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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                to




Commission
File Number

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

State of
Incorporation

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

Huntsman Corporation

Delaware

42-1648585500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700333-85141

Huntsman International LLC

Delaware

87-0630358500 Huntsman Way
Salt Lake City, Utah 84108
(801) 584-5700




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.

Huntsman Corporation

YES ý

NO oHuntsman International LLC

YES ý

NO o


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

Huntsman Corporation

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o

Smaller reporting company oHuntsman International LLC

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý

Smaller reporting company o


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

Huntsman Corporation

YES o

NO ýHuntsman International LLC

YES o

NO ý




On August 4, 2008, 234,457,138 shares of common stock of Huntsman Corporation were outstanding and 2,728 units of membership
interests of Huntsman International LLC were outstanding. There is no established trading market for Huntsman International LLC's units of membership interests. All of Huntsman
International LLC's units of membership interests are held by Huntsman Corporation.



This
Quarterly Report on Form 10-Q presents information for two registrants: Huntsman Corporation and Huntsman International LLC. Huntsman
International LLC is a wholly owned subsidiary of Huntsman Corporation and is the principal operating company of Huntsman Corporation. The information reflected in this Quarterly Report on
Form 10-Q is equally applicable to both Huntsman Corporation and Huntsman International LLC, except where otherwise indicated. Huntsman International LLC meets the
conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and, to the extent applicable, is therefore filing this form with a reduced disclosure
format.



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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES
HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2008

TABLE OF CONTENTS



PART I

FINANCIAL INFORMATION


3ITEM 1.

Financial Statements:Huntsman Corporation and Subsidiaries:Condensed Consolidated Balance Sheets (Unaudited)


3Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)


4Condensed Consolidated Statements of Cash Flows (Unaudited)


5Huntsman International LLC and Subsidiaries:Condensed Consolidated Balance Sheets (Unaudited)


7Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)


8Condensed Consolidated Statements of Cash Flows (Unaudited)


9Huntsman Corporation and Subsidiaries and Huntsman International LLC and Subsidiaries:Notes to Condensed Consolidated Financial Statements (Unaudited)


11ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations


64ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk


87ITEM 4.

Controls and Procedures


88PART II

OTHER INFORMATION


89ITEM 1.

Legal Proceedings


89ITEM 1A.

Risk Factors


89ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds


92ITEM 6.

Exhibits


93


2

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

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

June 30,
2008

December 31,
2007ASSETSCurrent assets:Cash and cash equivalents

$
140.7

$
154.0Restricted cash


3.4


Accounts and notes receivables (net of allowance for doubtful accounts of $42.5 and $43.3, respectively)


1,385.8


1,253.3Accounts receivable from affiliates


18.6


9.4Inventories, net


1,564.6


1,451.9Prepaid expenses


27.6


37.4Deferred income taxes


73.3


72.6Other current assets


110.9


116.6Total current assets


3,324.9


3,095.2Property, plant and equipment, net


3,927.4


3,762.6Investment in unconsolidated affiliates


270.1


227.8Intangible assets, net


165.5


173.2Goodwill


95.3


92.5Deferred income taxes


383.2


349.5Notes receivable from affiliates


9.1


8.4Other noncurrent assets


571.6


456.4Total assets

$
8,747.1

$
8,165.6LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
1,090.0

$
1,005.4Accounts payable to affiliates


13.2


13.0Accrued liabilities


874.9


885.2Deferred income taxes


3.4


3.2Current portion of long-term debt


385.4


68.5Total current liabilities


2,366.9


1,975.3Long-term debt


3,568.1


3,500.3Deferred income taxes


180.6


154.4Notes payable to affiliates


4.7


4.7Other noncurrent liabilities


660.0


677.8Total liabilities


6,780.3


6,312.5Minority interests in common stock of consolidated subsidiaries


33.0


26.5Commitments and contingencies (Notes 16 and 17)Stockholders' equity:Common stock $0.01 par value, 1,200,000,000 shares authorized, 234,457,138 and 222,012,474 issued and 233,552,817 and 221,036,190 outstanding in 2008 and 2007,
respectively


2.4


2.2Mandatory convertible preferred stock $0.01 par value, 100,000,000 shares authorized, 5,750,000 issued and outstanding at December 31, 2007





287.5Additional paid-in capital


3,138.0


2,831.9Unearned stock-based compensation


(17.8
)

(11.3
)Accumulated deficit


(1,562.7
)

(1,540.1
)Accumulated other comprehensive income


373.9


256.4Total stockholders' equity


1,933.8


1,826.6Total liabilities and stockholders' equity

$
8,747.1

$
8,165.6


See accompanying notes to condensed consolidated financial statements (unaudited).

3

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Table of Contents

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

Three months
ended June 30,

Six months ended
June 30,2008

2007

2008

2007Revenues:Trade sales, services and fees

$
2,866.9

$
2,420.2

$
5,382.0

$
4,623.5Related party sales


28.8


51.0


54.1


99.6Total revenues


2,895.7


2,471.2


5,436.1


4,723.1Cost of goods sold


2,514.2


2,083.6


4,687.7


3,944.5Gross profit


381.5


387.6


748.4


778.6Operating expenses:Selling, general and administrative


233.8


218.0


461.2


425.3Research and development


40.5


36.2


79.5


69.5Other operating expense


1.4


6.0


11.8


8.3Restructuring, impairment and plant closing costs


1.0


13.2


5.0


24.4Total expenses


276.7


273.4


557.5


527.5Operating income


104.8


114.2


190.9


251.1Interest expense, net


(65.5
)

(70.0
)

(130.3
)

(143.8
)Loss on accounts receivable securitization program


(4.9
)

(4.7
)

(9.5
)

(8.9
)Equity in income of investment in unconsolidated affiliates


3.6


5.1


6.7


7.3Expenses associated with the Merger


(3.8
)




(9.0
)

Other income (expense)


0.5


(1.2
)

0.7


(2.1
)Income from continuing operations before income taxes and minority interest


34.7


43.4


49.5


103.6Income tax (expense) benefit


(21.2
)

8.0


(24.6
)

(4.4
)Minority interest in subsidiaries' (income) loss


(3.1
)

11.1


(6.5
)

10.7Income from continuing operations


10.4


62.5


18.4


109.9Income (loss) from discontinued operations, net of tax


4.9


(124.5
)

3.8


(127.7
)Income (loss) before extraordinary gain (loss)


15.3


(62.0
)

22.2


(17.8
)Extraordinary gain (loss) on the acquisition of a business, net of tax of nil


8.4


(8.9
)

8.8


(6.5
)Net income (loss)

$
23.7

$
(70.9
)
$
31.0

$
(24.3
)Net income (loss)

$
23.7

$
(70.9
)
$
31.0

$
(24.3
)Other comprehensive (loss) income


(10.4
)

22.7


117.5


42.9Comprehensive income (loss)

$
13.3

$
(48.2
)
$
148.5

$
18.6Basic income (loss) per share:Income from continuing operations

$
0.04

$
0.28

$
0.08

$
0.50Income (loss) from discontinued operations, net of tax


0.02


(0.56
)

0.01


(0.58
)Extraordinary gain (loss) on the acquisition of a business, net of tax


0.04


(0.04
)

0.04


(0.03
)Net income (loss)

$
0.10

$
(0.32
)
$
0.13

$
(0.11
)Weighted average shares


233.5


220.9


230.3


220.9Diluted income (loss) per share:Income from continuing operations

$
0.04

$
0.27

$
0.08

$
0.47Income (loss) from discontinued operations, net of tax


0.02


(0.53
)

0.01


(0.54
)Extraordinary gain (loss) on the acquisition of a business, net of tax


0.04


(0.04
)

0.04


(0.03
)Net income (loss)

$
0.10

$
(0.30
)
$
0.13

$
(0.10
)Weighted average shares


233.7


233.5


233.7


233.5Dividends per share

$
0.10

$
0.10

$
0.20

$
0.20


See accompanying notes to condensed consolidated financial statements (unaudited).

4

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Table of Contents

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

Six months ended
June 30,2008

2007Operating Activities:Net income (loss)

$
31.0

$
(24.3
)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Extraordinary (gain) loss on the acquisiton of a business, net of tax


(8.8
)

6.5Equity in income of investment in unconsolidated affiliates


(6.7
)

(7.3
)Dividends received from unconsolidated affiliate


11.0


Depreciation and amortization


191.3


217.0Provision for losses on accounts receivable


1.3


4.4Loss (gain) on disposal of assets


3.7


(1.6
)Loss on early extinguishment of debt





1.8Noncash interest expense


2.3


2.0Noncash restructuring, impairment and plant closing costs


2.2


11.7Impairment loss on pending disposal of discontinued operations





240.0Deferred income taxes


0.2


(88.6
)Net unrealized loss (gain) on foreign currency transactions


19.6


(7.5
)Stock-based compensation


11.2


11.9Minority interest in subsidiaries' income (loss)


6.5


(10.7
)Other, net


(5.1
)

9.8Changes in operating assets and liabilities:Accounts and notes receivable


(91.3
)

(185.0
)Inventories, net


(45.1
)

29.9Prepaid expenses


11.2


26.2Other current assets


9.9


42.0Other noncurrent assets


(109.9
)

(64.2
)Accounts payable


41.7


12.9Accrued liabilities


(12.8
)

(170.9
)Other noncurrent liabilities


(43.6
)

29.3Net cash provided by operating activities


19.8


85.3Investing Activities:Capital expenditures


(224.2
)

(282.8
)Acquisition of business, net of cash acquired and post-closing adjustments





26.9Proceeds from sale of assets, net of adjustments


(26.3
)

15.8Investment in unconsolidated affiliates, net


(40.8
)

(16.7
)Proceeds from government securities, restricted as to use


3.6


7.2Change in restricted cash


(3.4
)

Other, net


0.2


(0.5
)Net cash used in investing activities


(290.9
)

(250.1
)


(Continued)

5

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

(Dollars in Millions)

Six months ended
June 30,2008

2007Financing Activities:Net borrowings under revolving loan facilities

$
332.0

$
205.0Net repayments from overdraft facilities and other short-term debt


(8.6
)

(0.2
)Repayments of long-term debt


(5.2
)

(317.5
)Proceeds from long-term debt


17.1


266.1Repayments on notes payable


(28.5
)

(39.1
)Proceeds from notes payable


4.7


7.2Dividends paid to common stockholders


(46.8
)

(44.2
)Dividends paid to preferred stockholders


(3.6
)

(7.2
)Repurchase and cancellation of stock awards


(3.6
)

Call premiums related to early extinguishment of debt





(1.2
)Debt issuance costs paid


(2.2
)

(4.2
)Other, net


(0.1
)

(0.8
)Net cash provided by financing activities


255.2


63.9Effect of exchange rate changes on cash


2.6


5.2Decrease in cash and cash equivalents


(13.3
)

(95.7
)Cash and cash equivalents at beginning of period


154.0


263.2Cash and cash equivalents at end of period

$
140.7

$
167.5Supplemental cash flow information:Cash paid for interest

$
133.7

$
151.2Cash paid for income taxes


10.1


33.8


During
the six months ended June 30, 2008 and 2007, the amount of capital expenditures in accounts payable increased by $0.8 million and $27.0 million, respectively.
The fair value of nonvested share awards that vested during the six months ended June 30, 2008 and 2007 was $13.1 million and $8.7 million, respectively.

See
accompanying notes to condensed consolidated financial statements (unaudited).

6

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Table of Contents

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

June 30,
2008

December 31,
2007ASSETSCurrent assets:Cash and cash equivalents

$
140.7

$
153.9Restricted cash


3.4


Accounts and notes receivables (net of allowance for doubtful accounts of $42.5 and $43.3, respectively)


1,385.8


1,253.3Accounts receivable from affiliates


262.2


193.1Inventories, net


1,564.6


1,451.9Prepaid expenses


25.9


37.1Deferred income taxes


75.1


74.4Other current assets


110.6


112.7Total current assets


3,568.3


3,276.4Property, plant and equipment, net


3,732.9


3,556.3Investment in unconsolidated affiliates


270.1


227.8Intangible assets, net


169.3


177.4Goodwill


95.3


92.5Deferred income taxes


332.6


300.0Notes receivable from affiliates


9.1


8.4Other noncurrent assets


571.6


456.3Total assets

$
8,749.2

$
8,095.1LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
1,090.0

$
1,005.4Accounts payable to affiliates


16.0


15.0Accrued liabilities


773.5


781.0Deferred income taxes


3.4


3.2Current portion of long-term debt


385.4


68.5Total current liabilities


2,268.3


1,873.1Long-term debt


3,568.1


3,500.3Deferred income taxes


154.0


124.3Notes payable to affiliates


4.7


4.7Other noncurrent liabilities


659.9


676.8Total liabilities


6,655.0


6,179.2Minority interests in common stock of consolidated subsidiaries


33.0


26.5Commitments and contingencies (Notes 16 and 17)Members' equity:Members' equity, 2,728 units issued and outstanding


2,856.8


2,845.4Accumulated deficit


(1,102.6
)

(1,142.9
)Accumulated other comprehensive income


307.0


186.9Total members' equity


2,061.2


1,889.4Total liabilities and members' equity

$
8,749.2

$
8,095.1


See
accompanying notes to condensed consolidated financial statements (unaudited).

7

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Table of Contents

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

Three months ended
June 30,

Six months ended
June 30,2008

2007

2008

2007Revenues:Trade sales, services and fees

$
2,866.9

$
2,420.2

$
5,382.0

$
4,623.5Related party sales


28.8


51.0


54.1


99.6Total revenues


2,895.7


2,471.2


5,436.1


4,723.1Cost of goods sold


2,509.9


2,077.0


4,679.3


3,936.4Gross profit


385.8


394.2


756.8


786.7Operating expenses:Selling, general and administrative


233.8


217.9


462.2


425.2Research and development


40.5


36.2


79.5


69.5Other operating expense


1.4


6.0


11.8


8.3Restructuring, impairment and plant closing costs


1.0


13.2


5.0


24.4Total expenses


276.7


273.3


558.5


527.4Operating income


109.1


120.9


198.3


259.3Interest expense, net


(65.6
)

(70.2
)

(130.5
)

(144.4
)Loss on accounts receivable securitization program


(4.9
)

(4.7
)

(9.5
)

(8.9
)Equity in income of investment in unconsolidated affiliates


3.6


5.1


6.7


7.3Other income (expense)


0.5


(1.2
)

0.7


(2.5
)Income from continuing operations before income taxes and minority interest


42.7


49.9


65.7


110.8Income tax expense


(21.8
)

(18.5
)

(28.2
)

(42.1
)Minority interest in subsidiaries' (income) loss


(3.1
)

11.1


(6.5
)

10.7Income from continuing operations


17.8


42.5


31.0


79.4Income (loss) from discontinued operations, net of tax


4.9


(124.5
)

3.8


(127.7
)Income (loss) before extraordinary gain (loss)


22.7


(82.0
)

34.8


(48.3
)Extraordinary gain (loss) on the acquisition of a business, net of tax of nil


8.4


(8.9
)

8.8


(6.5
)Net income (loss)

$
31.1

$
(90.9
)
$
43.6

$
(54.8
)Net income (loss)

$
31.1

$
(90.9
)
$
43.6

$
(54.8
)Other comprehensive (loss) income


(9.3
)

22.3


120.1


45.3Comprehensive income (loss)

$
21.8

$
(68.6
)
$
163.7

$
(9.5
)


See
accompanying notes to condensed consolidated financial statements (unaudited).

8

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Table of Contents

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

Six months ended
June 30,2008

2007Operating Activities:Net income (loss)

$
43.6

$
(54.8
)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Extraordinary (gain) loss on the acquisition of a business, net of tax


(8.8
)

6.5Equity in income of investment in unconsolidated affiliates


(6.7
)

(7.3
)Dividends received from unconsolidated affiliate


11.0


Depreciation and amortization


180.0


205.6Provision for losses on accounts receivable


1.3


4.4Loss (gain) on disposal of assets


3.7


(1.6
)Loss on early extinguishment of debt





2.2Noncash interest expense


2.3


2.3Noncash restructuring, impairment and plant closing costs


2.2


11.7Impairment loss on pending disposal of discontinued operations





240.0Deferred income taxes


3.8


(50.9
)Net unrealized loss (gain) on foreign currency transactions


19.6


(7.5
)Noncash compensation


11.2


11.9Minority interest in subsidiaries' income (loss)


6.5


(10.7
)Other, net


(5.1
)

(18.8
)Changes in operating assets and liabilities:Accounts and notes receivable


(91.3
)

(185.0
)Inventories, net


(45.1
)

29.9Prepaid expenses


12.7


27.8Other current assets


6.3


40.5Other noncurrent assets


(109.9
)

(67.7
)Accounts payable


41.7


12.9Accrued liabilities


(9.9
)

(167.5
)Other noncurrent liabilities


(40.5
)

36.1Net cash provided by operating activities


28.6


60.0Investing Activities:Capital expenditures


(224.2
)

(282.8
)Acquisition of business, net of cash acquired and post-closing adjustments





26.9Proceeds from sale of assets, net of adjustments


(26.3
)

15.8Receivable from affiliate


(59.1
)

Investment in unconsolidated affiliates, net


(40.8
)

(16.7
)Change in restricted cash


(3.4
)

Other, net


0.2


(0.5
)Net cash used in investing activities


(353.6
)

(257.3
)


(Continued)

9

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Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

(Dollars in Millions)

Six months ended
June 30,2008

2007Financing Activities:Net borrowings under revolving loan facilities

$
332.0

$
205.0Net repayments from overdraft facilities and other short-term debt


(8.6
)

(0.2
)Repayments of long-term debt


(5.2
)

(317.5
)Proceeds from long-term debt


17.1


266.1Repayments on notes payable


(28.5
)

(38.1
)Proceeds from notes payable


4.7


4.5Call premiums related to early extinguishment of debt





(1.2
)Debt issuance costs paid


(2.2
)

(4.2
)Other, net


(0.1
)

(0.8
)Net cash provided by financing activities


309.2


113.6Effect of exchange rate changes on cash


2.6


5.2Decrease in cash and cash equivalents


(13.2
)

(78.5
)Cash and cash equivalents at beginning of period


153.9


246.0Cash and cash equivalents at end of period

$
140.7

$
167.5Supplemental cash flow information:Cash paid for interest

$
134.0

$
151.8Cash paid for income taxes


10.1


33.8


During
the six months ended June 30, 2008 and 2007, the amount of capital expenditures in accounts payable increased by $0.8 million and $27.0 million, respectively.
During the six months ended June 30, 2008 and 2007, Huntsman Corporation contributed $11.2 million and $11.9 million, respectively, to Huntsman International related to
stock-based compensation.

See
accompanying notes to condensed consolidated financial statements (unaudited).

10

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Table of Contents

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

1.    GENERAL

CERTAIN DEFINITIONS

For convenience in this report, the terms "Company," "our," "us" or "we" may be used to refer to Huntsman Corporation and, unless the
context otherwise requires, its subsidiaries and predecessors. Any references to our "Company," "we," "us" or "our" as of a date prior to October 19, 2004 (the date of our formation) are
to Huntsman Holdings, LLC and its subsidiaries (including their respective predecessors). In this report, "Huntsman International Holdings" refers to Huntsman International Holdings LLC
(our 100% owned subsidiary that merged into Huntsman International LLC on August 16, 2005) and, unless the context otherwise requires, its subsidiaries; "Huntsman International"
refers to Huntsman International LLC (our 100% owned subsidiary) and, unless the context otherwise requires, its subsidiaries; "Huntsman Advanced Materials" refers to Huntsman Advanced
Materials Holdings LLC (our 100% owned indirect subsidiary, the membership interests of which we contributed to Huntsman International on December 20, 2005) and,
unless the context otherwise requires, its subsidiaries; "Huntsman LLC" refers to Huntsman LLC (our 100% owned subsidiary that merged into Huntsman International on
August 16, 2005); "HPS" refers to Huntsman Polyurethanes Shanghai Ltd. (our consolidated splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd); "SLIC"
refers to Shanghai Liengheng Isocyanate Investment BV (our unconsolidated manufacturing joint venture with BASF AG and three Chinese chemical companies); "HMP" refers to HMP Equity
Holdings Corporation (our 100% owned subsidiary that merged into us on March 17, 2005); "HMP Equity Trust" refers to HMP Equity Trust (the holder of approximately 20% of our
common stock); and "Hexion" refers to Hexion Specialty Chemicals, Inc., an entity owned by an affiliate of Apollo Management, L.P.

In
this report, we may use, without definition, the common names of competitors or other industry participants. We may also use the common names or abbreviations for certain chemicals
or products.

DESCRIPTION OF BUSINESS

We are a global manufacturer of differentiated chemical products; we also manufacture inorganic chemical products. Our products
comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers.

COMPANY

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

We
operate all of our businesses through Huntsman International, our 100% owned subsidiary. Huntsman International is a Delaware limited liability company and was formed in 1999.
Substantially all of our debt obligations are obligations of Huntsman International and/or its subsidiaries.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1.    GENERAL (Continued)

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



MERGER AGREEMENT AND LITIGATION WITH APOLLO AND HEXION

On July 12, 2007, we entered into a Merger Agreement with Hexion (the "Merger Agreement") pursuant to which Hexion agreed to
acquire all of our outstanding common stock for $28.00 per share in cash (the "Merger"). Under the terms of the Merger Agreement, the $28.00 per share cash price to be paid by Hexion increases at the
rate of 8% per annum (inclusive of any dividends paid) beginning April 6, 2008 and continuing through the closing date of the Merger. On October 16, 2007, our stockholders holding a
majority of the shares entitled to vote thereon approved a proposal to adopt the Merger Agreement.

On
June 18, 2008, Apollo Fund IV, Apollo Fund V, and various affiliated Apollo entities (collectively "Apollo") and Hexion filed an action for declaratory judgment against us in
Delaware Chancery Court. We believe that, by filing this action, both Apollo and Hexion are improperly seeking to avoid their obligations under the Merger Agreement. The action seeks the following
declarations from the court:



In
connection with this action, Hexion engaged Duff & Phelps, a financial advisor, to provide a letter stating that the combined company would be insolvent following the
consummation of the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1.    GENERAL (Continued)

Merger.
This letter was based on certain assumptions and was produced without our consultation or consent.

Notwithstanding
the pending litigation, the Merger Agreement remains in effect, and we are seeking to cause the Merger to be completed in accordance with the terms of the Merger
Agreement. On July 4, 2008, we exercised our right under the Merger Agreement to extend the termination date of the Merger by 90 days from July 4, 2008 to October 2, 2008.
This extension follows Hexion's previous decision to extend the termination date of the Merger by 90 days from April 5, 2008 to July 4, 2008. Beginning on the termination date, if
the Merger has not yet been consummated, the Merger Agreement may be terminated by either party at any time, unless such party's failure to fulfill any material covenant or agreement in the Merger
Agreement has been the cause or resulted in the failure of the Merger to be consummated.

On
July 7, 2008, Hexion amended its complaint to seek the additional declaration that the extension of the Merger Agreement by our Board of Directors from July 4, 2008 to
October 2, 2008 was invalid. Through its amended complaint, Hexion also seeks an injunction against us and others from prosecuting any claim against the plaintiffs in a different forum relating
to or arising out of the Merger Agreement or the transactions contemplated thereby.

We
intend to defend the claims brought by Hexion and Apollo vigorously and have asked the Delaware court to declare that:



We
have also asked the court to enjoin Hexion from continuing to breach the Merger Agreement and to specifically order Hexion to perform its obligations under the Merger Agreement. In
addition, we have filed counterclaims against Hexion in Delaware, including, among others, breach of contract, breach of good faith and fair dealing, defamation, injurious falsehood and commercial
disparagement. Discovery in the case will be expedited, and trial on the issues set forth above is scheduled to begin on September 8, 2008. If we are not successful in connection with this
litigation, the Merger Agreement could be terminated and the damages owed to our Company as a result of that event could be eliminated or reduced.

On
June 23, 2008, we filed a state court petition in Montgomery County, Texas against Leon Black, Joshua J. Harris and Apollo. The action alleges that Apollo and
Messrs. Black and Harris tortiously interfered with and fraudulently induced us to terminate our June 25, 2007 merger agreement with Basell AF (an affiliate of Access Industries) and
seeks damages in excess of $3 billion. On July 18, 2008, Apollo and Messrs. Black and Harris filed special appearances objecting to the jurisdiction of the Court. On
July 21, 2008, they filed answers denying liability and moved to dismiss or, alternatively, to stay the case until the Delaware action is concluded. Discovery in this action for damages has not
been expedited, and a trial date has not yet been set.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1.    GENERAL (Continued)

The
Merger cannot be completed until each of the other closing conditions specified in the Merger Agreement has been satisfied or waived. The closing conditions include, among others,
the expiration of waiting periods or grants of approvals under competition laws in the United States, European Union and certain other jurisdictions. Despite the pending litigation, Hexion has
indicated that it intends to cooperate fully, and continue to work closely, with regulatory agencies in these jurisdictions, including the Federal Trade Commission (the "FTC") and the European
Commission.

The
Merger Agreement contains no financing condition and requires Hexion to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to consummate the Merger and the related financing. Hexion has confirmed that its committed financing remains in place. However, Hexion has publicly stated that it does not expect
that it will be able to satisfy the conditions necessary to draw down on such financing and that it does not expect that substitute financing will be available. In connection with the pending Delaware
litigation, we are disputing Hexion's claim that it cannot satisfy the conditions to its committed financing. Under the Merger Agreement, if the lenders fail to fund the financing in accordance with
their commitments, Hexion has agreed in certain circumstances to commence litigation against such lenders in order to compel them to provide the committed funds. We cannot provide any assurances that
Hexion will be able to satisfy the conditions necessary to draw down on its committed financing or otherwise compel its lenders to fund in accordance with their obligations, or that substitute
financing will be available.

For
more information regarding the Merger, please see our Proxy Statement filed with the Securities and Exchange Commission on September 12, 2007. For information regarding
certain risks associated with the Merger, please also see "Part II. Item 1A. Risk Factors."

HUNTSMAN CORPORATION AND HUNTSMAN INTERNATIONAL FINANCIAL STATEMENTS

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



PRINCIPLES OF CONSOLIDATION

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

1.    GENERAL (Continued)

INTERIM FINANCIAL STATEMENTS

Our interim condensed consolidated financial statements (unaudited) and Huntsman International's interim condensed consolidated
financial statements (unaudited) were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP" or "U.S. GAAP") and in management's
opinion, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, financial position and cash flows for the periods
presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These condensed consolidated financial statements (unaudited) should be read in
conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Annual Report on Form 10-K for the year ended
December 31, 2007 for our Company and Huntsman International.

USE OF ESTIMATES

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

RECLASSIFICATIONS

Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform with the current
presentation. The most significant of these reclassifications was to reclassify the results of operations of our former North American polymers business and U.S. base chemicals business to
discontinued operations. See "Note 3. Discontinued Operations." All segment information for prior periods has been reclassified to reflect these transfers.

2.    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 162,The Hierarchy of
Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). We will apply this statement upon
its effective date, stated as 60 days following the Securities and Exchange Commission's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan Amendment of FASB
Statement 133. SFAS No. 161 requires enhanced disclosures regarding the effect of an entity's derivative instruments and related hedging activities on its
financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Early application is
encouraged. We are evaluating SFAS No. 161 to determine the impact of this statement on our consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2.    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

In
December 2007, the FASB issued SFAS No. 141 (R),Business Combinations, which replaced SFAS No. 141, Business Combinations. In
December 2007, the FASB also issued SFAS No. 160,Noncontrolling Interests in
Consolidated Financial Statementsan amendment of ARB No. 51. These statements significantly change the accounting for business combinations and
noncontrolling interests. Among other things, these statements will require more assets acquired and liabilities assumed to be measured at fair value as of the acquisition date, liabilities related to
contingent consideration to be remeasured to fair value each subsequent reporting period, an acquirer in preacquisition periods to expense all acquisition-related costs, and noncontrolling interests
in subsidiaries initially to be measured at fair value and classified as a separate component of equity. These statements are to be applied prospectively for fiscal years beginning after
December 15, 2008, except for the presentation and disclosure requirements of SFAS No. 160 which are retrospective for all periods. We are evaluating SFAS No. 141
(R) and SFAS No. 160 to determine the impact of these statements on our consolidated financial statements.

We
adopted SFAS No. 159,The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement
No. 115, on January 1, 2008. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value,
with changes in fair value reflected in earnings. We have not elected the fair value option for any existing or any new instruments that were not previously accounted for at fair value.

In
September 2006, the FASB issued SFAS No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R). Beginning with our fiscal year ended December 31, 2008, SFAS No.
158 requires that the assumptions used to measure our benefit obligations and annual expense be determined as of the balance sheet date and all plan assets be reported as of that date.
Accordingly, our Company and Huntsman International recorded a charge to retained earnings, net of tax, of $2.9 million and $3.2 million, respectively, as of January 1, 2008. For
more information, see "Note 12. Employee Benefit Plans."

We
adopted SFAS No. 157,Fair Value Measurements, on January 1, 2008. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff Positions ("FSP") No. FAS 157-1: Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes
of Lease Classification or Measurement under Statement 13, which removes certain leasing transactions from the scope of SFAS No. 157, and No.
FAS 157-2:Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal
years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of this pronouncement for nonfinancial assets and liabilities is not expected to have a
significant impact on our consolidated financial statements. See "Note 11. Fair Value Measurements."

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3.    DISCONTINUED OPERATIONS

U.S. BASE CHEMICALS BUSINESS

On November 5, 2007, we completed the U.S. Base Chemicals Disposition. This disposition included our former olefins
manufacturing assets located at Port Arthur, Texas. The captive ethylene unit at our retained Port Neches, Texas site of our Performance Products segment operations was not included in the sale. This
asset, along with a long-term
post-closing arrangement for the supply of ethylene and propylene from Flint Hills Resources to us, will continue to provide feedstock for our downstream derivative units.

The
following results of our former U.S base chemicals business have been presented as discontinued operations in the accompanying condensed consolidated statements of operations
(unaudited) (dollars in millions):

Three months
ended
June 30,

Six months
ended
June 30,2008

2007

2008

2007Revenues

$


$
46.4

$


$
81.4Costs and expenses





(51.9
)




(89.7
)Adjustment to loss on disposal


4.0





2.7


Operating income (loss)


4.0


(5.5
)

2.7


(8.3
)Income tax expense


(1.2
)




(1.0
)

Income (loss) from discontinued operations, net of tax

$
2.8

$
(5.5
)
$
1.7

$
(8.3
)


In
connection with the U.S. Base Chemicals Disposition, we recognized an adjustment to the loss on disposal of $4.0 million and $2.7 million during the three and six
months ended June 30, 2008, respectively, related to sales and use tax settlements, and post-closing adjustments. The final sales price is subject to post-closing
adjustment regarding certain expenditures related to the rebuild of our former Port Arthur, Texas facility. As of June 30, 2008, we estimate that our remaining payment related to certain
expenditures for the rebuild of our former Port Arthur, Texas facility (which have been substantially completed) was $8.7 million, for which we have accrued a liability. We expect to settle
this obligation during the remainder of 2008. Finalization of this estimate will likely result in an adjustment to the loss on disposal during 2008.

The
EBITDA of our former U.S. base chemicals business is reported in our Base Chemicals segment.

NORTH AMERICAN POLYMERS BUSINESS

On August 1, 2007 we completed the North American Polymers Disposition. The disposition included our polymers manufacturing
assets located at four U.S. sites: Odessa and Longview, Texas; Peru, Illinois; and Marysville, Michigan. In accordance with the amended and restated asset purchase agreement with Flint Hills
Resources, we also shut down our Mansonville, Quebec expandable polystyrene manufacturing facility in June 2007.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3.    DISCONTINUED OPERATIONS (Continued)

The
following results of our former North American polymers business have been presented as discontinued operations in the accompanying condensed consolidated statements of operations
(unaudited) (dollars in millions):

Three months
ended
June 30,

Six months
ended
June 30,2008

2007

2008

2007Revenues

$


$
385.6

$


$
746.0Costs and expenses





(377.5
)




(736.3
)Impairment loss on pending disposal





(240.0
)




(240.0
)Adjustment to loss on disposal


2.7





3.9


Operating income (loss)


2.7


(231.9
)

3.9


(230.3
)Income tax (expense) benefit


(1.1
)

75.9


(1.5
)

75.9Income (loss) from discontinued operations, net of tax

$
1.6

$
(156.0
)
$
2.4

$
(154.4
)


During
the three and six months ended June 30, 2008, we recorded an adjustment to the loss on disposal in connection with the North American Polymers Disposition of
$2.7 million and $3.9 million, respectively, primarily related to property tax settlements and post-closing adjustments.

In
connection with the U.S. Petrochemicals Disposition, we agreed to indemnify Flint Hills Resources with respect to any losses resulting from (i) the breach of
representations and warranties contained in the amended and restated asset purchase agreement, (ii) any pre-sale liabilities related to certain assets not assumed by Flint Hills
Resources, and (iii) any unknown environmental liability related to the pre-sale operations of the assets sold. We are not required to pay under these indemnification obligations
until claims against us, on a cumulative basis, exceed $10 million. Upon exceeding this $10 million threshold, we generally are obligated to provide indemnification for any losses up to
a limit of $150 million. We believe that there is a remote likelihood that we will be required to pay any significant amounts under the indemnity provision.

The
EBITDA of our former North American polymers business is reported in our Polymers segment.

EUROPEAN BASE CHEMICALS AND POLYMERS BUSINESS

On December 29, 2006, we completed the U.K. Petrochemicals Disposition. This transaction involved the sale of the
outstanding equity interests of Huntsman Petrochemicals (UK) Limited. The final sales price was subject to adjustments relating to working capital, investment in the LDPE plant in Wilton, U.K. and
unfunded pension liabilities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3.    DISCONTINUED OPERATIONS (Continued)

The
following results of our European base chemicals and polymers business have been presented as discontinued operations in the accompanying condensed consolidated statements of
operations (unaudited) (dollars in millions):

Three months
ended
June 30,

Six months
ended
June 30,2008

2007

2008

2007Adjustment to loss on disposal

$
0.5

$
37.2

$
(0.3
)
$
35.6Operating income (loss)


0.5


37.2


(0.3
)

35.6Income tax expense











Income (loss) from discontinued operations, net of tax

$
0.5

$
37.2

$
(0.3
)
$
35.6


During
the three and six months ended June 30, 2008, we recorded an increase (reduction) to the loss on disposal of $0.5 million and $(0.3) million, respectively, related
primarily to a pension levy. During the three and six months ended June 30, 2007, we recorded an adjustment to the loss on disposal of $37.2 and $35.6 million, respectively, related
primarily to pension and post-closing working capital adjustments.

In
connection with the sale, we agreed to indemnify the buyer with respect to any losses resulting from any environmental liability related to the pre-sale operations of the
assets sold. These indemnities have various payment thresholds and time limits depending on the site and type of claim. Generally, we are not required to pay under these indemnification obligations
until claims against us exceed £0.1 million (approximately $0.2 million) individually or £1.0 million (approximately $2.0 million) in the aggregate.
We also agreed to indemnify the buyer with respect to certain tax liabilities. Our maximum exposure generally shall not exceed $600 million in the aggregate. We believe that there is a remote
likelihood that we will be required to pay any significant amounts under the indemnity provision.

The
EBITDA of our former European base chemicals business is reported in our Base Chemicals segment.

TDI BUSINESS

On July 6, 2005, we sold our TDI business. The sale involved the transfer of our TDI customer list and sales contracts. We
discontinued the use of our remaining TDI assets. Our former TDI business has been accounted for as a discontinued operation and was reported in our Polyurethanes segment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3.    DISCONTINUED OPERATIONS (Continued)

Accordingly,
the following results of TDI have been presented as discontinued operations in the accompanying condensed consolidated statements of operations (unaudited) (dollars in millions):

Three months
ended
June 30,

Six months
ended
June 30,2008

2007

2008

2007Costs and expenses

$


$
(0.6
)
$


$
(1.0
)Operating loss





(0.6
)




(1.0
)Income tax benefit





0.4





0.4Loss from discontinued operations, net of tax

$


$
(0.2
)
$


$
(0.6
)


4.    BUSINESS COMBINATIONS

PENDING METROCHEM ACQUISITION

On June 29, 2007, we signed an agreement to acquire the Baroda division of Metrochem Industries Ltd ("Baroda") in India.
Under the terms of the agreement, either party may terminate the agreement since the transaction was not consummated by April 30, 2008. If neither party were to exercise its right to terminate
the agreement, the remaining conditions to closing were to be satisfied and the transaction were to close under its current terms, we estimate the purchase price, including certain working capital and
capital expenditures incurred pre-closing, would be approximately $55 million U.S. dollar equivalents, of which approximately $10 million U.S. dollar
equivalents (€6.24 million) would represent deferred purchase price that would be paid 18 months following the acquisition date upon the completion by the seller of
certain conditions. This purchase price would exclude from working capital the receivables existing on the closing date due to Baroda from our affiliates, which would be settled at or prior to
closing. Baroda is a manufacturer of textile dyes and intermediates. As of June 30, 2008, this agreement has not been terminated. There can be no assurance that the transaction will be
consummated or, if consummated, that it will be consummated on the terms set forth in the agreement.

TEXTILE EFFECTS ACQUISITION

On June 30, 2006, we acquired Ciba's textile effects business (the "Textile Effects Acquisition"). The operating results
of the textile effects business have been consolidated with our operating results beginning on July 1, 2006 and are reported with our advanced materials operations as part of our Materials and
Effects segment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

4.    BUSINESS COMBINATIONS (Continued)

We accounted for the Textile Effects Acquisition using the purchase method in accordance with SFAS No. 141,Business
Combinations.As such, we analyzed the fair value of tangible and intangible assets acquired and liabilities assumed, and we determined the excess of fair value of net assets
acquired over cost. Because the fair value of the acquired assets and liabilities assumed exceeded the acquisition price, the valuation of the long-lived assets acquired was reduced to
zero in accordance with SFAS No. 141. Accordingly, no basis was assigned to property, plant and equipment or any other non-current nonfinancial assets and the remaining
excess was recorded as an extraordinary gain, net of taxes (which were not applicable because the gain was recorded in purchase accounting). During the three and six months ended June 30, 2008,
we recorded an additional extraordinary gain on the acquisition of $8.4 million and $8.8 million, respectively, related to the reversal of accruals for certain employee termination costs
recorded in connection with the Textile Effects Acquisition and a reimbursement by Ciba of certain restructuring costs associated with the acquisition. During the three and six months ended
June 30, 2007, we adjusted the preliminary purchase price allocation for, among other things, the finalization of restructuring plans, estimates of asset retirement obligations, the
determination of related deferred taxes and finalization of the post-closing working capital adjustments, resulting in a reduction to the extraordinary gain on the acquisition of
$8.9 million and $6.5 million, respectively.

5.    INVENTORIES

Inventories consisted of the following (dollars in millions):

June 30,
2008

December 31,
2007Raw materials and supplies

$
280.5

$
260.8Work in progress


100.5


94.1Finished goods


1,260.7


1,163.6Total


1,641.7


1,518.5LIFO reserves


(77.1
)

(66.6
)Net

$
1,564.6

$
1,451.9


As
of June 30, 2008 and December 31, 2007, approximately 9% each of inventories were recorded using the last-in, first-out cost method.

In
the normal course of operations, at times, we exchange raw materials with other companies for the purpose of reducing transportation costs. The net open exchange positions are valued
at our cost. The amount included in inventory under open exchange agreements payable by us at June 30, 2008 was $28.7 million (47.9 million pounds of feedstock and products). The
amount included in inventory under open exchange agreements payable by us at December 31, 2007 was $26.6 million (53.5 million pounds of feedstock and products).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6.    RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS

As of June 30, 2008 and December 31, 2007, accrued restructuring costs by type of cost and initiative consisted of the following (dollars in millions):

Workforce
reductions(1)

Demolition and
decommissioning

Non-cancelable
lease costs

Other
restructuring
costs

Total(2)Accrued liabilities as of January 1, 2008

$
64.8

$
12.2

$
5.1

$
13.7

$
95.8Adjustment to Textile Effects opening balance sheet liabilities


(8.4
)










(8.4
)2008 charges for 2004 initiatives


0.3





1.1





1.42008 charges for 2008 initiatives


1.0


0.1





0.7


1.8Reversal of reserves no longer required


(0.4
)










(0.4
)2008 payments for 2003 initiatives


(1.4
)




(0.5
)

(0.1
)

(2.0
)2008 payments for 2004 initiatives


(2.7
)




(0.5
)




(3.2
)2008 payments for 2006 initiatives


(11.7
)

(2.1
)




(0.4
)

(14.2
)2008 payments for 2007 initiatives


(0.1
)










(0.1
)2008 payments for 2008 initiatives


(1.0
)

(0.1
)




(0.7
)

(1.8
)Net activity of discontinued operations


(0.2
)










(0.2
)Foreign currency effect on reserve balance


6.4


1.3


0.1


0.3


8.1Accrued liabilities as of June 30, 2008

$
46.6

$
11.4

$
5.3

$
13.5

$
76.8


---

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Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6.    RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

June 30,
2008

December 31,
20072001 initiatives

$
1.4

$
1.42003 initiatives


9.1


11.22004 initiatives


7.4


9.52006 initiatives


47.8


70.42007 initiatives


0.5


0.8Foreign currency effect on reserve balance


10.6


2.5Total

$
76.8

$
95.8


Details
with respect to our restructuring reserves by segment and initiative are provided below (dollars in millions):

Polyurethanes

Materials
and
Effects

Performance
Products

Pigments

Discontinued
Operations

Corporate
& Other

TotalAccrued liabilities as of January 1, 2008

$
4.5

$
81.3

$
2.0

$
7.6

$
0.4

$


$
95.8Adjustment to Textile Effects opening balance sheet liabilities





(8.4
)













(8.4
)2008 charges for 2004 initiatives








0.1


1.3








1.42008 charges for 2008 initiatives





1.4











0.4


1.8Reversal of reserves no longer required











(0.4
)







(0.4
)2008 payments for 2003 initiatives


(1.0
)

(0.3
)

(0.2
)

(0.5
)







(2.0
)2008 payments for 2004 initiatives


(0.2
)




(0.6
)

(2.4
)







(3.2
)2008 payments for 2006 initiatives





(14.1
)




(0.1
)







(14.2
)2008 payments for 2007 initiatives





(0.1
)













(0.1
)2008 payments for 2008 initiatives





(1.4
)










(0.4
)

(1.8
)Net activity of discontinued operations














(0.2
)




(0.2
)Foreign currency effect on reserve balance


0.3


7.5





0.3








8.1Accrued liabilities as of June 30, 2008

$
3.6

$
65.9

$
1.3

$
5.8

$
0.2

$


$
76.8Current portion of restructuring reserve

$
1.7

$
64.1

$
1.3

$
4.0

$
0.2

$


$
71.3Long-term portion of restructuring reserve


1.9


1.8





1.8








5.5


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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

6.    RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING COSTS (Continued)

Details with respect to cash and non-cash restructuring charges by initiative are provided below (dollars in millions):

Six months ended
June 30, 2008Cash charges:2008 charges for 2004 initiatives

$
1.42008 charges for 2008 initiatives


1.8Reversals of reserves no longer required


(0.4
)Non-cash charges


2.2Total Restructuring, Impairment and Plant Closing Costs

$
5.0


Six months ended
June 30, 2007Cash charges:2007 charges for 2004 initiatives

$
1.02007 charges for 2005 initiatives


0.22007 charges for 2007 initiatives


14.5Reversals of reserves no longer required


(3.0
)Non-cash charges


11.7Total Restructuring, Impairment and Plant Closing Costs

$
24.4


During
the six months ended June 30, 2008, our Materials and Effects segment recorded charges of $1.4 million related to decommissioning and other costs associated with the
plant closures in France and Switzerland and supply chain integration costs, and it reversed accruals of $8.4 million for certain employee termination costs recorded in connection with the
Textile Effects Acquisition.

During
the six months ended June 30, 2008, our Pigments segment recorded charges of $1.3 million for 2004 initiatives primarily related to lease termination costs
associated with our London, England office, and it reversed accruals of $0.4 million for certain employee termination costs no longer required.

During
the six months ended June 30, 2008, we recorded a non-cash impairment charge of $2.2 million in Corporate and other related to capital expenditures and
turnaround costs associated with our Australian styrenics business that was previously impaired. The long-lived assets of our Australian styrenics business were determined to be impaired
in accordance with SFAS No. 144 and an impairment charge was recorded in 2005. Capital expenditures and turnaround costs in this business, which are necessary to maintain
operations, are also considered to be impaired immediately after they are incurred.

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HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7.    INVESTMENT IN UNCONSOLIDATED AFFILIATES

Summarized applicable financial information of our unconsolidated affiliate Sasol-Huntsman GmbH and Co. KG. for the three and six months ended June 30, 2008 and 2007
is presented below (dollars in millions):

Three months ended
June 30,

Six months ended
June 30,2008

2007

2008

2007Revenues

$
36.0

$
26.8

$
66.6

$
49.9Gross profit


9.8


8.2


16.9


17.0Net income


4.9


3.4


8.4


7.7


During
the six months ended June 30, 2008, we contributed $43.5 million as our 50% equity contribution to our ethyleneamines manufacturing joint venture in Jubail
Industrial City, Saudi Arabia with Zamil Group. This joint venture's funding requirements will be satisfied through a combination of debt and equity, with the equity already provided on a
50/50 basis by us and Zamil Group. This joint venture is accounted for under the equity method.

8.    DEBT

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

June 30,
2008

December 31,
2007Senior Credit Facilities:Revolving Facility

$
323.4

$
Term Loans


1,540.0


1,540.0Secured Notes


294.6


294.4Senior Notes


198.0


198.0Subordinated Notes


1,368.9


1,310.5Australian Credit Facilities


58.0


50.0HPS (China) debt


126.4


106.8Other


44.2


69.1Total debt

$
3,953.5

$
3,568.8Current portion

$
385.4

$
68.5Long-term portion


3,568.1


3,500.3Total debt

$
3,953.5

$
3,568.8


TRANSACTIONS AFFECTING OUR SENIOR CREDIT FACILITIES

As of June 30, 2008, our senior secured credit facilities ("Senior Credit Facilities") consisted of (i) a
$650.0 million revolving facility (the "Revolving Facility") and (ii) a $1,540.0 million term loan B facility (the "Dollar Term Loan"). As of June 30, 2008,
there were $323.4 million borrowings outstanding under our Revolving Facility, which is classified as current in the accompanying balance

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8.    DEBT (Continued)

sheets
(unaudited), and we had approximately $40.1 million in U.S. dollar equivalents of letters of credit and bank guarantees issued and outstanding under our Revolving Facility. The
Revolving Facility matures in the third quarter of 2010 and the Dollar Term Loan matures in 2014; provided however, that the maturities of each will accelerate if we do not repay all but
$100 million of our outstanding debt securities on or before three months prior to the maturity dates of such securities. The next maturity date of such securities is in October of 2010.

As
of June 30, 2008, borrowings under the Revolving Facility and Dollar Term Loan bore interest at LIBOR plus 1.75%. The applicable interest rate of the Dollar Term Loan is
currently set at LIBOR plus 1.75%, subject to a reduction to LIBOR plus 1.50% upon achieving certain secured leverage ratio thresholds defined in our credit agreements. The credit agreements governing
our Senior Credit Facilities contain one financial covenant, which is applicable only to the Revolving Facility, and this covenant is only in effect when loans or letters of credit are outstanding
under the Revolving Facility. Our Senior Credit Facilities agreements provide for, among other things, customary restrictions and limitations on our ability to incur liens, incur additional debt,
merge or sell assets, make certain restricted payments, prepay other indebtedness, make investments or engage in transactions with affiliates, and also contain other customary default provisions.

OTHER TRANSACTIONS AFFECTING OUR DEBT

HPS, our splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd, maintains a working capital line as part of
its overall secured credit facilities. In February 2008, HPS borrowed an additional RMB 122.8 million ($17.9 million) to fund its working capital and operating requirements. As of
June 30, 2008, HPS had $26.0 million and RMB 688.6 million ($100.4 million) outstanding under its credit facilities.

On
June 30, 2008, our subsidiary, Huntsman (UK) Limited, entered into a $125.0 million short term committed revolving credit facility maturing on June 28, 2009
(the "Short Term Revolving Facility"), of which nothing was drawn as of June 30, 2008. The Short Term Revolving Facility is secured, pursuant to the terms of a debenture governed by
English law, by all existing and after acquired personal property of Huntsman Holdings (UK) Limited, including certain intercompany notes, some of which are secured in nature. The Short Term Revolving
Facility is supported by an unsecured parent company guarantee provided by Huntsman International. At our option, the Short Term Revolving Facility may bear interest at a rate equal to (i) a
LIBOR-based eurocurrency rate plus an applicable margin ranging between 3.00% and 4.00%, or with respect to euro-denominated loans a EURIBOR-based rate plus an applicable margin ranging between 3.00%
and 4.00%, or (ii) a prime-based rate plus an applicable margin ranging between 2.00% or 3.00%, depending on the level of borrowings under the facility. The Short Term Revolving Facility
contains two financial covenants, including a leverage covenant which is consistent with the Senior Credit Facilities and a minimum tangible net worth covenant. Our Short Term Revolving Facility
agreement provides for, among other things, customary restrictions and limitations on our ability to incur liens, incur additional debt, merge or sell assets, prepay other indebtedness, make
investments or engage in transactions with affiliates, and also contains other customary default provisions.

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HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8.    DEBT (Continued)

The
Merger Agreement provides certain restrictions and limitations concerning the amendment of debt agreements, the extension, repayment and refinancing of certain debt, in addition to
the incurrence of new debt.

COMPLIANCE WITH COVENANTS

Our management believes that we are in compliance with the financial covenants contained in the agreements governing the Senior Credit
Facilities, the Short Term Revolving Facility, the credit facilities maintained by our Australian subsidiaries (the "Australian Credit Facilities"), the A/R Securitization Program
(as defined in "Note 10. Securitization of Accounts Receivable") and the indentures governing our notes.

9.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We may enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign currency rates. On January 15, 2008, we entered
into a series of forward foreign currency contracts in our Pigments segment to partially hedge the impact, for up to one year, of movements in foreign currency rates associated with the purchases of
raw materials and sales of pigment in non-functional currencies. As of June 30, 2008, these contracts had a notional amount of approximately $80 million and are designated as
cash flow hedges. As of June 30, 2008, these contracts had a fair value of $4.0 million and were recorded in other current assets. For the three months ended June 30, 2008, the
effective portion of the changes in the fair value of $1.2 million were recorded in other comprehensive income, with ineffectiveness of a credit of $0.1 million recorded in sales, a
credit of $1.2 million recorded in cost of sales and a foreign currency gain of $0.8 million. For the six months ended June 30, 2008, the effective portion of the changes in the
fair value of $2.9 million were recorded in other comprehensive income, with ineffectiveness of a credit of $0.4 million recorded in sales, a credit of $1.4 million recorded in
cost of sales and a foreign currency gain of $1.0 million.

As
of and for the three and six months ended June 30, 2008, the fair value and realized gains (losses) of our other outstanding foreign currency rate hedging contracts were not
significant.

We
have a cross currency interest rate swap pursuant to which we have agreed to swap $152.6 million of LIBOR floating rate debt payments for €115.9 million
of EURIBOR floating rate debt payments. At maturity, on August 15, 2012, we are required to pay principal of €115.9 million and will receive principal of
$152.6 million. During the life of this swap, we will receive floating rate interest (LIBOR) in dollars and we will pay floating rate interest (EURIBOR) in euros. This swap is currently not
designated as a hedge for financial reporting purposes. As of June 30, 2008, the fair value of this swap was $31.8 million, net of accrued interest, and was recorded in other noncurrent
liabilities in our condensed consolidated balance sheet (unaudited). For the three and six months ended June 30, 2008, we recorded an unrealized foreign currency gain (loss) on this swap of
$0.3 million and $(13.3) million, respectively, in the condensed consolidated statement of operations (unaudited).

We
also have a cross currency interest rate swap pursuant to which we have agreed to swap $95.8 million of LIBOR floating rate debt payments for
€70.7 million of EURIBOR floating rate debt payments. On maturity, April 19, 2010, we are required to pay principal of €70.7 million and will

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

receive
principal of $95.8 million. During the life of this swap, we will receive floating rate interest (LIBOR) in dollars and we will pay floating rate interest (EURIBOR) in euros. This swap
was designated as a hedge of a net investment for financial reporting purposes. As of June 30, 2008, the fair value of this swap was $16.1 million, net of accrued interest, and was
recorded in other noncurrent liabilities in our condensed consolidated balance sheet (unaudited). For the three and six months ended June 30, 2008, the effective portion of the changes in the
fair value of $(0.6) million and $7.4 million, respectively, were recorded in other comprehensive income, with ineffectiveness of $0.2 million and $0.3 million, respectively,
recorded in interest expense.

From
time to time, we review our non-U.S. dollar-denominated debt and swaps to determine the appropriate amounts designated as hedges. As of June 30, 2008, we
have designated approximately €450.7 million of debt and swaps as net investment hedges. As of June 30, 2008, we had approximately
€1,090.2 million in net euro-denominated assets.

10.    SECURITIZATION OF ACCOUNTS RECEIVABLE

Under our accounts receivable securitization program ("A/R Securitization Program"), we grant an undivided interest in certain of our trade receivables to a qualified
off-balance sheet entity (the "Receivables Trust") at a discount. This undivided interest serves as security for the issuance by the Receivables Trust of commercial paper. The A/R
Securitization Program currently provides for financing through a commercial paper conduit program (in both U.S. dollars and euros). The A/R Securitization Program consists of a
commercial paper conduit program with a committed amount of approximately $500 million U.S. dollar equivalents. The A/R Securitization Program matures on April 1, 2009.

As
of June 30, 2008, the Receivables Trust had $503.0 million in U.S. dollar equivalents (comprised of $200.9 million and
€192.0 million ($302.1 million)) in commercial paper outstanding.

11.    FAIR VALUE MEASUREMENTS

We adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. In February 2008, the
FASB issued FASB Staff Position ("FSP") No. FAS 157-1 and FAS 157-2, which delays the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years, and removes certain leasing transactions from the scope of SFAS No. 157.

Our
derivative instruments, available-for-sale securities and retained interest in securitized receivables are the only assets and liabilities that we record at
fair value and that are currently subject

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11.    FAIR VALUE MEASUREMENTS (Continued)

to
SFAS No. 157. We remeasure the fair value of these instruments on a recurring basis as follows (dollars in millions):

Fair Value Amounts UsingDescription

Quarter ended
June 30, 2008

Quoted prices in
active markets for
identical assets
(Level 1)

Significant other
observable inputs
(Level 2)

Significant
unobservable inputs
(Level 3)Assets:Derivatives(1)

$
4.0

$


$
4.0

$
Available-for-sale securities(2)


14.0


14.0





Retained interest insecuritized receivables(3)


171.9








171.9Total assets

$
189.9

$
14.0

$
4.0

$
171.9Liabilities:Derivatives(1)

$
49.4

$


$
49.4

$



---

Fair Value Measurements Using Level 3

Three months
ended
June 30, 2008

Six months
ended
June 30, 2008Balance at beginning of period

$
136.9

$
136.4Total losses (realized/unrealized) included in earnings


(7.2
)

(5.6
)Purchases, issuances, and settlements


42.2


41.1Balance at end of period

$
171.9

$
171.9The amount of total (losses) gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held
at June 30, 2008

$
(2.2
)
$
5.3


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11.    FAIR VALUE MEASUREMENTS (Continued)

Gains and losses (realized and unrealized) included in earnings for the three and six months ended June 30, 2008 are reported in loss on accounts receivable program and other
income (expense) as follows (dollars in millions):

Loss on accounts
receivable securitization
program

Other income (expense)Three months
ended

Six months
ended

Three months
ended

Six months
endedJune 30, 2008

June 30, 2008Total (losses) gains included in earnings

$
(6.7
)
$
(14.1
)
$
(0.5
)
$
8.5Changes in unrealized (losses) gains relating to assets still held at June 30, 2008

$
(1.7
)
$
(3.2
)
$
(0.5
)
$
8.5


12.    EMPLOYEE BENEFIT PLANS

We adopted certain provisions of SFAS No. 158 on January 1, 2008. Beginning with our fiscal year ended December 31, 2008, SFAS No. 158 requires
that the assumptions used to measure our benefit obligations and annual expenses be determined as of the balance sheet date and all plan assets be reported as of that date. We used the second approach
as described in paragraph 19 of SFAS No. 158 to transition our measurement date from November 30 to December 31. Under this approach, our Company and Huntsman
International recorded a charge to retained earnings, net of tax, of $2.9 million and $3.2 million, respectively, as of January 1, 2008.

Components
of the net periodic benefit costs for the three and six months ended June 30, 2008 and 2007 were as follows (dollars in millions):

Huntsman Corporation

Defined Benefit Plans
Three months ended
June 30,

Other Postretirement Benefit Plans
Three months ended
June 30,2008

2007

2008

2007Service cost

$
18.8

$
20.8

$
0.9

$
1.1Interest cost


38.8


34.1


2.2


2.4Expected return on assets


(48.3
)

(43.6
)




Amortization of transition obligation


0.4


0.5





Amortization of prior service cost


(1.4
)

(1.7
)

(0.6
)

(0.7
)Amortization of actuarial loss


1.1


3.2


0.4


0.9Net periodic benefit cost


9.4


13.3


2.9


3.7Less discontinued operations





(1.3
)




(1.0
)Net periodic benefit cost from continuing operations

$
9.4

$
12.0

$
2.9

$
2.7


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

12.    EMPLOYEE BENEFIT PLANS (Continued)

Defined Benefit Plans
Six months ended
June 30,

Other Postretirement
Benefit Plans
Six months ended
June 30,2008

2007

2008

2007Service cost

$
37.6

$
41.6

$
1.8

$
2.2Interest cost


77.7


68.2


4.3


4.8Expected return on assets


(96.6
)

(87.2
)




Amortization of transition obligation


0.7


1.0





Amortization of prior service cost


(2.8
)

(3.4
)

(1.1
)

(1.4
)Amortization of actuarial loss


2.1


6.4


0.8


1.8Net periodic benefit cost


18.7


26.6


5.8


7.4Less discontinued operations





(2.6
)




(2.0
)Net periodic benefit cost from continuing operations

$
18.7

$
24.0

$
5.8

$
5.4


Huntsman International

Defined Benefit Plans
Three months ended
June 30,

Other Postretirement
Benefit Plans
Three months ended
June 30,2008

2007

2008

2007Service cost

$
18.8

$
20.8

$
0.9

$
1.1Interest cost


38.8


34.1


2.2


2.4Expected return on assets


(48.3
)

(43.6
)




Amortization of transition obligation


0.4


0.5





Amortization of prior service cost


(1.4
)

(1.7
)

(0.6
)

(0.7
)Amortization of actuarial loss


2.6


4.9


0.4


0.9Net periodic benefit cost


10.9


15.0


2.9


3.7Less discontinued operations





(1.3
)




(1.0
)Net periodic benefit cost from continuing operations

$
10.9

$
13.7

$
2.9

$
2.7


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

12.    EMPLOYEE BENEFIT PLANS (Continued)

Defined Benefit Plans
Six months ended
June 30,

Other Postretirement
Benefit Plans
Six months ended
June 30,2008

2007

2008

2007Service cost

$
37.6

$
41.6

$
1.8

$
2.2Interest cost


77.7


68.2


4.3


4.8Expected return on assets


(96.6
)

(87.2
)




Amortization of transition obligation


0.7


1.0





Amortization of prior service cost


(2.8
)

(3.4
)

(1.2
)

(1.4
)Amortization of actuarial loss


5.1


9.8


0.8


1.8Net periodic benefit cost


21.7


30.0


5.7


7.4Less discontinued operations





(2.6
)




(2.0
)Net periodic benefit cost from continuing operations

$
21.7

$
27.4

$
5.7

$
5.4


During
the six months ended June 30, 2008 and 2007, we made contributions to our pension plans of $58.4 million and $89.4 million, respectively. During the remainder
of 2008, we expect to contribute an additional amount of approximately $43 million to our pension plans.

13.    STOCKHOLDERS' EQUITY

5% MANDATORY CONVERTIBLE PREFERRED STOCK

In connection with the initial public offering of our 5% mandatory convertible preferred stock on February 16, 2005, we declared
all dividends that will be payable on such preferred stock from the issuance through the mandatory conversion date, which was February 16, 2008. Accordingly, we recorded dividends payable of
$43.1 million and a corresponding charge to net loss available to common stockholders during the year ended December 31, 2005. We paid the final dividend in cash on February 16,
2008. Also on February 16, 2008, the mandatory convertible preferred stock converted, pursuant to its terms, into 12,082,475 shares of our common stock.

COMMON STOCK DIVIDENDS

On March 31, 2008 and June 30, 2008, we paid dividends of $23.4 million each, or $0.10 per share each, to common
stockholders of record as of March 14, 2008 and June 16, 2008, respectively. On March 30, 2007 and June 29, 2007, we paid cash dividends of $22.1 million each, or
$0.10 per share each, to common stockholders of record as of March 15, 2007 and June 15, 2007, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14.    OTHER COMPREHENSIVE INCOME (LOSS)

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

Huntsman Corporation

Accumulated other
comprehensive income (loss)

Other comprehensive
income (loss)Three months ended

Six months endedJune 30,
2008

December 31,
2007

June 30,
2008

June 30,
2007

June 30,
2008

June 30,
2007Foreign currency translation adjustments, net of tax of $(15.7) million and $4.9 million as of June 30, 2008 and December 31, 2007, respectively

$
497.8

$
378.6

$
(12.2
)
$
19.8

$
119.2

$
36.4Employee benefit related adjustments, net of tax of $17.9 and $18.5 as of June 30, 2008 and December 31, 2007, respectively


(144.5
)

(143.6
)

(0.5
)

1.3


(0.9
)

4.5Other comprehensive income of unconsolidated affiliates


9.4


9.3


0.1


2.0


0.1


2.0Other


11.2


12.1


2.2


(0.4
)

(0.9
)

Total

$
373.9

$
256.4

$
(10.4
)
$
22.7

$
117.5

$
42.9


Huntsman International

Accumulated other
comprehensive income (loss)

Other comprehensive
income (loss)Three months ended

Six months endedJune 30,
2008

December 31,
2007

June 30,
2008

June 30,
2007

June 30,
2008

June 30,
2007Foreign currency translation adjustments, net of tax of $(29.0) million and $(8.4) million as of June 30, 2008 and December 31, 2007, respectively

$
496.8

$
377.5

$
(12.1
)
$
17.4

$
119.3

$
36.3Employee benefit related adjustments, net of tax of $52.9 and $54.5 as of June 30, 2008 and December 31, 2007, respectively


(204.9
)

(206.5
)

0.5


3.2


1.6


6.9Other comprehensive income of unconsolidated affiliates


9.4


9.3


0.1


2.0


0.1


2.0Other


5.7


6.6


2.2


(0.3
)

(0.9
)

0.1Total

$
307.0

$
186.9

$
(9.3
)
$
22.3

$
120.1

$
45.3


Items of other comprehensive income (loss) of our Company and our unconsolidated affiliates have been recorded net of tax, with the exception of
the foreign currency translation adjustments related to subsidiaries with earnings permanently reinvested. The tax effect is determined based upon the jurisdiction where the income or loss was
recognized and is net of valuation allowances that have been recorded.

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15.    EXPENSES ASSOCIATED WITH THE MERGER

Expenses associated with the Merger incurred during the three and six months ended June 30, 2008 were $3.8 and $9.0 million, respectively, and related primarily to
professional fees as well as bonuses of $1.8 million to certain members of our board of directors for services related to the Merger. For more information regarding the Merger, see
"Note 1. GeneralMerger Agreement and Litigation with Apollo and Hexion."

Prior
to entering into the Merger Agreement, we terminated an Agreement and Plan of Merger (the "Basell Agreement") dated June 26, 2007 with Basell and paid Basell a
$200 million termination fee required under the terms of the Basell Agreement (the "Basell Termination Fee") during the third quarter of 2007. One-half of the Basell
Termination Fee, or $100 million, was reimbursed by Hexion. We could be required to pay Hexion $325 million under certain remote circumstances in connection with our termination of the
Merger Agreement. The $100 million funded by Hexion has been deferred and is recorded in "Accrued liabilities" in the accompanying condensed consolidated balance sheet (unaudited) as of
June 30, 2008.

Other
costs associated with the Merger Agreement would be payable upon consummation of the Merger. We will recognize these costs if and when the business combination is consummated. The
following is a discussion of these costs.

TRANSACTION AND RETENTION BONUSES

Upon consummation of the Merger (the "Closing Date"), certain employees will receive transaction bonuses. A retention bonus has
also been offered to certain employees payable upon the earlier of (i) the date that is 12 months following the Closing Date, or (ii) with respect to an employee that is
involuntarily terminated prior to the payment of the retention bonus, the date of such employee's termination of employment. With both bonuses, the employee must
work until the date the bonus is payable. If paid, these bonuses will total $19.5 million. If the eligible employee terminates employment with our Company voluntarily prior to that date, the
bonuses will be forfeited. Furthermore, if the Merger is not consummated, we are not obligated to pay such bonuses.

For
more information regarding the effect of the Merger on stock-based incentive awards, see "Note 18. Stock-Based Compensation Plans" below.

INVESTMENT BANKING FEES

In connection with the Merger, we have agreed to pay Merrill Lynch a fee of $25 million for its investment banking services, all
of which is contingent upon and would be payable upon consummation of the Merger. If, at any time during Merrill Lynch's engagement or the two years thereafter, we receive a break-up fee
upon termination of an agreement for the sale of our Company, we will pay Merrill Lynch 5% of any such fee, including any reverse break-up fee payable in connection with the termination of
the Merger Agreement.

VOTING AGREEMENT FEES

As of the date of the Merger Agreement, MatlinPatterson was one of our significant shareholders and an affiliate of two of our former
directors. Pursuant to a voting agreement in connection with the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

15.    EXPENSES ASSOCIATED WITH THE MERGER (Continued)

Merger,
we agreed to reimburse MatlinPatterson for up to $13.0 million in additional investment banking fees payable to UBS if the Merger is consummated. If the Merger is not consummated, no
such fees will be paid.

16.    COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Litigation with Apollo and Hexion

On June 18, 2008, Apollo and Hexion filed an action for declaratory judgment against us in Delaware Chancery Court related to
the Merger Agreement. The action seeks the following declarations from the court:



In
connection with this action, Hexion engaged Duff & Phelps, a financial advisor, to provide a letter stating that the combined company would be insolvent following the
consummation of the Merger. This letter was based on certain assumptions and was produced without our consultation or consent.

On
July 7, 2008, Hexion amended its complaint to seek the additional declaration that the extension of the Merger Agreement by our Board of Directors from July 4, 2008 to
October 2, 2008 was invalid. Hexion's amended complaint also seeks an injunction against us and others from prosecuting any claim against the plaintiffs in a different forum relating to or
arising out of the Merger Agreement or the transactions contemplated thereby.

We
intend to defend the claims brought by Hexion and Apollo vigorously and have asked the Delaware court to declare that:



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16.    COMMITMENTS AND CONTINGENCIES (Continued)



We
have also asked the court to enjoin Hexion from continuing to breach the Merger Agreement and to specifically order Hexion to perform its obligations under the Merger Agreement. In
addition, we have filed counterclaims against Hexion in Delaware, including, among others, breach of contract, breach of good faith and fair dealing, defamation, injurious falsehood and commercial
disparagement. Discovery in the case will be expedited, and trial on the issues set forth above is scheduled to begin on September 8, 2008. If we are not successful in connection with this
litigation, the Merger Agreement could be terminated and the damages owed to our Company as a result of that event could be eliminated or reduced.

On
June 23, 2008, we filed a state court petition in Montgomery County, Texas against Leon Black, Joshua J. Harris and Apollo. The action alleges that Apollo and
Messrs. Black and Harris tortiously interfered with and fraudulently induced us to terminate our June 25, 2007 merger agreement with Basell AF (an affiliate of Access Industries) and
seeks damages in excess of $3 billion. On July 18, 2008, Apollo and Messrs. Black and Harris filed special appearances objecting to the jurisdiction of the Court. On
July 21, 2008, they filed answers denying liability and moved to dismiss or, alternatively, to stay the case until the Delaware action is concluded. Discovery in this action for damages has not
been expedited, and a trial date has not yet been set.

For
information regarding the Merger and related litigation, please also see "Note 1. GeneralMerger Agreement and Litigation with Apollo and Hexion."

Discoloration Claims

Certain claims have been filed against us relating to discoloration of unplasticized polyvinyl chloride products allegedly caused by
our titanium dioxide ("Discoloration Claims"). Substantially all of the titanium dioxide that is the subject of these claims was manufactured prior to our acquisition of the titanium dioxide business
from ICI in 1999. Net of amounts we have received from insurers and pursuant to contracts of indemnity, we have paid an aggregate of approximately $16 million in costs and settlement amounts
for Discoloration Claims through June 30, 2008.

During
each of the six months ended June 30, 2008 and June 30, 2007, we did not settle any Discoloration Claims. The two Discoloration Claims unresolved as of
June 30, 2008 asserted aggregate damages of €37.7 million ($59.3 million). This amount decreased from asserted damages of €61.4 million as
of March 31, 2008 largely because one of the claimants to the action reassessed its losses from €51.0 million to €26.3 million. An appropriate
liability has been accrued for these claims. Based on our understanding of the merits of these claims and our rights under contracts of indemnity and insurance, we do not believe that the net impact
on our financial condition, results of operations or liquidity will be material.

While
additional Discoloration Claims may be made in the future, we cannot reasonably estimate the amount of loss related to such claims. Although we may incur additional costs as a
result of future claims (including settlement costs), based on our history with Discoloration Claims to date, the fact that substantially all of the titanium dioxide that has been the subject of these
Discoloration Claims was manufactured and sold more than eight years ago, and the fact that we have rights under contract to indemnity, including from ICI, we do not believe that any unasserted
Discoloration Claims will have a

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16.    COMMITMENTS AND CONTINGENCIES (Continued)

material
impact on our financial condition, results of operations or liquidity. Based on this conclusion and our inability to reasonably estimate our expected costs with respect to these unasserted
claims, we have made no accruals in our financial statements as of June 30, 2008 for costs associated with unasserted Discoloration Claims.

Asbestos Litigation

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

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

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

Six Months Ended
June 30,2008

2007Unresolved at beginning of period


1,192


1,367Tendered during period


10


17Resolved during period(1)


59


142Unresolved at end of period


1,143


1,242


---

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16.    COMMITMENTS AND CONTINGENCIES (Continued)

We
have never made any payments with respect to these cases. As of June 30, 2008, we had an accrued liability of $16.4 million relating to these cases and a corresponding
receivable of $16.4 million relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability
associated with these cases would not be material to our financial condition, results of operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our
accruals. Additional asbestos exposure claims may be made against us
in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to
unasserted asbestos exposure claims as of June 30, 2008.

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

Six Months Ended
June 30,2008

2007Unresolved at beginning of period


39


42Filed during period


2


51Resolved during period


1


2Unresolved at end of period


40


91


We
paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of nil and $138,500 during the six months ended June 30, 2008 and 2007,
respectively. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of
operations or liquidity; however, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such
claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure
claims as of June 30, 2008.

Antitrust Matters

We have been named as a defendant in civil antitrust suits alleging a conspiracy to fix prices in the MDI, TDI, and polyether polyols
industries that are now consolidated as the "Polyether Polyols" cases in multidistrict litigation known as In re Urethane Antitrust Litigation, MDL No. 1616, Civil
No. 2:04-md-01616-JWL-DJW, United States District Court, District of Kansas, initial order transferring and consolidating cases filed
August 23, 2004. Other defendants named in the Polyether Polyols cases are Bayer, BASF, Dow and Lyondell. These cases purport to be brought on behalf of a nationwide class of purchasers of MDI,
TDI and polyether polyols. Bayer entered into a classwide settlement agreement with the plaintiffs that was approved by the court. Class certification briefing is underway in these consolidated cases.

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16.    COMMITMENTS AND CONTINGENCIES (Continued)

We
have also been named as a defendant in putative class action antitrust suits alleging a conspiracy to fix prices in the MDI, TDI and polyether polyols industries filed in the Superior
Court of Justice, Ontario, Canada on May 5, 2006 and in Superior Court, Quebec, Canada on May 17, 2006. The other defendants named above in the Polyether Polyols cases are also
defendants in these Canadian cases.

We
also have been named as a defendant in a putative class action antitrust suit pending in the Superior Court of California, County of San Francisco, filed on February 15, 2005
that alleges a conspiracy to fix prices of certain rubber and urethane products in California. The other defendants named in the Polyether Polyols cases are also defendants in this case. The
California action has been stayed pending disposition of the Polyether Polyols cases.

We
have also been named as a defendant in a proposed third amended complaint in a putative class action antitrust suit pending in federal district court in Massachusetts that alleges a
conspiracy to fix prices of certain rubber and urethane products. Other proposed new defendants are also defendants in the Polyether Polyols cases. The Massachusetts action has been stayed pending
settlement of previously asserted claims against previously named parties. We have filed papers opposing the motion for leave to file a third amended complaint in that action.

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

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

MTBE Litigation

We have been named as a defendant in nine lawsuits pending in the U.S. District Court for the Southern District of New York
alleging liability related to MTBE contamination in groundwater. Four of these cases were filed on March 23, 2007, one was filed on March 28, 2007, three were filed on April 5,
2007 and one was filed on January 11, 2008. Numerous other companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants
in these and many other cases currently pending in U.S. courts. The plaintiffs in the nine cases in which we have been named are municipal water districts and a regional water supply authority
that claim that defendants' conduct has caused MTBE contamination of their groundwater. The plaintiffs seek injunctive relief, such as monitoring and abatement, compensatory damages, punitive damages
and attorney fees. At this time, we have insufficient information to meaningfully assess our

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16.    COMMITMENTS AND CONTINGENCIES (Continued)

potential
exposure in these cases and therefore we have not accrued a liability for these claims. We believe that our liability in these cases, if any, would likely be covered, at least in part, by
insurance and/or by indemnity agreements with prior owners.

Shareholder Litigation Relating to the Pending Sale of Our Company

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

On
September 20, 2007, the parties entered into a Memorandum of Understanding with plaintiffs' counsel in the Delaware and Texas actions to settle these four lawsuits. As part of
the proposed settlement, the defendants deny all allegations of wrongdoing, but we agreed to make certain additional
disclosures in the final proxy statement that was mailed to our stockholders on or about September 14, 2007. In connection with the settlement, the parties also reached an agreement with
respect to any application that the plaintiffs' counsel will make for an award of customary attorneys' fees and expenses to be paid following the completion of the Merger. The settlement is subject to
customary conditions, including court approval of the terms of the settlement following notice to members of the proposed settlement class. If finally approved by the court, the settlement will
resolve all claims that were brought on behalf of the proposed settlement class in connection with the Merger, the Merger Agreement, the adequacy of the merger consideration, the negotiations
preceding the Merger Agreement, the adequacy and completeness of the disclosures made in connection with the Merger, and any actions of the individual defendants in the events listed above, including
any alleged breach of fiduciary duties by any of the defendants, or the aiding and abetting thereof. The settlement will not affect stockholders' appraisal rights, if available, pursuant to
Section 262 of the General Corporation Law of the State of Delaware.

The
Memorandum of Understanding will be null and void and of no force and effect if the Merger is not consummated, the Delaware actions are not dismissed or the Texas court does not give
final approval of the settlement and dismiss the Texas action with prejudice for any reason.

The
settlement will not affect the timing of the Merger or the amount of the merger consideration to be paid in the Merger. Under the terms of the Memorandum of Understanding, the terms
of the proposed settlement will not be presented to the court for approval until the Merger is consummated.

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16.    COMMITMENTS AND CONTINGENCIES (Continued)

Port Arthur Plant Fire Insurance Litigation

On August 31, 2007, an action was brought against our Company and International Risk Insurance Company ("IRIC"), our captive
insurer, in the United States District Court for the Southern District of Texas, by seventeen reinsurance companies (the "Reinsurers") that reinsure risks under the property insurance
policy issued by IRIC to our Company (the "Policy") for the period covering the April 29, 2006 fire at our manufacturing facility in Port Arthur, Texas. The action seeks to compel our
Company and IRIC to arbitrate with the Reinsurers to resolve disputes related to the claim for losses caused by the fire or, in the alternative, to declare judgment in favor of the Reinsurers. Motions
to dismiss that action filed by our Company and IRIC were heard December 21, 2007, but have not been decided by the court. In a second and related action filed by our Company against IRIC in
state court in Jefferson County, Texas, IRIC filed a third party petition against the Reinsurers, who then removed that action to the United States District Court for the Eastern District of
Texas. Some of the Reinsurers have filed answers and motions to compel arbitration, to stay these proceedings, and to change venue to the United States District Court for the Southern District
of Texas
in order to consolidate the two actions. Our Company has filed a motion to remand that action to the state court and opposition to the Reinsurers' motions in that action. On April 23, 2008, the
United States District Court for the Eastern District of Texas transferred the case to the United States District Court for the Southern District of Texas but did not rule on the motion
to remand. Our Company has paid its deductible on the claim of $60 million and has been advanced $325.0 million to date (of which $20.0 million was advanced during the six
months ended June 30, 2008) by the Reinsurers. Our Company has claimed an additional approximately $275 million as presently due and owing and unpaid under the Policy for losses caused
by the fire, and anticipates filing additional claims. For more information, see "Note 19. Casualty Losses and Insurance RecoveriesPort Arthur, Texas Plant Fire."

Other Proceedings

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

GUARANTEES

In January 2003, Huntsman International entered into two related joint venture agreements to build MDI production facilities
near Shanghai, China. SLIC, our manufacturing joint venture with BASF AG and three Chinese chemical companies, operates three plants that manufacture MNB, aniline and crude MDI. We indirectly own 35%
of SLIC and it is an unconsolidated affiliate.

On
September 19, 2003, SLIC obtained secured financing for the construction of production facilities. SLIC obtained various committed loans in the aggregate amount of
approximately $230 million in U.S. dollar equivalents. As of June 30, 2008, there were $74.5 million and RMB 921.4 million ($134.3 million) in
outstanding borrowings under these facilities. The interest rate on these facilities is LIBOR plus 0.48% for U.S. dollar borrowings and 90% of the Peoples Bank of

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16.    COMMITMENTS AND CONTINGENCIES (Continued)

China
rate for RMB borrowings. The loans are secured by substantially all the assets of SLIC and will be paid in 16 semiannual installments, which began on June 30, 2007. We
unconditionally guarantee 35% of any amounts due and unpaid by SLIC under the loans described above (except for a $1.5 million VAT facility which is not guaranteed). Our guarantee remains in
effect until SLIC has commenced production of at least 70% of capacity for at least 30 days and has achieved a debt service coverage ratio of at least 1:1. SLIC commenced operations in the
third quarter of 2006. We have estimated that the fair value of this guarantee is nil as of the closing of the transaction and, accordingly, no amounts have been recorded.

GENERAL

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

ENVIRONMENTAL, HEALTH AND SAFETY SYSTEMS

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

EHS CAPITAL EXPENDITURES

We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and
repair pollution control equipment. For the six months ended June 30, 2008 and 2007, our capital expenditures for EHS matters totaled $27.3 million and $23.5 million,
respectively. Since capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, we
cannot provide assurance that our recent expenditures will be indicative of future amounts required under EHS laws.

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17.    ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

REMEDIATION LIABILITIES

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

Under
the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state laws, a current or former owner or operator
of real property may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or
operator may be liable regardless of whether it owned or operated the facility at the time of the release. We have been notified by third parties of claims against us for cleanup liabilities at
approximately 10 former facilities or third party sites, including, but not limited to, sites listed under CERCLA. Based on current information and past experiences at other CERCLA sites, we do
not expect any of these third party claims to result in material liability to us. Recently, Huntsman Advanced Materials received notice from the U.S. Department of Agriculture that the North
Maybe Canyon Superfund site near Soda Springs, Idaho (a Huntsman Polymers Corporation legacy site) will require a Remedial Investigation/Feasibility Study. The current lease holders of the site
have been doing a site investigation since 2004. We continue to believe, based on known facts, that our liability at the site will not be material.

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

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

By
letter dated March 7, 2006, our Base Chemicals and Polymers facility in West Footscray, Australia was issued a clean-up notice by the Australian (Victorian) EPA.
The agency was concerned about soil and groundwater contamination emanating from the site. Although we fulfilled all initial requirements under the clean-up notice, the agency revoked the
original clean-up notice on September 4, 2007 and issued a revised clean-up notice granting an extension due to "the complexity of

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17.    ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

contamination
issues" at the site. The revised clean-up notice reflects a more detailed program, with a deadline for the submission of a detailed site remediation action plan by
March 31, 2009.

In
many cases, our potential liability arising from historical contamination is based on operations and other events occurring prior to our ownership of a business or specific facility.
In these situations, we frequently obtained an indemnity agreement from the prior owner addressing remediation liabilities arising from pre-closing conditions. We have successfully
exercised our rights under these contractual covenants for a number of sites and, where applicable, mitigated our ultimate remediation liability. We cannot assure you, however, that all of such
matters will be subject to indemnity, that the prior owner will honor its indemnity or that our existing indemnities will be sufficient to cover our liabilities for such matters.

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

ENVIRONMENTAL RESERVES

We have accrued liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs and known
penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are based upon available facts, existing
technology and past experience and are discounted when supported by applicable accounting principles. The environmental liabilities do not include amounts recorded as asset retirement obligations. We
have accrued $8.3 million and $7.2 million for environmental liabilities as of June 30, 2008 and December 31, 2007, respectively. Of these amounts, $5.7 million and
$4.6 million are classified as accrued liabilities in our condensed consolidated balance sheets (unaudited) as of June 30, 2008 and December 31, 2007, respectively, and
$2.6 million and $2.6 million are classified as other noncurrent liabilities in our condensed consolidated balance sheets (unaudited) as of June 30, 2008 and December 31,
2007, respectively. In certain cases, our remediation liabilities are payable over periods of up to 30 years. We may incur losses for environmental remediation in excess of the amounts accrued;
however, we are not able to estimate the amount or range of such potential excess.

REGULATORY DEVELOPMENTS

Under the EU's integrated pollution prevention and control directive ("IPPC"), EU member governments are to adopt rules and implement a
cross media (air, water and waste) environmental permitting program for individual facilities. While the EU countries are at varying stages in their respective implementation of the IPPC permit
program, we have submitted all necessary IPPC permit applications required to date and in some cases received completed permits from the applicable

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17.    ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

government
agency. We expect to submit all other IPPC applications and related documents on a timely basis as the various countries implement the IPPC permit program. Although we do not know with
certainty what each IPPC permit will require, we believe, based upon our experience with the permits received to date, that the costs of compliance with the IPPC permit program will not be material to
our financial condition, results of operations or cash flows.

In
December 2006, the EU parliament and EU council approved a new EU regulatory framework for chemicals called "REACH" (Registration, Evaluation and Authorization of Chemicals).
REACH took effect on June 1, 2007, and the program it establishes will be phased in over 11 years. Under the regulation, companies that manufacture or import more than one ton of a
chemical substance per year will be required to register such chemical substances and isolated intermediates in a central database. Use authorizations will be granted for a specific chemical if the
applicants can show that any risk in
using the chemical can be adequately controlled or, where there are no suitable alternatives available, if the applicant can demonstrate that the social and economic benefits of using the chemical
outweigh the risks. In addition, specified uses of some hazardous substances may be restricted. Furthermore, all applicants will have to study the availability of alternative chemicals. If an
alternative is available, an applicant will have to submit a "substitution" plan to the regulatory agency. The regulatory agency will only authorize persistent bio-accumulative and toxic
substances if an alternative chemical is not available. The registration, evaluation and authorization phases of the program will require expenditures and resource commitments in order to, for
example, develop information technology tools, generate data, prepare and submit dossiers for substance registration, participate in consortia, obtain legal advice and reformulate products, if
necessary. We have established a cross-business European REACH team that is working closely with our businesses to identify and list all substances purchased, manufactured or imported by or for us
into the EU. Compliance with REACH begins with a chemical pre-registration process, which utilizes internal resources at nominal expense, began on June 1, 2008 and must be completed
by November 30, 2008. By the deadline, all chemical substances either manufactured or imported into Europe must be pre-registered or removed from the marketplace. The process of
pre-registering all products that we manufacture or import into Europe is currently on schedule for completion by the November 30 deadline. Although the total long-term
cost for REACH compliance is not estimable at this time, we spent approximately $3.0 million on REACH compliance in 2007, and we do not anticipate that compliance costs will be material to us
in the near-term.

GREENHOUSE GAS REGULATION

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

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17.    ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

compliance
costs. Currently, however, it is not possible to estimate the likely financial impact of potential future regulation on any of our sites.

CHEMICAL FACILITY ANTI-TERRORISM RULEMAKING

As required by the Homeland Security Appropriations Act of 2006, on April 9, 2007, the Department of Homeland Security
(the "DHS") issued the Chemical Facility Anti-Terrorism Standards or "CFATS", an interim final rule establishing risk-based performance standards for the chemical
industry. The majority of the standards went into effect on June 8, 2007 and require security vulnerability assessments ("SVAs") and site security plans for facilities qualifying as
high risk.

Since
2003, we have conducted SVAs at our higher risk manufacturing facilities in the U.S. using American Chemical Council protocols. Those assessments led to changes in our
operations in certain instances in an effort to ensure greater security. However, not all of our facilities, including some of our recently acquired sites, have been assessed. A second round of SVAs
under the CFATS regime will be based on the DHS list of "Chemicals of Interest" ("Appendix A") released on November 2, 2007 and will consider the volume of on-site chemicals,
proximity of neighbors to a facility and other factors. Our operating locations with Appendix A chemicals that met the volume thresholds are preparing to conduct SVAs before the end of 2008. We
expect that the cost to perform the SVAs is nominal. At this time, we do not know if we will need to implement any changes to our facilities based on the findings of the SVAs.

MTBE DEVELOPMENTS

We produce MTBE, an oxygenate that is blended with gasoline to reduce vehicle air emissions and to enhance the octane rating of
gasoline. Existing or future litigation or legislative initiatives restricting the use of MTBE in gasoline may subject us or our products to environmental liability or materially adversely affect our
sales and costs. Because MTBE has contaminated some water supplies, its use has become controversial in the U.S. and elsewhere, and its use has been effectively eliminated in the U.S. market.

As
a result of these developments, we currently market, either directly or through third parties, MTBE to customers located outside the U.S. for use as a gasoline additive. There
are additional costs associated with sales to customers outside the U.S., which may result in decreased profitability compared to historical sales in the U.S. We may also elect to use all or a
portion of our precursor TBA to produce saleable products other than MTBE. If we opt to produce products other than MTBE, necessary modifications to our facilities will require significant capital
expenditures and the sale of such other products may produce a lower level of cash flow than that historically produced from the sale of MTBE.

Numerous
companies, including refiners, manufacturers and sellers of gasoline, as well as manufacturers of MTBE, have been named as defendants in approximately 150 cases currently
pending in U.S. courts that allege MTBE contamination in groundwater. We have been named as a defendant in nine of those lawsuits. For more information, see "Note 16. Commitment and
ContingenciesLegal MattersMTBE Litigation." The plaintiffs in the MTBE groundwater contamination cases generally

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17.    ENVIRONMENTAL, HEALTH AND SAFETY MATTERS (Continued)

seek
compensatory damages, punitive damages, injunctive relief, such as monitoring and abatement, and attorney fees. We currently have insufficient information to meaningfully assess our potential
exposure in these cases. We believe that some of our liability in these cases, if any, is likely covered by insurance and/or indemnity agreements with prior owners. It is possible that we could be
named as a defendant in additional existing or future MTBE contamination cases. We cannot provide assurances that adverse results against us in existing or future MTBE contamination cases will not
have a material adverse effect on our business, results of operations and financial position.

18.    STOCK-BASED COMPENSATION PLANS

Under the Huntsman Stock Incentive Plan (the "Stock Incentive Plan"), a plan approved by stockholders, we may grant non-qualified stock options, incentive stock
options, stock appreciation rights, restricted stock, phantom stock, performance awards and other stock-based awards to our employees and directors and to employees and directors of our subsidiaries,
provided that incentive stock options may be granted solely to employees. The terms of the grants are fixed at the grant date. As of June 30, 2008, we were authorized to grant up to
21,590,909 shares under the Stock Incentive Plan. Option awards have a maximum contractual term of 10 years and generally must have an exercise price at least equal to the market price
of our common stock on the date the option award is granted. Stock-based awards generally vest ratably over a three-year period.

Under
the Merger Agreement, we have agreed, among other things, that we will not grant or issue any capital stock or equity interests, other than (i) the issuance of common stock
upon the exercise of stock options granted under the Stock Incentive Plan and outstanding on the date of the Merger Agreement,
(ii) upon the expiration of any restrictions on any restricted stock granted under the Stock Incentive Plan and outstanding on the date of the Merger Agreement or issued in compliance with the
Merger Agreement, and (iii) issuances of restricted stock or phantom stock granted after February 15, 2008 under the Stock Incentive Plan to employees and directors in amounts consistent
with past practice or pursuant to action taken by our board of directors (or a committee thereof) and in aggregate not covering more than 600,000 shares of common stock, 50% of which
will become fully vested and convert into the right to receive the merger consideration upon the effective time of the Merger and 50% of which will become fully vested and convert into the right to
receive the merger consideration six months following the consummation of the Merger. If the Merger is not consummated, the restricted stock and phantom stock granted during 2008 will vest ratably
over a three-year period from the grant date.

Upon
consummation of the Merger, the restrictions applicable to each share of restricted common stock (including common stock underlying restricted stock units and phantom stock) issued
or granted pursuant to the Stock Incentive Plan shall immediately lapse, and, at the effective time of the Merger, each share of such common stock, restricted stock units and phantom stock will be
converted into the right to receive the merger consideration. All options to acquire shares of common stock outstanding under the Stock Incentive Plan will vest immediately prior to the effective time
of the Merger, and holders of such options will be entitled to receive an amount in cash equal to the excess, if any, of the merger consideration over the exercise price per share of common stock for
each option. Any

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18.    STOCK-BASED COMPENSATION PLANS (Continued)

incremental
compensation cost that may result from the acceleration of vesting of stock-based awards in connection with the Merger will be recognized when the Merger is consummated.

The
compensation cost from continuing operations for the Stock Incentive Plan was $5.1 million and $6.2 million for the three months ended June 30, 2008 and 2007,
respectively, and $11.2 million each for the six months ended June 30, 2008 and 2007. The total income tax benefit recognized in the statement of operations for stock-based compensation
arrangements was $3.5 million each for the six months ended June 30, 2008 and 2007.

The
fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table.
Because we became a publicly-held company in February 2005, expected volatilities are based on implied volatilities from the stock of comparable companies and other factors. The
expected term of options granted is estimated based on the contractual term of the instruments and employees' expected exercise and post-vesting employment termination behavior. The
risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Three months
ended
June 30,

Six months
ended
June 30,2008

2007

2008

2007Dividend yield

NA


2.0%

NA


1.9%Expected volatility

NA


20.8%

NA


20.8%Risk-free interest rate

NA


4.6%

NA


4.7%Expected life of stock options granted during the period

NA


6.6 years

NA


6.6 years


During
the three and six months ended June 30, 2008, no stock options were granted.

STOCK OPTIONS

A summary of stock option activity under the Stock Incentive Plan as of June 30, 2008 and changes during the six months then
ended is presented below:

Option Awards

Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value(in thousands)



(Years)

(in millions)Outstanding at January 1, 2008


6,327

$
21.32Granted





Exercised





Forfeited


(48
)

20.62Outstanding at June 30, 2008


6,279


21.32


7.7

$
Exercisable at June 30, 2008


4,199


21.73


7.3





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18.    STOCK-BASED COMPENSATION PLANS (Continued)

As
of June 30, 2008, there was $9.1 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the Stock Incentive Plan.
That cost is expected to be recognized over a weighted-average period of approximately 1.2 years.

NONVESTED SHARES

Nonvested shares granted under the Stock Incentive Plan consist of restricted stock, which is accounted for as an equity award, and
phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash. A summary of the status of our nonvested shares as of June 30, 2008 and changes
during the six months then ended is presented below:

Equity Awards

Liability AwardsShares

Weighted
Average
Grant-Date
Fair Value

Shares

Weighted
Average
Grant-Date
Fair Value(in thousands)



(in thousands)Nonvested at January 1, 2008


1,007

$
21.12


145

$20.76Granted


492


24.56


108

24.56Vested


(535)
(1)

21.60


(58
)
21.03Forfeited


(7
)

20.59


(8
)
22.13Nonvested at June 30, 2008


957


22.62


187

22.82


---

As
of June 30, 2008, there was $19.7 million of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the Stock Incentive
Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.0 years. The total fair value of shares that vested during the six months ended June 30,
2008 and 2007 was $13.1 million and $8.7 million, respectively.

19.    CASUALTY LOSSES AND INSURANCE RECOVERIES

PORT ARTHUR, TEXAS PLANT FIRE

On April 29, 2006, our Port Arthur, Texas olefins manufacturing plant (which we sold in November 2007) experienced a
major fire. With the exception of cyclohexane operations at the site, which were restarted in June 2006, the remaining operations at the site were shutdown until we restarted operations in the
fourth quarter of 2007. The Port Arthur manufacturing plant is covered by property damage and business interruption insurance. With respect to coverage for this outage, the deductible for property
damage is $10.0 million and business interruption coverage does not apply for

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19.    CASUALTY LOSSES AND INSURANCE RECOVERIES (Continued)

the
first 60 days, subject to a combined deductible for property damage and business interruption of $60.0 million.

Through
June 30, 2008, we have received partial recovery advances totaling $325.0 million. We have recorded $187.9 million of repair and maintenance costs and fixed
costs incurred during the business interruption period against the $325.0 million of partial recovery advances resulting in a deferred insurance recovery gain of $137.1 million. We have
claimed an additional approximately $275 million as presently due and owing and unpaid under the insurance policy for losses caused by the fire, and anticipate filing additional claims. The
Reinsurers have failed to process additional requests for interim claim recovery advances pending their further review and adjusting of the overall claim. On August 31, 2007, the Reinsurers
filed suit against us and IRIC, our captive insurance company, in the United States District Court for the Southern District of Texas seeking to compel arbitration of certain disputed claims or
alternatively seeking a declaratory judgment on disputed claims. See "Note 16. Commitment and ContingenciesLegal MattersPort Arthur Plant Fire Insurance Litigation."

During
the six months ended June 30, 2008, the deferred insurance recovery gain remained unchanged at $137.1 million and is included in "Accrued liabilities" in the
accompanying condensed consolidated balance sheet (unaudited) as of June 30, 2008.

Future
insurance recovery advances, if any, in excess of accrued fixed costs and other expenses relating to the damaged facilities will be recorded as a deferred gain, and any remaining
deferred gains associated with this event will not be recognized in our consolidated statements of operations until final settlement is reached with our insurance carriers.

U.S. GULF COAST STORMS

On September 22, 2005, we sustained property damage at our Port Neches and Port Arthur, Texas facilities as a result of a
hurricane. We maintain customary insurance coverage for property damage and business interruption. With respect to coverage of these losses, the deductible for property damage was $10.0 million
per site, while business interruption coverage does not apply for the first 60 days.

During
2006 and 2007, we recorded insurance recoveries of $37.5 million related to the gulf coast storms. We and our insurers are working to reach a settlement on the remainder of
the insurance claim, and we can provide no assurance with respect to the ultimate resolution of this matter. Any future collections will represent income for us upon final settlement.

20.    INCOME TAXES

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

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20.    INCOME TAXES (Continued)

On
April 12, 2007, we received a Revenue Agent Report from the Internal Revenue Service ("IRS") related to the examination of our federal income tax returns for the years 2002
through 2004. The IRS initially proposed a decrease to our net operating losses of approximately $387 million related to transactions completed in 2002. However, on January 5, 2008, we
were notified by the IRS that no adjustment would be made to our net operating loss for this disputed item. As a result of the settlement of this audit cycle and the effective settlement of two
uncertain tax positions in other countries, during the six months ended June 30, 2008 we recorded a decrease in unrecognized tax benefits and a corresponding income tax benefit of
$18.4 million.

HUNTSMAN CORPORATION

We recorded income tax expense of $24.6 million and $4.4 million for the six months ended June 30, 2008 and 2007,
respectively. Our tax obligations are affected by the mix of income and losses in the tax jurisdictions in which we operate.

Our
effective income tax rate was 50% for the six months ended June 30, 2008, which is higher than the U.S. statutory rate of 35% primarily due to our mix of earnings in
tax jurisdictions with higher statutory rates and losses in tax jurisdictions which do not record tax benefits due to valuation allowances, partially offset by the benefit for the decrease in
unrecognized tax benefits during the year. Our effective income tax rate was 4% for the six months ended June 30, 2007, which is lower than the U.S. statutory rate of 35% primarily due
to our mix of earnings in tax jurisdictions where no tax expense is provided due to the release of valuation allowances, losses in tax jurisdictions where we recognize tax benefits, earnings in tax
jurisdictions with lower statutory rates, and a non-recurring benefit from the release of our U.S. valuation allowance. Our effective tax rate increased largely due to income in
jurisdictions where we no longer have a valuation allowance and net increases in operating losses in jurisdictions where we have valuation allowances and in which we do not record a
tax benefit.

Merger-related
costs of $9.0 million are included in income from continuing operations before income taxes for the six months ended June 30, 2008 which are not benefited
for tax purposes because such costs are not deductible for income tax purposes. See "Note 15. Expenses Associated with the Merger."

HUNTSMAN INTERNATIONAL

Huntsman International recorded income tax expense of $28.2 million and $42.1 million for the six months ended
June 30, 2008 and 2007, respectively. Huntsman International's tax obligations are affected by the mix of income and losses in the tax jurisdictions in which it operates.

Huntsman
International's effective income tax rate was 43% for the six months ended June 30, 2008, which is higher than the U.S. statutory rate of 35% primarily due to its
mix of earnings in tax jurisdictions with higher statutory rates and losses in tax jurisdictions which do not record tax benefits due to valuation allowances, offset by the benefit for the decrease in
unrecognized tax benefits during the year. Huntsman International's effective income tax rate was 38% for the six months ended June 30, 2007, which is higher than the U.S. statutory rate
of 35% primarily due to its mix of earnings in tax jurisdictions with higher statutory rates and losses in tax jurisdictions which do not record tax

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20.    INCOME TAXES (Continued)

benefits
due to valuation allowances. Huntsman International's effective tax rate increased largely due to income in jurisdictions where we no longer have a valuation allowance and net increases in
operating losses in jurisdictions where we have valuation allowances and in which we do not record a tax benefit.

21.    NET INCOME (LOSS) PER SHARE

Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares outstanding during
the period. Diluted income per share reflects potential dilution and is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding during the
period, increased by the number of additional shares that would have been outstanding if the potential dilutive units had been exercised or converted. On February 16, 2008, the mandatory
convertible preferred stock converted into 12,082,475 shares of our common stock.

Basic
and diluted income (loss) weighted average shares are determined as follows:

Three months ended June 30,

Six months ended June 30,2008

2007

2008

2007Weighted average shares outstanding


233,544,492


220,938,218


230,307,034


220,861,287Dilutive securities:Stock-based awards


139,549


95,872


272,620


105,149Preferred stock conversion





12,499,925


3,120,200


12,499,925Total dilutive shares outstanding assuming conversion


233,684,041


233,534,015


233,699,854


233,466,361


Additional
stock-based awards of 6,457,946 and 6,507,582 weighted average equivalent shares of stock were outstanding during the three months ended June 30, 2008 and 2007,
respectively, and additional stock-based awards of 6,385,652 and 6,164,452 weighted average equivalent shares of stock were outstanding during the six months ended June 30, 2008 and
2007, respectively, and were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

22.    OPERATING SEGMENT INFORMATION

We report our operations in six segments: Polyurethanes, Materials and Effects, Performance Products, Pigments, Polymers and Base Chemicals.

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22.    OPERATING SEGMENT INFORMATION (Continued)

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

Segment

ProductsPolyurethanes

MDI, PO, polyols, PG, TPU, aniline and MTBEMaterials and Effects

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

amines, surfactants, LAB, maleic anhydride, other performance chemicals, EG, olefins and technology licensesPigments

titanium dioxidePolymers(1)

LDPE and LLDPE, polypropylene and EPSBase Chemicals(1)(2)

olefins and cyclohexaneCorporate and other(2)

styrene


---

Sales
between segments are generally recognized at external market prices and are eliminated in consolidation. We use EBITDA to measure the financial performance of our global business
units and for reporting the results of our operating segments. This measure includes all operating items relating to the businesses. The EBITDA of operating segments excludes items that principally
apply to our

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22.    OPERATING SEGMENT INFORMATION (Continued)

Company
as a whole. The revenues and EBITDA for each of our reportable operating segments are as follows (dollars in millions):

Three months ended
June 30,

Six months ended
June 30,2008

2007

2008

2007Net Sales:Polyurethanes

$
1,160.9

$
1,010.2

$
2,162.6

$
1,850.2Materials and Effects


688.8


621.5


1,311.2


1,211.1Performance Products


725.1


548.4


1,356.4


1,100.3Pigments


320.7


293.2


605.9


563.4Corporate and other(2)


43.3


34.5


82.9


72.6Eliminations


(43.1
)

(36.6
)

(82.9
)

(74.5
)Total

$
2,895.7

$
2,471.2

$
5,436.1

$
4,723.1Huntsman Corporation:Segment EBITDA(1):Polyurethanes

$
147.7

$
158.6

$
279.5

$
276.9Materials and Effects


50.5


52.5


89.1


109.6Performance Products


50.5


33.2


103.5


105.3Pigments


7.3


21.9


17.7


45.4Corporate and other(2)


(53.0
)

(59.0
)

(116.4
)

(100.2
)Subtotal


203.0


207.2


373.4


437.0Polymers(3)


2.7


(219.9
)

3.9


(206.5
)Base Chemicals(3)


4.5


35.3


2.4


34.1Total


210.2


22.6


379.7


264.6Interest expense, net


(65.5
)

(70.0
)

(130.3
)

(143.8
)Income tax (expense) benefitcontinuing operations


(21.2
)

8.0


(24.6
)

(4.4
)Income tax (expense) benefitdiscontinued operations


(2.3
)

76.3


(2.5
)

76.3Depreciation and amortization


(97.5
)

(107.8
)

(191.3
)

(217.0
)Net income (loss)

$
23.7

$
(70.9
)
$
31.0

$
(24.3
)Huntsman International:Segment EBITDA(1):Polyurethanes

$
147.7

$
158.6

$
279.5

$
276.9Materials and Effects


50.5


52.5


89.1


109.6Performance Products


50.5


33.2


103.5


105.3Pigments


7.3


21.9


17.7


45.4Corporate and other(2)


(50.6
)

(58.0
)

(111.3
)

(103.8
)Subtotal


205.4


208.2


378.5


433.4Polymers(3)


2.7


(219.9
)

3.9


(206.5
)Base Chemicals(3)


4.5


35.3


2.4


34.1Total


212.6


23.6


384.8


261.0Interest expense, net


(65.6
)

(70.2
)

(130.5
)

(144.4
)Income tax expensecontinuing operations


(21.8
)

(18.5
)

(28.2
)

(42.1
)Income tax (expense) benefitdiscontinued operations


(2.3
)

76.3


(2.5
)

76.3Depreciation and amortization


(91.8
)

(102.1
)

(180.0
)

(205.6
)Net income (loss)

$
31.1

$
(90.9
)
$
43.6

$
(54.8
)


---

54

---



Table of Contents

HUNTSMAN CORPORATION AND SUBSIDIARIES

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

22.    OPERATING SEGMENT INFORMATION (Continued)

23.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF HUNTSMAN INTERNATIONAL LLC (UNAUDITED)

The following condensed consolidating financial information (unaudited) of Huntsman International presents, in separate columns, financial information for the following: Huntsman
International (on a parent only basis), with its investment in subsidiaries recorded under the equity method; the guarantors of Huntsman International's debt on a combined, and where
appropriate, consolidated basis; and non-guarantor subsidiaries on a combined, and where appropriate, consolidated basis. Additional columns present eliminating adjustments and
consolidated totals as of June 30, 2008 and December 31, 2007 and for the three and six months ended June 30, 2008 and 2007. There are no contractual restrictions limiting
transfers of cash from Huntsman International's guarantors to Huntsman International. Each Huntsman International guarantor is 100% owned by Huntsman International and has fully and unconditionally
guaranteed Huntsman International's debt on a joint and several basis.

55

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Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

AS OF JUNE 30, 2008

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International LLCASSETSCurrent assets:Cash and cash equivalents

$
5.8

$
5.9

$
129.0

$


$
140.7Restricted cash








3.4





3.4Accounts and notes receivables, net


31.9


152.7


1,201.2





1,385.8Accounts receivable from affiliates


1,128.6


2,387.9


117.0


(3,371.3
)

262.2Inventories, net


91.7


238.9


1,243.1


(9.1
)

1,564.6Prepaid expenses


3.4


0.6


21.9





25.9Deferred income taxes


7.1


47.7


18.9


1.4


75.1Other current assets


0.1


0.8


109.7





110.6Total current assets


1,268.6


2,834.5


2,844.2


(3,379.0
)

3,568.3Property, plant and equipment, net


472.2


889.5


2,368.6


2.6


3,732.9Investment in affiliates


5,724.4


1,582.6


114.1


(7,151.0
)

270.1Intangible assets, net


115.4


0.6


53.3





169.3Goodwill





87.1


12.3


(4.1
)

95.3Deferred income taxes


135.6


17.0


217.3


(37.3
)

332.6Notes receivables from affiliates


537.1


2,032.9


9.0


(2,569.9
)

9.1Other noncurrent assets


57.8


149.5


364.3





571.6Total assets

$
8,311.1

$
7,593.7

$
5,983.1

$
(13,138.7
)
$
8,749.2LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
32.2

$
274.4

$
783.3

$
0.1

$
1,090.0Accounts payable to affiliates


2,214.5


725.3


447.5


(3,371.3
)

16.0Accrued liabilities


92.7


194.0


486.8





773.5Deferred income taxes








3.4





3.4Current portion of long-term debt


339.0





46.4





385.4Total current liabilities


2,678.4


1,193.7


1,767.4


(3,371.2
)

2,268.3Long-term debt


3,385.9


2.5


179.7





3,568.1Deferred income taxes


2.2


72.6


115.1


(35.9
)

154.0Notes payable to affiliates





493.4


2,081.3


(2,570.0
)

4.7Other noncurrent liabilities


183.4


115.8


361.4


(0.7
)

659.9Total liabilities


6,249.9


1,878.0


4,504.9


(5,977.8
)

6,655.0Minority interest in consolidated subsidiaries





0.5


25.3


7.2


33.0Members' equity:Members' equity


2,856.8


4,796.1


1,333.5


(6,129.6
)

2,856.8Subsidiary preferred stock





1.4


1.5


(2.9
)

(Accumulated deficit) retained earnings


(1,102.6
)

397.8


(27.6
)

(370.2
)

(1,102.6
)Accumulated other comprehensive income


307.0


519.9


145.5


(665.4
)

307.0Total members' equity


2,061.2


5,715.2


1,452.9


(7,168.1
)

2,061.2Total liabilities and members' equity

$
8,311.1

$
7,593.7

$
5,983.1

$
(13,138.7
)
$
8,749.2


56

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

AS OF DECEMBER 31, 2007

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International LLCASSETSCurrent assets:Cash and cash equivalents

$
11.3

$
5.7

$
136.9

$


$
153.9Accounts and notes receivables, net


29.9


212.4


1,011.0





1,253.3Accounts receivable from affiliates


1,527.9


2,438.6


532.1


(4,305.5
)

193.1Inventories, net


96.1


233.7


1,130.4


(8.3
)

1,451.9Prepaid expenses


5.9


26.5


24.3


(19.6
)

37.1Deferred income taxes


9.3


45.6


18.1


1.4


74.4Other current assets


9.8


1.1


101.8





112.7Total current assets


1,690.2


2,963.6


2,954.6


(4,332.0
)

3,276.4Property, plant and equipment, net


471.0


837.6


2,244.9


2.8


3,556.3Investment in affiliates


5,345.1


1,597.3


114.9


(6,829.5
)

227.8Intangible assets, net


127.8


1.8


47.8





177.4Goodwill





87.1


9.5


(4.1
)

92.5Deferred income taxes


85.1


16.6


210.9


(12.6
)

300.0Notes receivables from affiliates


517.7


1,726.5


8.4


(2,244.2
)

8.4Other noncurrent assets


57.1


97.8


301.4





456.3Total assets

$
8,294.0

$
7,328.3

$
5,892.4

$
(13,419.6
)
$
8,095.1LIABILITIES AND MEMBERS' EQUITYCurrent liabilities:Accounts payable

$
40.6

$
258.4

$
706.4

$


$
1,005.4Accounts payable to affiliates


2,682.4


707.6


930.5


(4,305.5
)

15.0Accrued liabilities


100.8


237.8


462.0


(19.6
)

781.0Deferred income taxes








3.2





3.2Current portion of long-term debt


26.6





41.9





68.5Total current liabilities


2,850.4


1,203.8


2,144.0


(4,325.1
)

1,873.1Long-term debt


3,342.9





157.4





3,500.3Deferred income taxes


2.2


11.4


121.7


(11.0
)

124.3Notes payable to affiliates


27.7


477.2


1,744.1


(2,244.3
)

4.7Other noncurrent liabilities


181.4


121.8


374.3


(0.7
)

676.8Total liabilities


6,404.6


1,814.2


4,541.5


(6,581.1
)

6,179.2Minority interest in consolidated subsidiaries





0.5


19.0


7.0


26.5Members' equity:Members' equity


2,845.4


4,672.2


1,296.4


(5,968.6
)

2,845.4Subsidiary preferred stock





1.5


1.4


(2.9
)

(Accumulated deficit) retained earnings


(1,142.9
)

383.5


(3.4
)

(380.1
)

(1,142.9
)Accumulated other comprehensive income


186.9


456.4


37.5


(493.9
)

186.9Total members' equity


1,889.4


5,513.6


1,331.9


(6,845.5
)

1,889.4Total liabilities and members' equity

$
8,294.0

$
7,328.3

$
5,892.4

$
(13,419.6
)
$
8,095.1


57

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Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 2008

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International LLCRevenues:Trade sales, services and fees

$
239.3

$
777.6

$
1,850.0

$


$
2,866.9Related party sales


96.9


117.3


302.9


(488.3
)

28.8Total revenues


336.2


894.9


2,152.9


(488.3
)

2,895.7Cost of goods sold


272.9


803.9


1,914.1


(481.0
)

2,509.9Gross profit


63.3


91.0


238.8


(7.3
)

385.8Selling, general and administrative


28.7


35.7


169.6


(0.2
)

233.8Research and development


13.1


8.3


19.1





40.5Other operating (income) expense


(6.4
)

(0.4
)

8.2





1.4Restructuring, impairment and plant closing costs








1.0





1.0Operating income


27.9


47.4


40.9


(7.1
)

109.1Interest (expense) income, net


(60.6
)

30.0


(35.0
)




(65.6
)Gain (loss) on accounts receivable securitization program


1.5


(2.8
)

(3.6
)




(4.9
)Equity in income (loss) of investment in affiliates and subsidiaries


55.5


0.2


3.6


(55.7
)

3.6Other (expense) income


(6.4
)

(0.1
)

0.5


6.5


0.5Income (loss) from continuing operations before income taxes and minority interest


17.9


74.7


6.4


(56.3
)

42.7Income tax benefit (expense)


11.9


(29.7
)

(4.0
)




(21.8
)Minority interest in subsidiaries' income








(3.0
)

(0.1
)

(3.1
)Income (loss) from continuing operations


29.8


45.0


(0.6
)

(56.4
)

17.8Income from discontinued operations, net of tax


1.3


2.9


0.7





4.9Extraordinary gain on the acquisition of a business, net of tax








8.4





8.4Net income (loss)

$
31.1

$
47.9

$
8.5

$
(56.4
)
$
31.1


58

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED JUNE 30, 2007

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International LLCRevenues:Trade sales, services and fees

$
248.5

$
582.7

$
1,589.0

$


$
2,420.2Related party sales


125.0


118.1


263.3


(455.4
)

51.0Total revenues


373.5


700.8


1,852.3


(455.4
)

2,471.2Cost of goods sold


294.1


624.9


1,611.8


(453.8
)

2,077.0Gross profit


79.4


75.9


240.5


(1.6
)

394.2Selling, general and administrative


55.9


23.9


138.3


(0.2
)

217.9Research and development


10.6


8.2


17.4





36.2Other operating expense (income)


2.0


(13.1
)

17.1





6.0Restructuring, impairment and plant closing (credits) costs





(0.5
)

13.7





13.2Operating income


10.9


57.4


54.0


(1.4
)

120.9Interest income (expense), net


4.7


(43.4
)

(31.5
)




(70.2
)Loss on accounts receivable securitization program


(0.2
)

(2.7
)

(1.8
)




(4.7
)Equity in (loss) income of investment in affiliates and subsidiaries


(106.6
)

68.4


5.1


38.2


5.1Other (expense) income


(1.6
)

5.5


(1.0
)

(4.1
)

(1.2
)(Loss) income from continuing operations before income taxes and minority interest


(92.8
)

85.2


24.8


32.7


49.9Income tax benefit (expense)


10.4


(13.8
)

(15.1
)




(18.5
)Minority interest in subsidiaries' loss





4.1


11.2


(4.2
)

11.1(Loss) income from continuing operations


(82.4
)

75.5


20.9


28.5


42.5(Loss) income from discontinued operations, net of tax


(11.7
)

(134.7
)

21.9





(124.5
)Extraordinary gain (loss) on the acquisition of a business, net of tax


3.2





(12.1
)




(8.9
)Net (loss) income

$
(90.9
)
$
(59.2
)
$
30.7

$
28.5

$
(90.9
)


59

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2008

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International LLCRevenues:Trade sales, services and fees

$
450.4

$
1,425.1

$
3,506.5

$


$
5,382.0Related party sales


216.0


215.6


579.2


(956.7
)

54.1Total revenues


666.4


1,640.7


4,085.7


(956.7
)

5,436.1Cost of goods sold


537.1


1,473.0


3,618.1


(948.9
)

4,679.3Gross profit


129.3


167.7


467.6


(7.8
)

756.8Selling, general and administrative


43.4


68.3


350.9


(0.4
)

462.2Research and development


25.8


15.5


38.2





79.5Other operating expense (income)


25.5


(32.5
)

18.8





11.8Restructuring, impairment and plant closing costs


0.1





4.9





5.0Operating income


34.5


116.4


54.8


(7.4
)

198.3Interest (expense) income, net


(116.8
)

53.9


(67.6
)




(130.5
)Gain (loss) on accounts receivable securitization program


4.3


(6.1
)

(7.7
)




(9.5
)Equity in income (loss) of investment in affiliates and subsidiaries


79.2


(4.6
)

6.7


(74.6
)

6.7Other (expense) income


(6.3
)

(0.1
)

0.6


6.5


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


(5.1
)

159.5


(13.2
)

(75.5
)

65.7Income tax benefit (expense)


47.8


(63.4
)

(12.6
)




(28.2
)Minority interest in subsidiaries' income








(6.4
)

(0.1
)

(6.5
)Income (loss) from continuing operations


42.7


96.1


(32.2
)

(75.6
)

31.0Income (loss) from discontinued operations, net of tax


0.9


3.7


(0.8
)




3.8Extraordinary gain on the acquisition of a business, net of tax








8.8





8.8Net income (loss)

$
43.6

$
99.8

$
(24.2
)
$
(75.6
)
$
43.6


60

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2007

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International
LLCRevenues:Trade sales, services and fees

$
472.8

$
1,130.0

$
3,020.7

$


$
4,623.5Related party sales


249.1


226.6


510.1


(886.2
)

99.6Total revenues


721.9


1,356.6


3,530.8


(886.2
)

4,723.1Cost of goods sold


558.2


1,188.5


3,074.4


(884.7
)

3,936.4Gross profit


163.7


168.1


456.4


(1.5
)

786.7Selling, general and administrative


105.1


44.7


275.8


(0.4
)

425.2Research and development


20.3


16.5


32.7





69.5Other operating expense (income)


7.0


(20.2
)

21.5





8.3Restructuring, impairment and plant closing (credits) costs





(0.4
)

24.8





24.4Operating income


31.3


127.5


101.6


(1.1
)

259.3Interest income (expense), net


4.3


(85.1
)

(63.6
)




(144.4
)Gain (loss) on accounts receivable securitization program


0.2


(4.5
)

(4.6
)




(8.9
)Equity in (loss) income of investment in affiliates and subsidiaries


(88.6
)

82.5


7.3


6.1


7.3Other (expense) income


(3.4
)

5.4


(0.4
)

(4.1
)

(2.5
)(Loss) income from continuing operations before income taxes and minority interest


(56.2
)

125.8


40.3


0.9


110.8Income tax benefit (expense)


11.1


(25.7
)

(27.5
)




(42.1
)Minority interest in subsidiaries' loss





0.1


10.8


(0.2
)

10.7(Loss) income from continuing operations


(45.1
)

100.2


23.6


0.7


79.4(Loss) income from discontinued operations, net of tax


(8.3
)

(140.0
)

20.6





(127.7
)Extraordinary loss on the acquisition of a business, net of tax


(1.4
)




(5.1
)




(6.5
)Net (loss) income

$
(54.8
)
$
(39.8
)
$
39.1

$
0.7

$
(54.8
)


61

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2008

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash (used in) provided by operating activities

$
(68.6
)
$
306.9

$
(209.7
)
$


$
28.6Investing activities:Capital expenditures


(23.5
)

(82.5
)

(118.2
)




(224.2
)Proceeds from sale of assets, net of adjustments





(27.9
)

1.6





(26.3
)Net (receivable) collections from affiliates


(59.1
)

(270.8
)




270.8


(59.1
)Investment in affiliates, net


(150.0
)

(40.6
)

(0.3
)

150.1


(40.8
)Change in restricted cash








(3.4
)




(3.4
)Other, net





(0.4
)

0.6





0.2Net cash provided by (used in) investing activities


(232.6
)

(422.2
)

(119.7
)

420.9


(353.6
)Financing activities:Net borrowings under revolving loan facilities


324.5





7.5





332.0Net repayments on overdraft facilities








(8.6
)




(8.6
)Repayments of long-term debt








(5.2
)




(5.2
)Proceeds from long-term debt








17.1





17.1Intercompany borrowings








270.8


(270.8
)

Repayments on notes payable


(26.6
)




(1.9
)




(28.5
)Proceeds from notes payable








4.7





4.7Contribution from (distributions to) parent, net





115.5


34.6


(150.1
)

Debt issuance costs paid


(2.2
)










(2.2
)Other, net








(0.1
)




(0.1
)Net cash provided by financing activities


295.7


115.5


318.9


(420.9
)

309.2Effect of exchange rate changes on cash








2.6





2.6(Decrease) increase in cash and cash equivalents


(5.5
)

0.2


(7.9
)




(13.2
)Cash and cash equivalents at beginning of period


11.3


5.7


136.9





153.9Cash and cash equivalents at end of period

$
5.8

$
5.9

$
129.0

$


$
140.7


62

---



Table of Contents

HUNTSMAN INTERNATIONAL LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2007

(Dollars in Millions)

Parent
Company

Guarantors

Nonguarantors

Eliminations

Consolidated
Huntsman
International
LLCNet cash provided by (used in) operating activities

$
590.7

$
(460.0
)
$
(65.4
)
$
(5.3
)
$
60.0Investing activities:Capital expenditures


(14.9
)

(151.3
)

(116.6
)




(282.8
)Acquisition of business, net of cash acquired and post-closing adjustments








26.9





26.9Proceeds from sale of assets








15.8





15.8Net (receivable) collections from affiliates


(739.3
)

2.9





736.4


Investment in affiliates, net


42.7


(1.3
)

(15.4
)

(42.7
)

(16.7
)Other, net








(0.5
)




(0.5
)Net cash used in investing activities


(711.5
)

(149.7
)

(89.8
)

693.7


(257.3
)Financing activities:Net borrowings (repayments) under revolving loan facilities


218.5





(13.5
)




205.0Net repayments on overdraft facilities








(0.2
)




(0.2
)Repayments of long-term debt


(313.0
)

(0.3
)

(4.2
)




(317.5
)Proceeds from long-term debt


249.5





16.6





266.1Intercompany borrowings (repayments)





739.3


(2.9
)

(736.4
)

Repayments on notes payable


(36.8
)




(1.3
)




(38.1
)Proceeds from notes payable








4.5





4.5Call premiums related to early extinguishment of debt


(1.2
)










(1.2
)Debt issuance costs paid


(4.2
)










(4.2
)(Distributions to) contributions from parent, net





(116.8
)

68.8


48.0


Other, net


0.1


(0.9
)







(0.8
)Net cash provided by financing activities


112.9


621.3


67.8


(688.4
)

113.6Effect of exchange rate changes on cash








5.2





5.2(Decrease) increase in cash and cash equivalents


(7.9
)

11.6


(82.2
)




(78.5
)Cash and cash equivalents at beginning of period


18.1





227.9





246.0Cash and cash equivalents at end of period

$
10.2

$
11.6

$
145.7

$


$
167.5


63

---





Table of Contents

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

FORWARD-LOOKING STATEMENTS

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

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

There
are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report.
Any forward-looking statements should be considered in light of the risks referenced in "Part II. Item 1A. Risk Factors" in this report and in "Part I. Item 1A. Risk
Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2007.

OVERVIEW

Business

We are a global manufacturer of differentiated chemical products; we also manufacture inorganic chemical products. Our products
comprise a broad range of chemicals and formulations, which we market globally to a diversified group of consumer and industrial customers. Our products are used in a wide range of applications,
including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power
generation, refining, synthetic fiber, textile chemicals and dye industries. We are a leading global producer in many of our key product lines, including MDI, amines, surfactants, epoxy-based polymer
formulations, textile chemicals, dyes, maleic anhydride and titanium dioxide. We had revenues for the six months ended June 30, 2008 and 2007 of $5,436.1 million and
$4,723.1 million, respectively.

We
currently report our operations in six segments: Polyurethanes, Materials and Effects, Performance Products, Pigments, Polymers, and Base Chemicals. Our Polyurethanes, Materials and
Effects and
Performance Products segments produce differentiated chemical products and our Pigments segment produces inorganic chemical products. Our former Polymers and Base Chemicals segments produced commodity
chemical products prior to the dispositions discussed in "Note 3. Discontinued Operations" to our condensed consolidated financial statements (unaudited) included elsewhere in
this report.

64

---



Table of Contents

RECENT DEVELOPMENTS

Merger Agreement and Litigation with Apollo and Hexion

On July 12, 2007, we entered into the Merger Agreement with Hexion pursuant to which Hexion agreed to acquire all of our
outstanding common stock for $28.00 per share in cash. Under the terms of the Merger Agreement, the $28.00 per share cash price to be paid by Hexion increases at the rate of 8% per annum (inclusive of
any dividends paid) beginning April 6, 2008 and continuing through the closing date of the Merger. On October 16, 2007, our stockholders holding a majority of the shares entitled to vote
thereon approved a proposal to adopt the Merger Agreement.

On
June 18, 2008, Apollo and Hexion filed an action for declaratory judgment against us in Delaware Chancery Court. We believe that, by filing this action, both Apollo and Hexion
are improperly seeking to avoid their obligations under the Merger Agreement. The action seeks the following declarations from the court:



In
connection with this action, Hexion engaged Duff & Phelps, a financial advisor, to provide a letter stating that the combined company would be insolvent following the
consummation of the Merger. This letter was based on certain assumptions and was produced without our consultation or consent.

Notwithstanding
the pending litigation, the Merger Agreement remains in effect, and we are seeking to cause the Merger to be completed in accordance with the terms of the Merger
Agreement. On July 4, 2008, we exercised our right under the Merger Agreement to extend the termination date of the Merger by 90 days from July 4, 2008 to October 2, 2008.
This extension follows Hexion's previous decision to extend the termination date of the Merger by 90 days from April 5, 2008 to July 4, 2008. Beginning on the termination date, if
the Merger has not yet been consummated, the Merger Agreement may be terminated by either party at any time, unless such party's failure to fulfill any material covenant or agreement in the Merger
Agreement has been the cause or resulted in the failure of the Merger to be consummated.

On
July 7, 2008, Hexion amended its complaint to seek the additional declaration that the extension of the Merger Agreement by our Board of Directors from July 4, 2008 to
October 2, 2008 was invalid. Through its amended complaint, Hexion also seeks an injunction against us and others from prosecuting any claim against the plaintiffs in a different forum relating
to or arising out of the Merger Agreement or the transactions contemplated thereby.

We
intend to defend the claims brought by Hexion and Apollo vigorously and have asked the Delaware court to declare that:



65

---



Table of Contents



We
have also asked the court to enjoin Hexion from continuing to breach the Merger Agreement and to specifically order Hexion to perform its obligations under the Merger Agreement. In addition, we
have filed counterclaims against Hexion in Delaware, including, among others, breach of contract, breach of good faith and fair dealing, defamation, injurious falsehood and commercial disparagement.
Discovery in the case will be expedited, and trial on the issues set forth above is scheduled to begin on September 8, 2008. If we are not successful in connection with this litigation, the
Merger Agreement could be terminated and the damages owed to our Company as a result of that event could be eliminated or reduced.

On
June 23, 2008, we filed a state court petition in Montgomery County, Texas against Leon Black, Joshua J. Harris and Apollo. The action alleges that Apollo and
Messrs. Black and Harris tortiously interfered with and fraudulently induced us to terminate our June 25, 2007 merger agreement with Basell AF (an affiliate of Access Industries) and
seeks damages in excess of $3 billion. On July 18, 2008, Apollo and Messrs. Black and Harris filed special appearances objecting to the jurisdiction of the Court. On
July 21, 2008, they filed answers denying liability and moved to dismiss or, alternatively, to stay the case until the Delaware action is concluded. Discovery in this action for damages has not
been expedited, and a trial date has not yet been set.

The
Merger cannot be completed until each of the other closing conditions specified in the Merger Agreement has been satisfied or waived. The closing conditions include, among others,
the expiration of waiting periods or grants of approvals under competition laws in the United States, European Union and certain other jurisdictions. Despite the pending litigation, Hexion has
indicated that it intends to cooperate fully, and continue to work closely, with regulatory agencies in these jurisdictions, including the Federal Trade Commission (the "FTC") and the European
Commission.

The
Merger Agreement contains no financing condition and requires Hexion to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to consummate the Merger and the related financing. Hexion has confirmed that its committed financing remains in place. However, Hexion has publicly stated that it does not expect
that it will be able to satisfy the conditions necessary to draw down on such financing and that it does not expect that substitute financing will be available. In connection with the pending Delaware
litigation, we are disputing Hexion's claim that it cannot satisfy the conditions to its committed financing. Under the Merger Agreement, if the lenders fail to fund the financing in accordance with
their commitments, Hexion has agreed in certain circumstances to commence litigation against such lenders in order to compel them to provide the committed funds. We cannot provide any assurances that
Hexion will be able to satisfy the conditions necessary to draw down on its committed financing or otherwise compel its lenders to fund in accordance with their obligations, or that substitute
financing will be available.

For
more information regarding the Merger, please see our Proxy Statement filed with the Securities and Exchange Commission on September 12, 2007. For information regarding
certain risks associated with the Merger, please also see "Part II. Item 1A. Risk Factors."

66

---



Table of Contents

RESULTS OF OPERATIONS

For each of our Company and Huntsman International, the following tables set forth the unaudited condensed consolidated results of
operations for the three and six months ended June 30, 2008 and 2007 (dollars in millions):

Huntsman Corporation

Three months ended
June 30,



Six months ended
June 30,Percent
Change

Percent
Change2008

2007

2008

2007Total revenues

$
2,895.7

$
2,471.2


17
%
$
5,436.1

$
4,723.1


15
%Cost of goods sold


2,514.2


2,083.6


21
%

4,687.7


3,944.5


19
%Gross profit


381.5


387.6


(2
)%

748.4


778.6


(4
)%Operating expense


275.7


260.2


6
%

552.5


503.1


10
%Restructuring, impairment and plant closing costs


1.0


13.2


(92
)%

5.0


24.4


(80
)%Operating income


104.8


114.2


(8
)%

190.9


251.1


(24
)%Interest expense, net


(65.5
)

(70.0
)

(6
)%

(130.3
)

(143.8
)

(9
)%Loss on accounts receivable securitization program


(4.9
)

(4.7
)

4
%

(9.5
)

(8.9
)

7
%Equity in income of investment in unconsolidated affiliates


3.6


5.1


(29
)%

6.7


7.3


(8
)%Expenses associated with the Merger


(3.8
)




NM


(9.0
)




NMOther income (expense)


0.5


(1.2
)

NM


0.7


(2.1
)

NMIncome from continuing operations before income taxes and minority interest


34.7


43.4


(20
)%

49.5


103.6


(52
)%Income tax (expense) benefit


(21.2
)

8.0


NM


(24.6
)

(4.4
)

459
%Minority interests in subsidiaries' (income) loss


(3.1
)

11.1


NM


(6.5
)

10.7


NMIncome from continuing operations


10.4


62.5


(83
)%

18.4


109.9


(83
)%Income (loss) from discontinued operations, net of tax


4.9


(124.5
)

NM


3.8


(127.7
)

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


8.4


(8.9
)

NM


8.8


(6.5
)

NMNet income (loss)


23.7


(70.9
)

NM


31.0


(24.3
)

NMInterest expense, net


65.5


70.0


(6
)%

130.3


143.8


(9
)%Income tax expense (benefit) from continuing operations


21.2


(8.0
)

NM


24.6


4.4


459
%Income tax expense (benefit) from discontinued operations


2.3


(76.3
)

NM


2.5


(76.3
)

NMDepreciation and amortization


97.5


107.8


(10
)%

191.3


217.0


(12
)%EBITDA(1)

$
210.2

$
22.6


830
%
$
379.7

$
264.6


43
%Net cash provided by operating activities










$
19.8

$
85.3


(77
)%Net cash used in investing activities











(290.9
)

(250.1
)

16
%Net cash provided by financing activities











255.2


63.9


299
%


67

---



Table of Contents

Huntsman International

Three months ended
June 30,



Six months ended
June 30,Percent
Change

Percent
Change2008

2007

2008

2007Total revenues

$
2,895.7

$
2,471.2


17
%
$
5,436.1

$
4,723.1


15
%Cost of goods sold


2,509.9


2,077.0


21
%

4,679.3


3,936.4


19
%Gross profit


385.8


394.2


(2
)%

756.8


786.7


(4
)%Operating expense


275.7


260.1


6
%

553.5


503.0


10
%Restructuring, impairment and plant closing costs


1.0


13.2


(92
)%

5.0


24.4


(80
)%Operating income


109.1


120.9


(10
)%

198.3


259.3


(24
)%Interest expense, net


(65.6
)

(70.2
)

(7
)%

(130.5
)

(144.4
)

(10
)%Loss on accounts receivable securitization program


(4.9
)

(4.7
)

4
%

(9.5
)

(8.9
)

7
%Equity in income of investment in unconsolidated affiliates


3.6


5.1


(29
)%

6.7


7.3


(8
)%Other income (expense)


0.5


(1.2
)

NM


0.7


(2.5
)

NMIncome from continuing operations before income taxes and minority interest


42.7


49.9


(14
)%

65.7


110.8


(41
)%Income tax expense


(21.8
)

(18.5
)

18
%

(28.2
)

(42.1
)

(33
)%Minority interests in subsidiaries' (income) loss


(3.1
)

11.1


NM


(6.5
)

10.7


NMIncome from continuing operations


17.8


42.5


(58
)%

31.0


79.4


(61
)%Income (loss) from discontinued operations, net of tax


4.9


(124.5
)

NM


3.8


(127.7
)

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


8.4


(8.9
)

NM


8.8


(6.5
)

NMNet income (loss)


31.1


(90.9
)

NM


43.6


(54.8
)

NMInterest expense, net


65.6


70.2


(7
)%

130.5


144.4


(10
)%Income tax expense from continuing operations


21.8


18.5


18
%

28.2


42.1


(33
)%Income tax expense (benefit) from discontinued operations


2.3


(76.3
)

NM


2.5


(76.3
)

NMDepreciation and amortization


91.8


102.1


(10
)%

180.0


205.6


(12
)%EBITDA(1)

$
212.6

$
23.6


801
%
$
384.8

$
261.0


47
%Net cash provided by operating activities










$
28.6

$
60.0


(52
)%Net cash used in investing activities











(353.6
)

(257.3
)

37
%Net cash provided by financing activities











309.2


113.6


172
%


---

NMNot
Meaningful

68

---



Table of Contents

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

Huntsman Corporation

Three months
ended June 30,

Six months ended
June 30,2008

2007

2008

2007Foreign exchange lossesunallocated

$
(5.5
)
$
(3.8
)
$
(10.0
)
$
(6.6
)Loss on early extinguishment of debt





(0.4
)




(1.8
)Loss on accounts receivable securitization program


(4.9
)

(4.7
)

(9.5
)

(8.9
)Legal and contract settlement charges, net





(6.3
)




(6.3
)Amounts included in discontinued operations


7.2


(186.5
)

6.3


(175.9
)(Loss) gain on sale of business/assets, net











4.1Expenses associated with the Merger


(3.8
)




(9.0
)

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


8.4


(8.9
)

8.8


(6.5
)Restructuring, impairment and plant closing (costs) credits:Materials and Effects





(8.6
)

(1.4
)

(14.4
)Performance Products





(0.3
)

(0.1
)

(0.4
)Pigments


0.4


1.0


(0.9
)

1.5Corporate and other


(1.4
)

(5.3
)

(2.6
)

(11.1
)Total restructuring, impairment and plant closing costs


(1.0
)

(13.2
)

(5.0
)

(24.4
)Total

$
0.4

$
(223.8
)
$
(18.4
)
$
(226.3
)


Huntsman International

Three months
ended June 30,

Six months ended
June 30,2008

2007

2008

2007Foreign exchange lossesunallocated

$
(5.5
)
$
(3.8
)
$
(10.0
)
$
(6.6
)Loss on early extinguishment of debt





(0.4
)




(2.2
)Loss on accounts receivable securitization program


(4.9
)

(4.7
)

(9.5
)

(8.9
)Legal and contract settlement charges, net





(6.3
)




(6.3
)Amounts included in discontinued operations


7.2


(186.5
)

6.3


(175.9
)(Loss) gain on sale of business/assets, net











4.1Extraordinary gain (loss) on the acquisition of a business


8.4


(8.9
)

8.8


(6.5
)Restructuring, impairment and plant closing (costs) credits:Materials and Effects





(8.6
)

(1.4
)

(14.4
)Performance Products





(0.3
)

(0.1
)

(0.4
)Pigments


0.4


1.0


(0.9
)

1.5Corporate and other


(1.4
)

(5.3
)

(2.6
)

(11.1
)Total restructuring, impairment and plant closing costs


(1.0
)

(13.2
)

(5.0
)

(24.4
)Total

$
4.2

$
(223.8
)
$
(9.4
)
$
(226.7
)


---

69

---



Table of Contents





70

---



Table of Contents

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

Huntsman Corporation

Six months ended
June 30,Percent
Change2008

2007EBITDA

$
379.7

$
264.6


43
%Depreciation and amortization


(191.3
)

(217.0
)

(12
)%Interest expense, net


(130.3
)

(143.8
)

(9
)%Income tax expensecontinuing operations


(24.6
)

(4.4
)

459
%Income tax (expense) benefitdiscontinued operations


(2.5
)

76.3


NMNet income (loss)


31.0


(24.3
)

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


(8.8
)

6.5


NMEquity in income of investment in unconsolidated affiliates


(6.7
)

(7.3
)

(8
)%Dividends received from unconsolidated affiliate


11.0





NMDepreciation and amortization


191.3


217.0


(12
)%Loss (gain) on disposal of assets


3.7


(1.6
)

NMNoncash restructuring, impairment and plant closing costs


2.2


251.7


(99
)%Loss on early extinguishment of debt





1.8


NMNoncash interest expense


2.3


2.0


15
%Deferred income taxes


0.2


(88.6
)

NMNet unrealized loss (gain) on foreign currency transactions


19.6


(7.5
)

NMOther, net


13.9


15.4


(10
)%Changes in operating assets and liabilities


(239.9
)

(279.8
)

(14
)%Net cash provided by operating activities

$
19.8

$
85.3


(77
)%


71

---



Table of Contents

Huntsman International

Six months ended
June 30,Percent
Change2008

2007EBITDA

$
384.8

$
261.0


47
%Depreciation and amortization


(180.0
)

(205.6
)

(12
)%Interest expense, netcontinuing operations


(130.5
)

(144.4
)

(10
)%Income tax expensecontinuing operations


(28.2
)

(42.1
)

(33
)%Income tax (expense) benefitdiscontinued operations


(2.5
)

76.3


NMNet income (loss)


43.6


(54.8
)

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


(8.8
)

6.5


NMEquity in income of investment in unconsolidated affiliates


(6.7
)

(7.3
)

(8
)%Dividends received from unconsolidated affiliate


11.0





NMDepreciation and amortization


180.0


205.6


(12
)%(Loss) gain on disposal of assets


3.7


(1.6
)

NMNoncash restructuring, impairment and plant closing costs


2.2


251.7


(99
)%Loss on early extinguishment of debt





2.2


NMNoncash interest expense


2.3


2.3


Deferred income taxes


3.8


(50.9
)

NMNet unrealized loss (gain) on foreign currency transactions


19.6


(7.5
)

NMOther, net


13.9


(13.2
)

NMChanges in operating assets and liabilities


(236.0
)

(273.0
)

(14
)%Net cash provided by operating activities

$
28.6

$
60.0


(52
)%


---

NMNot
Meaningful

Three Months Ended June 30, 2008 Compared with Three Months Ended June 30, 2007

For the three months ended June 30, 2008, we had net income of $23.7 million on revenues of $2,895.7 million,
compared with net loss of $70.9 million on revenues of $2,471.2 million for the 2007 period. For the three months ended June 30, 2008, Huntsman International had net income of
$31.1 million on revenues of $2,895.7 million compared with a net loss of $90.9 million on revenues of $2,471.2 million for the 2007 period. The increase of
$94.6 million in our net income and the increase of $122.0 million in Huntsman International's net income was the result of the following
items:



72

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73

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Table of Contents

Segment Analysis

Three months ended June 30,Percent
Change2008

2007RevenuesPolyurethanes

$
1,160.9

$
1,010.2


15
%Materials and Effects


688.8


621.5


11
%Performance Products


725.1


548.4


32
%Pigments


320.7


293.2


9
%Corporate and other


43.3


34.5


26
%Eliminations


(43.1
)

(36.6
)

18
%Total

$
2,895.7

$
2,471.2


17
%Huntsman CorporationSegment EBITDAPolyurethanes

$
147.7

$
158.6


(7
)%Materials and Effects


50.5


52.5


(4
)%Performance Products


50.5


33.2


52
%Pigments


7.3


21.9


(67
)%Corporate and other


(53.0
)

(59.0
)

(10
)%Subtotal


203.0


207.2


(2
)%Polymers


2.7


(219.9
)

NMBase Chemicals


4.5


35.3


(87
)%Total

$
210.2

$
22.6


830
%Huntsman InternationalSegment EBITDAPolyurethanes

$
147.7

$
158.6


(7
)%Materials and Effects


50.5


52.5


(4
)%Performance Products


50.5


33.2


52
%Pigments


7.3


21.9


(67
)%Corporate and other


(50.6
)

(58.0
)

(13
)%Subtotal


205.4


208.2


(1
)%Polymers


2.7


(219.9
)

NMBase Chemicals


4.5


35.3


(87
)%Total

$
212.6

$
23.6


801
%


Year-Over-Year Increase (Decrease)

Average
Selling Price

Sales
VolumesPolyurethanes


9%


6%Materials and Effects


10%


1%Performance Products


32%


0%Pigments


9%


0%


---

NMNot
Meaningful

74

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Table of Contents

Polyurethanes

For the three months ended June 30, 2008, Polyurethanes segment revenues increased as a result of both higher average selling
prices and increased sales volumes, driven largely by strong MDI growth in global emerging markets. MDI average selling prices increased by 7%
primarily in response to sharply higher raw material costs and favorable foreign exchange movements as the U.S. dollar weakened against other relevant currencies. Average selling prices for
MTBE increased by 33% due to strong market demand, as well as in response to higher raw material costs. Segment EBITDA decreased principally on lower margins in urethanes. Urethanes margins were lower
as sharply higher raw material and energy costs more than offset improvement in average selling prices and the increase in sales volumes.

Materials and Effects

For the three months ended June 30, 2008, Materials and Effects segment revenues increased primarily as a result of higher
average selling pricesin response to higher raw material costs and favorable foreign exchange movements as the U.S. dollar weakened against other relevant
currenciesand on slightly higher sales volumes. Sales volumes of our advanced materials products increased by 10% as result of strong demand in all regions; whereas sales volumes of our
textile effects products decreased by 14% primarily as a result of a slowdown in Western European and North American markets. Segment EBITDA decreased principally on lower margins on our textile
effects products as raw material and energy costs increased by more than average selling prices, offset somewhat by higher margins on our advanced materials products as higher sales volumes and higher
average selling prices more than offset higher raw materials and energy costs. During the three months ended June 30, 2008 and 2007, our Materials and Effects segment recorded restructuring and
plant closing charges of nil and $8.6 million, respectively. For more information concerning restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to
our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Performance Products

For the three months ended June 30, 2008, Performance Products segment revenues increased primarily due to a rise in average
selling prices in response to higher raw material costs and favorable foreign exchange movements as the U.S. dollar weakened against other relevant currencies. Sales volumes, excluding tolling,
were unchanged, with increases in most products offset by lower olefin by-product sales. Segment EBITDA increased principally on increased volumes of higher margin products and expanded
margins, as average selling prices more than offset increases in raw material and energy costs and higher fixed costs.

Pigments

For the three months ended June 30, 2008, Pigments segment revenues increased primarily as a result of favorable foreign
exchange movements as the U.S. dollar weakened against other relevant currencies and on higher average selling prices in Asia and global emerging markets. Sales volumes remained unchanged as
higher sales volumes in Europe and Asia were offset by lower sales volumes in North America and global emerging markets. Segment EBITDA decreased principally due to reduced margins resulting from
higher raw material and energy prices.

Corporate and OtherHuntsman Corporation

Corporate and other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain

75

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Table of Contents

(loss)
on acquisition of a business, Merger-related expenses and the operating results of our Australian styrenics business. The increase in EBITDA from Corporate and other items resulted primarily
from $17.3 million of favorable adjustments to the extraordinary gain on acquisition ($8.4 million gain recorded in the 2008 period compared to $8.9 million loss in the 2007
period) related to the Textile Effects Acquisition and an increase of $7.4 million of EBITDA from our Australian styrenics business. For more information regarding extraordinary gain associated
with the Textile Effects Acquisition, see "Note 4. Business CombinationsTextile Effects Acquisition" to our condensed consolidated financial statements (unaudited) included
elsewhere in this report. These increases in EBITDA were offset somewhat by $14.2 million of lower minority interest in subsidiaries' income and $3.8 million of expenses incurred during
the second quarter of 2008 associated with the Merger. For more information regarding these Merger-related expenses, see "Note 15. Expenses Associated with the Merger" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

Corporate and OtherHuntsman International

Corporate and other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early
extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on acquisition of a business and the operating
results of our Australian styrenics business. The increase in EBITDA from Corporate and other items resulted primarily from $17.3 million of favorable adjustments to the extraordinary gain on
acquisition ($8.4 million gain recorded in the 2008 period compared to $8.9 million loss in the 2007 period) related to the Textile Effects Acquisition and an increase of
$7.4 million of EBITDA from our Australian styrenics business. For more information regarding extraordinary gain associated with the Textile Effects Acquisition, see "Note 4. Business
CombinationsTextile Effects Acquisition" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. These increases in EBITDA were offset somewhat
by $14.2 million of lower minority interest in subsidiaries' income.

Polymers

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

For
the three months ended June 30, 2008, Polymers segment EBITDA increased to $2.7 million, as compared with a loss of $219.9 million in the 2007 period. The EBITDA
loss in the 2007 period resulted primarily from a $240.0 million impairment loss recorded in anticipation of the North American Polymers Disposition. The EBITDA in the 2008 period resulted from
property tax settlements and a gain on the sale of property. For more information, see "Note 3. Discontinued OperationsNorth American Polymers Business" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

Base Chemicals

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

For
the three months ended June 30, 2008, Base Chemicals segment EBITDA decreased to $4.5 million, as compared with $35.3 million in the 2007 period. This decrease
in Base Chemicals segment EBITDA resulted from lower adjustments to the losses recorded in connection with the

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Table of Contents

U.S. Base
Chemicals Disposition and the U.K. Petrochemicals Disposition. For more information, see "Note 3. Discontinued OperationsU.S. Base Chemicals
Business" and "Note 3. Discontinued OperationsEuropean Base Chemicals and Polymers Business" to our condensed consolidated financial statements (unaudited) included elsewhere in
this report.

Six Months Ended June 30, 2008 Compared with Six Months Ended June 30, 2007

For the six months ended June 30, 2008, we had net income of $31.0 million on revenues of $5,436.1 million,
compared with a net loss of $24.3 million on revenues of $4,723.1 million for the 2007 period. For the six months ended June 30, 2008, Huntsman International had net income of
$43.6 million on revenues of $5,436.1 million compared with a net loss of $54.8 million on revenues of $4,723.1 million for the 2007 period. The increase of
$55.3 million in our net income and the increase of $98.4 million in Huntsman International's net income was the result of the following items:



77

---



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78

---







Table of Contents

Segment Analysis

Six months ended June 30,Percent
Change2008

2007RevenuesPolyurethanes

$
2,162.6

$
1,850.2


17
%Materials and Effects


1,311.2


1,211.1


8
%Performance Products


1,356.4


1,100.3


23
%Pigments


605.9


563.4


8
%Corporate and other


82.9


72.6


14
%Eliminations


(82.9
)

(74.5
)

11
%Total

$
5,436.1

$
4,723.1


15
%Huntsman CorporationSegment EBITDAPolyurethanes

$
279.5

$
276.9


1
%Materials and Effects


89.1


109.6


(19
)%Performance Products


103.5


105.3


(2
)%Pigments


17.7


45.4


(61
)%Corporate and other


(116.4
)

(100.2
)

16
%Subtotal


373.4


437.0


(15
)%Polymers


3.9


(206.5
)

NMBase Chemicals


2.4


34.1


(93
)%Total

$
379.7

$
264.6


43
%Huntsman InternationalSegment EBITDAPolyurethanes

$
279.5

$
276.9


1
%Materials and Effects


89.1


109.6


(19
)%Performance Products


103.5


105.3


(2
)%Pigments


17.7


45.4


(61
)%Corporate and other


(111.3
)

(103.8
)

7
%Subtotal


378.5


433.4


(13
)%Polymers


3.9


(206.5
)

NMBase Chemicals


2.4


34.1


(93
)%Total

$
384.8

$
261.0


47
%


Year-Over-Year Increase (Decrease)

Average
Selling Price

Sales
VolumesPolyurethanes


12%


5
%Materials and Effects


11%


(2
)%Performance Products


31%


(7
)%Pigments


7%


0
%


---

NMNot
Meaningful

79

---



Table of Contents

Polyurethanes

For the six months ended June 30, 2008, Polyurethanes segment revenues increased as a result of both higher average selling
prices and increased sales volumes, driven largely by
MDI growth in global emerging markets, partially offset by lower sales volumes to certain customers due to our pending merger. MDI average selling prices increased by 7% primarily in response to
sharply higher raw material costs and favorable foreign exchange movements as the U.S. dollar weakened against other relevant currencies. Average selling prices for MTBE increased by 46% due to
strong market demand as well as in response to higher raw material costs. Segment EBITDA increased on higher MTBE margins, from overall increases in sales volumes and from higher overall average
selling prices that more than offset sharp increases in raw material and energy costs.

Materials and Effects

For the six months ended June 30, 2008, Materials and Effects segment revenues increased primarily as a result of higher average
selling pricesin response to higher raw material costs and favorable foreign exchange movements as the U.S. dollar weakened against other relevant currenciesoffset in
part by lower sales volumes, partially attributable to lower sales volumes to certain customers due to our pending merger. Sales volumes of our advanced materials products increased by 4%, primarily
in Asia; whereas sales volumes of our textile effects products decreased by 12% primarily as a result of a slowdown in Western European and North American markets. Segment EBITDA decreased principally
on lower margins on our textile effects products as raw material and energy costs increased by more than average selling prices, offset somewhat by higher margins on our advanced materials products as
higher sales volumes and higher average selling prices more than offset higher raw materials and energy costs and general and administrative expenses. During the six months ended June 30, 2008
and 2007, our Materials and Effects segment recorded restructuring and plant closing charges of $1.4 million and $14.4 million, respectively. For more information concerning
restructuring activities, see "Note 6. Restructuring, Impairment and Plant Closing Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in
this report.

Performance Products

For the six months ended June 30, 2008, Performance Products segment revenues increased primarily due to higher average selling
pricesin response to higher raw material costs and favorable foreign exchange movements as the U.S. dollar weakened against other relevant currenciesoffset in part by
a reduction in sales volumes, excluding tolling. Lower olefin by-product sales and the conversion of most of our ethylene glycol business to a toll manufacturing operation in 2008 more
than offset volume increases across all other product groups. Segment EBITDA was lower as the benefit from increased volumes of higher margin products was more than offset by higher fixed costs and
lower margins, where the increase in average selling prices lagged increases in raw material and energy costs.

Pigments

For the six months ended June 30, 2008, Pigments segment revenues increased primarily as a result of favorable foreign exchange
movements as the U.S. dollar weakened against other relevant currencies, partially offset by lower average selling prices in local currencies, particularly in Europe due to competitive markets.
Segment EBITDA decreased principally due to reduced margins resulting from higher raw material and energy prices and lower local currency selling prices.

Corporate and OtherHuntsman Corporation

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

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non-operating
income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on acquisition of a business, Merger-related expenses and the operating
results of our Australian styrenics business. The reduction in EBITDA from Corporate and other for the six months ended June 30, 2008 resulted primarily from $17.2 million of lower
minority interest in subsidiaries' income and $9.0 million of expenses incurred during the first half of 2008 associated with the Merger. For more information regarding these Merger-related
expenses, see "Note 15. Expenses Associated with the Merger" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. Additionally, EBITDA for the six
months ended June 30, 2008 was lower due to $9.7 million of higher corporate information technology costs. These reductions to EBITDA were offset somewhat by $15.3 million of
favorable adjustments to the extraordinary gain on acquisition ($8.8 million gain recorded in the 2008 period compared to $6.5 million loss in the 2007 period) related to the Textile
Effects Acquisition and an increase of $5.5 million of EBITDA from our Australian styrenics business. For more information regarding extraordinary gain associated with the Textile Effects
Acquisition, see "Note 4. Business CombinationsTextile Effects Acquisition" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Corporate and OtherHuntsman International

Corporate and other includes unallocated corporate overhead, foreign exchange gains and losses, loss on accounts receivable
securitization program, loss on the early extinguishment of debt, other non-operating income and expense, minority interest in subsidiaries' (income) loss, extraordinary gain (loss) on
acquisition of a business and the operating results of our Australian styrenics business. The reduction in EBITDA from Corporate and other for the six months ended June 30, 2008 resulted
primarily from $17.2 million of lower minority interest in subsidiaries' income and $9.7 million of higher corporate information technology costs. These reductions to EBITDA were offset
somewhat by $15.3 million of favorable adjustments to the extraordinary gain on acquisition ($8.8 million gain recorded in the 2008 period compared to $6.5 million loss in the
2007 period) related to the Textile Effects Acquisition and an increase of $5.5 million of EBITDA from our Australian styrenics business. For more information regarding extraordinary gain
associated with the Textile Effects Acquisition, see "Note 4. Business CombinationsTextile Effects Acquisition" to our condensed consolidated financial statements (unaudited)
included elsewhere in this report.

Polymers

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

For
the six months ended June 30, 2008, Polymers segment EBITDA increased to $3.9 million, as compared with a loss of $206.5 million in the 2007 period. The EBITDA
loss in the 2007 period resulted primarily from a $240.0 million impairment loss recorded in anticipation of the North American Polymers Disposition. The EBITDA in the 2008 period resulted from
property tax settlements and post-closing adjustments to the loss on disposal. For more information, see "Note 3. Discontinued OperationsNorth American Polymers
Business" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Base Chemicals

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

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For
the six months ended June 30, 2008, Base Chemicals segment EBITDA decreased to $2.4 million, as compared with $34.1 million in the 2007 period. This decrease in
Base Chemicals segment EBITDA resulted from lower adjustments to the losses recorded in connection with the U.S. Base Chemicals Disposition and the U.K. Petrochemicals Disposition. For
more information, see "Note 3. Discontinued OperationsU.S. Base Chemicals Business" and "Note 3. Discontinued OperationsEuropean Base Chemicals and
Polymers Business" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

LIQUIDITY AND CAPITAL RESOURCES

The following is a discussion of our liquidity and capital resources and does not include separate information with respect to Huntsman
International in accordance with General Instructions H(1)(a) and (b) of Form 10-Q.

Cash

Net cash provided by operating activities for the six months ended June 30, 2008 and 2007 was $19.8 million and
$85.3 million, respectively. The decrease in cash provided by operations was primarily attributable to lower operating income as described in "Results of Operations" above.

Net
cash used in investing activities for the six months ended June 30, 2008 and 2007 was $290.9 million and $250.1 million, respectively. During the six months
ended June 30, 2008 and 2007, we paid $224.2 million and $282.8 million, respectively, for capital expenditures. The capital expenditures for the six months ended June 30,
2007 included $85.0 million spent on our former Port Arthur, Texas facility that was previously damaged by fire. During the six months ended June 30, 2008 and 2007, we received
$1.6 million and $15.8 million, respectively, from the sale of assets. During the six months ended June 30, 2008, we made $27.9 million of payments related to certain
expenditures for the rebuild of our former
Port Arthur, Texas facility, resulting in an adjustment to the sales proceeds. See "Note 3. Discontinued OperationsU.S. Base Chemicals Business" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report. During the six months ended June 30, 2008, we contributed approximately $43.5 million to our
ethyleneamines joint venture in Saudi Arabia. During the six months ended June 30, 2007, we finalized our post-closing adjustments with respect to the Textile Effects Acquisition,
resulting in a reduction to the purchase price of $26.9 million.

Net
cash provided by financing activities for the six months ended June 30, 2008 was $255.2 million as compared with $63.9 million in the 2007 period. This increase
in net cash provided by financing activities was primarily due to higher borrowings under our revolving loan facilities and lower net repayments of debt in the 2008 period as compared to the
2007 period.

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Changes in Financial Condition

The following information summarizes our working capital position as of June 30, 2008 and December 31, 2007 (dollars
in millions):

June 30,
2008

December 31,
2007

Increase
(Decrease)

Percent
ChangeCash and cash equivalents

$
140.7

$
154.0

$
(13.3
)

(9
)%Restricted cash


3.4





3.4


NMAccounts and notes receivable, net


1,404.4


1,262.7


141.7


11
%Inventories, net


1,564.6


1,451.9


112.7


8
%Prepaid expenses


27.6


37.4


(9.8
)

(26
)%Deferred income taxes


73.3


72.6


0.7


1
%Other current assets


110.9


116.6


(5.7
)

(5
)%Total current assets


3,324.9


3,095.2


229.7


7
%Accounts payable


1,103.2


1,018.4


84.8


8
%Accrued liabilities


874.9


885.2


(10.3
)

(1
)%Deferred income taxes


3.4


3.2


0.2


6
%Current portion of long-term debt


385.4


68.5


316.9


463
%Total current liabilities


2,366.9


1,975.3


391.6


20
%Working capital

$
958.0

$
1,119.9

$
(161.9
)

(14
)%


---

NMNot
Meaningful

Our
working capital decreased by $161.9 million as a result of the net impact of the following significant changes:



Subsidiary Debt

With the exception of our guarantees of certain debt of our Chinese joint ventures and certain indebtedness incurred from time to time
to finance insurance premiums, we have no direct debt or guarantee obligations. Substantially all of our debt has been incurred by our subsidiaries (primarily Huntsman International); such debt is
non-recourse to us and we have no contractual obligation to fund our subsidiaries' respective operations.

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Transactions Affecting our Senior Credit Facilities

As of June 30, 2008, our Senior Credit Facilities consisted of (i) the $650.0 million Revolving Facility and
(ii) the $1,540.0 million Dollar Term Loan. As of June 30, 2008, there were $323.4 million borrowings outstanding under our Revolving Facility, which is classified as
current in the accompanying balance sheets (unaudited), and we had approximately $40.1 million in U.S. dollar equivalents of letters of credit and bank guarantees issued and outstanding
under our Revolving Facility. The Revolving Facility matures in the third quarter of 2010 and the Dollar Term Loan matures in 2014; provided however, that the maturities of each will accelerate if we
do not repay all but $100 million of our outstanding debt securities on or before three months prior to the maturity dates of such securities. The next maturity date of such securities is in
October of 2010.

As
of June 30, 2008, borrowings under the Revolving Facility and Dollar Term Loan bore interest at LIBOR plus 1.75%. The applicable interest rate of the Dollar Term Loan is
currently set at LIBOR plus 1.75%, subject to a reduction to LIBOR plus 1.50% upon achieving certain secured leverage ratio thresholds defined in our credit agreements. The credit agreements governing
our Senior Credit Facilities contain one financial covenant, which is applicable only to the Revolving Facility, and this covenant is only in effect when loans or letters of credit are outstanding
under the Revolving Facility. Our Senior Credit Facilities agreements provide for, among other things, customary restrictions and limitations on our ability to incur liens, incur additional debt,
merge or sell assets, make certain
restricted payments, prepay other indebtedness, make investments or engage in transactions with affiliates, and also contain other customary default provisions.

Other Transactions Affecting Our Debt

HPS, our splitting joint venture with Shanghai Chlor-Alkali Chemical Company, Ltd, maintains a working capital line as part of
its overall secured credit facilities. In February 2008, HPS borrowed an additional RMB 122.8 million ($17.9 million) to fund its working capital and operating requirements. As of
June 30, 2008, HPS had $26.0 million and RMB 688.6 million ($100.4 million) outstanding under its credit facilities.

On
June 30, 2008, our subsidiary, Huntsman (UK) Limited, entered into the Short Term Revolving Facility, a $125.0 million short term committed revolving credit facility
maturing on June 28, 2009, of which nothing was drawn as of June 30, 2008. The Short Term Revolving Facility is secured, pursuant to the terms of a debenture governed by English law, by
all existing and after acquired personal property of Huntsman Holdings (UK) Limited, including certain intercompany notes, some of which are secured in nature. The Short Term Revolving Facility is
supported by an unsecured parent company guarantee provided by Huntsman International. At our option, the Short Term Revolving Facility may bear interest at a rate equal to (i) a LIBOR-based
eurocurrency rate plus an applicable margin ranging between 3.00% and 4.00%, or, with respect to euro-denominated loans, a EURIBOR-based rate plus an applicable margin ranging between
3.00% and 4.00%, or (ii) a prime-based rate plus an applicable margin ranging between 2.00% or 3.00%, depending on the level of borrowings under the facility. The Short Term Revolving Facility
contains two financial covenants, including a leverage covenant which is consistent with the Senior Credit Facilities and a minimum tangible net worth covenant. Our Short Term Revolving Facility
agreement provides for, among other things, customary restrictions and limitations on our ability to incur liens, incur additional debt, merge or sell assets, prepay other indebtedness, make
investments or engage in transactions with affiliates, and also contains other customary default provisions.

The
Merger Agreement provides certain restrictions and limitations concerning the amendment of debt agreements, the extension, repayment and refinancing of certain debt, in addition to
the incurrence of new debt.

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Compliance with Covenants

Our management believes that we are in compliance with the financial covenants contained in the agreements governing the Senior Credit
Facilities, Short Term Revolving Facility, the Australian Credit Facilities, the A/R Securitization Program and the indentures governing our notes.

Short-Term and Long-Term Liquidity

We depend upon our credit facilities and other debt instruments to provide liquidity for our operations and working capital needs. As
of June 30, 2008, we had $579.3 million of combined cash and combined unused borrowing capacity, consisting of $144.1 million in cash and restricted cash, $286.5 million in
availability under our Revolving Facility, $125.0 million in availability under our Short Term Revolving Facility, $23.7 million attributable to our European overdraft facility and nil
in availability under our A/R Securitization Program.

Our
liquidity has been significantly impacted by recent transactions and increases in accounts receivable and inventory, net of accounts payable. During the six months ended
June 30, 2008, our accounts receivable and inventory, net of accounts payable increased $94.7 million as reflected on our condensed consolidated statement of cash flows (unaudited)
included elsewhere in this report, and our outstandings under our A/R Securitization Program increased by $75.5 million (which includes approximately $20 million attributed to change in
foreign currency rates). During the six months ended June 30, 2008, we contributed approximately $43.5 million to our ethyleneamines manufacturing joint venture in Jubail Industrial
City, Saudi Arabia with Zamil Group. Relating to this project, we expect to receive in the second half of 2008 approximately $10 million from a third party loan reimbursing us for a portion of
equity contributions we previously made. This joint venture's funding requirements will be satisfied through a combination of debt and equity, with the equity already provided on a 50/50 basis
by us and Zamil Group. We expect the facility to come on line in early 2010 with annual capacity of 60 million pounds.

In
addition, we spent $59.2 million during the six months ended June 30, 2008 on scheduled maintenance and catalyst replacement (turnaround) at our Performance Products
manufacturing site in Port Neches, Texas (of which $30.6 million was spent in the three months ended June 30, 2008).

As
discussed above in "Other Transactions Affecting Our Debt," at the end of the second quarter of 2008, we entered into the Short Term Revolving Facility and thereby
increased our liquidity.

We
anticipate that our liquidity will be impacted by our ongoing fire claim. As a result of the fire damage at our Port Arthur, Texas facility that occurred on April 29, 2006, we
have received, and anticipate receiving additional settlements of insurance claims. We completed the rebuild and commissioning of the facility in the fourth quarter of 2007. The settlement of
insurance claims will continue during 2008. See "Note 16. Commitments and ContingenciesPort Arthur Plant Fire Insurance Litigation" and "Note 19. Casualty Losses and
Insurance RecoveriesPort Arthur, Texas Plant Fire" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Capital Expenditures

We incurred capital expenditures of $224.2 million for the six months ended June 30, 2008, as compared with
$282.8 million in the 2007 period. Capital expenditures for the six months ended June 30, 2008 included spending on the maleic anhydride expansion at our Geismar, Louisiana site, the
expansion at our Greatham, U.K. titanium dioxide facility, as well as other smaller projects. Capital expenditures for the six months ended June 30, 2007 included spending of
$85.0 million for the rebuild of our fire damaged Port Arthur, Texas facility.

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We
expect to finance our capital expenditure commitments through a combination of cash flows from operations and financing arrangements. We expect to spend, in total, approximately
$440 million on capital projects in 2008.

Off-Balance Sheet Arrangements

Receivables Securitization

For a discussion of our A/R Securitization Program, see "Note 10. Securitization of Accounts Receivable" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

Financing of Chinese MDI Facilities

On September 19, 2003, SLIC obtained secured financing for the construction of production facilities. SLIC obtained various
committed loans in the aggregate amount of approximately $230 million in U.S. dollar equivalents. As of June 30, 2008, there were $74.5 million and RMB 921.4 million
($134.3 million) in outstanding borrowings under these facilities. The interest rate on these facilities is LIBOR plus 0.48% for U.S. dollar borrowings and 90% of the Peoples Bank of
China rate for RMB borrowings. The loans are secured by substantially all the assets of SLIC and will be paid in 16 semiannual installments, which began on June 30, 2007. We
unconditionally guarantee 35% of any amounts due and unpaid by SLIC under the loans described above (except for a $1.5 million VAT facility which is not guaranteed). Our guarantee remains in
effect until SLIC has commenced production of at least 70% of capacity for at least 30 days and achieved a debt service coverage ratio of at least 1:1. SLIC commenced operations in the third
quarter of 2006. We have estimated that the fair value of this guarantee is nil as of the closing of the transaction and, accordingly, no amounts have been recorded.

Restructuring, Impairment and Plant Closing Costs

For a discussion of restructuring, impairment and plant closing costs, see "Note 6. Restructuring, Impairment and Plant Closing
Costs" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

Legal Proceedings

For a discussion of legal proceedings, see "Note 16. Commitments and ContingenciesLegal Matters" to our condensed
consolidated financial statements (unaudited) included elsewhere in this report.

Environmental, Health and Safety Matters

For a discussion of environmental, health and safety matters, see "Note 17. Environmental, Health and Safety Matters" to our
condensed consolidated financial statements (unaudited) included elsewhere in this report.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see "Note 2. Recently Issued Accounting Pronouncements" to our
condensed consolidated financial statements (unaudited) included elsewhere in this report.

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Critical Accounting Policies

Our critical accounting policies are presented in Management's Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the year ended December 31, 2007. For a discussion of developments related to long-lived asset impairments see
"Note 3. Discontinued Operations" and
"Note 4. Business Combinations" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

On
January 15, 2008, we entered into a series of forward foreign currency contracts in our Pigments segment to partially hedge the impact, for up to one year, of movements in
foreign currency rates associated with the purchases of raw materials and sales of pigment in non-functional currencies. As of June 30, 2008, these contracts had a notional amount
of approximately $80 million and are designated as cash flow hedges. As of June 30, 2008, these contracts had a fair value of $4.0 million and were recorded in other current
assets. For the three months ended June 30, 2008, the effective portion of the changes in the fair value of $1.2 million were recorded in other comprehensive income, with ineffectiveness
of a credit of $0.1 million recorded in sales, a credit of $1.2 million recorded in cost of sales and a foreign currency gain of $0.8 million. For the six months ended
June 30, 2008, the effective portion of the changes in the fair value of $2.9 million were recorded in other comprehensive income, with ineffectiveness of a credit of $0.4 million
recorded in sales, a credit of $1.4 million recorded in cost of sales and a foreign currency gain of $1.0 million.

As
of and for the three and six months ended June 30, 2008, the fair value and realized gains (losses) of our other outstanding foreign currency rate hedging contracts were not
significant.

We
have a cross currency interest rate swap pursuant to which we have agreed to swap $152.6 million of LIBOR floating rate debt payments for €115.9 million
of EURIBOR floating rate debt payments. At maturity, on August 15, 2012, we are required to pay principal of €115.9 million and will receive principal of
$152.6 million. During the life of this swap, we will receive floating rate interest (LIBOR) in dollars and we will pay floating rate interest (EURIBOR) in euros. This swap is currently not
designated as a hedge for financial reporting purposes. As of June 30, 2008, the fair value of this swap was $31.8 million, net of accrued interest, and was recorded in other noncurrent
liabilities in our condensed consolidated balance sheet (unaudited) included elsewhere in this report. For the three and six months ended June 30, 2008, we recorded an unrealized foreign
currency gain (loss) on this swap of $0.3 million and $(13.3) million, respectively, in our condensed consolidated statement of operations (unaudited) included elsewhere in this report.

We
also have a cross currency interest rate swap pursuant to which we have agreed to swap $95.8 million of LIBOR floating rate debt payments for
€70.7 million of EURIBOR floating rate debt payments. On maturity, April 19, 2010, we are required to pay principal of €70.7 million and will
receive principal of $95.8 million. During the life of this swap, we will receive floating rate interest (LIBOR) in dollars and we will pay floating rate interest (EURIBOR) in euros. This swap
was designated as a hedge of a net investment for financial reporting purposes. As of June 30, 2008, the fair value of this swap was $16.1 million, net of accrued interest, and was
recorded in other noncurrent liabilities in our condensed consolidated balance sheet (unaudited). For the three and six months ended June 30, 2008, the effective portion of the changes in the
fair value of $(0.6) million and $7.4 million, respectively, were recorded in other comprehensive income, with ineffectiveness of $0.2 million and $0.3 million, respectively,
recorded in interest expense.

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From
time to time, we review our non-U.S. dollar-denominated debt and swaps to determine the appropriate amounts designated as hedges. As of June 30, 2008, we
have designated approximately €450.7 million of debt and swaps as net investment hedges. As of June 30, 2008, we had approximately
€1,090.2 million in net euro-denominated assets.

ITEM 4.    CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"))
as of June 30, 2008. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of June 30, 2008, our disclosure controls and procedures
were effective, in that they ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and
reported within the time periods specified in the Commission's rules and forms, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial
officer, as appropriate to allow timely decisions regarding required disclosure.

No
changes to our internal control over financial reporting occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). However, we cannot give any
assurance that our internal controls over financial reporting will be completely effective. Ineffective internal controls over financial reporting could cause
investors to lose confidence in our reported financial information and could result in a lower trading price for our securities.

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

ENVIRONMENTAL ENFORCEMENT PROCEEDINGS

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

On
April 29, 2006, there was a release of hydrocarbons followed by a significant fire in the ethylene refrigeration area of our Base Chemicals Light Olefins Unit located in Port
Arthur, Texas. See "Note 19. Casualty Losses and Insurance RecoveriesPort Arthur, Texas Plant Fire" to our consolidated financial statements included elsewhere in this report.
There were no fatalities or serious injuries from the fire. An incident investigation team was formed immediately. The cause of the fire was determined to be a sudden rupture of a straight run of pipe
which had been weakened by undetected external corrosion under insulation. The Texas Commission on Environmental Quality (the "TCEQ") proposed, and we accepted, a penalty of approximately
$0.1 million for alleged excessive environmental releases occurring as a consequence of the fire. The penalty, half of which funded a Supplemental Environmental Project, was paid in full and
the settlement received the approval of the TCEQ on May 7, 2008.

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

OTHER LEGAL PROCEEDINGS

For a discussion of other legal proceedings, see "Note 16. Commitments and ContingenciesLegal Matters" and
"Note 17. Environmental, Health and Safety MattersRemediation Liabilities" to our condensed consolidated financial statements (unaudited) included elsewhere in this report.

ITEM 1A.    RISK FACTORS

Any of the following risks could materially and adversely affect our business, results of operations and
financial condition. For additional risk factors, see "Part I. Item 1A. Risk Factors," in our Annual Report on Form 10-K for the year ended December 31,
2007.

Risks Related to the Merger

Any failure to complete the Merger could materially adversely impact the market price of our common stock as well as our business, financial condition and results of
operations.

Consummation of the Merger is subject to our and Hexion's performance under the Merger Agreement and a number of closing conditions. On
June 18, 2008, Hexion filed suit in Delaware Chancery Court seeking a declaratory judgment that, among other things, certain closing conditions could not be met. Please see "Note 16.
Commitments and ContingenciesLegal Matters" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. Following this announcement, the price of our
common stock dropped significantly. If the Merger is not

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completed
for any reason, the price of our common stock will likely decline further to the extent that the current market price of our common stock reflects market assumptions that the Merger will be
completed or that all or a portion of the premium implied by the merger consideration will be realized. We may also be subject to additional risks,
including:



Accordingly,
investors should not place undue reliance on the occurrence of the Merger. In addition, if the Merger does not occur, there can be no assurance that a comparable transaction
will be consummated that results in investors' shares being purchased or that we will receive any termination fee under the Merger Agreement. The realization of any of these risks may materially
adversely affect our business, financial condition, results of operations or the market price of our common stock.

If the banks that have provided commitment letters for the funds to complete the Merger are not required or refuse to fund, Hexion will have to seek other financing to
complete the Merger, which financing may not be available.

Hexion has obtained commitment letters for senior secured credit facilities and a senior secured bridge facility with affiliates of
Credit Suisse and Deutsche Bank AG to be made available to Hexion and/or one or more of its subsidiaries for purposes of, among other things, financing the merger consideration. Hexion's ability to
draw on the proposed loan facility is subject to the satisfaction of certain conditions. Under the Merger Agreement, Hexion's obligation to consummate the Merger is not conditioned upon receipt or
availability of financing. However, Hexion has publicly stated that it does not expect that it will be able to draw on the proposed loan facility or obtain substitute financing to raise the necessary
funds to pay the merger consideration. In addition, while Hexion is owned by affiliates of Apollo Management, L.P., Apollo Management, L.P. is not obligated to contribute additional
equity to us or Hexion in order to consummate the Merger. For more information, see "Recent DevelopmentsMerger Agreement and Litigation with Apollo and Hexion" above.

Necessary consents and approvals from government entities may delay or prevent the closing of the Merger.

The Merger is conditioned upon, among other things, receipt of regulatory approvals or expiration of required waiting periods in the
United States, the European Union and several other jurisdictions.

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There
can be no assurance when any such approvals will be obtained or when such waiting periods will expire, if at all. As a result, stockholders face the risk that the completion of the Merger may be
delayed or that the Merger may not be completed.

The period of time expected before completing the Merger may increase the risk that we inadvertently fail to comply with our covenants, including those that restrict our
conduct of business or that a material adverse effect occurs in our business which would permit Hexion to refuse to consummate the Merger.

The Merger is subject to obtaining the required regulatory clearances and approvals and other conditions beyond our control that may
delay or otherwise materially adversely affect its completion. In addition, certain matters related to the consummation of the Merger are the subject of litigation in Delaware. Please see
"Note 16. Commitments and ContingenciesLegal Matters" to our condensed consolidated financial statements (unaudited) included elsewhere in this report. We cannot predict when these
conditions will be satisfied and related litigation resolved. Further, the period of time necessary to satisfy the requirements for obtaining the required clearances and approvals could significantly
delay the effective time of the Merger which would increase the risk that we inadvertently fail to comply with our covenants, including those that restrict our conduct of business or that there arises
an occurrence, condition, change or event that would constitute a material adverse effect under the terms of the Merger Agreement, which would permit Hexion to refuse to consummate the Merger.

We could incur substantial merger-related costs in connection with the Merger.

We have incurred and expect to continue to incur a number of non-recurring costs associated with completing the Merger.
These costs could be substantial and could have an adverse effect on our reported results before the consummation of the Merger.

The pendency of the Merger could materially adversely affect our business and operations.

In connection with the pending Merger, some of our vendors, customers and strategic partners have delayed or deferred, and may continue
to delay or defer, decisions relating to their ongoing and future relationships with us, which has negatively affected, and could continue to negatively affect our revenues, earnings and cash flows
and adversely affect our prospects which could be detrimental to our stockholders if the Merger is not consummated.

Uncertainties associated with the Merger may cause a loss of employees and may otherwise materially adversely affect our business and operations.

Our future results of operations will depend in part upon our ability to retain existing highly skilled and qualified employees and to
attract new employees. A number of our employees are highly skilled scientists and highly trained technicians, and failure to continue to attract and retain such individuals could materially adversely
affect our ability to compete. In addition, current and prospective employees may experience uncertainty about their roles following the effective time of the Merger. This uncertainty may materially
adversely affect our ability to attract and retain key management, sales, marketing, technical and other personnel. This inability to retain key personnel could have an adverse effect on our ability
to operate the business as a stand-alone enterprise in the event the Merger is not consummated.

The Merger Agreement contains restrictive covenants that may limit our ability to respond to changes in market conditions or pursue business opportunities.

The Merger Agreement contains restrictive covenants that limit our ability to, among other
things:



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Although
the Merger Agreement provides that Hexion will not unreasonably withhold its consent to us taking otherwise prohibited actions, there can be no assurances that Hexion will grant
such consent. The requirement that we comply with these provisions prior to the Merger may materially adversely affect our ability to react to changes in market conditions, take advantage of business
opportunities, obtain future financing, fund needed capital expenditures, or finance equipment purchases, any of which could have a material and adverse effect on the prospects of our business, which
could be detrimental to our stockholders in the event the Merger is not consummated.

Rating agencies could downgrade their corporate debt ratings for us before the effective time of the Merger. Such downgrades could have a material adverse effect on the
ongoing cost of financing our business.

Some rating agencies that provide corporate ratings on us or provide ratings on our debt may downgrade their corporate or debt ratings
with respect to us in light of the pending Merger and the financing thereof. A downgrade could materially adversely affect our ability to finance our operations, including increasing the cost of
obtaining financing under existing or future facilities or of debt securities, and may affect the payment terms offered by vendors which could result in a negative impact on our liquidity.

In certain circumstances, the Merger Agreement requires us to pay Hexion a termination fee of $225 million plus an amount equal to $100 million (the
"Reimbursement Amount"), representing the portion of the $200 million termination fee paid to Basell that was funded by Hexion, and any such payment could have material and adverse consequences
to our financial condition and operations.

Under the Merger Agreement, we may be required to pay to Hexion a termination fee of $225 million and the Reimbursement Amount
of $100 million if the Merger Agreement is terminated under certain circumstances. Should the Merger Agreement be terminated in circumstances under which the termination fee and Reimbursement
Amount are payable, the payment could have material and adverse consequences to our financial condition and operations after such time.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

The following table presents shares of restricted stock granted under our stock incentive plan that we withheld upon vesting to satisfy
our tax withholding obligations during the second quarter of 2008. We have no publicly announced plans or programs to repurchase our common stock.

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Number
(or Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
ProgramsApril











May


1,529

$
23.20





June


2,945

$
21.90





Total


4,474

$
22.34








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ITEM 6.    EXHIBITS

31.1

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

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

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

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


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned thereunto duly authorized.

Dated:
August 7, 2008

HUNTSMAN CORPORATIONHUNTSMAN INTERNATIONAL LLCBy:

/s/J. KIMO ESPLINJ. Kimo Esplin Executive Vice President and Chief Financial Officer
(Authorized Signatory and Principal Financial Officer)By:

/s/L. RUSSELL HEALYL. Russell Healy Vice President and Controller
(Authorized Signatory and Principal Accounting Officer)


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EXHIBIT INDEX

31.1

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

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

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

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


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