-based performance standards. We are unable to determine the cost of security enhancements at our High Risk sites
until the site security plans are developed. We anticipate this phase of the rule to be completed by mid-2009.

MTBE Developments

We produce MTBE, an oxygenate that is blended with gasoline to reduce vehicle air emissions and to enhance the octane rating of
gasoline. Litigation or legislative initiatives restricting the use of MTBE in gasoline may subject us or our products to environmental liability or materially adversely affect our sales and costs.
Because MTBE has contaminated some water supplies, its use has become controversial in the U.S. and elsewhere, and its use has been effectively eliminated in the U.S. market. Since 2007, we have
marketed MTBE, either directly or through third parties, only to gasoline additive customers located outside the U.S., although there are additional costs associated with such

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outside-U.S.
sales which may result in decreased profitability compared to historical sales in the U.S. We may also elect to use all or a portion of our precursor tertiary butyl alcohol to
produce saleable products other than MTBE. If we opt to produce products other than MTBE, necessary modifications to our facilities will require significant capital expenditures and the sale of such
other products may produce a lower level of cash flow than that historically produced from the sale of MTBE.

Numerous
companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in more than 150 cases in U.S. courts that
allege MTBE contamination in groundwater. Many of these cases were settled after the parties engaged in mediation supervised by a court-appointed special settlement master. Beginning in March 2007 and
continuing through December 2008, we have been named as a defendant in fourteen of these lawsuits, all of which are still pending. For more information, see "Item 3 Legal
ProceedingsMTBE Litigation." The plaintiffs in the MTBE groundwater contamination cases generally seek compensatory damages, punitive damages, injunctive relief, such as monitoring and
abatement, and attorney fees. We currently have insufficient information to meaningfully assess our potential exposure in these cases. We believe that some of our liability in these cases, if any, is
likely covered by insurance and/or indemnity agreements with prior owners. It is possible that we could be named as a defendant in additional existing or future MTBE contamination cases. We cannot
provide assurances that adverse results against us in existing or future MTBE contamination cases will not have a material adverse effect on our business, results of operations and financial position.

AVAILABLE INFORMATION

We maintain an internet website at http://www.huntsman.com. Our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to these reports are available free of charge through our website as soon as reasonably practicable after we
file this material with the SEC. We also provide electronic or paper copies of our SEC filings free of charge upon request.

GLOSSARY OF CHEMICAL TERMS

APAOamorphous
polyalpha olefins

DEGdi-ethylene
glycol

BDObutane
diol

DGA®
AgentDIGLYCOLAMINE® agent

EGethylene
glycol

EOethylene
oxide

EPSexpanded
polystyrene

LABlinear
alkyl benzene

LASlinear
alkylbenzene sulfonate

LDPElow
density polyethylene

LERliquid
epoxy resins

LLDPElinear
low density polyethylene

LNGliquefied
natural gas

MEGmono-ethylene
glycol

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MDImethyl
diphenyl diisocyanate

MTBEmethyl
tertiary-butyl ether

PGpropylene
glycol

POpropylene
oxide

Polyolsa
substance containing several hydroxyl groups. A diol, triol and tetrol contain two, three and four hydroxyl groups respectively

TBAtertiary-butyl
alcohol

TBHPtert-butyl
hydroperoxide

TDItoluene
diisocyanate

TEGtri-ethylene
glycol

TiO2titanium
dioxide pigment

TPUthermoplastic
polyurethane

UPRunsaturated
polyester resin

ITEM 1A.    RISK FACTORS

Any of the following risks could materially and adversely affect our business, results of operations and financial condition.

RISKS RELATED TO OUR BUSINESS

We have a history of losses and may incur losses in the future.

We have incurred net losses in three of the last five fiscal years. Our history of losses may have a negative impact on our business,
including our ability to fund operations, make capital expenditures and service debt obligations. Persistent continued losses likely would negatively affect our ability to meet such obligations over
the long-term. Our history of losses may also increase our cost of borrowing and make it more difficult and/or expensive to take advantage of opportunities for growth.

Our industry is affected by global economic factors including risks associated with a recession and our customers' access to credit.

Our financial results are substantially dependent upon the overall economic conditions in the United States, the European Union and
Asia. A recession in any of these locations or globallyor public perceptions that result in declining economic conditionscould substantially decrease the demand for our
products and adversely affect our business. Indeed, as a result of the current economic downturn, we have experienced decreased demand for many of our products. Moreover, many of our customers rely on
access to credit to adequately fund their operations. The inability of our customers to access credit facilities will adversely affect our business by reducing our sales, increasing our exposure to
accounts receivable bad debts and reducing our profitability.

The
current negative worldwide economic conditions and market instability also makes it increasingly difficult for us, our customers and our suppliers to forecast demand trends. A
continued decline in demand could place further pressure on our results of operations. The timing and extent of any changes to currently prevailing market conditions is uncertain and supply and demand
may be unbalanced at any time. As a consequence, we are unable to accurately predict the extent or duration of business cycles or their effect on our financial condition or results of operations, and
can give no assurances as to the timing, extent or duration of the current or future business cycles.

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Significant price volatility or interruptions in supply of our raw materials may result in increased costs that we may be unable to pass on to our customers, which could
reduce our profitability.

The prices of the raw materials that we purchase from third parties are cyclical and volatile. We purchase a substantial portion of
these raw materials from third party suppliers, and, following the dispositions of our base chemicals and polymers businesses in 2007 and 2006, respectively, our purchases from third party suppliers
have significantly increased. The cost of these raw materials represents a substantial portion of our operating expenses. The prices for a number of these raw materials generally follow price trends
of, and vary with market conditions for, crude oil and natural gas feedstocks, which are highly volatile and cyclical.

The
feedstocks and other raw materials we consume are generally commodity products that are readily available at market prices. We frequently enter into supply agreements with particular
suppliers, but disruptions of existing supply arrangements could substantially impact our profitability. If certain of our suppliers are unable to meet their obligations under present supply
agreements, we may be forced to pay higher prices to obtain the necessary raw materials from other sources and we may not be able to increase prices for our finished products to recoup the higher raw
materials costs. In addition, if any of the raw materials that we use become unavailable within the geographic area from which they are now sourced, then we may not be able to obtain suitable or cost
effective substitutes. Any interruption in
the supply of raw materials could increase our costs or decrease our revenues, which could reduce our cash flow.

Our
supply agreements typically provide for market-based pricing and provide us only limited protection against price volatility. While we attempt to match cost increases with
corresponding product price increases, we are not always able to raise product prices immediately or at all. Timing differences between raw material prices, which may change daily, and contract
product prices, which in many cases are negotiated only monthly or less often, have had and may continue to have a negative effect on our cash flow. Any cost increase that we are not able to pass on
to our customers could have a material adverse effect on our business, results of operations, financial condition and liquidity.

We are subject to the risk of loss resulting from nonpayment or nonperformance by our customers.

As a result of the current economic downturn, some of our customers have initiated or are contemplating initiating bankruptcy
proceedings. Our credit procedures and policies may not be adequate to eliminate customer credit risk. Our customers may experience financial difficulties, including bankruptcies, restructurings and
liquidations. These and other financial problems that may be experienced by our customers, as well as potential financial weakness in our industry, may increase our risk in extending trade credit to
customers. A significant adverse change in a customer relationship or in a customer's financial position could cause us to limit or discontinue business with that customer, require us to assume more
credit risk relating to that customer's receivables or limit our ability to collect accounts receivable from that customer, all of which could have a material adverse effect on our business, results
of operations, financial condition and liquidity.

Our available cash and access to additional capital may be limited by our significant leverage, which could restrict our ability to grow our businesses.

We have a significant amount of indebtedness outstanding. As of December 31, 2008, we had total consolidated outstanding
indebtedness of approximately $3,882 million (including the current portion of long-term debt) and a debt to total capitalization ratio of approximately 71%. This balance does not
reflect approximately $446 million under our off-balance sheet A/R Securitization Program at

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December 31,
2008. Our outstanding debt could have important consequences for our businesses, including the following:



We
require substantial capital to finance our operations and continued growth, and we may incur substantial additional debt from time to time for a variety of purposes, including
acquiring additional businesses. However, our existing debt instruments contain restrictive covenants. Among other things, these covenants limit or prohibit our ability to incur more debt; make
prepayments of other debt; pay dividends, redeem stock or make other distributions; issue capital stock; make investments; create liens; enter into transactions with affiliates; enter into sale and
leaseback transactions; merge or consolidate; and transfer or sell assets.

Our
debt instruments also require us to comply with certain financial covenants under certain circumstances. For example, the leverage covenant applicable to our $650 million
revolving facility (the "Revolving Facility") under our senior secured credit facilities (the "Senior Credit Facilities") requires us to maintain a debt to EBITDA ratio of 3.75 to 1 when loans or
letters of credit are outstanding under the Revolving Facility. As of December 31, 2008, we were in compliance with the covenant. However, if we violate this covenant, it could lead to an event
of default under the Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and result in a loss of such facilities. Given the current credit
environment, it may not be possible for us to replace the Senior Credit Facilities with a substitute facility on terms acceptable to us, or at all.

We
also must comply with certain financial covenants under our $575 million A/R Securitization Program. Failure to meet such covenants could lead to an event of default and could
require us to cease use of such facility and collect our trade receivables until our obligations are paid in full. A default under the accounts receivable securitization program would also constitute
an event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and result in a loss of such facilities. In the event the
debt under one or more of the facilities is accelerated, cross-default provisions in other debt instruments of our Company would likely be triggered, which would likely have a material and adverse
impact on our Company's financial condition.

Also,
if we undergo a change of control, our debt instruments may require us to make an offer to purchase certain of our notes. Under these circumstances, we may also be required to
repay indebtedness under our Senior Credit Facilities prior to our notes. In this event, we may not have the financial resources necessary to purchase such notes, which would result in an event of
default under the indentures governing such notes.

As
of December 31, 2008, the current portion of our long term debt totaled approximately $205 million. As of December 31, 2008, we had combined outstanding variable
rate borrowings of

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approximately
$2 billion. Assuming a 1% increase in interest rates, without giving effect to any interest rate hedges, our annual interest rate expense would increase by approximately
$18 million. If we are unable to generate sufficient cash flow or are otherwise unable to obtain the funds required to meet payments of principal and interest on our indebtedness, or if we
otherwise fail to comply with the various covenants in the instruments governing our indebtedness, we could be in default under the terms of those instruments. In the event of a default, a holder of
the indebtedness could elect to declare all the funds borrowed under those instruments to be due and payable together with accrued and unpaid interest, the creditors under our Senior Credit Facilities
could elect to terminate their commitments thereunder and we or one or more of our subsidiaries, could be forced into bankruptcy or liquidation. Any of the foregoing consequences could have a material
adverse effect on our business, results of operations and financial condition.

We may not be able to obtain funding because of the deterioration of the credit and capital markets. This may hinder or prevent us from meeting our future capital needs and
from refinancing our existing indebtedness.

Global financial markets and economic conditions have been, and continue to be, disrupted and volatile, which has caused a substantial
deterioration in the credit and capital markets. These conditions, along with significant write-offs in the financial services sector and the re-pricing of credit risk, will
likely continue and may make it difficult to obtain funding for our ongoing capital needs.

In
particular, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets generally has diminished
significantly. Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets
generally has increased as many lenders and institutional investors have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at maturity on terms that are
similar to existing debt, and reduced, or in some cases ceased, to provide funding to borrowers.

Due
to these factors, we cannot be certain that funding for our capital needs from credit and capital markets will be available if needed and, to the extent required, on acceptable
terms. In addition, we may be unable to refinance our existing indebtedness on terms that are acceptable to us or at all. If we cannot meet our capital needs or refinance our existing indebtedness, it
could have a material adverse effect on our financial position and results of operations.

A downgrade in the ratings of the securities of our Company or our subsidiaries could result in increased interest and other financial expenses related to future borrowings
of our Company or our subsidiaries and could restrict our access to additional capital or trade credit.

Standard and Poor's Ratings Services and Moody's Investors Service maintain credit ratings for us. Each of these ratings is currently
below investment grade. Any decision by these or other ratings agencies to downgrade such ratings in the future could result in increased interest and other financial expenses relating to our future
borrowings and could restrict our ability to obtain additional financing on satisfactory terms. In addition, any downgrade could restrict our access to, and negatively impact the terms of, trade
credit extended by our suppliers of raw materials.

Loss of key members of our management could disrupt our business.

We depend on the continued employment and performance of our senior executives and other key members of management. If any of these
individuals resigns or becomes unable to continue in his present role and is not adequately replaced, our business operations and our ability to implement our growth strategies could be materially
disrupted. We generally do not have employment agreements with, and we do not maintain any "key man" life insurance for, any of our executive officers.

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Uncertainties following the termination of the Merger may result in a loss of employees and may otherwise materially adversely affect our business and operations.

Our future results of operations will depend in part upon our ability to retain existing highly skilled and qualified employees and to
attract new employees. A number of our employees are highly skilled scientists and highly trained technicians, and failure to continue to attract and retain such individuals could materially adversely
affect our ability to compete. In addition, current and prospective employees may experience uncertainty about their roles following the termination of the Merger. This uncertainty may materially
adversely affect our ability to attract and retain key management, sales, marketing, technical and other personnel. Any inability to retain key personnel could have an adverse effect on our ability to
operate the business as a stand-alone enterprise.

Natural or other disasters could disrupt our business and result in loss of revenue or in higher expenses.

Any serious disruption at any of our facilities due to hurricane, fire, earthquake, flood, terrorist attack or any other natural or
man-made disaster could impair our ability to use our facilities and have a material adverse impact on our revenues and increase our costs and expenses. If there is a natural disaster or
other serious disruption at any of these facilities, it could impair our ability to adequately supply our customers and negatively impact our operating results. In addition, many of our current and
potential customers are concentrated in specific geographic areas. A disaster in one of these regions could have a material adverse impact on our operations, operating results and financial condition.

Our results of operations may be adversely affected by fluctuations in currency exchange rates and international business risks.

We conduct a majority of our business operations outside the U.S., and these operations are subject to risks normally associated with
international operations. These risks include the need to convert currencies that may be received for our products into currencies in which we purchase raw materials or pay for services, which could
result in a gain or loss depending on fluctuations in exchange rates. In addition, we translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during
the reporting period or the exchange rate at the end of that period. During times of a strengthening U.S. dollar, our reported international sales and earnings may be reduced because the local
currency may translate into fewer U.S. dollars. Because we currently have significant operations located outside the United States, we are exposed to fluctuations in global currency rates which may
result in gains or losses on our financial statements.

Other
risks of international operations include trade barriers, tariffs, exchange controls, national and regional labor strikes, social and political risks, general economic risks and
required compliance with a variety of foreign laws, including tax laws. Furthermore, in foreign jurisdictions where process of law may vary from country to country, we may experience difficulty in
enforcing agreements. In jurisdictions where bankruptcy laws and practices may vary, we may experience difficulty collecting foreign receivables through foreign legal systems. The occurrence of these
risks, among others, could disrupt the businesses of our international subsidiaries, which could significantly affect their ability to make distributions to us.

Demand for many of our products is cyclical, and we may experience depressed market conditions for such products.

Historically, the markets for many of our products have experienced alternating periods of tight supply, causing prices and profit
margins to increase, followed by periods of capacity additions, resulting in oversupply and declining prices and profit margins. The volatility these markets experience occurs as a result of changes
in the supply and demand for products, changes in energy prices and

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changes
in various other economic conditions around the world. This cyclicality and volatility of our industry results in significant fluctuations in profits and cash flow from period to period and
over the business cycle. Currently, we are confronted by depressed market conditions and such conditions could exist for a prolonged period.

The industries in which we compete are highly competitive, and we may not be able to compete effectively with our competitors that have greater financial resources, which
could have a material adverse effect on our business, results of operations and financial condition.

The industries in which we operate are highly competitive. Among our competitors are some of the world's largest chemical companies and
major integrated petroleum companies that have their own raw material resources. Some of these companies may be able to produce products more economically than we can. In addition, some of our
competitors have greater financial resources, which may enable them to invest significant capital into their businesses, including expenditures for research and development. If any of our current or
future competitors develops proprietary technology that enables them to produce products at a significantly lower cost, our technology could be rendered uneconomical or obsolete. Moreover, certain of
our businesses use technology that is widely available. Accordingly, barriers to entry, apart from capital availability, may be low in certain product segments of our business, and the entrance of new
competitors into the industry may reduce our ability to capture improving profit margins in circumstances where capacity utilization in the industry is increasing. Further, petroleum-rich
countries have become more significant participants in the petrochemical industry and may expand this role significantly in the
future. Increased competition in any of our businesses could compel us to reduce the prices of our products, which could result in reduced profit margins and loss of market share and have a material
adverse effect on our business, results of operations, financial condition and liquidity.

Our operations involve risks that may increase our operating costs, which could reduce our profitability.

Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations are subject
to hazards inherent in the manufacturing and marketing of differentiated and commodity chemical products. These hazards include: chemical spills, pipeline leaks and ruptures, storage tank leaks,
discharges or releases of toxic or hazardous substances or gases and other hazards incident to the manufacturing, processing, handling, transportation and storage of dangerous chemicals. We are also
potentially subject to other hazards, including natural disasters and severe weather; explosions and fires; transportation problems, including interruptions, spills and leaks; mechanical failures;
unscheduled downtimes; labor difficulties; remediation complications; and other risks. Many potential hazards can cause bodily injury and loss of life, severe damage to or destruction of property and
equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties and liabilities. Furthermore, we are subject to present and future
claims with respect to workplace exposure, exposure of contractors on our premises as well as other persons located nearby, workers' compensation and other matters.

We
maintain property, business interruption and casualty insurance policies which we believe are in accordance with customary industry practices, but we are not fully insured against all
potential hazards and risks incident to our business. We maintain property damage and business interruption insurance policies and products liability and sudden and accidental insurance policies, as
well as insurance policies covering other types of risks, including pollution legal liability insurance. Each of these insurance policies is subject to customary exclusions, deductibles and coverage
limits, in accordance with industry standards and practices. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some
instances, certain insurance may become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability

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for
which we were not fully insured, it could have a material adverse effect on our business, results of operations, financial condition and liquidity.

In
addition, we are subject to various claims and litigation in the ordinary course of business. We are a party to various pending lawsuits and proceedings. It is possible that judgments
could be rendered against us in these cases or others in which we could be uninsured or not covered by indemnity and beyond the amounts that we currently have reserved or anticipate incurring for such
matters.

Financial difficulties and related problems at our vendors, suppliers and other business partners could result in a disruption in our operations and have a material adverse
effect on our business.

We rely on numerous vendors and suppliers and collaborations with other industry participants to provide us with chemicals, feedstocks
and other raw materials, along with energy sources and, in certain cases, facilities, that we need to operate our business. Recently, the chemical industry, including potentially certain companies on
which we rely, has experienced severe financial difficulties, including issues with solvency. We believe that certain of our business partners may be experiencing or may experience cash flow problems,
which could be further aggravated by recessionary industry conditions. Some of these companies may be forced to reduce their output, shut down their operations or file for bankruptcy protection.
Financial difficulties or solvency problems at companies on which we rely could materially adversely affect their ability to provide us with the raw materials, energy sources or facilities that we
need, which could disrupt our operations, including the production of certain of our products. In addition, it could be difficult to find replacements for certain of our business partners without
incurring significant delays or cost increases.

We are subject to many environmental and safety regulations that may result in unanticipated costs or liabilities, which could reduce our profitability.

We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection
of the environment and human health, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. Actual or alleged
violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as, under some environmental
laws, the assessment of strict liability and/or joint and several liability. Moreover, changes in environmental regulations could inhibit or interrupt our operations, or require us to modify our
facilities or operations. Accordingly, environmental or regulatory matters may cause us to incur significant unanticipated losses, costs or liabilities, which could reduce our profitability. See
"Item 1. BusinessEnvironmental, Health and Safety Matters" and "Item 3. Legal Proceedings" included elsewhere in this Annual Report on Form 10-K for the
year ended December 31, 2008.

In
addition, we could incur significant expenditures in order to comply with existing or future environmental or safety laws. Capital expenditures and costs relating to environmental or
safety matters will be subject to evolving regulatory requirements and will depend on the timing of the promulgation and enforcement of specific standards which impose requirements on our operations.
Capital expenditures and costs beyond those currently anticipated may therefore be required under existing or future environmental or safety laws.

Furthermore,
we may be liable for the costs of investigating and cleaning up environmental contamination on or from our properties or at off-site locations where we disposed
of or arranged for the disposal or treatment of hazardous materials or from disposal activities that pre-dated our purchase of our businesses. We may therefore incur additional costs and
expenditures beyond those currently anticipated to address all such known and unknown situations under existing and future environmental laws. See "Item 1. BusinessEnvironmental,
Health and Safety Matters" and "Item 3. Legal

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Proceedings"
included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2008.

Existing or future litigation or legislative initiatives restricting the use of MTBE in gasoline may subject us or our products to environmental liability, materially reduce
our sales and/or materially increase our costs.

We produce MTBE, an oxygenate that is blended with gasoline to reduce vehicle air emissions and to enhance the octane rating of
gasoline. Litigation or legislative initiatives restricting the use of MTBE in gasoline may subject us or our products to environmental liability or materially adversely affect our sales and costs.
Because MTBE has contaminated some water supplies, its use has become controversial in the U.S. and elsewhere, and its use has been effectively eliminated in the U.S. market. We currently market MTBE,
either directly or through third parties, to gasoline additive customers located outside the U.S., although there are additional costs associated with such outside-U.S. sales which may
result in decreased profitability compared to historical sales in the U.S. We may also elect to use all or a portion of our precursor tertiary butyl alcohol to produce saleable products other than
MTBE. If we opt to produce products other than MTBE, necessary modifications to our facilities will require significant capital expenditures and the sale of such other products may produce a lower
level of cash flow than that historically produced from the sale of MTBE.

Numerous
companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in more than 150 cases in U.S. courts that
allege MTBE contamination in groundwater. Many of these cases were settled after the parties engaged in mediation supervised by a court-appointed special settlement master. Beginning in March 2007 and
continuing through December 2008, we have been named as a defendant in fourteen of these lawsuits, all of which are still pending. For more information, see "Item 3 Legal
ProceedingsMTBE Litigation." The plaintiffs in the MTBE groundwater contamination cases generally seek compensatory damages, punitive damages, injunctive relief, such as monitoring and
abatement, and attorney fees. We currently have insufficient information to meaningfully assess our potential exposure in these cases. We believe that some of our liability in these cases, if any, is
likely covered by insurance and/or indemnity agreements with prior owners. It is possible that we could be named as a defendant in additional existing or future MTBE contamination cases. We cannot
provide assurances that adverse results against us in existing or future MTBE contamination cases will not have a material adverse effect on our business, results of operations and financial position.

Our business is dependent on our intellectual property. If our patents are declared invalid or our trade secrets become known to our competitors, our ability to compete may
be adversely affected.

Proprietary protection of our processes, apparatuses and other technology is important to our business. Consequently, we may have to
rely on judicial enforcement of our patents and other proprietary rights. While a presumption of validity exists with respect to patents issued to us in the U.S., there can be no assurance that any of
our patents will not be challenged, invalidated, circumvented or rendered unenforceable. Furthermore, if any pending patent application filed by us does not result in an issued patent, or if patents
are issued to us, but such patents do not provide meaningful protection of our intellectual property, then our ability to compete may be adversely affected. Additionally, our competitors or other
third parties may obtain patents that restrict or preclude our ability to lawfully produce or sell our products in a competitive manner, which could have a material adverse effect on our business,
results of operations, financial condition and liquidity.

We
also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. While it
is our policy to enter into confidentiality agreements with our employees and third parties to protect our intellectual property, these confidentiality agreements may be breached, may not provide
meaningful protection for

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our
trade secrets or proprietary know-how, or adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and know-how. In
addition, others could obtain knowledge of our trade secrets through independent development or other access by legal means. The failure of our patents or confidentiality agreements to protect our
processes, apparatuses, technology, trade secrets or proprietary know-how could have a material adverse effect on our business, results of operations, financial condition and liquidity.

Future acquisitions, partnerships and joint ventures may require significant resources and/or result in unanticipated adverse consequences that could have a material adverse
effect on our business, results of operations and financial condition.

In the future we may seek to grow our Company and businesses by making acquisitions or entering into partnerships and joint ventures.
Any future acquisition, partnership or joint venture may require that we make a significant cash investment, issue stock or incur substantial debt. In addition, acquisitions, partnerships or
investments may require significant managerial attention, which may be diverted from our other operations. These capital, equity and managerial commitments
may impair the operation of our businesses. Any future acquisitions of businesses or facilities, could entail a number of additional risks, including:



We
have incurred indebtedness to finance past acquisitions. We may finance future acquisitions with additional indebtedness. We could face the financial risks associated with incurring
additional indebtedness such as reducing our liquidity and access to financing markets and increasing the amount of cash flow required to service such indebtedness, which could have a material adverse
effect on our business, results of operations and financial condition.

If our subsidiaries do not make sufficient distributions to us, then we will not be able to make payment on our debts.

With the exception of our Convertible Notes, our debt is generally the exclusive obligation of Huntsman International and the
guarantors of such debt and not of any of our other subsidiaries. Because a significant portion of our operations are conducted by these other subsidiaries, our cash flow and our ability to service
indebtedness, including our ability to pay the interest on our debt when due and principal of such debt at maturity, are dependent to a large extent upon cash dividends and distributions or other
transfers from non-guarantor subsidiaries. Any payment of dividends, distributions, loans or advances by our non-guarantor subsidiaries to us could be subject to restrictions
on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate,
and any restrictions imposed by the current and future
debt instruments of our non-guarantor subsidiaries. In addition, payments to us by our subsidiaries are contingent upon our non-guarantor subsidiaries' earnings.

Our
subsidiaries are separate and distinct legal entities and, except for our guarantor subsidiaries, have no obligation, contingent or otherwise, to pay any amounts due on our debt or
to make any funds available therefor, whether by dividends, loans, distributions or other payments, and do not guarantee the payment of interest on, or principal of, our debt. Any right that we have
to receive any assets of

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any
of our subsidiaries that are not guarantors upon the liquidation or reorganization of any such subsidiary, and the consequent right of holders of notes to realize proceeds from the sale of their
assets, will be structurally subordinated to the claims of that subsidiary's creditors, including trade creditors and holders of debt issued by that subsidiary.

Terrorist attacks, such as the attacks that occurred on September 11, 2001, the continuing military action in Iraq, general instability in various OPEC member and
other energy-producing nations, the threat of other attacks or acts of war in the U.S. and abroad and increased security regulations related to our industry could adversely affect our business.

The attacks of September 11, 2001, and subsequent events, including the continuing military action in Iraq, have caused
instability in the U.S. and other financial markets and have led, and may continue to lead, to further armed hostilities, prolonged military action in Iraq, or further acts of terrorism in the U.S. or
abroad, which could cause further instability in financial markets. Current regional tensions and conflicts in various OPEC member and other energy-producing nations, including the continuing military
action in Iraq, have caused, and may cause further, increases in raw material costs, particularly natural gas and crude oil based feedstocks, which are used in our operations. The uncertainty
surrounding the threat of further armed hostilities, military action or acts of terrorism may impact any or all of our physical facilities and operations, which are located in North America, Europe,
Australia, Asia, Africa, South America and the Middle East, or those of our customers. Furthermore, the terrorist attacks, subsequent events and future developments in any of these areas may result in
reduced demand from our customers for our products. A terrorist attack on any of our significant facilities could have a material adverse effect on our business. In addition, local, state and federal
governments have begun a regulatory process that could lead to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals, which could result in
higher operating costs. These developments will subject our worldwide operations to increased risks and, depending on their magnitude, could have a material adverse effect on our business, results of
operations, financial condition and liquidity.

RISKS RELATED TO OUR COMMON STOCK

Our stock price has been and may continue to be subject to large fluctuations.

We have experienced significant fluctuations in our stock price and share trading volume in the past and may continue to do so. The
trading price of our common stock has been and may continue to be subject to wide fluctuations in response to a variety of issues, including broad market factors that may have a material adverse
impact on our stock price, regardless of actual performance. The following factors could affect our stock price:



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Shares available for future sale may cause our common stock price to decline, which may negatively impact the trading price of our common stock.

Sales of substantial numbers of additional shares of our common stock, or the perception that such sales could occur, may cause
prevailing market prices for shares of our common stock to decline. In connection with the Settlement Agreement, we issued $250 million of our Convertible Notes to certain Apollo affiliates.
These notes are convertible into our common stock at any time, at the holder's option, and interest is payable either in cash or, at our option, in shares of our common stock. At maturity, we may, at
our option, pay the principal amount of the notes in shares of our common stock. We agreed to use our reasonable best efforts to register the resale of our common stock issuable upon conversion of the
notes or as payment of interest or principal thereon under the Securities Act. Any sales of our shares of common stock issued in connection with the notes may negatively impact the trading price of
our common stock.

We have the ability to issue additional equity securities, which would lead to further dilution of our issued and outstanding common stock.

The issuance of additional equity securities would result in dilution of then-existing stockholders' equity interests in
us. Our certificate of incorporation authorizes our Board of Directors, without stockholder approval, to establish one or more series of preferred stock and to determine, with respect to any series of
preferred stock, the number of shares in that series and the terms, rights and limitations of that series. If we issue additional convertible notes or convertible preferred stock, a subsequent
conversion may dilute the current common stockholders' interest. Our Board of Directors has no present intention of issuing any such convertible instruments, but reserves the right to do so in the
future. In addition, we may issue additional shares of common stock under our equity incentive plans.

Certain provisions contained in our certificate of incorporation and bylaws could discourage a takeover attempt, which may reduce or eliminate the likelihood of a change of
control transaction and, therefore, limit your ability to sell our common stock at a price higher than the current market value.

Certain provisions contained in our certificate of incorporation and bylaws, such as a classified Board of Directors, limitations on
stockholder proposals at meetings of stockholders and the inability of stockholders to call special meetings and certain provisions of Delaware law, could make it more difficult for a third party to
acquire control of our company, even if some of our stockholders considered such a change of control to be beneficial. Our certificate of incorporation also authorizes our Board of Directors to issue
preferred stock without stockholder approval. Therefore, our Board of Directors could elect to issue preferred stock that has special voting or other rights that could make it even more difficult for
a third party to acquire us, which may reduce or eliminate your ability to sell our common stock at a price higher than the current market value.

The declaration of dividends by our Company is subject to the discretion of our Board of Directors and there can be no assurance that we will continue to pay dividends.

Over the past two years we have paid quarterly dividends on our common stock. The declaration of dividends by our Company is subject to
the discretion of our Board of Directors. Our Board of Directors takes into account such matters as general business conditions, our financial results, expected liquidity and capital expenditure
requirements, contractual, legal or regulatory restrictions on the payment of dividends, the effect on our debt ratings and such other factors as our Board of Directors may deem relevant, and we can
provide no assurance that we will continue to pay dividends on our common stock.

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Jon M. Huntsman, Peter R. Huntsman and the Huntsman family, through HMP Equity Trust and other of their affiliates, may be deemed to control approximately 30%
of our outstanding common stock, and their interests may conflict with those of other stockholders or our Company.

Jon M. Huntsman, Peter R. Huntsman and other members of the Huntsman family, through HMP Equity Trust and other of their
affiliates, may be deemed to control approximately 30% of our outstanding common stock. Through their interests, they may have the ability to substantially impact:



The
interests and objectives of the Huntsman family may be different from those of our Company or our other stockholders, and the Huntsman family may vote their common stock in a manner
that may adversely affect our other stockholders.

Jon M.
Huntsman and Peter R. Huntsman are directors of our Company and they control HMP Equity Trust. This may create conflicts of interest because these directors have
responsibilities to HMP Equity Trust and its beneficial owners. Their duties to HMP Equity Trust and its beneficial owners may conflict with their duties as directors of our Company regarding business
dealings between HMP Equity Trust and us and other matters. The resolution of these conflicts may not always be in our or our stockholders' best interest.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

As of December 31, 2008, we did not have any unresolved comments from the staff of the SEC.

ITEM 2.    PROPERTIES

We own or lease chemical manufacturing and research facilities in the locations indicated in the list below which we believe are
adequate for our short-term and anticipated long-term needs. We own or lease office space and storage facilities throughout the U.S. and in many foreign countries. Our
principal executive offices are located at 500 Huntsman Way, Salt Lake City, Utah 84108. The following is a list of our material owned or leased properties where manufacturing, research and main
office facilities are located.

Location

Business Segment

Description of FacilitySalt Lake City, Utah

Corporate and Other

Executive OfficesThe Woodlands, Texas(1)

Various

Operating Headquarters, Global Technology CenterGeismar, Louisiana(2)(7)

Polyurethanes

MDI, Nitrobenzene(3), Aniline(3) and Polyols Manufacturing Facilities and Polyurethanes Systems HouseRozenburg, Netherlands(1)

Polyurethanes

MDI Manufacturing Facility, Polyols Manufacturing Facilities and Polyurethanes Systems HouseShanghai, China

Polyurethanes

MDI Finishing Facilities,Global Technology CenterDeerpark, Australia

Polyurethanes

Polyurethane Systems HouseCartagena, Colombia

Polyurethanes

Polyurethane Systems HouseDeggendorf, Germany

Polyurethanes

Polyurethane Systems House


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Location

Business Segment

Description of FacilityTernate, Italy

Polyurethanes

Polyurethane Systems HouseShanghai, China(1)

Polyurethanes

Polyurethane Systems House, Global Technology CenterThane (Maharashtra), India(1)

Polyurethanes

Polyurethane Systems HouseSamuprakam, Thailand(1)

Polyurethanes

Polyurethane Systems HouseKuan Yin, Taiwan(1)

Polyurethanes

Polyurethane Systems HouseTlalnepantla, Mexico

Polyurethanes

Polyurethane Systems HouseMississauga, Ontario(1)

Polyurethanes

Polyurethane Systems HouseDammam, Saudi Arabia(3)

Polyurethanes

Polyurethane Systems HouseAuburn Hills, Michigan(1)

Polyurethanes

Polyurethane Research FacilityEverberg, Belgium

Polyurethanes and Performance Products

Polyurethane and Performance Products Regional Headquarters/Global Technology CenterGateway West, Singapore(1)

Polyurethanes, Performance Products and Materials and Effects

Commercial/Administration CenterDerry, New Hampshire(1)

Polyurethanes

TPU Research FacilityRingwood, Illinois(1)

Polyurethanes

TPU Manufacturing FacilityOsnabrück, Germany

Polyurethanes

TPU Manufacturing Facility/ Polyurethane Systems HouseWilton, U.K.

Polyurethanes

Aniline and Nitrobenzene Manufacturing FacilitiesPort Neches, Texas

Polyurethanes and Performance Products

Olefins, EO, EG, Surfactants, Amines and PO Manufacturing FacilitiesBergkamen, Germany

Materials and Effects

Synthesis FacilityMonthey, Switzerland

Materials and Effects

Resins and Synthesis FacilityPamplona, Spain

Materials and Effects

Resins and Synthesis FacilityMcIntosh, Alabama

Materials and Effects

Resins and Synthesis FacilityChennai, India(4)

Materials and Effects

Resins and Synthesis FacilityBad Saeckingen, Germany(1)

Materials and Effects

Formulating FacilityDuxford, U.K.

Materials and Effects

Formulating FacilitySadat City, Egypt

Materials and Effects

Formulating FacilityTaboão da Serra, Brazil

Materials and Effects

Formulating FacilityPanyu, China(1)(5)

Materials and Effects

Formulating FacilityEast Lansing, Michigan

Materials and Effects

Formulating FacilityIstanbul, Turkey(1)

Materials and Effects

Formulating FacilityLos Angeles, California

Materials and Effects

Formulating FacilityLangweid am Leich, Germany(1)

Materials and Effects

Formulating FacilitySchweizerhalle, Switzerland(1)

Materials and Effects

Formulating FacilityCharlotte, North Carolina(1)

Materials and Effects

Formulating FacilityBasel, Switzerland(1)

Materials and Effects

Synthesis FacilitySamutsakorn (Mahachai), Thailand(1)

Materials and Effects

Synthesis FacilityAtotonilquillo, Mexico

Materials and Effects

Synthesis FacilityPanyu, China(1)

Materials and Effects

Production FacilityHigh Point, North Carolina(1)

Materials and Effects

Research FacilityConroe, Texas

Performance Products

Amines Manufacturing FacilityPetfurdo, Hungary(1)

Performance Products

Amines Manufacturing FacilityLlanelli, U.K.

Performance Products

Amines Manufacturing Facility


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Location

Business Segment

Description of FacilityFreeport, Texas(1)

Performance Products

Amines Manufacturing FacilityJurong Island, Singapore(1)

Performance Products

Amines Manufacturing FacilityChocolate Bayou, Texas(1)

Performance Products

LAB Manufacturing FacilityPensacola, Florida(1)

Performance Products

Maleic Anhydride Manufacturing FacilityDayton, Texas

Performance Products

Surfactant Manufacturing FacilityBotany, Australia

Performance Products

Surfactant/EG Manufacturing FacilitySt. Mihiel, France

Performance Products

Surfactant Manufacturing FacilityLavera, France(1)

Performance Products

Surfactant Manufacturing FacilityCastiglione, Italy

Performance Products

Surfactant Manufacturing FacilityPatrica/Frosinone, Italy

Performance Products

Surfactant Manufacturing FacilityBarcelona, Spain(1)

Performance Products

Surfactant Manufacturing FacilityMelbourne, Australia

Performance Products

Research FacilityGreatham, U.K.

Pigments

Titanium Dioxide Manufacturing FacilityGrimsby, U.K(6)

Pigments

Titanium Dioxide Manufacturing FacilityCalais, France

Pigments

Titanium Dioxide Manufacturing FacilityHuelva, Spain

Pigments

Titanium Dioxide Manufacturing FacilityScarlino, Italy

Pigments

Titanium Dioxide Manufacturing FacilityTeluk Kalung, Malaysia

Pigments

Titanium Dioxide Manufacturing FacilityUmbogintwini, South Africa

Pigments

Titanium Dioxide Manufacturing FacilityBillingham, U.K.

Pigments

Titanium Dioxide Research and Technical FacilityWest Footscray, Australia

Corporate and Other

Styrenics Manufacturing Facility


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ITEM 3.    LEGAL PROCEEDINGS

Litigation Relating to our Merger with Hexion

For information regarding the termination of the Merger and settlement of the related litigation, see "Item 1.
BusinessTermination of Merger Agreement and Settlement of Related Litigation" above.

Texas Bank Litigation

For information with respect to the Texas Bank Litigation, see "Item 1. BusinessRecent
DevelopmentsTexas Bank Litigation" above.

Discoloration Claims

Certain claims have been filed against us relating to discoloration of unplasticized polyvinyl chloride products allegedly caused by
our titanium dioxide ("Discoloration Claims"). Substantially all of the titanium dioxide that is the subject of these claims was manufactured prior to our acquisition of the titanium dioxide business
from ICI in 1999. Net of amounts we have received from insurers and pursuant to contracts of indemnity, we have paid an aggregate of approximately $16 million in costs and settlement amounts
for Discoloration Claims through December 31, 2008.

During
the year ended December 31, 2008, we did not settle any Discoloration Claims. During the year ended December 31, 2007, we paid an insignificant amount in partial
settlement of a claim. The two Discoloration Claims unresolved as of December 31, 2008 asserted aggregate damages of €36 million (approximately $51 million). An
appropriate liability has been accrued for these claims. Based on our understanding of the merits of these claims and our rights under contracts of indemnity and insurance, we do not believe that the
net impact on our financial condition, results of operations or liquidity will be material.

While
additional Discoloration Claims may be made in the future, we cannot reasonably estimate the amount of loss related to such claims. Although we may incur additional costs as a
result of future claims (including settlement costs), based on our history with Discoloration Claims to date, the fact that substantially all of the titanium dioxide that has been the subject of these
Discoloration Claims was manufactured and sold more than nine years ago, and the fact that we have rights under contract to indemnity, including from ICI, we do not believe that any unasserted
Discoloration Claims will have a material impact on our financial condition, results of operations or liquidity. Based on this conclusion and our inability to reasonably estimate our expected costs
with respect to these unasserted claims, we have made no accruals in our financial statements as of December 31, 2008 for costs associated with unasserted Discoloration Claims.

ENVIRONMENTAL ENFORCEMENT PROCEEDINGS

On occasion, we receive notices of violation, enforcement or other complaints from regulatory agencies alleging
non-compliance with applicable EHS laws. Based on currently available information and our past experience, we do not believe that the resolution of any pending or threatened environmental
enforcement proceedings will have a material impact on our financial condition, results of operations or cash flows.

In
May 2007, our operation in Wilton, U.K., allegedly caused a discharge of wastewater effluent to be made to Northumbrian Water's Bran Sands treatment facility that contained elevated
levels of nitrobenzene. Northumbrian Water alleges that this discharge caused a disruption of its treatment facility which, in turn, exceeded its discharge consent from the U.K. Environmental Agency.
The Environmental Agency is investigating a possible prosecution against Northumbrian Water and/or us for the breach. Northumbrian Water has threatened to prosecute our subsidiary in the U.K. To date,
however, no charges have been filed.

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By
letter dated November 26, 2008, the Texas Commission on Environmental Quality combined the alleged air emission-related violations and proposed penalties associated with two
previously issued draft orders for our Port Neches, Texas facility. The proposed penalty for the combined order is $120,000. However, we entered into an expedited penalty settlement of $100,000, half
of which will be paid through a Supplemental Environmental Project agreed to with the agency.

Asbestos Litigation

We have been named as a "premises defendant" in a number of asbestos exposure cases, typically claims by non-employees of
exposure to asbestos while at a facility. In the past, these cases typically have involved multiple plaintiffs bringing actions against multiple defendants, and the complaints have not indicated which
plaintiffs were making claims against which defendants, where or how the alleged injuries occurred or what injuries each plaintiff claimed. These facts, which would be central to any estimate of
probable loss, generally have been learned only through discovery.

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

The
following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the prior owner, all of which have
been accepted.

Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Unresolved at beginning of period


1,192


1,367


576Tendered during period


21


21


998Resolved during period(1)


73


196


207Unresolved at end of period


1,140


1,192


1,367






We
have never made any payments with respect to these cases. As of December 31, 2008, we had an accrued liability of $16 million relating to these cases and a corresponding
receivable of $16 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated
with these cases would not be material to our financial condition, results of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals.
Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to

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estimate
the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of December 31, 2008.

Certain
cases in which we are a "premises defendant" are not subject to indemnification by prior owners or operators. The following table presents for the periods indicated certain
information about these cases. Cases include all cases for which service has been received by us, other than a number of cases that were erroneously filed against us due to a clerical error. The cases
filed in error have been dismissed.

Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Unresolved at beginning of period


39


42


34Filed during period


8


52


19Resolved during period


4


55


11Unresolved at end of period


43


39


42


We
paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of nil, $3 million and nil during the years ended December 31, 2008, 2007
and 2006, respectively. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results
of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and
such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos
exposure claims as of December 31, 2008.

Antitrust Matters

We have been named as a defendant in civil antitrust suits alleging that between 1999 and 2004 we conspired with Bayer, BASF, Dow, and
Lyondell to fix the prices of MDI, TDI, polyether polyols, and related systems ("polyether polyol products") sold in the United States in violation of the federal Sherman Act. These cases are
consolidated as the "Polyether Polyols" cases in multidistrict litigation known as In re Urethane Antitrust Litigation, MDL No. 1616, Civil
No. 2:04-md-01616-JWL-DJW, pending in the United States District Court, District of Kansas. The Kansas court has ruled that plaintiffs may
prosecute the Polyether Polyols cases on behalf of a class of all direct purchasers of polyether polyol products in the United States. Bayer has entered into a settlement with the plaintiffs' class
and has been dismissed as a defendant. Merits discovery is underway, and trial has been set for May 3, 2011.

We
and the other Polyether Polyol defendants (excluding Bayer) have also been named as defendants in two civil antitrust suits brought by certain direct purchasers of polyether polyol
products that opted out of the class certified in MDL No. 1616. These cases have been brought by 12 groups of affiliated
companies, 73 plaintiffs in all, who allege that between 1994 and 2006 the Polyether Polyol defendants conspired to fix the prices of polyether polyol products sold in the United States and abroad in
violation of the Sherman Act, similar laws of several U.S. states, and the laws of the European Union and certain of its member states. We and the other defendants have moved to dismiss the
opt-out complaints.

We,
along with the other Polyether Polyols defendants and Rhodia, have also been named as a defendant in civil antitrust suits alleging a conspiracy to fix the prices of polyether polyol
products sold in Canada in violation of Canadian competition law. These cases, filed in the Superior Court of Justice, Ontario, Canada on May 5, 2006 and in Superior Court, Quebec, Canada on
May 17, 2006, purport to be brought on behalf of various classes of Canadian direct purchasers of polyether polyol products. There has been little activity in these cases since they were filed.

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Along
with Flexsys, Crompton (now Chemtura), Uniroyal, Rhein Chemie Rheinau, and the other Polyether Polyol defendants, we also have been named as a defendant in a civil antitrust suit
pending in the Superior Court of California, County of San Francisco, filed on February 15, 2005, that alleges that between 1994 and 2004 the defendants conspired to fix the prices of certain
rubber and urethane products sold in California in violation of antitrust and unfair competition laws of California. This case purports to be brought on behalf of a class of all California purchasers
of products containing rubber and urethanes products. By agreement of the parties this case has been stayed pending the resolution of MDL No. 1616.

Along
with Dow, BASF, and Lyondell, we have also been named as a defendant in a third amended complaint proposed for filing in an existing civil antitrust suit pending against Bayer and
Chemtura in federal district court in Massachusetts. The proposed amended complaint alleges that beginning around 1990 we and the other defendants conspired to fix the prices of MDI, TDI, polyether
polyols, and polyester polyols sold throughout the United States in violation of the federal Sherman Act and the laws of various states. The proposed amended complaint seeks to sue on behalf of all
indirect purchasers of such products in the United States. The Massachusetts action has been stayed pending plaintiffs' settlement of the previously asserted claims against Bayer and Chemtura. We have
filed papers opposing the motion for leave to file the proposed amended complaint adding us as a defendant in that action.

The
plaintiffs' pleadings in these various antitrust suits provide few specifics about any alleged illegal conduct on our part, and we are not aware of any illegal conduct by us or any
of our employees. For these reasons, we cannot estimate the possibility of loss or range of loss relating to these claims, and therefore we have not accrued a liability for these claims. Nevertheless,
we could incur losses due to these claims in the future and those losses could be material.

In
addition, on February 16, 2006, the Antitrust Division of the U.S. Department of Justice served us with a grand jury subpoena requesting production of documents relating to our
sale of polyether polyol products. The other defendants in the Polyether Polyols cases have confirmed that they were also served with subpoenas in this matter. We cooperated fully with the
investigation, and by letter dated December 16, 2007, the U.S. Department of Justice notified us that its investigation of possible antitrust violations by manufacturers of polyether polyol
products has been closed.

MTBE Litigation

We have been named as a defendant in 14 lawsuits pending in multidistrict litigation in the U.S. District Court for the Southern
District of New York alleging liability related to MTBE contamination in groundwater. Four of these cases were filed on March 23, 2007, one was filed on March 28, 2007, three were filed
on April 5, 2007, one was filed on January 11, 2008, two were filed on September 4, 2008, one was filed November 7, 2008, one was filed November 18, 2008, and one
was filed on December 19, 2008. Numerous other companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in these and
many other cases currently pending in U.S. courts. The plaintiffs in the fourteen cases in which we have been named are municipal water districts, a regional water supply authority, and municipal
corporations that claim that defendants' conduct has caused MTBE contamination of their groundwater. The plaintiffs seek injunctive relief, such as monitoring and abatement, compensatory damages,
punitive damages and attorney fees. At this time, we have insufficient information to meaningfully assess our potential exposure in these cases and therefore we have not accrued a liability for these
claims. We believe that our liability in these cases, if any, would likely be covered, at least in part, by insurance and/or by indemnity agreements with prior owners.

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Shareholder Litigation

From July 5 to July 13, 2007, four putative shareholder class action complaints were filed against our Company and our
directors alleging breaches of fiduciary duty in connection with our then-proposed sale to Basell and the receipt of a superior proposal from Hexion. Three actions were filed in Delaware:
Cohen v. Archibald, et al., No. 3070, in the Court of Chancery for the State of Delaware (filed July 5, 2007); Augenstein v. Archibald, et al., No. 3076, in the Court of Chancery
for the State of Delaware (filed July 9, 2007); and Murphy v. Huntsman, et al., No. 3094, in the Court of Chancery for the State of Delaware (filed July 13, 2007). Another action
was
filed in Texas: Schwoegler v. Huntsman Corporation, et al., Cause No. 07-07-06993-CV, in the 9th Judicial District Court of Montgomery County,
Texas (filed July 6, 2007). As subsequently amended, these lawsuits together allege that we and our directors breached fiduciary duties to the stockholders by, among other things, engaging in
an unfair sales process, approving an unfair price per share for the Merger with Hexion, and making inadequate disclosures to stockholders, and that Basell, Hexion and MatlinPatterson entities aided
and abetted these breaches of fiduciary duty. The lawsuits sought to enjoin the stockholder vote on the Merger.

On
September 20, 2007, the parties entered into a Memorandum of Understanding with plaintiffs' counsel in the Delaware and Texas actions to settle these four lawsuits. As part of
the proposed settlement, the defendants deny all allegations of wrongdoing, but we agreed to make certain additional disclosures in the final proxy statement that was mailed to our stockholders on or
about September 14, 2007. In connection with the settlement, the parties also reached an agreement with respect to any application that the plaintiffs' counsel will make for an award of
customary attorneys' fees and expenses to be paid following the completion of the Merger.

The
Memorandum of Understanding is now null and void and of no force and effect because the Merger was not consummated. The Texas action has been voluntarily dismissed, but there has
been no further developments in the Delaware actions at this time.

A
fifth putative shareholder class action was filed against the Company and three of its officers on August 12, 2008 in the United States District Court for the District of Utah
alleging, among other things, that the defendants failed to disclose material adverse facts about the Company's financial well-being, business relationships and prospects during the period
from June 26, 2007 to June 18, 2008 in violation of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5. Prior to any further activity in
the case, the action was voluntarily dismissed October 3, 2008.

Port Arthur Plant Fire Insurance Litigation

On August 31, 2007, an action was brought against our Company and International Risk Insurance Company ("IRIC"), our captive
insurer, in the United States District Court for the Southern District of Texas, by seventeen reinsurance companies (the"Reinsurers") that reinsure risks under the property insurance policy issued by
IRIC to our Company (the"Policy") for the period covering the April 29, 2006 fire at our manufacturing facility in Port Arthur, Texas. The action seeks to compel our Company and IRIC to
arbitrate with the Reinsurers to resolve disputes related to the claim for losses caused by the fire or, in the alternative, to declare judgment in favor of the Reinsurers. On September 26,
2008, the court denied motions to dismiss filed by our Company and IRIC, ordering the parties to engage in a short period of discovery on the issue of arbitrability. In a second and related action
filed by our Company against IRIC in state court in Jefferson County, Texas, IRIC filed a third party petition against the Reinsurers, who then removed that action to the United States District Court
for the Eastern District of Texas. Some of the Reinsurers filed answers and motions to compel arbitration, to stay these proceedings, and to change venue to the United States District Court for the
Southern District of Texas in order to consolidate the two actions. Our Company filed a motion to remand that action to the state court and opposition to the Reinsurers' motions in that action. On
April 23, 2008,

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the
United States District Court for the Eastern District of Texas transferred the case to the United States District Court for the Southern District of Texas. On September 26, 2008, the court
denied our Company's motion to remand that suit to the state court in which it was filed. Pursuant to a December 29, 2008 agreement among the parties to the actions referenced above:
(1) a mediation is scheduled for February 24-25, 2009, (2) if the disputes are not fully resolved in mediation, the parties will submit all coverage and quantum issues
to a three-arbitrator panel in August of 2009, with a binding award to be entered by September 30, 2009, (3) the Reinsurers paid an additional $40 million on the claim of the
Company on December 29, 2008 and agreed that all monies paid by the participating Reinsurers on the claim to date are nonrefundable, (4) the Company waived its noncontractual claims
against the Reinsurers, (5) the first action referenced above will be stayed pending final resolution and entry of judgment, and (6) the second action reference above will be dismissed.
Reinsurers responsible for a small percentage of our remaining claim were not parties to the two lawsuits and are not parties to the agreement, thus we may need to pursue them separately for their pro
rata shares of the unpaid claim. Our Company has paid its deductible on the claim of $60 million and has been paid $365 million to date by the Reinsurers. As of December 31, 2008,
our Company has claimed an additional approximately $235 million as presently due and owing and unpaid under the Policy for losses caused by the fire, and anticipates filing additional claims.
For more information, see "Note 24. Casualty Losses and Insurance RecoveriesPort Arthur, Texas Plant Fire."

Other Proceedings

We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under
provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these
matters will have a material adverse effect on our financial condition, results of operations or liquidity.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our annual meeting of stockholders was held on November 19, 2008. At that meeting, Jon M. Huntsman and Marsha J. Evans
were re-elected to serve as Class I directors on our Board of Directors for three-year terms to expire at our annual meeting in 2011 and the appointment of
Deloitte & Touche LLP as independent registered public accounting firm for 2008 was ratified.

The
following table gives a brief description of each matter voted upon at our 2008 annual meeting and, as applicable, the number of votes cast for, against or withheld, as well as the
number of abstentions.

Description of Matter

For

Against

Withheld

Abstentions1. Election of Class I Directors:Jon M. Huntsman


204,492,458

N/A


1,335,414

N/AMarsha J. Evans


205,244,876

N/A


582,996

N/A2. Ratification of the appointment of Deloitte & Touche LLP as independent registered public accounting firm for
2008


205,395,924

301,536


N/A

130,412


---

N/ANot
applicable

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following is information concerning our executive officers and significant employees as of the date of this report.

Jon M. Huntsmanis the Executive Chairman of the Board of Directors of our Company. Prior to appointment as Executive Chairman
effective February 2008, Mr. Huntsman served as Chairman of the
Board of Directors of our Company, a position he had held since our Company was formed. Mr. Huntsman also serves on our Litigation Committee. He has been Chairman of the Board of all Huntsman
companies since he founded his first plastics company in 1970. Mr. Huntsman served as Chief Executive Officer of our Company and our affiliated companies from 1970 to 2000. Mr. Huntsman
is a director or manager, as applicable, of Huntsman International and certain of our other subsidiaries. In addition, Mr. Huntsman serves or has served as Chairman or as a member of numerous
corporate, philanthropic and industry boards, including the American Red Cross, The Wharton School, University of Pennsylvania, Primary Children's Medical Center Foundation, the Chemical Manufacturers
Association and the American Plastics Council. Mr. Huntsman was selected in 1994 as the chemical industry's top CEO for all businesses in Europe and North America. Mr. Huntsman formerly
served as Special Assistant to the President of the United States and as Vice Chairman of the U.S. Chamber of Commerce. He is the Chairman and Founder of the Huntsman Cancer Institute.

Peter R. Huntsmanis President, Chief Executive Officer and a Director of our Company. Mr. Huntsman also serves on our
Litigation Committee. Prior to his appointment in July 2000 as Chief Executive Officer, Mr. Huntsman had served as President and Chief Operating Officer since 1994. In 1987, Mr. Huntsman
joined Huntsman Polypropylene Corporation as Vice President before serving as Senior Vice President and General Manager. Mr. Huntsman has also served as President of Olympus Oil, as Senior Vice
President of Huntsman Chemical Corporation and as a Senior Vice President of Huntsman Packaging Corporation, a former subsidiary of our Company. Mr. Huntsman is a director or manager, as
applicable, of Huntsman International and certain of our other subsidiaries.

J. Kimo Esplinis Executive Vice President and Chief Financial Officer. Mr. Esplin has served as Chief Financial Officer of all of
the Huntsman companies since 1999. From 1994 to 1999, Mr. Esplin served as our Treasurer. Prior to joining Huntsman in 1994, Mr. Esplin was a Vice President in the Investment Banking
Division of Bankers Trust Company, where he worked for seven years. Mr. Esplin also serves as a director of Nutraceutical International Corporation, a publicly traded nutrition supplements
company.

Samuel D. Scruggsis Executive Vice President, General Counsel and Secretary. Mr. Scruggs served as Vice President and
Treasurer from 2000 to 2002 and as Vice President and Associate General Counsel from 1999 to 2000. Prior to joining Huntsman in 1995, Mr. Scruggs was an associate with the law firm of Skadden,
Arps, Slate, Meagher & Flom LLP.

Andre Gentonis Division President, Advanced Materials. Prior to his appointment to this position in February 2009, Mr. Genton
served as Vice President & Global Operating Officer for our Advanced Materials business since November 2006. From January 2005 to November 2006, he served as Vice President Design &
Composites Engineering for our Advanced Materials business. From June 2003 to January 2005 he served as Vice President Global Structural Composites for our Advanced Materials business. Prior to
joining Huntsman in 2003, Mr. Genton held a variety of positions with Vantico (formerly a part of Ciba).

Anthony P. Hankinsis Division President, Polyurethanes. Mr. Hankins was appointed to this position in March 2004. From May
2003 to February 2004, Mr. Hankins served as President, Performance Products, from January 2002 to April 2003, he served as Global Vice President, Rigids Division for our Polyurethanes
business, from October 2000 to December 2001, he served as Vice

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PresidentAmericas
for our Polyurethanes business, and from March 1998 to September 2000, he served as Vice PresidentAsia Pacific for our Polyurethanes business.
Mr. Hankins worked for ICI from 1980 to February 1998, when he joined our Company. At ICI, Mr. Hankins held numerous management positions in the plastics, fibers and polyurethanes
businesses. He has extensive international experience, having held senior management positions in Europe, Asia and the U.S.

Paul G. Hulmeis Division President, Textile Effects. Mr. Hulme was appointed to this position in February 2009. From June
2003 to February 2009, Mr. Hulme served as Division President, Materials and Effects. From February 2000 to May 2003, Mr. Hulme served as Vice President, Performance Chemicals, and from
December 1999 to February 2000 he served as Operations Director, Polyurethanes. Prior to joining Huntsman in 1999, Mr. Hulme held various positions with ICI in finance, accounting and
information systems roles. Mr. Hulme is a Chartered Accountant.

Donald J. Stanutzis Division President, Performance Products. Mr. Stanutz was appointed to this position in March 2004.
Mr. Stanutz served as Executive Vice President and Chief Operating Officer of Huntsman LLC from December 2001 to February 2004, as Executive Vice President, Global Sales and Marketing
from July 2000 to November 2001 and as Executive Vice President, Polyurethanes, PO and Performance Chemicals from July 1999 to June 2000. Prior to joining Huntsman in 1994, Mr. Stanutz served
in a variety of senior positions with Texaco Chemical Company.

Simon Turneris Division President, Pigments. Prior to his appointment to this position in November 2008, Mr. Turner served as
Senior Vice President, Pigments since April 2008. From September 2004 to April 2008 Mr. Turner served as Vice President of Global Sales and from July 1999 to September 2004, he held positions
including General Manager Co-Products and Director Supply Chain and Shared Services. Prior to joining Huntsman in July 1999, Mr. Turner held various positions with ICI.

Michael J. Kernis Senior Vice PresidentEnvironmental, Health & Safety. Mr. Kern has held this position
since July 2001. Mr. Kern has served in several senior management positions of our Company, including Senior Vice President, Environmental, Health & Safety from July 2001 to December
2003 and Senior Vice President, Manufacturing from December 1995 to July 2001. Prior to joining Huntsman, Mr. Kern held a variety of positions within Texaco Chemical Company, including Area
ManagerJefferson County Operations from April 1993 until joining our Company, Plant Manager of the Port Neches facility from August 1992 to March 1993, Manager of the PO/MTBE project from
October 1989 to July 1992, and Manager of Oxides and Olefins from April 1988 to September 1989.

Brian V. Riddis Senior Vice President, Purchasing. Mr. Ridd has held this position since July 2000. Mr. Ridd served
as Vice President, Purchasing from December 1995 until he was appointed to his current position. Mr. Ridd joined Huntsman in 1984.

Russ R. Stolleis Senior Vice President, Global Public Affairs and Communications. Mr. Stolle was appointed to this position in
October 2006. From November 2002 to October 2006, Mr. Stolle served as Vice President and Deputy General Counsel, from October 2000 to November 2002 he served as Vice President and Chief
Technology Counsel, and from April 1994 to October 2000 he served as Chief Patent and Licensing Counsel. Prior to joining Huntsman in 1994, Mr. Stolle had been an attorney with
Texaco Inc. and an associate with the law firm of Baker & Botts.

L. Russell Healyis Vice President and Controller. Mr. Healy is also Vice President and Controller of Huntsman International and
certain of our other subsidiaries and has served in these capacities since April 2004. From August 2001 to April 2004, Mr. Healy served as Vice President, Finance, from July 1999 to July 2001,
he served as Vice President and Finance Director for Huntsman International, and from October 1995 to June 1999, he served as Vice President, Tax. Prior to joining Huntsman in 1995, Mr. Healy
was a partner with the accounting firm of Deloitte & Touche, LLP. Mr. Healy is a Certified Public Accountant and holds a master's degree in accounting.

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Martin Caseyis Vice President, Strategic Planning. Dr. Casey has held this position since August 2004. From 1999 until he was
appointed to his current position, Dr. Casey was responsible for planning and business development in Huntsman's Polyurethanes Business, which was acquired from ICI in 1999. From 1995 to 1999
he was New Business Development Manager for ICI's polyurethanes business, before which he was Business Manager for ICI's acrylic sheet business and held a variety of earlier positions in technical and
business management roles.

Sean Douglasis Vice President and Treasurer. Mr. Douglas served as Vice President, Finance from July 2001 until he was appointed
to his current position in 2002 and as Vice President, Administration from January 1997 to July 2001. Mr. Douglas is a Certified Public Accountant and, prior to joining Huntsman in 1990, worked
for the accounting firm of Price Waterhouse.

Kevin C. Hardmanis Vice President, Tax. Mr. Hardman served as Chief Tax Officer from 1999 until he was appointed to his
current position in 2002. Mr. Hardman is also Vice President, Tax of Huntsman International. Prior to joining Huntsman in 1999, Mr. Hardman was a tax Senior Manager with the accounting
firm of Deloitte & Touche, LLP, where he worked for 10 years. Mr. Hardman is a Certified Public Accountant and holds a master's degree in tax accounting.

Steven C. Jorgensenis Vice President of Internal Audit and Controls. Mr. Jorgensen was appointed to this position effective
May 2007. Mr. Jorgensen joined Huntsman in May 2004 as Director of Internal Controls and in May 2005 was appointed as Director of Internal Audit and Controls. Prior to joining Huntsman,
Mr. Jorgensen was Vice President and Audit Manager with General Electric Consumer Finance, and prior to that he was an audit Senior Manager with the accounting firm of Deloitte &
Touche LLP. Mr. Jorgensen is a Certified Public Accountant and holds a masters degree in accounting.

James R. Mooreis Vice President and Deputy General Counsel. Mr. Moore served as Vice President and Chief Environmental
Counsel from 2002 until he was appointed to his current position in 2003. Mr. Moore served as Senior Environmental Counsel from 1998 to 2002. From 1989 until joining Huntsman in 1998,
Mr. Moore was a partner at the Seattle law firm of Perkins Coie. Mr. Moore also previously served as a trial attorney with the U.S. Department of Justice, an assistant U.S. Attorney and
Regional Counsel, Region 10, of the U.S. Environmental Protection Agency.

Kurt D. Ogdenis Vice President, Investor Relations. Prior to his appointment to this position in February 2009, Mr. Ogden served
as Director, Corporate Finance since October 2004. Prior to joining Huntsman in 2004, Mr. Ogden held various positions with Hillenbrand Industries, Pliant Corporation and Huntsman Chemical
Corporation. Mr. Ogden is a Certified Public Accountant and holds a master's degree in business administration.

R. Wade Rogersis Vice President, Global Human Resources. Mr. Rogers has held this position since May 2004. From October 2003 to
May 2004, Mr. Rogers served as Director, Human ResourcesAmericas and from August 2000 to October 2003, he served as Director, Human Resources for our Polymers and Base Chemicals
businesses. From the time he joined Huntsman in 1994 to August 2000, Mr. Rogers served as Area Manager, Human ResourcesJefferson County Operations. Prior to joining Huntsman,
Mr. Rogers held a variety of positions with Texaco Chemical Company.

Maria Csiba-Womersleyis Vice President and Chief Information Officer. Ms. Csiba-Womersley was appointed to this position effective
September 1, 2006. Ms. Csiba-Womersley served as Global eBusiness Director from 2004 to 2006 and also served as our Director of Global IT Planning and Security. Previously,
Ms. Csiba-Womersley was a Regional Polymer Sales Manager, a Business Director for Polypropylene and Director of Polymer Logistics. Ms. Csiba-Womersley joined Huntsman in 1997.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION AND HOLDERS

Our common stock is listed on the New York Stock Exchange under the symbol "HUN." As of February 13, 2009, there were
approximately 136 stockholders of record and the closing price of our common stock on the New York Stock Exchange was $2.91 per share.

The
reported high and low sale prices of our common stock on the New York Stock Exchange for each of the periods set forth below are as follows:

Period

High

Low2008First Quarter

$
25.71

$
22.35Second Quarter


23.95


9.81Third Quarter


14.48


7.01Fourth Quarter


14.50


2.82




Period

High

Low2007First Quarter

$
21.92

$
18.74Second Quarter


24.39


18.40Third Quarter


28.40


22.24Fourth Quarter


27.00


23.60


DIVIDENDS

On March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008 we paid dividends of
approximately $23 million each, for a total of $93 million, or $0.10 per share each, to common stockholders of record as of March 14, 2008, June 16, 2008,
September 15, 2008 and December 15, 2008, respectively. On March 30, 2007, June 29, 2007, September 28, 2007 and December 31, 2007, we paid cash dividends of
approximately $22 million each for a total of $88 million, or $0.10 per share each, to common stockholders of record as of March 15, 2007, June 15, 2007,
September 15, 2007 and December 15, 2007, respectively.

PURCHASES OF EQUITY SECURITIES BY THE COMPANY

Neither we nor any "affiliated issuer" (as such term is defined in Rule 10b-18(a)(3) promulgated under the
Securities Exchange Act of 1934, as amended) made any purchase of our equity securities during the fourth quarter of the fiscal year ended December 31, 2008.

STOCK PERFORMANCE GRAPH

Information relating to our stock performance graph will be contained in the definitive proxy statement for the annual meeting of our
stockholders and is incorporated herein by reference.

ITEM 6.    SELECTED FINANCIAL DATA

The selected historical financial data set forth below presents our historical financial data and the historical financial data of our
predecessor Huntsman Holdings, LLC as of and for the dates and periods indicated. You should read the selected financial data in conjunction with "Management's

60

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Table of Contents

Discussion
and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and accompanying notes included elsewhere in this report.

Huntsman Corporation
(in millions of dollars, except per share amounts)

Year ended December 31,2008

2007

2006

2005

2004Statements of Operations Data:Revenues

$
10,215

$
9,651

$
8,731

$
8,446

$
7,632Gross profit


1,264


1,540


1,422


1,413


1,123Restructuring, impairment and plant closing costs


36


42


15


107


274Operating income


165


537


645


554


228Income (loss) from continuing operations(a)


478


52


307


(131
)

(342
)Income (loss) from discontinued operations, net of tax(b)


117


(217
)

(133
)

124


114Extraordinary gain (loss) on the acquisition of a business, net of tax of nil(c)


14


(7
)

56





Cumulative effect of changes in accounting principle, net of tax(d)











(28
)

Net income (loss)


609


(172
)

230


(35
)

(228
)Basic income (loss) per common share(e):Income (loss) from continuing operations

$
2.06

$
0.23

$
1.39

$
(0.79
)
$
(1.95
)Income (loss) from discontinued operations, net of tax


0.50


(0.98
)

(0.60
)

0.57


0.52Extraordinary gain (loss) on the acquisition of a business


0.06


(0.03
)

0.25





Cumulative effect of changes in accounting principle, net of tax(d)











(0.13
)

Net income (loss)

$
2.62

$
(0.78
)
$
1.04

$
(0.35
)
$
(1.43
)Diluted income (loss) per common share(e):Income (loss) from continuing operations

$
2.04

$
0.22

$
1.32

$
(0.79
)
$
(1.95
)Income (loss) from discontinued operations, net of tax


0.50


(0.93
)

(0.57
)

0.57


0.52Extraordinary gain (loss) on the acquisition of a business


0.06


(0.03
)

0.24





Cumulative effect of changes in accounting principle, net of tax(d)











(0.13
)

Net income (loss)

$
2.60

$
(0.74
)
$
0.99

$
(0.35
)
$
(1.43
)Other Data:Depreciation and amortization

$
398

$
413

$
465

$
501

$
537Capital expenditures


418


665


550


339


227Dividends per share


0.40


0.40








Balance Sheet Data (at period end):Total assets

$
8,058

$
8,166

$
8,445

$
8,871

$
9,424Total debt


3,882


3,569


3,645


4,458


6,300Total liabilities


6,426


6,313


6,679


7,330


9,065


---

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62

---





Table of Contents

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. Our products comprise a
broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those
in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining,
synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines,
including MDI, amines, surfactants, epoxy-based polymer formulations, textile chemicals, dyes, maleic anhydride and titanium dioxide. Our administrative, research and development and manufacturing
operations are primarily conducted at the facilities listed in "Item 2. Properties" above, which are located in 25 countries. We employed approximately 12,600 associates worldwide
at December 31, 2008.

As
of December 31, 2008, we operated in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. Our Polyurethanes, Materials and Effects and
Performance Products segments produce differentiated organic chemical products and our Pigments segment produces inorganic chemical products. In a series of transactions completed in 2006 and 2007, we
sold substantially all of our Polymers and Base Chemicals operations. We report the results from these discontinued operations in our Polymers and Base Chemicals segments. For more information, see
"Note 3. Discontinued Operations" to our consolidated financial statements included elsewhere in this report.

Growth
in our Polyurethanes and Materials and Effects segments has been driven by the continued substitution of our products for other materials across a broad range of applications, as
well as by the level of global economic activity. Historically, demand for many of these products has grown at rates in excess of GDP growth. In Polyurethanes, this growth, particularly in Asia, has
in recent years resulted in improved demand and higher industry capacity utilization rates for many of our key products, including MDI. However, new capacity combined with slower global demand has
reduced capacity utilization in 2008.

In
our Performance Products segment, demand for our performance specialties has generally continued to grow at rates in excess of GDP as overall demand is significantly influenced by new
product and application development. Demand for most of our performance intermediates has grown in line with GDP growth. Over time, demand for maleic anhydride has generally grown at rates that
slightly exceed GDP growth. However, given its dependence on the UPR market, which is heavily influenced by construction end markets, maleic anhydride demand can be cyclical.

Historically,
demand for titanium dioxide pigments has grown at rates approximately equal to global GDP growth. 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 producers, contract arrangements
and seasonality. The industry experiences some seasonality in its sales because sales of paints, the largest end use for titanium dioxide, generally peak during the spring and summer months in the
northern hemisphere. This results in greater sales volumes in the second and third quarters of the year.

We
are currently operating in a difficult worldwide economic environment in all of our businesses. As we enter 2009, chemical industry conditions remain challenging as a result of the
global economic and financial turmoil. During the fourth quarter of 2008, we experienced significant declines in selling prices and sales volumes for many of our products, and we expect these
difficult economic conditions to continue in the short-term. As a result of the recent decline in selling prices, we recognized a charge

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Table of Contents

of
$34 million in the fourth quarter of 2008 to write our inventory down to the lower of cost or market values.

RECENT DEVELOPMENTS

2009 COST REDUCTION INITIATIVES

On January 22, 2009, we announced a company-wide initiative to reduce costs across all of our divisions and
functions. Including steps taken during the fourth quarter of 2008, we expect to reduce our full-time employees by approximately 1,250 positions, or 10%, by year-end 2009. The
number of full-time contractors working in our businesses are expected to be reduced by an additional 490 positions. Together, we expect these reductions to result in operating cost
savings of approximately $150 million.

As
part of this initiative, the Board of Directors approved and we announced plans on January 22, 2009 to close our titanium dioxide plant located in Grimsby, U.K. The Grimsby
plant is our Pigment segment's oldest and least efficient manufacturing plant and has an annual production capacity of 40,000 tons of titanium dioxide. Pigment production at the plant, which had a net
book value of approximately $32 million at December 31, 2008, is expected to cease during the first quarter of 2009. Approximately 200 full-time employees and contractors
work at the site. Annual operating cost savings resulting from the plant's closure is expected to be approximately $28 million.

TERMINATION OF MERGER AGREEMENT AND SETTLEMENT OF RELATED LITIGATION

For information with respect to the termination of the Merger Agreement and the settlement of related litigation, see "Item 1.
BusinessTermination of Merger Agreement and Settlement of Related Litigation" above.

SALE OF NOTES IN CONNECTION WITH SETTLEMENT AGREEMENT

For information with respect to our sale of $250 million of Convertible Notes, see "Item 1. BusinessRecent
DevelopmentsSale of Notes in Connection with Settlement Agreement" above.

VOTING AND STANDSTILL AGREEMENT

For information with respect to the Voting and Standstill Agreement, see "Item 1. BusinessRecent
DevelopmentsVoting and Standstill Agreement" above.

TEXAS BANK LITIGATION

For information with respect to the Texas Bank Litigation, see "Item 1. BusinessRecent
DevelopmentsTexas Bank Litigation" above.

64

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Table of Contents

RESULTS OF OPERATIONS

For each of our Company and Huntsman International, the following tables set forth the condensed consolidated results of operations for
the years ended December 31, 2008, 2007 and 2006 (dollars in millions):

Huntsman Corporation

Percent ChangeYear Ended December 31,2008 vs 2007

2007 vs 20062008

2007

2006Revenues

$
10,215

$
9,651

$
8,731


6
%

11
%Cost of goods sold


8,951


8,111


7,309


10
%

11
%Gross profit


1,264


1,540


1,422


(18
)%

8
%Operating expense


1,063


961


762


11
%

26
%Restructuring, impairment and plant closing costs


36


42


15


(14
)%

180
%Operating income


165


537


645


(69
)%

(17
)%Interest expense, net


(263
)

(286
)

(351
)

(8
)%

(19
)%Loss on accounts receivable securitization program


(27
)

(21
)

(13
)

29
%

62
%Equity in income of investment in unconsolidated affiliates


14


13


4


8
%

225
%Loss on early extinguishment of debt


(1
)

(2
)

(27
)

(50
)%

(93
)%Income (expenses) associated with the Merger


780


(210
)




NM


NMOther income


1





2


NM


NMIncome from continuing operations before income taxes and minority interest


669


31


260


NM


(88
)%Income tax (expense) benefit


(190
)

12


50


NM


(76
)%Minority interests in subsidiaries' (income) loss


(1
)

9


(3
)

NM


NMIncome from continuing operations


478


52


307


819
%

(83
)%Income (loss) from discontinued operations (including gain (loss) on disposal of $11 in 2008, ($340) in 2007 and ($302) in 2006), net of
tax


117


(217
)

(133
)

NM


63
%Extraordinary gain (loss) on the acquisition of a business, net tax of nil


14


(7
)

56


NM


NMNet income (loss)


609


(172
)

230


NM


NMInterest expense, net


263


286


351


(8
)%

(19
)%Income tax expense (benefit) from continuing operations


190


(12
)

(50
)

NM


(76
)%Income tax expense (benefit) from discontinued operations


69


(140
)

35


NM


NMDepreciation and amortization


398


413


465


(4
)%

(11
)%EBITDA(1)

$
1,529

$
375

$
1,031


308
%

(64
)%Net cash provided by (used in) operating activities

$
767

$
(52
)
$
892


NM


NMNet cash (used in) provided by investing activities


(489
)

200


174


NM


15
%Net cash provided by (used in) financing activities


230


(269
)

(961
)

NM


(72
)%


65

---



Table of Contents

Huntsman International

Percent ChangeYear Ended December 31,2008 vs 2007

2007 vs 20062008

2007

2006Revenues

$
10,215

$
9,651

$
8,731


6
%

11
%Cost of goods sold


8,934


8,095


7,292


10
%

11
%Gross profit


1,281


1,556


1,439


(18
)%

8
%Operating expense


1,062


961


762


11
%

26
%Restructuring, impairment and plant closing costs


36


42


15


(14
)%

180
%Operating income


183


553


662


(67
)%

(16
)%Interest expense, net


(264
)

(287
)

(355
)

(8
)%

(19
)%Loss on accounts receivable securitization program


(27
)

(21
)

(13
)

29
%

62
%Equity in income of investment in unconsolidated affiliates


14


13


4


8
%

225
%Loss on early extinguishment of debt


(1
)

(3
)

(39
)

(67
)%

(92
)%Other income


1





2


NM


NM(Loss) income from continuing operations before income taxes and minority interest


(94
)

255


261


NM


(2
)%Income tax benefit (expense)


2


(41
)

31


NM


NMMinority interests in subsidiaries' (income) loss


(1
)

9


(3
)

NM


NM(Loss) income from continuing operations


(93
)

223


289


NM


(23
)%Income (loss) from discontinued operations (including gain (loss) on disposal of $11 in 2008, ($351) in 2007 and ($280) in 2006), net of
tax


117


(228
)

(111
)

NM


105
%Extraordinary gain (loss) on the acquisition of a business, net of tax of nil


14


(7
)

56


NM


NMNet income (loss)


38


(12
)

234


NM


NMInterest expense, net


264


287


355


(8
)%

(19
)%Income tax (benefit) expense from continuing operations


(2
)

41


(31
)

NM


NMIncome tax expense (benefit) from discontinued operations


69


(140
)

35


NM


NMDepreciation and amortization


374


391


439


(4
)%

(11
)%EBITDA(1)

$
743

$
567

$
1,032


31
%

(45
)%Net cash provided by operating activities

$
39

$
57

$
883


(32
)%

(94
)%Net cash (used in) provided by investing activities


(314
)

8


159


NM


(95
)%Net cash provided by (used in) financing activities


213


(169
)

(944
)

NM


(82
)%


66

---



Table of Contents

For
each of our Company and Huntsman International, the following tables set forth certain items of (expense) income included in EBITDA (dollars in millions):

Huntsman Corporation

Year ended December 31,2008

2007

2006Foreign exchange (losses) gainsunallocated

$
(31
)
$
(12
)
$
10Loss on early extinguishment of debt


(1
)

(2
)

(27
)Loss on accounts receivable securitization program


(27
)

(21
)

(13
)Legal and contract settlement expense, net





(6
)

Amounts included in discontinued operations


186


(324
)

5Gain on sale of businesses/assets, net


1


73


92Recovery of property losses








9Income (expenses) associated with the Merger


780


(210
)

Extraordinary gain (loss) on the acquisition of a business


14


(7
)

56Restructuring, impairment and plant closing (costs) credits:Polyurethanes








3Materials and Effects


(25
)

(25
)

(4
)Performance Products


(1
)

(1
)

(2
)Pigments


(4
)

(3
)

(4
)Corporate and Other


(6
)

(13
)

(8
)Total restructuring, impairment and plant closing costs


(36
)

(42
)

(15
)Total

$
886

$
(551
)
$
117


Huntsman International

Year ended December 31,2008

2007

2006Foreign exchange (losses) gainsunallocated

$
(31
)
$
(12
)
$
10Loss on early extinguishment of debt


(1
)

(3
)

(39
)Loss on accounts receivable securitization program


(27
)

(21
)

(13
)Legal and contract settlement expense, net





(6
)

Amounts included in discontinued operations


186


(335
)

27Gain on sale of businesses/assets, net


1


73


92Recovery of property losses








9Extraordinary gain (loss) on the acquisition of a business


14


(7
)

56Restructuring, impairment and plant closing (costs) credits:Polyurethanes








3Materials and Effects


(25
)

(25
)

(4
)Performance Products


(1
)

(1
)

(2
)Pigments


(4
)

(3
)

(4
)Corporate and Other


(6
)

(13
)

(8
)Total restructuring, impairment and plant closing costs


(36
)

(42
)

(15
)Total

$
106

$
(353
)
$
127


---

NMNot
meaningful

67

---



Table of Contents

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

68

---



Table of Contents

most
directly comparable to EBITDA. For each of our Company and Huntsman International, the following tables reconcile EBITDA to net income (loss) and to net cash provided by (used in) operations
(dollars in millions):

Huntsman Corporation

Percent ChangeYear Ended December 31,2008 vs 2007

2007 vs 20062008

2007

2006EBITDA(1)

$
1,529

$
375

$
1,031


308
%

(64
)%Depreciation and amortization


(398
)

(413
)

(465
)

(4
)%

(11
)%Interest expense, net


(263
)

(286
)

(351
)

(8
)%

(19
)%Income tax (expense) benefit from continuing operations


(190
)

12


50


NM


(76
)%Income tax (expense) benefit from discontinued operations


(69
)

140


(35
)

NM


NMNet income (loss)


609


(172
)

230


NM


NMExtraordinary (gain) loss on the acquisition of a business, net of tax


(14
)

7


(56
)

NM


NMEquity in income of investment in unconsolidated affiliates


(14
)

(13
)

(4
)

8
%

225
%Depreciation and amortization


398


413


465


(4
)%

(11
)%Loss on disposal of businesses/assets, net


6


269


209


(98
)%

29
%Noncash restructuring, impairment and plant closing costs


7


15


18


(53
)%

(17
)%Loss on early extinguishment of debt


1


2


27


(50
)%

(93
)%Noncash interest expense


2


5


5


(60
)%

Deferred income taxes


202


(203
)

(82
)

NM


148
%Net unrealized loss (gain) on foreign currency transactions


4


(9
)

(42
)

NM


(79
)%Noncash gain on partial fire insurance settlement


(135
)







NM


NMOther, net


41


19


32


116
%

(41
)%Changes in operating assets and liabilities


(340
)

(385
)

90


(12
)%

NMNet cash provided by (used in) operating activities

$
767

$
(52
)
$
892


NM


NM


69

---



Table of Contents

Huntsman International

Percent ChangeYear Ended December 31,2008 vs 2007

2007 vs 20062008

2007

2006EBITDA(1)

$
743

$
567

$
1,032


31
%

(45
)%Depreciation and amortization


(374
)

(391
)

(439
)

(4
)%

(11
)%Interest expense, net


(264
)

(287
)

(355
)

(8
)%

(19
)%Income tax benefit (expense) from continuing operations


2


(41
)

31


NM


NMIncome tax (expense) benefit from discontinued operations


(69
)

140


(35
)

NM


NMNet income (loss)


38


(12
)

234


NM


NMExtraordinary (gain) loss on the acquisition of a business, net of tax


(14
)

7


(56
)

NM


NMEquity in income of investment in unconsolidated affiliates


(14
)

(13
)

(4
)

8
%

225
%Depreciation and amortization


374


391


439


(4
)%

(11
)%Loss on disposal of businesses/assets, net


6


269


188


(98
)%

43
%Noncash restructuring, impairment and plant closing costs


7


15


18


(53
)%

(17
)%Loss on early extinguishment of debt


1


3


39


(67
)%

(92
)%Noncash interest expense


2


5


9


(60
)%

(44
)%Deferred income taxes


26


(150
)

(63
)

NM


138
%Net unrealized loss (gain) on foreign currency transactions


4


(9
)

(42
)

NM


(79
)%Noncash gain on partial fire insurance settlement


(135
)







NM


NMOther, net


42


19


26


121
%

(27
)%Changes in operating assets and liabilities


(298
)

(468
)

95


(36
)%

NMNet cash provided by operating activities

$
39

$
57

$
883


(32
)%

(94
)%


---

NMNot
meaningful

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

For the year ended December 31, 2008, we had net income of $609 million on revenues of $10,215 million, compared
with a net loss of $172 million on revenues of $9,651 million for 2007. For the year ended December 31, 2008 Huntsman International had net income of $38 million on
revenues of $10,215 million compared with a net loss of $12 million on revenues of $9,651 million for 2007. The increase of $781 million in our net income and the increase
of $50 million in Huntsman International's net income was the result of the following:



70

---



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71

---



Table of Contents



Segment Analysis

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

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

Year ended
December 31,Percent
Change2008

2007RevenuesPolyurethanes

$
4,055

$
3,813


6
%Materials and Effects


2,395


2,419


(1
)%Performance Products


2,703


2,310


17
%Pigments


1,072


1,109


(3
)%Corporate and Other


159


155


3
%Eliminations


(169
)

(155
)

9
%Total

$
10,215

$
9,651


6
%Huntsman CorporationSegment EBITDAPolyurethanes

$
382

$
592


(35
)%Materials and Effects


116


199


(42
)%Performance Products


278


202


38
%Pigments


17


51


(67
)%Corporate and Other


550


(342
)

NMSubtotal


1,343


702


91
%Polymers


3


(197
)

NMBase Chemicals


183


(130
)

NMTotal

$
1,529

$
375


308
%


72

---



Table of Contents

Huntsman International

Year ended
December 31,Percent
Change2008

2007Segment EBITDAPolyurethanes

$
382

$
592


(35
)%Materials and Effects


116


199


(42
)%Performance Products


278


202


38
%Pigments


17


51


(67
)%Corporate and Other


(236
)

(150
)

57
%Subtotal


557


894


(38
)%Polymers


3


(197
)

NMBase Chemicals


183


(130
)

NMTotal

$
743

$
567


31
%




Average
Selling
Price

Sales
VolumesPeriod-Over-Period Increase (Decrease)Polyurethanes(1)


8
%

(1
)%Materials and Effects


9
%

(9
)%Performance Products(1)


29
%

(11
)%Pigments


10
%

(12
)%


---

NMNot
Meaningful

Polyurethanes

For the year ended December 31, 2008, Polyurethanes segment revenues increased as a result of higher average selling prices,
offset in part by reduced sales volumes. Average MDI selling prices increased by 4%, despite a significant decline in average selling prices in Asia during the fourth quarter of 2008, primarily due to
global price increase initiatives early in the year in response to higher raw materials costs. Prices also benefited from foreign exchange movements as the U.S dollar weakened against other relevant
currencies. Average selling prices for MTBE increased by 20% due to improved market demand as well as in response to higher raw materials costs, again despite a significant decline in average selling
prices during the fourth quarter of 2008. The decrease in Polyurethanes segment sales volumes was primarily driven by slower growth in the U.S. related to slower construction-related demand and
production outages caused by the recent U.S. Gulf Coast storms. Lower sales volumes were also due to lower than expected sales volumes in Asia with Olympic-related production restrictions and a sharp
drop in global demand in the fourth quarter of 2008 related to the overall economic slowdown. Segment EBITDA decreased principally on lower margins related to sharply higher raw material and energy
costs and the overall effects of the recent U.S. Gulf Coast storms and also on a significant write-down of certain inventories to the lower of cost or market values, all of which more than
offset improved average selling prices.

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Materials and Effects

For the year ended December 31, 2008, Materials and Effects segment revenues decreased primarily as a result of lower sales
volumes, offset in part by higher average selling prices. Sales volumes for our textile effects products decreased by 19% primarily as a result of lower demand for dyes and chemicals in all regions
related to the worldwide economic slowdown. Sales volumes for our advanced materials products decreased by 3%, primarily as a result of lower demand, mainly in Europe and the U.S. as a consequence of
the worldwide economic slowdown. Average selling prices in our Materials and Effects segment increased mainly as a result of price increase initiatives in certain markets and regions in response to
higher raw materials costs and from foreign exchange movements as the U.S. dollar weakened against other relevant currencies. Segment EBITDA decreased primarily from lower contribution margins as
lower sales volumes and higher raw materials, energy and manufacturing costs more than offset higher average selling prices. EBITDA from our advanced materials products decreased by $9 million
principally as a result of lower contribution margins as lower sales volumes and higher raw materials, energy and manufacturing costs more than offset higher average selling prices, offset in part by
lower general and administrative expenses. EBITDA from our textile effects products decreased by $74 million due principally to lower sales volumes and lower margins, as raw material and energy
costs increased by more than average selling prices. During each
of the years ended December 31, 2008 and 2007, our Materials and Effects segment recorded restructuring and plant closing charges of $25 million. For more information concerning
restructuring activities, see "Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements included elsewhere in this report.

Performance Products

For the year ended December 31, 2008, Performance Products segment revenues increased primarily due to an increase in average
selling prices and higher toll manufacturing revenues, offset by lower sales volumes. Average selling prices rose in response to higher raw material costs and as a result of foreign exchange movements
as the U.S. dollar weakened against other relevant currencies. The reduction in sales volumes was primarily due to the conversion of most of our ethylene glycol business to a toll manufacturing
operation in 2008 and lower olefin by-product sales. Segment EBITDA increased principally due to expanded margins, as higher average selling prices more than offset increases in raw
material and energy costs. The higher margins more than offset increases in plant fixed costs resulting from additional planned maintenance and hurricane repairs.

Pigments

For the year ended December 31, 2008, Pigments segment revenues decreased primarily as a result of lower sales volumes, offset
in part by higher average selling prices in local currencies in all markets and foreign exchange movements as the U.S. dollar weakened against other relevant currencies. Sales volumes were lower
primarily due to lower worldwide demand related to the global economic downturn. The positive effect on revenues of the U.S. dollar weakness was substantially offset by its effect on our costs.
Segment EBITDA decreased principally due to lower sales volumes and reduced margins resulting from higher raw material and energy costs. During the years ended December 31, 2008 and 2007, our
Pigments segment recorded restructuring and plant closing charges of $4 million and $3 million, respectively. For more information concerning restructuring activities, see
"Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements included elsewhere in this report.

Corporate and OtherHuntsman Corporation

Corporate and Other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early extinguishment of debt, other

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non-operating
income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on the acquisition of a business, gain on the sale of our former U.S.
butadiene and MTBE business, Merger-related income and expenses and the operating results of our Australian styrenics business. The increase in EBITDA from Corporate and Other for the year ended
December 31, 2008 resulted primarily from a $990 million increase in the income associated with the Merger ($780 million of income recorded in the 2008 period compared to
$210 million of expenses in the 2007 period). For more information regarding these Merger-related income (expenses), see "Note 21. Income (Expenses) Associated with the Merger" to our
consolidated financial statements included elsewhere in this report. Additionally, for the year ended December 31, 2008, EBITDA was higher by $21 million due to favorable adjustments to
the extraordinary gain on acquisition of our Textile Effects business (a $14 million gain recorded in the 2008 period compared to a $7 million loss in the 2007 period). For more
information regarding the extraordinary gain associated with our June 30, 2006 acquisition of Ciba's textile effects business (the "Textile Effects Acquisition"), see "Note 4. Business
Dispositions and CombinationsTextile Effects Acquisition" to our consolidated financial statements included elsewhere in this report. These increases in EBITDA were offset somewhat by a
$19 million increase in unallocated foreign exchange losses (a loss of $31 million in 2008 compared to a loss of $12 million in 2007), an increase of $14 million in losses
from our Australian styrenics business, and a $10 million decrease in minority interests in subsidiaries' loss. In addition, the increase in Corporate and Other segment EBITDA was offset by an
$11 million gain recorded in 2007 in connection with the U.K. Petrochemical Disposition and a $69 million gain recorded in 2007 in connection with the sale of our former U.S. butadiene
and MTBE business. For more information, see "Note 4. Business Dispositions and CombinationsSale of U.S. Butadiene and MTBE Business" to our consolidated financial statements
included elsewhere in this report.

Corporate and OtherHuntsman International

Corporate and Other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on the
acquisition of a business, gain on the sale of our former U.S. butadiene and MTBE business and the operating results of our Australian styrenics business. The decrease in EBITDA from Corporate and
Other for the year ended December 31, 2008 resulted primarily from a $19 million increase in unallocated foreign exchange losses (a loss of $31 million in 2008 compared to a loss
of $12 million in 2007), an increase of $14 million in losses from
our Australian styrenics business, and a $10 million decrease in minority interests in subsidiaries' loss. In addition, Corporate and Other segment EBITDA was lower due to an $11 million
gain recorded in 2007 in connection with the U.K. Petrochemical Disposition and a $69 million gain recorded in 2007 in connection with the sale of our former U.S. butadiene and MTBE business.
For more information, see "Note 4. Business Dispositions and CombinationsSale of U.S. Butadiene and MTBE Business" to our consolidated financial statements included elsewhere in
this report. These decreases in EBITDA were offset somewhat by a $21 million favorable adjustment to the extraordinary gain on acquisition of our Textile Effects business (a $14 million
gain recorded in the 2008 period compared to a $7 million loss in the 2007 period). For more information regarding the extraordinary gain associated with the Textile Effects Acquisition, see
"Note 4. Business Dispositions and CombinationsTextile Effects Acquisition" to our consolidated financial statements included elsewhere in this report.

Polymers

The operating results of our North American polymers business are classified as discontinued operations, and, accordingly, the revenues
of this business are excluded from revenues for all periods presented. The EBITDA of our North American polymers business is included in the Polymers segment EBITDA for all periods presented.

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For
the year ended December 31, 2008, Polymers segment EBITDA increased to $3 million as compared with a loss of $197 million in the 2007 period. The EBITDA loss in
the 2007 period resulted primarily from the $233 million loss recorded in connection with the North American Polymers Disposition. The EBITDA in the 2008 period resulted from property tax
settlements and post-closing adjustments to the loss on disposal. For more information, see "Note 3. Discontinued OperationsNorth American Polymers Business" to our
consolidated financial statements included elsewhere in this report.

Base Chemicals

The operating results of our base chemicals business are classified as discontinued operations, and, accordingly, the revenues of this
business are excluded from revenues for
all periods presented. The EBITDA of our base chemicals business is included in the Base Chemicals segment EBITDA for all periods presented.

For
the year ended December 31, 2008, Base Chemicals segment EBITDA increased to $183 million as compared with a loss of $130 million in the 2007 period. This
increase in Base Chemicals segment EBITDA resulted from $175 million of income related to a partial fire insurance settlement for the Port Arthur fire and adjustments to the losses recorded in
connection with the U.S. Base Chemicals Disposition and the U.K. Petrochemicals Disposition. For more information, see "Note 24. Casualty Losses and Insurance Recoveries," "Note 3.
Discontinued OperationsU.S. Base Chemicals Business" and "European Base Chemicals and Polymers Business" to our consolidated financial statements included elsewhere in this
report.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

For the year ended December 31, 2007, we had a net loss of $172 million on revenues of $9,651 million, compared
with net income of $230 million on revenues of $8,731 million for 2006. For the year ended December 31, 2007, Huntsman International had a net loss of $12 million on
revenues of $9,651 million compared with net income of $234 million on revenues of $8,731 million for 2006. The decrease of $402 million in our net income and the decrease
of $246 million in Huntsman International's net income was the result of the following:



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Segment Analysis

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

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

Year ended
December 31,Percent
Change2007

2006RevenuesPolyurethanes

$
3,813

$
3,457


10
%Materials and Effects


2,419


1,792


35
%Performance Products


2,310


2,037


13
%Pigments


1,109


1,058


5
%Corporate and Other


155


538


(71
)%Eliminations


(155
)

(151
)

3
%Total

$
9,651

$
8,731


11
%Huntsman CorporationSegment EBITDAPolyurethanes

$
592

$
583


2
%Materials and Effects


199


154


29
%Performance Products


202


208


(3
)%Pigments


51


113


(55
)%Corporate and Other


(342
)

(62
)

452
%Subtotal


702


996


(30
)%Polymers


(197
)

121


NMBase Chemicals


(130
)

(86
)

51
%Total

$
375

$
1,031


(64
)%


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Huntsman International

Year ended
December 31,Percent
Change2007

2006Segment EBITDAPolyurethanes

$
592

$
583


2
%Materials and Effects


199


154


29
%Performance Products


202


208


(3
)%Pigments


51


113


(55
)%Corporate and Other


(150
)

(61
)

146
%Subtotal


894


997


(10
)%Polymers


(197
)

121


NMBase Chemicals


(130
)

(86
)

51
%Total

$
567

$
1,032


(45
)%




Average
Selling
Price

Sales
VolumesPeriod-Over-Period Increase (Decrease)Polyurethanes(1)


9
%

2
%Materials and Effects


12
%

20
%Performance Products(1)


5
%

8
%Pigments





5
%


---

NMNot
Meaningful

Polyurethanes

For the year ended December 31, 2007, Polyurethanes segment revenues increased as a result of both higher average selling prices
and growth in overall sales volumes. MDI average selling prices in 2007 increased by 6% as compared with 2006 due to favorable foreign exchange movements, particularly for euro-denominated
sales and in response to higher raw material costs. MTBE average selling prices for 2007 increased by 20% as compared with 2006 mainly due to higher raw material costs, strong export market demand and
tight supply. Overall,
Polyurethanes sales volumes increased primarily by higher MDI volumes due in particular to strong demand in insulation-related applications and in global emerging markets. For the year ended
December 31, 2007, Polyurethanes segment EBITDA increased primarily due to higher PO/co-product MTBE and urethanes margins, with average selling prices increasing by more than raw
material and energy costs, as well as an increase in sales volumes. The improvement in margins more than offset increased costs resulting from the delayed start up of our China MDI joint venture.

Materials and Effects

Materials and Effects segment revenues for the year ended December 31, 2007 increased primarily due to the Textile Effects
Acquisition on June 30, 2006. The textile effects business contributed $523 million to the increase in revenues for the year ended December 31, 2006, while advanced materials
revenues for the same period increased by $104 million, or 8%, as compared to 2006. The increase in advanced materials revenues was attributable to a 12% increase in average selling prices,

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partially
offset by a 4% decrease in sales volumes. Average selling prices increased mainly due to favorable impacts of currency fluctuations as the U.S. dollar weakened against the relevant European
currencies, price increase initiatives across all regions and most of our major product markets. Sales volumes decreased mainly in Europe and the Americas as a result of lower demand in the coatings,
construction, sport and electronics market groups. This was partially offset with sales volume growth in the adhesives and power market groups in Asia. The textile effects business contributed
$29 million to the increase in segment EBITDA for the year ended December 31, 2007 resulting from a full year of EBITDA in 2007 as compared with six months in 2006, while advanced
materials EBITDA for 2007 increased by $16 million, or 11%, as compared to 2006. Advanced materials EBITDA increased as a result of higher contribution margins on increased average selling
prices, partially offset by higher manufacturing and selling, general and administrative costs which were negatively impacted by exchange rates as the U.S. dollar weakened against the relevant
European currencies. During the year ended December 31, 2007, our Materials and Effects segment recorded restructuring, impairment and plant closing charges of $25 million as compared to
$4 million in 2006. For further information concerning restructuring activities, see "Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements
included elsewhere in this report.

Performance Products

For the year ended December 31, 2007, Performance Products segment revenues increased due to higher sales volumes and higher
average selling prices. Sales volumes
increased principally due to higher demand across most product groups. Volumes were lower in maleic anhydride where demand was impacted by the downturn in the U.S. housing market, and in ethanolamines
where production was lower. Average selling prices increased in response to higher raw material and energy costs and favorable currency effects as the U.S. dollar weakened against European and
Australian currencies. For the year ended December 31, 2007, Performance Products segment EBITDA decreased as raw materials cost increases were recovered by higher selling prices but the impact
of higher sales volumes was more than offset by increased fixed costs. The increase in fixed costs was mainly due to higher maintenance expenditures, negative currency impacts from
non-U.S. operations and a $6 million charge related to the settlement of a legal dispute. In addition, during 2006 we recorded gains of $2 million on the sale of real estate
and insurance receipts related to property damage incurred at our Port Neches, Texas facility resulting from Hurricane Rita in September 2005. During the years ended December 31, 2007 and 2006,
the Performance Product segment recorded restructuring, impairment and plant closing charges of $1 million and $2 million, respectively. For further information concerning restructuring
activities, see "Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements included elsewhere in this report.

Pigments

For the year ended December 31, 2007, Pigments segment revenues increased principally from higher sales volumes primarily due to
stronger customer demand in Europe and Asia. Average selling prices decreased in local currencies in both the European and North American regions due to competitive markets, offset by favorable
foreign currency exchange impacts on selling prices as the U.S. dollar weakened against the relevant European currencies. Pigments segment EBITDA for the year ended December 31, 2007 decreased
due to lower local currency selling prices. The positive effect on revenues caused by the strength of the major European currencies was more than offset by the negative impact on selling prices as the
U.S. dollar weakened against the major European currencies.

Corporate and OtherHuntsman Corporation

Corporate and Other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early extinguishment of debt, other

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non-operating
income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on the acquisition of a business, Merger-related expenses, the operating
results of our Australian styrenics business and the operating results of our former U.S. butadiene and MTBE
business and the impact of purchase accounting adjustments. For the year ended December 31, 2007, EBITDA from Corporate and Other items decreased by $280 million to a loss of
$342 million from a loss of $62 million for 2006. The reduction in EBITDA resulted primarily from $210 million of expenses incurred during the second half of 2007 associated with
the Merger. For further information regarding these Merger-related expenses, see "Note 21. Income (Expenses) Associated with the Merger" to our consolidated financial statements included
elsewhere in this report. EBITDA of Corporate and Other was also impacted by gains on the sale of our former U.S. butadiene and MTBE business in 2007 and 2006 of $69 million and
$90 million, respectively. For further information, see "Note 4. Business Dispositions and CombinationsSale of U.S. Butadiene and MTBE Business" to our consolidated
financial statements included elsewhere in this report. In addition, Corporate and Other EBITDA was impacted by the following: an extraordinary (loss) gain of $(7) million and $56 million
recorded in 2007 and 2006, respectively, related to the Textile Effects Acquisition; a $22 million increase in unallocated foreign exchange losses in 2007 which resulted from $12 million
of losses in 2007 as compared with $10 million of gains in 2006; and increased information technology costs of $24 million. The decrease in Corporate and Other segment EBITDA was
partially offset by the $22 million loss on disposal recorded in 2006 in connection with the U.K. Petrochemical Disposition as compared with a gain on disposal of $11 million recognized
in 2007, and a $25 million decrease in expenses in 2007 related to the early extinguishment of debt. For further information regarding the extraordinary gain associated with the Textile Effects
Acquisition, see "Note 4. Business Dispositions and CombinationsTextile Effects Acquisition" to our consolidated financial statements included elsewhere in this report.

Corporate and OtherHuntsman International

Corporate and Other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on the
acquisition of a business, the operating results of our Australian styrenics business and the operating results of our former U.S. butadiene and MTBE business. For the year ended December 31,
2007, EBITDA from Corporate and Other items decreased by $89 million to a loss of $150 million from a loss of $61 million for 2006. The reduction in EBITDA resulted primarily from
the following: an extraordinary (loss) gain of $(7) million and $56 million recorded in 2007 and 2006, respectively, related to the Textile Effects Acquisition; a $22 million increase in
unallocated foreign exchange losses in 2007 which resulted from $12 million of losses in 2007 as compared with $10 million of gains in 2006; and increased information technology costs of
$24 million. The decrease in Corporate and Other segment EBITDA was partially offset by a reduction of $36 million in expenses in the 2007 period related to the early extinguishment of
debt. In addition, Corporate and Other segment EBITDA was impacted by gains on the sale of our former U.S. butadiene and MTBE business in 2007 and 2006 of $69 million and $90 million,
respectively. For further information, see "Note 4. Business Dispositions and CombinationsSale of U.S. Butadiene and MTBE Business" to our consolidated financial statements
included elsewhere in this report. For further information regarding the extraordinary gain associated with the Textile Effects Acquisition, see "Note 4. Business Dispositions and
CombinationsTextile Effects Acquisition" to our consolidated financial statements included elsewhere in this report.

Polymers

The operating results of our polymers business are classified as discontinued operations, and, accordingly, the revenues of this
business are excluded from revenues for all periods presented. The EBITDA of our polymers business is included in the Polymers segment EBITDA for all periods presented.

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The
decrease in Polymers segment EBITDA resulted primarily from the North American Polymers Disposition and the resulting loss on disposal of $233 million and a decrease in EBITDA
from operations prior to the dispositions. For further information, see "Note 3. Discontinued OperationsNorth American Polymers Business" to our consolidated financial statements
included elsewhere in this report.

Base Chemicals

The operating results of our base chemicals business are classified as discontinued operations, and, accordingly, the revenues of this
business are excluded from revenues for all periods presented. The EBITDA of our base chemicals business is included in the Base Chemicals segment EBITDA for all periods presented.

The
reduction in Base Chemicals segment EBITDA was driven primarily by the November 5, 2007 U.S. Base Chemicals Disposition and resulting loss on disposal of $146 million
in 2007 as compared to a $280 million loss on the U.K. Petrochemicals Disposition in 2006 and a related gain on disposal of $28 million in 2007 and a decrease in EBITDA from operations
prior to the dispositions. For further information, see "Note 3. Discontinued OperationsU.S. Base Chemicals Business" and "Note 3. Discontinued
OperationsEuropean Base Chemicals and Polymers Business" to our consolidated financial statements included elsewhere in this report.

LIQUIDITY AND CAPITAL RESOURCES

The
following is a discussion of our liquidity and capital resources and generally does not include separate information with respect to Huntsman International
in accordance with General Instruction I of Form 10-K.

Cash Flows for Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

Net cash provided by (used in) operating activities for the years ended December 31, 2008 and 2007 was $767 million and
$(52) million, respectively. The increase in cash provided by operations was primarily attributable to $765 million of net cash received in connection with the Settlement Agreement and to a
$45 million favorable year-over-year variance in operating assets and liabilities changes, offset in part by lower operating income as described in "Results
of Operations" above.

Net
cash (used in) provided by investing activities for the years ended December 31, 2008 and 2007 was $(489) million and $200 million, respectively. During the
years ended December 31, 2008 and 2007, we paid $418 million and $665 million, respectively, for capital expenditures. The capital expenditures for the year ended
December 31, 2007 included $157 million spent on our former Port Arthur, Texas facility that was previously damaged by fire and has been sold to Flint Hills Resources. In addition,
during 2007, we spent $72 million on our Greatham, U.K. expansion for our Pigments segment as compared with $29 million in 2008. During the years ended December 31, 2008 and 2007,
we received $3 million and $850 million, respectively, from the sale of assets. On August 1, 2007, we completed the North American Polymers Disposition for $354 million and
on November 5, 2007 we completed the U.S. Base Chemicals Disposition for $415 million. In 2006, we sold the assets comprising our former U.S. butadiene and MTBE business and received the
final payment of $70 from that sale in November 2007. During the year ended December 31, 2008, we made $29 million of payments related to certain expenditures to rebuild our former Port
Arthur, Texas facility, resulting in an adjustment to the sales proceeds. See "Note 3. Discontinued OperationsU.S. Base Chemicals Business" to our consolidated financial statements
included elsewhere in this report. During the year ended December 31, 2008, we contributed $44 million to our ethylenamines joint venture in Saudi Arabia. During the year ended
December 31, 2007, we finalized our post-closing adjustments with respect to the Textile Effects Acquisition, resulting in a reduction to the purchase price of $27 million.

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Net
cash provided by financing activities for the year ended December 31, 2008 was $230 million as compared with a use of cash of $269 million in the 2007 period.
This increase in net cash provided by financing activities was primarily due to the issuance of the Convertible Notes in connection with the Settlement Agreement and lower net repayments of debt in
the 2008 period as compared to the 2007 period. For more information regarding the issuance of the Convertible Notes, see "Convertible Notes" below.

Cash Flows for the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

Net cash (used in) provided by operating activities for the years ended December 31, 2007 and 2006 was $(52) million and
$892 million, respectively. The decrease in cash provided by operating activities was primarily attributable to $196 million of cash used in 2007 to build working capital as compared
with $148 million of cash generated in 2006 from the reduction of working capital. Net cash from operating activities was also impacted by a decrease in operating income as described in
"Results of Operations" above and the payment of the Basell Termination Fee as described in "Note 21. Income (Expenses) Associated with the Merger" to our consolidated financial statements
included elsewhere in this report.

Net
cash provided by investing activities for the years ended December 31, 2007 and 2006 was $200 million and $174 million, respectively. During the years ended
December 31, 2007 and 2006, we invested $665 million and $550 million, respectively, in capital expenditures. The increase in capital expenditures was largely attributable to the
$157 million of capital expenditures incurred during the year ended December 31, 2007 for the rebuild of our Port Arthur, Texas olefins facility that was damaged by fire and to
$72 million of capital expenditures on our Greatham, U.K. expansion for our Pigments divisions. During the year ended December 31, 2007 we finalized our post-closing working
capital adjustments with respect to the Textile Effects Acquisition, resulting in a reduction to the purchase price of $27 million, and acquired businesses for $14 million. During the
year ended December 31, 2006, we acquired the Textile Effects business for $177 million, net of cash acquired. During the years ended December 31, 2007 and 2006, we sold assets
and received proceeds of $850 million and $895 million, respectively. On August 1, 2007, we completed the North American Polymers Disposition to Flint Hills Resources for
$354 million, and on November 5, 2007 we completed the U.S. Base Chemicals Disposition to Flint Hills Resources for $415 million. On June 27, 2006, we sold the assets
comprising our former U.S. butadiene and MTBE business for $274 million, of which $204 million was paid to us during 2006. The additional $70 million was paid to us on
November 9, 2007 after the successful restart of our Port Arthur, Texas olefins unit that was damaged by fire. On December 29, 2006, we sold our European base chemicals and polymers
business for $685 million in
cash. For further information, see "Note 4. Business Dispositions and Combinations" to our consolidated financial statements included elsewhere in this report.

Net
cash used in financing activities for the year ended December 31, 2007 was $269 million as compared with $961 million in 2006. This decrease in net cash used in
financing activities is partly due to lower net repayments of debt in 2007 compared to 2006 and an increase in dividends paid to common stockholders in 2007 of $88 million. During the year
ended December 31, 2007, we had net repayments under our debt arrangements of $162 million and used $1 million to pay premiums associated with repayment of indebtedness. In the
first quarter 2007, we repaid in full our remaining 10.125% subordinated notes due 2009 of $150 million with proceeds from our offering of 7.875% subordinated notes due 2014 of
$152 million. Additionally, in the second quarter 2007, we amended our Senior Credit Facilities, increasing our U.S. dollar denominated term loan by $97 million, and we used the proceeds
to repay in full our euro denominated term loan. During the year ended December 31, 2006, we had net repayments under our debt arrangements of $914 million and used $30 million to
pay premiums associated with the repayment of indebtedness.

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Changes in Financial Condition

The following information summarizes our working capital position as of December 31, 2008 and December 31, 2007 (dollars
in millions):

December 31,
2008

December 31,
2007

Increase
(Decrease)

Percent
ChangeCash and cash equivalents

$
657

$
154

$
503


327
%Restricted cash


5





5


NMAccounts receivable, net


913


1,262


(349
)

(28
)%Inventories, net


1,500


1,452


48


3
%Prepaid expenses


45


37


8


22
%Deferred income taxes


21


73


(52
)

(71
)%Other current assets


99


117


(18
)

(15
)%Total current assets


3,240


3,095


145


5
%Accounts payable


747


1,018


(271
)

(27
)%Accrued liabilities


617


885


(268
)

(30
)%Deferred income taxes


36


3


33


NMCurrent portion of long-term debt


205


69


136


197
%Total current liabilities


1,605


1,975


(370
)

(19
)%Working capital

$
1,635

$
1,120

$
515


46
%


Our
working capital increased by $515 million as a result of the net impact of the following significant changes:



Debt and Liquidity

Our direct debt and guarantee obligations consist of our Convertible Notes, guarantees of certain debt of HPS and SLIC, our Chinese MDI
joint ventures, guarantees of certain debt of our Saudi Arabia joint venture and certain indebtedness incurred from time to time to finance certain insurance premiums. We have no other direct debt or
guarantee obligations, and all of the additional debt discussed below has been incurred by our subsidiaries (primarily Huntsman International); such

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subsidiary
debt is nonrecourse to us and we have no contractual obligation to fund our subsidiaries' respective operations.

Senior Credit Facilities

As of December 31, 2008, our Senior Credit Facilities consisted of our (i) $650 million Revolving Facility and
(ii) $1,540 million term loan B facility (the "Dollar Term Loan"). As of December 31, 2008, there were no borrowings outstanding under the Revolving Facility, and we had
$32 million in U.S. dollar equivalents of letters of credit and bank guarantees issued and outstanding under the Revolving Facility. The Revolving Facility matures in August 2010 and the Dollar
Term Loan matures in 2014; provided, however, that the maturities of the Revolving Facility and the Dollar Term Loan will accelerate if we do not repay or refinance all but $100 million of our
outstanding debt securities on or before three months prior to the maturity dates of such debt securities (the next maturity date of such debt securities is October 2010).

At
the present time, borrowings under the Revolving Facility and the Dollar Term Loan bear interest at LIBOR plus 1.75%. However, the applicable interest rate of the Dollar Term Loan is
subject to a reduction to LIBOR plus 1.50% upon achieving certain secured leverage ratio thresholds. The agreements governing our Secured Credit Facilities contain one financial covenant, which is
applicable only to the Revolving Facility, and this covenant is only in effect when loans or letters of credit are outstanding under the Revolving Facility. In addition, the applicable agreements
provide for customary restrictions and limitations on our ability to incur liens, incur additional debt, merge or sell assets, make certain restricted payments, prepay other indebtedness, make
investments or engage in transactions with affiliates, and also contain other customary default provisions.

As
of December 31, 2008, the weighted average interest rate on the Senior Credit Facilities was approximately 2.3%. Our obligations under the Senior Credit Facilities are
guaranteed by our guarantor subsidiaries, which consist of substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (collectively, the "Guarantors"), and are secured by a
first priority lien (generally shared with the holders of the 2010 Secured Notes (defined below)) on substantially all of our domestic property, plant and equipment, the stock of all of or our
material domestic subsidiaries and certain foreign subsidiaries and pledges of intercompany notes between various of our subsidiaries.

On
November 14, 2007, in connection with the U.S. Base Chemicals Disposition, we used a portion of the proceeds to make a repayment of $100 million on the Dollar Term Loan.
Substantially all of the remaining proceeds were used to repay borrowings under the Revolving Facility and reduce amounts under the A/R Securitization Program.

On
April 19, 2007, we entered into an amendment to our Senior Credit Facilities. Pursuant to this amendment, the maturity of the Dollar Term Loan was extended to April 2014 and
the loan amount was increased to $1,640 million. We used the increased amount to repay, in full, our previously outstanding euro term loan facility (the "Euro Term Loan").

On
January 16, 2007, we made a voluntary repayment of $75 million U.S. dollar equivalents on our term loan B facility ($71 million on the Dollar Term Loan and
€3 million on the Euro Term Loan) with available liquidity.

Secured Notes

As of December 31, 2008, we had outstanding $296 million aggregate principal amount ($295 million book value and
$455 million original aggregate principal amount) under our 11.625% senior secured notes due October 15, 2010 (the "2010 Secured Notes"). The 2010 Secured Notes are currently redeemable
at 102.906% of the principal amount plus accrued interest, declining to par on and after October 15, 2009. Interest on the 2010 Secured Notes is payable semiannually in April and

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October
of each year. The 2010 Secured Notes are secured by a first priority lien on all collateral securing the Senior Credit Facilities as described above (other than capital stock of Huntsman
International's first-tier foreign subsidiaries), shared equally with the lenders on the Senior Credit Facilities, subject to certain inter-creditor arrangements. The 2010 Secured Notes
contain covenants relating to the incurrence of debt and limitations on distributions, certain restricted payments, asset sales and affiliate transactions and are guaranteed by the Guarantors. The
indentures
governing the 2010 Secured Notes also contain provisions requiring us to offer to repurchase the notes upon a change of control.

Senior Notes

As of December 31, 2008, we had outstanding $198 million ($300 million original aggregate principal amount) of
11.5% senior notes due 2012 (the "2012 Senior Notes"). Interest on the 2012 Senior Notes is payable semiannually in January and July of each year. The 2012 Senior Notes are currently redeemable at
105.75% of the principal amount plus accrued interest, declining ratably to par on and after July 15, 2010. The 2012 Senior Notes are unsecured obligations. The indentures governing our 2012
Senior Notes contain covenants, among other things, relating to the incurrence of debt and limitations on distributions and certain restricted payments, asset sales and affiliate transactions and are
guaranteed by the Guarantors. The indentures governing the 2012 Senior Notes contain provisions requiring us to offer to repurchase the notes upon a change of control.

Subordinated Notes

As of December 31, 2008, we had outstanding $175 million 7.375% senior subordinated notes due 2015 and
€135 million (approximately $191 million) 7.5% senior subordinated notes due 2015 (collectively, the "2015 Subordinated Notes"). The 2015 Subordinated Notes are
redeemable on or after January 1, 2010 at 103.688% and 103.750%, respectively, of the principal amount plus accrued interest, declining ratably to par on and after January 1, 2013.

As
of December 31, 2008, we had outstanding €400 million (approximately $567 million) 6.875% senior subordinated notes due 2013 (the "2013
Subordinated Notes") and $347 million aggregate principal amount ($352 million book value) under our 7.875% senior subordinated notes due 2014 (the "2014 Subordinated Notes"). The 2013
Subordinated Notes are redeemable on or after November 15, 2009 at 105.156% of the principal amount plus accrued interest, declining ratably to par on or after November 15, 2012. The
2014 Subordinated Notes are redeemable on or after November 15, 2010 at 103.938% of the principal amount plus accrued interest, declining ratably to par on or after November 15, 2012.

Interest
on the 2015 Subordinated Notes is payable semiannually in January and July of each year. Interest on the 2013 Subordinated Notes and the 2014 Subordinated Notes is payable
semiannually in November and May of each year. All of our subordinated notes are unsecured. The indentures governing our subordinated notes contain covenants relating, among other things, to the
incurrence of debt and limitations on distributions, certain restricted payments, asset sales and affiliate transactions.
Our subordinated notes are guaranteed by the Guarantors. The indentures also contain provisions requiring us to offer to repurchase the notes upon a change of control.

In
February 2007, we closed on a direct private placement of $147 million (included within the total outstanding principal amount of $347 million of 2014 Subordinated
Notes) in aggregate principal amount of the 2014 Subordinated Notes. These notes were issued at a premium of 104% of principal amount for a yield of 7.01%. We used the net proceeds of
$152 million to redeem all (approximately €114 million) of our remaining outstanding euro denominated 10.125% senior subordinated notes due 2009, which were called for
redemption on March 27, 2007 at a call price of 101.688% plus accrued interest.

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Convertible Notes

Pursuant to the Settlement Agreement on December 23, 2008, we issued $250 million in Convertible Notes (recorded at
$235 million fair value). The Convertible Notes will be convertible at any time, at the option of the holder, at an initial conversion rate of 127.275 shares of our common stock per
$1,000 principal amount of Convertible Notes (which is equal to an initial conversion price of $7.857 per share), subject to specified anti-dilution adjustments. The Convertible Notes will
bear interest at the rate of 7% per year payable semi-annually on January 1 and July 1 of each year, beginning on July 1, 2009. Interest is payable either in cash or,
at our option, in shares of our common stock having a market value at that time equal to the interest payment. The Convertible Notes are our senior unsecured obligations and are not guaranteed by any
of our subsidiaries, including Huntsman International.

The
Convertible Notes will mature on December 23, 2018. At maturity, we may, at our option, pay the principal amount of the Convertible Notes in shares of our common stock having
a market value at that time equal to the principal amount of the Convertible Notes, plus an amount equal to the underwriting spread of a nationally-recognized underwriter chosen by us that would be
paid by a seller of the shares at such time.

We
may redeem the Convertible Notes in whole, for cash, at the principal amount of the Convertible Notes plus accrued and unpaid interest, at any time on or after December 23,
2011 if the closing price of our common stock, for at least 20 consecutive trading days prior to the notice of redemption, exceeds 135% of the conversion price in effect at that time.

Upon
occurrence of certain change of control events, the holders of the Convertible Notes may require us to redeem all or any portion of the holders' Convertible Notes at the principal
amount plus accrued and unpaid interest.

Other Debt

We maintain a $25 million European Overdraft Facility that is a demand facility used for the working capital needs for our
European subsidiaries ("European Overdraft Facility"). As of December 31, 2008 and December 31, 2007, we had $16 million and $15 million U.S. dollar equivalents,
respectively, in borrowings outstanding under the European Overdraft Facility. We also maintain other foreign overdraft facilities used for working capital needs.

HPS
obtained secured loans for the construction of its MDI production facility. This debt consists of various committed loans. As of December 31, 2008, HPS had $25 million
outstanding in U.S. dollar borrowings and 672 million in RMB borrowings (approximately $98 million) under these facilities. The interest rate on these facilities is LIBOR plus 0.48% for
U.S. dollar borrowings and 90% of the Peoples Bank of China rate for RMB borrowings. As of December 31, 2008, the interest rate was approximately 3.1% for U.S. dollar borrowings and 6.5% for
RMB borrowings. The loans are secured by substantially all the assets of HPS and will be repaid in 16 semiannual installments (which began on June 30, 2007). We have guaranteed 70% of any
amount due and unpaid by HPS under the loans described above (except for the VAT facility, which is not guaranteed). Our guarantees remain in effect until HPS has met certain conditions. The
conditions outstanding include completion of the building and equipment mortgage registrations, which are progressing as planned, and maintaining a debt service coverage ratio of at least 1.5:1 at the
time such registrations are completed. Our Chinese MDI joint ventures are unrestricted subsidiaries under the Senior Credit Facilities and under the indentures governing our outstanding notes.

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On October 22, 2008, HPS entered into a loan facility for the purpose of discounting commercial drafts with recourse. The facility has a stated capacity
discounting up to CNY500 million (approximately $73 million) and drafts are discounted using a discount rate of 3-months Shanghai Inter-Bank Offer Rate (SIBOR)
plus 4.2%. As of December 31, 2008, the all-in discount rate was 6.39%. As of December 31, 2008, HPS has discounted with recourse CNY500 million (approximately
$73 million) of commercial drafts. While the facility has a maturity of July 24, 2009, the lender has the right to accept or reject drafts presented for discounting.

Our
Australian subsidiaries maintain credit facilities that had an aggregate outstanding balance of A$59 million (approximately $41 million) as of December 31, 2008
($30 million of which is classified as current portion of long term debt). These facilities are nonrecourse to Huntsman International and bear interest at the Australian index rate plus a
margin of 2.4%. As of December 31, 2008, the interest rate for these facilities was 7.0%. The Australian credit facilities mature in May 2010.

We
finance certain insurance premiums and, as of December 31, 2008 and 2007, we had outstanding notes payable in the amount of $23 million and $27 million,
respectively. Insurance premium financings are generally secured by the unearned premiums under such policies.

On
June 30, 2008, our subsidiary, Huntsman (UK) Limited, entered into a $125 million short term committed revolving credit facility maturing on June 28, 2009 (the
"Short Term Revolving Facility"). In
connection with an amendment to the A/R Securitization Program on November 13, 2008, we terminated the short term committed revolving credit facility of our subsidiary, Huntsman (UK) Limited,
of which nothing was drawn. See "Note 16. Securitization of Accounts Receivable" to our consolidated financial statements included elsewhere in this report.

Notes Payable from Huntsman International to Huntsman Corporation

Under an existing promissory note, as of December 31, 2008 we lent $423 million to our subsidiary, Huntsman
International, which funds were used by Huntsman International to repay borrowings outstanding under the Revolving Facility. This demand note is unsecured and is classified as current on the
consolidated balance sheets included elsewhere in this report. As of December 31, 2008, under the terms of the note, Huntsman International promises to pay us interest on the unpaid principal
amount thereof in like money at a rate per annum not to exceed 25 basis points (0.25%) less than the then current revolving loan U.S. LIBOR-based borrowing as defined by the Revolving Facility. On
January 6, 2009, the interest rate was amended to a rate per annum based on the previous monthly average borrowing rate obtained under our A/R Securitization Program for U.S. dollar
outstandings less 10 basis points. Notwithstanding the foregoing, the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S.
LIBOR-based borrowings under the Revolving Facility. With our consent the principal and accrued interest outstanding under this Note may also be forgiven or capitalized or satisfied with any alternate
form of consideration.

Compliance with Covenants

Our management believes that we are in compliance with the covenants contained in the agreements governing our debt instruments,
including our Senior Credit Facilities, our A/R Securitization Program and the indentures governing our notes.

We
have only one financial covenant under our Senior Credit Facilities (the "Leverage Covenant"), which applies to our $650 million Revolving Facility. At any time loans or
letters of credit are outstanding under our Revolving Facility, the Leverage Covenant requires that Huntsman International maintain a net secured debt to EBITDA ratio of 3.75 to 1 (as defined in the
applicable agreement, the "Secured Leverage Ratio").

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If
in the future we were not able to meet the Secured Leverage Ratio, unless we obtained an amendment or waiver (as to which we can provide no assurance), then, for so long as we did not
meet the Secured Leverage Ratio, we would not have access to the liquidity otherwise available under our Revolving Facility. If we failed to meet the Secured Leverage Ratio at a time when we had loans
or letters of credit outstanding under the Revolving Facility, we would be in default under our Senior Credit Facilities, and, unless we obtained a waiver or forbearance with respect to such default
(as to which we can provide no assurance), we would be required to pay off the balance of our Senior Credit Facilities in full and would not have further access to such facilities.

The
agreements governing our $575 million A/R Securitization Program also contain certain financial covenants. Any material failure to meet the A/R Securitization Program
covenants in the future could lead to an event of default under the A/R Securitization Program, which could require us to cease our use of such facility. Under these circumstances, unless any default
was remedied or waived, we would likely lose the ability to obtain financing with respect to our trade receivables. A material default under the A/R Securitization Program would also constitute an
event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.

Short-Term and Long-Term Liquidity

During December 2008, pursuant to the Settlement Agreement, Hexion, Apollo and their affiliates paid us $1 billion (including
the proceeds from the sale of the Convertible Notes). Prior to our receipt of such proceeds under the Settlement Agreement, we were highly dependent on our credit facilities and other debt instruments
to provide liquidity for our operations and working capital needs. While we remain dependent upon our credit facilities and other debt instruments to meet our liquidity needs, as of
December 31, 2008, we had $662 million of cash and restricted cash. We used $423 million of the Settlement Agreement proceeds to repay the Revolving Facility in full as of
December 31, 2008.

As
of December 31, 2008, we had $1,291 million of combined cash and unused borrowing capacity, consisting of the following:



Our
liquidity can be significantly impacted by changes in working capital. For the year ended December 31, 2008, our accounts receivable and inventory, net of accounts payable in
2008, increased by $42 million, as reflected on our consolidated statement of cash flows included elsewhere in this report. We expect volatility to continue in our working capital components in
2009. We have various restructuring programs ongoing and we expect to spend approximately $125 million related to our restructuring plans during 2009. For a discussion of restructuring,
impairment and plant closing costs, see "Note 11. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements included elsewhere in this report.

During
2009 we expect to spend approximately $230 million in capital expenditures as compared to $418 million for the year ended December 31, 2008. We expect to fund
our restructuring and capital expenditures through a combination of available cash, cash flows from operations and financing arrangements.

We
currently have $205 million classified as current portion of long-term debt. For more information, see "Note 14. Debt" to our consolidated financial
statements included elsewhere in this report. As of December 31, 2008, our current portion of long-term debt includes various short term

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facilities,
including but not limited to our HPS draft discounting facility in China that had amounts outstanding of $73 million, our Australian credit facilities of $30 million and our
insurance premium
financings of $23 million. Although we can make no assurances, we currently intend to extend these debt instruments beyond their stated maturities.

On
April 29, 2006, we experienced fire damage at our Port Arthur, Texas facility. This facility has been subsequently rebuilt and sold. In connection with this fire damage, we
have received partial insurance proceeds to date of $365 million, of which $40 million was received in December 2008. We have claimed an additional $235 million as of
December 31, 2008 as presently due and owing and unpaid under our insurance policies, and anticipate filing additional claims. The settlement of insurance claims will continue during 2009. Any
anticipated additional net recoveries are expected to be used to repay secured debt. See "Note 22. Commitments and ContingenciesPort Arthur Plant Fire Insurance Litigation" and
"Note 24. Casualty Losses and Insurance RecoveriesPort Arthur, Texas Plant Fire" to our consolidated financial statements included elsewhere in this report.

During
the first half of 2009, we expect to complete our acquisition of the Baroda Textile Effects (India) ("Baroda") division of Metrochem Industries, Ltd, subject to certain
conditions being met. We estimate the purchase price, including certain working capital positions, to be approximately $29 million (U.S. dollar equivalents), pursuant to a
non-binding agreement in principle between Baroda and our Company. This purchase price excludes from working capital the receivables existing on the closing date due to Baroda from our
affiliates, which will be settled in the ordinary course. We believe that the majority of the purchase price will be funded through local Indian financing.

As
of December 31, 2008, the amount outstanding under our A/R Securitization Program was $446 million compared with $428 million at December 31, 2007. This
program was amended in November 2008 and was extended through November 2009. This facility fluctuates in capacity depending on the program's eligible receivables base which is influenced by such
factors as market demand, pricing and foreign currency rates. Although we can make no assurances, we intend to extend the A/R Securitization Program beyond its stated term. See "Note 16.
Accounts Receivable Securitization Program" to our consolidated financial statements included elsewhere in this report.

Contractual Obligations and Commercial Commitments

Our obligations under long-term debt (including the current portion), lease agreements and other contractual commitments as
of December 31, 2008 are summarized below (dollars in millions):

2009

2010-2011

2012-2013

After 2013

TotalLong-term debt, including current portion

$
205

$
413

$
825

$
2,439

$
3,882Interest(1)


218


376


260


133


987Operating leases


47


84


60


96


287Purchase commitments(2)


157


183


113


75


528Total(3)(4)

$
627

$
1,056

$
1,258

$
2,743

$
5,684


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2009

2010-2011

2012-2013

5-Year Average AnnualPension plans

$
143

$
318

$
296

$
132Other postretirement obligations


13


27


26


12


Off-Balance Sheet Arrangements

Receivables Securitization

For a discussion of our A/R Securitization Program, see "Note 16. Securitization of Accounts Receivable" to our consolidated
financial statements included elsewhere in this report.

Guarantees

On September 19, 2003, SLIC obtained secured financing for the construction of production facilities. SLIC obtained various
committed loans in the aggregate amount of approximately $230 million in U.S. dollar equivalents. As of December 31, 2008, there were $68 million and RMB 840 million
(approximately $123 million) in outstanding borrowings 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. The loans are secured by substantially all the assets of SLIC and will be paid in 16 semiannual installments (of which 13 installments remain), which began on
June 30, 2007. We unconditionally guarantee 35% of any amounts due and unpaid by SLIC under
the loans described above (except for the VAT facility which is not guaranteed). Our guarantee remains in effect until SLIC has met certain conditions. The conditions outstanding include completion of
the building and equipment mortgage registrations, which are progressing as planned, and maintaining a debt service coverage ratio of at least 1:1 at the time such registrations are completed. We have
estimated that the fair value of this guarantee is nil as of the closing of the transaction and, accordingly, no amounts have been recorded.

Our
unconsolidated Saudi Arabia joint venture with Zamil Group obtained various loan commitments in the aggregate amount of approximately $195 million in U.S. dollar equivalents,
of which $45 million was drawn under a short term bridge loan facility as of December 31, 2008. We have provided certain guarantees of approximately $14 million for these
commitments, and our guarantees will terminate upon completion of the project and satisfaction of certain other conditions. We have estimated that the fair value of such guarantees was nil as of the
closing date of this transaction and, accordingly, no amounts have been recorded. In connection with the funding of this joint venture, in December 2008 one of our subsidiaries obtained financing from
a Saudi bank of approximately $10 million U.S. dollar equivalents for a portion of our share of our equity contribution previously made.

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Restructuring, Impairment and Plant Closing Costs

For a discussion of restructuring, impairment and plant closing costs, see "Note 11. Restructuring, Impairment and Plant Closing
Costs" to our consolidated financial statements included elsewhere in this report.

Legal Proceedings

For a discussion of legal proceedings, see "Note 22. Commitments and ContingenciesLegal Matters" to our
consolidated financial statements included elsewhere in this report.

Environmental, Health and Safety Matters

For a discussion of environmental, health and safety matters, see "Note 23. Environmental, Health and Safety Matters" to our
consolidated financial statements included elsewhere in this report.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For a discussion of recently issued accounting pronouncements, see "Note 2. Summary of Significant Accounting
PoliciesRecently Issued Accounting Pronouncements" to our consolidated financial statements included elsewhere in this report.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S.
requires management to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial statements. Our significant accounting policies are summarized in
"Note 2. Summary of Significant Accounting Policies" to our consolidated financial statements included elsewhere in this report. Summarized below are our critical accounting policies:

Casualty Losses and Insurance Recoveries

PORT ARTHUR, TEXAS PLANT FIRE

On April 29, 2006, our Port Arthur, Texas olefins manufacturing plant (which we sold in November 2007) experienced a major fire.
With the exception of cyclohexane operations at the site, which were restarted in June 2006, the operations at the site were shutdown until the fourth quarter of 2007. The Port Arthur manufacturing
plant is covered by property damage and business interruption insurance. With respect to coverage for this outage, the deductible for property damage is $10 million and business interruption
coverage does not apply for the first 60 days, subject to a combined deductible for property damage and business interruption of $60 million.

Through
December 31, 2008, we received partial recovery advances on this loss totaling $365 million, including $40 million received in December 2008. We have claimed
an additional approximately $235 million as of December 31, 2008, as presently due and owing and unpaid under the insurance policy for losses caused by the fire, and anticipate filing
additional claims. On December 29, 2008, we reached a partial settlement with certain of the Reinsurers (the "Partial Fire Insurance Settlement") whereby we received a partial claim
reimbursement of $40 million and we and the Reinsurers agreed to dismiss all legal suits arising from this insured loss and to participate in non-binding mediation scheduled to
occur in February 2009 and, if the non-binding mediation is not successful, in binding arbitration targeted to occur in the later half of 2009. Also as part of the Partial Fire Insurance
Settlement, the Reinsurers that are parties to such agreement agreed that none of their respective portion, or $340 million of the $365 million of partial recovery advances received to
date are refundable (those insurers representing the other $25 million portion received to date were not

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required
to enter into this agreement because their coverage limits had been exhausted at much lower levels).

Through
December 31, 2008, we had recorded $190 million of repair and maintenance costs and fixed costs incurred during the business interruption period and had recognized
in earnings a corresponding amount of the partial recovery amounts. Prior to the Partial Fire Insurance Settlement, we had deferred recognition of the gain associated with partial recovery advances
and these amounts were included in accrued liabilities on the accompanying consolidated balance sheets. As a result of the Partial Fire Insurance Settlement, we recognized a gain of
$175 million in the fourth quarter of 2008 which represented all previously deferred insurance recovery gain amounts. The following table describes changes to the deferred insurance recovery
gain during the years ended December 31, 2008, 2007 and 2006 (dollars in millions):

2008

2007

2006Balance at January 1

$
137

$
94

$
Insurance recovery advances


40


175


150Incurrence of repair and maintenance costs during the period


(2
)

(52
)

(17
)Incurrence of fixed costs during the business interruption period





(80
)

(39
)Recognition of deferred gain in connection with the PartialFire Insurance Settlement


(175
)




Balance as of December 31

$


$
137

$
94


Future
collections on this insured loss, if any, will represent additional income for us upon final settlement.

2005 U.S. GULF COAST STORMS

On September 22, 2005, we sustained property damage at our Port Neches and Port Arthur, Texas facilities as a result of a
hurricane. We maintain customary insurance coverage for property damage and business interruption. With respect to coverage of these losses, the deductible for property damage was $10 million
per site, while business interruption coverage does not apply for the first 60 days.

During
2007 and 2006, we received insurance recovery advances of $38 million related to the 2005 Gulf Coast storms. On December 12, 2008, the insurers agreed to pay an
additional $3 million of insurance recovery advances related to the 2005 Gulf Coast storms, of which $2 million was received as of December 31, 2008. We and our insurers are
working to reach a settlement on the remainder of the
insurance claim, and we can provide no assurance with respect to the ultimate resolution of this matter. Any future collections will represent income for us upon final settlement.

Fair Value of Convertible Notes

Pursuant to the Settlement Agreement, on December 23, 2008, we issued $250 million of our Convertible Notes to Apollo
affiliates under the Note Purchase Agreement. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 157,Fair Value
Measurements, and the guidance included in FASB Staff Position ("FSP") No. 157-3,Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active, we recorded these Convertible Notes in our accounting records at a fair value of $235 million.

We
primarily used the income approach to determine the fair value of the Convertible Notes. Fair value is based on the present value of estimated future cash flows, calculated using
management's best estimates of key assumptions including relevant interest rates, expected share volatility, dividend yields, and the probabilities associated with certain features of the Convertible
Notes. We also used the

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market
approach to assess comparables and corroborate the fair value determined using the income approach.

Management
used judgment with respect to assumptions used in estimating the fair value of the Convertible Notes. The effect of the following changes in certain key assumptions is
summarized as follows (dollars in millions):

Assumptions

Balance Sheet Impact(1)Expected volatility10% increase


610% decrease


(7
)Effective market yield1% increase


(6
)1% decrease


6






Revenue Recognition

We generate substantially all of our revenues through sales in the open market and long-term supply agreements. We
recognize revenue when it is realized or realizable and earned. Revenue for product sales is recognized when a sales arrangement exists, risk and title to the product transfer to the customer,
collectibility is reasonably assured and pricing is fixed or determinable. The transfer of risk and title to the product to the customer usually occurs at the time shipment is made.

Revenue
arrangements that contain multiple deliverables, which relate primarily to the licensing of technology, are evaluated in accordance with Emerging Issues Task Force ("EITF") Issue
No. 00-21,Revenue Arrangements with Multiple Deliverables, to determine whether the arrangements should be divided into separate
units of accounting and how the arrangement consideration should be measured and allocated among the separate units of accounting.

Long-Lived Assets

The determination of useful lives of our property, plant and equipment is considered a critical accounting estimate. Such lives are
estimated based upon our historical experience, engineering estimates and industry information and are reviewed when economic events indicate that we may not be able to recover the carrying value of
the assets. The estimated lives of our property range from 3 to 33 years and depreciation is recorded on the straight-line method. Inherent in our estimates of useful lives is the
assumption that periodic maintenance and an appropriate level of annual capital expenditures will be performed. Without on-going capital improvements and maintenance, the productivity and
cost efficiency declines and the useful lives of our assets would be shorter.

Management
uses judgment to estimate the useful lives of our long-lived assets. If the useful lives of our property, plant and equipment as of December 31, 2008 were
to have been estimated to be one year greater or one year less, then depreciation expense for the year ended December 31, 2008 would have been approximately $24 million less or
$28 million greater, respectively.

We
are required to evaluate our plant assets whenever events indicate that the carrying value may not be recoverable in the future or when management's plans change regarding those
assets, such as idling or closing a plant. We evaluate impairment by comparing undiscounted cash flows of the related asset groups to the carrying value. Key assumptions in determining the future cash
flows include the useful life, technology, competitive pressures, raw material pricing and regulations.

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Goodwill

We review our goodwill for impairment annually, at the beginning of the third quarter, and when events and circumstances change that
would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill has been assigned to reporting units for purposes of impairment testing. Substantially all of
our goodwill balance relates to our advanced materials business, a reporting unit within our Materials and Effects segment.

Fair
value is estimated using the market approach, as well as the income approach based on discounted cash flow projections. The estimated fair values of our reporting units are
dependent on several significant assumptions including, among others, market information, operating results, earnings projections and anticipated future cash flows.

We
previously tested goodwill for impairment at the beginning of the third quarter of 2008 as part of the annual impairment testing procedures and determined that no goodwill impairment
existed. Since our annual impairment testing procedures, our market capitalization has declined below the net book value of our company. We have evaluated the movement in our stock price as it relates
to the fair values of our reporting units. Based on this evaluation, we determined that we did not have a triggering event in the fourth quarter that would require an interim goodwill impairment test.

Restructuring and Plant Closing Costs

We have recorded restructuring charges in recent periods in connection with closing certain plant locations, work force reductions and
other cost savings programs. These charges are recorded when management has committed to a plan and incurred a liability related to the plan. Also in connection with the Textile Effects Acquisition,
we recorded liabilities for workforce reduction, non-cancelable lease termination costs and demolition, decommissioning and other restructuring costs. Estimates for plant closing costs
include the write-off of the carrying value of the plant, any necessary environmental and/or regulatory costs, contract termination and demolition costs. Estimates for work force
reductions and other costs savings are recorded based upon estimates of the number of positions to be terminated, termination benefits to be provided and other information as necessary. While
management evaluates the estimates on a quarterly basis and will adjust the reserve when information indicates that the estimate is above or below the initial estimate, management's estimates on a
project-by-project basis have not varied to a material degree. For further discussion of our restructuring activities, see "Note 11. Restructuring, Impairment and Plant
Closing Costs" to our consolidated financial statements included elsewhere in this report.

Income Taxes

We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they
will be realized. Valuation allowances are reviewed each period on a tax jurisdiction by tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change
in judgment about the realizability of the related deferred tax assets.

We
do not provide for income taxes or benefits on the undistributed earnings of our non-U.S. subsidiaries as earnings are reinvested and, in the opinion of management, will
continue to be reinvested indefinitely.

We
adopted FIN 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, on
January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance SFAS No. 109,Accounting for Income
Taxes, by prescribing a recognition

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threshold
and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The application of income tax law is
inherently complex. We are required to determine if an income tax position meets the criteria of more-likely-than-not to be realized based on the merits of the
position under tax laws, in order to recognize an income tax benefit. This requires us to make many assumptions and judgments regarding merits of income tax positions and the application of income tax
law. Additionally, if a tax position meets the recognition criteria of more-likely-than-not we are required to make judgments and assumptions to measure the amount
of the tax benefits to recognize based on the probability of the amount of tax benefits that would be realized if the tax position was challenged by the taxing authorities. Interpretations and
guidance surrounding income tax laws and regulations change over time. As a consequence, changes in assumptions and judgments can materially affect amounts recognized in the consolidated financial
statements.

Employee Benefit Programs

We sponsor several contributory and non-contributory defined benefit plans, covering employees primarily in the U.S., the
U.K., the Netherlands, Belgium and Switzerland, but also covering employees in a number of other countries. We fund the material plans through trust arrangements (or local equivalents) where the
assets are held separately from us. We also sponsor unfunded postretirement plans which provide medical and life insurance benefits covering certain employees in the U.S. and Canada. Amounts recorded
in the consolidated financial statements are recorded based upon actuarial valuations performed by various independent actuaries. Inherent in these valuations are numerous assumptions regarding
expected return on assets, discount rates, compensation increases, mortality rates and health care costs trends. These assumptions are disclosed in "Note 19. Employee Benefit Plans" to our
consolidated financial statements included elsewhere in this report.

Management,
with the advice of its actuaries, uses judgment to make assumptions on which our employee benefit plan liabilities and expenses are based. The effect of a 1% change in three
key assumptions is summarized as follows (dollars in millions):

Assumptions

Statement of
Operations(1)

Balance Sheet
Impact(2)Discount rate1% increase

$
(16
)
$
(364
)1% decrease


23


422Expected return on assets1% increase


(27
)

1% decrease


27


Rate of compensation increase1% increase


18


1001% decrease


(13
)

(93
)






Stock-Based Compensation Plans

Management uses judgment in determining assumptions used in the Black-Scholes valuation model to estimate fair value of its stock-based
compensation plans. Because we did not have stock-based compensation plans prior to our initial public offering of common stock in February 2005, our ability to use historical experience for
assumptions related to stock-based compensation plans has been limited.

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As
of December 31, 2008, the effect of a 10% change in expected volatility and expected life of stock options granted would not be significant to our statements of operations or balance sheets.

Environmental Reserves

Environmental remediation costs for our facilities are accrued when it is probable that a liability has been incurred and the amount
can be reasonably estimated. Estimates of environmental reserves require evaluating government regulation, available technology, site-specific information and remediation alternatives. We
accrue an amount equal to our best estimate of the costs to remediate based upon the available information. Adjustments to our estimates are made periodically based upon additional information
received as remediation progresses. For further information, see "Note 23. Environmental, Health and Safety Matters" to our consolidated financial statements included elsewhere in this report.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to
time, we enter into transactions, including transactions involving derivative instruments, to manage certain of these exposures.

All
derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in
accumulated other comprehensive (loss) income, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform
effectiveness assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.

We
also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated
other comprehensive (loss) income.

INTEREST RATE RISKS

Through our borrowing activities, we are exposed to interest rate risk. Such risk arises due to the structure of our debt portfolio,
including the duration of the portfolio and the mix of fixed and floating interest rates. 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 derivative instruments.

From
time to time, we may purchase interest rate swaps and/or interest rate collars to reduce the impact of changes in interest rates on our floating-rate
long-term debt. Under interest rate swaps, we agree 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 collars entitle us to receive from the counterparties (major banks) the amounts, if any, by which our interest
payments on certain of our floating-rate borrowings exceed a certain rate, and require us to pay to the counterparties (major banks) the amount, if any, by which our interest payments on
certain of our floating-rate borrowings are less than a certain rate.

Interest
rate contracts were recorded as a component of other noncurrent liabilities as of December 31, 2008 and 2007. The effective portion of the changes in the fair value of
the swaps were recorded in accumulated other comprehensive (loss) income, with any ineffectiveness recorded in interest expense. As of December 31, 2008 and 2007, the fair value of these
contracts was not

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significant.
As of December 31, 2008 and 2007, the contracts had a notional amount of $13 million and $14 million, respectively, and a maturity date of 2010 each.

For
the years ended December 31, 2008 and 2007, the changes in accumulated other comprehensive (loss) income associated with cash flow hedging activities were not considered
significant.

On
July 2, 2007, we let expire an interest rate contract of notional amount of $60 million pursuant to which we had swapped LIBOR interest for a fixed rate of 4.315%.

During
2009, interest expense of approximately nil is expected to be reclassified to earnings. The actual amount that will be reclassified to earnings over the next twelve months may
vary from this amount due to changing market conditions. We are exposed to credit losses in the event of nonperformance by a counterparty to the derivative financial instruments. We anticipate,
however, that the counterparties will be able to fully satisfy obligations under the contracts. Market risk arises from changes in interest rates.

FOREIGN EXCHANGE RATES RISK

Our cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in
various currencies. From time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where
practicable, we generally net multicurrency cash balances among our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time
through financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of one year or less). We do not hedge our currency
exposures in a manner that would eliminate the effect of changes in exchange rates on our cash flows and earnings. Our A/R Securitization Program in certain circumstances requires that we enter into
forward foreign currency hedges intended to hedge currency exposures. As of December 31, 2008 and December 31, 2007, we had no forward currency hedges outstanding.

On
January 15, 2008, we entered into a series of forward foreign currency contracts in our Pigments segment to partially hedge the impact, for up to one year, of movements in
foreign currency rates associated with the purchases of raw materials and sales of pigment in non-functional currencies. As of December 31, 2008, these contracts had a notional
amount of approximately $9 million and were designated as cash flow hedges. As of December 31, 2008, the fair value of these contracts was not considered significant. For the year ended
December 31, 2008, the effective portion of the changes in the fair value was not significant with ineffectiveness of $1 million recorded as a decrease in sales, $1 million
recorded as a reduction in cost of sales and a foreign currency loss of $1 million.

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we had swapped $153 million of LIBOR floating rate debt payments for
€116 million of EURIBOR floating rate debt payments. This swap was not designated as a hedge for financial reporting purposes. For the years ended December 31, 2008 and
2007, we recorded a foreign currency gain (loss) on this swap of $21 million and ($17) million, respectively, in the consolidated statement of operations, included elsewhere in this report.

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we had swapped $96 million of LIBOR floating rate debt payments for
€71 million of EURIBOR floating rate debt payments. This swap was designated as a hedge of a net investment for financial reporting purposes. We received a cash benefit from the
unwind of $3 million in the fourth quarter of 2008. For the years ended December 31, 2008 and 2007, the effective portion of the changes in the fair value of $14 million and ($8)
million, respectively, was recorded as income (loss) in other comprehensive (loss)

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income,
with ineffectiveness of $2 million and nil, respectively, recorded in interest expense in the consolidated statement of operations included elsewhere in this report.

On
July 12, 2007, we unwound a cross currency interest rate swap pursuant to which we had swapped $31 million of 11.0% fixed rate debt for
€25 million of 9.4% fixed rate debt. The swap was not designated as a hedge for financial reporting purposes. We recorded an unrealized foreign currency loss on this swap of
$2 million and $3 million, respectively, in our consolidated statements of operations included elsewhere in this report, for the years ended December 31, 2007 and 2006.

A
significant portion of our debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated
in currencies other than the entities' functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of
certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future ("permanent loans") and the designation of certain debt and swaps as net investment
hedges.

Foreign
currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on
intercompany loans that are designated as Permanent Loans are recorded in other comprehensive income. From time to time, we review such designation of intercompany loans.

From
time to time, we review our non-U.S. dollar denominated debt and swaps to determine the appropriate amounts designated as hedges. As of December 31, 2008, we have
designated approximately €205 million of euro-denominated debt as a hedge of
our net investments. As of December 31, 2008, we had approximately €961 million in net euro assets.

COMMODITY PRICES RISK

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 many of our finished products are at market related prices which are largely set on a monthly or quarterly basis in line with industry practice. Consequently, we
do not generally hedge our commodity exposures.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements required by this item are included on the pages immediately following the Index to Consolidated
Financial Statements appearing on page F-1.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in our independent accountants, Deloitte & Touche LLP, or disagreements with them on matters
of accounting or financial disclosure.

ITEM 9A.    CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE 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
December 31, 2008. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of December 31, 2008, our disclosure controls and procedures
were effective, in that they ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and
reported within the time periods specified in

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the
SEC's rules and forms, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions
regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No changes to our internal control over financial reporting occurred during the quarter ended December 31, 2008 that have
materially affected, or are 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).

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control
framework and processes for our Company and Huntsman International are designed to provide reasonable assurance to management, Huntsman International's Board of Managers and our Board of Directors
regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of
America.

Our
internal control over financial reporting for our Company and Huntsman International includes those policies and procedures that:



Because
of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further,
because of changing conditions, effectiveness of internal control over financial reporting may vary over time.

Our
management assessed the effectiveness of our internal control over financial reporting for our Company and Huntsman International and concluded that, as of December 31, 2008,
such internal control is effective. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal ControlIntegrated
Framework("COSO").

Our
independent registered public accountants, Deloitte & Touche LLP, with direct access to our Board of Directors through our Audit Committee, have audited the
consolidated financial statements prepared by our Company and Huntsman International and have issued attestation reports on internal control over financial reporting for our Company and Huntsman
International.

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MANAGEMENT'S PROCESS TO ASSESS THE EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING

To comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we completed a comprehensive compliance
process to evaluate our internal control over financial reporting for our Company and Huntsman International. We involved employees at all levels of our Company during 2008 in training, performing and
evaluating our internal controls.

Our
management's conclusion on the effectiveness of internal control over financial reporting is based on a comprehensive evaluation and analysis of the five elements of COSO. Our
management considered information from multiple sources as the basis its conclusionincluding self-assessments of the control activities within each work process, assessments
of entity-level controls and internal control attestations from significant nonconsolidated joint ventures and external service providers, as well as from key management. In addition, our internal
control processes contain self-monitoring mechanisms, and proactive steps are taken to correct deficiencies as they are identified. We also maintain an internal auditing program that
independently assesses the effectiveness of internal control over financial reporting within each of the five COSO elements.

/s/ PETER R. HUNTSMAN

/s/ J. KIMO ESPLINPeter R. Huntsman President and Chief Executive Officer

J. Kimo Esplin Executive Vice President and Chief Financial Officer/s/ L. RUSSELL HEALY L. Russell Healy Vice President and ControllerFebruary 24, 2009


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Huntsman Corporation and subsidiaries

We
have audited the internal control over financial reporting of Huntsman Corporation and subsidiaries (the "Company") as of December 31, 2008, based on criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanyingManagement's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal
control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement
schedules as of and for the year ended December 31, 2008 of the Company and our report dated February 25, 2009 expressed an unqualified opinion on those financial statements and
financial statement schedules and included an explanatory paragraph regarding the Company's adoption of

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certain
provisions of FASB Statement No. 158,Employers' Accounting for Defined Benefit Pensions and Other Postretirement Plans, on
January 1, 2008.

/s/
DELOITTE & TOUCHE LLP

Houston,
Texas
February 25, 2009

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Managers and Members of
Huntsman International LLC and subsidiaries

We
have audited the internal control over financial reporting of Huntsman International LLC and subsidiaries (the "Company") as of December 31, 2008, based on criteria
established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The
Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanyingManagement's Report on Internal Control Over
Financial Reporting.Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2008 of the Company and our report dated February 25, 2009 expressed an unqualified opinion on those financial statements and financial
statement schedules and included an explanatory paragraph regarding the Company's adoption of certain provisions of

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FASB
Statement No. 158,Employers' Accounting for Defined Benefit Pensions and Other Postretirement Plans, on January 1, 2008.

/s/
DELOITTE & TOUCHE LLP

Houston,
Texas
February 25, 2009

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ITEM 9B.    OTHER INFORMATION

None.

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to our Directors (including identification of our Audit Committee's financial expert(s)) and executive officers is
contained in the definitive Proxy Statement for our Annual Meeting of Stockholders or in an amendment to this report and is incorporated herein by reference. See also the information regarding
executive officers of the registrant set forth in Part I under the caption "Executive Officers of the Registrant" in reliance on General Instruction G to Form 10-K.

Code of Ethics

Our Company has adopted a code of ethics, as defined by Item 406(b) of Regulation S-K under the Exchange Act,
that applies to our principal executive officer, principal financial officer and principal accounting officer or controller. A copy of the code of ethics is posted on our website, at www.huntsman.com.
We intend to disclose any amendments to, or waivers from, our code of ethics on our website.

ITEM 11.    EXECUTIVE COMPENSATION

Information relating to executive compensation and our equity compensation plans is contained in the definitive Proxy Statement for our
Annual Meeting of Stockholders or in an amendment to this report and is incorporated herein by reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information with respect to beneficial ownership of our common stock by each Director and all Directors and officers of our Company as
a group is contained in the definitive Proxy Statement for our Annual Meeting of Stockholders or in an amendment to this report and is incorporated herein by reference.

Information
relating to any person who beneficially owns in excess of 5 percent of the total outstanding shares of our common stock is contained in the definitive Proxy Statement
for our Annual Meeting of Stockholders or in an amendment to this report and is incorporated herein by reference.

Information
with respect to compensation plans under which equity securities are authorized for issuance is contained in the definitive Proxy Statement for our Annual Meeting of
Stockholders or in an amendment to this report and is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information with respect to certain relationships and related transactions is contained in the definitive Proxy Statement for our
Annual Meeting of Stockholders or in an amendment to this report and is incorporated herein by reference.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information with respect to principal accountant fees and services is contained in the definitive Proxy Statement for our Annual
Meeting of Stockholders or in an amendment to this filing and is incorporated herein by reference.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES







Exhibit Index

Please see the Exhibit Index at the conclusion of this Annual Report on Form 10-K for exhibits filed with this
Annual Report on Form 10-K or incorporated by reference. The following exhibits, also listed on the Exhibit Index, are filed with this Annual Report on Form 10-K:

Number

Description21.1

Subsidiaries of the Company23.1

Consent of Independent Registered Public Accounting Firm31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused
this report to be signed on their behalf by the undersigned, thereunto duly authorized.

Dated: February 26, 2009HUNTSMAN CORPORATION
HUNTSMAN INTERNATIONAL LLCBy:

/s/ J. KIMO ESPLIN J. Kimo Esplin Executive Vice President and Chief Financial
Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Huntsman Corporation in the capacities
indicated on the 26 day of February 2009.

/s/ JON M. HUNTSMAN Jon M. Huntsman Executive Chairman of the Board and Director

/s/ PETER R. HUNTSMAN Peter R. Huntsman President, Chief Executive Officer and Director
(Principal Executive Officer)/s/ J. KIMO ESPLIN J. Kimo Esplin Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

/s/ L. RUSSELL HEALY L. Russell Healy Vice President and Controller
(Principal Accounting Officer)/s/ H. WILLIAM LICHTENBERGER H. William Lichtenberger Chairman of the Nominating and Corporate
Governance Committee and Director

/s/ WAYNE A. REAUD Wayne A. Reaud Chairman of the Compensation Committee,
Chairman of the Litigation Committee and Director/s/ RICHARD MICHAELSON Richard Michaelson Chairman of the Audit Committee and Director

/s/ NOLAN D. ARCHIBALD Nolan D. Archibald Director/s/ MARSHA J. EVANS Marsha J. Evans Director

/s/ ALVIN V. SHOEMAKER Alvin V. Shoemaker Director


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Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Huntsman International in the capacities
indicated on the 26 day of February 2009.

/s/ JON M. HUNTSMAN Jon M. Huntsman Chairman of the Board of Managers and Manager

/s/ PETER R. HUNTSMAN Peter R. Huntsman President, Chief Executive Officer and Manager (Principal Executive Officer)/s/ J. KIMO ESPLIN J. Kimo Esplin Executive Vice President, Chief Financial
Officer and Manager
(Principal Financial Officer)

/s/ L. RUSSELL HEALY L. Russell Healy Vice President and Controller
(Principal Accounting Officer)/s/ SAMUEL D. SCRUGGS Samuel D. Scruggs Executive Vice President, General Counsel,
Secretary and Manager


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HUNTSMAN CORPORATION AND SUBSIDIARIES        HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



PageHuntsman Corporation and Subsidiaries:Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets as of December 31, 2008 and 2007

F-3Consolidated Statements of Operations and Comprehensive (Loss) Income for the Years Ended December 31, 2008,
 2007 and 2006

F-4Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2008, 2007 and
2006

F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006

F-7Huntsman International LLC and Subsidiaries:Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm

F-9Consolidated Balance Sheets as of December 31, 2008 and 2007

F-10Consolidated Statements of Operations and Comprehensive (Loss) Income for the Years Ended
December 31, 2008, 2007 and 2006

F-11Consolidated Statements of Members' Equity for the Years Ended December 31, 2008, 2007 and
2006

F-12Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
2006

F-13Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries:Notes to Consolidated Financial Statements

F-15Schedules to Consolidated Financial StatementsSchedule to Consolidated Financial Statements, Schedule ICondensed Financial Information of
Registrant

F-113Schedule to Consolidated Financial Statements, Schedule IIValuation and Qualifying
Accounts

F-117


F-1

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Huntsman Corporation and subsidiaries

We
have audited the accompanying consolidated balance sheets of Huntsman Corporation and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the related
consolidated statements of operations and comprehensive (loss) income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also
included the financial statement schedules listed in the Index on page F-1. These financial statements and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Huntsman Corporation and subsidiaries as of December 31,
2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

As
discussed in Note 2 and 19 to the consolidated financial statements, the Company adopted certain provisions of FASB Statement No. 158,Employers'
Accounting for Defined Benefit Pensions and Other Postretirement Plans, on each of December 31, 2006 and January 1, 2008; and FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxesan interpretation of FASB Statement No. 109, on January 1, 2007.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2008, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 25, 2009 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP

Houston,
Texas
February 25, 2009

F-2

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        (In Millions, Except Share and Per Share Amounts)

December 31,2008

2007ASSETSCurrent assets:Cash and cash equivalents

$
657

$
154Restricted cash


5


Accounts and notes receivable (net of allowance for doubtful accounts of $47 and $43, respectively)


905


1,253Accounts receivable from affiliates


8


9Inventories, net


1,500


1,452Prepaid expenses


45


37Deferred income taxes


21


73Other current assets


99


117Total current assets


3,240


3,095Property, plant and equipment, net


3,649


3,763Investment in unconsolidated affiliates


267


228Intangible assets, net


153


173Goodwill


92


93Deferred income taxes


284


350Notes receivable from affiliates


9


8Other noncurrent assets


364


456Total assets

$
8,058

$
8,166LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
731

$
1,005Accounts payable to affiliates


16


13Accrued liabilities


617


885Deferred income taxes


36


3Current portion of long-term debt


205


69Total current liabilities


1,605


1,975Long-term debt


3,677


3,500Deferred income taxes


117


154Notes payable to affiliates


6


5Other noncurrent liabilities


1,021


679Total liabilities


6,426


6,313Minority interests in common stock of consolidated subsidiaries


22


27Commitments and contingencies (Notes 22 and 23)Stockholders' equity:Common stock $0.01 par value, 1,200,000,000 shares authorized, 234,430,334 and 222,012,474 issued and 233,553,515 and 221,036,190 outstanding in 2008 and
2007, respectively


2


2Mandatory convertible preferred stock $0.01 par value, 100,000,000 shares authorized, 5,750,000 issued and outstanding at December 31, 2007





288Additional paid-in capital


3,141


2,831Unearned stock-based compensation


(13
)

(12
)Accumulated deficit


(1,031
)

(1,540
)Accumulated other comprehensive (loss) income


(489
)

257Total stockholders' equity


1,610


1,826Total liabilities and stockholders' equity

$
8,058

$
8,166


See accompanying notes to consolidated financial statements.

F-3

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS AND  COMPREHENSIVE (LOSS) INCOME        (In Millions, Except Share and Per Share
Amounts)

Year ended December 31,2008

2007

2006Revenues:Trade sales, services and fees

$
10,117

$
9,480

$
8,622Related party sales


98


171


109Total revenues


10,215


9,651


8,731Cost of goods sold


8,951


8,111


7,309Gross profit


1,264


1,540


1,422Operating expenses:Selling, general and administrative


882


871


761Research and development


154


145


115Other operating expense (income)


27


(55
)

(114
)Restructuring, impairment and plant closing costs


36


42


15Total expenses


1,099


1,003


777Operating income


165


537


645Interest expense, net


(263
)

(286
)

(351
)Loss on accounts receivable securitization program


(27
)

(21
)

(13
)Equity in income of investment in unconsolidated affiliates


14


13


4Loss on early extinguishment of debt


(1
)

(2
)

(27
)Income (expenses) associated with the Merger


780


(210
)

Other income


1





2Income from continuing operations before income taxes and minority interest


669


31


260Income tax (expense) benefit


(190
)

12


50Minority interest in subsidiaries' (income) loss


(1
)

9


(3
)Income from continuing operations


478


52


307Income (loss) from discontinued operations (including gain (loss) on disposal of $11 in 2008, ($340) in 2007 and ($302) in 2006), net of tax


117


(217
)

(133
)Income (loss) before extraordinary gain (loss)


595


(165
)

174Extraordinary gain (loss) on the acquisition of a business, net of tax of nil


14


(7
)

56Net income (loss)

$
609

$
(172
)
$
230Net income (loss)

$
609

$
(172
)
$
230Other comprehensive (loss) income


(746
)

318


149Comprehensive (loss) income

$
(137
)
$
146

$
379


(Continued)

F-4

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME (Continued)

(In Millions, Except Share and Per Share Amounts)

Year ended December 31,2008

2007

2006Basic income (loss) per share:Income from continuing operations

$
2.06

$
0.23

$
1.39Income (loss) from discontinued operations, net of tax


0.50


(0.98
)

(0.60
)Extraordinary gain (loss) on the acquisition of a business


0.06


(0.03
)

0.25Net income (loss)

$
2.62

$
(0.78
)
$
1.04Weighted average shares


231,968,936


220,948,495


220,618,478Diluted income (loss) per share:Income from continuing operations

$
2.04

$
0.22

$
1.32Income (loss) from discontinued operations, net of tax


0.50


(0.93
)

(0.57
)Extraordinary gain (loss) on the acquisition of a business


0.06


(0.03
)

0.24Net income (loss)

$
2.60

$
(0.74
)
$
0.99Weighted average shares


234,263,249


232,792,291


233,142,373Dividends per share

$
0.40

$
0.40

$



See
accompanying notes to consolidated financial statements.

F-5

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        (Dollars in Millions)

SharesAccumulated
other
comprehensive
(loss) incomeCommon
Stock

Mandatory
convertible
preferred stock

Common
stock

Mandatory
convertible
preferred stock

Additional
paid-in
capital

Unearned
stock-based
compensation

Accumulated
deficit

TotalBalance, January 1, 2006


220,451,484


5,750,000

$
2

$
288

$
2,780

$
(12
)
$
(1,506
)
$
(31
)
$
1,521Net income




















230





230Other comprehensive income























149


149Issuance of nonvested stock awards














9


(9
)







Vesting of stock awards


278,531























Recognition of stock-based compensation














9


8








17Cumulative effect of adoption of SFAS No. 158, net of tax























(179
)

(179
)Repurchase and cancellation of stock awards


(77,586
)
















(2
)




(2
)Balance, December 31, 2006


220,652,429


5,750,000


2


288


2,798


(13
)

(1,278
)

(61
)

1,736Net loss




















(172
)




(172
)Other comprehensive income























318


318Issuance of nonvested stock awards














10


(10
)







Vesting of stock awards


393,555























Stock options exercised


99,332











2











2Recognition of stock-based compensation














13


11








24Repurchase and cancellation of stock awards


(109,126
)
















(2
)




(2
)Dividends declared on common stock




















(88
)




(88
)Reversal of valuation allowance on deferred tax assets related to previous equity transactions














8











8Balance, December 31, 2007


221,036,190


5,750,000


2


288


2,831


(12
)

(1,540
)

257


1,826Net income




















609





609Other comprehensive loss























(746
)

(746
)Issuance of nonvested stock awards














12


(12
)







Vesting of stock awards


594,908











1











1Recognition of stock-based compensation














9


11








20Repurchase and cancellation of stock awards


(160,058
)
















(4
)




(4
)Preferred stock conversion


12,082,475


(5,750,000
)




(288
)

288











Effect of adoption of SFAS No. 158, net of tax




















(3
)




(3
)Dividends declared on common stock




















(93
)




(93
)Balance, December 31, 2008


233,553,515




$
2

$


$
3,141

$
(13
)
$
(1,031
)
$
(489
)
$
1,610


See accompanying notes to consolidated financial statements

F-6

---





Table of Contents

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

Year ended December 31,2008

2007

2006Operating Activities:Net income (loss)

$
609

$
(172
)
$
230Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Extraordinary (gain) loss on the acquisition of a business, net of tax


(14
)

7


(56
)Equity in income of investment in unconsolidated affiliates


(14
)

(13
)

(4
)Dividends received from unconsolidated affiliates


11





Depreciation and amortization


398


413


465Provision for losses on accounts receivable


6


3


6Loss on disposal of businesses/assets, net


6


269


209Loss on early extinguishment of debt


1


2


27Noncash interest expense


2


5


5Noncash restructuring, impairment and plant closing costs


7


15


18Deferred income taxes


202


(203
)

(82
)Net unrealized loss (gain) on foreign currency transactions


4


(9
)

(42
)Stock-based compensation


20


26


18Minority interest in subsidiaries' income (loss)


1


(9
)

3Noncash gain on partial fire insurance settlement


(135
)




Other, net


3


(1
)

5Changes in operating assets and liabilities:Accounts and notes receivable


263


56


228Inventories, net


(119
)

(74
)

(59
)Prepaid expenses


(9
)

3


(15
)Other current assets


(1
)

53


(51
)Other noncurrent assets


41


(158
)

163Accounts payable


(186
)

(148
)

22Accrued liabilities


(64
)

(87
)

22Other noncurrent liabilities


(265
)

(30
)

(220
)Net cash provided by (used in) operating activities


767


(52
)

892Investing Activities:Capital expenditures


(418
)

(665
)

(550
)Acquisition of business, net of cash acquired and post-closing adjustments


(2
)

13


(177
)Proceeds from sale of businesses/assets, net of adjustments


(26
)

850


895Investment in unconsolidated affiliates


(44
)

(17
)

(14
)Cash received from unconsolidated affiliates


10


4


2Proceeds from maturity of government securities, restricted as to use


4


14


14Change in restricted cash


(8
)




Other, net


(5
)

1


4Net cash (used in) provided by investing activities


(489
)

200


174


(Continued)

F-7

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in Millions)

Year ended December 31,2008

2007

2006Financing Activities:Net borrowings (repayments) under revolving loan facilities

$
11

$
(17
)
$
(6
)Net borrowings (repayments) on overdraft facilities and other short-term debt


8


15


(7
)Repayments of long-term debt


(11
)

(422
)

(1,784
)Proceeds from issuance of long-term debt


336


266


872Borrowings on notes payable


48


56


74Repayments of notes payable


(55
)

(60
)

(63
)Debt issuance costs paid


(5
)

(5
)

(13
)Call premiums related to early extinguishment of debt





(1
)

(30
)Dividends paid to common stockholders


(93
)

(88
)

Dividends paid to preferred stockholders


(4
)

(14
)

(14
)Repurchase and cancellation of stock awards


(4
)




Contribution from minority shareholder








6Other, net


(1
)

1


4Net cash provided by (used in) financing activities


230


(269
)

(961
)Effect of exchange rate changes on cash


(5
)

12


15Increase (decrease) in cash and cash equivalents


503


(109
)

120Cash and cash equivalents at beginning of period


154


263


143Cash and cash equivalents at end of period

$
657

$
154

$
263Supplemental cash flow information:Cash paid for interest

$
265

$
301

$
397Cash paid for income taxes


34


73


40


During
the years ended December 31, 2008, 2007 and 2006, the amount of capital expenditures in accounts payable increased by $9 million, $72 million and nil,
respectively. The value of share awards that vested during the years ended December 31, 2008, 2007 and 2006 was $13 million, $9 million and $6 million, respectively.

See
accompanying notes to consolidated financial statements.

F-8

---



Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Managers and Members of
Huntsman International LLC and subsidiaries

We
have audited the accompanying consolidated balance sheets of Huntsman International LLC and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the
related consolidated statements of operations and comprehensive (loss) income, members' equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also
included the financial statement schedule listed in the Index on page F-1. These financial statements and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Huntsman International LLC and subsidiaries as of
December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth therein.

As
discussed in Note 2 and 19 to the consolidated financial statements, the Company adopted certain provisions of FASB Statement No. 158,Employers'
Accounting for Defined Benefit Pensions and Other Postretirement Plans, on each of December 31, 2006 and January 1, 2008; and FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxesan interpretation of FASB Statement No. 109, on January 1, 2007.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2008, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 25, 2009 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP

Houston,
Texas
February 25, 2009

F-9

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Millions)

December 31,2008

2007ASSETSCurrent assets:Cash and cash equivalents

$
87

$
154Restricted cash


5


Accounts and notes receivable (net of allowance for doubtful accounts of $47 and $43, respectively)


905


1,253Accounts receivable from affiliates


15


193Inventories, net


1,500


1,452Prepaid expenses


45


37Deferred income taxes


21


74Other current assets


99


113Total current assets


2,677


3,276Property, plant and equipment, net


3,466


3,556Investment in unconsolidated affiliates


267


228Intangible assets, net


157


177Goodwill


92


93Deferred income taxes


392


300Notes receivable from affiliates


9


9Other noncurrent assets


364


456Total assets

$
7,424

$
8,095LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
728

$
1,005Accounts payable to affiliates


16


15Accrued liabilities


560


781Deferred income taxes


35


3Note payable to affiliate


423


Current portion of long-term debt


205


69Total current liabilities


1,967


1,873Long-term debt


3,442


3,500Notes payable to affiliates


6


5Deferred income taxes


69


124Other noncurrent liabilities


1,021


677Total liabilities


6,505


6,179Minority interests in common stock of consolidated subsidiaries


22


27Commitments and contingencies (Notes 22 and 23)Members' equity:Members' equity, 2,728 units issued and outstanding


2,865


2,845Accumulated deficit


(1,414
)

(1,143
)Accumulated other comprehensive (loss) income


(554
)

187Total members' equity


897


1,889Total liabilities and members' equity

$
7,424

$
8,095


See accompanying notes to consolidated financial statements

F-10

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME

(Dollars in Millions)

Year Ended December 31,2008

2007

2006Revenues:Trade sales, services and fees

$
10,117

$
9,480

$
8,622Related party sales


98


171


109Total revenues


10,215


9,651


8,731Cost of goods sold


8,934


8,095


7,292Gross profit


1,281


1,556


1,439Operating expenses:Selling, general and administrative


881


871


761Research and development


154


145


115Other operating expense (income)


27


(55
)

(114
)Restructuring, impairment and plant closing costs


36


42


15Total expenses


1,098


1,003


777Operating income


183


553


662Interest expense, net


(264
)

(287
)

(355
)Loss on accounts receivable securitization program


(27
)

(21
)

(13
)Equity in income of investment in unconsolidated affiliates


14


13


4Loss on early extinguishment of debt


(1
)

(3
)

(39
)Other income


1





2(Loss) income from continuing operations before income taxes and minority interest


(94
)

255


261Income tax benefit (expense)


2


(41
)

31Minority interest in subsidiaries' (income) loss


(1
)

9


(3
)(Loss) income from continuing operations


(93
)

223


289Income (loss) from discontinued operations (including gain (loss) on disposal of $11 in 2008, ($351) in 2007 and ($280) in 2006), net of tax


117


(228
)

(111
)Income (loss) before extraordinary gain (loss)


24


(5
)

178Extraordinary gain (loss) on the acquisition of a business, net of tax of nil


14


(7
)

56Net income (loss)

$
38

$
(12
)
$
234Net income (loss)

$
38

$
(12
)
$
234Other comprehensive (loss) income


(741
)

334


183Comprehensive (loss) income

$
(703
)
$
322

$
417


See accompanying notes to consolidated financial statements

F-11

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

(Dollars in Millions)

Members' equityAccumulated
deficit

Accumulated other
comprehensive
(loss) incomeUnits

Amount

TotalBalance, January 1, 2006


2,728

$
2,794

$
(1,365
)
$
(97
)
$
1,332Net income








234





234Other comprehensive income











183


183Contribution from parent, net of distributions





18








18Cumulative effect of adoption of SFAS No. 158, net of tax











(233
)

(233
)Balance, December 31, 2006


2,728


2,812


(1,131
)

(147
)

1,534Net loss








(12
)




(12
)Other comprehensive income











334


334Contribution from parent, net of distributions





26








26Reversal of valuation allowance on deferred tax assets related to previous equity transactions





7








7Balance, December 31, 2007


2,728


2,845


(1,143
)

187


1,889Net income








38





38Other comprehensive loss











(741
)

(741
)Effect of adoption of SFAS No. 158, net of tax








(3
)




(3
)Contribution from parent, net of distributions





20








20Dividends paid








(306
)




(306
)Balance, December 31, 2008


2,728

$
2,865

$
(1,414
)
$
(554
)
$
897


See
accompanying notes to consolidated financial statements

F-12

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Millions)

Year Ended December 31,2008

2007

2006Operating Activities:Net income (loss)

$
38

$
(12
)
$
234Adjustments to reconcile net income (loss) to net cash provided by operating activities:Extraordinary (gain) loss on the acquisition of a business, net of tax


(14
)

7


(56
)Equity in income of investment in unconsolidated affiliates


(14
)

(13
)

(4
)Dividends received from unconsolidated affiliates


11





Depreciation and amortization


374


391


439Provision for losses on accounts receivable


6


3


6Loss on disposal of businesses/assets, net


6


269


188Loss on early extinguishment of debt


1


3


39Noncash interest expense


2


5


9Noncash restructuring, impairment and plant closing costs


7


15


18Deferred income taxes


26


(150
)

(63
)Net unrealized loss (gain) on foreign currency transactions


4


(9
)

(42
)Noncash compensation


20


26


18Minority interest in subsidiaries' income (loss)


1


(9
)

3Noncash gain on partial fire insurance settlement


(135
)




Other, net


4


(1
)

(1
)Changes in operating assets and liabilities:Accounts and notes receivable


263


56


229Inventories, net


(119
)

(74
)

(59
)Prepaid expenses


(9
)

3


(18
)Other current assets


(5
)

43


(51
)Other noncurrent assets


41


(162
)

235Accounts payable


(193
)

(148
)

22Accrued liabilities


(17
)

(177
)

21Other noncurrent liabilities


(259
)

(9
)

(284
)Net cash provided by operating activities


39


57


883Investing Activities:Capital expenditures


(418
)

(665
)

(550
)Acquisition of business, net of cash acquired and post-closing adjustments


(2
)

13


(177
)Proceeds from sale of businesses/assets, net of adjustments


(26
)

850


895Decrease (increase) in receivable from affiliate


179


(178
)

Investment in unconsolidated affiliates


(44
)

(17
)

(14
)Cash received from unconsolidated affiliates


10


4


2Change in restricted cash


(8
)




Other, net


(5
)

1


3Net cash (used in) provided by investing activities


(314
)

8


159(Continued)


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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in Millions)

Year Ended December 31,2008

2007

2006Financing Activities:Net borrowings (repayments) under revolving loan facilities


11


(17
)

(6
)Net borrowings (repayments) on overdraft facilities and other short-term debt


8


15


(7
)Repayments of long-term debt


(11
)

(422
)

(1,784
)Proceeds from issuance of long-term debt


101


266


872Issuance of note payable to affiliate


423





Borrowings on notes payable


48


53


74Repayments of notes payable


(55
)

(57
)

(60
)Dividends paid


(306
)




Debt issuance costs paid


(5
)

(5
)

(13
)Call premiums related to early extinguishment of debt





(1
)

(30
)Contribution from minority shareholder








6Other, net


(1
)

(1
)

4Net cash provided by (used in) financing activities


213


(169
)

(944
)Effect of exchange rate changes on cash


(5
)

12


15(Decrease) increase in cash and cash equivalents


(67
)

(92
)

113Cash and cash equivalents at beginning of period


154


246


133Cash and cash equivalents at end of period

$
87

$
154

$
246Supplemental cash flow information:Cash paid for interest

$
265

$
303

$
397Cash paid for income taxes


34


73


40


During
the years ended December 31, 2008, 2007 and 2006, the amount of capital expenditures in accounts payable increased by $9 million, $72 million and nil,
respectively. During the years ended December 31, 2008, 2007 and 2006, Huntsman Corporation contributed $20 million, $26 million and $18 million respectively, related to
stock based compensation.

See
accompanying notes to consolidated financial statements

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES        HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

DEFINITIONS

Each capitalized term used without definition in these notes to consolidated financial statements has the meaning specified in the
Annual Report on Form 10-K to which these notes to consolidated financial statements are included.

DESCRIPTION OF BUSINESS

We are a global manufacturer of differentiated organic chemical products and of inorganic chemical products. Our products comprise a
broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications, including those
in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining,
synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, epoxy-based polymer formulations, textile
chemicals, dyes, maleic anhydride and titanium dioxide.

As
of December 31, 2008, we operated in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. Our Polyurethanes, Materials and Effects and
Performance Products segments produce differentiated organic chemical products and our Pigments segment produces inorganic chemical products. In a series of transactions completed in 2006 and 2007, we
sold substantially all of our former Polymers and Base Chemicals operations. We report the results of these discontinued operations in our Polymers and Base Chemicals segments. For more information,
see "Note 3. Discontinued Operations."

COMPANY

Our Company, a Delaware corporation, was formed in 2004 to hold the Huntsman businesses. Jon M. Huntsman founded the
predecessor to our Company in the early 1970s as a small packaging company. Since then, we have grown through a series of significant acquisitions and now own a global portfolio of businesses.

We
operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.

During
2007, we completed the U.S. Petrochemicals Disposition pursuant to which we sold our North American polymers business and our U.S. base chemicals business. During 2006, we
completed the U.K. Petrochemicals Disposition. In 2005, we sold our former TDI business. The results of operations of these businesses are classified as discontinued operations. For further
information, see "Note 3. Discontinued Operations."

TERMINATION OF MERGER AGREEMENT AND SETTLEMENT OF RELATED LITIGATION

On July 12, 2007, we entered into the Merger Agreement with Hexion pursuant to which Hexion agreed to acquire all of our
outstanding common stock for $28.00 per share (plus a ticking fee) in cash. On June 18, 2008, Hexion, Apollo and certain of their affiliates filed an action for declaratory judgment against us
in Delaware Chancery Court. On June 23, 2008, we sued Apollo and certain of its

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

affiliates
in the District Court of Montgomery County alleging tortiously interfering with our previously executed merger agreement with Basell. On July 2, 2008, we countersued Hexion and
Apollo in the Delaware Litigation seeking specific performance of the Merger Agreement and, alternatively, damages.

Following
a six-day trial in the Delaware Chancery Court, Vice Chancellor Stephen P. Lamb issued an Opinion and an Order and Final Partial Judgment, ruling that, among
other things, we had not suffered a material adverse effect in our business and that Hexion knowingly and intentionally breached numerous of its covenants under the Merger Agreement (as a result of
which Hexion's liability for damages for failing to consummate the Merger would not be limited to the $325 million Termination Fee as provided in the Merger Agreement). Vice Chancellor Lamb
ordered Hexion to specifically perform its covenants under the Merger Agreement, including its covenants to (i) use reasonable best efforts to consummate the Merger and financing provided under
the Commitment Letter, (ii) refrain from taking any further action that could reasonably be expected to materially impair, delay or prevent consummation of financing, and (iii) take all
actions necessary to obtain antitrust approval for the Merger by October 2, 2008.

On
September 30, 2008, we filed suit in the 9th Judicial District Court in Montgomery County, Texas against the Lenders alleging, among other things, that the Lenders had
conspired with Apollo to tortiously interfere with the Basell Merger Agreement.

As
a result of the Delaware Litigation, Hexion and our Company agreed to schedule the closing of the Merger Agreement for October 28, 2008. The Commitment Letter required that the
Lenders be provided, at closing, with either (i) a solvency opinion of a reputable valuation firm, (ii) a solvency certificate signed by the chief financial officer of Hexion or
(iii) a solvency certificate signed by our chief financial officer. This closing condition could be satisfied if any one of the opinions/certificates described in the preceding sentence was
delivered and was in a form customary for transactions involving portfolio companies of Apollo. On September 12, 2008, we announced that we had engaged a reputable valuation firm, American
Appraisal, to provide an opinion that the combined Hexion/Huntsman entity was solvent based on traditional solvency tests. On October 23, 2008, five days prior to the anticipated closing,
American Appraisal provided us with a solvency opinion that the combined entity was solvent. On October 28, 2008, American Appraisal issued an additional opinion
that the combined entity was solvent, and J. Kimo Esplin executed a certificate in his capacity as our chief financial officer that the combined entity was solvent.

Notwithstanding
the opinions and certificate, very late on the evening of October 27, 2008, the Lenders sent a letter to Hexion stating that they did not believe that the solvency
opinion and certificate proposed to be provided met the condition of the Commitment Letter and effectively said that, as a result, the Lenders would not fund the proposed closing of the Merger
scheduled for October 28, 2008. Hexion sent the Lenders a reply letter disputing the Lenders' position and noting that both the American Appraisal opinion and the certificate of our chief
financial officer were in forms customary for transactions involving Apollo portfolio companies. Because the Lenders continued to refuse to fund, Hexion brought suit against the Lenders in the Supreme
Court of the State of New York, New York County on October 29, 2008 seeking specific performance of the Lenders' commitment under the Commitment Letter. Hexion also sought an order temporarily
restraining the Lenders from terminating the Commitment Letter. On October 31, 2008, the Court refused to grant Hexion a

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

preliminary
injunction preventing termination of the Commitment Letter. The Lenders have taken the position that the Commitment Letter expired by its terms on November 2, 2008.

On
December 13, 2008, we sent notice to Hexion and Apollo that, pursuant to the terms of the Merger Agreement, we had terminated the Merger Agreement. Following the termination of
the Merger Agreement, on December 14, 2008, we, together with certain of our affiliates, including Jon M. Huntsman and Peter R. Huntsman, entered into the Settlement Agreement
with Hexion, Hexion's chief executive officer Craig O. Morrison, and Apollo and certain of its affiliates, including Leon Black and Joshua J. Harris.

Under
the Settlement Agreement, upon full and final payment of all amounts due to us as described below, the parties agreed to take all necessary and appropriate action to obtain the
dismissal with prejudice of (i) the Delaware Litigation, (ii) the Texas Apollo Litigation and (iii) Apollo and Hexion's lawsuit against us in New York. In addition, we agreed to
promptly move to sever and dismiss Apollo from the Texas Bank Litigation and Hexion agreed to seek leave to withdraw its claims in the New York Bank Litigation. We also agreed to cooperate with Hexion
and Apollo in a stockholder action brought against them in New York by certain of our stockholders, and Hexion and Apollo have agreed to cooperate with us in the Texas Bank Litigation, including by
causing certain individuals to testify at trial if we so request. The parties also agreed to release each other from all claims and actions they have or may have against each other, other than claims
arising out of ordinary course business commercial dealings and certain other specified matters.

Pursuant
to the Settlement Agreement, Hexion and certain Apollo affiliates have paid us an aggregate of $1 billion. Of the $1 billion, Apollo affiliates paid us
$425 million in cash and purchased $250 million of our Convertible Notes (as described below). In addition, Hexion paid us the $325 million Termination Fee as required under the
Merger Agreement. Apollo and certain of its affiliates and Hexion and certain of its affiliates are jointly and severally liable for the payment of the aggregate $1 billion. In the
event any payment by or on behalf of Hexion or any of its affiliates is rescinded or required by any court to be returned for any reason having to do with Hexion and its affiliates, the joint and
several obligations of Apollo, Hexion and certain of their respective affiliates will continue in full force and effect.

Also
pursuant to the Settlement Agreement, we agreed to indemnify and hold harmless Hexion, Apollo and certain of their respective affiliates, officers, directors, managers, members,
employees, agents and other representatives from any claim for indemnification or contribution or any other claim asserted against the Indemnified Parties by the Lenders or their affiliates that in
any way arises out of any claims made by us and our affiliates against the Lenders, including claims for contribution asserted by the Lenders against Apollo and its affiliates in the Texas Bank
Litigation. Our indemnification obligation does not cover legal fees and expenses incurred by the Lenders or the attorneys' fees and expenses of the Indemnified Parties in defending the Lenders'
claims. The aggregate amount we must pay pursuant to indemnification will not exceed the amount of our recovery collected, if any, in the Texas Bank Litigation net of attorney fees, costs and expenses
related to the Texas Bank Litigation.

In
connection with the Settlement Agreement, on December 14, 2008, we, together with certain of our affiliates, entered into the Letter Agreement with Hexion and certain of its
affiliates and Apollo and certain of its affiliates, pursuant to which we agreed to pay Apollo and certain of its affiliates an

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

amount
of cash equal to 20% of the value of cash and non-cash consideration that is in excess of $500 million that we may obtain or receive in settlement in connection with any
claims we made against the Lenders arising from or relating to the Merger Agreement, the transactions contemplated thereby and related matters, including the Texas Bank Litigation, after we first
recover our attorneys' fees, costs and expenses in making the claim. In no circumstance will the aggregate amount of payments owed by us to the Apollo parties under the Letter Agreement exceed
$425 million. Moreover, in the event trial commences in the Texas Bank Litigation, any interest on the part of the Apollo parties will terminate immediately and we will not owe any portion of
any subsequent recovery to the Apollo parties.

All
of the aggregate $1 billion in payments due under the Settlement Agreement were paid to us before December 30, 2008. As a result, the Delaware Litigation, the Texas
Apollo Litigation, and Apollo and Hexion's lawsuit against us in New York have been dismissed. Hexion has withdrawn its claims against the Lenders in the New York Bank Litigation. We used
$423 million of the $1 billion in proceeds to pay down our Revolving Facility. We intend to use the remaining amount, net of fees and expenses related to the Merger, for general
liquidity purposes and possible additional reductions of our indebtedness.

The
Texas Bank Litigation remains ongoing, and a court ordered mediation is scheduled to begin May 11, 2009, followed by a trial which is currently set for June 8, 2009.
Please see "Recent DevelopmentsTexas Bank Litigation" below.

RECENT DEVELOPMENTS

SALE OF CONVERTIBLE NOTES IN CONNECTION WITH SETTLEMENT AGREEMENT

Pursuant to the Settlement Agreement, on December 23, 2008, we issued $250 million of our Convertible Notes to Apollo
affiliates under a Note Purchase Agreement. We recorded these Convertible Notes at a fair value of $235 million. The Convertible Notes are convertible at any time, at the holder's option, at an
initial conversion rate of 127.275 shares of our common stock per $1,000 principal amount of Convertible Notes (which is equal to an initial conversion price of $7.857 per share), subject to specified
anti-dilution adjustments. The Convertible Notes bear interest at the rate of 7% per year payable semi-annually on July 1 and January 1 of each year, beginning on
July 1, 2009. Interest is payable either in cash or, at our option, in shares of our common stock having a market value at that time equal to the interest payment. The Convertible Notes are our
senior unsecured obligations and are not guaranteed by any of our subsidiaries, including Huntsman International.

The
Convertible Notes will mature on December 23, 2018. At maturity, we may, at our option, pay the principal amount of the Convertible Notes in shares of our common stock having
a market value at that time equal to the principal amount of the Convertible Notes, plus an amount equal to the underwriting spread of a nationally-recognized underwriter chosen by us that would be
paid by a seller of the shares at such time.

We
may redeem the Convertible Notes in whole, for cash, at the principal amount of the Convertible Notes plus accrued and unpaid interest, at any time on or after December 23,
2011 if the closing price of our common stock, for at least 20 consecutive trading days prior to the notice of redemption, exceeds 135% of the conversion price in effect at that time.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

Upon
the occurrence of certain change of control events, the holders of the Convertible Notes may require us to redeem all or any portion of the holders' Convertible Notes at the
principal amount plus accrued and unpaid interest.

In
connection with the issuance of the Convertible Notes, we entered into a Registration Rights Agreement, dated as of December 23, 2008, with Apollo and certain of its
affiliates. Pursuant to the Registration Rights Agreement, we have agreed to use our reasonable best efforts to register the resale of our common stock issuable upon conversion of the Convertible
Notes (and common stock payable as interest or principal on the Convertible Notes) under the Securities Act of 1933, as amended.

VOTING AND STANDSTILL AGREEMENT

In addition to the Note Purchase Agreement and the Registration Rights Agreement, we entered into a Voting and Standstill Agreement,
dated as of December 23, 2008 with Apollo and certain other stockholders related to Apollo that prohibits such persons from owning any of our common stock, other than common stock paid to such
persons pursuant to the Convertible Notes or shares of our common stock beneficially owned by such persons as of December 23, 2008. Without our consent, persons subject to the Voting and
Standstill Agreement may not transfer the Convertible Notes or the Underlying Securities, other than (i) transfers involving Underlying Securities paid as interest, (ii) certain
transfers to certain affiliates and (iii) certain bona fide pledges related to borrowings from financial institutions. The Voting and Standstill Agreement further restricts Apollo and certain
related stockholders from taking certain actions, including engaging in or participating in any proxy solicitation relating to the election of our Board of Directors or our Board's publicly disclosed
recommendation on certain matters. The shares of our common stock held by such persons must be voted, at our election, either (i) in the manner recommended by our Board or (ii) in the
same proportion as our other stockholders. The Voting and Standstill Agreement terminates upon the later to occur of (i) December 31, 2010 or (ii) the date on which none of Apollo
and its related stockholders beneficially or of record own Convertible Notes or any Underlying Securities representing 3% or more of our then-outstanding common stock.

TEXAS BANK LITIGATION

As noted above, on September 30, 2008, we filed suit in the 9th Judicial District Court in Montgomery County, Texas
against the Lenders alleging, among other things, that the Lenders had conspired with Apollo to tortiously interfere with the Basell Merger Agreement. Our petition against the Lenders includes claims
of common law fraud, civil conspiracy, tortious interference with contract, and unjust enrichment. We are seeking to recover damages measured by the benefit of the bargain or the amount by which the
Lenders were unjustly enriched as a result of the injuries we believe they inflicted on us. Discovery, including depositions, has commenced. A court ordered mediation is scheduled to begin
May 11, 2009. Trial is currently set for June 8, 2009. Also pending before
the same court is a motion for summary judgment by certain entities and persons affiliated with Apollo Management, which seeks entry of an order barring contribution claims that have been asserted
against them by the Lenders. That motion is not currently set for hearing. We intend to prosecute our claims vigorously.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. GENERAL (Continued)

HUNTSMAN CORPORATION AND HUNTSMAN INTERNATIONAL FINANCIAL STATEMENTS

Except where otherwise indicated, these notes relate to the consolidated financial statements for each of our Company and Huntsman
International. The differences between our financial statements and Huntsman International's financial statements relate primarily to the following:



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

Our consolidated financial statements include the accounts of our wholly-owned and majority-owned subsidiaries and any variable
interest entities for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated, except for intercompany sales between continuing and discontinued
operations.

USE OF ESTIMATES

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

RECLASSIFICATIONS

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

REVENUE RECOGNITION

We generate substantially all of our revenues through sales in the open market and long-term supply agreements. We
recognize revenue when it is realized or realizable and earned. Revenue for product sales is recognized when a sales arrangement exists, risk and title to the product transfer to the customer,
collectibility is reasonably assured and pricing is fixed or determinable. The transfer of risk and title to the product to the customer usually occurs at the time shipment is made.

Revenue
arrangements that contain multiple deliverables, which relate primarily to licensing of technology, are evaluated in accordance with EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, to determine whether the arrangements should be divided into separate units of

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

accounting
and how the arrangement consideration should be measured and allocated among the separate units of accounting.

COST OF GOODS SOLD

We classify the costs of manufacturing and distributing our products as cost of goods sold. Manufacturing costs include variable costs,
primarily raw materials and energy, and fixed expenses directly associated with production. Manufacturing costs also include, among other things, plant site operating costs and overhead (including
depreciation), production planning and logistics costs, repair and maintenance costs, plant site purchasing costs, and engineering and technical support costs. Distribution, freight and warehousing
costs are also included in cost of goods sold.

CASH AND CASH EQUIVALENTS

We consider cash in checking accounts and cash in short-term highly liquid investments with an original maturity of three
months or less to be cash and cash equivalents. Cash flows from discontinued operations are not presented separately in the accompanying consolidated statements of cash flows.

SECURITIZATION OF ACCOUNTS RECEIVABLE

In connection with our A/R Securitization Program, we securitize certain trade receivables. The A/R Securitization Program is
structured so that we grant a participating undivided interest in certain of our trade receivables to a qualified off-balance sheet entity. We retain the servicing rights and a retained
interest in the securitized receivables. Losses are recorded on the sale and are based on the carrying value of the receivables as allocated between the receivables sold and the retained interests and
their relative fair value at the date of the transfer. Retained interests are subsequently carried at fair value which is estimated based on the present value of expected cash flows, calculated using
management's best estimates of key assumptions including credit losses and discount rates commensurate with the risks involved. For more information, see "Note 16. Securitization of Accounts
Receivable."

INVENTORIES

Inventories are stated at the lower of cost or market, with cost determined using last-in first-out,
first-in first-out, and average costs methods for different components of inventory.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives or lease term as follows:

Buildings and equipment

10 - 33 yearsPlant and equipment

3 - 25 yearsFurniture, fixtures and leasehold improvements

5 - 20 years


Interest
expense capitalized as part of plant and equipment was $17 million, $17 million and $16 million for the years ended December 31, 2008, 2007 and 2006,
respectively.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Periodic
maintenance and repairs applicable to major units of manufacturing facilities (a "turnaround") are accounted for on the deferral basis by capitalizing the costs of the
turnaround and amortizing the costs over the estimated period until the next turnaround. Normal maintenance and repairs of plant and equipment are charged to expense as incurred. Renewals, betterments
and major repairs that materially extend the useful life of the assets are capitalized, and the assets replaced, if any, are retired.

INVESTMENT IN UNCONSOLIDATED AFFILIATES

Investments in companies in which we exercise significant management influence, but do not control, are accounted for using the equity
method. Investments in companies in which we do not exercise significant influence are accounted for using the cost method.

INTANGIBLE ASSETS AND GOODWILL

Intangible assets are stated at cost (fair value at the time of acquisition) and are amortized using the straight-line
method over the estimated useful lives or the life of the related agreement as follows:

Patents and technology

5 - 30 yearsTrademarks

15 - 30 yearsLicenses and other agreements

5 - 15 yearsOther intangibles

5 - 15 years


Goodwill
represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not subject to any method of amortization, but is tested for
impairment annually (at the beginning of the third quarter) and when events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying
amount. When the fair value is less than the carrying value of the related reporting unit, we are required to reduce the amount of goodwill through a charge to earnings. Fair value is estimated using
the market approach, as well as the income approach based on discounted cash flow projections. Goodwill has been assigned to reporting units for purposes of impairment testing.

OTHER NONCURRENT ASSETS

Other noncurrent assets consist primarily of spare parts, deferred debt issuance costs, the overfunded portion related to defined
benefit plans for employees and capitalized turnaround costs. Debt issuance costs are amortized using the interest method over the term of the related debt.

CARRYING VALUE OF LONG-LIVED ASSETS

We review long-lived assets and all amortizable intangible assets, other than goodwill, for impairment whenever events or
changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based upon current and anticipated undiscounted cash flows, and we recognize an
impairment when such estimated cash flows are less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair
value. Fair value is generally estimated by discounting estimated future cash

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

flows
using a discount rate commensurate with the risks involved. See "Note 3. Discontinued Operations" and "Note 11. Restructuring, Impairment and Plant Closing Costs."

FINANCIAL INSTRUMENTS

The carrying amount reported in the balance sheet for cash and cash equivalents, accounts receivable and accounts payable approximates
fair value because of the immediate or short-term maturity of these financial instruments. The fair value of government securities and non-qualified employee benefit plan
investments are estimated using prevailing market prices. With the exception of our Convertible Notes, which were recorded at fair value based on the present value of estimated future cash flows, our
long-term debt was recorded at cost. The estimated fair values of our long-term debt other than the Convertible Notes are based on quoted market prices or on interest rates
that are currently available to us for issuance of debt with similar terms and remaining maturities for debt issues not quoted on an exchange. See "Note 17. Fair Value Measurements" and
"Note 18. Fair Value of Financial Instruments."

INCOME TAXES

We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they
will be realized. Valuation allowances have been established against a material portion of the non-U.S. deferred tax assets due to an uncertainty of realization. Valuation allowances are
reviewed each period on a tax jurisdiction by tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the
related deferred tax assets.

We
do not provide for income taxes or benefits on the undistributed earnings of our non-U.S. subsidiaries as earnings are reinvested and, in the opinion of management, will
continue to be reinvested indefinitely.

We
adopted FIN 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, on
January 1, 2007. The cumulative effect of adopting FIN 48 was not significant. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS
No. 109,Accounting for Income Taxes, by prescribing a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. The application of income tax law is inherently complex. We are required to determine if an income tax position meets
the criteria of more-likely-than-not to be realized based on the merits of the position under tax laws, in order to recognize an income tax benefit. This requires
us to make many assumptions and judgments regarding merits of income tax positions and the application of income tax law. Additionally, if a tax position meets the recognition criteria of
more-likely-than-not we are required to make judgments
and assumptions to measure the amount of the tax benefits to recognize based on the probability of the amount of tax benefits that would be realized if the tax position was challenged by the taxing
authorities. Interpretations and guidance surrounding income tax laws and regulations change over time. As a consequence, changes in assumptions and judgments can materially affect amounts recognized
in the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

DERIVATIVES AND HEDGING ACTIVITIES

All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative
is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in
the fair value of the derivative are recorded in accumulated other comprehensive (loss) income, to the extent effective, and will be recognized in the income statement when the hedged item affects
earnings. Changes in the fair value of the hedge in the net investment of certain international operations are recorded in other comprehensive income, to the extent effective. We perform effectiveness
assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify or has not been designated as a hedge, changes in fair value are recognized in earnings.

ENVIRONMENTAL EXPENDITURES

Environmental related restoration and remediation costs are recorded as liabilities when site restoration and environmental remediation
and clean-up obligations are either known or considered probable and the related costs can be reasonably estimated. Other environmental expenditures that are principally maintenance or
preventative in nature are recorded when expended and incurred and are expensed or capitalized as appropriate. See "Note 23. Environmental, Health and Safety Matters."

ASSET RETIREMENT OBLIGATIONS

We accrue for asset retirement obligations, which consist primarily of landfill closure costs and asbestos abatement costs, in the
period in which the obligations are incurred. Asset retirement obligations are accrued at estimated fair value. When the liability is initially recorded, we capitalize the cost by increasing the
carrying amount of the related long-lived asset. Over time, the liability is accreted to its settlement value and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, we will recognize a gain or loss for any difference between the settlement amount and the liability recorded. See "Note 12. Asset Retirement
Obligations."

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

FOREIGN CURRENCY TRANSLATION

The accounts of our operating subsidiaries outside of the U.S., except for those operating in highly inflationary economic
environments, consider the functional currency to be the currency of the economic environment in which they operate. Accordingly, assets and liabilities are translated at rates prevailing at the
balance sheet date. Revenues, expenses, gains and losses are translated at a weighted average rate for the period. Cumulative translation adjustments are recorded to stockholders' equity as a
component of accumulated other comprehensive income (loss).

Subsidiaries
that operate in economic environments that are highly inflationary consider the U.S. dollar to be the functional currency and include gains and losses from remeasurement to
the U.S.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

dollar
from the local currency in the statement of operations. The accounts of certain finance subsidiaries outside of the U.S. also consider the U.S. dollar to be the functional currency.

Transaction
gains and losses are recorded in the statements of operations and were net losses of $12 million, $14 million, and $1 million for the years ended
December 31, 2008, 2007 and 2006, respectively.

STOCK-BASED COMPENSATION

We account for stock-based compensation according to SFAS No. 123R,Share-Based
Payment.SFAS No. 123R requires entities to measure the cost of employee services received in exchange for an award of equity instruments based on the
grant-date fair value of the award. That cost will be recognized over the period during which the employee is required to provide services in exchange for the award. We have applied this
standard prospectively to share-based awards. See "Note 26. Stock-Based Compensation Plan."

NET INCOME (LOSS) PER SHARE

Basic income (loss) per share excludes dilution and is computed by dividing net loss available to common stockholders by the weighted
average number of shares outstanding during the period. Diluted income (loss) per share reflects potential dilution and is computed by dividing net loss available to common stockholders by the
weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.

On
December 23, 2008, we issued 7% Convertible Notes in an aggregate principal amount of $250 million that are convertible into common stock at a conversion price of $7.857
per share, subject to certain anti-dilution adjustments. See "Note 14. Debt."

On
February 16, 2005, we issued 5,750,000 shares of 5% mandatory convertible preferred stock. On February 16, 2008, the mandatory convertible preferred stock converted into
12,082,475 shares of common stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basic
and diluted income (loss) per share is calculated as follows (in millions, except share amounts):

Year Ended December 31,2008

2007

2006Numerator:Income from continuing operations

$
478

$
52

$
307Convertible notes interest expense, net of tax








Income from continuing operations available to common stockholders

$
478

$
52

$
307Shares (denominator):Weighted average shares outstanding


231,968,936


220,948,495


220,618,478Dilutive securities:Stock-based awards


74,193


297,221


23,970Convertible notes conversion


697,397





Preferred stock conversion


1,522,723


11,546,575


12,499,925Total dilutive shares outstanding assuming conversion


234,263,249


232,792,291


233,142,373


Additional
stock-based awards of 7,056,171, 5,735,503 and 4,320,784 weighted average equivalent shares of stock were outstanding during the years ended
December 31, 2008, 2007 and 2006, respectively. However, these stock-based awards were not included in the computation of diluted earnings per share because the effect would be
anti-dilutive.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2008, the FASB issued FSP No. FAS 132(R)-1,Employers' Disclosures about
Postretirement Benefit Plan Assets. This FSP provides guidance on an employers' disclosures about plan assets of a defined benefit pension or other postretirement plan. The
disclosures about plan assets required by this FSP are to be provided for fiscal years ending after December 15, 2009. We are evaluating FSP No. FAS 132(R)-1 to determine its
impact on our consolidated financial statements.

We
adopted FSP No. FAS 140-4 and FIN 46(R)-8,Disclosures by Public Entities (Enterprises) about Transfers of Financial
Assets and Interests in Variable Interest Entities, as of December 31, 2008. This FSP amends SFAS No. 140,Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets. It amends
FIN 46(R),Consolidation of Variable Interest Entities, to require public enterprises to provide additional disclosures about their involvement
with variable interest entities. It also requires additional disclosures by a public enterprise that is a sponsor or a servicer of a qualifying special purpose entity ("QSPE") that holds a variable
interest in the QSPE but was not the transferor of financial assets to the QSPE. See "Note 16. Securitization of Accounts Receivable" and "Note 17. Fair Value Measurements."

In
October 2008, the FASB issued FSP No. 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active. FSP 157-3 clarifies the application of SFAS No. 157,Fair Value Measurements, in a market that is not
active and provides examples to illustrate key

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

considerations
in determining the fair value of a financial asset when the market for that financial asset is not active. This FSP became effective, and we adopted it, upon issuance in October 2008.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162
identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in
conformity with GAAP in the U.S. (the GAAP hierarchy). We adopted this statement upon its effective date of November 15, 2008. The effective date was stated as 60 days following the
Securities and Exchange Commission's approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning of Present Fairly in Conformity
With Generally Accepted Accounting Principles,and that approval occurred on September 16, 2008.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan Amendment of FASB Statement
133. SFAS No. 161 requires enhanced disclosures regarding the effect of an entity's derivative instruments and related hedging activities on its financial position,
financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. We are evaluating
SFAS No. 161 to determine the impact of this statement on our consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (R),Business Combinations, which replaced SFAS No. 141, Business Combinations. In December 2007, the
FASB also issued SFAS No. 160,Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. These statements significantly change the accounting for business combinations and noncontrolling interests.
Among other things, these statements will require more assets acquired and liabilities assumed to be measured at fair value as of the acquisition date, liabilities related to contingent consideration
to be remeasured to fair value each subsequent reporting period, an acquirer in preacquisition periods to expense all acquisition-related costs, and noncontrolling interests in subsidiaries initially
to be measured at fair value and classified as a separate component of equity. These statements are to be applied prospectively for fiscal years beginning after December 15, 2008, except for
the presentation and disclosure requirements of SFAS No. 160 which are retrospective for all periods. We are evaluating SFAS No. 141 (R) and SFAS No. 160 to determine the
impact of these statements on our consolidated financial statements.

We
adopted SFAS No. 159,The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement
No. 115, on January 1, 2008. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value, with
changes in fair value reflected in earnings. We have not elected the fair value option for any existing or any new instruments that were not previously accounted for at fair value.

In
September 2006, the FASB issued SFAS No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment
of FASB Statements No. 87, 88, 106, and 132(R). Beginning with our fiscal year ended December 31, 2008, SFAS No. 158 requires that the assumptions used to
measure our benefit obligations and annual expense be determined as of the balance sheet date and all plan assets be reported as of that date. Accordingly, our Company and Huntsman International
recorded a charge to retained earnings, net of tax, of $3 million and $3 million, respectively, as of January 1, 2008. For more information, see "Note 19. Employee Benefit
Plans."

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

We
adopted SFAS No. 157,Fair Value Measurements, on January 1, 2008. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FSP No. FAS 157-1:Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement
13, which removes certain leasing transactions from the scope of SFAS No. 157, and No. FAS 157-2,Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years.
See "Note 17. Fair Value Measurements."

3. DISCONTINUED OPERATIONS

U.S. BASE CHEMICALS BUSINESS

On November 5, 2007, we completed the U.S. Base Chemicals Disposition. This disposition included our former olefins
manufacturing assets located at Port Arthur, Texas. The captive ethylene unit at the retained Port Neches, Texas site of our Performance Products segment operations was not included in the sale. This
asset, along with a long-term post-closing arrangement for the supply of ethylene and propylene from Flint Hills Resources to us, will continue to provide feedstock for our
downstream derivative units.

The
following results of our former U.S base chemicals business have been presented as discontinued operations in the accompanying consolidated statements of operations (dollars in
millions):

Year ended December 31,2008

2007

2006Revenues

$


$
181

$
474Costs and expenses





(206
)

(463
)Loss on disposal





(146
)

Adjustment to loss on disposal


8





Gain on partial fire insurance settlement


175





Operating income (loss)


183


(171
)

11Income tax (expense) benefit


(68
)

62


Income (loss) from discontinued operations, net of tax

$
115

$
(109
)
$
11


In
connection with the U.S. Base Chemicals Disposition, we recognized a pretax loss on disposal of $146 million in 2007, which included a pension curtailment gain of
$4 million. During 2008, we recognized an adjustment to the loss on disposal of $8 million related to a sales and use tax settlement, and post-closing adjustments. In
addition, during 2008, we recognized a $175 million gain from the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. DISCONTINUED OPERATIONS (Continued)

partial
settlement of insurance claims related to the fire at our former Port Arthur, Texas facility. For more information, see "Note 24. Casualty Losses and Insurance Recoveries."

The
EBITDA of our former U.S. base chemicals business is reported in our Base Chemicals segment.

NORTH AMERICAN POLYMERS BUSINESS

On August 1, 2007 we completed the North American Polymers Disposition. The disposition included our former polymers
manufacturing assets located at four U.S. sites: Odessa and Longview, Texas; Peru, Illinois; and Marysville, Michigan. In accordance with the amended and restated asset purchase agreement with Flint
Hills Resources, we also shut down our Mansonville, Quebec expandable polystyrene manufacturing facility in June 2007.

The
following results of our former North American polymers business have been presented as discontinued operations in the accompanying consolidated statements of operations (dollars in
millions):

Year ended December 31,2008

2007

2006Revenues

$


$
882

$
1,419Costs and expenses





(873
)

(1,342
)Loss on disposal





(233
)

Adjustment to loss on disposal


3





Operating income (loss)


3


(224
)

77Income tax (expense) benefit


(1
)

78


(1
)Income (loss) from discontinued operations, net of tax

$
2

$
(146
)
$
76


In
connection with the North American Polymers Disposition, we recognized a pretax loss on disposal of $233 million in 2007. During 2008, we recorded an adjustment to the loss on
disposal in connection with the North American Polymers Disposition of $3 million primarily related to property tax settlements and post-closing adjustments.

The
EBITDA of our former North American polymers business is reported in our Polymers segment.

In
connection with the U.S. Petrochemicals Disposition, we agreed to indemnify Flint Hills Resources with respect to any losses resulting from (i) the breach of representations
and warranties contained in the amended and restated asset purchase agreement, (ii) any pre-sale liabilities related to certain assets not assumed by Flint Hills Resources, and
(iii) any unknown environmental liability related to the pre-sale operations of the assets sold. We are not required to pay under these indemnification obligations until claims
against us, on a cumulative basis, exceed $10 million. Upon exceeding this $10 million threshold, we generally are obligated to provide indemnification for any losses up to a limit of
$150 million. We believe that the possibility that we will be required to pay any significant amounts under the indemnity provision is remote.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. DISCONTINUED OPERATIONS (Continued)

EUROPEAN BASE CHEMICALS AND POLYMERS BUSINESS

On December 29, 2006, we completed the U.K. Petrochemicals Disposition. This transaction involved the sale of the outstanding
equity interests of Huntsman Petrochemicals (UK) Limited. The final sales price was subject to adjustments relating to working capital, investment in the LDPE plant in Wilton, U.K. and unfunded
pension liabilities.

The
following results of our European base chemicals and polymers business have been presented as discontinued operations in the accompanying consolidated statements of operations
(dollars in millions):

Huntsman Corporation

Year ended
December 31,2007

2006Revenues

$


$
2,524Costs and expenses





(2,406
)Loss on disposal





(302
)Adjustment to loss on disposal


39


Operating income (loss)


39


(184
)Income tax expense





(34
)Income (loss) from discontinued operations, net of tax

$
39

$
(218
)


Huntsman International

Year ended
December 31,2007

2006Revenues

$


$
2,524Costs and expenses





(2,406
)Loss on disposal





(280
)Adjustment to loss on disposal


28


Operating income (loss)


28


(162
)Income tax expense





(34
)Income (loss) from discontinued operations, net of tax

$
28

$
(196
)


In
connection with the U.K. Petrochemicals Disposition, we and Huntsman International recognized a pretax loss of $302 million and $280 million, respectively, in 2006.
During 2007, we and Huntsman International recorded an adjustment to the loss on disposal of $39 million and $28 million, respectively, related primarily to a pension funding accrual and
post-closing adjustments.

The
EBITDA of our former European base chemicals business is reported in our Base Chemicals segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. DISCONTINUED OPERATIONS (Continued)

In connection with the sale, we agreed to indemnify the buyer with respect to any losses resulting from any environmental liability related to the pre-sale operations of the
assets sold. These indemnities have various payment thresholds and time limits depending on the site and type of claim. Generally, we are not required to pay under these indemnification obligations
until claims against us exceed £0.1 million (approximately $0.2 million) individually or £1 million (approximately $2 million) in the aggregate. We
also agreed to indemnify the buyer with respect to certain tax liabilities. Our maximum exposure generally shall not exceed $600 million in the aggregate. We believe that the possibility that
we will be required to pay any significant amounts under any of the indemnity provisions is remote.

TDI BUSINESS

On July 6, 2005, we sold our TDI business. The sale involved the transfer of our TDI customer list and sales contracts. We
discontinued the use of our remaining TDI assets. Our former TDI business has been accounted for as a discontinued operation under SFAS No. 144 and is reported in our Polyurethanes segment.
Accordingly, the following results of TDI have been presented as discontinued operations in the accompanying consolidated statements of operations (dollars in millions):

Year ended
December 31,2007

2006Revenues

$


$
Costs and expenses


(1
)

(2
)Operating loss


(1
)

(2
)Income tax benefit





Loss from discontinued operations, net of tax

$
(1
)
$
(2
)


4. BUSINESS DISPOSITIONS AND COMBINATIONS

SALE OF U.S. BUTADIENE AND MTBE BUSINESS

On
June 27, 2006, we sold the assets comprising our U.S. butadiene and MTBE business operated by our Base Chemicals segment and recognized a gain on
disposal of $90 million. The total sales price was $274 million, of which $204 million was paid to us during 2006. The additional $70 million was paid to us on
November 9, 2007 after the successful restart of our Port Arthur, Texas olefins unit that was damaged in a fire (see "Note 24. Casualty Losses and Insurance RecoveriesPort
Arthur, Texas Plant Fire") and the related resumption of crude butadiene supply. We recognized an additional pre-tax gain on the sale of approximately $69 million during 2007, which
is included in other operating expense (income) in the accompanying consolidated statement of operations.

The
results of operations of this business were not classified as a discontinued operation because of the expected continuing cash flows from the MTBE business we continue to operate in
our Polyurethanes
segment. The results of our former U.S. butadiene and MTBE business are reported in Corporate and Other.

In
connection with the sale, we indemnified the buyer with respect to any losses resulting from (i) the breach of representations and warranties contained in the asset purchase
agreement, (ii) pre-sale liabilities related to the pre-sale operations of the assets sold not assumed by the buyer, and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. BUSINESS DISPOSITIONS AND COMBINATIONS (Continued)

(iii) environmental
liability related to the pre-sale operations of the assets sold. We are not required to pay under these indemnification obligations until claims against us
exceed $5 million. Upon exceeding this $5 million threshold, we generally are obligated to provide indemnification for any losses in excess of $5 million, up to a limit of
$138 million. We believe that there is a remote likelihood that we will be required to pay any significant amounts under the indemnity provision.

TEXTILE EFFECTS ACQUISITION

On
June 30, 2006, we acquired Ciba's textile effects business for $172 million (CHF 215 million) in cash in the Textile Effects
Acquisition. This purchase price was subject to finalization of post-closing working capital adjustments, which resulted in a reduction to the purchase price of $27 million. The
operating results of the textile effects business have been consolidated with our operating results beginning on July 1, 2006 and are reported with our advanced materials operations as part of
our Materials and Effects segment.

We
have accounted for the Textile Effects Acquisition using the purchase method in accordance with SFAS No. 141,Business
Combinations.As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed, and we determined the excess of fair value of net assets
acquired over cost. Because the fair value of the acquired assets and liabilities assumed exceeded the acquisition price, the valuation of the long-lived assets acquired was reduced to
zero in accordance with SFAS No. 141. Accordingly, no basis was assigned to property, plant and equipment or any other noncurrent non-financial assets and the remaining excess was
recorded as an extraordinary gain, net of taxes (which were not applicable because the gain was recorded in purchase accounting). The final

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. BUSINESS DISPOSITIONS AND COMBINATIONS (Continued)

allocation
of the purchase price to the assets and liabilities acquired is summarized as follows (dollars in millions):

Acquisition cost:Acquisition payment, exclusive of post-closing working capital adjustment

$
172Post-closing working capital adjustment


(27
)Direct costs of acquisition


13Total acquisition costs


158Fair value of assets acquired and liabilities assumed:Cash


8Accounts receivable


255Inventories


233Prepaid expenses and other current assets


13Noncurrent assets


2Deferred taxes


2Accounts payable


(94
)Accrued liabilities


(35
)Short-term debt


(5
)Noncurrent liabilities


(172
)Total fair value of net assets acquired


207Extraordinary gain on the acquisition of a businessexcess of fair value of net assets acquired over cost

$
49


During
2006, we recorded an extraordinary gain on the acquisition of $56 million based on the preliminary purchase price allocation. During 2007, we adjusted the preliminary
purchase price allocation for, among other things, the finalization of restructuring plans, estimates of asset retirement obligations, the determination of related deferred taxes and finalization of
the post-closing working capital adjustments, resulting in a reduction to the extraordinary gain of $7 million. During 2008, we recorded an additional extraordinary gain on the
acquisition of $14 million related to the reversal of accruals for certain employee termination costs recorded in connection with the Textile Effects Acquisition and a reimbursement by CIBA of
certain restructuring costs associated with the acquisition.

In
connection with the Textile Effects Acquisition, we planned to exit certain activities of the textile effects business and expected to involuntarily terminate the employment of, or
relocate, certain textile effects employees. We estimated that we will eliminate 700 positions and will create approximately 250 new positions, globally. These plans included the exit of various
manufacturing, sales and administrative activities throughout the business through 2009. This purchase price allocation includes recorded liabilities for workforce reductions and other business exit
costs of $94 million.

DUPONT FLUOROCHEMICAL ACQUISITION

On
July 23, 2007, we acquired DuPont's global fluorochemical business for the nonwovens industry for $8 million in cash. The transaction with
DuPont included all existing contracts and business records. All manufacturing assets, cash, accounts receivable, inventory, employees, offices, laboratories and other

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. BUSINESS DISPOSITIONS AND COMBINATIONS (Continued)

assets
were specifically excluded from the purchase. The entire value of this acquisition was assigned to intangible assets with useful lives of 15 years.

PENDING METROCHEM ACQUISITION

On
June 29, 2007, we signed an agreement to acquire Baroda, a manufacturer of textile dyes and intermediates in India. Under the terms of the agreement,
either party may terminate the agreement since the transaction was not consummated by April 30, 2008. As of December 31, 2008, this agreement had not been terminated. On
February 6, 2009, we entered into a non-binding agreement in principle with Baroda under which the purchase price, including certain working capital positions, was revised to be
approximately $29 million (U.S. dollar equivalents). This purchase price excludes from working capital the receivables existing on the closing
date due to Baroda from our affiliates, which will be settled in the ordinary course. We believe that the majority of the purchase price will be funded through local Indian financing. We expect to
complete this acquisition during the first half of 2009, subject to certain conditions being met. However, there can be no assurances that this transaction will be consummated or, if consummated, that
it will be consummated on the terms set forth above.

5. INVENTORIES

Inventories consisted of the following (dollars in millions):

December 31,2008

2007Raw materials and supplies

$
282

$
261Work in progress


88


94Finished goods


1,192


1,164Total


1,562


1,519LIFO reserves


(62
)

(67
)Net

$
1,500

$
1,452


As
of December 31, 2008 and 2007, approximately 9% of inventories were recorded using the last-in, first-out cost method in each year.

For
the years ended December 31, 2007 and 2006, inventory quantities were reduced, resulting in a liquidation of certain LIFO inventory layers carried at costs that were lower
than the cost of current purchases, the effect of which reduced cost of sales by approximately $10 million and nil, respectively, of which $9 million and $1 million related to
discontinued operations, respectively. During 2008, 2007 and 2006, we recorded charges of $38 million, nil and $4 million, respectively, to write our inventory down to the lower of cost
or market.

In
the normal course of operations, we at times exchange raw materials and finished goods with other companies for the purpose of reducing transportation costs. The net
non-monetary open exchange positions are valued at cost. The amounts included in inventory under non-monetary open exchange agreements payable by us as of December 31,
2008 and 2007 were $19 million and $16 million, respectively. Other open exchanges are settled in cash and result in a net deferred profit

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. INVENTORIES (Continued)

margin.
The amounts under these open exchange agreements receivable by us at December 31, 2008 and 2007 were $5 million and $11 million, respectively.

6. PROPERTY, PLANT AND EQUIPMENT

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

Huntsman Corporation

December 31,2008

2007Land

$
122

$
121Buildings


549


524Plant and equipment


4,993


4,926Construction in progress


440


529Total


6,104


6,100Less accumulated depreciation


(2,455
)

(2,337
)Net

$
3,649

$
3,763


Depreciation
expense for the years ended December 31, 2008, 2007 and 2006 was $359 million, $377 million and $430 million, respectively, of which nil,
$32 million and $102 million related to discontinued operations, respectively.

Huntsman International

December 31,2008

2007Land

$
122

$
121Buildings


549


524Plant and equipment


5,100


5,033Construction in progress


440


529Total


6,211


6,207Less accumulated depreciation


(2,745
)

(2,651
)Net

$
3,466

$
3,556


Depreciation
expense for the years ended December 31, 2008, 2007 and 2006 was $334 million, $354 million and $403 million, respectively, of which nil,
$32 million and $100 million related to discontinued operations, respectively.

Property,
plant and equipment includes gross assets acquired under capital leases of $15 million and $16 million at December 31, 2008 and 2007, respectively; related
amounts included in accumulated depreciation were $11 million and $9 million at December 31, 2008 and 2007, respectively.

F-35

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. INVESTMENT IN UNCONSOLIDATED AFFILIATES

Our ownership percentage and investment in unconsolidated affiliates were as follows (dollars in millions):

December 31,2008

2007Equity Method:Sasol-Huntsman GmbH and Co. KG (50%)

$
34

$
39Arabian Amines Company (50%)


44


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


110


120BASF Huntsman Shanghai Isocyanate Investment BV (50%)(1)


58


52International Polyurethanes Investments (45%)


15


13Others


1


1Total equity method investments


262


225Cost Method:Gulf Advanced Chemicals Industry Corporation (4.35%)


5


3Total investments

$
267

$
228






Summarized
applicable financial information of our unconsolidated affiliate Sasol-Huntsman GmbH and Co. KG. as of December 31, 2008 and 2007 and for the years ended
December 31, 2008, 2007 and 2006 is presented below (dollars in millions):

2008

2007

2006Current assets

$
58

$
65Noncurrent assets


46


43Current liabilities


10


11Noncurrent liabilities


2


3Revenues


123


108

$
91Gross profit


23


30


23Net income


13


13


7


Summarized
applicable financial information of our unconsolidated affiliate Huntsman Shanghai Isocyanate Investment BV as of December 31, 2008 and 2007 and for the years
ended December 31, 2008, 2007 and 2006 is presented below (dollars in millions):

2008

2007

2006Current assets

$
85

$
103Noncurrent assets


346


349Current liabilities


110


48Noncurrent liabilities


154


266Revenues


411


266

$
69Gross profit


43


21


19Net income


13


8


2


F-36

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. INVESTMENT IN UNCONSOLIDATED AFFILIATES (Continued)

Summarized
applicable financial information of our unconsolidated affiliates, Louisiana Pigment Company, Arabian Amines Company and International Polyurethanes Investments as of
December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 is presented below (dollars in millions):

2008

2007

2006Assets

$
448

$
281Liabilities


142


38Revenues


307


273

$
334Net income


2


1





During
the year ended December 31, 2008, we contributed $44 million as our 50% equity contribution to our ethyleneamines manufacturing joint venture in Jubail Industrial
City, Saudi Arabia with Zamil Group. This joint venture's funding requirements will be satisfied through a combination of debt and equity, with the equity already provided on a 50/50 basis by us and
Zamil Group. The joint venture obtained various loan commitments in the aggregate amount of approximately $195 million in U.S. dollar equivalents, of which $45 million was drawn under a
short-term bridge loan facility as of December 31, 2008. We have provided certain guarantees of approximately $14 million for these commitments which will terminate upon
completion of the project and satisfaction of certain conditions. We have estimated that the fair value of these guarantees was nil as of the closing date of this transaction and, accordingly, no
amounts have been recorded. This joint venture is accounted for under the equity method.

8. INTANGIBLE ASSETS

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

Huntsman Corporation

December 31, 2008

December 31, 2007Carrying
Amount

Accumulated
Amortization

Net

Carrying
Amount

Accumulated
Amortization

NetPatents, trademarks and technology

$
355

$
255

$
100

$
351

$
226

$
125Licenses and other agreements


33


12


21


32


10


22Non-compete agreements


19


19





19


19


Other intangibles


47


15


32


32


6


26Total

$
454

$
301

$
153

$
434

$
261

$
173


During
2008 and 2007, we reversed certain valuation allowances on deferred tax assets related to prior acquisitions and recorded a corresponding reduction to intangible assets of
approximately $1 million and $2 million, respectively.

F-37

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INTANGIBLE ASSETS (Continued)

Amortization
expense was $27 million, $27 million and $28 million for the years ended December 31, 2008, 2007 and 2006, respectively, of which nil,
$1 million and $1 million related to discontinued operations, respectively.

Estimated
future amortization expense for intangible assets over the next five years is as follows (dollars in millions):

Year ending December 31:2009

$
272010


262011


252012


202013


18


Huntsman International

December 31, 2008

December 31, 2007Carrying
Amount

Accumulated
Amortization

Net

Carrying
Amount

Accumulated
Amortization

NetPatents, trademarks and technology

$
355

$
255

$
100

$
351

$
226

$
125Licenses and other agreements


33


12


21


32


10


22Non-compete agreements


19


19





19


19


Other intangibles


55


19


36


40


10


30Total

$
462

$
305

$
157

$
442

$
265

$
177


During
2008 and 2007, we reversed certain valuation allowances on deferred tax assets related to prior acquisitions and recorded a corresponding reduction to intangible assets of
approximately $1 million and $2 million, respectively.

Amortization
expense for Huntsman International was $28 million, $28 million and $29 million million for the years ended December 31, 2008, 2007 and 2006,
respectively, of which nil, $1 million and $1 million related to discontinued operations, respectively.

Huntsman
International's estimated future amortization expense for intangible assets over the next five years is as follows (dollars in millions):

Year ending December 31:2009

$
272010


272011


262012


212013


18


F-38

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. OTHER NONCURRENT ASSETS

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

December 31,2008

2007Pension assets

$
2

$
173Debt issuance costs


25


32Capitalized turnaround costs


104


45Spare parts inventory


78


70Catalyst assets


25


18Deposits


15


16Other noncurrent assets


115


102Total

$
364

$
456


Amortization
expense of catalyst assets for the years ended December 31, 2008, 2007 and 2006 was $12 million, $9 million and $7 million, respectively.

10. ACCRUED LIABILITIES

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

Huntsman Corporation

December 31,2008

2007Payroll, severance and related costs

$
101

$
142Interest


42


42Volume and rebate accruals


82


89Income taxes


37


23Taxes other than income taxes


72


79Restructuring and plant closing costs


73


76Environmental accruals


4


5Deferred gain on insurance recovery





137Pension liabilities


12


11Other postretirement benefits


13


14Deferred reimbursement of Merger-related costs





100Self-insured casualty loss reserves


21


19Other miscellaneous accruals


160


148Total

$
617

$
885


F-39

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. ACCRUED LIABILITIES (Continued)

Huntsman International

December 31,2008

2007Payroll, severance and related costs

$
101

$
142Interest


41


42Volume and rebate accruals


82


89Income taxes


22


23Taxes other than income taxes


72


79Restructuring and plant closing costs


73


76Environmental accruals


4


5Deferred gain on insurance recovery





137Pension liabilities


12


11Other postretirement benefits


13


14Self-insured casualty loss reserves


21


19Other miscellaneous accruals


119


144Total

$
560

$
781


11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

As of December 31, 2008, 2007 and 2006, accrued restructuring, impairment and plant closing costs by type of cost and initiative consisted of the following (dollars in millions):

Workforce
reductions(1)

Demolition and
decommissioning

Non-cancelable
lease costs

Other
restructuring
costs

Total(2)Accrued liabilities as of January 1, 2006

$
54

$
5

$
7

$
12

$
78Textile Effects opening balance sheet liabilities at June 30, 2006


65


2


3


5


752006 charges for 2003 initiatives


3











32006 charges for 2004 initiatives


4











42006 charges for 2005 initiatives


2











22006 charges for 2006 initiatives


2











2Reversal of reserves no longer required and liability reclassifications


(8
)

(2
)

(1
)




(11
)Partial reversal of Advanced Materials opening balance sheet liabilities


(3
)










(3
)2006 payments for 2003 initiatives


(9
)










(9
)2006 payments for 2004 initiatives


(17
)

(3
)

(1
)




(21
)2006 payments for 2005 initiatives


(8
)







(1
)

(9
)2006 payments for 2006 initiatives


(1
)










(1
)Net activity of discontinued operations


(12
)

(2
)







(14
)Foreign currency effect on reserve balance


4





1


1


6Accrued liabilities as of December 31, 2006


76





9


17


F-40

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

Workforce
reductions(1)

Demolition and
decommissioning

Non-cancelable
lease costs

Other
restructuring
costs

Total(2)102Adjustment to Textile Effects opening balance sheet liabilities


8


14


(2
)

(1
)

192007 charges for 2003 initiatives


1











12007 charges for 2004 initiatives


4





1





52007 charges for 2007 initiatives


1








25


26Reversal of reserves no longer required


(4
)




(1
)




(5
)2007 payments for 2003 initiatives


(3
)




(1
)




(4
)2007 payments for 2004 initiatives


(5
)

(1
)

(1
)




(7
)2007 payments for 2005 initiatives


(3
)










(3
)2007 payments for 2006 initiatives


(17
)

(1
)




(2
)

(20
)2007 payments for 2007 initiatives


(1
)







(25
)

(26
)Net activity of discontinued operations


(1
)










(1
)Reimbursable workforce reduction cost


1











1Foreign currency effect on reserve balance


8











8Accrued liabilities as of December 31, 2007


65


12


5


14


96Adjustment to Textile Effects opening balance sheet liabilities


(13
)




(1
)




(14
)2008 charges for 2004 initiatives


1





1





22008 charges for 2008 initiatives


27








1


28Reversal of reserves no longer required


(1
)










(1
)2008 payments for 2003 initiatives


(2
)




(1
)




(3
)2008 payments for 2004 initiatives


(3
)




(1
)




(4
)2008 payments for 2006 initiatives


(19
)

(11
)




(1
)

(31
)2008 payments for 2008 initiatives


(3
)







(1
)

(4
)Net activity of discontinued operations


(1
)










(1
)Foreign currency effect on reserve balance


7











7Accrued liabilities as of December 31, 2008

$
58

$
1

$
3

$
13

$
75


---

December 31,
2008

December 31,
20072003 initiatives & prior

$
9

$
122004 initiatives


6


102006 initiatives


26


712008 initiatives


24


Foreign currency effect on reserve balance


10


3Total

$
75

$
96


F-41

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

Details with respect to our reserves for restructuring, impairment and plant closing costs are provided below by segment and initiative (dollars
in millions):

Polyurethanes

Materials and
Effects

Performance
Products

Pigments

Discontinued
Operations

Corporate
& Other

TotalAccrued liabilities as of January 1, 2006

$
11

$
8

$
26

$
16

$
16

$
1

$
78Textile Effects opening balance sheet liabilities at June 30, 2006





75














752006 charges for 2003 initiatives











3








32006 charges for 2004 initiatives








1


3








42006 charges for 2005 initiatives








1








1


22006 charges for 2006 initiatives





2














2Reversal of reserves no longer required


(1
)

(1
)

(7
)

(2
)







(11
)Partial reversal of Advanced Materials opening balance sheet liabilities





(3
)













(3
)2006 payments for 2003 initiatives


(3
)

(2
)




(4
)







(9
)2006 payments for 2004 initiatives





(1
)

(12
)

(8
)







(21
)2006 payments for 2005 initiatives


(1
)

(1
)

(4
)

(1
)




(2
)

(9
)2006 payments for 2006 initiatives





(1
)













(1
)Net activity of discontinued operations














(14
)




(14
)Foreign currency effect on reserve balance


1


2


2


1








6Accrued liabilities as of December 31, 2006


7


78


7


8


2





102Adjustment to Textile Effects opening balance sheet liabilities





19














192007 charges for 2003 initiatives











1








12007 charges for 2004 initiatives











5








52007 charges for 2007 initiatives





26














26Reversal of reserves no longer required





(2
)




(3
)







(5
)2007 payments for 2003 initiatives


(2
)







(2
)







(4
)2007 payments for 2004 initiatives


(1
)




(4
)

(2
)







(7
)2007 payments for 2005 initiatives


(1
)




(2
)










(3
)2007 payments for 2006 initiatives





(20
)













(20
)2007 payments for 2007 initiatives





(26
)













(26
)Net activity of discontinued operations














(1
)




(1
)Reimburable workforce reduction cost











1








1Foreign currency effect on reserve balance


1


6


1











8Accrued liabilities as of December 31, 2007


4


81


2


8


1





96Adjustment to Textile Effects opening balance sheet liabilities





(14
)













(14
)2008 charges for 2004 initiatives











2








22008 charges for 2008 initiatives





24





3





1


28Reversal of reserves no longer required











(1
)







(1
)2008 payments for 2003 initiatives


(1
)

(1
)




(1
)







(3
)2008 payments for 2004 initiatives








(1
)

(3
)







(4
)2008 payments for 2006 initiatives





(31
)













(31
)2008 payments for 2008 initiatives





(3
)










(1
)

(4
)Net activity of discontinued operations














(1
)




(1
)Foreign currency effect on reserve balance





8





(1
)







7Accrued liabilities as of December 31, 2008

$
3

$
64

$
1

$
7

$


$


$
75Current portion of restructuring reserve

$
2

$
64

$
1

$
6

$


$


$
73Long-term portion of restructuring reserve


1








1








2


F-42

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

Details with respect to cash and non-cash restructuring charges for the years ended December 31, 2008, 2007 and 2006 by
initiative are provided below (dollars in millions):

Cash charges:2008 charges for 2004 initiatives

$
22008 charges for 2008 initiatives


28Reversal of reserves no longer required


(1
)Non-cash charges


7Total 2008 Restructuring, Impairment and Plant Closing Costs

$
36Cash charges:2007 charges for 2003 initiatives

$
12007 charges for 2004 initiatives


52007 charges for 2007 initiatives


26Reversal of reserves no longer required


(5
)Non-cash charges


15Total 2007 Restructuring, Impairment and Plant Closing Costs

$
42Cash charges:2006 charges for 2003 initiatives

$
32006 charges for 2004 initiatives


42006 charges for 2005 initiatives


22006 charges for 2006 initiatives


2Reversal of reserves no longer required


(5
)Non-cash charges


9Total 2006 Restructuring, Impairment and Plant Closing Costs

$
15


2008 RESTRUCTURING ACTIVITIES

As
of December 31, 2008, our Polyurethanes segment restructuring reserve consisted of $3 million related to restructuring initiatives at our
Rozenburg, Netherlands site (as announced in 2003).

As
of December 31, 2008, our Materials and Effects segment restructuring reserve consisted of $64 million, of which $40 million related to opening balance sheet
liabilities from the Textile Effects Acquisition and $23 million related to our 2008 restructuring initiatives with textile effects. During 2008, our Materials and Effects segment recorded cash
charges for 2008 initiatives of $24 million primarily related to the streamlining of the textile effects business into two global strategic business units, apparel & home textiles and
specialty textiles, as announced during the fourth quarter of 2008. We also reversed accruals of $14 million for certain employee termination costs recorded in connection with the Textile
Effects Acquisition. During 2008, we recorded a non-cash impairment charge of $1 million related to our Deer Park, Australia and Germany fixed assets.

F-43

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

As
of December 31, 2008, our Performance Products segment reserve consisted of $1 million related to various restructuring programs across our European surfactants
business. During 2008, we recorded a non-cash charge of $1 million related to the closure of our Guelph, Canada plant.

As
of December 31, 2008, our Pigments segment reserve consisted of $7 million related to the restructuring of commercial and business support activities and workforce
reductions in connection with our Huelva, Spain operations. During 2008, our Pigments segment recorded charges of $5 million related to the restructuring of commercial and business support
activities.

During
2008, we recorded a non-cash impairment charge of $5 million in Corporate and Other primarily related to capital expenditures and turnaround costs associated
with our Australian styrenics business that was previously impaired. The long-lived assets of our Australian styrenics business were determined to be impaired in accordance with SFAS
No. 144 and an impairment charge was recorded in 2005. Capital expenditures and turnaround costs in this business, which are necessary to maintain operations, are also considered to be impaired
immediately after they are incurred. Management has evaluated the strategic and operational initiatives related to this business, and based upon the renegotiation of certain raw material supply
agreements, has concluded that we will continue the operations of this business.

2007 RESTRUCTURING ACTIVITIES

As
of December 31, 2007, our Polyurethanes segment restructuring reserve consisted of $4 million related to restructuring initiatives at our
Rozenburg, Netherlands site (as announced in 2003).

As
of December 31, 2007, our Materials and Effects segment restructuring reserve consisted of $81 million primarily relating to opening balance sheet liabilities from the
Textile Effects Acquisition. During 2007, our Materials and Effects segment recorded cash charges for 2007 initiatives of $20 million related to redundant service contracts and integration
costs for information technology services and $4 million related to supply chain integration processes.

As
of December 31, 2007, our Performance Products segment reserve consisted of $2 million related to various restructuring programs across our European surfactants
business.

As
of December 31, 2007, our Pigments segment reserve consisted of $8 million related to the reorganization of business support activities following the reduction of our
TiO2 production capacity announced in 2004 and workforce reductions in connection with our Huelva, Spain operations.

During
2007, we recorded a non-cash impairment charge of $13 million in Corporate and Other related to capital expenditures and turnaround costs associated with our
Australian styrenics business that was previously impaired.

2006 RESTRUCTURING ACTIVITIES

As
of December 31, 2006, our Polyurethanes segment restructuring reserve consisted of $7 million related to restructuring initiatives at the
Rozenburg, Netherlands site (as announced in 2003).

As
of December 31, 2006, our Materials and Effects segment restructuring reserve consisted of $78 million related to opening balance sheet liabilities from the Textile
Effects Acquisition, the

F-44

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

restructuring
programs implemented in association with the 2003 acquisition of our advanced materials business and the realignment and simplification of the commercial and technical organization.
During 2006, we recorded $75 million of liabilities for workforce reduction, non-cancelable lease termination costs and demolition and decommissioning costs related to the Textile
Effects Acquisition. In addition, our Materials and Effects segment reversed $3 million of reserves established in connection with the acquisition of our advanced materials business. This
reserve reversal was recorded as a reduction to property, plant and equipment in accordance with EITF 95-3,Recognition of Liabilities in Connection with a
Purchase Business Combination.

As
of December 31, 2006, our Performance Products segment reserve consisted of $7 million related to various restructuring programs across our European surfactants business
and the realignment of our Jefferson County, Texas operations. During 2006, $6 million was reclassified to pension liabilities.

As
of December 31, 2006, our Pigments segment reserve consisted of $8 million related to the global workforce reductions announced in 2003, and the reduction of our TiO2
production capacity announced in 2004. The reversal of workforce reduction reserves recorded by our Pigments segment during 2006 relates primarily to the project announced in July 2005 that our
Pigments and Base Chemicals segments would establish a single U.K. headquarters in Teesside, U.K., which was abandoned in connection with the sale of our European base chemicals and polymers business.

During
2006, we recorded non-cash impairment charges in Corporate and Other of $8 million related to capital expenditures and turnaround costs associated with our
Australian styrenics business that was previously impaired.

12. ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations consist primarily of landfill capping, closure and post-closure costs and asbestos abatement costs. We are legally required to perform capping
and closure and post-closure care on the landfills and asbestos abatement on certain of our premises. In accordance with SFAS No. 143 and FIN 47, for each asset retirement
obligation we recognized the estimated fair value of a liability and capitalized the cost as part of the cost basis of the related asset.

F-45

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. ASSET RETIREMENT OBLIGATIONS (Continued)

The
following table describes changes to our asset retirement obligation liability (dollars in millions):

December 31,2008

2007Asset retirement obligation at beginning of year

$
19

$
18Accretion expense


2


2Revisions in timing and estimated cash flows


1


Liabilities relieved(1)





(2
)Foreign currency effect on reserve balance


(2
)

1Asset retirement obligation at end of year

$
20

$
19Amounts included in accrued liabilities

$
1

$
1Amounts included in other noncurrent liabilities


19


18Total asset retirement obligations

$
20

$
19






13. OTHER NONCURRENT LIABILITIES

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

Huntsman Corporation

December 31,2008

2007Pension liabilities

$
713

$
287Other postretirement benefits


136


134Environmental accruals


3


3Restructuring and plant closing costs


2


20Asset retirement obligations


19


18Other noncurrent liabilities


148


217Total

$
1,021

$
679


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. OTHER NONCURRENT LIABILITIES (Continued)

Huntsman International

December 31,2008

2007Pension liabilities

$
713

$
287Other postretirement benefits


136


134Environmental accruals


3


3Restructuring and plant closing costs


2


20Asset retirement obligations


19


18Other noncurrent liabilities


148


215Total

$
1,021

$
677


14. DEBT

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

HUNTSMAN CORPORATION

December 31,2008

2007Senior Credit Facilities:Term Loans

$
1,540

$
1,540Secured Notes


295


294Senior Notes


198


198Subordinated Notes


1,285


1,311Australian Credit Facilities


41


50HPS (China) debt


196


107Other


92


69Convertible Notes


235


Total debt

$
3,882

$
3,569Current portion

$
205

$
69Long-term portion


3,677


3,500Total debt

$
3,882

$
3,569


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. DEBT (Continued)

HUNTSMAN INTERNATIONAL

December 31,2008

2007Senior Credit Facilities:Term Loans

$
1,540

$
1,540Secured Notes


295


294Senior Notes


198


198Subordinated Notes


1,285


1,311Australian Credit Facilities


41


50HPS (China) debt


196


107Other


92


69Total debtexcluding affiliates

$
3,647

$
3,569Current portion

$
205

$
69Long-term portion


3,442


3,500Total debtexcluding affiliates

$
3,647

$
3,569Total debtexcluding affiliates

$
3,647

$
3,569Notes payable to affiliates


429


5Total debt

$
4,076

$
3,574


SUBSIDIARY DEBT

With
the exception of our Convertible Notes, our guarantees of certain debt of HPS and SLIC, our Chinese MDI joint ventures, our Saudi Arabia joint venture,
and certain indebtedness incurred from time to time to finance certain insurance premiums, we have no direct debt or guarantee obligations. Substantially all of our other debt has been incurred by our
subsidiaries (primarily Huntsman International); such subsidiary debt is nonrecourse to us and we have no contractual obligation to fund our subsidiaries' respective operations.

Senior Credit Facilities

As of December 31, 2008, our Senior Credit Facilities consisted of our (i) $650 million Revolving Facility and
(ii) $1,540 million Dollar Term Loan. As of December 31, 2008, there were no borrowings outstanding under the Revolving Facility, and we had $32 million in U.S. dollar
equivalents of letters of credit and bank guarantees issued and outstanding under the Revolving Facility. The Revolving Facility matures in August 2010 and the Dollar Term Loan matures in 2014;
provided, however, that the maturities of the Revolving Facility and the Dollar Term Loan will accelerate if we do not repay or refinance all but $100 million of our outstanding debt securities
on or before three months prior to the maturity dates of such debt securities (the next maturity date of such debt securities is October 15, 2010).

At
the present time, borrowings under the Revolving Facility and the Dollar Term Loan bear interest at LIBOR plus 1.75%. However, the applicable interest rate of the Dollar Term Loan is
subject to a reduction to LIBOR plus 1.50% upon achieving certain secured leverage ratio thresholds. The

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14. DEBT (Continued)

agreements
governing our Secured Credit Facilities contain one financial covenant, which is applicable only to the Revolving Facility, and this covenant is only in effect when loans or letters of
credit are outstanding under the Revolving Facility. In addition, the applicable agreements provide for customary restrictions and limitations on our ability to incur liens, incur additional debt,
merge or sell assets, make certain restricted payments, prepay other indebtedness, make investments or engage in transactions with affiliates, and also contain other customary default provisions.

As
of December 31, 2008, the weighted average interest rate on the Senior Credit Facilities was approximately 2.3%. Our obligations under the Senior Credit Facilities are
guaranteed by our guarantor subsidiaries, which consist of substantially all of our domestic subsidiaries and certain of our foreign subsidiaries and are secured by a first priority lien (generally
shared with the holders of the 2010 Secured Notes on substantially all of our domestic property, plant and equipment, the stock of all of or our material domestic subsidiaries and certain foreign
subsidiaries and pledges of intercompany notes between various of our subsidiaries.

On
November 14, 2007, in connection with the U.S. Base Chemicals Disposition, we used a portion of the proceeds to make a repayment of $100 million on the Dollar Term Loan.
Substantially all of the remaining proceeds were used to repay borrowings under the Revolving Facility and reduce amounts under the A/R Securitization Program.

On
April 19, 2007, we entered into an amendment to our Senior Credit Facilities. Pursuant to this amendment, the maturity of the Dollar Term Loan was extended to April 2014 and
the loan amount was increased to $1,640 million. We used the increased amount to repay, in full, our previously outstanding Euro Term Loan.

On
January 16, 2007, we made a voluntary repayment of $75 million U.S. dollar equivalents on our term loan B facility ($71 million on the Dollar Term Loan and
€3 million on the Euro Term Loan) with available liquidity.

Secured Notes

As of December 31, 2008, we had outstanding $296 million aggregate principal amount ($295 million book value and
$455 million original aggregate principal amount) under our 11.625% senior secured notes due October 15, 2010. The 2010 Secured Notes are currently redeemable at 102.906% of the
principal amount plus accrued interest, declining to par on and after October 15, 2009. Interest on the 2010 Secured Notes is payable semiannually in April and October of each year. The 2010
Secured Notes are secured by a first priority lien on all collateral securing the Senior Credit Facilities as described above (other than capital stock of Huntsman International's
first-tier foreign subsidiaries), shared equally with the lenders on the Senior Credit Facilities, subject to certain inter-creditor arrangements. The 2010 Secured Notes contain covenants
relating to the incurrence of debt and limitations on distributions, certain restricted payments, asset sales and affiliate transactions and are guaranteed by the Guarantors. The indentures governing
the 2010 Secured Notes also contain provisions requiring us to offer to repurchase the notes upon a change of control.

Senior Notes

As of December 31, 2008, we had outstanding $198 million ($300 million original aggregate principal amount) of
11.5% senior notes due 2012. Interest on the 2012 Senior Notes is payable

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14. DEBT (Continued)

semiannually
in January and July of each year. The 2012 Senior Notes are currently redeemable at 105.75% of the principal amount plus accrued interest, declining ratably to par on and after
July 15, 2010. The 2012 Senior Notes are unsecured obligations. The indentures governing our 2012 Senior Notes contain covenants, among other things, relating to the incurrence of debt and
limitations on distributions and certain restricted payments, asset sales and affiliate transactions and are guaranteed by the Guarantors. The indentures governing the 2012 Senior Notes contain
provisions requiring us to offer to repurchase the notes upon a change of control.

Subordinated Notes

As of December 31, 2008, we had outstanding $175 million 7.375% senior subordinated notes due 2015 and
€135 million (approximately $191 million) 7.5%
senior subordinated notes due 2015. The 2015 Subordinated Notes are redeemable on or after January 1, 2010 at 103.688% and 103.750%, respectively, of the principal amount plus accrued interest,
declining ratably to par on and after January 1, 2013.

As
of December 31, 2008, we had outstanding €400 million (approximately $567 million) 6.875% senior subordinated notes due 2013 and
$347 million aggregate principal amount ($352 million book value) under our 7.875% senior subordinated notes due 2014. The 2013 Subordinated Notes are redeemable on or after
November 15, 2009 at 105.156% of the principal amount plus accrued interest, declining ratably to par on or after November 15, 2012. The 2014 Subordinated Notes are redeemable on or
after November 15, 2010 at 103.938% of the principal amount plus accrued interest, declining ratably to par on or after November 15, 2012.

Interest
on the 2015 Subordinated Notes is payable semiannually in January and July of each year. Interest on the 2013 Subordinated Notes and the 2014 Subordinated Notes is payable
semiannually in November and May of each year. All of our subordinated notes are unsecured. The indentures governing our subordinated notes contain covenants relating, among other things, to the
incurrence of debt and limitations on distributions, certain restricted payments, asset sales and affiliate transactions. Our subordinated notes are guaranteed by the Guarantors. The indentures also
contain provisions requiring us to offer to repurchase the notes upon a change of control.

On
February 22, 2007, we closed on a direct private placement of $147 million (included within the total outstanding principal amount of $347 million of 2014
Subordinated Notes) in aggregate principal amount of the 2014 Subordinated Notes. These notes were issued at a premium of 104% of principal amount for a yield of 7.01%. We used the net proceeds of
$152 million to redeem all (approximately €114 million) of our remaining outstanding euro denominated 10.125% senior subordinated notes due 2009, which were called for
redemption on March 27, 2007 at a call price of 101.688% plus accrued interest.

Convertible Notes

Pursuant to the Settlement Agreement, on December 23, 2008, we issued $250 million in Convertible Notes (recorded at
$235 million fair value). The Convertible Notes are convertible at any time, at the option of the holder, at an initial conversion rate of 127.275 shares of our common stock per $1,000
principal amount of Convertible Notes (which is equal to an initial conversion price of $7.857 per share), subject to specified anti-dilution adjustments. The Convertible Notes bear
interest at

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. DEBT (Continued)

the
rate of 7% per year payable semi-annually on January 1 and July 1 of each year, beginning on July 1, 2009. Interest is payable either in cash or, at our option, in
shares of our common stock having a market value at that time equal to the interest payment. The Convertible Notes are our senior unsecured obligations and are not guaranteed by any of our
subsidiaries, including Huntsman International.

The
Convertible Notes will mature on December 23, 2018. At maturity, we may, at our option, pay the principal amount of the Convertible Notes in shares of our common stock having
a market value at that time equal to the principal amount of the Convertible Notes, plus an amount equal to the underwriting spread of a nationally-recognized underwriter chosen by us that would be
paid by a seller of the shares at such time.

We
may redeem the Convertible Notes in whole, for cash, at the principal amount of the Convertible Notes plus accrued and unpaid interest, at any time on or after December 23,
2011 if the closing price of our common stock, for at least 20 consecutive trading days prior to the notice of redemption, exceeds 135% of the conversion price in effect at that time.

Upon
the occurrence of certain change of control events, the holders of the Convertible Notes may require us to redeem all or any portion of the holders' Convertible Notes at the
principal amount plus accrued and unpaid interest.

Other Debt

We maintain a $25 million European Overdraft Facility that is a demand facility used for the working capital needs for our
European subsidiaries. As of December 31, 2008 and
December 31, 2007, we had $16 million and $15 million U.S. dollar equivalents, respectively, in borrowings outstanding under the European Overdraft Facility. We also maintain
other foreign overdraft facilities used for working capital needs.

HPS
obtained secured loans for the construction of its MDI production facility. This debt consists of various committed loans. As of December 31, 2008, HPS had $25 million
outstanding in U.S. dollar borrowings and 672 million in RMB borrowings (approximately $98 million) under these facilities. The interest rate on these facilities is LIBOR plus 0.48% for
U.S. dollar borrowings and 90% of the Peoples Bank of China rate for RMB borrowings. As of December 31, 2008, the interest rate was approximately 3.1% for U.S. dollar borrowings and 6.5% for
RMB borrowings. The loans are secured by substantially all the assets of HPS and will be repaid in 16 semiannual installments (which began on June 30, 2007). We have guaranteed 70% of any
amount due and unpaid by HPS under the loans described above (except for the VAT facility, which is not guaranteed). Our guarantees remain in effect until HPS has met certain conditions. The
conditions outstanding include completion of the building and equipment mortgage registrations, which are progressing as planned, and maintaining a debt service coverage ratio of at least 1.5:1 at the
time such registrations are completed. Our Chinese MDI joint ventures are unrestricted subsidiaries under the Senior Credit Facilities and under the indentures governing our outstanding notes.

On
October 22, 2008, HPS entered into a loan facility for the purpose of discounting commercial drafts with recourse. The facility has a stated capacity discounting up to
CNY500 million (approximately $73 million) and drafts are discounted using a discount rate of the three-month SIBOR plus 4.2%. As of December 31, 2008 the all-in
discount rate was 6.39%. As of December 31, 2008, HPS

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14. DEBT (Continued)

has
discounted with recourse CNY500 million (approximately $73 million) of commercial drafts. While the facility has a maturity of July 24, 2009, the lender has right to accept or
reject drafts presented for discounting.

Our
Australian subsidiaries maintain credit facilities that had an aggregate outstanding balance of A$59 million (approximately $41 million) as of December 31, 2008
($30 million of which is classified as current portion of long-term debt). These facilities are nonrecourse to Huntsman International and bear interest at the Australian index rate
plus a margin of 2.4%. As of December 31, 2008, the interest rate for these facilities was 7.0%. The Australian credit facilities mature in May 2010.

We
finance certain insurance premiums and, as of December 31, 2008 and 2007, we had outstanding notes payable in the amount of $23 million and $27 million,
respectively. Insurance premium financings are generally secured by the unearned premiums under such policies.

On
June 30, 2008, our subsidiary, Huntsman (UK) Limited, entered into the Short Term Revolving Facility, a $125 million short term committed revolving credit facility
maturing on June 28, 2009. In connection with an amendment to the A/R Securitization Program on November 13, 2008, we terminated the short term committed revolving credit facility of our
subsidiary, Huntsman (UK) Limited, of which nothing was drawn. See "Note 16. Securitization of Accounts Receivable."

Notes Payable from Huntsman International to Huntsman Corporation

Under an existing promissory note, as of December 31, 2008 we lent $423 million to our subsidiary, Huntsman
International, which funds were used by Huntsman International to repay borrowings outstanding under the Revolving Facility. This demand note is unsecured and is classified as current on the
accompanying consolidated balance sheets. As of December 31, 2008, under the terms of the note, Huntsman International promises to pay us interest on the unpaid principal amount thereof in like
money at a rate per annum not to exceed 25 basis points (0.25%) less than the then current revolving loan U.S. LIBOR-based borrowing as defined by the Revolving Facility. On January 6, 2009,
the interest rate was amended to a rate per annum based on the previous monthly average borrowing rate obtained under our A/R Securitization Program for U.S. dollar outstandings less 10 basis points.
Notwithstanding the foregoing, the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S. LIBOR-based borrowings under the Revolving
Facility. With our consent, the principal and accrued interest outstanding under this note may also be forgiven or capitalized or satisfied with any alternate form of consideration.

COMPLIANCE WITH COVENANTS

Our
management believes that we are in compliance with the covenants contained in the agreements governing our debt instruments, including our Senior Credit
Facilities, our A/R Securitization Program and the indentures governing our notes.

We
have only one financial covenant under our Senior Credit Facilities, which applies to our $650 million Revolving Facility. At any time loans or letters of credit are
outstanding under our Revolving Facility, the Leverage Covenant requires that Huntsman International maintain a net secured debt to EBITDA ratio of 3.75 to 1 (as defined in the applicable agreement,
the "Secured Leverage Ratio").

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14. DEBT (Continued)

If
in the future we were not able to meet the Secured Leverage Ratio, unless we obtained an amendment or waiver (as to which we can provide no assurance), then, for so long as we did not
meet the Secured Leverage Ratio, we would not have access to the liquidity otherwise available under our Revolving Facility. If we failed to meet the Secured Leverage Ratio at a time when we had loans
or letters of credit outstanding under the Revolving Facility, we would be in default under our Senior Credit Facilities, and, unless we obtained a waiver or forbearance with respect to such default
(as to which we can provide no assurance), we would be required to pay off the balance of our Senior Credit Facilities in full and would not have further access to such facilities.

The
agreements governing our $575 million A/R Securitization Program also contain certain financial covenants. Any material failure to meet the A/R Securitization Program
covenants in the future could lead to an event of default under the A/R Securitization Program, which could require us to cease our use of such facility. Under these circumstances, unless any default
was remedied or waived, we would likely lose the ability to obtain financing with respect to our trade receivables. A material default under the A/R Securitization Program would also constitute an
event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.

MATURITIES

The
scheduled maturities of our debt by year as of December 31, 2008 are as follows (dollars in millions):

HUNTSMAN CORPORATION

Year ending December 31:2009

$
2052010


3642011


492012


2282013


597Thereafter


2,439$
3,882


HUNTSMAN INTERNATIONAL

Year ending December 31:2009

$
6282010


3642011


492012


2282013


597Thereafter


2,210$
4,076


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14. DEBT (Continued)

We
also have lease obligations accounted for as capital leases which are included in other long-term debt. The scheduled maturities of our commitments under capital leases
are as follows (dollars in millions):

Year ending December 31:2009

$
42010


2Total minimum payments


6Less: Amounts representing interest


(1
)Present value of minimum lease payments


5Less: Current portion of capital leases


(3
)Long-term portion of capital leases

$
2


15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risks, such as changes in interest rates, foreign exchange rates and commodity pricing risks. From time to time, we enter into transactions, including
transactions involving derivative instruments, to manage certain of these exposures.

All
derivatives, whether designated in hedging relationships or not, are recorded on our balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and the hedged items are recognized in earnings. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in
accumulated other comprehensive (loss) income, to the extent effective, and will be recognized in the income statement when the hedged item affects earnings. To the extent applicable, we perform
effectiveness assessments in order to use hedge accounting at each reporting period. For a derivative that does not qualify as a hedge, changes in fair value are recognized in earnings.

We
also hedge our net investment in certain European operations. Changes in the fair value of the hedge in the net investment of certain European operations are recorded in accumulated
other comprehensive (loss) income.

INTEREST RATE RISKS

Through
our borrowing activities, we are exposed to interest rate risk. Such risk arises due to the structure of our debt portfolio, including the duration of
the portfolio and the mix of fixed and floating interest rates. 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 derivative instruments.

From
time to time, we may purchase interest rate swaps and/or interest rate collars to reduce the impact of changes in interest rates on our floating-rate
long-term debt. Under interest rate swaps, we agree 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 collars entitle us to receive from the counterparties (major banks) the amounts, if any, by which our interest
payments on certain of our floating-rate borrowings exceed a certain rate, and require us to

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15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

pay
to the counterparties (major banks) the amount, if any, by which our interest payments on certain of our floating-rate borrowings are less than a certain rate.

Interest
rate contracts were recorded as a component of other noncurrent liabilities as of December 31, 2008 and 2007. The effective portion of the changes in the fair value of
the swaps were recorded in accumulated other comprehensive (loss) income, with any ineffectiveness recorded in interest expense. As of December 31, 2008 and 2007, the fair value of these
contracts was not significant. As of December 31, 2008 and 2007, the contracts had a notional amount of $13 million and $14 million, respectively, and a maturity date of 2010,
each.

For
the years ended December 31, 2008 and 2007, the changes in accumulated other comprehensive (loss) income associated with cash flow hedging activities were not considered
significant.

On
July 2, 2007, we let expire an interest rate contract of notional amount of $60 million pursuant to which we had swapped LIBOR interest for a fixed rate of 4.315%.

During
2009, interest expense of approximately nil is expected to be reclassified to earnings. The actual amount that will be reclassified to earnings over the next twelve months may
vary from this amount due to changing market conditions. We are exposed to credit losses in the event of nonperformance by a counterparty to the derivative financial instruments. We anticipate,
however, that the counterparties
will be able to fully satisfy obligations under the contracts. Market risk arises from changes in interest rates.

FOREIGN EXCHANGE RATE RISK

Our
cash flows and earnings are subject to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various currencies. From
time to time, we may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. Where practicable, we generally net
multicurrency cash balances among our subsidiaries to help reduce exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through financial market
transactions, principally through the purchase of spot or forward foreign exchange contracts (generally with maturities of one year or less). We do not hedge our currency exposures in a manner that
would eliminate the effect of changes in exchange rates on our cash flows and earnings. Our A/R Securitization Program in certain circumstances requires that we enter into forward foreign currency
hedges intended to hedge currency exposures. As of December 31, 2008 and December 31, 2007, we had no forward currency hedges outstanding.

On
January 15, 2008, we entered into a series of forward foreign currency contracts in our Pigments segment to partially hedge the impact, for up to one year, of movements in
foreign currency rates associated with the purchases of raw materials and sales of pigment in non-functional currencies. As of December 31, 2008, these contracts had a notional
amount of approximately $9 million and were designated as cash flow hedges. As of December 31, 2008, the fair value of these contracts was not considered significant. For the year ended
December 31, 2008, the effective portion of the changes in the fair value was not significant with ineffectiveness of $1 million recorded as a decrease in sales, $1 million
recorded as a reduction in cost of sales and a foreign currency loss of $1 million.

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15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we had swapped $153 million of LIBOR floating rate debt payments for
€116 million of EURIBOR floating rate debt payments. This swap was not designated as a hedge for financial reporting purposes. For the years ended December 31, 2008 and
2007, we recorded a foreign currency gain (loss) on this swap of $21 million and ($17) million, respectively, in the consolidated statement of operations.

On
October 24, 2008, we unwound a cross currency interest rate swap pursuant to which we had swapped $96 million of LIBOR floating rate debt payments for
€71 million of EURIBOR floating rate debt payments. This swap was designated as a hedge of a net investment for financial reporting purposes. We received a cash benefit from the
unwind of $3 million in the fourth quarter of 2008. For the years ended December 31, 2008 and 2007, the effective portion of the changes in the fair value of $14 million and ($8)
million, respectively, was recorded as income (loss) in other comprehensive (loss) income, with ineffectiveness of $2 million and nil, respectively, recorded in interest expense in our
consolidated statement of operations.

On
July 12, 2007, we unwound a cross currency interest rate swap pursuant to which we had swapped $31 million of 11.0% fixed rate debt for
€25 million of 9.4% fixed rate debt. The swap was not designated as a hedge for financial reporting purposes. We recorded an unrealized foreign currency loss on this swap of
$2 million and $3 million, respectively, in our consolidated statements of operations for the years ended December 31, 2007 and 2006.

A
significant portion of our debt is denominated in euros. We also finance certain of our non-U.S. subsidiaries with intercompany loans that are, in many cases, denominated
in currencies other than the entities' functional currency. We manage the net foreign currency exposure created by this debt through various means, including cross-currency swaps, the designation of
certain intercompany loans as permanent loans because they are not expected to be repaid in the foreseeable future ("permanent loans") and the designation of certain debt and swaps as net investment
hedges.

Foreign
currency transaction gains and losses on intercompany loans that are not designated as permanent loans are recorded in earnings. Foreign currency transaction gains and losses on
intercompany loans that are designated as permanent loans are recorded in other comprehensive income. From time to time, we review such designation of intercompany loans.

From
time to time, we review our non-U.S. dollar denominated debt and swaps to determine the appropriate amounts designated as hedges. As of December 31, 2008, we have
designated approximately €205 million of euro-denominated debt as a hedge of our net investments. As of December 31, 2008, we had approximately
€961 million in net euro assets.

COMMODITY PRICES RISK

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 many of our finished products are at market related prices which are largely set on a monthly or quarterly basis in line with industry practice. Consequently, we do not generally
hedge our commodity exposures.

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16. SECURITIZATION OF ACCOUNTS RECEIVABLE

Under our A/R Securitization Program, we grant an undivided interest in certain of our trade receivables to a qualified off-balance sheet entity at a discount. This undivided
interest serves as security for the issuance by the Receivables Trust of commercial paper. The A/R Securitization Program currently provides for financing through a commercial paper conduit program
(in both U.S. dollars and euros). We account for the transfer of our receivables as a sale in accordance with SFAS No. 140. On November 13, 2008, we completed an amendment and expansion
of our A/R Securitization Program. In connection with this amendment and expansion, among other things, the amendment (1) added two of our subsidiaries as receivables originators under the
program, (2) increased the size of the program to an aggregate currency equivalent of approximately $575 million U.S. dollars from $500 million, (3) added two new financial
institutions as funding agents for their related commercial paper conduits and liquidity providers, and (4) extended the term of the program through November 12, 2009. As a result of the
amendment, the Receivable Trust has commercial paper conduit financing available at an interest rate equal to commercial paper cost of funds plus 150 basis points per annum.

As
of December 31, 2008, the Receivables Trust had $446 million in U.S. dollar equivalents in commercial paper outstanding (consisting of $175 million and
approximately €191 million ($271 million)) and held $25 million of cash collateral that was used subsequent to year-end to redeem outstanding
commercial paper.

As
of December 31, 2008 and 2007, the fair value of our retained interest in receivables (including servicing assets) subject to the program was approximately $147 million
and $136 million, respectively. Our retained interest is reported in accounts and notes receivable in the consolidated balance sheet. The value of the retained interest is subject to credit and
interest rate risk. For the years ended
December 31, 2008, 2007 and 2006, new sales of accounts receivable under the program totaled approximately $5,187 million, $5,466 million and $7,492 million, respectively,
and cash collections from receivables under the program that were reinvested totaled approximately $5,117 million, $5,580 million and $7,395 million, respectively. Servicing fees
received during the years ended December 31, 2008, 2007 and 2006 were approximately $7 million, $7 million and $8 million, respectively.

We
incur losses on the A/R Securitization Program for the discount on receivables under the program and fees and expenses associated with the program. For the years ended
December 31, 2008, 2007 and 2006, losses on the A/R Securitization Program were $27 million, $21 million and $13 million, respectively. We also retain 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 the A/R Securitization Program were not significant for the years ended December 31, 2008, 2007 and 2006. For each
of the years ending December 31, 2008 and 2007, the fair value of the open forward currency contracts was nil.

F-57

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. SECURITIZATION OF ACCOUNTS RECEIVABLE (Continued)

The key economic assumptions used in valuing the residual interest are presented below:

December 31,2008

2007Weighted average life (in days)


38-46


38-43Credit losses (annual rate)


Less than 1
%

Less than 1
%Discount rate (weighted average life)


Less than 1
%

Less than 1
%


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 December 31, 2008 and 2007 were $21 million and $20 million, respectively.

17. FAIR VALUE MEASUREMENTS

We adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. In February 2008, the FASB issued FSP No. FAS 157-1 and FAS 157-2, which delays the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least
annually), to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years and removes certain leasing transactions from the scope of SFAS No. 157.
Assets and liabilities that we record at fair value and that are currently subject to SFAS No. 157 include our derivative instruments, available-for-sale securities,
retained interests in securitized receivables and our Convertible Notes.

The
following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):

Fair Value Amounts UsingDescription

December 31,
2008

Quoted prices in active
markets for identical
assets (Level 1)

Significant other
observable inputs
(Level 2)

Significant
unobservable inputs
(Level 3)Assets:Available-for-sale securities(1)

$
10

$
10

$


$
Retained interest in securitized receivables(2)


147








147Total assets

$
157

$
10

$


$
147Liabilities:Derivatives(3)

$
(1
)
$


$
(1
)
$



---

F-58

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. FAIR VALUE MEASUREMENTS (Continued)

The
following table shows a reconciliation of beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)
(dollars in millions):

Fair Value Measurements Using Level 3 Inputs

Year ended
December 31, 2008Balance at beginning of period

$
136Total net losses (realized/unrealized) included in earnings


(40
)Purchases, issuances and settlements


51Balance at end of period

$
147The amount of total losses for the period included in earnings attributable to the changes in unrealized gains or losses relating to
assets still held at December 31, 2008

$
(16
)


Gains
and losses (realized and unrealized) included in earnings (or changes in net assets) for the year ended December 31, 2008 are reported in loss on accounts receivable
securitization program and other income (expense) as follows (dollars in millions):

Other income (expense)Loss on accounts receivable securitization programDecember 31, 2008December 31, 2008Total net losses included in earnings (or changes in net assets)

$
(31
)
$
(9
)Changes in unrealized losses relating to assets still held at December 31, 2008

$
(7
)
$
(9
)


The
following liabilities were measured at fair value upon initial recognition (dollars in millions):

Fair Value Amounts UsingDescription

December 31, 2008

Quoted prices in active
markets for identical
assets (Level 1)

Significant other
observable inputs
(Level 2)

Significant
unobservable inputs
(Level 3)Liabilities:Convertible Notes(4)

$
(235
)
$


$


$
(235
)


---

F-59

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. FAIR VALUE MEASUREMENTS (Continued)



18. FAIR VALUE OF FINANCIAL INSTRUMENTS

Huntsman Corporation

December 31,2008

2007Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value(Dollars in millions)Non-qualifed employee benefit plan investments

$
10

$
10

$
13

$
13Government securities








4


4Long-term debt (including current portion)


3,882


2,537


3,569


3,637


Huntsman International

December 31,2008

2007Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value(Dollars in millions)Non-qualifed employee benefit plan investments

$
10

$
10

$
13

$
13Long-term debt (including current portion)


3,647


2,302


3,569


3,637


The
carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the immediate or
short-term maturity of these financial instruments. The fair value of government securities and non-qualified employee benefit plan investments are estimated using prevailing
market prices. With the exception of our Convertible Notes, which were recorded at fair value based on the present value of estimated future cash flows, our long-term debt was recorded at
cost. The estimated fair values of our long-term debt other than the Convertible Notes are based on quoted market prices or on interest rates that are currently available to us for
issuance of debt with similar terms and remaining maturities for debt issues not quoted on an exchange.

The
fair value estimates presented herein are based on pertinent information available to management as of December 31, 2008 and 2007. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2008,
and current estimates of fair value may differ significantly from the amounts presented herein.

F-60

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT AND OTHER POSTRETIREMENT BENEFIT PLANS

Our employees participate in a trusteed, non-contributory defined benefit pension plan (the "Plan") that covers
substantially all of our full-time U.S. employees. Effective July 1, 2004, the Plan formula for employees not covered by a collective bargaining agreement was converted to a cash
balance design. For represented employees, participation in the cash balance design is subject to the terms of negotiated contracts. For participating employees, benefits accrued under the prior
formula were converted to opening cash balance accounts. The new cash balance benefit formula provides annual pay credits from 4% to 12% of eligible pay, depending on age and service, plus accrued
interest. Participants in the plan on July 1, 2004 may be eligible for additional annual pay credits from 1% to 8%, depending on their age and service as of that date, for up to five years. The
conversion to the cash balance plan did not have a significant impact on the accrued benefit liability, the funded status or ongoing pension expense.

We
sponsor defined benefit plans in a number of countries outside of the U.S. The availability of these plans, and their specific design provisions, are consistent with local competitive
practices and regulations.

We
also sponsor two unfunded postretirement benefit plans other than pensions, which provide medical and life insurance benefits.

Our
postretirement benefit plans provide a fully insured Medicare Part D plan including prescription drug benefits affected by the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the "Act"). We cannot determine whether the medical benefits provided by our postretirement benefit
plans are actuarially equivalent to those provided by the Act. We do not collect a subsidy and our net periodic postretirement benefits cost, and related benefit obligation, do not reflect an amount
associated with the subsidy.

In
September 2006, the FASB issued SFAS No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment
of FASB Statements No. 87, 88, 106, and 132(R). SFAS No. 158 requires us to recognize the overfunded or underfunded status of our defined benefit postretirement
plan(s) (other than multiemployer plans) as an asset or liability in our statement of financial position and to recognize changes in the funded status in the year in which the changes occur through
comprehensive income. We adopted certain provisions of SFAS No. 158 on January 1, 2008. Beginning with our fiscal year ended December 31, 2008, SFAS No. 158 requires that
the assumptions used to measure our benefit obligations and annual expenses be determined as of the balance sheet date and all plan assets be reported as of that date. We used the second approach as
described in paragraph 19 of SFAS No. 158 to transition our measurement date from November 30 to December 31. Under this approach, we recorded a charge to beginning
retained earnings, net of tax, of $3 million, as of January 1, 2008.

F-61

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

The
following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets at December 31, 2008 and 2007 (dollars in millions):

Defined Benefit Plans

Other Postretirement Benefit Plans2008

2007

2008

2007U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
PlansChange in benefit obligationBenefit obligation at beginning of year

$
660

$
2,257

$
663

$
2,585

$
144

$
5

$
171

$
5Elimination of early measurement date


1


8

















Service cost


24


50


30


50


3





4


Interest cost


40


113


40


113


8





9


Participant contributions





12





13


3








Plan amendments





1





(3
)










Divestitures/acquisitions











(4
)










Exchange rate changes





(257
)




144





(1
)




1Settlements/transfers





(35
)




(339
)










Other





(2
)

4


(2
)










Curtailments








(1
)










(9
)

Special termination benefits





1

















Actuarial (gain)/loss


(16
)

(47
)

(17
)

(215
)

5





(17
)

Benefits paid


(55
)

(92
)

(59
)

(85
)

(17
)

(1
)

(14
)

(1
)Benefit obligation at end of year

$
654

$
2,009

$
660

$
2,257

$
146

$
3

$
144

$
5Change in plan assetsFair value of plan assets at beginning of year

$
519

$
2,230

$
490

$
2,271

$


$


$


$
Elimination of early measurement date


7


42

















Actual return on plan assets


(159
)

(415
)

29


143











Exchange rate changes





(210
)




136











Participant contributions





12





13


3








Other





(1
)




(1
)










Administrative expenses





(1
)
















Company contributions


36


62


59


93


14


1


14


1Settlements/transfers





(35
)




(340
)










Benefits paid


(55
)

(92
)

(59
)

(85
)

(17
)

(1
)

(14
)

(1
)Fair value of plan assets at end of year

$
348

$
1,592

$
519

$
2,230

$


$


$


$
Funded statusFair value of plan assets

$
348

$
1,592

$
519

$
2,230

$


$


$


$
Benefit obligation


654


2,009


660


2,257


146


3


144


5Funded status


(306
)

(417
)

(141
)

(27
)

(146
)

(3
)

(144
)

(5
)Contributions paid December 1 through December 31








8


35








1


Accrued benefit cost

$
(306
)
$
(417
)
$
(133
)
$
8

$
(146
)
$
(3
)
$
(143
)
$
(5
)Amounts recognized in balance sheet:Noncurrent asset

$


$
2

$
2

$
171

$


$


$


$
Current liability


(5
)

(7
)

(5
)

(6
)

(13
)




(13
)

(1
)Noncurrent liability


(301
)

(412
)

(130
)

(157
)

(133
)

(3
)

(130
)

(4
)$
(306
)
$
(417
)
$
(133
)
$
8

$
(146
)
$
(3
)
$
(143
)
$
(5
)


F-62

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

Huntsman Corporation

Defined Benefit Plans

Other Postretirement Benefit Plans2008

2007

2008

2007U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
PlansAmounts recognized in accumulated other comprehensive (loss) income:Net actuarial loss

$
292

$
592

$
112

$
76

$
37

$
1

$
33

$
1Prior service cost


(36
)

(2
)

(41
)

(5
)

(15
)




(17
)

Transition obligation


1


1


2


1











$
257

$
591

$
73

$
72

$
22

$
1

$
16

$
1


Huntsman International

Defined Benefit Plans

Other Postretirement Benefit Plans2008

2007

2008

2007U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
Plans

U.S. Plans

Non-U.S.
PlansAmounts recognized in accumulated other comprehensive (loss) income:Net actuarial loss

$
295

$
682

$
115

$
172

$
37

$
1

$
33

$
1Prior service cost


(36
)

(2
)

(41
)

(5
)

(15
)




(17
)

Transition obligation


1


1


2


1











$
260

$
681

$
76

$
168

$
22

$
1

$
16

$
1


The
amounts in accumulated other comprehensive (loss) income that are expected to be recognized as components of net periodic benefit cost during the next fiscal year are as follows
(dollars in millions):

Huntsman Corporation

Defined Benefit Plans

Other Postretirement
Benefit PlansU.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. PlansActuarial loss

$
7

$
29

$
2

$
Prior service cost


(5
)

(2
)

(2
)

Transition obligation





1





Total

$
2

$
28

$


$



F-63

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

Huntsman International

Defined Benefit Plans

Other Postretirement
Benefit PlansU.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. PlansActuarial loss

$
7

$
34

$
2

$
Prior service cost


(5
)

(2
)

(2
)

Transition obligation





1





Total

$
2

$
33

$


$



Components
of net periodic benefit costs for the years ended December 31, 2008, 2007 and 2006 were as follows (dollars in millions):

Huntsman Corporation

Defined Benefit PlansU.S. plans

Non U.S. plans2008

2007

2006

2008

2007

2006Service cost

$
24

$
30

$
34

$
50

$
50

$
53Interest cost


40


40


37


113


113


98Expected return on assets


(42
)

(40
)

(34
)

(148
)

(158
)

(125
)Amortization of transition obligation


1


1


1





1


1Amortization of prior service cost


(5
)

(6
)

(6
)

(1
)

(1
)

(1
)Amortization of actuarial loss (gain)


5


7


9


(1
)

7


10Curtailment gain





(14
)










(18
)Settlement loss (gain)











1


(5
)

1Special termination benefits











1





2Net periodic benefit cost


23


18


41


15


7


21Less discontinued operations





11


(7
)




11


(2
)Net periodic benefit cost from continuing operations

$
23

$
29

$
34

$
15

$
18

$
19




Other Postretirement Benefit PlansU.S. plans

Non U.S. plans2008

2007

2006

2008

2007

2006Service cost

$
3

$
4

$
4

$


$


$
Interest cost


8


9


9








Amortization of prior service cost


(2
)

(2
)

(3
)







Amortization of actuarial loss


2


2


3








Curtailment gain





(4
)










Net periodic benefit cost


11


9


13








Less discontinued operations





1


(2
)







Net periodic benefit cost from continuing operations

$
11

$
10

$
11

$


$


$



F-64

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

Huntsman International

Defined Benefit PlansU.S. plans

Non U.S. plans2008

2007

2006

2008

2007

2006Service cost

$
24

$
30

$
34

$
50

$
50

$
53Interest cost


40


40


37


113


113


98Expected return on assets


(42
)

(40
)

(34
)

(148
)

(158
)

(125
)Amortization of transition obligation


1


1


1





1


1Amortization of prior service cost


(5
)

(6
)

(6
)

(1
)

(1
)

(1
)Amortization of actuarial loss


5


7


10


5


14


20Curtailment gain





(14
)










Settlement loss











1


5


1Special termination benefits











1





2Net periodic benefit cost


23


18


42


21


24


49Less discontinued operations





11


(7
)







(19
)Net periodic benefit cost from continuing operations

$
23

$
29

$
35

$
21

$
24

$
30




Other Postretirement Benefit PlansU.S. plans

Non U.S. plans2008

2007

2006

2008

2007

2006Service cost

$
3

$
4

$
4

$


$


$
Interest cost


8


9


9








Amortization of prior service cost


(2
)

(2
)

(3
)







Amortization of actuarial loss


2


2


3








Curtailment gain





(4
)










Net periodic benefit cost


11


9


13








Less discontinued operations





1


(2
)







Net periodic benefit cost from continuing operations

$
11

$
10

$
11

$


$


$



F-65

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

The
following weighted-average assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost for the year:

Defined Benefit PlansU.S. plans

Non U.S. plans2008

2007

2006

2008

2007

2006Projected benefit obligation:Discount rate


6.47
%

6.21
%

5.67
%

5.04
%

5.09
%

4.39
%Rate of compensation increase


3.77
%

3.89
%

3.89
%

3.21
%

3.24
%

3.22
%Net periodic pension cost:Discount rate


6.21
%

5.67
%

5.75
%

5.09
%

4.39
%

4.61
%Rate of compensation increase


3.89
%

3.89
%

3.90
%

3.24
%

3.22
%

3.33
%Expected return on plan assets


8.25
%

8.25
%

8.25
%

6.89
%

6.75
%

6.89
%




Other Postretirement Benefit PlansU.S. plans

Non U.S. plans2008

2007

2006

2008

2007

2006Projected benefit obligation:Discount rate


6.39
%

6.05
%

5.63
%

6.25
%

5.25
%

5.00
%Net periodic pension cost:Discount rate


6.05
%

5.63
%

5.71
%

5.25
%

5.00
%

5.00
%


The
projected benefit obligation and fair value of plan assets for the defined benefit plans with projected benefit obligations in excess of plan assets were as follows (dollars in
millions):

U.S. plans

Non U.S. plans2008

2007

2008

2007Projected benefit obligation in excess of plan assetsProjected benefit obligation, end of year

$
654

$
642

$
2,005

$
1,198Fair value of plan assets, end of year


348


499


1,587


1,027


The
projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the defined benefit plans with an accumulated benefit obligation in excess of plan
assets at December 31, 2008 and 2007 were as follows (dollars in millions):

U.S. plans

Non U.S. plans2008

2007

2008

2007Accumulated benefit obligation in excess of plan assetsProjected benefit obligation, year end

$
654

$
642

$
1,337

$
172Accumulated benefit obligation, year end


628


617


1,233


152Fair value of plan assets, year end


348


499


957


31


F-66

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

Expected
future contributions and benefit payments are as follows (dollars in millions):

U.S. Plans

Non-U.S. PlansDefined
Benefit
Plans

Other
Postretirement
Benefit
Plans

Defined
Benefit
Plans

Other
Postretirement
Benefit
Plans2009 expected employer contributions:To plan trusts

$
85

$
13

$
58

$
Expected benefit payments:2009


45


13


86


2010


45


13


86


2011


46


13


90


2012


48


13


96


2013


42


12


93


2014-2018


229


57


494


1


In
both 2008 and 2007, the health care trend rate used to measure the expected increase in the cost of benefits was assumed to be 9%, decreasing to 5% after 2016. Assumed health care
cost trend rates have a significant effect on the amounts reported for the postretirement benefit plans. A one-percent-point change in assumed health care cost trend rates would have the
following effects (dollars in millions):

Asset category

Increase

DecreaseEffect on total of service and interest cost

$


$
Effect on postretirement benefit obligation


4


(4
)


The
asset allocation for our pension plans at December 31, 2008 and 2007 and the target allocation for 2009, by asset category, follows. The fair value of plan assets for these
plans was $1,940 million at December 31, 2008. Based upon historical returns, the expectations of our investment

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

committee
and outside advisors, the expected long term rate of return on these assets is estimated to be between 6.89% and 8.25%.

Asset category

Target Allocation 2009

Allocation at
December 31, 2008

Allocation at
December 31, 2007U.S. pension plans:Large Cap Equities


30
%

27
%

30
%Small/Mid Cap Equities


15
%

15
%

17
%International Equities


19
%

14
%

17
%Fixed Income


25
%

29
%

24
%Real Estate/Other


11
%

15
%

10
%Cash








2
%Total U.S. pension plans


100
%

100
%

100
%Non-U.S. pension plans:Equities


48
%

42
%

53
%Fixed Income


38
%

44
%

41
%Real Estate/Other


13
%

12
%

5
%Cash


1
%

2
%

1
%Total non-U.S. pension plans


100
%

100
%

100
%


Equity
securities in our pension plans did not include any equity securities of our Company or our affiliates at the end of 2008.

Our
pension plan assets are managed by outside investment managers; assets are rebalanced based upon market opportunities and the consideration of transactions costs. Our strategy with
respect to pension assets is to pursue an investment plan that, over the long term is expected to protect the funded status of the plan, enhance the real purchasing power of plan assets, and not
threaten the plan's ability to meet currently committed obligations.

DEFINED CONTRIBUTION PLANS

We
have a money purchase pension plan covering substantially all of our domestic employees who were hired prior to January 1, 2004. Employer
contributions are made based on a percentage of employees' earnings (ranging up to 8%).

We
also have a salary deferral plan covering substantially all domestic employees. Plan participants may elect to make voluntary contributions to this plan up to a specified amount of
their compensation. We contribute an amount equal to one-half of the participant's contribution, not to exceed 2% of the participant's compensation.

Coincident
with the introduction of the cash balance formula within our defined benefit pension plan, the money purchase pension plan was closed to new hires. At the same time, the
company match in the salary deferral plan was increased, for new hires, to a 100% match, not to exceed 4% of the participant's compensation, once the participant has achieved six years of service with
the Company.

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. EMPLOYEE BENEFIT PLANS (Continued)

Our
total combined expense for the above defined contribution plans for the years ended December 31, 2008, 2007 and 2006 was $12 million, $16 million and
$15 million, respectively of which nil, $4 million and $4 million related to discontinued operations, respectively.

SUPPLEMENTAL SALARY DEFERRAL PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The
Huntsman Supplemental Savings Plan ("SSP") is a non-qualified plan covering key management employees and allows participants to defer amounts
that would otherwise be paid as compensation. The participant can defer up to 75% of their salary and bonus each year. This plan also provides benefits that would be provided under the Huntsman Salary
Deferral Plan if that plan were not subject to legal limits on the amount of contributions that can be allocated to an individual in a single year. The SSP was amended and restated effective as of
January 1, 2005 to allow eligible executive employees to comply with Section 409A of the Internal Revenue Code of 1986 ("Section 409A").

The
Huntsman Supplemental Executive Retirement Plan (the "SERP") is an unfunded nonqualified pension plan established to provide certain executive employees with benefits that could not
be provided, due to legal limitations, under the Huntsman Defined Benefit Pension Plan, a qualified defined benefit pension plan, and the Huntsman Money Purchase Pension Plan, a qualified money
purchase pension plan.

Assets
of these plans are included in other noncurrent assets and at December 31, 2008 and 2007 were $10 million and $13 million, respectively. During each of the
years ended December 31, 2008, 2007 and 2006, we expensed a total of $1 million for the SSP and the SERP.

STOCK-BASED INCENTIVE PLAN

In
connection with the initial public offering of common and preferred stock on February 16, 2005, we adopted the Huntsman Stock Incentive Plan (the
"Stock Incentive Plan"). The Stock Incentive Plan permits the grant of non-qualified stock options, incentive stock options, stock appreciation rights, nonvested stock, phantom stock,
performance awards and other stock-based awards ("Awards") to our employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock options may
be granted solely to employees. A maximum of 21,590,909 shares of common stock may be delivered pursuant to the Awards under the Stock Incentive Plan. See "Note 26. Stock-Based Compensation
Plans."

INTERNATIONAL PLANS

International
employees are covered by various post employment arrangements consistent with local practices and regulations. Such obligations are included in
the consolidated financial statements in other long-term liabilities.

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES

The following is a summary of U.S. and non-U.S. provisions for current and deferred income taxes (dollars in millions):

Huntsman Corporation

For the Year ended December 31,2008

2007

2006Income tax (expense) benefit:U.S.Current

$
(22
)
$
1

$
15Deferred


(190
)

(16
)

6Non-U.S.Current


(36
)

(53
)

(49
)Deferred


58


80


78Total

$
(190
)
$
12

$
50


Huntsman International

For the Year ended December 31,2008

2007

2006Income tax benefit (expense):U.S.Current

$
(6
)
$
1

$
16Deferred


(10
)

(63
)

4Non-U.S.Current


(36
)

(53
)

(49
)Deferred


54


74


60Total

$
2

$
(41
)
$
31


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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

The following schedule reconciles the differences between the U.S. federal income taxes at the U.S. statutory rate to our (provision) benefit for income taxes (dollars in millions):

Huntsman Corporation

For the Year ended December 31,2008

2007

2006Income from continuing operations before income taxes and minority interest

$
669

$
31

$
260Expected tax expense at U.S. statutory rate of 35%


(234
)

(11
)

(91
)Change resulting from:State tax (expense) benefit net of federal benefit


(7
)

3


1Effects of non-U.S. operations and tax rate differentials


5


(15
)

(8
)Expenses associated with the Merger


73


(73
)

U.K. exchange gains and losses


24


1


(2
)Tax authority dispute resolutions


68


3


55Change in valuation allowance


(117
)

110


94Othernet


(2
)

(6
)

1Total income tax (expense) benefit

$
(190
)
$
12

$
50


Huntsman International

For the Year ended
December 31,2008

2007

2006(Loss) income from continuing operations before income taxes and minority interest

$
(94
)
$
255

$
261Expected tax benefit (expense) at U.S. statutory rate of 35%


33


(89
)

(91
)Change resulting from:State tax (expense) benefit net of federal benefit


(7
)

3


3Effects of non-U.S. operations and tax rate differential


2


(18
)

(8
)U.K. exchange gains and losses


24


1


(2
)Tax authority dispute resolutions


68


3


55Change in valuation allowance


(115
)

63


73Othernet


(3
)

(4
)

1Total income tax benefit (expense)

$
2

$
(41
)
$
31


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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

The
components of income (loss) from continuing operations before income taxes and minority interest were as follows (dollars in millions):

Huntsman Corporation

For the Year ended
December 31,2008

2007

2006U.S.

$
805

$
33

$
201Non-U.S.


(136
)

(2
)

59Total

$
669

$
31

$
260


Huntsman International

For the Year ended
December 31,2008

2007

2006U.S.

$
42

$
257

$
203Non-U.S.


(136
)

(2
)

58Total

$
(94
)
$
255

$
261


Components
of deferred income tax assets and liabilities were as follows (dollars in millions):

Huntsman Corporation

December 31,2008

2007Deferred income tax assets:Net operating loss and AMT credit carryforwards

$
739

$
789Pension and other employee compensation


278


150Property, plant and equipment


110


136Intangible assets


81


82Foreign tax credits


67


69Other, net


106


185Total


1,381


1,411Deferred income tax liabilities:Property, plant and equipment


(474
)

(517
)Pension and other employee compensation


(1
)

(34
)Other, net


(85
)

(98
)Total


(560
)

(649
)Net deferred tax asset before valuation allowance


821


762Valuation allowance


(669
)

(496
)Net deferred tax asset (liability)

$
152

$
266


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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

December 31,2008

2007Current tax asset

$
21

$
73Current tax liability


(36
)

(3
)Non-current tax asset


284


350Non-current tax liability


(117
)

(154
)Total

$
152

$
266


Huntsman International

December 31,2008

2007Deferred income tax assets:Net operating loss and AMT credit carryforwards

$
819

$
718Pension and other employee compensation


278


150Property, plant and equipment


110


136Intangible assets


80


80Foreign tax credits


71


69Other, net


103


184Total


1,461


1,337Deferred income tax liabilities:Property, plant and equipment


(455
)

(495
)Pension and other employee compensation


(1
)

(34
)Other, net


(15
)

(51
)Total


(471
)

(580
)Net deferred tax asset before valuation allowance


990


757Valuation allowance


(681
)

(510
)Net deferred tax asset (liability)

$
309

$
247Current tax asset

$
21

$
74Current tax liability


(35
)

(3
)Non-current tax asset


392


300Non-current tax liability


(69
)

(124
)Total

$
309

$
247


As
of December 31, 2008, we have fully utilized all of our U.S. federal regular tax net operating loss carryforwards ("NOLs"). We have NOLs of $2,565 million in various
non-U.S. jurisdictions. While the majority of the non-U.S. NOLs have no expiration date, $210 million have a limited life and $8 million are scheduled to expire
in 2009. We had $10 million of NOLs expire unused in 2008 that had been previously subject to a full valuation allowance.

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

Included
in the $2,565 million of non-U.S. NOLs is $1,169 million attributable to Huntsman Advanced Materials, LLC's Luxembourg entities. As of
December 31, 2008, there was a valuation allowance against these net tax-effected NOLs of $281 million. Due to the uncertainty surrounding the realization of the benefits of
these losses that may result from future dissolution or restructuring of the Luxembourg entities, including potential ruling requests from Luxembourg authorities, we have reduced the related deferred
tax asset with a valuation allowance.

We
are subject to the "ownership change" rules of Section 382 of the Internal Revenue Code. Under these rules, our use of the NOLs could be limited in tax periods following the
date of an ownership change. Based upon the existence of significant tax "built-in income" items, the ownership change rules had no effect on our ability to utilize the NOLs.

Valuation
allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in
judgment about the realizability of the related deferred tax assets. During the fourth quarter of 2008, we established valuation allowances of $35 million on certain net deferred tax assets
principally, in Switzerland. During 2007, we released valuation allowances of $123 million on certain net deferred tax assets, principally in the United States.

The
following is a summary of changes in the valuation allowance (dollars in millions):

Huntsman Corporation

2008

2007

2006Valuation allowance as of January 1

$
496

$
572

$
550Valuation allowance as of December 31


669


496


572Net change


(173
)

76


(22
)Foreign currency movements


(19
)

17


7Deferred tax liabilities recorded in purchase accounting which reduced the need for valuation allowance








(8
)Recognition of net operating losses based on final settlement with U.S. and U.K. tax authorities, with a corresponding increase to
valuation allowances








53Increase to deferred tax assets with an offsetting decrease to valuation allowances


76


27


72Movement of net deferred tax assets related to discontinued operations








(7
)Reversal of valuation allowances on deferred tax assets related to prior acquisitions, with a corresponding credit to equity





(8
)

Reversal of valuation allowances on deferred tax assets related to prior acquisitions, with a corresponding reduction to goodwill and
intangible assets


(1
)

(2
)

(1
)Change in valuation allowance per rate reconciliation

$
(117
)
$
110

$
94


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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

2008

2007

2006Components of change in valuation allowance affecting operating tax expense:Effects of pre-tax income and pre-tax losses in jurisdictions with valuation allowances

$
(82
)
$
(10
)
$
73Releases of valuation allowances in various jurisdictions





123


29Establishments of valuation allowances in various jurisdictions


(35
)

(3
)

(8
)Change in valuation allowance per rate reconciliation

$
(117
)
$
110

$
94


Huntsman International

2008

2007

2006Valuation allowance as of January 1

$
510

$
536

$
495Valuation allowance as of December 31


681


510


536Net change


(171
)

26


(41
)Foreign currency movements


(19
)

17


7Deferred tax liabilities recorded in purchase accounting which reduced the need for valuation allowances








(8
)Recognition of net operating losses based on final settlement with U.S. and U.K. tax authorities, with a corresponding increase to
valuation allowances








53Increase to deferred tax assets with an offsetting decrease to valuation allowance


76


30


71Movement of net deferred tax assets related to discontinued operations








(8
)Reversal of valuation allowances on deferred tax assets related to prior acquisitions, with a corresponding credit to equity





(8
)

Reversal of valuation allowances on deferred tax assets related to prior acquisitions, with a corresponding reduction to goodwill and
intangible assets


(1
)

(2
)

(1
)Change in valuation allowance per rate reconciliation

$
(115
)
$
63

$
73Components of change in valuation allowance affecting operating tax expense:Effects of pre-tax income and pre-tax losses in jurisdictions with valuation allowances

$
(80
)
$
(8
)
$
66Releases of valuation allowances in various jurisdictions





74


21Establishments of valuation allowances in various jurisdictions


(35
)

(3
)

(14
)Change in valuation allowance per rate reconciliation

$
(115
)
$
63

$
73


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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

The following is a reconciliation of our unrecognized tax benefits (dollars in millions):

2008

2007Unrecognized tax benefits as of January 1

$
141

$
124Gross increases and decreasestax positions taken during a prior period


(77
)

1Gross increases and decreasestax positions taken during the current period


11


9Decreases related to settlement of amounts due to tax authorities


(2
)

(1
)Reductions resulting from the lapse of statute of limitations


(4
)

(1
)Foreign currency movements


(5
)

9Unrecognized tax benefits as of December 31

$
64

$
141


As
of December 31, 2008 and 2007, the amount of unrecognized tax benefits which, if recognized, would affect the effective tax rate was $44 million and $117 million,
respectively.

In
accordance with our accounting policy, we continue to recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the year ended
December 31, 2008, we recognized approximately $7 million of tax benefit in income tax expense related to interest and $1 million of tax expense related to penalties. We had
approximately $5 million and $12 million accrued for the payment of interest and approximately $2 million and $1 million accrued for the payment of penalties as of
December 31, 2008 and 2007, respectively.

We
conduct business globally and, as a result, we file income tax returns in the U.S. federal, various U.S. state and various non-U.S. jurisdictions. The following table
summarizes the tax years that remain subject to examination by major tax jurisdictions:

Tax Jurisdiction

Open Tax YearsAustralia

2002 and laterBelgium

2004 and laterChina

2002 and laterGermany

2002 and laterItaly

2000 and laterSwitzerland

2004 and laterThe Netherlands

2005 and laterUnited Kingdom

2007 and laterUnited States federal

2005 and later


Certain
of our U.S. and non-U.S. income tax returns are currently under various stages of audit by applicable tax authorities and the amounts ultimately agreed upon in
resolution of the issues raised may differ materially from the amounts accrued.

We
estimate that it is reasonably possible that certain of our unrecognized tax benefits (both U.S. and non-U.S.) could change within 12 months of the reporting date
with a resulting decrease in the unrecognized tax benefits within a reasonably possible range of $10 million to $15 million. For the 12-month period from the reporting date,
we would expect that a substantial portion of the decrease in our unrecognized tax benefits would result in a corresponding benefit to our income tax expense.

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. INCOME TAXES (Continued)

During
2008, we concluded and settled tax examinations in the U.S. (both Federal and various states) and various non-U.S. jurisdictions including, but not limited to,
Germany, Italy and the U.K.

For
non-U.S. entities that were not treated as branches for U.S. tax purposes, we do not provide for income taxes on the undistributed earnings of these subsidiaries as
earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely. The undistributed earnings of foreign subsidiaries that are deemed to be permanently invested
were $279 million at December 31, 2008. It is not practicable to determine the unrecognized deferred tax liability on those earnings.

21. INCOME (EXPENSES) ASSOCIATED WITH THE MERGER

Total income (expenses) associated with the Merger were as follows (dollars in millions):

December 31,2008

2007Gain recognized pursuant to the Settlement Agreement

$
765

$
Basell Termination Fee


100


(200
)Investment banking fees


(25
)

Directors' fees


(17
)

Legal fees and other


(43
)

(10
)Total

$
780

$
(210
)


Prior
to entering into the Merger Agreement, we terminated the Basell Merger Agreement and paid Basell the $200 million Basell Termination Fee required under the terms of the
Basell Merger Agreement during the third quarter of 2007. One-half of the Basell Termination Fee, or $100 million, was reimbursed by Hexion. The $100 million funded by Hexion
had been deferred and was recorded in accrued liabilities in the December 31, 2007 consolidated balance sheet. This amount was recognized in earnings during the fourth quarter of 2008 in
connection with the Settlement Agreement. Fees paid in connection with the Merger consist of the following:



For
more information regarding the termination of the Merger and settlement of the related litigation, see "Note 1. GeneralTermination of Merger Agreement and
Settlement of Related Litigation."

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22. COMMITMENTS AND CONTINGENCIES

PURCHASE COMMITMENTS

We
have various purchase commitments extending through 2023 for materials and supplies entered into in the ordinary course of business. The purchase
commitments are contracts that require minimum volume purchases. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a
facility. The contractual purchase prices for substantially all of these contracts require minimum payments, even if no volume is purchased. Historically, we have not made any minimum payments under
such take or pay contracts without taking the product.

Total
purchase commitments as of December 31, 2008 are as follows (dollars in millions):

Year ending December 31:2009

$
1572010


1102011


732012


652013


48Thereafter


75$
528


OPERATING LEASES

We
lease certain railcars, aircraft, equipment and facilities under long-term lease agreements. The total net expense recorded under operating
lease agreements in the accompanying consolidated statements of operations is approximately $48 million, $46 million and $51 million for the years ended December 31, 2008,
2007 and 2006, respectively, of which nil, $9 million and $13 million related to discontinued operations, respectively.

Future
minimum lease payments under operating leases as of December 31, 2008 are as follows (dollars in millions):

Year ending December 31:2009

$
472010


442011


402012


322013


28Thereafter


96$
287


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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22. COMMITMENTS AND CONTINGENCIES (Continued)

LEGAL MATTERS

Litigation Relating to our Merger with Hexion

For information regarding the termination of the Merger Agreement and settlement of the related litigation, see "Note 1.
GeneralTermination of Merger Agreement and Settlement of Related Litigation" above.

Texas Bank Litigation

For information with respect to the Texas Bank Litigation, see "Note 1. GeneralRecent
DevelopmentsTexas Bank Litigation" above.

Discoloration Claims

Certain claims have been filed against us relating to discoloration of unplasticized polyvinyl chloride products allegedly caused by
our titanium dioxide. Substantially all of
the titanium dioxide that is the subject of these claims was manufactured prior to our acquisition of the titanium dioxide business from ICI in 1999. Net of amounts we have received from insurers and
pursuant to contracts of indemnity, we have paid an aggregate of approximately $16 million in costs and settlement amounts for Discoloration Claims through December 31, 2008.

During
the year ended December 31, 2008, we did not settle any Discoloration Claims. During the year ended December 31, 2007, we paid an insignificant amount in partial
settlement of a claim. The two Discoloration Claims unresolved as of December 31, 2008 asserted aggregate damages of €36 million (approximately $51 million). An
appropriate liability has been accrued for these claims. Based on our understanding of the merits of these claims and our rights under contracts of indemnity and insurance, we do not believe that the
net impact on our financial condition, results of operations or liquidity will be material.

While
additional Discoloration Claims may be made in the future, we cannot reasonably estimate the amount of loss related to such claims. Although we may incur additional costs as a
result of future claims (including settlement costs), based on our history with Discoloration Claims to date, the fact that substantially all of the titanium dioxide that has been the subject of these
Discoloration Claims was manufactured and sold more than nine years ago, and the fact that we have rights under contract to indemnity, including from ICI, we do not believe that any unasserted
Discoloration Claims will have a material impact on our financial condition, results of operations or liquidity. Based on this conclusion and our inability to reasonably estimate our expected costs
with respect to these unasserted claims, we have made no accruals in our financial statements as of December 31, 2008 for costs associated with unasserted Discoloration Claims.

Asbestos Litigation

We have been named as a "premises defendant" in a number of asbestos exposure cases, typically claims by non-employees of
exposure to asbestos while at a facility. In the past, these cases typically have involved multiple plaintiffs bringing actions against multiple defendants, and the complaints have not indicated which
plaintiffs were making claims against which defendants, where or how the alleged

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22. COMMITMENTS AND CONTINGENCIES (Continued)

injuries
occurred or what injuries each plaintiff claimed. These facts, which would be central to any estimate of probable loss, generally have been learned only through discovery.

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

The
following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the prior owner, all of which have
been accepted.

Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Unresolved at beginning of period


1,192


1,367


576Tendered during period


21


21


998Resolved during period(1)


73


196


207Unresolved at end of period


1,140


1,192


1,367


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We
have never made any payments with respect to these cases. As of December 31, 2008, we had an accrued liability of $16 million relating to these cases and a corresponding
receivable of $16 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated
with these cases would not be material to our financial condition, results of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals.
Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with
such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of December 31, 2008.

Certain
cases in which we are a "premises defendant" are not subject to indemnification by prior owners or operators. The following table presents for the periods indicated certain
information about these cases. Cases include all cases for which service has been received by us, other than a number of

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cases
that were erroneously filed against us due to a clerical error. The cases filed in error have been dismissed.

Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Unresolved at beginning of period


39


42


34Filed during period


8


52


19Resolved during period


4


55


11Unresolved at end of period


43


39


42


We
paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of nil, $3 million and nil during the years ended December 31, 2008, 2007
and 2006, respectively. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results
of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and
such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos
exposure claims as of December 31, 2008.

Antitrust Matters

We have been named as a defendant in civil antitrust suits alleging that between 1999 and 2004 we conspired with Bayer, BASF, Dow, and
Lyondell to fix the prices of MDI, TDI, polyether polyols, and related systems ("polyether polyol products") sold in the United States in violation of the federal Sherman Act. These cases are
consolidated as the "Polyether Polyols" cases in multidistrict litigation known as In re Urethane Antitrust Litigation, MDL No. 1616, Civil
No. 2:04-md-01616-JWL-DJW, pending in the United States District Court, District of Kansas. The Kansas court has ruled that plaintiffs may
prosecute the Polyether Polyols cases on behalf of a class of all direct purchasers of polyether polyol products in the United States. Bayer has entered into a settlement with the plaintiffs' class
and has been dismissed as a defendant. Merits discovery is underway, and trial has been set for May 3, 2011.

We
and the other Polyether Polyol defendants (excluding Bayer) have also been named as defendants in two civil antitrust suits brought by certain direct purchasers of polyether polyol
products that opted out of the class certified in MDL No. 1616. These cases have been brought by 12 groups of affiliated
companies, 73 plaintiffs in all, who allege that between 1994 and 2006 the Polyether Polyol defendants conspired to fix the prices of polyether polyol products sold in the United States and abroad in
violation of the Sherman Act, similar laws of several U.S. states, and the laws of the European Union and certain of its member states. We and the other defendants have moved to dismiss the
opt-out complaints.

We,
along with the other Polyether Polyols defendants and Rhodia, have also been named as a defendant in civil antitrust suits alleging a conspiracy to fix the prices of polyether polyol
products sold in Canada in violation of Canadian competition law. These cases, filed in the Superior Court of Justice, Ontario, Canada on May 5, 2006 and in Superior Court, Quebec, Canada on
May 17, 2006, purport to

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be
brought on behalf of various classes of Canadian direct purchasers of polyether polyol products. There has been little activity in these cases since they were filed.

Along
with Flexsys, Crompton (now Chemtura), Uniroyal, Rhein Chemie Rheinau, and the other Polyether Polyol defendants, we also have been named as a defendant in a civil antitrust suit
pending in the Superior Court of California, County of San Francisco, filed on February 15, 2005, that alleges that between 1994 and 2004 the defendants conspired to fix the prices of certain
rubber and urethane products sold in California in violation of antitrust and unfair competition laws of California. This case purports to be brought on behalf of a class of all California purchasers
of products containing rubber and urethanes products. By agreement of the parties this case has been stayed pending the resolution of MDL No. 1616.

Along
with Dow, BASF, and Lyondell, we have also been named as a defendant in a third amended complaint proposed for filing in an existing civil antitrust suit pending against Bayer and
Chemtura in federal district court in Massachusetts. The proposed amended complaint alleges that beginning around 1990 we and the other defendants conspired to fix the prices of MDI, TDI, polyether
polyols, and polyester polyols sold throughout the United States in violation of the federal Sherman Act and the laws of various states. The proposed amended complaint seeks to sue on behalf of all
indirect purchasers of such products in the United States. The Massachusetts action has been stayed pending plaintiffs' settlement of the previously asserted claims against Bayer and Chemtura. We have
filed papers opposing the motion for leave to file the proposed amended complaint adding us as a defendant in that action.

The
plaintiffs' pleadings in these various antitrust suits provide few specifics about any alleged illegal conduct on our part, and we are not aware of any illegal conduct by us or any
of our employees. For these reasons, we cannot estimate the possibility of loss or range of loss relating to these claims, and therefore we have not accrued a liability for these claims. Nevertheless,
we could incur losses due to these claims in the future and those losses could be material.

In
addition, on February 16, 2006, the Antitrust Division of the U.S. Department of Justice served us with a grand jury subpoena requesting production of documents relating to our
sale of polyether polyol products. The other defendants in the Polyether Polyols cases have confirmed that they were also served with subpoenas in this matter. We cooperated fully with the
investigation, and by letter dated December 16, 2007, the U.S. Department of Justice notified us that its investigation of possible antitrust violations by manufacturers of polyether polyol
products has been closed.

MTBE Litigation

We have been named as a defendant in 14 lawsuits pending in multidistrict litigation in the U.S. District Court for the Southern
District of New York alleging liability related to MTBE contamination in groundwater. Four of these cases were filed on March 23, 2007, one was filed on March 28, 2007, three were filed
on April 5, 2007, one was filed on January 11, 2008, two were filed on September 4, 2008, one was filed November 7, 2008, one was filed November 18, 2008, and one
was filed on December 19, 2008. Numerous other companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in these and
many other cases currently pending in U.S. courts. The plaintiffs in the fourteen cases in which we have been

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named
are municipal water districts, a regional water supply authority, and municipal corporations that claim that defendants' conduct has caused MTBE contamination of their groundwater. The
plaintiffs seek injunctive relief, such as monitoring and abatement, compensatory damages, punitive damages and attorney fees. At this time, we have insufficient information to meaningfully assess our
potential exposure in these cases and therefore we have not accrued a liability for these claims. We believe that our liability in these cases, if any, would likely be covered, at least in part, by
insurance and/or by indemnity agreements with prior owners.

Shareholder Litigation

From July 5 to July 13, 2007, four putative shareholder class action complaints were filed against our Company and our
directors alleging breaches of fiduciary duty in connection with our then-proposed sale to Basell and the receipt of a superior proposal from Hexion. Three actions were filed in Delaware:
Cohen v. Archibald, et al., No. 3070, in the Court of Chancery for the State of Delaware (filed July 5, 2007); Augenstein v. Archibald, et al., No. 3076, in the Court of Chancery
for the State of Delaware (filed July 9, 2007); and Murphy v. Huntsman, et al., No. 3094, in the Court of Chancery for the State of Delaware (filed July 13, 2007). Another action
was filed in Texas: Schwoegler v. Huntsman Corporation, et al., Cause
No. 07-07-06993-CV, in the 9th Judicial District Court of Montgomery County, Texas (filed July 6, 2007). As subsequently amended, these
lawsuits together allege that we and our directors breached fiduciary duties to the stockholders by, among other things, engaging in an unfair sales process, approving an unfair price per share for
the Merger with Hexion, and making inadequate disclosures to stockholders, and that Basell, Hexion and MatlinPatterson entities aided and abetted these breaches of fiduciary duty. The lawsuits sought
to enjoin the stockholder vote on the Merger.

On
September 20, 2007, the parties entered into a Memorandum of Understanding with plaintiffs' counsel in the Delaware and Texas actions to settle these four lawsuits. As part of
the proposed settlement, the defendants deny all allegations of wrongdoing, but we agreed to make certain additional disclosures in the final proxy statement that was mailed to our stockholders on or
about September 14, 2007. In connection with the settlement, the parties also reached an agreement with respect to any application that the plaintiffs' counsel will make for an award of
customary attorneys' fees and expenses to be paid following the completion of the Merger.

The
Memorandum of Understanding is now null and void and of no force and effect because the Merger was not consummated. The Texas action has been voluntarily dismissed, but there has
been no further developments in the Delaware actions at this time.

A
fifth putative shareholder class action was filed against the Company and three of its officers on August 12, 2008 in the United States District Court for the District of Utah
alleging, among other things, that the defendants failed to disclose material adverse facts about the Company's financial well-being, business relationships and prospects during the period
from June 26, 2007 to June 18, 2008 in violation of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5. Prior to any further activity in
the case, the action was voluntarily dismissed October 3, 2008.

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Port Arthur Plant Fire Insurance Litigation

On August 31, 2007, an action was brought against our Company and IRIC, our captive insurer, in the United States District Court
for the Southern District of Texas, by the Reinsurers under the property insurance policy issued by IRIC to our Company for the period covering the April 29, 2006 fire at our manufacturing
facility in Port Arthur, Texas. The action seeks to compel our Company and IRIC to arbitrate with the Reinsurers to resolve disputes related to the claim for
losses caused by the fire or, in the alternative, to declare judgment in favor of the Reinsurers. On September 26, 2008, the court denied motions to dismiss filed by our Company and IRIC,
ordering the parties to engage in a short period of discovery on the issue of arbitrability. In a second and related action filed by our Company against IRIC in state court in Jefferson County, Texas,
IRIC filed a third party petition against the Reinsurers, who then removed that action to the United States District Court for the Eastern District of Texas. Some of the Reinsurers filed answers and
motions to compel arbitration, to stay these proceedings, and to change venue to the United States District Court for the Southern District of Texas in order to consolidate the two actions. Our
Company filed a motion to remand that action to the state court and opposition to the Reinsurers' motions in that action. On April 23, 2008, the United States District Court for the Eastern
District of Texas transferred the case to the United States District Court for the Southern District of Texas. On September 26, 2008, the court denied our Company's motion to remand that suit
to the state court in which it was filed. Pursuant to a December 29, 2008 agreement among the parties to the actions referenced above: (1) a mediation is scheduled for
February 24-25, 2009, (2) if the disputes are not fully resolved in mediation, the parties will submit all coverage and quantum issues to a three-arbitrator panel in August
of 2009, with a binding award to be entered by September 30, 2009, (3) the Reinsurers paid an additional $40 million on the claim of the Company on December 29, 2008 and
agreed that all monies paid by the participating Reinsurers on the claim to date are nonrefundable, (4) the Company waived its noncontractual claims against the Reinsurers, (5) the first
action referenced above will be stayed pending final resolution and entry of judgment, and (6) the second action reference above will be dismissed. Reinsurers responsible for a small percentage
of our remaining claim were not parties to the two lawsuits and are not parties to the agreement, thus we may need to pursue them separately for their pro rata shares of the unpaid claim. Our Company
has paid its deductible on the claim of $60 million and has been paid $365 million to date by the Reinsurers. As of December 31, 2008, our Company has claimed an additional
approximately $235 million as presently due and owing and unpaid under the Policy for losses caused by the fire, and anticipates filing additional claims. For more information, see
"Note 24. Casualty Losses and Insurance RecoveriesPort Arthur, Texas Plant Fire."

Other Proceedings

We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under
provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these
matters will have a material adverse effect on our financial condition, results of operations or liquidity.

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GUARANTEES

On
September 19, 2003, SLIC obtained secured financing for the construction of production facilities. SLIC obtained various committed loans in the
aggregate amount of approximately $230 million in U.S. dollar equivalents. As of December 31, 2008, there were $68 million and RMB 840 million (approximately
$123 million) in outstanding borrowings 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. The loans are secured by substantially all the assets of SLIC and will be paid in 16 semiannual installments (of which 13 installments remain), which began on June 30, 2007.
We unconditionally guarantee 35% of any amounts due and unpaid by SLIC under the loans described above (except for the VAT facility which is not guaranteed). Our guarantee remains in effect until SLIC
has met certain conditions. The conditions outstanding include completion of the building and equipment mortgage registrations, which are progressing as planned, and maintaining a debt service
coverage ratio of at least 1:1 at the time such registrations are completed. We have estimated that the fair value of this guarantee is nil as of the closing of the transaction and, accordingly, no
amounts have been recorded.

Our
unconsolidated Saudi Arabia joint venture with Zamil Group obtained various loan commitments in the aggregate amount of approximately $195 million in U.S. dollar equivalents,
of which $45 million was drawn under a short term bridge loan facility as of December 31, 2008. We have provided certain guarantees of approximately $14 million for these
commitments, and our guarantees will terminate upon completion of the project and satisfaction of certain other conditions. We have estimated that the fair value of such guarantees was nil as of the
closing date of this transaction and, accordingly, no amounts have been recorded.

23. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

General

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

EHS Systems

We are committed to achieving and maintaining compliance with all applicable EHS legal requirements, and we have developed policies and
management systems that are intended to identify

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the
multitude of EHS legal requirements applicable to our operations, enhance compliance with applicable legal requirements, ensure the safety of our employees, contractors, community neighbors and
customers and minimize the production and emission of wastes and other pollutants. Although EHS legal requirements are constantly changing and are frequently difficult to comply with, these EHS
management systems are designed to assist us in our compliance goals while also fostering efficiency and improvement and minimizing overall risk to us.

EHS Capital Expenditures

We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and
repair pollution control equipment. For the years ended December 31, 2008, 2007 and 2006, our capital expenditures for EHS
matters totaled $58 million, $69 million and $53 million, respectively. Since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in
part, on the timing, promulgation and enforcement of specific requirements, we cannot provide assurance that our recent expenditures will be indicative of future amounts required under EHS laws.

Remediation Liabilities

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

Under
the CERCLA and similar state laws, a current or former owner or operator of real property may be liable for remediation costs regardless of whether the release or disposal of
hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the
release. We have been notified by third parties of claims against us for cleanup liabilities at approximately 10 former facilities or third party sites, including, but not limited to, sites listed
under CERCLA. Based on current information and past experiences at other CERCLA sites, we do not expect any of these third party claims to result in material liability to us.

In
addition, under the RCRA and similar state laws, we may be required to remediate contamination originating from our properties as a condition to our hazardous waste permit. Some of
our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal. We are aware of soil, groundwater or surface contamination
from past operations at some of our sites, and we may find contamination at other sites in the future. For example, our Port Neches, Texas, and Geismar, Louisiana, facilities are the subject of
ongoing remediation requirements under RCRA authority.

In
June of 2006, an agreement was reached between the local regulatory authorities and our advanced materials site in Pamplona, Spain to relocate our manufacturing operations in order to
facilitate new urban development desired by the city. Subsequently, as required by the authorities, soil and groundwater sampling was performed and followed by a quantitative risk assessment. Although

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unresolved
at this time, some level of remediation of site contamination may be required in the future, but the estimated cost is unknown because the remediation approach and timing has not been
determined.

By
letter dated March 7, 2006, our Base Chemicals and Polymers facility in West Footscray, Australia, was issued a clean-up notice by the Australian (Victorian) EPA.
The agency was concerned about soil and groundwater contamination emanating from the site. Although we fulfilled all initial requirements under the clean-up notice, the agency revoked the
original clean-up notice on September 4, 2007 and issued a revised clean-up notice granting an extension due to "the complexity of contamination issues" at the site. The
revised clean-up notice reflects the requirement for a more detailed program, with a deadline for the submission of a detailed site remediation action plan by March 31, 2009. We
expect to respond to the EPA addressing their revised concerns. We can provide no assurance that the EPA will agree with our proposed plan or will not seek to institute additional requirements for the
site. However, we do not believe the costs to us associated with this issue will be material.

In
many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of a business or specific facility.
In these situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully
exercised our rights under these contractual covenants for a number of sites and, where applicable, mitigated our ultimate remediation liability. We cannot assure you, however, that all of such
matters will be subject to indemnity, that the prior owner will honor its indemnity or that our existing indemnities will be sufficient to cover our liabilities for such matters.

Based
on available information and the indemnification rights we believe are likely to be available, we believe that the costs to investigate and remediate known contamination will not
have a material adverse effect on our financial condition, results of operations or cash flows. However, if such indemnities are unavailable or do not fully cover the costs of investigation and
remediation or we are required to contribute to such costs, and if such costs are material, then such expenditures may have a material adverse effect on our financial condition, results of operations
or cash flows. At the current time, we are unable to estimate the full cost, exclusive of indemnification benefits, to remediate any of the known contamination sites.

Environmental Reserves

We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known
penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are based upon requirements placed upon
the company by regulators, available facts, existing technology and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. We had accrued
$7 million and $8 million for environmental liabilities as of December 31, 2008 and 2007, respectively. Of these amounts, $4 million and $5 million were classified
as accrued liabilities in our consolidated balance sheets as of December 31, 2008 and 2007, respectively, and $3 million and $3 million were classified as other noncurrent
liabilities in our consolidated balance sheets as of December 31, 2008 and December 31, 2007, respectively. In certain cases, our remediation

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liabilities
may be payable over periods of up to 30 years. We may incur losses for environmental remediation in excess of the amounts accrued; however, we are not able to estimate the amount or
range of such potential excess.

Regulatory Developments

Under the EU's integrated pollution prevention and control directive, EU member governments adopted rules and implemented a cross media
(air, water and waste) environmental permitting program for individual facilities. Although the EU countries varied in their respective implementation of the IPPC permit program, we submitted on a
timely basis all necessary IPPC permit applications required and received completed permits from the applicable government agencies. Based upon a review of those permits, the costs of compliance with
the IPPC permit program are not material to our financial condition, results of operations or cash flows.

In
December 2006, the EU parliament and EU council approved a new EU regulatory framework for chemicals called "REACH" (Registration, Evaluation and Authorization of Chemicals). REACH
took effect on June 1, 2007, and the program it establishes will be phased in over 11 years. Under the regulation, companies that manufacture or import more than one ton of a chemical
substance per year will be required to register such chemical substances and isolated intermediates in a central database. Use authorizations will be granted for a specific chemical if the applicants
can show that any risk in using the chemical can be adequately controlled or, where there are no suitable alternatives available, if the applicant can demonstrate that the social and economic benefits
of using the chemical outweigh the risks. In addition, specified uses of some hazardous substances may be restricted. Furthermore, all
applicants will have to study the availability of alternative chemicals. If an alternative is available, an applicant will have to submit a "substitution" plan to the regulatory agency. The regulatory
agency will only authorize persistent bio-accumulative and toxic substances if an alternative chemical is not available. The registration, evaluation and authorization phases of the
program will require expenditures and resource commitments in order to, for example, develop information technology tools, generate data, prepare and submit dossiers for substance registration,
participate in consortia, obtain legal advice and reformulate products, if necessary. We have established a cross-business European REACH team that is working closely with our businesses to identify
and list all substances purchased, manufactured or imported by or for us into the EU. Our pre-registration REACH compliance began on June 1, 2008, utilizing internal resources at
nominal expense, and we met all chemical pre-registration requirements by the November 30, 2008 statutory deadline. We are currently proceeding with the registration of the
high-volume and high-priority chemicals under the program. Although the total long-term cost for REACH compliance is not estimable at this time, we spent
approximately $2 million and $3 million during the years ended December 31, 2008 and 2007, respectively, on REACH compliance.

Greenhouse Gas Regulation

In the EU and other jurisdictions committed to compliance with the Kyoto Protocol to the United Nations Framework Convention on Climate
Change, there is an increasing likelihood that our manufacturing sites will be affected in some way over the next few years by regulation or taxation of GHG emissions. In addition, although the U.S.
is not a signatory to the Convention, several states, including California, are implementing their own GHG regulatory programs, and a federal program in

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the
U.S. is likely for the future. Several of our sites are subject to existing GHG legislation, but few have experienced or anticipate significant cost increases as a result, although it is likely
that GHG emission restrictions will increase over time. Potential consequences of such restrictions include capital requirements to modify assets used to meet GHG restriction and/or increases in
energy costs above the level of general inflation, as well as direct compliance costs. Currently, however, it is not possible to estimate the likely financial impact of potential future regulation on
any of our sites.

Chemical Facility Anti-terrorism Rulemaking

The Department of Homeland Security issued the final rule of their "Chemical Facility Anti-Terrorism Standard" in 2007. The
initial phase of the rule required all chemical facilities in the U.S. to evaluate their facilities against the DHS Appendix A list of "Chemicals of Interest." Facilities which have specified
chemicals in designated quantities on the
Appendix A list were required to submit a "Top Screen" to DHS in 2008. A Top Screen is a questionnaire completed by a facility having Chemicals of Interest in designated threshold quantities.
In early 2008, we submitted Top Screens from several of our facilities. After reviewing the Top Screens, DHS determined that some of our sites were "High Risk" facilities. As a result, we were
required to perform Security Vulnerability Assessments at the High Risk sites. The SVAs were completed and sent to DHS during the fourth quarter of 2008. We are currently awaiting the final risk
ranking from the DHS, based on their assessment of the SVAs. Any of the sites which are still considered High Risk after the DHS assessment will be required to develop site security plans based on a
list of DHS risk-based performance standards. We are unable to determine the cost of security enhancements at our High Risk sites until the site security plans are developed. We anticipate
this phase of the rule to be completed by mid-2009.

MTBE Developments

We produce MTBE, an oxygenate that is blended with gasoline to reduce vehicle air emissions and to enhance the octane rating of
gasoline. Litigation or legislative initiatives restricting the use of MTBE in gasoline may subject us or our products to environmental liability or materially adversely affect our sales and costs.
Because MTBE has contaminated some water supplies, its use has become controversial in the U.S. and elsewhere, and its use has been effectively eliminated in the U.S. market. Since 2007, we have
marketed MTBE, either directly or through third parties, only to gasoline additive customers located outside the U.S., although there are additional costs associated with such outside-U.S.
sales which may result in decreased profitability compared to historical sales in the U.S. We may also elect to use all or a portion of our precursor tertiary butyl alcohol to produce saleable
products other than MTBE. If we opt to produce products other than MTBE, necessary modifications to our facilities will require significant capital expenditures and the sale of such other products may
produce a lower level of cash flow than that historically produced from the sale of MTBE.

Numerous
companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in more than 150 cases in U.S. courts that
allege MTBE contamination in groundwater. Many of these cases were settled after the parties engaged in mediation supervised by a court-appointed special settlement master. Beginning in March 2007 and
continuing through December 2008, we have been named as a defendant in fourteen of these lawsuits, all of which are still pending. For more information, see "Note 22. Commitment and
ContingenciesLegal MattersMTBE Litigation." The plaintiffs in the MTBE groundwater contamination cases

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generally
seek compensatory damages, punitive damages, injunctive relief, such as monitoring and abatement, and attorney fees. We currently have insufficient information to meaningfully assess our
potential exposure in these cases. We believe that some of our liability in these cases, if any, is likely covered by insurance and/or indemnity agreements with prior owners. It is possible that we
could be named as a defendant in additional existing or future MTBE contamination cases. We cannot provide
assurances that adverse results against us in existing or future MTBE contamination cases will not have a material adverse effect on our business, results of operations and financial position.

24. CASUALTY LOSSES AND INSURANCE RECOVERIES

PORT ARTHUR, TEXAS PLANT FIRE

On
April 29, 2006, our Port Arthur, Texas olefins manufacturing plant (which we sold in November 2007) experienced a major fire. With the exception of
cyclohexane operations at the site, which were restarted in June 2006, the operations at the site were shutdown until the fourth quarter of 2007. The Port Arthur manufacturing plant is covered by
property damage and business interruption insurance. With respect to coverage for this outage, the deductible for property damage is $10 million and business interruption coverage does not
apply for the first 60 days, subject to a combined deductible for property damage and business interruption of $60 million.

Through
December 31, 2008, we received partial recovery advances on this loss totaling $365 million, including $40 million received in December 2008. We have claimed
an additional approximately $235 million as of December 31, 2008 as presently due and owing and unpaid under the insurance policy for losses caused by the fire, and anticipate filing
additional claims. On December 29, 2008, we reached a partial settlement with certain of the Reinsurers whereby we received a partial claim reimbursement of $40 million and we and the
Reinsurers agreed to dismiss all legal suits arising from this insured loss and to participate in non-binding mediation scheduled to occur in February 2009 and, if the
non-binding mediation is not successful, in binding arbitration targeted to occur in the later half of 2009. Also as part of the Partial Fire Insurance Settlement, the Reinsurers that are
parties to such agreement agreed that none of their respective portion, or $340 million of the $365 million of partial recovery advances received to date are refundable (those insurers
representing the other $25 million portion received to date were not required to enter into this agreement because their coverage limits had been exhausted at much lower levels).

Through
December 31, 2008, we had recorded $190 million of repair and maintenance costs and fixed costs incurred during the business interruption period and had recognized
in earnings a corresponding amount of the partial recovery amounts. Prior to the Partial Fire Insurance Settlement, we had deferred recognition of the gain associated with partial recovery advances
and these amounts were included in accrued liabilities on the accompanying consolidated balance sheets. As a result of the Partial Fire Insurance Settlement, we recognized a gain of
$175 million in the fourth quarter of 2008 which represented all previously deferred insurance recovery gain amounts. The following table

F-90

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

24. CASUALTY LOSSES AND INSURANCE RECOVERIES (Continued)

describes
changes to the deferred insurance recovery gain during the years ended December 31, 2008, 2007 and 2006 (dollars in millions):

2008

2007

2006Balance at January 1

$
137

$
94

$
Insurance recovery advances


40


175


150Incurrence of repair and maintenance costs during the period


(2
)

(52
)

(17
)Incurrence of fixed costs during the business interruption period





(80
)

(39
)Recognition of deferred gain in connection with the Partial Fire Insurance Settlement


(175
)




Balance as of December 31

$


$
137

$
94


Future
collections on this insured loss, if any, will represent additional income for us upon final settlement.

2005 U.S. GULF COAST STORMS

On
September 22, 2005, we sustained property damage at our Port Neches and Port Arthur, Texas facilities as a result of a hurricane. We maintain
customary insurance coverage for property damage and business interruption. With respect to coverage of these losses, the deductible for property damage was $10 million per site, while business
interruption coverage does not apply for the first 60 days.

During
2007 and 2006, we received insurance recovery advances of $38 million related to the 2005 Gulf Coast storms. On December 12, 2008, the insurers agreed to pay an
additional $3 million of insurance recovery advances related to the 2005 Gulf Coast storms, of which $2 million was received as of December 31, 2008. We and our insurers are
working to reach a settlement on the remainder of the insurance claim, and we can provide no assurance with respect to the ultimate resolution of this matter. Any future collections will represent
income for us upon final settlement.

25. STOCKHOLDERS' EQUITY

On February 16, 2005, we completed an initial public offering of 55,681,819 shares of our common stock sold by us and 13,579,546 share of our common stock sold by a selling
stockholder, in each case at a price to the public of $23 per share, and 5,750,000 shares of our mandatory convertible preferred stock sold by us at a price to the public of $50 per share. On
February 16, 2008, the mandatory convertible preferred stock converted into 12,082,475 shares of our common stock. See "Note 2. Summary of Significant Accounting PoliciesNet
Income (Loss) per Share."

DIVIDENDS ON COMMON STOCK

On
March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008 we paid dividends of approximately $23 million
each, for a total of $93 million, or $0.10 per share each, to common stockholders of record as of March 14, 2008, June 16, 2008, September 15, 2008 and December 15,
2008, respectively. On March 30, 2007, June 29, 2007, September 28, 2007 and December 31, 2007, we paid cash dividends of approximately $22 million each, or $0.10
per share each, for a total of

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

25. STOCKHOLDERS' EQUITY (Continued)

$88 million,
to common stockholders of record as of March 15, 2007, June 15, 2007, September 15, 2007 and December 15, 2007, respectively.

DIVIDENDS ON MANDATORY CONVERTIBLE PREFERRED STOCK

In
connection with the initial public offering of our 5% mandatory convertible preferred stock on February 16, 2005, we declared all dividends that will
be payable on such preferred stock from the issuance through the mandatory conversion date, which was February 16, 2008. Accordingly, we recorded dividends payable of $43 million and a
corresponding charge to net loss available to common stockholders during the year ended December 31, 2005. As of December 31, 2007, we had $4 million invested in government
securities that were restricted to be used to satisfy our dividend payment obligations through the mandatory conversion date. We paid the final dividend in cash on February 16, 2008.

26. STOCK-BASED COMPENSATION PLAN

Under the Huntsman Stock Incentive Plan (the "Stock Incentive Plan"), a plan approved by stockholders, we may grant non-qualified stock options, incentive stock options,
stock appreciation rights, restricted stock, phantom stock, performance awards and other stock-based awards to our employees and directors and to employees and directors of our subsidiaries, provided
that incentive stock options may be granted solely to employees. The terms of the grants are fixed at the grant date. As of December 31, 2008, we were authorized to grant up to 21,590,909
shares under the Stock Incentive Plan. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price of our common stock
on the date the option award is granted. Stock-based awards generally vest over a three-year period.

The
compensation cost from continuing operations for the Stock Incentive Plan was $20 million, $25 million, and $16 million for the years ended December 31,
2008, 2007 and 2006, respectively. The total income tax benefit recognized in the statement of operations for stock-based compensation arrangements was $6 million, $8 million and nil for
the years ended December 31, 2008, 2007 and 2006, respectively.

The
fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Because we
only became a publicly-held company in February 2005, expected volatilities were based on implied volatilities from the stock of comparable companies and other factors. The expected term
of options granted was estimated based on the contractual term of the instruments and employees' expected exercise and post-vesting employment termination behavior. The
risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant.

Year ended December 31,2008

2007

2006Dividend yield

NA


1.9
%

Expected volatility

NA


20.8
%

23.1
%Risk-free interest rate

NA


4.7
%

4.6
%Expected life of stock options granted during the period

NA


6.6 years


6.6 years


During
the year ended December 31, 2008, no stock options were granted.

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26. STOCK-BASED COMPENSATION PLAN (Continued)

STOCK OPTIONS

A summary of stock option activity under the Stock Incentive Plan as of December 31, 2008 and changes during the year then ended
is presented below:

Option Awards

Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value(000)



(Years)

($000)Outstanding at January 1, 2008


6,327

$
21.32Granted





Exercised





Forfeited


(192
)

20.96Outstanding at December 31, 2008


6,135


21.33


7.1

$
Exercisable at December 31, 2008


4,236


21.67


6.8





The
weighted-average grant-date fair value of stock options granted during the years ended December 31, 2007 and 2006 was $5.15 and $7.27 per option,
respectively. As of December 31, 2008, there was $5 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the Stock Incentive Plan.
That cost is expected to be recognized over a weighted-average period of approximately nine months.

The
total intrinsic value of stock options exercised during the year ended December 31, 2007 was not significant. During the years ended December 31, 2008 and 2006 there
were no stock options exercised.

NONVESTED SHARES

Nonvested shares granted under the Stock Incentive Plan consist of restricted stock, which is accounted for as an equity award, and
phantom stock, which is accounted for as a liability award

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26. STOCK-BASED COMPENSATION PLAN (Continued)

because
it can be settled in either stock or cash. A summary of the status of our nonvested shares as of December 31, 2008 and changes during the years then ended is presented below:

Equity Awards

Liability AwardsShares

Weighted
Average Grant-
Date Fair
Value

Shares

Weighted
Average Grant-
Date Fair
Value(000)



(000)Nonvested at January 1, 2008


1,007

$
21.12


145

$
20.76Granted


492


24.56


108


24.56Vested


(537
)(1)

21.59


(58
)

21.03Forfeited


(32
)

22.37


(24
)

22.57Nonvested at December 31, 2008


930


22.62


171


22.82


---

As
of December 31, 2008, there was $13 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the Stock
Incentive Plan. That cost is
expected to be recognized over a weighted-average period of approximately 18 months. The value of share awards that vested during the years ended December 31, 2008, 2007 and 2006 was
$13 million, $9 million and $6 million, respectively.

F-94

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

27. OTHER COMPREHENSIVE (LOSS) INCOME

Other comprehensive income consisted of the following (dollars in millions):

Huntsman Corporation

December 31,2008

2007

2006Accumulated
income (loss)

Income
(loss)

Accumulated
income (loss)

Income
(loss)

Income
(loss)Foreign currency translation adjustments, net of tax of $16 and $5 as of December 31, 2008 and 2007, respectively

$
204

$
(176
)
$
380

$
134

$
168Pension and other postretirement benefits adjustments, net of tax of $158 and $18 as of December 31, 2008 and 2007, respectively


(713
)

(569
)

(144
)

184


(23
)Other comprehensive income of unconsolidated affiliates


9





9


2


Other


11


(1
)

12


(2
)

4Total

$
(489
)
$
(746
)
$
257

$
318

$
149


Huntsman International

December 31,2008

2007

2006Accumulated
income (loss)

Income
(loss)

Accumulated
income (loss)

Income
(loss)

Income
(loss)Foreign currency translation adjustments, net of tax of $3 and $(8) as of December 31, 2008 and 2007, respectively

$
202

$
(176
)
$
378

$
136

$
199Pension and other postretirement benefits adjustments, net of tax of $193 and $54 as of December 31, 2008 and 2007, respectively


(771
)

(564
)

(207
)

198


(18
)Other comprehensive income of unconsolidated affiliates


9





9


2


Other


6


(1
)

7


(2
)

2Total

$
(554
)
$
(741
)
$
187

$
334

$
183


During
2006, $49 million of foreign currency translation adjustments were reclassified to loss on disposal of discontinued operations related to the U.K. Petrochemicals
Disposition.

The
adoption of SFAS No. 158 and related pension adjustments in 2006 included the effect of the calculation of the additional minimum pension liability prior to the adoption of
the SFAS No. 158, which is included in other comprehensive (loss) income, as well as the net effect of the adoption of SFAS No. 158, which is a direct adjustment to accumulated other
comprehensive (loss) income.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

27. OTHER COMPREHENSIVE (LOSS) INCOME (Continued)

Items
of other comprehensive (loss) income of our Company and our consolidated affiliates have been recorded net of tax, with the exception of the foreign currency translation
adjustments related to subsidiaries with earnings permanently reinvested. The tax effect is determined based upon the jurisdiction where the income or loss was recognized and is net of valuation
allowances that have been recorded

28. RELATED PARTY TRANSACTIONS

Our accompanying consolidated financial statements include the following transactions with our affiliates not otherwise disclosed (dollars in millions):

Year ended December 31,2008

2007

2006Sales to:Unconsolidated affiliates

$
98

$
171

$
109Inventory purchases from:Unconsolidated affiliates


299


224


145


We
have agreed with the Jon and Karen Huntsman Foundation, a private charitable foundation established by Jon M. and Karen H. Huntsman to further the charitable interests of the
Huntsman family, that we will donate our Salt Lake City office building and our option to acquire an adjacent undeveloped parcel of land to the foundation free of debt. We have agreed to complete this
donation on the earlier of November 30, 2009 or the date on which we occupy less than 20% of the two main floors of the Salt Lake City office building. Under certain circumstances, after we
make this donation we will have the right, but not the obligation, to lease space in the Salt Lake City office building from the foundation.

Through
May 2002, we paid the premiums on various life insurance policies for Jon M. Huntsman. These policies have been liquidated, and the cash values have been paid to
Mr. Huntsman. Mr. Huntsman is indebted to us in the amount of approximately $2 million, which represents the insurance premiums paid on his behalf through May 2002. This amount is
included in other noncurrent assets on the accompanying consolidated balance sheets. We have a consulting agreement with Mr. Huntsman pursuant to which he receives $950,000 per year.

Wayne A.
Reaud, a member of our board of directors, is of counsel to the law firm of Reaud, Morgan & Quinn. We pay the firm $200,000 per year for legal services.
Mr. Reaud has no interest in the firm or in the proceeds for current work done at the firm. As of counsel, the law firm provides Mr. Reaud with an office and certain secretarial
services.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29. OTHER OPERATING EXPENSE (INCOME)

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

Year ended December 31,2008

2007

2006Loss (gain) on sale of business/asset, net

$
6

$
(70
)
$
(92
)Foreign exchange losses


12


14


1Bad debts


6


3


6Legal and contract settlementsnet





6


Insurance recoveries





(11
)

(35
)Other, net


3


3


6Total other operating expense (income)

$
27

$
(55
)
$
(114
)


30. OPERATING SEGMENT INFORMATION

We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of
differentiated and commodity chemical products. We have reported our operations through six segments: Polyurethanes, Materials and Effects, Performance Products, Pigments, Polymers and Base Chemicals.
We have organized our business and derived our operating segments around differences in product lines.

The
major products of each reportable operating segment are as follows:

Segment

ProductsPolyurethanes

MDI, PO, polyols, PG, TPU, aniline and MTBEMaterials and Effects

epoxy resin compounds and formulations; cross-linking, matting and curing agents; epoxy, acrylic and polyurethane-based adhesives, tooling resin formulations, textile chemicals and dyes and APAOPerformance Products

amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins and technology licensesPigments

titanium dioxidePolymers(1)

LDPE and LLDPE, polypropylene and EPSBase Chemicals(1)

olefins and cyclohexaneCorporate and Other

Styrene


---

Sales
between segments are generally recognized at external market prices and are eliminated in consolidation. We use EBITDA to measure the financial performance of our global business
units and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30. OPERATING SEGMENT INFORMATION (Continued)

for
reporting the results of our operating segments. This measure includes all operating items relating to the businesses. The EBITDA of operating segments excludes items that principally apply to our
company as a whole. The revenues and EBITDA for each of our reportable operating segments are as follows (dollars in millions):

December 31,2008

2007

2006Net Sales:Polyurethanes

$
4,055

$
3,813

$
3,457Materials and Effects


2,395


2,419


1,792Performance Products


2,703


2,310


2,037Pigments


1,072


1,109


1,058Corporate and Other


159


155


538Eliminations


(169
)

(155
)

(151
)Total

$
10,215

$
9,651

$
8,731Huntsman Corporation:Segment EBITDA(1):Polyurethanes

$
382

$
592

$
583Materials and Effects


116


199


154Performance Products


278


202


208Pigments


17


51


113Corporate and Other(2)


550


(342
)

(62
)Subtotal


1,343


702


996Polymers(3)


3


(197
)

121Base Chemicals(3)


183


(130
)

(86
)Total


1,529


375


1,031Interest expense, net


(263
)

(286
)

(351
)Income tax (expense) benefitcontinuing operations


(190
)

12


50Income tax (expense) benefitdiscontinued operations


(69
)

140


(35
)Depreciation and amortization


(398
)

(413
)

(465
)Net income (loss)

$
609

$
(172
)
$
230Depreciation and Amortization:Polyurethanes

$
153

$
150

$
142Materials and Effects


47


43


47Performance Products


69


62


54Pigments


91


90


78Polymers





22


45Base Chemicals





11


58Corporate and Other(2)


38


35


41Total

$
398

$
413

$
465Capital Expenditures:Polyurethanes

$
109

$
120

$
82Materials and Effects


81


89


52


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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30. OPERATING SEGMENT INFORMATION (Continued)

December 31,2008

2007

2006Performance Products


149


148


89Pigments


69


104


40Polymers





12


209Base Chemicals





177


61Corporate and Other(2)


10


15


17Total

$
418

$
665

$
550Total Assets:Polyurethanes

$
4,442

$
4,650Materials and Effects


1,701


2,006Performance Products


2,313


2,216Pigments


1,474


1,589Corporate and Other(2)


(1,872
)

(2,295
)Total

$
8,058

$
8,166


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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30. OPERATING SEGMENT INFORMATION (Continued)



December 31,2008

2007

2006Huntsman InternationalSegment EBITDA(1):Polyurethanes

$
382

$
592

$
583Materials and Effects


116


199


154Performance Products


278


202


208Pigments


17


51


113Corporate and Other


(236
)

(150
)

(61
)Subotal


557


894


997Polymers(3)


3


(197
)

121Base Chemicals(3)


183


(130
)

(86
)Total


743


567


1,032Interest expense, net


(264
)

(287
)

(355
)Income tax benefit (expense)continuing operations


2


(41
)

31Income tax (expense) benefitdiscontinued operations


(69
)

140


(35
)Depreciation and amortization


(374
)

(391
)

(439
)Net income (loss)

$
38

$
(12
)
$
234Depreciation and Amortization:Polyurethanes

$
153

$
150

$
142Materials and Effects


47


43


47Performance Products


69


62


54Pigments


91


90


78Polymers





22


45Base Chemicals





11


58Corporate and Other(2)


14


13


13Total

$
374

$
391

$
437Capital Expenditures:Polyurethanes

$
109

$
120

$
82Materials and Effects


81


89


52Performance Products


149


148


89Pigments


69


104


40Polymers





12


209Base Chemicals





177


61Corporate and Other(2)


10


15


17Total

$
418

$
665

$
550


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30. OPERATING SEGMENT INFORMATION (Continued)

December 31,2008

2007Total Assets:Polyurethanes

$
4,442

$
4,650Materials and Effects


1,701


2,006Performance Products


2,313


2,216Pigments


1,474


1,589Corporate and Other(2)


(2,505
)

(2,366
)Total

$
7,425

$
8,095


---

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

30. OPERATING SEGMENT INFORMATION (Continued)



December 31,2008

2007

2006By Geographic AreaRevenues:United States

$
5,019

$
4,788

$
5,080Netherlands


2,401


2,173


1,947Other nations


6,113


6,038


4,262Eliminations


(3,318
)

(3,348
)

(2,558
)Total

$
10,215

$
9,651

$
8,731Long-lived assets(1):Huntsman CorporationUnited States

$
1,601

$
1,533Netherlands


390


403Other nations


1,658


1,827Total

$
3,649

$
3,763Huntsman InternationalUnited States

$
1,418

$
1,327Netherlands


390


403Other nations


1,658


1,826Total

$
3,466

$
3,556


---

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL

The following condensed consolidating financial statements present, in separate columns, financial information for the following: Huntsman International LLC (on a parent only
basis), with its investment in subsidiaries recorded under the equity method; the Guarantors on a combined, and where appropriate, consolidated basis; and the non-guarantors on a combined,
and where appropriate, consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of December 31, 2008 and 2007 and for the years ended
December 31, 2008, 2007 and 2006. There are no contractual restrictions limiting transfers of cash from guarantor subsidiaries to Huntsman International. Each of the Guarantors is 100% owned by
Huntsman International and has fully and unconditionally guaranteed Huntsman International's outstanding notes on a joint and several basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING BALANCE SHEETS  AS OF DECEMBER 31, 2008  (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCASSETSCurrent assets:Cash and cash equivalents

$


$
3

$
84

$


$
87Restricted cash








5





5Accounts and notes receivable, net


19


114


772





905Accounts receivable from affiliates


350


1,819


38


(2,192
)

15Inventories, net


103


198


1,207


(8
)

1,500Prepaid expenses


14


29


21


(19
)

45Deferred income taxes


9





21


(9
)

21Other current assets


61


2


92


(56
)

99Total current assets


556


2,165


2,240


(2,284
)

2,677Property, plant and equipment, net


477


924


2,062


3


3,466Investment in affiliates


4,883


1,367


118


(6,101
)

267Intangible assets, net


103





54





157Goodwill





87


9


(4
)

92Deferred income taxes


168


9


273


(58
)

392Notes receivable from affiliates


319


1,470


9


(1,789
)

9Other noncurrent assets


47


145


172





364Total assets

$
6,553

$
6,167

$
4,937

$
(10,233
)
$
7,424LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
20

$
175

$
533

$


$
728Accounts payable to affiliates


1,567


265


375


(2,191
)

16Accrued liabilities


91


155


389


(75
)

560Deferred income tax





35


10


(10
)

35Note payable to affiliate


423











423Current portion of long-term debt


39





166





205Total current liabilities


2,140


630


1,473


(2,276
)

1,967Long-term debt


3,303


12


127





3,442Notes payable to affiliates





282


1,513


(1,789
)

6Deferred income taxes


2


2


65





69Other noncurrent liabilities


211


175


635





1,021Total liabilities


5,656


1,101


3,813


(4,065
)

6,505Minority interest in consolidated subsidiaries








17


5


22Members' equity:Members' equity


2,865


4,685


1,716


(6,401
)

2,865Subsidiary preferred stock





1


1


(2
)

(Accumulated deficit) retained earnings


(1,414
)

499


(111
)

(388
)

(1,414
)Accumulated other comprehensive loss


(554
)

(119
)

(499
)

618


(554
)Total members' equity


897


5,066


1,107


(6,173
)

897Total liabilities and members' equity

$
6,553

$
6,167

$
4,937

$
(10,233
)
$
7,424


F-103

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING BALANCE SHEETS  AS OF DECEMBER 31, 2007  (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCASSETSCurrent assets:Cash and cash equivalents

$
11

$
6

$
137

$


$
154Accounts and notes receivable, net


30


212


1,011





1,253Accounts receivable from affiliates


1,528


2,439


532


(4,306
)

193Inventories, net


96


234


1,130


(8
)

1,452Prepaid expenses


6


27


24


(20
)

37Deferred income taxes


9


46


18


1


74Other current assets


10


1


102





113Total current assets


1,690


2,965


2,954


(4,333
)

3,276Property, plant and equipment, net


471


838


2,245


2


3,556Investment in affiliates


5,345


1,597


115


(6,829
)

228Intangible assets, net


128


1


48





177Goodwill





87


9


(3
)

93Deferred income taxes


85


16


211


(12
)

300Notes receivable from affiliates


518


1,726


9


(2,244
)

9Other noncurrent assets


57


98


301





456Total assets

$
8,294

$
7,328

$
5,892

$
(13,419
)
$
8,095LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
41

$
258

$
706

$


$
1,005Accounts payable to affiliates


2,682


708


931


(4,306
)

15Accrued liabilities


101


238


462


(20
)

781Deferred income tax








3





3Current portion of long-term debt


27





42





69Total current liabilities


2,851


1,204


2,144


(4,326
)

1,873Long-term debt


3,343





157





3,500Notes payable to affiliates


28


477


1,744


(2,244
)

5Deferred income taxes


2


11


122


(11
)

124Other noncurrent liabilities


181


122


374





677Total liabilities


6,405


1,814


4,541


(6,581
)

6,179Minority interest in consolidated subsidiaries








19


8


27Members' equity:Members' equity


2,845


4,673


1,296


(5,969
)

2,845Subsidiary preferred stock





2


1


(3
)

(Accumulated deficit) retained earnings


(1,143
)

383


(3
)

(380
)

(1,143
)Accumulated other comprehensive income


187


456


38


(494
)

187Total members' equity


1,889


5,514


1,332


(6,846
)

1,889Total liabilities and members' equity

$
8,294

$
7,328

$
5,892

$
(13,419
)
$
8,095


F-104

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS  YEAR ENDED DECEMBER 31, 2008  (Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International
LLCRevenues:Trade sales, services and fees

$
869

$
2,778

$
6,470

$


$
10,117Related party sales


337


442


1,080


(1,761
)

98Total revenues


1,206


3,220


7,550


(1,761
)

10,215Cost of goods sold


1,006


2,869


6,806


(1,747
)

8,934Gross profit


200


351


744


(14
)

1,281Selling, general and administrative


109


132


641


(1
)

881Research and development


53


31


70





154Other operating (income) expense


(15
)

55


(13
)




27Restructuring, impairment and plant closing costs








36





36Operating income


53


133


10


(13
)

183Interest (expense) income, net


(231
)

106


(139
)




(264
)Gain (loss) on accounts receivable securitization program


6


(10
)

(23
)




(27
)Equity in income (loss) of investment in affiliates and subsidiaries


106


(45
)

14


(61
)

14Other (expense) income


(14
)




1


13


(Loss) income from continuing operations before income taxes and minority interest


(80
)

184


(137
)

(61
)

(94
)Income tax benefit (expense)


119


(77
)

16


(56
)

2Minority interest in subsidiaries' income








(1
)




(1
)Income (loss) from continuing operations


39


107


(122
)

(117
)

(93
)(Loss) income from discontinued operations, net of tax


(1
)

119


(1
)




117Extraordinary gain on the acquisition of a business, net of tax








14





14Net income (loss)

$
38

$
226

$
(109
)
$
(117
)
$
38


F-105

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS  YEAR ENDED DECEMBER 31, 2007  (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCRevenues:Trade sales, services and fees

$
934

$
2,420

$
6,126

$


$
9,480Related party sales


484


450


1,007


(1,770
)

171Total revenues


1,418


2,870


7,133


(1,770
)

9,651Cost of goods sold


1,084


2,528


6,247


(1,764
)

8,095Gross profit


334


342


886


(6
)

1,556Selling, general and administrative


140


120


612


(1
)

871Research and development


45


33


67





145Other operating expense (income)


36


(121
)

30





(55
)Restructuring, impairment and plant closing (credits) costs





(1
)

43





42Operating income


113


311


134


(5
)

553Interest expense, net


(64
)

(95
)

(128
)




(287
)Gain (loss) on accounts receivable securitization program


9


(9
)

(21
)




(21
)Equity in (loss) income of investment in affiliates and subsidiaries


(79
)

51


13


28


13Other (expense) income


(6
)

6


2


(5
)

(3
)(Loss) income from continuing operations before income taxes and minority interest


(27
)

264





18


255Income tax benefit (expense)


29


(93
)

23





(41
)Minority interest in subsidiaries' loss








9





9Income from continuing operations


2


171


32


18


223(Loss) income from discontinued operations, net of tax


(12
)

(231
)

15





(228
)Extraordinary loss on the acquisition of a business, net of tax


(2
)




(5
)




(7
)Net (loss) income

$
(12
)
$
(60
)
$
42

$
18

$
(12
)


F-106

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS  YEAR ENDED DECEMBER 31, 2006  (Dollars in Millions)

Parent
Company

Guarantors

Non-guarantors

Eliminations

Consolidated
Huntsman
International
LLCRevenues:Trade sales, services and fees

$
921

$
2,689

$
5,012

$


$
8,622Related party sales


310


350


913


(1,464
)

109Total revenues


1,231


3,039


5,925


(1,464
)

8,731Cost of goods sold


912


2,681


5,154


(1,455
)

7,292Gross Profit


319


358


771


(9
)

1,439Selling, general and administrative


133


120


508





761Research and development


37


30


48





115Other operating expense (income)


58


(160
)

(12
)




(114
)Restructuring, impairment and plant closing costs





3


12





15Operating income


91


365


215


(9
)

662Interest expense, net


(138
)

(82
)

(135
)




(355
)Gain (loss) on accounts receivable securitization program


13


(10
)

(16
)




(13
)Equity in income (loss) of investment in affiliates and subsidiaries


302


(20
)

4


(282
)

4Other (expense) income


(42
)

11





(6
)

(37
)Income from continuing operations before income taxes and minority interest


226


264


68


(297
)

261Income tax benefit


7


9


15





31Minority interest in subsidiaries' income





(40
)

(1
)

38


(3
)Income from continuing operations


233


233


82


(259
)

289Income (loss) from discontinued operations, net of tax


3


68


(182
)




(111
)Extraordinary (loss) gain on the acquisition of a business, net of tax


(2
)




58





56Net income (loss)

$
234

$
301

$
(42
)
$
(259
)
$
234


F-107

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS  YEAR ENDED DECEMBER 31, 2008  (Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash (used in) provided by operating activities

$
(320
)
$
649

$
(290
)
$


$
39Investing activities:Capital expenditures


(50
)

(154
)

(214
)




(418
)Acquisition of business, net of cash acquired and post-closing adjustments








(2
)




(2
)Proceeds from sale of assets, net of adjustments





(28
)

2





(26
)Decrease in receivable from affiliate


406


46





(273
)

179Investment in affiliate


(164
)

(426
)




546


(44
)Cash received from affiliate





10








10Change in restricted cash








(8
)




(8
)Other, net





(3
)

(2
)




(5
)Net cash provided by (used in) investing activities


192


(555
)

(224
)

273


(314
)Financing activities:Net borrowings under revolving loan facilities


8





3





11Net borrowings on overdraft facilities and other short-term debt








8





8Repayments of long-term debt


(1
)




(10
)




(11
)Proceeds from long-term debt


1


10


90





101Issuance of note payable to affiliate


423











423Intercompany (repayments) borrowings





(227
)

(46
)

273


Borrowings on notes payable


41





7





48Repayments of notes payable


(44
)




(11
)




(55
)Contribution from parent, net





120


426


(546
)

Dividends paid


(306
)










(306
)Debt issuance costs paid


(5
)










(5
)Other, net








(1
)




(1
)Net cash provided by (used in) financing activities


117


(97
)

466


(273
)

213Effect of exchange rate changes on cash








(5
)




(5
)Decrease in cash and cash equivalents


(11
)

(3
)

(53
)




(67
)Cash and cash equivalents at beginning of period


11


6


137





154Cash and cash equivalents at end of period

$


$
3

$
84

$


$
87


F-108

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW  YEAR ENDED DECEMBER 31, 2007  (Dollars in Millions)

Parent
Company

Guarantors

Non-Guarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash (used in) provided by operating activities

$
(1,378
)
$
1,356

$
85

$
(6
)
$
57Investing activities:Capital expenditures


(42
)

(313
)

(310
)




(665
)Acquisition of business, net of cash acquired and post-closing adjustments


(8
)




21





13Proceeds from sale of businesses/assets


348


486


16





850Decrease (increase) in receivable from affiliate


1,234


(83
)




(1,329
)

(178
)Investment in affiliate





(16
)

(12
)

11


(17
)Cash received from affiliate


19





4


(19
)

4Other, net








1





1Net cash provided by (used in) investing activities


1,551


74


(280
)

(1,337
)

8Financing activities:Net repayments under revolving loan facilities








(17
)




(17
)Net borrowings on overdraft facilities and other short-term debt








15





15Repayments of long-term debt


(413
)




(9
)




(422
)Proceeds from long-term debt


249





17





266Intercompany (repayments) borrowings





(1,412
)

83


1,329


Borrowings on notes payable


47





6





53Repayments of notes payable


(57
)










(57
)Debt issuance costs paid


(5
)










(5
)Call premiums related to early extinguishment of debt


(1
)










(1
)Dividends paid





(6
)




6


Other, net





(6
)

(3
)

8


(1
)Net cash (used in) provided by financing activities


(180
)

(1,424
)

92


1,343


(169
)Effect of exchange rate changes on cash








12





12(Decrease) increase in cash and cash equivalents


(7
)

6


(91
)




(92
)Cash and cash equivalents at beginning of period


18





228





246Cash and cash equivalents at end of period

$
11

$
6

$
137

$


$
154


F-109

---





Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31. CONDENSED CONSOLIDATING FINANCIAL STATEMENTSHUNTSMAN INTERNATIONAL (Continued)

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW  YEAR ENDED DECEMBER 31, 2006  (Dollars in Millions)

Parent
Company

Guarantors

Non-
Guarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash provided by (used in) operating activities

$
1,497

$
(981
)
$
376

$
(9
)
$
883Investing activities:Capital expenditures


(31
)

(113
)

(406
)




(550
)Acquisition of business, net of cash acquired and post-closing adjustments


(10
)




(167
)




(177
)Proceeds from sale of business/assets





201


694





895(Increase) decrease in receivable from affiliate


(1,191
)

425





766


Investment in affiliate





(8
)

(14
)

8


(14
)Cash received from affiliate


714


2





(714
)

2Other, net








3





3Net cash (used in) provided by investing activities


(518
)

507


110


60


159Financing activities:Net repayments under revolving loan facilities








(6
)




(6
)Net repayments on overdraft facilities and other short-term debt








(7
)




(7
)Repayments of long-term debt


(1,755
)

(9
)

(20
)




(1,784
)Proceeds from long-term debt


810





62





872Intercompany borrowings (repayments)





487


(425
)

(62
)

Borrowings on notes payable


67





7





74Repayments of notes payable


(50
)

(1
)

(9
)




(60
)Debt issuance costs paid


(13
)










(13
)Call premiums related to early extinguishment of debt


(30
)










(30
)Contribution from minority shareholder








6





6Dividends paid





(11
)




11


Other, net








4





4Net cash (used in) provided by financing activities


(971
)

466


(388
)

(51
)

(944
)Effect of exchange rate changes on cash








15





15Increase (decrease) in cash and cash equivalents


8


(8
)

113





113Cash and cash equivalents at beginning of period


10


8


115





133Cash and cash equivalents at end of period

$
18

$


$
228

$


$
246


F-110

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32. SELECTED UNAUDITED QUARTERLY FINANCIAL DATA

A summary of selected unaudited quarterly financial data for the years ended December 31, 2008 and 2007 is as follows (dollars in millions):

Huntsman Corporation

Three months endedMarch 31,
2008

June 30,
2008

September 30,
2008

December 31,
2008Revenues

$
2,540

$
2,896

$
2,731

$
2,048Gross profit


367


381


351


165Restructuring, impairment and plant closing costs


4


1


3


28Income (loss) from continuing operations(a)(b)


8


10


(22
)

482Income (loss) before extraordinary gain


7


15


(21
)

594Net income (loss)


7


24


(20
)

598Basic income (loss) per share:Income (loss) from continuing operations(a)(b)


0.04


0.04


(0.10
)

2.06Income (loss) before extraordinary gain


0.03


0.06


(0.10
)

2.55Net income (loss)


0.03


0.10


(0.09
)

2.56Diluted income (loss) per share:Income (loss) from continuing operations(a)(b)


0.03


0.04


(0.10
)

2.04Income (loss) before extraordinary gain


0.03


0.06


(0.10
)

2.52Net income (loss)


0.03


0.10


(0.09
)

2.53




Three months endedMarch 31,
2007

June 30,
2007

September 30,
2007

December 31,
2007Revenues

$
2,252

$
2,471

$
2,424

$
2,504Gross profit


391


388


400


361Restructuring, impairment and plant closing costs


11


13


10


8Income (loss) from continuing operations


48


62


(136
)

78Income (loss) before extraordinary loss


45


(63
)

(150
)

3Net income (loss)


47


(71
)

(150
)

2Basic income (loss) per share:Income from continuing operations


0.21


0.28


(0.62
)

0.35Income (loss) before extraordinary loss


0.20


(0.28
)

(0.68
)

0.01Net income (loss)


0.21


(0.32
)

(0.68
)

0.01Diluted income (loss) per share:Income (loss) from continuing operations


0.20


0.27


(0.62
)

0.33Income (loss) before extraordinary loss


0.19


(0.27
)

(0.68
)

0.01Net income (loss)


0.20


(0.30
)

(0.68
)

0.01


F-111

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

32. SELECTED UNAUDITED QUARTERLY FINANCIAL DATA (Continued)

Huntsman International

Three months endedMarch 31,
2008

June 30,
2008

September 30,
2008

December 31,
2008Revenues

$
2,540

$
2,896

$
2,731

$
2,048Gross profit


371


386


355


169Restructuring, impairment and plant closing costs


4


1


3


28Income (loss) from continuing operations(b)


13


18


7


(131
)Income (loss) before extraordinary gain


12


23


8


(19
)Net income (loss)


13


32


9


(16
)




Three months endedMarch 31, 2007

June 30, 2007

September 30, 2007

December 31, 2007Revenues

$
2,252

$
2,471

$
2,424

$
2,504Gross profit


393


394


405


364Restructuring, impairment and plant closing costs


11


13


10


8Income from continuing operations


37


43


62


81Income (loss) before extraordinary loss


34


(82
)

48


(5
)Net income (loss)


36


(91
)

48


(5
)


---

33. SUBSEQUENT EVENTS

On February 5, 2009, our board of directors declared a $0.10 per share cash dividend, payable on March 31, 2009, to stockholders of record as of March 16, 2009.

On
January 22, 2009, our board of directors approved and we announced plans to close our titanium dioxide plant located in Grimsby, U.K. The Grimsby plant is our Pigments
segment's oldest and least efficient manufacturing plant and has annual production capacity of 40,000 tons of titanium dioxide. Pigments production at this plant, which had a net book value of
approximately $32 million at December 31, 2008, is expected to cease during the first quarter of 2009. Approximately 200 full-time employees and contractors work at this
site.

F-112

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Table of Contents

HUNTSMAN CORPORATION (PARENT ONLY)    Schedule ICondensed Financial Information of Registrant

HUNTSMAN CORPORATION (Parent Only)  BALANCE SHEETS  (Dollars in Millions)

December 31,2008

2007ASSETSCash and cash equivalents

$
570

$
Note receivable from affiliate


423


Investment in government securities (restricted as to use)





4Total current assets


993


4Investment in and advances to affiliates


903


2,112Total assets

$
1,896

$
2,116LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable

$
4

$
Payable to affiliate


7


184Dividends payable





4Accrued liabilities


40


100Total current liabilities


51


288Long-term debt


235


Other long term liabilities





2Total liabilities


286


290STOCKHOLDERS' EQUITYCommon stock, $0.01 par value, 1,200,000,000 shares authorized, 234,430,334 and 222,012,474 issued and 233,553,515 and 221,036,190 outstanding in 2008 and
2007, respectively


2


2Mandatory convertible preferred stock, $0.01 par value, 100,000,000 shares authorized, and 5,750,000 issued and outstanding in 2007





288Additional paid-in capital


3,141


2,831Unearned stock-based compensation


(13
)

(12
)Accumulated deficit


(1,031
)

(1,540
)Accumulated other comprehensive (loss) income


(489
)

257Total stockholders' equity


1,610


1,826Total liabilities and stockholders' equity

$
1,896

$
2,116


This
statement should be read in conjunction with the notes to the consolidated financial statements.

F-113

---





Table of Contents

HUNTSMAN CORPORATION (Parent Only)  STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)  (Dollars in Millions)

Year ended December 31,2008

2007

2006Selling, general and administrative

$
(3
)
$
(4
)
$
(5
)Interest income





1


1Equity in (loss) income of subsidiaries


(474
)

41


234Dividend incomeaffiliate


306





Income (expenses) associated with the Merger


780


(210
)

Net income (loss)

$
609

$
(172
)
$
230Net income (loss)

$
609

$
(172
)
$
230Other comprehensive (loss) income from subsidiaries


(746
)

318


149Comprehensive (loss) income

$
(137
)
$
146

$
379


This
statement should be read in conjunction with the notes to the consolidated financial statements.

F-114

---





Table of Contents

HUNTSMAN CORPORATION (Parent Only)  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)  (Dollars in Millions)

SharesAccumulated
other
comprehensive
(loss) incomeCommon Stock

Mandatory
convertible
preferred stock

Common
stock

Mandatory
convertible
preferred stock

Additional
paid-in
capital

Unearned
stock-based
compensation

Accumulated
deficit

TotalBalance, January 1, 2006


220,451,484


5,750,000

$
2

$
288

$
2,780

$
(12
)
$
(1,506
)
$
(31
)
$
1,521Net income




















230





230Other comprehensive income























149


149Issuance of nonvested stock awards














9


(9
)







Vesting of stock awards


278,531























Recognition of stock-based compensation














9


8








17Cumulative effect of adoption of SFAS No. 158, net of tax























(179
)

(179
)Repurchase and cancellation of stock awards


(77,586
)
















(2
)




(2
)Balance, December 31, 2006


220,652,429


5,750,000


2


288


2,798


(13
)

(1,278
)

(61
)

1,736Net loss




















(172
)




(172
)Other comprehensive income























318


318Issuance of nonvested stock awards














10


(10
)







Vesting of stock awards


393,555























Stock options exercised


99,332











2











2Recognition of stock-based compensation














13


11








24Repurchase and cancellation of stock awards


(109,126
)
















(2
)




(2
)Dividends declared on common stock




















(88
)




(88
)Reversal of valuation allowance on deferred tax assets related to previous equity transactions














8











8Balance, December 31, 2007


221,036,190


5,750,000


2


288


2,831


(12
)

(1,540
)

257


1,826Net income




















609





609Other comprehensive loss























(746
)

(746
)Issuance of nonvested stock awards














12


(12
)







Vesting of stock awards


594,908











1











1Recognition of stock-based compensation














9


11








20Repurchase and cancellation of stock awards


(160,058
)
















(4
)




(4
)Preferred stock conversion


12,082,475


(5,750,000
)




(288
)

288











Effect of adoption of SFAS No. 158, net of tax




















(3
)




(3
)Dividends declared on common stock




















(93
)




(93
)Balance, December 31, 2008


233,553,515




$
2

$


$
3,141

$
(13
)
$
(1,031
)
$
(489
)
$
1,610


This statement should be read in conjunction with the notes to the consolidated financial statements.

F-115

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Table of Contents

HUNTSMAN CORPORATION (Parent Only)  STATEMENTS OF CASH FLOWS  (Dollars in Millions)

Year ended December 31,2008

2007

2006Operating Activities:Net income (loss)

$
609

$
(172
)
$
230Equity in loss (income) of subsidiaries


474


(41
)

(234
)Changes in operating assets and liabilities


(49
)

104


6Net cash provided by (used in) operating activities


1,034


(109
)

2Investing Activities:Loan to affiliate


(423
)




Proceeds from maturity of government securities (restricted as to use)


4


14


14Net cash (used in) provided by investing activities


(419
)

14


14Financing Activities:Proceeds from issuance of Convertible Note


235





Dividends paid to preferred stockholders


(4
)

(14
)

(14
)Dividends paid to common stockholders


(93
)

(88
)

Repurchase and cancellation of stock awards


(4
)




Stock options exercised





2


(Decrease) increase payable to affiliates


(179
)

178


5Net cash (used in) provided by financing activities


(45
)

78


(9
)Increase (decrease) in cash and cash equivalents


570


(17
)

7Cash and cash equivalents at beginning of period





17


10Cash and cash equivalents at end of period

$
570

$


$
17


This
statement should be read in conjunction with the notes to the consolidated financial statements.

F-116

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES  Schedule IIValuation and Qualifying Accounts  (Dollars in Millions)

Column A

Column B

Column C



Column D

Column EAdditionsDescription

Balance at
Beginning
of Period

Charged
to cost and
expenses

Charged
to other
accounts

Deductions

Balance at
End of
PeriodAllowance for Doubtful Accounts:Year ended December 31, 2008

$
43

$
6

$
(2
)
$


$
47Year ended December 31, 2007

$
39

$
3

$
1

$


$
43Year ended December 31, 2006

$
34

$
6

$


$
(1
)
$
39


F-117

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Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES  Schedule IIValuation and Qualifying Accounts  (Dollars in Millions)

Column A

Column B

Column C



Column D

Column EAdditionsDescription

Balance at
Beginning
of Period

Charged
to cost and
expenses

Charged
to other
accounts

Deductions

Balance at
End of PeriodAllowance for Doubtful Accounts:Year ended December 31, 2008

$
43

$
6

$
(2
)
$


$
47Year ended December 31, 2007

$
39

$
3

$
1

$


$
43Year ended December 31, 2006

$
34

$
6

$


$
(1
)
$
39


F-118

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Table of Contents

EXHIBIT INDEX

Number

Description1.1

Underwriting Agreement, dated as of August 2, 2007, by and among the Company, MatlinPatterson Global Opportunities Partners L.P., MatlinPatterson Global Opportunities Partners B, L.P., MatlinPatterson
Global Opportunities Partners (Bermuda) L.P. and Credit Suisse Securities (USA) LLC (incorporated by reference to Exhibit 1.1 to our current report on Form 8-K filed on August 6, 2007)2.1

Asset Purchase Agreement, dated February 15, 2007 among Flint Hills Resources, LLC, Huntsman International LLC, Huntsman Petrochemical Corporation, Huntsman International Chemicals Corporation, Huntsman
Polymers Holdings Corporation, Huntsman Expandable Polymers Company, LLC, Huntsman Polymers Corp. and Huntsman Chemical Company of Canada, Inc. (incorporated by reference to Exhibit 2.1 to our current report on Form 8-K filed on
February 20, 2007)2.2

Amended and Restated Asset Purchase Agreement dated June 22, 2007 among Flint Hills Resources, LP, Flint Hills Resources, LLC, Huntsman International LLC, Huntsman Petrochemical Corporation,
Huntsman International Chemicals Corporation, Huntsman Polymers Holdings Corporation, Huntsman Expandable Polymers Company, LC, Huntsman Polymers Corp. and Huntsman Chemical Company of Canada, Inc. (incorporated by reference to Exhibit 2.1
to our current report on Form 8-K filed on June 25, 2007)2.3

Agreement and Plan of Merger, dated as of June 26, 2007, among the Company, Basell AF and BI Acquisition Holdings Limited (incorporated by reference to Exhibit 2.1 to our current report on Form 8-K
filed on June 27, 2007)2.4

Agreement and Plan of Merger, dated as of July 12, 2007, among the Company, Hexion Specialty Chemicals, Inc. and Nimbus Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to our current
report on Form 8-K filed on July 13, 2007)3.1

Certificate of Designations, Preferences and Rights of 5% Mandatory Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed on February 16,
2005)3.2

Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1(i) to our current report on Form 8-K filed on November 26, 2008)3.3

Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1(ii) to our current report on Form 8-K filed on November 26, 2008)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 Huntsman LLC's registration statement on Form S-4 filed on January 29, 2004 (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

Indenture, dated as of June 22, 2004, among Huntsman LLC, the Guarantors party thereto and HSBC Bank USA, as Trustee, relating to the 111/2% Senior Notes due 2012 and Senior
Floating Rate Notes due 2011 (incorporated by reference to Exhibit 4.1 to Huntsman LLC's quarterly report on Form 10-Q for the three months ended June 30, 2004, filed on August 16, 2004)4.5

Form of Restricted Fixed Rate Note due 2012 (included as Exhibit A-1 to Exhibit 4.4)


---



Table of Contents

Number

Description4.6

Form of Restricted Floating Rate Note due 2011 (included as Exhibit A-2 to Exhibit 4.4)4.7

Form of Guarantee relating to the 111/2% Senior Notes due 2012 and Senior Floating Rate Notes due 2011 (included as Exhibit E to Exhibit 4.4)4.8

Indenture, dated as of December 17, 2004, among Huntsman International LLC, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee, relating to the
73/8% Senior Subordinated Notes due 2015 and the 71/2% Senior Subordinated Notes due 2015 (incorporated by reference to Exhibit 4.1 to Huntsman International LLC's current report on
Form 8-K filed on December 23, 2004)4.9

Form of Restricted 73/8% Senior Subordinated Note denominated in dollars due 2015 (included as Exhibit A-1 to Exhibit 4.8)4.10

Form of Restricted 71/2% Senior Subordinated Note denominated in euros due 2015 (included as Exhibit A-2 to Exhibit 4.8)4.11

Form of Unrestricted 73/8% Senior Subordinated Note denominated in dollars due 2015 (included as Exhibit A-3 to Exhibit 4.8)4.12

Form of Unrestricted 71/2% Senior Subordinated Note denominated in euros due 2015 (included as Exhibit A-4 to Exhibit 4.8)4.13

Form of Guarantee (included as Exhibit E to Exhibit 4.8)4.14

Registration Rights Agreement dated as of February 10, 2005, by and among the Company and the stockholders signatory thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K
filed on February 16, 2005)4.15

Form of stock certificate of Huntsman Corporation (incorporated by reference to Exhibit 4.68 to amendment No. 3 to our registration statement on Form S-1 filed on February 8, 2005 (File
No. 333-120749))4.16

Form of mandatory convertible preferred stock certificate of Huntsman Corporation (incorporated by reference to Exhibit A to Exhibit 3.01 to our current report on Form 8-K filed February 16,
2005)4.17

Supplemental Indenture, dated as of July 11, 2005, among Huntsman LLC, the Guarantors named therein and HSBC Bank USA, National Association, as Trustee, relating to the 111/2%
Huntsman LLC Senior Notes due 2012 and Huntsman LLC Senior Floating Rate Notes due 2011 (incorporated by reference to Exhibit 4.1 to Huntsman LLC's current report on Form 8-K filed on July 15, 2005)4.18

Supplemental Indenture, dated as of July 13, 2005 among Huntsman LLC, the Guarantors named therein and HSBC Bank USA, National Association, as Trustee, relating to the 115/8%
Huntsman LLC Senior Secured Notes due 2010 (incorporated by reference to Exhibit 4.2 to Huntsman LLC's current report on Form 8-K filed on July 15, 2005)4.19

Supplemental Indenture dated August 16, 2005 to Indenture dated as December 17, 2004 by and among Huntsman International LLC, the guarantors named therein, and Wells Fargo Bank, National Association (as
successor by consolidation to Wells Fargo Bank Minnesota, National Association), as trustee, relating to Huntsman International LLC's dollar denominated 73/8% Senior Subordinated Notes due 2015 and euro denominated
71/2% Senior Subordinated Notes due 2015 (incorporated by reference to Exhibit 4.4 to Huntsman International LLC's current report on Form 8-K filed on August 22, 2005)


---



Table of Contents

Number

Description4.20

Supplemental Indenture dated August 16, 2005, to Indenture dated as of September 30, 2003 by and among Huntsman International LLC (as successor to Huntsman LLC), the guarantors named therein, and HSBC
Bank USA, National Association, as trustee, relating to Huntsman International LLC's 115/8% Senior Secured Notes due 2010, originally issued by Huntsman LLC (incorporated by reference to Exhibit 4.7 to
Huntsman International LLC's current report on Form 8-K filed on August 22, 2005)4.21

Supplemental Indenture dated August 16, 2005, to Indenture dated as of June 22, 2004 by and among Huntsman International LLC (as successor to Huntsman LLC), the guarantors named therein, and HSBC
Bank USA, National Association, as trustee, relating to Huntsman International LLC's 111/2% Senior Notes due 2012 and Senior Floating Rate Notes due 2011, originally issued by Huntsman LLC (incorporated by
reference to Exhibit 4.10 to Huntsman International LLC's current report on Form 8-K filed on August 22, 2005)4.22

Form of Restricted Stock Agreement for Outside Directors, effective for grants prior to February 6, 2008 (incorporated by reference to Exhibit 4.7 to our registration statement on Form S-8 filed on
February 10, 2006 (File No. 333-131729))4.23

Form of Restricted Stock Unit Agreement for Outside Directors effective for grants prior to February 6, 2008 (incorporated by reference to Exhibit 4.8 of our registration statement on Form S-8 filed on
February 10, 2006 (File No. 333-131729))4.24

Indenture, dated as of November 13, 2006, among Huntsman International LLC, as Issuer, the Guarantors party thereto, and Wells Fargo Bank, National Association, as Trustee, relating to the $200,000,000
77/8% Senior Subordinated Notes due 2014 and the €400,000,000 67/8 Senior Subordinated Notes due 2013 (incorporated by reference to Exhibit 4.1 to our quarterly report on Form 10-Q
for the three months ended September 30, 2006, filed on November 14, 2006)4.25

Form of Restricted 77/8% Senior Subordinated Note denominated in dollars due 2014 (included as Exhibit A-1 to Exhibit 4.24)4.26

Form of Restricted 67/8% Senior Subordinated Note denominated in euros due 2013 (included as Exhibit A-2 to Exhibit 4.24)4.27

Form of Unrestricted 77/8% Senior Subordinated Note denominated in dollars due 2014 (included as Exhibit A-3 to Exhibit 4.24)4.28

Form of Unrestricted 67/8% Senior Subordinated Note denominated in euros due 2013 (included as Exhibit A-4 to Exhibit 4.24)4.29

Exchange and Registration Rights Agreement, dated as of November 13, 2006, among Huntsman International LLC, as Issuer, the Guarantors party thereto, and the Purchasers as defined therein, relating to
$200,000,000 aggregated principal amount of the 77/8% Senior Subordinated Notes due 2014 (incorporated by reference to Exhibit 4.2 to our quarterly report on Form 10-Q for the three months ended September 30,
2006, filed on November 14, 2006)4.30

Amended and Restated Registration Rights Agreement dated July 12, 2007, among the Company, Huntsman Family Holdings Company LLC, MatlinPatterson Global Opportunities Partners, L.P., MatlinPatterson
Global Opportunities Partners B, L.P., MatlinPatterson Global Opportunities Partners (Bermuda), L.P. and the other stockholders party thereto (incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed on
July 13, 2007)4.31

Form of Restricted Stock Agreement for Outside Directors (incorporated by reference to Exhibit 4.31 to our annual report on Form 10-K filed on February 22, 2008)


---



Table of Contents

Number

Description4.32

Form of Restricted Stock Unit Agreement for Outside Directors (incorporated by reference to Exhibit 4.32 to our annual report on Form 10-K filed on February 22, 2008)10.1

Aircraft Dry Lease, dated as of September 14, 2001, between Jstar Corporation and Airstar Corporation (incorporated by reference to Exhibit 10.10 to amendment No. 1 to the registration statement on
Form S-4 of Huntsman LLC filed on February 11, 2004 (File No. 333-112279))10.2

Business Consulting Agreement, dated as of June 3, 2003, between Huntsman International LLC and Jon M. Huntsman (incorporated by reference to Exhibit 10.41 to amendment No. 1 to the registration
statement on Form S-4 of Huntsman International LLC (File No. 333-106482))10.3

Huntsman Cost Reduction Incentive Plan and Form of Participation Agreement (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of HMP Equity Holdings Corporation filed on
November 23, 2004)10.4

Gift Agreement by and among Huntsman Group Inc. and the Jon and Karen Huntsman Foundation (incorporated by reference to Exhibit 10.17 to amendment No. 4 to our registration statement on Form S-1
filed on February 8, 2005 (File No. 333-120749))10.5

Pledge, Assignment and Collateral Agency Agreement dated February 16, 2005 between the Company and Citibank, N.A. (incorporated by reference to Exhibit 10.18 to amendment No. 4 to our registration
statement on Form S-1 filed on February 8, 2005 (File No. 333-120749))10.6

Huntsman Corporation Stock Incentive Plan (incorporated by reference to Exhibit 10.19 to amendment No. 4 to our registration statement on Form S-1 filed on February 8, 2005 (File
No. 333-120749))10.7

Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.20 to amendment No. 4 to our registration statement on Form S-1 filed on February 8, 2005 (File
No. 333-120749))10.8

Form of Restricted Stock Agreement, effective for grants prior to February 6, 2008 (incorporated by reference to Exhibit 10.21 to amendment No. 4 to our registration statement on Form S-1 filed on
February 8, 2005 (File No. 333-120749))10.9

Form of Stock Appreciation Rights Agreement (incorporated by reference to Exhibit 10.22 to amendment No. 4 to our registration statement on Form S-1 filed on February 8, 2005 (File
No. 333-120749))10.10

Form of Phantom Share Agreement, effective for grants prior to February 6, 2008 (incorporated by reference to Exhibit 10.23 to amendment No. 4 to our registration statement on Form S-1 filed on
February 8, 2005 (File No. 333-120749))10.11

Form of Executive Severance Plan (as amended and restated) (incorporated by reference to Exhibit 10.24 to amendment No. 4 to our registration statement on Form S-1 filed on February 8, 2005 (File
No. 333-120749))10.12

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.25 to amendment No. 4 to our registration statement on Form S-1 filed on February 8, 2005 (File No. 333-120749))10.13

Employment Agreement with Paul Hulme (incorporated by reference to Exhibit 10.24 to amendment No. 1 to our registration statement on Form S-1 dated January 6, 2005 (File No. 333-120749))


---



Table of Contents

Number

Description10.14

Employment Agreement with Anthony Hankins (incorporated by reference to Exhibit 10.27 to amendment No. 2 to our registration statement on Form S-1 filed on January 28, 2005 (File No. 333-120749))10.15

Huntsman Supplemental Executive Retirement Plan, as amended through the sixth amendment, April 21, 2005 (incorporated by reference to Exhibit 10.1 to our quarterly report on Form 10-Q for the
three-months ended March 31, 2005, filed on May 11, 2005)10.16

Credit Agreement dated August 16, 2005 among Huntsman International LLC, Deutsche Bank AG New York Branch as Administrative Agent and the other financial institutions named therein (incorporated by reference
to Exhibit 10.1 to Huntsman International LLC's current report on Form 8-K filed August 22, 2005)10.17

Intercreditor Agreement dated August 16, 2005 among Deutsche Bank AG New York Branch as collateral agent and administrative agent under the above referenced credit agreement, and HSBC Bank USA, National
Association as trustee under the indenture governing Huntsman International LLC's 115/8% Senior Secured Notes (incorporated by reference to Exhibit 10.2 to Huntsman International LLC's current report on
Form 8-K filed August 22, 2005)10.18

Second Amendment to Amended and Restated Pooling Agreement, dated August 16, 2005, among Huntsman Receivables France LLC, Huntsman (Europe), BVBA and J.P. Morgan Bank (incorporated by reference to
Exhibit 10.4 to Huntsman International LLC's current report on Form 8-K filed on August 22, 2005)10.19

Fourth Amendment to 2000-1 Supplement, dated August 16, 2005, among Huntsman Receivables Finance LLC, Huntsman (Europe), BVBA and J.P. Morgan (Ireland) Plc (incorporated by reference to
Exhibit 10.5 to Huntsman International LLC's current report on Form 8-K filed on August 22, 2005)10.20

Form of Non-qualified Stock Option Agreement for Outside Directors (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed November 8, 2005)10.21

Amended and Restated Huntsman Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed December 30, 2005)10.22

Huntsman Supplemental Executive MPP Plan (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed December 30, 2005)10.23

Amended and Restated Huntsman Supplemental Savings Plan (incorporated by reference to Exhibit 10.3 to our current report on Form 8-K filed December 30, 2005)10.24

Huntsman Outside Directors Elective Deferral Plan (incorporated by reference to Exhibit 10.4 to our current report on Form 8-K filed December 30, 2005)10.25

Second Amended and Restated Pooling Agreement, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA and J.P. Morgan Bank (Ireland), as trustee, dated as of April 18, 2006 (incorporated by reference
to Exhibit 10.1 to our quarterly report on Form 10-Q for the three months ended March 31, 2006, filed on May 9, 2006)10.26

Amended and Restated 2000-1 Supplement to Second Amended and Restated Pooling Agreement, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA, Jupiter Securitization Corporation, the several financial
institutions party thereto as funding agents, the Series 2000-1 Conduit Purchasers party thereto, the several financial institutions party thereto as Series 2000-1 APA Banks, J.P.Morgan Securities Ltd., JPMorgan Chase Bank, N.A., and
J.P.Morgan (Ireland) plc, as trustee, dated as of April 18, 2006 (incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-Q for the three months ended March 31, 2006, filed on May 9, 2006)


---



Table of Contents

Number

Description10.27

Amended and Restated Contribution Agreement, between Huntsman International LLC and Huntsman Receivables Finance LLC, dated as of April 18, 2006 (incorporated by reference to Exhibit 10.3 to our
quarterly report on Form 10-Q for the three months ended March 31, 2006, filed on May 9, 2006)10.28

Second Amended and Restated Servicing Agreement, dated as of April 18, 2006, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA, the various affiliates of Huntsman International LLC party
thereto as local servicers, J.P.Morgan Bank (Ireland), as Trustee, PricewaterhouseCoopers LLP, and Huntsman International LLC (incorporated by reference to Exhibit 10.4 to our quarterly report on Form 10-Q for the three months
ended March 31, 2006, filed on May 9, 2006)10.29

Consent and Second Amendment to Credit Agreement and Amendment to Security Documents, dated June 30, 2006, by and among Huntsman International LLC, as Borrower, Deutsche Bank AG New York Branch, as
Administrative Agent and Collateral Agent, and the other financial institutions party thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on July 7, 2006)10.30

Withdrawal of Originator, dated November 28, 2006, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA, the various affiliates of Huntsman International LLC party thereto as local servicers,
J.P.Morgan Bank (Ireland), as Trustee, PricewaterhouseCoopers LLP, and Huntsman International LLC (incorporated by reference to Exhibit 10.30 to our annual report on Form 10-K filed on March 1, 2007)10.31

Third Amendment to Credit Agreement dated April 19, 2007 by and among Huntsman International LLC, as Borrower, Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent, and the other
financial institutions party thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on April 23, 2007)10.32

First Amendment to Huntsman Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.32 to our annual report on Form 10-K filed on February 22, 2008)10.33

First Amendment to Huntsman Supplemental Executive MPP Plan (incorporated by reference to Exhibit 10.33 to our annual report on Form 10-K filed on February 22, 2008)10.34

First Amendment to Huntsman Supplemental Savings Plan (incorporated by reference to Exhibit 10.34 to our annual report on Form 10-K filed on February 22, 2008)10.35

Second Amendment to Huntsman Supplemental Savings Plan (incorporated by reference to Exhibit 10.35 to our annual report on Form 10-K filed on February 22, 2008)10.36

First Amendment to Huntsman Outside Directors Elective Deferral Plan (incorporated by reference to Exhibit 10.36 to our annual report on Form 10-K filed on February 22, 2008)10.37

Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.37 to our annual report on Form 10-K filed on February 22, 2008)10.38

Form of Phantom Share Agreement (incorporated by reference to Exhibit 10.38 to our annual report on Form 10-K filed on February 22, 2008)10.39

Huntsman Corporation's Acceptance of Backstop Commitment dated October 26, 2008, among the Company and certain stockholders (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K
filed on October 28, 2008)


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Table of Contents

Number

Description10.40

Second Amendment to the Second Amended and Restated Pooling Agreement, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA, the Series 2000-1 conduit purchasers party thereto, the several financial
institutions party thereto as Series 2000-1 APA banks, the several financial institutions party thereto as funding agents, JPMorgan Chase Bank, N.A. as administrative agent and BNY Financial Services plc, the successor to J.P. Morgan Bank
(Ireland) plc, as trustee, The Bank of New York Mellon, and JPMorgan Chase Bank, N.A., dated as of November 13, 2008 (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on November 19,
2008)10.41

Second Amended and Restated 2000-1 Supplement to Second Amended and Restated Pooling Agreement, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA, the several financial institutions party thereto as
funding agents, the Series 2000-1 Conduit Purchasers party thereto, the several financial institutions party thereto as Series 2000-1 APA Banks, J.P.Morgan Securities Ltd., JPMorgan Chase Bank, N.A., and BNY Financial Services plc,
 the successor to J.P.Morgan (Ireland) plc, as trustee, dated as of November 13, 2008 (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed on November 19, 2008)10.42

Amendment to the Second Amended and Restated Servicing Agreement, among Huntsman Receivables Finance LLC, Huntsman (Europe) BVBA, the various affiliates of Huntsman International LLC party thereto as local
servicers, Huntsman International LLC, as servicer guarantor, BNY Financial Services plc, the successor to J.P.Morgan Bank (Ireland), as trustee, and PricewaterhouseCoopers LLP, as liquidation servicer, dated as of November 13,
2008 (incorporated by reference to Exhibit 10.3 to our current report on Form 8-K filed on November 19, 2008)10.43

Settlement Agreement and Release, dated December 14, 2008, among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc.,
Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed on December 15, 2008)10.44

Letter Agreement, dated December 14, 2008, among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison,
Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed on December 15, 2008)10.45

Note Purchase Agreement, dated December 23, 2008, by and among Huntsman Corporation and Apollo Investment Fund VI, L.P. and certain of its affiliates (incorporated by reference to Exhibit 10.1 to our
current report on Form 8-K filed on December 23, 2008)10.46

Registration Rights Agreement, dated December 23, 2008, by and among Huntsman Corporation and Apollo Investment Fund VI, L.P. and certain of its affiliates (incorporated by reference to Exhibit 10.2 to
our current report on Form 8-K filed on December 23, 2008)10.47

Voting and Standstill Agreement, dated December 23, 2008, by and among Huntsman Corporation and Apollo Investment Fund VI, L.P. and certain of its affiliates (incorporated by reference to Exhibit 10.3
to our current report on Form 8-K filed on December 23, 2008)21.1
*
Subsidiaries of the Company23.1
*
Consent of Independent Registered Public Accounting Firm31.1
*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


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Table of Contents

Number

Description31.2
*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
*
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
*
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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