Use these links to rapidly review the documentTABLE OF CONTENTS

---

---

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

Form 10-Q/A
Amendment No. 1

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended September 30, 2003            
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number 333-85141

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

|Delaware(State or other jurisdiction of
incorporation or organization)                                                  |  | 87-0630358I.R.S. Employer Identification No.
|----------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------
|500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700(Address of principal executive offices and telephone number)

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

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

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

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

On
November 14, 2003, 1,000 member equity units of Huntsman International LLC were outstanding. There is no established trading market for Registrant's units of membership
interest. All of Registrant's units of membership interest are held by an affiliate.

---

---

---

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A amends Items 1, 2 and 4 of Part I of the Quarterly Report on Form 10-Q
previously filed for the quarter ended September 30, 2003 by Huntsman International LLC (the "Company"). This Form 10-Q/A is filed in connection with the Company's
restatement of its financial statements for the three and nine months ended September 30, 2003. Financial statement information and related disclosures included in this
Form 10-Q/A reflect, where appropriate, changes as a result of the restatement. All other information contained in this Form 10-Q/A is as of the date of the
original filing.

In
February 2004, the Company discovered an error in how it had accounted for product exchange balances under a toll processing agreement with a customer. The error was caused by
the use of an incorrect exchange factor in the Company's new SAP-based enterprise resource planning ("ERP") system. The Company's use of the incorrect exchange factor resulted from its implementation
of and transition to the new SAP-based ERP system in 2003, and the Company has restated its financial statements for the three and nine months ended September 30, 2003 to correct the effect of
this error and to adjust certain other items which, considered in relation to the financial statements taken as a whole, are not material.

The
significant effects of the restatement on the consolidated balance sheet as of September 30, 2003 and the related consolidated statements of operations and comprehensive loss
are as follows (in millions):

As Previously
Reported

As
RestatedAt September 30, 2003:Inventory

$
609.8

$
598.9Total assets


5,254.6


5,240.7Retained earnings


81.9


69.6For the nine months ended September 30, 2003:Cost of goods sold


3,444.5


3,454.6Operating income


96.1


83.4Net loss


(104.6
)

(116.9
)EBITDA(1)


276.3


263.6For the three months ended September 30, 2003:Cost of goods sold


1,129.2


1,139.3Operating income


41.3


28.6Net loss


(20.0
)

(32.3
)EBITDA(1)


104.2


91.5


---

For
more information concerning the restatement and the Company's actions with respect to internal control over financial reporting, see "Item 4Controls and
Procedures" below.

---

HUNTSMAN INTERNATIONAL LLC  FORM 10-Q/A FOR THE QUARTERLY PERIOD  ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS



|                             |         |                                                                         
|---------------------------- | ------- | ------------------------------------------------------------------------
|PART I FINANCIAL INFORMATION
|                             | ITEM 1. |                                                                         
|                             |         | Consolidated Balance Sheets (unaudited)                                 
|                             |         | Consolidated Statements of Operations and Comprehensive Loss (unaudited)
|                             |         | Consolidated Statement of Equity (unaudited)                            
|                             |         | Consolidated Statements of Cash Flows (unaudited)                       
|                             |         | Notes to Consolidated Financial Statements (unaudited)                  
|                             | ITEM 2. |                                                                         
|                             | ITEM 4. |                                                                         
|PART II OTHER INFORMATION   
|                             | ITEM 6. |                                                                         

---



PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

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

|                                                |                                                                                                          | September 30,
2003
As Restated,
see Note 20 |         | December 31,
2002 |        
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | ----------------- | -------
|ASSETS                                          |                                                                                                          |                                             |         |                   |        
|Current assets:                                 |                                                                                                          |                                             |         |                   |        
|                                                | Cash and cash equivalents                                                                                |                                             | $       | 81.1              |        
|                                                | Accounts and notes receivables (net of allowance for doubtful accounts of $11.8 and $14.5, respectively) |                                             |         | 518.5             |        
|                                                | Inventories                                                                                              |                                             |         | 598.9             |        
|                                                | Prepaid expenses                                                                                         |                                             |         | 35.6              |        
|                                                | Deferred income taxes                                                                                    |                                             |         | 31.2              |        
|                                                | Other current assets                                                                                     |                                             |         | 72.7              |        
|                                                |                                                                                                          |                                             |         |                   |        
|                                                |                                                                                                          | Total current assets                        |         |                   | 1,338.0
|Property, plant and equipment, net              |                                                                                                          |                                             | 3,128.2 |                   |        
|Investment in unconsolidated affiliates         |                                                                                                          |                                             | 138.2   |                   |        
|Intangible assets, net                          |                                                                                                          |                                             | 284.3   |                   |        
|Other noncurrent assets                         |                                                                                                          |                                             | 352.0   |                   |        
|                                                |                                                                                                          |                                             |         |                   |        
|                                                |                                                                                                          | Total assets                                |         | $                 | 5,240.7
|                                                |                                                                                                          |                                             |         |                   |        
|LIABILITIES AND EQUITY                          |                                                                                                          |                                             |         |                   |        
|Current liabilities:                            |                                                                                                          |                                             |         |                   |        
|                                                | Accounts payable (includes overdraft facilities of $4.4 as of September 30, 2003)                        |                                             | $       | 308.1             |        
|                                                | Accrued liabilities                                                                                      |                                             |         | 503.2             |        
|                                                | Current portion of long-term debt                                                                        |                                             |         | 1.2               |        
|                                                | Other current liabilities                                                                                |                                             |         | 17.9              |        
|                                                |                                                                                                          |                                             |         |                   |        
|                                                |                                                                                                          | Total current liabilities                   |         |                   | 830.4  
|Long-term debt                                  |                                                                                                          |                                             | 2,997.8 |                   |        
|Deferred income taxes                           |                                                                                                          |                                             | 210.4   |                   |        
|Other noncurrent liabilities                    |                                                                                                          |                                             | 156.7   |                   |        
|                                                |                                                                                                          |                                             |         |                   |        
|                                                |                                                                                                          | Total liabilities                           |         |                   | 4,195.3
|                                                |                                                                                                          |                                             |         |                   |        
|Minority interests                              |                                                                                                          |                                             | 2.8     |                   |        
|                                                |                                                                                                          |                                             |         |                   |        
|Commitments and contingencies (Notes 15 and 16) |                                                                                                          |                                             |         |                   |        
|Equity:                                         |                                                                                                          |                                             |         |                   |        
|                                                | Member's equity, 1,000 units                                                                             |                                             |         | 1,026.1           |        
|                                                | Retained earnings                                                                                        |                                             |         | 69.6              |        
|                                                | Accumulated other comprehensive loss                                                                     |                                             |         | (53.1             | )      
|                                                |                                                                                                          |                                             |         |                   |        
|                                                |                                                                                                          | Total equity                                |         |                   | 1,042.6
|                                                |                                                                                                          |                                             |         |                   |        
|                                                |                                                                                                          | Total liabilities and equity                |         | $                 | 5,240.7
|                                                |                                                                                                          |                                             |         |                   |        

See
accompanying notes to unaudited consolidated financial statements.

1

---

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

|                                                  |                                       | Three Months
Ended
Sept 30, 2003
As Restated,
see Note 20 |         | Three Months
Ended
Sept 30, 2002 |         | Nine Months
Ended
Sept 30, 2003
As Restated,
see Note 20 |         | Nine Months
Ended
Sept 30, 2002 |        
|------------------------------------------------- | ------------------------------------- | --------------------------------------------------------- | ------- | -------------------------------- | ------- | -------------------------------------------------------- | ------- | ------------------------------- | -------
|Revenues:                                         |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|                                                  | Trade sales                           |                                                           | $       | 1,255.2                          |         | $                                                        | 1,104.6 |                                 | $      
|                                                  | Related party sales                   |                                                           |         | 20.5                             |         |                                                          | 90.6    |                                 |        
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|                                                  |                                       | Total revenues                                            |         |                                  | 1,275.7 |                                                          |         | 1,195.2                         |        
|Cost of goods sold                                |                                       |                                                           | 1,139.3 |                                  |         | 1,020.3                                                  |         |                                 | 3,454.6
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|Gross profit                                      |                                       |                                                           | 136.4   |                                  |         | 174.9                                                    |         |                                 | 426.2  
|Expenses:                                         |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|                                                  | Selling, general and administrative   |                                                           |         | 90.4                             |         |                                                          | 89.2    |                                 |        
|                                                  | Research and development              |                                                           |         | 12.6                             |         |                                                          | 13.1    |                                 |        
|                                                  | Restructuring and plant closing costs |                                                           |         | 4.8                              |         |                                                          | 1.1     |                                 |        
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|                                                  |                                       | Total expenses                                            |         |                                  | 107.8   |                                                          |         | 103.4                           |        
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|Operating income                                  |                                       |                                                           | 28.6    |                                  |         | 71.5                                                     |         |                                 | 83.4   
|Interest expense                                  |                                       |                                                           | (62.4   | )                                |         | (66.1                                                    | )       |                                 | (190.7 
|Interest income                                   |                                       |                                                           | 1.0     |                                  |         |                                                         |         |                                 | 1.6    
|Loss on sale of accounts receivable               |                                       |                                                           | (5.9    | )                                |         | (4.2                                                     | )       |                                 | (24.0  
|Other income (expense)                            |                                       |                                                           | 1.1     |                                  |         | (2.4                                                     | )       |                                 | (1.2   
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|Loss before income taxes                          |                                       |                                                           | (37.6   | )                                |         | (1.2                                                     | )       |                                 | (130.9 
|Income tax benefit                                |                                       |                                                           | 5.3     |                                  |         | 1.9                                                      |         |                                 | 14.0   
|Minority interests in subsidiaries' income (loss) |                                       |                                                           |        |                                  |         | (0.1                                                     | )       |                                 |       
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|Net income (loss)                                 |                                       |                                                           | (32.3   | )                                |         | 0.6                                                      |         |                                 | (116.9 
|Other comprehensive income                        |                                       |                                                           | 18.6    |                                  |         | 5.0                                                      |         |                                 | 94.3   
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        
|Comprehensive income (loss)                       |                                       | $                                                         | (13.7   | )                                | $       | 5.6                                                      |         | $                               | (22.6  
|                                                  |                                       |                                                           |         |                                  |         |                                                          |         |                                 |        

See
accompanying notes to unaudited consolidated financial statements.

2

---



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED) (Dollars in Millions)

|                                                       |  | Member's Equity |  |   |         | Accumulated
Other
Comprehensive
Loss |   |        |  
|------------------------------------------------------ |  | --------------- |  | - | ------- | ------------------------------------ | - | ------ | -
|
|
|Balance, January 1, 2003                               |  | 1,000           |  | $ | 1,026.1 |                                      | $ | 186.5  |  
|Net loss (as restated, see Note 20)                    |  |                 |  |   |        |                                      |   | (116.9 | )
|Other comprehensive income                             |  |                 |  |   |        |                                      |   |       |  
|                                                       |  |                 |  |   |         |                                      |   |        |  
|Balance, September 30, 2003 (as restated, see Note 20) |  | 1,000           |  | $ | 1,026.1 |                                      | $ | 69.6   |  
|                                                       |  |                 |  |   |         |                                      |   |        |  

See
accompanying notes to unaudited consolidated financial statements.

3

---

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

|                                                                                         |                                                | Nine Months
Ended
Sept 30 2003
As Restated,
see Note 20 |        | Nine Months
Ended
Sept 30 2002 |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------- | ------ | ------------------------------ | -
|Cash Flows From Operating Activities:                                                    |                                                |                                                         |        |                                |  
|Net income (loss)                                                                        |                                                | $                                                       | (116.9 | )                              | $
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                |                                                         |        |                                |  
|Equity in earnings of investment in unconsolidated affiliates                            |                                                |                                                         |       |                                |  
|Depreciation and amortization                                                            |                                                |                                                         | 205.4  |                                |  
|Provision for losses on accounts receivable                                              |                                                |                                                         | 3.1    |                                |  
|Noncash restructuring and plant closing charges                                          |                                                |                                                         | 11.4   |                                |  
|Write-off of plant and equipment                                                         |                                                |                                                         | 3.0    |                                |  
|Noncash interest expense                                                                 |                                                |                                                         | 11.9   |                                |  
|Deferred income taxes                                                                    |                                                |                                                         | (22.6  | )                              |  
|Gain on foreign currency transactions                                                    |                                                |                                                         | (27.2  | )                              |  
|Minority interests in subsidiaries                                                       |                                                |                                                         |       |                                |  
|Changes in operating assets and liabilities:                                             |                                                |                                                         |        |                                |  
|                                                                                         | Accounts and notes receivables                 |                                                         |        | (52.5                          | )
|                                                                                         | Change in receivables sold, net                |                                                         |        | 59.0                           |  
|                                                                                         | Inventories                                    |                                                         |        | (4.5                           | )
|                                                                                         | Prepaid expenses                               |                                                         |        | (12.5                          | )
|                                                                                         | Other current assets                           |                                                         |        | (16.4                          | )
|                                                                                         | Other noncurrent assets                        |                                                         |        | (1.2                           | )
|                                                                                         | Accounts payable                               |                                                         |        | (46.6                          | )
|                                                                                         | Accrued liabilities                            |                                                         |        | (51.6                          | )
|                                                                                         | Other current liabilities                      |                                                         |        | (1.5                           | )
|                                                                                         | Other noncurrent liabilities                   |                                                         |        | (7.5                           | )
|                                                                                         |                                                |                                                         |        |                                |  
|Net cash provided by (used in) operating activities                                      |                                                |                                                         | (67.2  | )                              |  
|                                                                                         |                                                |                                                         |        |                                |  
|Investing Activities:                                                                    |                                                |                                                         |        |                                |  
|Acquisitions of minority interest                                                        |                                                |                                                         |       |                                |  
|Capital expenditures                                                                     |                                                |                                                         | (95.7  | )                              |  
|Net cash received from unconsolidated affiliates                                         |                                                |                                                         | 2.1    |                                |  
|Advances to unconsolidated affiliates                                                    |                                                |                                                         | (2.2   | )                              |  
|                                                                                         |                                                |                                                         |        |                                |  
|Net cash used in investing activities                                                    |                                                |                                                         | (95.8  | )                              |  
|                                                                                         |                                                |                                                         |        |                                |  
|Financing Activities:                                                                    |                                                |                                                         |        |                                |  
|                                                                                         | Net borrowings under revolving loan facilities |                                                         |        | 132.0                          |  
|                                                                                         | Issuance of senior notes                       |                                                         |        | 157.9                          |  
|                                                                                         | Repayment of long-term debt                    |                                                         |        | (125.9                         | )
|                                                                                         | Shares issued to minorities for cash           |                                                         |        | 2.8                            |  
|                                                                                         | Debt issuance costs                            |                                                         |        | (4.3                           | )
|                                                                                         |                                                |                                                         |        |                                |  
|Net cash provided by financing activities                                                |                                                |                                                         | 162.5  |                                |  
|                                                                                         |                                                |                                                         |        |                                |  
|Effect of exchange rate changes on cash                                                  |                                                |                                                         | 6.2    |                                |  
|                                                                                         |                                                |                                                         |        |                                |  
|Increase (decrease) in cash and cash equivalents                                         |                                                |                                                         | 5.7    |                                |  
|Cash and cash equivalents at beginning of period                                         |                                                |                                                         | 75.4   |                                |  
|                                                                                         |                                                |                                                         |        |                                |  
|Cash and cash equivalents at end of period                                               |                                                | $                                                       | 81.1   |                                | $
|                                                                                         |                                                |                                                         |        |                                |  
|Supplemental cash flow information:                                                      |                                                |                                                         |        |                                |  
|                                                                                         | Cash paid for interest                         |                                                         | $      | 204.5                          |  
|                                                                                         | Cash paid for income taxes                     |                                                         | $      | 10.3                           |  

See
accompanying notes to unaudited consolidated financial statements.

4

---



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

1.     General



Huntsman International LLC and its subsidiaries (collectively, the "Company") are global manufacturers and marketers of differentiated and commodity chemicals.
The Company is a Delaware limited liability company and all of its membership interests are owned by Huntsman International Holdings LLC ("HIH"). HIH is a Delaware limited liability company and its
membership interests are owned 100%, directly and indirectly, by HMP Equity Holdings Corporation ("HMP").

HMP
is a Delaware corporation and is owned 100% by Huntsman Group Inc., a Delaware corporation, subject to warrants that, if exercised, would entitle the holders to up to 12% of
the common equity of HMP. Huntsman Group Inc. is owned 100% by Huntsman Holdings, LLC ("Huntsman Holdings"), a Delaware limited liability company. The voting membership interests of Huntsman
Holdings are owned by the Huntsman family, MatlinPatterson Global Opportunities Partners, L.P. ("GOP"), Consolidated Press (Finance) Limited ("CPH") and certain members of the Company's senior
management. In addition, Huntsman Holdings has issued certain non-voting preferred units to Huntsman Holdings Preferred Member LLC, which, in turn, is owned by GOP (indirectly), CPH, the
Huntsman Cancer Foundation, certain members of the Company's senior management and certain members of the Huntsman family. Huntsman Holdings has issued certain other non-voting preferred
units to the Huntsman family, GOP and CPH that track the performance of the Huntsman Advanced Materials LLC business. The Huntsman family has board and operational control of the Company.

The
Company operates through four principal operating segments: Polyurethanes, Performance Products, Pigments and Base Chemicals.



The accompanying consolidated financial statements of the Company are unaudited. However, in management's opinion, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of results of operations, financial position and cash flows for the periods shown, have been made. Results for interim periods are not
necessarily indicative of those to be expected for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to
consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

2.     Recently Adopted Financial Accounting Standards

In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the
retirement of tangible, long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred by capitalizing it as part of the carrying amount of the long-lived assets. As required by SFAS No. 143, the Company adopted this
new accounting standard on January 1, 2003. This statement had no impact on the Company since the timing of any ultimate obligation is indefinite.

In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Other Technical Corrections." In addition to amending or rescinding pronouncements to make various technical corrections, clarify meanings or describe applicability, SFAS
No. 145 precludes companies from recording gains or losses from extinguishment of

5

---

debt
as an extraordinary item. The Company was required to adopt this statement as of January 1, 2003. The adoption of SFAS No. 145 did not have a material effect on the Company's
consolidated financial statements.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated With Exit or Disposal Activities." SFAS
No. 146 requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit or disposal costs
were
accrued upon management's commitment to an exit or disposal plan, which is generally before an actual liability has been incurred. The Company adopted this pronouncement in the first quarter of 2003.
The adoption of SFAS No. 146 on January 1, 2003 did not have a material effect on the Company's consolidated financial statements.

In
January 2003, the FASB issued Financial Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Guarantees of Indebtedness of Others." FIN No. 45 requires recognition of a liability for the obligation undertaken upon issuing a guarantee. This liability
would be recorded at the inception date of the guarantee and would be measured at fair value. The disclosure provisions of the interpretation are effective for the financial statements as of
December 31, 2002. The liability recognition provisions apply prospectively to any guarantees issued or modified after December 31, 2002. The adoption of FIN No. 45 did not have a
material effect on the Company's consolidated financial statements.

In
January 2003, the FASB issued FIN No. 46,"Consolidation of Variable Interest Entities."FIN No. 46 addresses the
requirements for business enterprises to consolidate related entities, for which they do not have controlling interests through voting or other rights, if they are determined to be the primary
beneficiary as a result of variable economic interests. FIN No. 46 provides guidance for determining the primary beneficiary for entities with multiple economic entities with multiple economic
interests. Transfers to a qualifying special purpose entity are not subject to this interpretation. FIN No. 46 is effective at the time of investment for interests obtained in a variable
economic entity after January 31, 2003. In October 2003, the FASB issued FASB Staff position No. 46-6, which defers the effective date for FIN No. 46 to the
first interim or annual period ending after December 15, 2003 for variable interest entities created before February 1, 2003. The adoption of FIN No. 46 is not expected to have a
material impact on the Company's consolidated earnings, financial position, or cash flows.

In
May 2003, FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities."SFAS
No. 149 amends and clarifies accounting for derivative instruments and hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after
September 30, 2003 and for hedging relationships designated after September 30, 2003, with this guidance applied prospectively. This statement had no impact on the Company's results of
operations or financial position at September 30, 2003.

In
May 2003, the FASB issued SFAS No. 150,"Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity."SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments created or modified after May 31, 2003 and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. The Company does not expect SFAS No. 150 to have a material impact on its financial statements upon adoption.

6

---

3.     Inventories

Inventories as of September 30, 2003 and December 31, 2002 consisted of the following (dollars in millions):

September 30,
2003

December 31,
2002Raw materials and supplies

$
121.0

$
149.6Work in progress


17.8


25.9Finished goods


460.1


385.8Total


598.9


561.3


4.     Property, Plant and Equipment

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

September 30,
2003

December 31,
2002Land

$
45.6

$
42.9Buildings


187.2


157.7Plant and equipment


3,655.8


3,446.3Construction in progress


223.4


172.7Total


4,112.0


3,819.6Less accumulated depreciation


(983.8
)

(748.5
)Net

$
3,128.2

$
3,071.1


Property,
plant and equipment includes gross assets acquired under capital leases of $18.8 million and $20.4 million at September 30, 2003 and December 31, 2002,
respectively; related amounts included in accumulated depreciation were $5.0 million and $3.1 million at September 30, 2003 and December 31, 2002, respectively.

5.     Investments in Unconsolidated Affiliates

The Company's ownership percentage and investments in unconsolidated affiliates, primarily manufacturing joint ventures, are as follows (in millions):

September 30,
2003

December 31,
2002Louisiana Pigment Company, L.P. (50%)

$
129.3

$
131.4Rubicon, Inc. (50%)


1.4


1.3BASF Huntsman Shanghai Isocyanate Investment BV (50%)


6.1


Others


1.4


1.2Total

$
138.2

$
133.9


7

---

6.     Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets as of September 30, 2003 and December 31, 2002 were as follows (dollars
in millions):

|                                    |  | September 30, 2003 |       | December 31, 2002
|----------------------------------- |  | ------------------ | ----- | -----------------
|
|Patents, trademarks, and technology |  | $                  | 352.3 |                  
|Non-compete agreements              |  |                    | 49.5  |                  
|Other intangibles                   |  |                    | 30.8  |                  
|                                    |  |                    |       |                  
|Total                               |  | $                  | 432.6 |                  
|                                    |  |                    |       |                  

7.     Other Noncurrent Assets

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

September 30,
2003

December 31,
2002Prepaid pension assets

$
155.9

$
146.2Debt issuance costs


55.0


60.7Capitalized turnaround expense


47.5


47.6Receivables from affiliates


17.0


18.6Spare parts inventory


53.8


46.2Other noncurrent assets


22.8


19.5Total

$
352.0

$
338.8


8.     Accrued Liabilities

Accrued liabilities consist of the following (in millions):

September 30,
2003

December 31,
2002Raw materials and services

$
186.2

$
217.7Payroll, severance and related costs


79.5


67.4Interest


38.0


61.3Volume and rebates accruals


53.7


52.5Taxes (income, property and VAT)


41.9


41.4Restructuring and plant closing costs


21.4


7.1Freight


14.9


12.8Utilities


9.8


6.7Environmental accruals


11.6


4.3Payable to affiliate





15.4Other miscellaneous accruals


46.2


37.2Total

$
503.2

$
523.8


8

---

9.     Other Noncurrent Liabilities

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

|                              |  | September 30,
2003 |       | December 31,
2002
|----------------------------- |  | ------------------ | ----- | -----------------
|Pension liabilities           |  | $                  | 88.8  |                  
|Other postretirement benefits |  |                    | 11.8  |                  
|Environmental accruals        |  |                    | 9.2   |                  
|Payable to affiliate          |  |                    | 38.2  |                  
|Other noncurrent liabilities  |  |                    | 8.7   |                  
|                              |  |                    |       |                  
|Total                         |  | $                  | 156.7 |                  
|                              |  |                    |       |                  

10.   Restructuring and Plant Closing Charges

As of December 31, 2002, the Company had a $7.1 million reserve for restructuring and plant closing costs related to the closure of the Shepton
Mallet, U.K. Polyurethanes manufacturing facility recorded in accrued liabilities. The entire amount was related to workforce reductions. The Company made cash payments related to this restructuring
of $3.1 million, $0.3 million and $1.0 million in the first, second and third quarters of 2003, respectively. The unpaid reserve remains in accrued liabilities.

On
March 11, 2003, the Company's Polyurethanes segment announced that it would integrate its global flexible products division into its urethane specialties division, and recorded
a restructuring charge of $17.1 million in the first quarter of 2003 for workforce reductions. In June 2003, the Polyurethanes segment announced further restructuring at its Rozenburg,
Netherlands site. The charge for this restructuring is estimated to total approximately $10.4 million and will be recorded through December 2005. During the second and third quarters of
2003 respectively, charges of $1.4 million and $3.7 million were taken for workforce reductions relating to this restructuring. The Company made cash payments of $0.8 million,
$5.6 million and $4.5 million in the first, second and third quarters of 2003, respectively, related to these restructuring activities. The unpaid reserve remains in accrued liabilities.

In
June 2003, the Company announced that its Performance Products segment would close a number of plants at the Company's Whitehaven, UK facility and recorded a charge of
$20.1 million in the second quarter 2003. This charge represents $11.4 million relating to an impairment of assets at Whitehaven (in connection with the plant shutdowns) and
$8.7 million of workforce reduction costs. These charges are part of an overall cost reduction program for this segment that is expected to be implemented and recorded from 2003 to 2005. The
Company made cash payments of $1.6 million and $0.3 million in the second and third quarters of 2003, respectively. The unpaid reserve remains in accrued liabilities.

In
August 2003, the Company announced restructuring activities related to workforce reductions in the Malaysian operations of its Pigments segment and recorded a charge of
$1.1 million. The total of the charges for this restructuring is estimated to be approximately $2.3 million and will be recorded through June 2005. These charges are part of an
overall cost reduction program for this segment that is expected to be implemented and recorded from 2003 to 2005. During the third quarter 2003, the Company made cash payments of $0.5 million
related to this restructuring. The unpaid reserve remains in accrued liabilities.

9

---

As
of September 30, 2003, accrued restructuring and plant closing costs consist of the following (dollars in millions):

|                              |  | Accrued
Restructuring and Plant Closing Costs as of
December 31, 2002 |     | Total
Charge |   | Non-cash
Charge |  | Cash
Payments |       | Accrued
Restructuring and Plant Closing Costs as of
September 30, 2003
|----------------------------- |  | --------------------------------------------------------------------- | --- | ------------ | - | --------------- |  | ------------- | ----- | ----------------------------------------------------------------------
|Property, plant and equipment |  | $                                                                     |    |              | $ | 11.4            |  | $             | (11.4 | )                                                                     
|Workforce reductions          |  |                                                                       | 7.1 |              |   | 32.0            |  |               |      |                                                                       
|                              |  |                                                                       |     |              |   |                 |  |               |       |                                                                       
|Total                         |  | $                                                                     | 7.1 |              | $ | 43.4            |  | $             | (11.4 | )                                                                     
|                              |  |                                                                       |     |              |   |                 |  |               |       |                                                                       

11.   Long-term Debt

Long-term debt outstanding as of September 30, 2003 and December 31, 2002 is as follows (dollars in millions):

September 30,
2003

December 31,
2002Senior Secured Credit Facilities:Revolving loan facility

$
199.0

$
67.0Term A dollar loan


61.8


109.7Term A euro loan (in U.S. dollar equivalent)


86.3


138.5Term B loan


517.5


526.3Term C loan


517.5


526.3Senior Unsecured Notes


457.3


300.0Senior Subordinated Notes


1,126.6


1,076.8Other long-term debt


33.0


29.2Subtotal


2,999.0


2,773.8Less current portion


(1.2
)

(43.9
)Total

$
2,997.8

$
2,729.9




As of September 30, 2003, the Company had senior secured credit facilities (the "HI Credit Facilities") which consisted of a revolving loan facility of up
to $400 million that matures on June 30, 2005, term A dollar loan and term A euro loan facilities that were to mature on June 30, 2005 (with the next semi-annual
payment due in the fourth quarter 2004), a term B loan facility that matures on June 30, 2007, and a term C loan facility that matures on June 30, 2008. On October 17, 2003, the
Company amended the HI Credit Facilities. The amendment provides, among other things, for changes to certain financial covenants, including the leverage and interest coverage ratios, the annual amount
of permitted capital expenditures, and the consolidated net worth covenant. With the exception of the changes relating to capital expenditures, these changes to the financial covenants apply to the
quarterly periods ended September 30, 2003 through December 31, 2004. The amendment also allows for the issuance of $205 million of additional term B and term C loans, which was
accomplished on October 22, 2003, the net proceeds of which have been applied to pay down the Company's revolving loan facility by approximately $53 million, and the remainder of the net
proceeds have been applied to repay, in full, the term A loan. As a result of this refinancing, effective October 22, 2003, the Company has no scheduled maturities in 2004 and scheduled
maturities of approximately $12 million in each of 2005 and 2006 under its term loans. The amendment also allows the Company to issue additional senior unsecured notes up to a maximum of
$800 million.

10

---

Interest
rates for the HI Credit Facilities are based upon, at the Company's option, either a eurocurrency rate (LIBOR) or a base rate (prime) plus the applicable spread. The applicable
spreads vary based on a pricing grid, in the case of eurocurrency based loans, from 1.50% to 4.50% per annum depending on the loan facility and whether specified conditions have been satisfied, and,
in the case of base rate loans, from 0.25% to 3.25% per annum. As of September 30, 2003 and December 31, 2002, the average interest rates on the HI Credit Facilities were 5.3% and 5.6%,
respectively, excluding the impact of interest rate hedges.

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

The
HI Credit Facilities contain covenants relating to incurrence of debt, purchase and sale of assets, limitations on investments, affiliate transactions, change in control provisions
and maintenance of certain financial ratios. The financial covenants include a leverage ratio, interest coverage ratio, minimum consolidated net worth level and a limit on capital expenditures. The HI
Credit Facilities also limit the payment of dividends generally to the amount required by the members to pay income taxes. Management believes that, as of September 30, 2003, the Company is in
compliance with the covenants of the HI Credit Facilities, as amended on October 17, 2003.



In March 2002, the Company issued $300 million 9.875% Senior Notes (collectively with the 2003 Senior Notes, the "Senior Notes"). Interest on the
Senior Notes is payable semi-annually and the Senior Notes mature on March 1, 2009. The Senior Notes are fully and unconditionally guaranteed on a joint and several basis by the
Guarantors. The Senior Notes may be redeemed, in whole or in part, at any time by the Company prior to March 1, 2006 at 100% of the face value plus a "make whole" premium, as defined in the
applicable indenture. After March 1, 2006, the Senior Notes may be redeemed, in whole or in part, at a redemption price that declines from 104.937% to 100% after March 1, 2008.

On
April 11, 2003, the Company sold an additional $150 million in aggregate principal amount of 9.875% Senior Notes due 2009 (the "2003 Senior Notes") in a transaction
exempt from the registration requirements of the Securities Act of 1933. The offering was priced at 105.25% plus accrued interest from March 1, 2003. The Company used approximately
$26 million of the net proceeds to repay part of the revolving portion of the HI Credit Facilities. The balance of the net proceeds was used primarily to prepay the next 16 months of
scheduled amortization due under the term portion of the HI Credit Facilities. In connection with the Company's contractual obligation to register the 2003 Senior Notes, on June 25, 2003, the
Company filed a registration statement on Form S-4 with the Securities and Exchange Commission and on October 28, 2003, the Company filed amendment No. 1 to the
registration statement on Form S-4 with the Securities and Exchange Commission.

The
Company also has outstanding $600 million and €450 million 10.125% Senior Subordinated Notes (the "Subordinated Notes"). Interest on the Subordinated
Notes is payable semi-annually and the Subordinated Notes mature on July 1, 2009. The Subordinated Notes are fully and unconditionally guaranteed on a joint and several basis by the
Guarantors. The Subordinated Notes are redeemable



11

---



The
Senior Notes and the Subordinated Notes contain covenants relating to the incurrence of debt, limitations on distributions, asset sales and affiliate transactions, among other
things. They also contain a change of control provision requiring the Company to offer to repurchase the Senior Notes and the Subordinated Notes upon a change of control. Management believes that the
Company is in compliance with the covenants of the Senior Notes and the Subordinated Notes as of September 30, 2003.

12.   Derivatives and Hedging Activities



Interest rate contracts with a fair value of $14.3 million and $23.4 million were recorded as a component of other current liabilities as of
September 30, 2003 and December 31, 2002, respectively. The fair value of the cash flow hedges and the interest rate contracts not designated as hedges are $9.3 million and
$5.0 million as of September 30, 2003 and $15.6 million and $7.8 million as of December 31, 2002, respectively. The changes in fair value of the cash flow hedges
resulted in a $0.4 million and a $0.9 million decrease in interest expense and a $5.9 million increase and a $2.4 million decrease in other comprehensive income (loss) for
the nine months ended September 30, 2003 and 2002, respectively. The changes in fair value of the interest rate contracts not designated as hedges resulted in a $2.9 million decrease and
a $1.3 million increase in interest expense for the nine months ended September 30, 2003 and 2002, respectively.



As of September 30, 2003, there were no cash flow commodity price hedging contracts recorded in other current assets and other comprehensive income. As of
December 31, 2002, the fair value of cash flow commodity price hedging contracts was not material.

As
of September 30, 2003 commodity price hedging contracts designated as fair value hedges are included in the balance sheet as an increase of $0.2 million to other current
liabilities and a decrease to inventory of $0.3 million. As of December 31, 2002 commodity price hedging contracts designated as fair value hedges are included in the balance sheet as an
increase of $0.8 to other current liabilities and an increase to inventory of $0.8 million.

Commodity
price contracts not designated as hedges as defined by SFAS No. 133 are reflected in the balance sheet as $0.5 million and $0.2 million in other current
assets and liabilities, respectively, as of September 30, 2003, and $0.8 million and $0.2 million other current assets and liabilities, respectively, as of December 31,
2002.

During
the nine months ended September 30, 2003 and 2002, the Company recorded a decrease of $1.8 million and an increase of $3.8 million, respectively, in cost of
goods sold related to net gains and losses from settled contracts, net gains and losses in fair value price hedges, and the change in fair value on commodity price hedging contracts not designated as
hedges as defined in SFAS No. 133.



As of September 30, 2003 and December 31, 2002 and for the nine months ended September 30, 2003 and 2002, the fair value, change in fair
value, and realized gains (losses) of outstanding foreign currency rate hedging contracts was not material. During the nine months ended September 30, 2003, a $0.9 increase was recorded to
other comprehensive income (loss) as a result of hedging transactions.



Currency effects of net investment hedges produced losses of approximately $57.5 million and $56.5 million in other comprehensive loss (foreign
currency translation adjustments) for the nine months ended September 30, 2003 and 2002, respectively. As of September 30, 2003 and December 31, 2002, there was a cumulative net
loss of approximately $90.2 million and $32.7 million, respectively.

12

---

13.   Securitization of Accounts Receivable

On December 21, 2000, the Company initiated a five-year revolving securitization program under which certain trade receivables were and will be
transferred to an off balance sheet special purpose entity at a discount. Under the terms of the agreements, the Company and its subsidiaries continue to service the receivables in exchange for a 1%
fee of the outstanding receivables, and the Company is subject to recourse provisions. At September 30, 2003, the special purpose entity had outstanding approximately $188 million in
medium-term notes ("MTNs") and approximately $110 million in commercial paper.

The
Company's retained interest in receivables (including servicing assets) subject to the program was approximately $114 million and $112 million as of
September 30, 2003 and December 31, 2002, respectively. The value of the retained interest is subject to credit and interest rate risk. For the nine months ended September 30,
2003 and 2002, new sales totaled approximately $3,085 million and $3,644 million, respectively, and cash collections reinvested totaled approximately $2,941 million and
$3,181 million, respectively. Servicing fees received during the first nine months of 2003 and 2002 were approximately $3.6 million and $3.9 million, respectively, and are
recorded as a reduction in the loss on sale of accounts receivable in the statements of operations.

The
key economic assumptions used in valuing the residual interest at September 30, 2003 are presented below:

Weighted average life (in months)

2Credit losses (annual rate)

Less than 1%Discount rate (annual rate)

5%


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
September 30, 2003 and December 31, 2002 were $16.2 million and $11.2 million, respectively.

14.   Other Comprehensive Income (Loss)

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

|                                                              |  | September 30, 2003 |       | December 31, 2002 |  
|------------------------------------------------------------- |  | ------------------ | ----- | ----------------- | -
|
|Foreign currency translation adjustments                      |  | $                  | 49.6  |                   | $
|Additional minimum pension liability                          |  |                    | (91.7 | )                 |  
|Additional minimum pension liabilityunconsolidated affiliate |  |                    | (5.4  | )                 |  
|Unrealized loss on securities                                 |  |                    | 0.4   |                   |  
|Net unrealized loss on derivative instruments                 |  |                    | (4.9  | )                 |  
|Cumulative effect of accounting change                        |  |                    | (1.1  | )                 |  
|                                                              |  |                    |       |                   |  
|Total                                                         |  | $                  | (53.1 | )                 | $
|                                                              |  |                    |       |                   |  

15.   Commitments and Contingencies

The Company has various purchase commitments extending through 2017 for materials, supplies and services entered into in the ordinary course of business. The
purchase commitments are contracts that require minimum volume purchases. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shut down of
a facility. The contractual purchase price for substantially all of these contracts is variable based upon market prices, subject to

13

---

annual
negotiations. The Company has also entered into a limited number of contracts which require minimum payments, even if no volume is purchased. These contracts approximate $35 million
annually through 2017.

The
Company is involved in litigation from time to time in the ordinary course of its business. In management's opinion, after consideration of indemnification arrangements, none of such
litigation is material to the Company's financial condition or results of operations.

16.   Environmental Matters



The Company's operations are subject to extensive environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters,
and the generation, handling, storage, transportation, treatment and disposal of waste materials, as adopted by various governmental
authorities in the jurisdictions in which the Company operates. The Company makes every reasonable effort to remain in full compliance with existing governmental regulations. Accordingly, the Company
may incur costs for capital improvements and general compliance under environmental laws, including costs to acquire, maintain and repair pollution control equipment. The Company cannot provide
assurances that material capital expenditures beyond those currently anticipated will not be required under environmental laws.



The Company has established financial reserves relating to environmental restoration and remediation programs, which the Company believes are sufficient for known
requirements. In connection with various acquisitions, the acquisition agreements generally provide for indemnification for environmental pollution existing on the date of acquisition. Liabilities are
recorded when site restoration and environmental remediation and clean-up obligations are either known or considered probable and can be reasonably estimated. Liabilities are based upon
all available facts, existing technology, past experience and cost-sharing and indemnification arrangements (as to which, the Company considers the viability of other parties).

A
total of $20.8 million has been accrued related to environmental matters as of September 30, 2003. Estimates of ultimate future environmental restoration and remediation
costs are inherently imprecise due to currently unknown factors such as the magnitude of possible contamination, the timing and extent of such restoration and remediation, the determination of the
Company's liability in proportion to other parties, the extent to which such costs are recoverable from insurance, and the extent to which environmental laws and regulations may change in the future.
However, it is not anticipated that any future costs, in excess of those that have been accrued by the Company, will be material to the Company's results of operations or financial position as a
result of compliance with current environmental laws and regulations



Given the nature of the Company's business, violations of environmental laws may result in restrictions imposed on its operating activities, substantial fines,
penalties, damages or other costs, any of which could have a material adverse effect on its business, financial condition, results of operations or cash flows. The Company is aware of the following
matters:

Huntsman
Petrochemical Corporation and the Texas Commission on Environmental Quality (the "TCEQ," formerly the Texas Natural Resource Conservation Commission or TNRCC) settled
outstanding allegations of environmental regulatory violations at the Company's Port Neches, Texas, facilities on May 29, 2003. The settlement imposes penalties totaling $352,250 and requires
that the

14

---

Company
apply for an air emissions permit for the joint wastewater treatment plant that services all of the Port Neches facilities. Less than $100,000 of the aforementioned penalties are allocable to
the Company. Although management does not anticipate it, it is possible that the terms of a joint wastewater treatment plant air permit may cause it to incur substantial costs that could be material.

On
October 6, 2002, a leak of sulphuric acid from two tanks located near the Company's Whitehaven, U.K. plant was discovered. About 342 to 347 tonnes of acid were released onto
the ground and into the soil near the tanks. Although the Company took immediate steps to contain the spillage and recover acid, a quantity of acid reached a nearby beach via a geological fault. The
Company believes that it did not own the tanks; however, it did own the acid in the tanks. The U.K. Environmental Authority ("EA") and the Health and Safety Executive (the "HSE") are investigating the
incident, and the HSE has issued three Improvement Notices requiring corrective action. Although the Company can give no assurances, based on currently available information and its understanding of
similar investigations and penalties in the past, the Company believes that, if any charges are brought or additional corrective action orders issued and the Company is ultimately found to be legally
responsible, the probable penalties would not be material to its financial position or results of operations.

The
Company's subsidiary, Tioxide Europe S.L. ("Tioxide"), is in the process of voluntarily removing filter salts from a property previously operated by Almagrera in Spain. Almagrera
supplied sulphuric acid to Tioxide. Under an agreement with Almagrera, Tioxide had for some time supplied filter salts to Almagrera to be used in the manufacture of sulphuric acid. When Almagrera
filed for bankruptcy and closed its plant by the end of 2001, a large pile of stored filter salts was found on its premises, far from its normal warehouse. Tioxide estimates the cost of removal and
disposal of the filter salts will total $2.0 million. As of September 30, 2003, Tioxide had spent $1.0 million. Another $0.4 million will likely be spent during the balance
of 2003 and the rest ($0.6 million) is likely to be spent in 2004. The Company does not believe expenditures in connection with this matter will be material.

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

By
letter dated March 6, 2003, the Company's subsidiary, Huntsman Ethyleneamines Ltd., was notified by the TCEQ of a probable enforcement action arising out of the
inspection of the Freeport, Texas facility on December 16-19, 2002. Seven types of violations relating to the Texas Clean Air Act requirements were cited. The TCEQ has proposed a
penalty of $43,000. The Company has taken issue with most of the allegations of non-compliance, and the TCEQ has agreed to drop some of them. It is yet unclear what level of penalty, if
any, will be imposed.

Under
the European Union ("EU") Integrated Pollution Prevention and Control Directive ("IPPC"), EU member governments are to adopt rules and implement a cross-media (air, water, waste)
environmental permitting program for individual facilities. The UK has been the first EU member government to request IPPC permit applications from the Company. In the UK, the Company has submitted
several applications and, very recently, negotiated and received its first IPPC permit. Based upon the terms of that permit, the Company does not anticipate that it will have to make material capital
expenditures to comply. Other IPPC permits are under review by the UK Environment Agency.

15

---

The
Company is not yet in a position to know with certainty what the other UK IPPC permits will require, and it is possible that the costs of compliance could be material; however, the Company
believes, based upon its experience to date, that the costs of compliance with IPPC permitting in the UK will not be material to its financial condition or results of operations.

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



The presence of MTBE in some groundwater supplies in California and other states (primarily due to gasoline leaking from underground storage tanks) and in surface
water (primarily from recreational watercraft) has led to public concern about MTBE's potential to contaminate drinking water supplies. Heightened public awareness regarding this issue has resulted in
state, federal and foreign initiatives to rescind the federal oxygenate requirements for reformulated gasoline or to restrict or prohibit the use of MTBE in particular. For example, the California Air
Resources Board adopted regulations that would prohibit the addition of MTBE to gasoline as of January 1, 2004. Certain other states have also taken actions to restrict or eliminate the future
use of MTBE. In connection with the proposed ban, the State of California requested that the U.S. Environmental Protection Agency (the "EPA") waive the federal oxygenated fuels requirements of the
federal Clean Air Act for gasoline sold in California. The EPA denied the State's request on June 12, 2001. Certain of the state bans have been challenged in court as unconstitutional (in light
of the Clean Air Act); to date, these challenges have not been
successful. The Company is unable to predict what the short- and long-term effects of these matters will be.

Bills
have been in both houses of the U.S. Congress to accomplish similar goals of curtailing or eliminating the oxygenated fuels requirements in the Clean Air Act, or of curtailing MTBE
use. To date, no such legislation has become law. Whether a ban or substantial restrictions on MTBE use will become federal law in the future is unknown at this time.

In
addition, on March 20, 2000, the EPA announced its intention, through an advanced notice of proposed rulemaking, to phase out the use of MTBE under authority of the federal
Toxic Substances Control Act. In its notice, the EPA also called on the U.S. Congress to restrict the use of MTBE under the Clean Air Act. Any phase-out of or future regulation of MTBE in
California (in which a significant amount of MTBE is consumed), in other states, or nationally may result in a significant reduction in demand for MTBE and may result in a material loss in revenues or
material costs or expenditures.

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

In
the event that there should be a phase-out of MTBE in the United States, the Company believes it will be able to export MTBE to Europe or elsewhere or use its
co-product tertiary butyl alcohol ("TBA") to produce saleable products other than MTBE. The Company believes that its low production costs at its PO/MTBE facility will put it in a
favorable position relative to other higher cost sources (primarily, on-purpose manufacturing). If the Company opts to produce products other than

16

---

MTBE,
necessary modifications to its facilities may require significant capital expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

In
addition, while there has been litigation concerning the environmental effects of MTBE, the Company is not a defendant in any pending MTBE case, and the Company believes that it would
have valid defenses in the event such a case were brought against it. However, the Company cannot give any assurance that it will not be named in litigation relating to the environmental effects of
MTBE or that such litigation will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.



In September 2003, the European Commission released a proposed regulation concerning the registration, evaluation, authorization and restrictions of
chemicals, also known as REACH. The REACH initiative, as proposed, would require risk assessment and registration of chemicals, preparations (e.g., soaps and paints) and articles (e.g., consumer
products) before those materials could be manufactured or imported into EU countries. Where warranted by a risk assessment, hazardous substances would require authorizations for their use. This
authorization could impose risk control strategies that would require capital expenditures by the Company. As proposed, REACH would take effect in stages over the next decade. The impacts of REACH on
the chemical industry and the Company are unclear at this time because the parameters of the program are still being actively debated. Nevertheless, it is possible that REACH, if implemented, would be
costly to the Company.

17.   Operating Segment Information

The Company derives its revenues, earnings and cash flows from the manufacture and sale of a wide variety of differentiated and commodity chemical products. The
Company has four reportable operating segments: Polyurethanes, Performance Products, Pigments and Base Chemicals.

The
major products of each reportable operating segment are as follows:

|Segment              |  | Products                                                   
|-------------------- |  | -----------------------------------------------------------
|Polyurethanes        |  | MDI, TDI, TPU, polyols, aniline, PO and MTBE               
|Performance Products |  | Surfactants, ethyleneamines and other performance chemicals
|Pigments             |  | Titanium dioxide                                           
|Base Chemicals       |  | Ethylene, propylene, benzene, cyclohexane and paraxylene   

Sales
between segments are generally recognized at external market prices.

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

17

---

results
of its business operations. The net sales and EBITDA for each of the Company's reportable operating segments are as follows (dollars in millions):

|(In Millions)                 |                          | Three Months
Ended
Sept 30, 2003 |       | Three Months
Ended
Sept 30, 2002 |         | Nine Months
Ended
Sept 30, 2003 |       | Nine Months
Ended
Sept 30, 2002 |       
|----------------------------- | ------------------------ | -------------------------------- | ----- | -------------------------------- | ------- | ------------------------------- | ----- | ------------------------------- | ------
|Net sales                     |                          |                                  |       |                                  |         |                                 |       |                                 |       
|                              | Polyurethanes            |                                  | $     | 597.4                            |         | $                               | 545.6 |                                 | $     
|                              | Performance Products     |                                  |       | 164.9                            |         |                                 | 143.3 |                                 |       
|                              | Pigments                 |                                  |       | 251.0                            |         |                                 | 232.5 |                                 |       
|                              | Base Chemicals           |                                  |       | 303.0                            |         |                                 | 303.6 |                                 |       
|                              | Eliminations             |                                  |       | (40.6                            | )       |                                 | (29.8 | )                               |       
|                              |                          |                                  |       |                                  |         |                                 |       |                                 |       
|                              |                          | Total                            |       | $                                | 1,275.7 |                                 | $     | 1,195.2                         |       
|                              |                          |                                  |       |                                  |         |                                 |       |                                 |       
|Segment EBITDA(1)             |                          |                                  |       |                                  |         |                                 |       |                                 |       
|                              | Polyurethanes            |                                  | $     | 68.9                             |         | $                               | 93.9  |                                 | $     
|                              | Performance Products     |                                  |       | 4.6                              |         |                                 | 3.5   |                                 |       
|                              | Pigments                 |                                  |       | 28.5                             |         |                                 | 21.1  |                                 |       
|                              | Base Chemicals           |                                  |       | (1.1                             | )       |                                 | 20.8  |                                 |       
|                              | Unallocated and other(2) |                                  |       | (9.4                             | )       |                                 | (8.3  | )                               |       
|                              |                          |                                  |       |                                  |         |                                 |       |                                 |       
|                              |                          | Total EBITDA                     |       | $                                | 91.5    |                                 | $     | 131.0                           |       
|Interest expense, net         |                          |                                  | (61.4 | )                                |         | (66.1                           | )     |                                 | (189.1
|Income tax benefit            |                          |                                  | 5.3   |                                  |         | 1.9                             |       |                                 | 14.0  
|Depreciation and amortization |                          |                                  | (67.7 | )                                |         | (66.2                           | )     |                                 | (205.4
|                              |                          |                                  |       |                                  |         |                                 |       |                                 |       
|                              |                          | Net income (loss)                |       | $                                | (32.3   | )                               | $     | 0.6                             |       
|                              |                          |                                  |       |                                  |         |                                 |       |                                 |       

---

18.   Recent Events



On October 17, 2003, the Company amended the HI Credit Facilities. The amendment provides, among other things, for changes to certain financial covenants,
including the leverage and interest coverage ratios, the annual amount of permitted capital expenditures, and the consolidated net worth covenant. With the exception of the changes relating to capital
expenditures, these changes to the financial covenants apply to the quarterly periods ended September 30, 2003 through December 31, 2004. The amendment also allows for the issuance of
$205 million of additional term B and term C loans, which was accomplished on October 22, 2003, the net proceeds of which have been applied to

18

---

pay
down the Company's revolving loan facility by approximately $53 million, and the remainder of the net proceeds have been applied to repay, in full, the term A loan. As a result of this
refinancing, the Company has no scheduled term loan maturities in 2004 and scheduled term loan maturities of approximately $12 million in each of 2005 and 2006. The amendment also allows the
Company to issue additional senior unsecured notes up to a maximum of $800 million.



In January 2003, the Company entered into joint venture agreements to build MDI production facilities near Shanghai, China with BASF and three Chinese
chemical companies. A feasibility study for the project has been approved by the appropriate Chinese authorities, preliminary engineering work has commenced and a business license was issued on
March 7, 2003. On September 19, 2003, the joint venture obtained secured financing for the construction of the production facilities. The financing is non-recourse to the
Company, but will be guaranteed during the construction phase by affiliates of the joint venture, including Huntsman Holdings. The Company anticipates that its investment in the joint venture and
other related capital costs will approximate $75 million.



On November 10, 2003, HMP announced an initiative to reduce fixed costs and overhead expenses by a minimum of $200 million over the next
18 months. HMP is reviewing redundant sites, underutilized assets and all of its spending to reduce costs. HMP announced that it intends to continue to leverage its size, its global
infrastructure and its people to increase productivity and reduce overall costs. HMP has not yet announced the extent to which the cost initiatives will directly impact the Company. The Company
expects to make additional announcements of site consolidations and headcount reductions in the near future.

19.   Consolidating Condensed Financial Statements

The following consolidating condensed 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, under the Company's indenture, on a combined, or where appropriate, consolidated basis, with
its investment in the non-guarantors recorded under the equity method; and the non-guarantors on a consolidated basis. Additional columns present eliminating adjustments and
consolidated totals as of September 30, 2003 and December 31, 2002 and for the periods ended September 30, 2003 and 2002. There are no contractual restrictions limiting transfers
of cash from guarantor and non-guarantor subsidiaries to the Company. The combined guarantors are wholly-owned subsidiaries of the Company and have fully and unconditionally guaranteed the
senior notes and the senior subordinated notes on a joint and several basis. The Company has not presented separate financial statements and other disclosures for each of the guarantors because
management believes that such information is not material to investors.

19

---



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING CONDENSED BALANCE SHEETS        SEPTEMBER 30, 2003 (UNAUDITED) (Dollars in Millions)        As Restated

|                       |                                               | Parent Only
Huntsman
International |   | Guarantors |         | Non-
Guarantors |         | Eliminations |     | Consolidated
Huntsman
International |        
|---------------------- | --------------------------------------------- | ---------------------------------- | - | ---------- | ------- | --------------- | ------- | ------------ | --- | ----------------------------------- | -------
|ASSETS                 |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|Current Assets:        |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       | Cash and cash equivalents                     |                                    | $ | 9.2        |         | $               |        |              | $   | 71.9                                |        
|                       | Accounts and notes receivables, net           |                                    |   | 46.5       |         |                 | 99.1    |              |     | 445.0                               |        
|                       | Inventories                                   |                                    |   | 52.4       |         |                 | 93.2    |              |     | 453.3                               |        
|                       | Prepaid expenses                              |                                    |   | 8.6        |         |                 | 2.8     |              |     | 24.2                                |        
|                       | Deferred tax asset                            |                                    |   |            |         |                 |         |              |     | 31.2                                |        
|                       | Other current assets                          |                                    |   | 103.1      |         |                 | 299.1   |              |     | 70.0                                |        
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       |                                               | Total current assets               |   |            | 219.8   |                 |         | 494.2        |     |                                     | 1,095.6
|                       | Property, plant and equipment, net            |                                    |   | 535.3      |         |                 | 334.6   |              |     | 2,258.3                             |        
|                       | Investment in unconsolidated affiliates       |                                    |   | 3,387.9    |         |                 | 717.3   |              |     | 7.5                                 |        
|                       | Intangible assets, net                        |                                    |   | 267.1      |         |                 | 5.0     |              |     | 12.2                                |        
|                       | Other noncurrent assets                       |                                    |   | 81.2       |         |                 | 1,859.6 |              |     | 262.2                               |        
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       |                                               | Total assets                       |   | $          | 4,491.3 |                 | $       | 3,410.7      |     | $                                   | 3,635.8
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|LIABILITIES AND EQUITY |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|Current liabilities:   |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       | Accounts payable                              |                                    | $ | 61.0       |         | $               | 95.6    |              | $   | 223.8                               |        
|                       | Accrued liabilities                           |                                    |   | 66.9       |         |                 | 29.7    |              |     | 446.2                               |        
|                       | Current portion of long-term debt             |                                    |   | 1.2        |         |                 |        |              |     |                                    |        
|                       | Other current liabilities                     |                                    |   | 269.5      |         |                 | 6.1     |              |     | 102.0                               |        
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       |                                               | Total current liabilities          |   |            | 398.6   |                 |         | 131.4        |     |                                     | 772.0  
|                       | Long-term debt                                |                                    |   | 3,005.3    |         |                 |        |              |     | 1,843.5                             |        
|                       | Deferred income taxes                         |                                    |   | (4.1       | )       |                 |        |              |     | 214.5                               |        
|                       | Other noncurrent liabilities                  |                                    |   | 48.9       |         |                 |        |              |     | 107.8                               |        
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       |                                               | Total liabilities                  |   |            | 3,448.7 |                 |         | 131.4        |     |                                     | 2,937.8
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|Minority interests     |                                               |                                    |  |            |         |                |         |              | 2.8 |                                     |        
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|Equity:                |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       | Member's equity                               |                                    |   | 1,026.1    |         |                 | 2,437.2 |              |     | 787.6                               |        
|                       | Subsidiary equity                             |                                    |   |           |         |                 |        |              |     |                                    |        
|                       | Retained earnings                             |                                    |   | 69.6       |         |                 | 795.2   |              |     | 1.9                                 |        
|                       | Accumulated other comprehensive income (loss) |                                    |   | (53.1      | )       |                 | 46.9    |              |     | (94.3                               | )      
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       |                                               | Total equity                       |   |            | 1,042.6 |                 |         | 3,279.3      |     |                                     | 695.2  
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        
|                       |                                               | Total liabilities and equity       |   | $          | 4,491.3 |                 | $       | 3,410.7      |     | $                                   | 3,635.8
|                       |                                               |                                    |   |            |         |                 |         |              |     |                                     |        

20

---

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING CONDENSED BALANCE SHEETS        DECEMBER 31, 2002 (UNAUDITED) (Dollars in Millions)

|                       |                                         | Parent Only
Huntsman
International |   | Guarantors |         | Non-
Guarantors |         | Eliminations |   | Consolidated
Huntsman
International |        
|---------------------- | --------------------------------------- | ---------------------------------- | - | ---------- | ------- | --------------- | ------- | ------------ | - | ----------------------------------- | -------
|ASSETS                 |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|Current Assets:        |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       | Cash and cash equivalents               |                                    | $ | 19.0       |         | $               | 0.3     |              | $ | 56.1                                |        
|                       | Accounts and notes receivables, net     |                                    |   | 91.3       |         |                 | 113.8   |              |   | 378.2                               |        
|                       | Inventories                             |                                    |   | 53.2       |         |                 | 63.4    |              |   | 444.7                               |        
|                       | Prepaid expenses                        |                                    |   | 4.3        |         |                 | 1.9     |              |   | 15.8                                |        
|                       | Other current assets                    |                                    |   | 74.5       |         |                 | 245.5   |              |   | 130.7                               |        
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       |                                         | Total current assets               |   |            | 242.3   |                 |         | 424.9        |   |                                     | 1,025.5
|                       | Property, plant and equipment, net      |                                    |   | 562.3      |         |                 | 339.3   |              |   | 2,169.5                             |        
|                       | Investment in unconsolidated affiliates |                                    |   | 3,098.0    |         |                 | 717.4   |              |   | 1.5                                 |        
|                       | Intangible assets, net                  |                                    |   | 289.4      |         |                 | 6.3     |              |   | 7.1                                 |        
|                       | Other noncurrent assets                 |                                    |   | 87.9       |         |                 | 1,599.0 |              |   | 245.0                               |        
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       |                                         | Total assets                       |   | $          | 4,279.9 |                 | $       | 3,086.9      |   | $                                   | 3,448.6
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|LIABILITIES AND EQUITY |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|Current liabilities:   |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       | Accounts payable                        |                                    | $ | 52.1       |         | $               | 59.7    |              | $ | 318.4                               |        
|                       | Accrued liabilities                     |                                    |   | 100.0      |         |                 | 26.3    |              |   | 428.2                               |        
|                       | Current portion of long-term debt       |                                    |   | 43.2       |         |                 |        |              |   | 0.7                                 |        
|                       | Other current liabilities               |                                    |   | 229.9      |         |                 | 11.7    |              |   | 100.5                               |        
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       |                                         | Total current liabilities          |   |            | 425.2   |                 |         | 97.7         |   |                                     | 847.8  
|                       | Long-term debt                          |                                    |   | 2,741.2    |         |                 |        |              |   | 1,581.8                             |        
|                       | Deferred income taxes                   |                                    |   |           |         |                 |        |              |   | 215.1                               |        
|                       | Other noncurrent liabilities            |                                    |   | 48.3       |         |                 | 3.8     |              |   | 106.3                               |        
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       |                                         | Total liabilities                  |   |            | 3,214.7 |                 |         | 101.5        |   |                                     | 2,751.0
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|Equity:                |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       | Member's equity                         |                                    |   | 1,026.1    |         |                 |        |              |   |                                    |        
|                       | Subsidiary equity                       |                                    |   |           |         |                 | 2,408.8 |              |   | 772.8                               |        
|                       | Retained earnings                       |                                    |   | 186.5      |         |                 | 675.7   |              |   | 34.9                                |        
|                       | Accumulated other comprehensive loss    |                                    |   | (147.4     | )       |                 | (99.1   | )            |   | (110.1                              | )      
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       |                                         | Total equity                       |   |            | 1,065.2 |                 |         | 2,985.4      |   |                                     | 697.6  
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        
|                       |                                         | Total liabilities and equity       |   | $          | 4,279.9 |                 | $       | 3,086.9      |   | $                                   | 3,448.6
|                       |                                         |                                    |   |            |         |                 |         |              |   |                                     |        

21

---



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)        THREE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) (Dollars in
Millions)        As Restated

|                                                         |                                       | Parent Only
Huntsman
International |       | Guarantors |       | Non-
Guarantors |       | Eliminations |       | Consolidated
Huntsman
International |      
|-------------------------------------------------------- | ------------------------------------- | ---------------------------------- | ----- | ---------- | ----- | --------------- | ----- | ------------ | ----- | ----------------------------------- | -----
|Revenues:                                                |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|                                                         | Trade sales and services              |                                    | $     | 184.9      |       | $               | 172.9 |              | $     | 897.4                               |      
|                                                         | Related party sales                   |                                    |       | 38.0       |       |                 | 36.7  |              |       | 19.4                                |      
|                                                         | Tolling fees                          |                                    |       |           |       |                 |      |              |       |                                    |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|                                                         |                                       | Total revenue                      |       |            | 222.9 |                 |       | 209.6        |       |                                     | 916.8
|Cost of goods sold                                       |                                       |                                    | 181.1 |            |       | 190.5           |       |              | 841.3 |                                     |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|Gross profit                                             |                                       |                                    | 41.8  |            |       | 19.1            |       |              | 75.5  |                                     |      
|Expenses:                                                |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|                                                         | Selling, general and administrative   |                                    |       | 40.1       |       |                 | 2.3   |              |       | 48.0                                |      
|                                                         | Research and development              |                                    |       | 8.4        |       |                 | 0.7   |              |       | 3.5                                 |      
|                                                         | Restructuring and plant closing costs |                                    |       |           |       |                 |      |              |       | 4.8                                 |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|Total expenses                                           |                                       |                                    | 48.5  |            |       | 3.0             |       |              | 56.3  |                                     |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|Operating income                                         |                                       |                                    | (6.7  | )          |       | 16.1            |       |              | 19.2  |                                     |      
|Interest (expense) income, net                           |                                       |                                    | (64.0 | )          |       | 38.1            |       |              | (35.5 | )                                   |      
|Gain (loss) on sale of accounts receivable               |                                       |                                    | (3.4  | )          |       | 0.1             |       |              | (2.6  | )                                   |      
|Equity in earnings (losses) of unconsolidated affiliates |                                       |                                    | 40.7  |            |       | (16.0           | )     |              |      |                                     |      
|Other income (expense)                                   |                                       |                                    | 1.1   |            |       |                |       |              |      |                                     |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|Income (loss) before income taxes                        |                                       |                                    | (32.3 | )          |       | 38.3            |       |              | (18.9 | )                                   |      
|Income tax (expense) benefit                             |                                       |                                    |      |            |       |                |       |              | 5.3   |                                     |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|Net income (loss)                                        |                                       |                                    | (32.3 | )          |       | 38.3            |       |              | (13.6 | )                                   |      
|Other comprehensive income (loss)                        |                                       |                                    | 18.6  |            |       | 26.3            |       |              | 5.0   |                                     |      
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      
|Comprehensive income (loss)                              |                                       | $                                  | (13.7 | )          | $     | 64.6            |       | $            | (8.6  | )                                   | $    
|                                                         |                                       |                                    |       |            |       |                 |       |              |       |                                     |      

22

---

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)        THREE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) (Dollars in
Millions)

|                                                         |                                     | Parent Only
Huntsman
International |       | Guarantors |       | Non-
Guarantors |       | Eliminations |       | Consolidated
Huntsman
International |      
|-------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ----- | ---------- | ----- | --------------- | ----- | ------------ | ----- | ----------------------------------- | -----
|Revenues:                                                |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|                                                         | Trade sales and services            |                                    | $     | 181.0      |       | $               | 159.0 |              | $     | 764.6                               |      
|                                                         | Related party sales                 |                                    |       | 36.1       |       |                 | 29.1  |              |       | 88.6                                |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|                                                         |                                     | Total revenue                      |       |            | 217.1 |                 |       | 188.1        |       |                                     | 853.2
|Cost of goods sold                                       |                                     |                                    | 158.7 |            |       | 157.8           |       |              | 767.0 |                                     |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|Gross profit                                             |                                     |                                    | 58.4  |            |       | 30.3            |       |              | 86.2  |                                     |      
|Expenses:                                                |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|                                                         | Selling, general and administrative |                                    |       | 26.0       |       |                 | 4.1   |              |       | 60.2                                |      
|                                                         | Research and development            |                                    |       | 8.8        |       |                 | 0.4   |              |       | 3.9                                 |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|Total expenses                                           |                                     |                                    | 34.8  |            |       | 4.5             |       |              | 64.1  |                                     |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|Operating income                                         |                                     |                                    | 23.6  |            |       | 25.8            |       |              | 22.1  |                                     |      
|Interest (expense) income, net                           |                                     |                                    | (66.0 | )          |       | 32.0            |       |              | (32.1 | )                                   |      
|Gain (loss) on sale of accounts receivable               |                                     |                                    | (0.5  | )          |       | (1.1            | )     |              | (2.6  | )                                   |      
|Equity in earnings (losses) of unconsolidated affiliates |                                     |                                    | 43.7  |            |       | (12.9           | )     |              |      |                                     |      
|Other income (expense)                                   |                                     |                                    | (0.2  | )          |       | (0.3            | )     |              | (1.9  | )                                   |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|Income (loss) before income taxes                        |                                     |                                    | 0.6   |            |       | 43.5            |       |              | (14.5 | )                                   |      
|Income tax expense                                       |                                     |                                    |      |            |       |                |       |              | 1.9   |                                     |      
|Minority interests in subsidiaries' income               |                                     |                                    |      |            |       |                |       |              | (0.1  | )                                   |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|Net income (loss)                                        |                                     |                                    | 0.6   |            |       | 43.5            |       |              | (12.7 | )                                   |      
|Other comprehensive income (loss)                        |                                     |                                    | 5.0   |            |       | 15.5            |       |              | 27.3  |                                     |      
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      
|Comprehensive income (loss)                              |                                     | $                                  | 5.6   |            | $     | 59.0            |       | $            | 14.6  |                                     | $    
|                                                         |                                     |                                    |       |            |       |                 |       |              |       |                                     |      

23

---

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)        NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) (Dollars in Millions)
       As Restated

|                                                         |                                       | Parent Only
Huntsman
International |        | Guarantors |       | Non-
Guarantors |       | Eliminations |         | Consolidated
Huntsman
International |        
|-------------------------------------------------------- | ------------------------------------- | ---------------------------------- | ------ | ---------- | ----- | --------------- | ----- | ------------ | ------- | ----------------------------------- | -------
|Revenues:                                                |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|                                                         | Trade sales and services              |                                    | $      | 529.4      |       | $               | 509.9 |              | $       | 2,651.7                             |        
|                                                         | Related party sales                   |                                    |        | 100.0      |       |                 | 89.6  |              |         | 190.7                               |        
|                                                         | Tolling fees                          |                                    |        |           |       |                 |      |              |         |                                    |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|                                                         |                                       | Total revenue                      |        |            | 629.4 |                 |       | 599.5        |         |                                     | 2,842.4
|Cost of goods sold                                       |                                       |                                    | 519.3  |            |       | 548.5           |       |              | 2,577.3 |                                     |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|Gross profit                                             |                                       |                                    | 110.1  |            |       | 51.0            |       |              | 265.1   |                                     |        
|Expenses:                                                |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|                                                         | Selling, general and administrative   |                                    |        | 114.2      |       |                 | 2.1   |              |         | 145.9                               |        
|                                                         | Research and development              |                                    |        | 27.6       |       |                 | 1.4   |              |         | 8.2                                 |        
|                                                         | Restructuring and plant closing costs |                                    |        |           |       |                 |      |              |         | 43.4                                |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|Total expenses                                           |                                       |                                    | 141.8  |            |       | 3.5             |       |              | 197.5   |                                     |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|Operating income                                         |                                       |                                    | (31.7  | )          |       | 47.5            |       |              | 67.6    |                                     |        
|Interest (expense) income, net                           |                                       |                                    | (192.2 | )          |       | 110.9           |       |              | (107.8  | )                                   |        
|Gain (loss) on sale of accounts receivable               |                                       |                                    | (16.1  | )          |       | (1.1            | )     |              | (6.8    | )                                   |        
|Equity in earnings (losses) of unconsolidated affiliates |                                       |                                    | 124.3  |            |       | (37.8           | )     |              |        |                                     |        
|Other income (expense)                                   |                                       |                                    | (1.2   | )          |       |                |       |              |        |                                     |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|Income (loss) before income taxes                        |                                       |                                    | (116.9 | )          |       | 119.5           |       |              | (47.0   | )                                   |        
|Income tax (expense) benefit                             |                                       |                                    |       |            |       |                |       |              | 14.0    |                                     |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|Net income (loss)                                        |                                       |                                    | (116.9 | )          |       | 119.5           |       |              | (33.0   | )                                   |        
|Other comprehensive income (loss)                        |                                       |                                    | 94.3   |            |       | 146.0           |       |              | 15.8    |                                     |        
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        
|Comprehensive income (loss)                              |                                       | $                                  | (22.6  | )          | $     | 265.5           |       | $            | (17.2   | )                                   | $      
|                                                         |                                       |                                    |        |            |       |                 |       |              |         |                                     |        

24

---

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)        NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) (Dollars in Millions)

|                                                         |                                     | Parent Only
Huntsman
International |        | Guarantors |       | Non-
Guarantors |       | Eliminations |         | Consolidated
Huntsman
International |        
|-------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ------ | ---------- | ----- | --------------- | ----- | ------------ | ------- | ----------------------------------- | -------
|Revenues:                                                |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|                                                         | Trade sales and services            |                                    | $      | 507.2      |       | $               | 468.1 |              | $       | 2,135.3                             |        
|                                                         | Related party sales                 |                                    |        | 95.4       |       |                 | 88.8  |              |         | 258.7                               |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|                                                         |                                     | Total revenue                      |        |            | 602.6 |                 |       | 556.9        |         |                                     | 2,394.0
|Cost of goods sold                                       |                                     |                                    | 422.6  |            |       | 454.4           |       |              | 2,218.5 |                                     |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|Gross profit                                             |                                     |                                    | 180.0  |            |       | 102.5           |       |              | 175.5   |                                     |        
|Expenses:                                                |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|                                                         | Selling, general and administrative |                                    |        | 92.6       |       |                 | 5.6   |              |         | 135.9                               |        
|                                                         | Research and development            |                                    |        | 26.2       |       |                 | 1.3   |              |         | 11.6                                |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|Total expenses                                           |                                     |                                    | 118.8  |            |       | 6.9             |       |              | 147.5   |                                     |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|Operating income                                         |                                     |                                    | 61.2   |            |       | 95.6            |       |              | 28.0    |                                     |        
|Interest (expense) income, net                           |                                     |                                    | (183.4 | )          |       | 88.0            |       |              | (85.4   | )                                   |        
|Gain (loss) on sale of accounts receivable               |                                     |                                    | (1.8   | )          |       | (2.6            | )     |              | 0.1     |                                     |        
|Equity in earnings (losses) of unconsolidated affiliates |                                     |                                    | 126.5  |            |       | (63.4           | )     |              |        |                                     |        
|Other income (expense)                                   |                                     |                                    |       |            |       | 0.1             |       |              | (2.5    | )                                   |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|Income (loss) before income taxes                        |                                     |                                    | 2.5    |            |       | 117.7           |       |              | (59.8   | )                                   |        
|Income tax benefit                                       |                                     |                                    |       |            |       |                |       |              | 5.1     |                                     |        
|Minority interests in subsidiaries' income               |                                     |                                    |       |            |       |                |       |              | 0.1     |                                     |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|Net income (loss)                                        |                                     |                                    | 2.5    |            |       | 117.7           |       |              | (54.6   | )                                   |        
|Other comprehensive income (loss)                        |                                     |                                    | 87.6   |            |       | 148.8           |       |              | 40.3    |                                     |        
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        
|Comprehensive income (loss)                              |                                     | $                                  | 90.1   |            | $     | 266.5           |       | $            | (14.3   | )                                   | $      
|                                                         |                                     |                                    |        |            |       |                 |       |              |         |                                     |        

25

---



HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW        NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) (Dollars in Millions)    
 As Restated

|                                                    |  | Parent Only
Huntsman
International |          | Guarantors |   | Non-
Guarantors |   | Eliminations |          | Consolidated
Huntsman
International |  
|--------------------------------------------------- |  | ---------------------------------- | -------- | ---------- | - | --------------- | - | ------------ | -------- | ----------------------------------- | -
|Net cash used in operating activities               |  | $                                  | (225.3   | )          | $ | 181.4           |   | $            | (23.3    | )                                   | $
|Investing activities:                               |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Capital expenditures                                |  |                                    | (5.5     | )          |   | (8.2            | ) |              | (82.0    | )                                   |  
|Net cash received from unconsolidated affiliates    |  |                                    |         |            |   | 2.1             |   |              |         |                                     |  
|Advances to unconsolidated affiliates               |  |                                    | (2.2     | )          |   |                |   |              |         |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Net cash used in investing activities               |  |                                    | (7.7     | )          |   | (6.1            | ) |              | (82.0    | )                                   |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Financing activities:                               |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Net borrowings under revolving loan facilities      |  |                                    | 132.0    |            |   |                |   |              |         |                                     |  
|Issuance of senior notes                            |  |                                    | 157.9    |            |   |                |   |              |         |                                     |  
|Repayment of long term debt                         |  |                                    | (124.6   | )          |   |                |   |              | (1.3     | )                                   |  
|Cash contributions by parent                        |  |                                    |         |            |   | 227.0           |   |              | 3,097.1  |                                     |  
|Cash distributions from subsidiaries                |  |                                    | 3,305.8  |            |   |                |   |              |         |                                     |  
|Cash distributions to parent                        |  |                                    |          |            |   | (199.7          | ) |              | (3,106.1 | )                                   |  
|Cash distributions to subsidiaries                  |  |                                    | (3,324.1 | )          |   |                |   |              |         |                                     |  
|Shares issued to minorities for cash                |  |                                    |         |            |   |                |   |              | 2.8      |                                     |  
|Intercompany advancesnet of repayments             |  |                                    | 72.3     |            |   | (202.1          | ) |              | 125.5    |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Net cash provided by (used in) financing activities |  |                                    | 219.3    |            |   | (174.8          | ) |              | 118.0    |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Effect of exchange rate changes on cash             |  |                                    | 3.9      |            |   | (0.8            | ) |              | 3.1      |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Increase in cash and cash equivalents               |  |                                    | (9.8     | )          |   | (0.3            | ) |              | 15.8     |                                     |  
|Cash and cash equivalents at beginning of period    |  |                                    | 19.0     |            |   | 0.3             |   |              | 56.1     |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Cash and cash equivalents at end of period          |  | $                                  | 9.2      |            | $ | 0.0             |   | $            | 71.9     |                                     | $
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  

26

---

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES        CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW        NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) (Dollars in Millions)

|                                                    |  | Parent Only
Huntsman
International |          | Guarantors |   | Non-
Guarantors |   | Eliminations |          | Consolidated
Huntsman
International |  
|--------------------------------------------------- |  | ---------------------------------- | -------- | ---------- | - | --------------- | - | ------------ | -------- | ----------------------------------- | -
|Net cash provided by (used in) operating activities |  | $                                  | (112.4   | )          | $ | 177.8           |   | $            | (4.2     | )                                   | $
|Investing activities:                               |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Acquisition of minority interest                    |  |                                    |         |            |   |                |   |              | (9.0     | )                                   |  
|Capital expenditures                                |  |                                    | (7.4     | )          |   | (1.8            | ) |              | (125.5   | )                                   |  
|Net cash received from unconsolidated affiliates    |  |                                    |         |            |   | 6.3             |   |              |         |                                     |  
|Advances to unconsolidated affiliates               |  |                                    | (2.4     | )          |   |                |   |              |         |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Net cash provided by (used in) investing activities |  |                                    | (9.8     | )          |   | 4.5             |   |              | (134.5   | )                                   |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Financing activities:                               |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Borrowings under credit facilities                  |  |                                    | 245.6    |            |   |                |   |              | 5.5      |                                     |  
|Repayment of credit facilities                      |  |                                    | (474.4   | )          |   |                |   |              | (5.1     | )                                   |  
|Issuance of senior subordinated                     |  |                                    |         |            |   |                |   |              |         |                                     |  
|notes                                               |  |                                    | 300.0    |            |   |                |   |              |         |                                     |  
|Debt issuance costs                                 |  |                                    | (10.3    | )          |   |                |   |              |         |                                     |  
|Cash contributions by parent                        |  |                                    |         |            |   | 240.0           |   |              | 2,214.7  |                                     |  
|Cash distributions from subsidiaries                |  |                                    | 2,477.3  |            |   |                |   |              |         |                                     |  
|Cash distributions to parent                        |  |                                    |          |            |   | (255.5          | ) |              | (2,221.8 | )                                   |  
|Cash distributions to subsidiaries                  |  |                                    | (2,454.7 | )          |   |                |   |              |         |                                     |  
|Intercompany advancesnet of repayments             |  |                                    | 25.8     |            |   | (169.0          | ) |              | 143.2    |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Net cash provided by (used in) financing activities |  |                                    | 109.3    |            |   | (184.5          | ) |              | 136.5    |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Effect of exchange rate changes on cash             |  |                                    | (0.6     | )          |   | (0.3            | ) |              | (6.5     | )                                   |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Decrease in cash and cash equivalents               |  |                                    | (13.5    | )          |   | (2.5            | ) |              | (8.7     | )                                   |  
|Cash and cash equivalents at beginning of period    |  |                                    | 21.0     |            |   | 2.8             |   |              | 60.1     |                                     |  
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  
|Cash and cash equivalents at end of period          |  | $                                  | 7.5      |            | $ | 0.3             |   | $            | 51.4     |                                     | $
|                                                    |  |                                    |          |            |   |                 |   |              |          |                                     |  

27

---

20.   Restatement

In February 2004, the Company discovered an error in how it had accounted for product exchange balances under a toll processing agreement with a customer.
The error was caused by the use of an incorrect exchange factor in the Company's new SAP-based ERP system. The Company's use of the incorrect exchange factor resulted from its implementation of and
transition to the new SAP-based ERP system in 2003. As a result, the consolidated balance sheet as of September 30, 2003, the consolidated statements of operations and comprehensive loss for
the three and nine month periods ended September 30, 2003, the consolidated statement of cash flows for the nine month period ended September 30, 2003, and the consolidated statement of
equity as of September 30, 2003 have been restated from the amounts previously reported to correct the effect of the error and to adjust certain other items which, considered in relation to the
financial statements taken as a whole, are not material.

The
significant effects of the restatement on the consolidated balance sheet as of September 30, 2003 and the related consolidated statements of operations and comprehensive loss
are as follows (in millions):

As Previously
Reported

As
RestatedAt September 30, 2003:Inventory

$
609.8

$
598.9Total assets


5,254.6


5,240.7Retained earnings


81.9


69.6For the nine months ended September 30, 2003:Cost of goods sold


3,444.5


3,454.6Operating income


96.1


83.4Net loss


(104.6
)

(116.9
)For the three months ended September 30, 2003:Cost of goods sold


1,129.2


1,139.3Operating income


41.3


28.6Net loss


(20.0
)

(32.3
)


28

---



ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Explanatory Note

In February 2004, we discovered an error in how we had accounted for product exchange balances under a toll processing agreement with a customer. The error
was caused by the use of an incorrect exchange factor in our new SAP-based enterprise resource planning ("ERP") system. Our use of the incorrect exchange factor resulted from our implementation of and
transition to the new SAP-based ERP system in 2003, and we have restated our financial statements for the period ended September 30, 2003 to correct the effect of this error and to adjust
certain other items which, considered in relation to the financial statements taken as a whole, are not material.

The
significant effects of the restatement on the consolidated balance sheet as of September 30, 2003 and the related consolidated statements of operations and comprehensive loss
are as follows (in millions):

As Previously
Reported

As
RestatedAt September 30, 2003:Inventory

$
609.8

$
598.9Total Assets


5,254.6


5,240.7Retained earnings


81.9


69.6For the nine months ended September 30, 2003:Cost of goods sold


3,444.5


3,454.6Operating income


96.1


83.4Net loss


(104.6
)

(116.9
)EBITDA(1)


276.3


263.6For the three months ended September 30, 2003:Cost of goods sold


1,129.2


1,139.3Operating income


41.3


28.6Net loss


(20.0
)

(32.3
)EBITDA(1)


104.2


91.5


---

For
more information concerning the restatement and our actions with respect to internal control over financial reporting, see "Item 4Controls and Procedures" below.

In
the following Management's Discussion and Analysis of Financial Condition and Results of Operations, all amounts reflect the restatement indicated in the accompanying unaudited
consolidated financial statements.

29

---

Forward-looking Statements

Some of the statements contained in this report are forward-looking in nature. In some cases, you can identify forward-looking statements by terminology such as
"believes," "expects," "may," "will," "should," "anticipates" or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. You are cautioned that our
business and operations are subject to a variety of risks and uncertainties, and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Some of
the risks and uncertainties are discussed below in "Cautionary Statement for Forward Looking Information" and elsewhere in this report. We make no commitment to revise or update any
forward-looking statements in order to reflect events or circumstances after the date any such statement is made.

General

Our company, Huntsman International LLC, formerly known as Huntsman ICI Chemicals LLC, is a Delaware limited liability company. For convenience in this report,
the terms "Company," "our," "us" or "we" may be used to refer to Huntsman International LLC and, unless the context otherwise requires, its subsidiaries.

All
of our membership interests are owned by Huntsman International Holdings LLC ("HIH"). HIH is a Delaware limited liability company and all of its membership interests are owned
directly and indirectly by HMP Equity Holdings Corporation ("HMP"). HMP is a Delaware corporation and is owned 100% by Huntsman Group Inc., a Delaware corporation, subject to warrants that, if
exercised, would entitle the holders to up to 12% of the common equity of HMP. Huntsman Group Inc. is owned 100% by Huntsman Holdings, LLC ("Huntsman Holdings"), a Delaware limited liability
company. The voting membership interests of Huntsman Holdings are owned by the Huntsman family, MatlinPatterson Global Opportunities Partners, L.P. ("GOP"), Consolidated Press (Finance) Limited
("CPH") and certain members of our Company's senior management. In addition, Huntsman Holdings has issued certain non-voting preferred units to Huntsman Holdings Preferred Member LLC,
which, in turn, is owned by GOP (indirectly), CPH, the Huntsman Cancer Foundation, certain
members of our Company's senior management and certain members of the Huntsman family. Huntsman Holdings has issued certain other non-voting preferred units to the Huntsman family, GOP and
CPH that track the performance of the Huntsman Advanced Materials LLC business. The Huntsman family has board and operational control of our Company.

We
derive our revenues, earnings and cash flow from the sale of a wide variety of differentiated and commodity chemicals. We manage our operations through our four principal operating
segments: Polyurethanes, Performance Products, Pigments and Base Chemicals. We manufacture products at facilities located in North America, Europe, Asia, Australia and Africa, and our products are
sold throughout the world. The major products of each reportable operating segment are as follows:

|Segment              |  | Products                                                   
|-------------------- |  | -----------------------------------------------------------
|Polyurethanes        |  | MDI, TDI, TPU, polyols, aniline, PO and MTBE               
|Performance Products |  | Surfactants, ethyleneamines and other performance chemicals
|Pigments             |  | Titanium dioxide                                           
|Base Chemicals       |  | Ethylene, propylene, benzene, cyclohexane and paraxylene   

Our
products are divided into two broad categoriesdifferentiated and commodity chemicals. Our Polyurethanes and Performance Products businesses mainly produce differentiated
products and our Pigments and Base Chemicals businesses mainly produce commodity chemicals. Among our commodity products, our Pigments business, while cyclical, tends to follow different trends and is
not influenced by the same factors as our petrochemical-based commodity products. In addition, there are a limited number of significant competitors in our Pigments business, relatively high barriers
to entry and strong

30

---

customer
loyalty. Each of our four operating segments is impacted to varying degrees by economic conditions, prices of raw materials and global supply and demand pressures.

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

In
comparison to commodity businesses, the demand for many of the products we produce in our Performance Products segment historically has also been relatively resistant to changes in
global economic conditions. Like our Polyurethanes segment, Performance Products growth in general is strongly influenced by product substitution, innovation and new product development. Also, demand
stability benefits from a broad range of end markets. A significant portion of our Performance Products is sold into consumer end use applications including household detergents and personal care
products. As such, historically, demand for these products has been relatively stable and tends to be less susceptible to changes in global economic conditions.

Historically,
growth in demand for TiO2 pigments has generally been in line with GDP growth rates. Pigment prices have historically reflected industry-wide
operating rates but have typically lagged behind movements in these rates by up to twelve months due to the effects of product stocking and destocking by customers and suppliers, contract arrangements
and cyclicality. The industry experiences some seasonality in its sales because sales of paints, the largest end use for TiO2, are generally highest in periods leading up to spring and
summer months. This results in greater sales volumes in the first half of the year because the proportion of our TiO2 products sold in Europe and North America is greater than that sold in
Asia and the rest of the world.

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

Recent Events

Amendment of HI Credit Facilities and Refinancing of Term Loan A

On October 17, 2003, we amended our senior secured credit facilities (the "HI Credit Facilities"). The amendment provides, among other things, for changes
to certain financial covenants, including the leverage and interest coverage ratios, the annual amount of permitted capital expenditures, and the

31

---

consolidated
net worth covenant. With the exception of the changes relating to capital expenditures, these changes to the financial covenants apply to the quarterly periods ended September 30,
2003 through December 31, 2004. The amendment also allows for the issuance of $205 million of additional term B and term C loans, which we completed on October 22, 2003, the net
proceeds of which have been applied to pay down our revolving loan facility by approximately $53 million, and the remainder of the net proceeds have been applied to repay, in full, the term A
loan. As a result of this refinancing, we have no scheduled term loan maturities in 2004 and scheduled term loan maturities of approximately $12 million in each of 2005 and 2006. The amendment
also allows us to issue additional senior unsecured notes up to a maximum of $800 million.

Chinese MDI Joint Venture

In January 2003, we entered into joint venture agreements to build MDI production facilities near Shanghai, China with BASF and three Chinese chemical
companies. A feasibility study for the project has been approved by the appropriate Chinese authorities, preliminary engineering work has commenced and a business license was issued on March 7,
2003. On September 19, 2003, the joint venture obtained secured financing for the construction of the production facilities. The financing is non-recourse to our Company, but will
be guaranteed during the construction phase by affiliates of the joint venture, including Huntsman Holdings. We anticipate that our investment in the joint venture and other related capital costs will
approximate $75 million.

Global Cost Reduction Initiative

On November 10, 2003, HMP announced an initiative to reduce fixed costs and overhead expenses by a minimum of $200 million over the next
18 months. HMP is reviewing redundant sites, underutilized assets and all of its spending to reduce costs. HMP announced that it intends to continue to leverage its size, its global
infrastructure and its people to increase productivity and reduce overall costs. HMP has not yet announced the extent to which the cost initiatives will directly impact our Company. We expect to make
additional announcements of site consolidations and headcount reductions in the near future.

32

---

Results of Operations

Three and Nine Months Ended September 30, 2003 Compared to Three and Nine Months Ended September 30, 2002 (Unaudited) (Dollars in Millions)

|                                                                                                     |  | Three Months
Ended
Sept 30, 2003 |         | Three Months
Ended
Sept 30, 2002 |   | Nine Months
Ended
Sept 30, 2003 |   | Nine Months
Ended
Sept 30, 2002 |        
|---------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | -------------------------------- | - | ------------------------------- | - | ------------------------------- | -------
|Revenues                                                                                             |  | $                                | 1,275.7 |                                  | $ | 1,195.2                         |   | $                               | 3,880.8
|Cost of goods sold                                                                                   |  |                                  | 1,139.3 |                                  |   | 1,020.3                         |   |                                 | 3,454.6
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        
|Gross profit                                                                                         |  |                                  | 136.4   |                                  |   | 174.9                           |   |                                 | 426.2  
|Expenses of selling, general, and administrative, research and development and other operating costs |  |                                  | 103.0   |                                  |   | 102.3                           |   |                                 | 299.4  
|Restructuring and plant closing costs                                                                |  |                                  | 4.8     |                                  |   | 1.1                             |   |                                 | 43.4   
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        
|Operating income                                                                                     |  |                                  | 28.6    |                                  |   | 71.5                            |   |                                 | 83.4   
|Interest expense, net                                                                                |  |                                  | (61.4   | )                                |   | (66.1                           | ) |                                 | (189.1 
|Loss on sale of accounts receivable                                                                  |  |                                  | (5.9    | )                                |   | (4.2                            | ) |                                 | (24.0  
|Other income (expense)                                                                               |  |                                  | 1.1     |                                  |   | (2.4                            | ) |                                 | (1.2   
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        
|Loss before income taxes                                                                             |  |                                  | (37.6   | )                                |   | (1.2                            | ) |                                 | (130.9 
|Income tax benefit                                                                                   |  |                                  | 5.3     |                                  |   | 1.9                             |   |                                 | 14.0   
|Minority interests in subsidiaries' income                                                           |  |                                  |        |                                  |   | (0.1                            | ) |                                 |       
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        
|Net income (loss)                                                                                    |  | $                                | (32.3   | )                                | $ | 0.6                             |   | $                               | (116.9 
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        
|Interest expense, net                                                                                |  |                                  | 61.4    |                                  |   | 66.1                            |   |                                 | 189.1  
|Income tax benefit                                                                                   |  |                                  | (5.3    | )                                |   | (1.9                            | ) |                                 | (14.0  
|Depreciation and amortization                                                                        |  |                                  | 67.7    |                                  |   | 66.2                            |   |                                 | 205.4  
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        
|EBITDA(1)                                                                                            |  | $                                | 91.5    |                                  | $ | 131.0                           |   | $                               | 263.6  
|                                                                                                     |  |                                  |         |                                  |   |                                 |   |                                 |        

---

33

---

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

|                                    |                      | Three Months
Ended
Sept 30, 2003 |      | Three Months
Ended
Sept 30, 2002 |      | Nine Months
Ended
Sept 30, 2003 |      | Nine Months
Ended
Sept 30, 2002 |      
|----------------------------------- | -------------------- | -------------------------------- | ---- | -------------------------------- | ---- | ------------------------------- | ---- | ------------------------------- | -----
|Foreign exchange gainsunallocated  |                      | $                                | 8.7  |                                  | $    | 4.1                             |      | $                               | 25.3 
|Loss on sale of accounts receivable |                      |                                  | (5.9 | )                                |      | (4.2                            | )    |                                 | (24.0
|Asset write-down                    |                      |                                  | (3.0 | )                                |      |                                |      |                                 | (5.8 
|Restructuring:                      |                      |                                  |      |                                  |      |                                 |      |                                 |      
|                                    | Polyurethanes        |                                  |      | (3.7                             | )    |                                 |     |                                 |      
|                                    | Performance Products |                                  |      |                                 |      |                                 | (1.1 | )                               |      
|                                    | Pigments             |                                  |      | (1.1                             | )    |                                 |     |                                 |      
|                                    |                      |                                  |      |                                  |      |                                 |      |                                 |      
|                                    |                      | Total restructuring              |      |                                  | (4.8 | )                               |      | (1.1                            | )    
|                                    |                      |                                  |      |                                  |      |                                 |      |                                 |      

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002

For the three months ended September 30, 2003, we incurred a net loss of $32.3 million on revenues of $1,275.7 million, compared to net
income of $0.6 million on revenues of $1,195.2 million for the same period in 2002. The decrease of $32.9 million in net income was the result of the following items:



34

---



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

Three Months
Ended
Sept 30, 2003

Three Months
Ended
Sept 30, 2002RevenuesPolyurethanes

$
597.4

$
545.6Performance Products


164.9


143.3Pigments


251.0


232.5Base Chemicals


303.0


303.6Eliminations


(40.6
)

(29.8
)Total

$
1,275.7

$
1,195.2Segment EBITDAPolyurethanes

$
68.9

$
93.9Performance Products


4.6


3.5Pigments


28.5


21.1Base Chemicals


(1.1
)

20.8Unallocated and other


(9.4
)

(8.3
)Total

$
91.5

$
131.0


Polyurethanes

For the three months ended September 30, 2003, Polyurethanes revenues increased by $51.8 million, or 10%, to $597.4 million from
$545.6 million for the same period in 2002. MDI revenues increased by 5%, resulting from a 9% increase in average selling prices, partially offset by a 4% decrease in sales volumes. The
reduction in sales volumes was largely the result of a reduction in spot sales to co-producers in the 2003 period. MDI volumes, excluding spot sales, rose by 2% overall with increases of
4% and 14% in the Americas and Asia respectively, offset by a reduction of 4% in Europe due to a slowdown in the rigid polyurethanes market. The 9% increase in overall average selling prices for MDI
resulted from the effect of the stronger euro versus the U.S. dollar and our continued efforts to increase sales prices as raw material costs have increased. Polyol sales revenue increased by 14% as
sales volume increased by 5% and average selling prices increased by 9%. PO/MTBE revenues increased by 14% for the three months ended September 30, 2003 as compared to the same period in 2002.
PO volumes decreased slightly while MTBE volumes were higher by 12%. MTBE pricing increased by 13% in response to higher feedstock costs and a strong late driving season in the U.S. that created
significant demand for MTBE in the third quarter 2003.

35

---

For
the three months ended September 30, 2003, Polyurethanes segment EBITDA decreased by $25.0 million to $68.9 million from $93.9 million for the same period
in 2002. Lower EBITDA resulted mainly from increased raw material and energy costs of $71.5 million. In addition, we recorded $3.7 million in restructuring charges in connection with
cost reduction efforts at our Rozenburg, Netherlands site. We also had an $11.1 million increase in fixed production costs, $3.5 million of which resulted from the strengthening of the
euro against the U.S. dollar, $1.8 million of which resulted from increased pension costs and $5.2 million of which resulted from an increase in fixed cost absorption. These decreases
were partly offset by increased average selling prices of $62.7 million. In addition, SG&A and other operating costs were impacted by $2.5 million due to an asset write-off.

Performance Products

For the three months ended September 30, 2003, Performance Products revenues increased by $21.6 million, or 15%, to $164.9 million from
$143.3 million for the same period in 2002. Surfactants average selling prices increased by 5% over the same period in 2002 primarily due to a stronger euro versus the U.S. dollar; however,
average selling prices in local currencies fell by 8% due mainly to product mix and more intense competition. Surfactants sales volumes fell by 7%, primarily due to softer European demand and
decreased export business as a result of the stronger euro. Ethyleneamines revenues increased 50% compared with the same period in 2002. Ethyleneamines average selling prices increased by 6% as prices
were increased to offset higher raw material prices. Sales volumes of ethyleneamines increased 34% from the comparable period of 2002 largely due to higher export sales.

For
the three months ended September 30, 2003, Performance Products segment EBITDA increased by $1.1 million from $3.5 million for the three months ended
September 30, 2002 to $4.6 million. Raw material costs increased by 12% but were largely recovered through increased selling prices. After allowing for adverse currency movements,
manufacturing costs and SG&A fell due to the impact of cost reduction initiatives. Other costs were essentially unchanged over the same period in 2002.

Pigments

For the three months ended September 30, 2003, Pigments revenues increased by $18.5 million, or 8%, to $251.0 million from
$232.5 million in 2002. Sales volumes decreased by 1% and average selling prices increased by 9%, of which 7% was due to favorable foreign currency movements. Average selling prices in local
currencies increased by 1%, 6% and 3% in Europe, Asia and North America, respectively, due to price increases implemented since September 2002 in response to favorable industry supply-demand
conditions that existed in the periods leading up to second quarter 2003.

For
the three months ended September 30, 2003, Pigments segment EBITDA increased by $7.4 million to $28.5 million from $21.1 million for the same period in
2002. Increased segment EBITDA is mainly due to a $20.9 million increase in average selling prices, which was partially offset by a $13.1 million increase in manufacturing costs.
Manufacturing costs increased primarily due to $13.2 million of unfavorable foreign currency movements and $1.8 million in higher pension and insurance charges, offset by savings from
improvement initiatives. SG&A costs increased by $0.9 million, primarily due to increased pension costs of $0.4 million and unfavorable foreign currency movements of $1.2 million,
offset by savings from improvement initiatives.

36

---

Base Chemicals

For the three months ended September 30, 2003, Base Chemicals revenues decreased by $0.6 million to $303.0 million from $303.6 million
for the same period in 2002. Sales volumes of ethylene increased by 7%. Sales volumes of propylene, benzene, paraxylene and cyclohexane were lower by 3%, 9%, 11% and 5%, respectively. Unit sales
prices were generally lower, with the exception of paraxylene which increased by 24%. Average sales prices of ethylene, propylene and benzene were lower by 1%, 2% and 10%, respectively. Unit sales
prices of cyclohexane were unchanged.

For
the three months ended September 30, 2003, Base Chemicals segment EBITDA decreased by $21.9 million to $(1.1) million from $20.8 for the same period in 2002.
Underlying margins were weaker for the three months ended September 30, 2003 than in the third quarter of 2002 in both the aromatics and olefins sectors. The price of the main feedstock,
naphtha, increased by 8% in the third quarter 2003 compared with the same period in 2002. For the 2003 period, indirect manufacturing costs were higher by $10.2 million, primarily due to
$2.0 million in increased pension costs, $2.0 million in increased maintenance costs, a currency impact of $1.6 million and the movement of $2.0 million of insurance and
technical support costs from SG&A to indirect costs. SG&A and other costs were lower by $5.0 million, primarily due to the movement of $2.0 million of insurance and technical support
costs to manufacturing costs and currency translation gains of $2.0 million.

Unallocated and Other

Unallocated and other items includes unallocated corporate overhead, loss on sale of accounts receivable and unallocated foreign exchange gains and losses. For
the three months ended September 30, 2003, segment EBITDA from unallocated and other items was lower by $1.1 million, at a loss of $9.4 million as compared to a loss of
$8.3 million in the same period in 2002. Unallocated foreign exchange gains increased by $4.6 million, with $8.6 million in gains in the third quarter 2003 as compared to
$4.1 million in the third quarter 2002. These unallocated foreign exchange gains and losses primarily result from movements in the foreign exchange rates used to translate intercompany balances
to the functional currency at the end of the period.

Loss
on sale of accounts receivable increased by $1.7 million and corporate overhead costs increased by $4.3 million. Increased loss on sale of accounts receivable is
primarily due to the impact of foreign currency movements on currency hedges required under our securitization program, and due to an increase in the size of our securitization program effective
October 2002. Corporate overhead costs
increased due to a $1.7 million increase in the management fee charged by Huntsman LLC and a $2.6 million increase in other overhead costs.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002

For the nine months ended September 30, 2003, we had a net loss of $116.9 million on revenues of $3,880.8 million, compared to net income of
$2.5 million on revenues of $3,368.1 million for the same period in 2002. The decrease of $119.4 million in net income was the result of the following items:



37

---



38

---



The
following table sets forth the revenues and EBITDA for each of our operating segments.

Nine Months
Ended
Sept 30, 2003

Nine Months
Ended
Sept 30, 2002RevenuesPolyurethanes

$
1,718.1

$
1,557.0Performance Products


490.5


426.8Pigments


752.5


669.2Base Chemicals


1,032.9


791.3Eliminations


(113.2
)

(76.2
)Total

$
3,880.8

$
3,368.1Segment EBITDAPolyurethanes

$
157.1

$
292.1Performance Products


(14.6
)

22.8Pigments


88.3


45.2Base Chemicals


62.7


5.6Unallocated and other


(29.9
)

(2.4
)Total

$
263.6

$
363.3


Polyurethanes

For the nine months ended September 30, 2003, Polyurethanes revenues increased by $161.7 million, or 10%, to $1,718.7 million from
$1,557.0 million for the same period in 2002. MDI sales revenue increased by 8%, as 11% higher average selling prices were partially offset by a 3% decrease in sales volumes. The reduction in
sales volumes was largely the result of a reduction in spot sales to co-producers in the 2003 period. MDI sales volumes, excluding spot sales, rose by 2% overall with increases of 5% and
4% in the Americas and Asia, respectively, offset by a 2% reduction in Europe due to a slowdown in the rigid polyurethanes market. MDI overall average selling prices increased by 11% as a result of
the stronger euro versus the U.S. dollar and our continued efforts to increase sales prices as raw material costs have increased. Polyol sales revenues increased by 13% as sales volumes increased by
2%, in line with underlying MDI volumes, and average selling prices increased by 11%. PO revenue decreased by 6%, primarily due to the conversion of certain sales to a tolling arrangement which
affected revenues but only had a minimal impact on gross margin. MTBE sales revenue increased by 21% due to a 6% increase in volumes and a 15% increase in selling prices due to stronger crude oil and
gasoline markets.

For
the nine months ended September 30, 2003, Polyurethanes segment EBITDA decreased by $135.0 million to $157.1 million from $292.1 million for the same
period in 2002. Lower EBITDA resulted mainly from a $259.0 million increase in raw material and energy costs, partly offset by a $182.0 million improvement in average selling prices.
Increased raw material and energy costs resulted from higher feedstock prices. We also recorded $22.3 million in restructuring charges in connection with the integration of our flexible
products division into our global urethane specialties division and cost reduction efforts at our Rozenburg, Netherlands site. Fixed production costs increased $24.0 million, primarily due to
the $14 million impact of the strengthening of the euro against the U.S. dollar, increased pension costs of $6.0 million, and a $1.3 million increase in fixed cost absorption.
SG&A costs also increased $8.5 million due to a $12.4 million adverse foreign exchange impact and a $2.5 million asset write-off, partly offset by $6.0 million in cost
savings.

39

---

Performance Products

For the nine months ended September 30, 2003, Performance Products revenues increased by $63.7 million, or 15%, to $490.5 million from
$426.8 million for the same period in 2002. Revenues increased primarily as the result of increased average selling prices. Surfactants average selling prices increased by 13% as compared with
the same period in 2002; however, average selling prices in local currency fell by 6% due mainly to product mix and more intense competition. Surfactants sales volumes fell by 5% primarily due to
weaker European demand and reduced export business as a result of a stronger euro. Ethyleneamines revenue increased 31% over the same period in 2002, as average selling prices increased by 8% in
response to higher raw material prices and sales volumes increased 10% from the comparable period of 2002 due to higher export sales.

For
the nine months ended September 30, 2003, Performance Products segment EBITDA decreased by $37.4 million from income of $22.8 million for the nine months ended
September 30, 2002 to a loss of $14.6 million in the 2003 period. Raw material costs increased by 22% over the same period last year, but were largely recovered through an increase in
average selling prices. Our surfactants business recorded a $20.1 million restructuring charge in the second quarter of 2003. In June 2003, we announced the closure of certain production
units at our Whitehaven, UK facility as part of a continuing review of our European operations. The charge consists of $8.7 million of severance costs and $11.4 million of asset
write-downs. Manufacturing and SG&A costs rose by $15.7 million over the same period in 2002. Of this increase, $14.0 million arose from the translation effect of the stronger euro
versus the U.S. dollar. Manufacturing costs in our ethylenamines business increased by $3.3 million due to the costs of operating additional production units and an overhaul at our Freeport,
Texas facility taken in June 2003. Other manufacturing and SG&A costs fell by $1.6 million due to ongoing cost reduction initiatives.

Pigments

For the nine months ended September 30, 2003, Pigments revenues increased by $83.3 million, or 12%, to $752.5 million from
$669.2 million in 2002. Sales volume decreased by 2% and average selling prices increased by 15%, of which 9% was due to favorable currency movements. Sales volumes in Europe and North America
decreased by 2% and 5%, respectively, compared to the same period in 2002 and sales volumes in Asia increased by 2% compared to the same period in 2002. Underlying average selling prices increased by
6%, 7% and 4% in Europe, Asia and North America, respectively, due to price increases implemented during the period in response to favorable industry supply-demand conditions that existed in the
periods leading up to second quarter 2003.

For
the nine months ended September 30, 2003, Pigments segment EBITDA increased by $43.1 million, to $88.3 million from $45.2 million for the same period in
2002. Increased segment EBITDA is due primarily to a $98.4 million increase in average selling prices, partially offset by $6.2 million of lower sales volumes and $43.3 million of
increased manufacturing costs. Manufacturing costs increased mainly due to a $36.6 million unfavorable impact of foreign currency movements and an $7.4 million increase in pension and
insurance charges, offset by savings from improvement initiatives. SG&A costs increased by $5.8 million, primarily due to $2.0 million of increased pension costs and $3.3 million
of unfavorable foreign currency movements.

Base Chemicals

For the nine months ended September 30, 2003, Base Chemicals revenues increased by $241.6 million, or 30%, to $1,032.9 million from
$791.3 million for the same period in 2002. Increased revenues were mainly due to increased average selling prices of ethylene, propylene, benzene, paraxylene and cyclohexane. Average selling
prices were higher largely due to higher underlying feedstock prices, particularly in the earlier part of 2003. Sales volumes of ethylene, propylene and

40

---

cyclohexane
were higher by 6%, 16% and 12%, respectively. Sales volumes of benzene and paraxylene were lower by 20% and 7%, respectively. The reduction in benzene sales volumes was due to increased
internal consumption to produce cyclohexane. Sales prices of ethylene, propylene, benzene, paraxylene and cyclohexane increased by 24%, 37%, 44%, 38% and 39%, respectively.

For
the nine months ended September 30, 2003, Base Chemicals EBITDA increased by $57.1 million to $62.7 million from $5.6 million for the same period in 2002.
Overall underlying margins were stronger for the nine months ended September 30, 2003 than in the first nine months of 2002 in both the aromatics and olefins sectors. Higher margins in the 2003
period resulted from stronger margins in the first six months of 2003, partially offset by the impact of lower comparative margins in the third quarter 2003. The negative impact of $9.0 million
in costs associated with the purchasing of product to cover our scheduled olefins manufacturing facility turnaround in the second quarter of 2002 was also a contributing factor to the higher 2003
margins. The price of the main feedstock, naphtha, increased by 25% in the first nine months of 2003 compared with the same period in 2002; however, this increase was more than covered by increased
product prices. For the 2003 period, indirect costs were higher by $26.6 million, primarily due to a currency impact of $11.0 million and the movement of $6.0 million of insurance
and technical support costs from SG&A to indirect costs. SG&A and other costs were lower by $13.0 million, primarily due to the movement of $6.0 million of insurance and technical
support costs to manufacturing costs, currency translation gains of $4.0 million and the $3.0 million sale of precious metals used in the manufacturing process.

Unallocated and Other

Unallocated and other items includes unallocated corporate overhead, loss on sale of accounts receivable and unallocated foreign exchange gains and losses. For
the nine months ended September 30, 2003, segment EBITDA from unallocated and other items decreased by $27.5 million to a loss of $29.9 million from a loss of $2.4 million
for the same period in 2002. Unallocated foreign exchange gains were $3.7 million lower, with a gain of $25.3 million in the nine months ended September 30, 2003 as compared to a
gain of $29.0 million in the nine months ended September 30, 2002. These unallocated foreign exchange gains and losses primarily resulted from movements in the foreign exchange rates
used to translate intercompany balances to the functional currency at the end of the period.

Loss
on sale of accounts receivable increased by $19.7 million with a loss of $24.0 million in the nine months ended September 30, 2003 as compared to a loss of
$4.3 million in the same period of 2002. Increased loss on sale of accounts receivable is primarily due to the impact of foreign currency movements on currency hedges required under our
securitization program, and due to an increase in the size of our securitization program effective October 2002. Other overhead costs were lower for the nine months ended September 30,
2003, with the exception of the management fee from Huntsman LLC, which increased by $1.7 million, and a $2.8 million asset write down.

Liquidity and Capital Resources

Cash

Net cash used in operating activities for the nine months ended September 30, 2003 was $67.2 million, as compared to $61.2 million provided
from operating activities for the same period in 2002. The variance is primarily attributable to reduced operating income as explained above in addition to a larger investment in net working capital
in the 2003 period.

Net
cash used in investing activities for the nine months ended September 30, 2003 was $95.8 million as compared to $139.8 million for the same period in 2002. The
decrease in cash used in the 2003 period was largely attributable to increased spending in the nine months ended September 30, 2002 in connection with the ICON modernization and expansion of
our titanium dioxide manufacturing

41

---

facility
at Greatham, U.K. and the SAP project within our Pigments segment, both of which were completed in 2002.

Net
cash provided by financing activities for the nine months ended September 30, 2003 was $162.5 million, as compared to $61.3 million for the same period in 2002.
The increase in cash provided by financing activities is mainly a result of increased net revolver borrowings to fund operating cash needs as explained above.

Debt and Liquidity

As of September 30, 2003, we had $199.0 million of outstanding borrowings and approximately $6.5 million of outstanding letters of credit
under our $400.0 million revolving credit facility which
matures in June 2005, and we had $81.1 million in cash balances on the balance sheet. We also maintain $25 million of short-term overdraft facilities, of which
approximately $21 million was available at September 30, 2003. As part of a refinancing that was completed on October 22, 2003 as described below, approximately $53 million
was repaid against our revolving credit facility. Total liquidity as of September 30, 2003 was approximately $297 million, or approximately $350 million pro forma after giving
effect to the October 22, 2003 refinancing.

As
of September 30, 2003, we had outstanding variable rate borrowings of approximately $1.4 billion and the weighted average interest rate of these borrowings was
approximately 5.3%. These rates do not consider the effects of interest rate hedging activities. Interest rates under the HI Credit Facilities vary based on a pricing grid for eurocurrency loans from
1.50% to 4.50% per annum and for base rate loans from 0.25% to 3.25% per annum, depending on the loan facility and whether specified conditions have been satisfied. We anticipate that the interest
rates applicable to our term B and term C loans will increase by 0.25% effective November 15, 2003.

We
depend upon our revolving credit facility to provide liquidity for our operations and working capital needs. On October 17, 2003, we amended the HI Credit Facilities. The
amendment provides, among other things, for changes to certain financial covenants, including the leverage and interest coverage ratios, the annual amount of permitted capital expenditures, and the
consolidated net worth covenant. These changes to the financial covenants apply to the quarterly period ended September 30, 2003 and will continue through the quarterly period ended
December 31, 2004. The amendment also allows for the issuance of $205 million of additional term B and term C loans, which was accomplished on October 22, 2003, the net proceeds
of which have been applied to pay down our revolving loan facility by approximately $53 million, and the remainder of the net proceeds have been applied to repay, in full, the term A loan. The
amendment also allows us to issue additional senior unsecured notes up to a maximum of $800 million.

As
a result of our recent refinancing of our term loan A, we do not have scheduled term debt maturities under the HI Credit Facilities until the second quarter 2005. In each of 2005 and
2006, our scheduled term debt maturities under the HI Credit Facilities are approximately $12 million per annum. Our $400 million revolving credit facility matures in June of 2005. We
anticipate addressing the maturity of this facility within the next 12 months.

We
also depend upon our accounts receivable securitization program to meet a significant portion of our ongoing liquidity needs. The securitization program consists of an annually
committed $125 million commercial paper facility which was renewed in October 2003 and a medium term note facility. As of September 30, 2003, the program had outstanding
approximately $188 million in medium term notes and $110 million in commercial paper. If at future renewal dates, the commercial paper facility provider determined that it was unwilling
to renew the $125 million commercial paper facility, in whole or in part, such determination could have a negative impact on our liquidity. Over a calendar year, we expect to obtain liquidity
resources of between $270 million and $310 million from the receivables program. If at any time we are unable to sell sufficient receivables into the program to

42

---

support
the volume of commercial paper and medium term notes issued under the program, we could be required to inject cash into the program as collateral. Depending on the circumstances and timing,
the requirement to provide cash collateral to the program could have a negative effect on our liquidity.

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

Contractual Obligations and Commercial Commitments

We have various purchase commitments extending through 2017 for materials, supplies and services entered into in the ordinary course of business. Included in the
purchase commitments table below are contracts which require minimum volume purchases that extend beyond one year or are renewable annually and have been renewed for 2003. Certain contracts allow for
changes in minimum required purchase volumes in the event of a temporary or permanent shut down of a facility. To the extent the contract requires a minimum notice period, such notice period has been
included in the table below. The contractual purchase price for substantially all of these contracts is variable based upon market prices, subject to annual negotiations. We have estimated our
contractual obligations by using the terms of our 2002 pricing for each contract. We also have a limited number of contracts which require a minimum payment, even if no volume is purchased. These
contracts approximate $35 million annually through 2017 and are included in the table below. We believe that all of our purchase obligations will be utilized in our normal operations. Our
obligations under long-term debt, lease agreements, and other contractual commitments as of December 31, 2002 are summarized below (dollars in millions):

|                          |  | Less than
1 year |       | 1-3 Years |   | 4-5 Years |  | After 5
Years |       | Total
|------------------------- |  | ---------------- | ----- | --------- | - | --------- |  | ------------- | ----- | -----
|Long-term debt            |  | $                | 42.1  |           | $ | 301.5     |  | $             | 526.6 |      
|Capital lease obligations |  |                  | 1.8   |           |   | 3.3       |  |               | 3.4   |      
|Operating leases          |  |                  | 16.8  |           |   | 21.2      |  |               | 11.4  |      
|Purchase commitments      |  |                  | 602.0 |           |   | 858.2     |  |               | 104.7 |      
|                          |  |                  |       |           |   |           |  |               |       |      
|Total                     |  | $                | 662.7 |           | $ | 1,184.2   |  | $             | 646.1 |      
|                          |  |                  |       |           |   |           |  |               |       |      

Restructuring and Plant Closing Charges

As of December 31, 2002, we had a $7.1 million reserve for restructuring and plant closing costs related to the closure of our Shepton Mallet, U.K.
Polyurethanes manufacturing facility recorded in accrued liabilities. The entire amount was related to workforce reductions. We made cash payments related to this restructuring of $3.1 million,
$0.3 million and $1.0 million in the first, second and third quarters of 2003, respectively. The unpaid reserve remains in accrued liabilities.

On
March 11, 2003, our Polyurethanes segment announced that it would integrate its global flexible products division into its urethane specialties division, and recorded a
restructuring charge of $17.1 million in the first quarter of 2003 for workforce reductions. In June 2003, the Polyurethanes segment announced further restructuring at its Rozenburg,
Netherlands site. The charge for this restructuring is estimated to total approximately $10.4 million and will be recorded through December 2005. During the second and third quarters of
2003 respectively, charges of $1.4 million and $3.7 million were taken for workforce reductions relating to this restructuring. We made cash payments of $0.8 million,
$5.6 million and $4.5 million in the first, second and third quarters of 2003, respectively, related to these restructuring activities. The unpaid reserve remains in accrued liabilities.

43

---



In June 2003, we announced that our Performance Products segment would close a number of plants at our Whitehaven, UK facility and recorded a charge of $20.1 million in the
second quarter 2003. This charge represents $11.4 million relating to an impairment of assets at Whitehaven (in connection with the plant shutdowns) and $8.7 million of workforce
reduction costs. These charges are part of an overall cost reduction program for this segment that is expected to be implemented and recorded from 2003 to 2005. We made cash payments of
$1.6 million and $0.3 million in the second and third quarters of 2003, respectively. The unpaid reserve remains in accrued liabilities.

In
August 2003, we announced restructuring activities related to workforce reductions in the Malaysian operations of our Pigments segment and recorded a charge of
$1.1 million. The total of the charges for this restructuring is estimated to be approximately $2.3 million and will be recorded through June 2005. These charges are part of an
overall cost reduction program for this segment that is expected to be implemented and recorded from 2003 to 2005. During the third quarter 2003, we made cash payments of $0.5 million related
to this restructuring. The unpaid reserve remains in accrued liabilities.

As
of September 30, 2003, accrued restructuring and plant closing costs consist of the following (dollars in millions):

|                              |  | Accrued
Restructuring and Plant Closing Costs as of
December 31, 2002 |     | Total
Charge |   | Non-cash
Charge |  | Cash
Payments |       | Accrued
Restructuring and Plant Closing Costs as of
September 30, 2003
|----------------------------- |  | --------------------------------------------------------------------- | --- | ------------ | - | --------------- |  | ------------- | ----- | ----------------------------------------------------------------------
|Property, plant and equipment |  | $                                                                     |    |              | $ | 11.4            |  | $             | (11.4 | )                                                                     
|Workforce reductions          |  |                                                                       | 7.1 |              |   | 32.0            |  |               |      |                                                                       
|                              |  |                                                                       |     |              |   |                 |  |               |       |                                                                       
|Total                         |  | $                                                                     | 7.1 |              | $ | 43.4            |  | $             | (11.4 | )                                                                     
|                              |  |                                                                       |     |              |   |                 |  |               |       |                                                                       

Off-Balance Sheet Arrangements

We maintain a securitization program arranged by JP Morgan which commenced on December 21, 2000, under which certain trade receivables are transferred to a
qualified special-purpose off-balance-sheet entity through December 2005. This entity is not an affiliate of our Company. The acquisitions of these receivables by the entity are
financed through the issuance of commercial paper and/or medium term notes ("MTNs"). The securitization program is an important source of liquidity to our Company. See "Liquidity and
Capital ResourcesDebt and Liquidity" above.

A
portion of the MTNs is denominated in euros and is subject to fluctuation in currency rates against the U.S. dollar. The total outstanding balance of MTNs is approximately
$188 million as of September 30, 2003. In addition to MTNs, the special purpose vehicle also maintains an annual commitment to issue commercial paper of up to $125 million. As of
September 30, 2003, the total outstanding balance of commercial paper was approximately $110 million. Subject to the annual seasonality of our accounts receivable, we estimate that the
total net proceeds from the facility may range between $270 million to $310 million at certain periods during a calendar year. As of September 30, 2003, the special-purpose entity
had total assets (consisting of cash and accounts receivable) of approximately $422 million, and $188 million of MTNs and $110 million of commercial paper outstanding. The
weighted average interest rates on the MTNs and commercial paper was approximately 2.1% as of September 30, 2003.

During
the nine months ended September 30, 2003, we sold approximately $3,085 million in receivables and received $3,144 in proceeds. We recorded $24.0 million as a
loss on receivables for the nine months ended September 30, 2003. A substantial portion of the loss resulted from losses in foreign exchange on foreign receivables as well as from foreign
exchange contracts associated with the program. In accordance with the agreements governing the securitization program, an unconsolidated

44

---

special
purpose entity enters into certain foreign exchange forward contracts for periods aligned with the average maturity of receivables sold into the program. In addition to foreign exchange gains
and losses on foreign receivables sold into the program, the periodic gains and losses associated with such contracts are also recorded by our Company as part of the gain or loss on sale of
receivables.

The
HI Credit Facilities require a mandatory prepayment to the extent that proceeds from the securitization facility exceed $310 million. To date, proceeds from the securitization
program have not exceeded this limit.

Investing Activities

Capital expenditures for the nine months ended September 30, 2003 were $95.7 million, a decrease of approximately $39.0 million as compared
to $134.7 million for the same period in 2002. The decrease was largely attributable to expenditures in connection with the ICON 2 modernization and expansion of our titanium dioxide
manufacturing facility at Greatham, U.K. and the SAP project in our Pigments segment, both of which were completed in 2002. We expect to spend between approximately $150 million and
$170 million during 2003 on capital projects and investments, including our investments in our Chinese MDI joint ventures. During 2003, we have made our initial contributions of approximately
$12 million in our Chinese MDI joint venture and expect to contribute up to a total of approximately $75 million over the next several years.

In
connection with our agreements with our Rubicon and Louisiana Pigment joint ventures, we are obligated to fund our proportionate share of capital expenditures. During the nine months
ended September 30, 2003 and 2002, we invested $2.2 million and $2.4 million, respectively, in Rubicon. During the nine months ended September 30, 2003 and 2002, we
received $2.1 million and $6.3 million, respectively, from Louisiana Pigment.

Environmental Matters



Our operations are subject to extensive environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters, and the
generation, handling, storage, transportation, treatment and disposal of waste materials, as adopted by various governmental authorities in the jurisdictions in which we operate. We make every
reasonable effort to remain in full compliance with existing governmental regulations. Accordingly, we may incur costs for capital improvements and general compliance under environmental laws,
including costs to acquire, maintain and repair pollution control equipment. We cannot provide assurances that material capital expenditures beyond those currently anticipated will not be required
under environmental laws.



We have established financial reserves relating to environmental restoration and remediation programs, which we believe are sufficient for known requirements. In
connection with various acquisitions, the acquisition agreements generally provide for indemnification for environmental pollution existing on the date of acquisition. Liabilities are recorded when
site restoration and environmental remediation and clean-up obligations are either known or considered probable and can be reasonably estimated. Liabilities are based upon all available
facts, existing technology, past experience and cost-sharing and indemnification arrangements (as to which, we consider the viability of other parties).

A
total of $20.8 million has been accrued related to environmental matters as of September 30, 2003. Estimates of ultimate future environmental restoration and remediation
costs are inherently imprecise due to currently unknown factors such as the magnitude of possible contamination, the

45

---

timing
and extent of such restoration and remediation, the determination of our liability in proportion to other parties, the extent to which such costs are recoverable from insurance, and the extent
to which environmental laws and regulations may change in the future. However, it is not anticipated that any future costs, in excess of those that have been accrued by our Company, will be material
to our results of operations or financial position as a result of compliance with current environmental laws and regulations



Given the nature of our business, violations of environmental laws may result in restrictions imposed on its operating activities, substantial fines, penalties,
damages or other costs, any of which could have a material adverse effect on its business, financial condition, results of operations or cash flows. We are aware of the following matters:

Huntsman
Petrochemical Corporation and the Texas Commission on Environmental Quality (the "TCEQ," formerly the Texas Natural Resource Conservation Commission or TNRCC) settled
outstanding allegations of environmental regulatory violations at the Company's Port Neches, Texas, facilities on May 29, 2003. The settlement imposes penalties totaling $352,250 and requires
that we apply for an air emissions permit for the joint wastewater treatment plant that services all of the Port Neches facilities. Less than $100,000 of the aforementioned penalties are allocable to
our Company. Although management does not anticipate it, it is possible that the terms of a joint wastewater treatment plant air permit may cause it to incur substantial costs that could be material.

On
October 6, 2002, a leak of sulphuric acid from two tanks located near our Whitehaven, U.K. plant was discovered. About 342 to 347 tonnes of acid were released onto the ground
and into the soil near the tanks. Although we took immediate steps to contain the spillage and recover acid, a quantity of acid reached a nearby beach via a geological fault. We believe that we did
not own the tanks; however, we did own the acid in the tanks. The U.K. Environmental Authority ("EA") and the Health and Safety Executive (the "HSE") are investigating the incident, and the HSE has
issued three Improvement Notices requiring corrective action. Although we can give no assurances, based on currently available information and our understanding of similar investigations and penalties
in the past, we believe that, if any charges are brought or additional corrective action orders issued and we are ultimately found to be legally responsible, the probable penalties would not be
material to our financial position or results of operations.

Our
subsidiary, Tioxide Europe S.L. ("Tioxide"), is in the process of voluntarily removing filter salts from a property previously operated by Almagrera in Spain. Almagrera supplied
sulphuric acid to Tioxide. Under an agreement with Almagrera, Tioxide had for some time supplied filter salts to Almagrera to be used in the manufacture of sulphuric acid. When Almagrera filed for
bankruptcy and closed its plant by the end of 2001, a large pile of stored filter salts was found on its premises, far from its normal warehouse. Tioxide estimates the cost of removal and disposal of
the filter salts will total $2.0 million. As of September 30, 2003, Tioxide had spent $1.0 million. Another $0.4 million will likely be spent during the balance of 2003 and
the rest ($0.6 million) is likely to be spent in 2004. We do not believe expenditures in connection with this matter will be material.

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

46

---

By
letter dated March 6, 2003, our subsidiary, Huntsman Ethyleneamines Ltd., was notified by the TCEQ of a probable enforcement action arising out of the inspection of the
Freeport, Texas facility on December 16-19, 2002. Seven types of violations relating to the Texas Clean Air Act requirements were cited. The TCEQ has proposed a penalty of $43,000.
We have taken issue with most of the allegations of non-compliance, and the TCEQ has agreed to drop some of them. It is yet unclear what level of penalty, if any, will be imposed.

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

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



The presence of MTBE in some groundwater supplies in California and other states (primarily due to gasoline leaking from underground storage tanks) and in surface
water (primarily from recreational
watercraft) has led to public concern about MTBE's potential to contaminate drinking water supplies. Heightened public awareness regarding this issue has resulted in state, federal and foreign
initiatives to rescind the federal oxygenate requirements for reformulated gasoline or to restrict or prohibit the use of MTBE in particular. For example, the California Air Resources Board adopted
regulations that would prohibit the addition of MTBE to gasoline as of January 1, 2004. Certain other states have also taken actions to restrict or eliminate the future use of MTBE. In
connection with the proposed ban, the State of California requested that the U.S. Environmental Protection Agency (the "EPA") waive the federal oxygenated fuels requirements of the federal Clean Air
Act for gasoline sold in California. The EPA denied the State's request on June 12, 2001. Certain of the state bans have been challenged in court as unconstitutional (in light of the Clean Air
Act); to date, these challenges have not been successful. We are unable to predict what the short- and long-term effects of these matters will be.

Bills
have been in both houses of the U.S. Congress to accomplish similar goals of curtailing or eliminating the oxygenated fuels requirements in the Clean Air Act, or of curtailing MTBE
use. To date, no such legislation has become law. Whether a ban or substantial restrictions on MTBE use will become federal law in the future is unknown at this time.

In
addition, on March 20, 2000, the EPA announced its intention, through an advanced notice of proposed rulemaking, to phase out the use of MTBE under authority of the federal
Toxic Substances Control Act. In its notice, the EPA also called on the U.S. Congress to restrict the use of MTBE under the Clean Air Act. Any phase-out of or future regulation of MTBE in
California (in which a significant amount of MTBE is consumed), in other states, or nationally may result in a significant reduction in demand for MTBE and may result in a material loss in revenues or
material costs or expenditures.

47

---

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

In
the event that there should be a phase-out of MTBE in the United States, we believe we will be able to export MTBE to Europe or elsewhere or use its co-product
tertiary butyl alcohol ("TBA") to produce saleable products other than MTBE. We believe that our low production costs at our PO/MTBE facility will put us in a favorable position relative to other
higher cost sources (primarily, on-purpose manufacturing). If we opt to produce products other than MTBE, necessary modifications to our facilities may require significant capital
expenditures and the sale of the other products may produce a materially lower level of cash flow than the sale of MTBE.

In
addition, while there has been litigation concerning the environmental effects of MTBE, we are not a defendant in any pending MTBE case, and we believe that we would have valid
defenses in the event such a case were brought against us. However, we cannot give any assurance that we will not be named in litigation relating to the environmental effects of MTBE or that such
litigation will not have a material adverse effect on our business, financial condition, results of operations or cash flows.



In September 2003, the European Commission released a proposed regulation concerning the registration, evaluation, authorization and restrictions of
chemicals, also known as REACH. The REACH initiative, as proposed, would require risk assessment and registration of chemicals, preparations (e.g., soaps and paints) and articles (e.g., consumer
products) before those materials could be manufactured or imported into EU countries. Where warranted by a risk assessment, hazardous substances would require authorizations for their use. This
authorization could impose risk control strategies that would require capital expenditures by our Company. As proposed, REACH would take effect in stages over the next decade. The impacts of REACH on
the chemical industry and on us are unclear at this time because the parameters of the program are still being actively debated. Nevertheless, it is possible that REACH, if implemented, would be
costly to us.

Recent Financial Accounting Standards

In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the
retirement of tangible, long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred by capitalizing it as part of the carrying amount of the long-lived assets. As required by SFAS No. 143, we adopted this new
accounting standard on January 1, 2003. This statement had no impact on us since the timing of any ultimate obligation is indefinite.

In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Other Technical Corrections." In addition to amending or rescinding pronouncements to make various technical corrections, clarify meanings or describe applicability, SFAS
No. 145 precludes companies from recording gains or losses from extinguishment of debt as an extraordinary item. We were required to adopt this statement as of January 1, 2003. The
adoption of SFAS No. 145 did not have a material effect on our consolidated financial statements.

48

---

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated With Exit or Disposal Activities." SFAS
No. 146 requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit or disposal costs
were accrued upon management's commitment to an exit or disposal plan, which is generally before an actual liability has been incurred. We adopted this pronouncement in the first quarter of 2003. The
adoption of SFAS No. 146 on January 1, 2003 did not have a material effect on our consolidated financial statements.

In
January 2003, the FASB issued Financial Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Guarantees of Indebtedness of Others." FIN No. 45 requires recognition of a liability for the obligation undertaken upon issuing a guarantee. This liability
would be recorded at the inception date of the guarantee and would be measured at fair value. The disclosure provisions of the interpretation are effective for the financial statements as of
December 31, 2002. The liability recognition provisions apply prospectively to any guarantees issued or modified after December 31, 2002. The adoption of FIN No. 45 did not have a
material effect on our consolidated financial statements.

In
January 2003, the FASB issued FIN No. 46,"Consolidation of Variable Interest Entities."FIN No. 46 addresses the
requirements for business enterprises to consolidate related entities, for which they do not have controlling interests through voting or other rights, if they are determined to be the primary
beneficiary as a result of variable economic interests. FIN No. 46 provides guidance for determining the primary beneficiary for entities with multiple economic entities with multiple economic
interests. Transfers to a qualifying special purpose entity are not subject to this interpretation. FIN No. 46 is effective at the time of investment for interests obtained in a variable
economic entity after January 31, 2003. In October 2003, the FASB issued FASB Staff position No. 46-6, which defers the effective date for FIN No. 46 to the
first interim or annual period ending after December 15, 2003 for variable interest entities created before February 1, 2003. The adoption of FIN No. 46 is not expected to have a
material impact on our consolidated earnings, financial position, or cash flows.

In
May 2003, FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities."SFAS
No. 149 amends and clarifies accounting for derivative instruments and hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after
September 30, 2003 and for hedging relationships designated after September 30, 2003, with this guidance applied prospectively. This statement had no impact on our results of operations
or financial position at September 30, 2003.

In
May 2003, the FASB issued SFAS No. 150,"Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity."SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments created or modified after May 31, 2003 and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. We do not expect SFAS No. 150 to have a material impact on our financial statements upon adoption.

49

---

Changes in Financial Condition

The following information summarizes our working capital position as of September 30, 2003 and December 31, 2002 (dollars in millions):

September 30,
2003

December 31,
2002

DifferenceCurrent assets:Cash and cash equivalents

$
81.1

$
75.4

$
5.7Accounts and notes receivable


518.5


467.9


50.6Inventories


598.9


561.3


37.6Prepaid expenses


35.6


22.0


13.6Deferred income taxes


31.2


31.2


Other current assets


72.7


75.4


(2.7
)Total current assets


1,338.0


1,233.2


104.8Current liabilities:Accounts payable


308.1


314.8


(6.7
)Accrued liabilities


503.2


523.8


(20.6
)Current portion of long-term debt


1.2


43.9


(42.7
)Other current liabilities


17.9


28.7


(10.8
)Total current liabilities


830.4


911.2


(80.8
)Working capital

$
507.6

$
322.0

$
185.6


As
of September 30, 2003, our working capital increased by $185.6 million as a result of the net impact of the following significant changes:



Cautionary Statement for Forward-Looking Information

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

50

---

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

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

There
are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report.
The following are among the factors that could cause actual results to differ materially from the forward-looking statements. There may be other factors, including those discussed elsewhere in this
report, that may cause our actual results to differ materially from the forward-looking statements. Any forward-looking statements should be considered in light of the risk factors specified in our
2002 annual report on Form 10-K, some of which are summarized below.



51

---



ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, 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 September 30, 2003. Based on this evaluation,
our chief executive officer and chief financial officer concluded prior to November 14, 2003 that, as of September 30, 2003, our disclosure controls and procedures were
(1) designed to ensure that material information relating to our Company, including our consolidated subsidiaries, is made known to the chief executive officer and chief financial officer by
others within those entities, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to
be disclosed by our Company in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the applicable rules and
forms.

As
described in "Note 20Restatement" to the accompanying unaudited consolidated financial statements, in February 2004, we discovered an error in accounting
for product exchange balances under a toll processing agreement with a customer. The error was caused by the use of an incorrect exchange factor in our new SAP-based ERP system. The use of the
incorrect exchange factor resulted from the implementation of and transition to our new SAP-based ERP system in 2003. In investigating this error, we discovered that timely reconciliation of product
exchange balances maintained by certain business units was not performed by the business unit's staff, and corporate accounting reviews of such reconciliations were not performed. In response to our
discovery of this accounting error and the reconciliation failures, we have implemented improvements to our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) in February 2004. These improvements consisted of the implementation of the following policies:



Except
as described above, no change in our internal control over financial reporting occurred that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting since the date of the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15.

52

---



PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | 31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
| | 31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
| | 32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | 32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

53

---



SIGNATURE

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

|                        |  | HUNTSMAN INTERNATIONAL LLC                                                                                                                                
|----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|                        |  | /s/J. KIMO ESPLINJ. Kimo Esplin Executive Vice President and Chief Financial Officer
(Authorized Signatory and Principal Financial and Accounting Officer)
|Date: February 10, 2004 |  |                                                                                                                                                           

54

---

Exhibit Index

|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

---