CAUTIONARY STATEMENTS ABOUT FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expenditures and financial results are forward-looking statements.

Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. For some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements see the Risk Factors discussion set forth under Part I, Item 1A beginning on page 6.

Overview
Long-term Growth Strategies - DuPont strives to grow shareholder value over the long term by executing its three growth strategies - Putting Science to Work, Leveraging the Power of One DuPont and Going Where the Growth Is. DuPont science and innovation is focused on delivering solutions for some of the world's toughest challenges such as the need for increased food production, renewable energy and raw materials, energy efficiency, and greater safety and protection. The initiatives employed to achieve the strategies are: #1 Grow in the areas of agriculture, biosciences, safety and protection and polymer science by delivering science-based solutions. #2 Expand the company's position in emerging markets. #3 Extend cost and capital productivity gains. Over the long term, DuPont continues to see the potential for attractive earnings growth from these initiatives. In addition to its growth strategies, DuPont's financial discipline principles are critical to delivering shareholder value over time. The principles are first to maintain a strong balance sheet and second to return excess cash to shareholders unless there is a compelling opportunity to invest for growth. The company's strong balance sheet supports liquidity and a low cost of borrowing and is a direct result from the disciplined execution of these principles.

Global Economic Conditions - The year 2008 was challenging due to a global economic recession with demand weakness in North American and Western European motor vehicle and construction related markets and dramatic escalation of global raw material, energy and transportation costs. Despite these challenges, the company delivered 4 percent sales growth and strong performances from the Agriculture & Nutrition segment, Pharmaceuticals, and most businesses in emerging markets. Early in the fourth quarter 2008 a financial crisis spreading globally triggered unprecedented market volatility and depressed economic growth. The fourth quarter of 2008 was the clear pivot point in the economic environment with a steep decline in demand becoming pervasive across a broader range of end markets and geographies. Reflecting these conditions, the company's full year sales volume dropped 5 percent versus the prior year.

Response to Challenging Global Market Conditions - In December 2008, DuPont announced plans to address rapidly deteriorating market conditions and strengthen the company's future competitiveness. Plans are focused on generating cash by better aligning cost, working capital and property, plant and equipment expenditures to the revised demand signals of the fourth quarter. These plans include a restructuring program with an associated fourth quarter pre-tax charge of $535 million, with expected pre-tax savings of about $130 million for 2009, and about $250 million annual savings thereafter. The restructuring will reduce about 2,500 employee positions, primarily those associated with motor vehicle and construction related businesses in Western Europe and the U.S. In addition to the expected $130 million cost savings in 2009 from restructuring, the company detailed plans to deliver an additional $600 million cost reduction in 2009. These plans include fixed cost productivity improvements, as well as immediate cost reductions implemented across the company such as significantly reducing discretionary spending, temporarily idling over 100 sites, reducing about 4,000 contractors and continuing productivity projects for streamlining and leveraging opportunities across operations, supply chain and support functions. The company also outlined 2009 plans to achieve a $1 billion net working capital reduction, and a 10 to 20 percent reduction in capital spending.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued

Analysis of Operations

(Dollars in millions) 2008 2007 2006 NET SALES $ 30,529 $ 29,378 $ 27,421

2008 versus 2007 Consolidated net sales for 2008 were $30.5 billion, up 4 percent. This reflects 10 percent sales growth through September 30, partly offset by a 17 percent year-over-year sales decline in the fourth quarter, precipitated by a significant decline in demand. Full year sales reflect a 7 percent increase in local selling prices and 3 percent favorable currency exchange, partly offset by 5 percent lower volume and a 1 percent reduction from portfolio changes. Worldwide sales volumes reflect a modest increase outside the U.S. driven by growth in emerging markets, more than offset by significantly lower volumes in the company's major polymer, chemical, material, and electronic product lines sold in the U.S. and Western Europe.

The table below shows a regional breakdown of 2008 consolidated net sales based on location of customers and percentage variances from prior year:

                                                                                         Percent Change Due to:
                                                      Percent
                                      2008           Change vs.         Local         Currency
(Dollars in billions)              Net Sales            2007            Price          Effect          Volume          Portfolio
Worldwide                          $   30.5                 4              7               3              (5 )              (1 )
United States                          11.0                (2 )            8               -             (10 )               -
Europe                                  9.5                 8              5               7              (4 )               -
Asia Pacific                            5.5                 6              6               2               -                (2 )
Canada & Latin America                  4.5                 9              9               4              (3 )              (1 )

2007 versus 2006 Consolidated net sales for 2007 were $29.4 billion, up 7 percent. This growth was principally the result of an 11 percent increase in sales outside of the U.S., reflecting in part the benefit of a weaker U.S. dollar (USD), which added 3 percent to worldwide sales. Worldwide volumes and local selling prices each increased 2 percent. Sales in the U.S. increased 1 percent reflecting 3 percent higher selling prices, partially offset by 2 percent lower volume. The decrease in U.S. sales volume was primarily due to lower demand for the company's products related to construction and motor vehicle production markets. Sales in Canada and Latin America increased 15 percent, primarily due to a 10 percent volume increase reflecting a substantial increase in sales of seed and crop protection products in South America.

The table below shows a regional breakdown of 2007 consolidated net sales based on location of customers and percentage variances from prior year:

                                                                                                           Percent Change Due to:
                                                    2007          Percent Change vs.
(Dollars in billions)                            Net Sales               2006               Local Price          Currency Effect        Volume
Worldwide                                        $   29.4                      7                   2                      3                 2
United States                                        11.3                      1                   3                      -                (2 )
Europe                                                8.8                     12                   2                      8                 2
Asia Pacific                                          5.2                      8                   2                      2                 4
Canada & Latin America                                4.1                     15                   2                      3                10

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued

(Dollars in millions) 2008 2007 2006 OTHER INCOME, NET $ 1,307 $ 1,275 $ 1,561

2008 versus 2007 Other income, net, increased $32 million versus 2007. The increase was attributable to an increase of $211 million in equity in earnings of affiliates, primarily due to the absence of the 2007 impairment charge described below, and a favorable $51 million litigation settlement in 2008. The increases are partially offset by additional net pre-tax exchange losses of $154 million and a decrease of $86 million in asset sales.

2007 versus 2006 Other income, net, decreased $286 million versus 2006. This reduction is primarily due to an impairment charge of $165 million to write down the company's investment in a polyester films joint venture in the Performance Materials segment, a decrease of $81 million in net pre-tax exchange gains and a decrease in miscellaneous items of $231 million offset by higher Cozaar®/Hyzaar® income of $128 million (see page 33 for Pharmaceuticals segment information and Note 3 to the Consolidated Financial Statements).

The decrease in miscellaneous items resulted from the absence of 2006 benefits of $90 million for the reversal of accrued interest related to the favorable settlement of certain prior-year tax contingencies and $76 million of insurance recoveries from its insurance carriers as part of asbestos litigation matters. Of the $76 million, $61 million related to costs, including outside counsel fees and expenses and settlements paid over the past twenty years. During this twenty year period, DuPont has been served with thousands of lawsuits alleging injury from exposure to asbestos on DuPont premises. Most of these claims have been disposed of through trial, dismissal or settlement. Management believes it is remote that the outcome of remaining or future asbestos litigation matters will have a material adverse effect on the company's consolidated financial position or liquidity. These asbestos related insurance recoveries were reflected in cash provided by operating activities within the company's Consolidated Statements of Cash Flows. The remaining $15 million is part of a total recovery of $143 million relating to insurance recoveries associated with damages to the company's facilities suffered as a result of Hurricane Katrina in 2005. The majority of the Hurricane Katrina recovery was included in cost of goods sold and other operating charges in the Consolidated Income Statements. No amounts were received from insurance carriers for damages suffered by the company as a result of Hurricane Rita.

Additional information related to the company's other income, net is included in Note 3 to the Consolidated Financial Statements.

  (Dollars in millions)                                 2008           2007           2006
  COST OF GOODS SOLD AND OTHER OPERATING CHARGES     $ 24,083       $ 21,746       $ 20,636
  As a percent of net sales                                79 %           74 %           75 %

2008 versus 2007 Cost of goods sold and other operating charges (COGS) for the year 2008 were $24.1 billion, versus $21.7 billion in 2007, an increase of 11 percent. COGS was 79 percent of net sales for 2008 versus 74 percent for the year 2007. The 5 percentage point increase principally reflects a $535 million charge for restructuring as discussed below, a $227 million charge for hurricane-related cleanup and repair, and significant increases in raw material, energy and freight costs.

In 2008, the company initiated a global restructuring program in response to the decline in the motor vehicle and construction markets, as well as the global economic recession. The program was established to reduce costs and improve profitability across the company's businesses. The program includes the elimination of approximately 2,500 positions principally located in Western Europe and the U.S. primarily supporting the motor vehicle and construction markets.

A resulting charge of $535 million has been reflected in COGS. This charge includes costs of $287 million related to employee severance costs and $248 million attributable to asset shut-downs, asset impairments and other non-personnel charges. Additional details related to this program are contained in the individual segment reviews and in Note 5 to the Consolidated Financial Statements.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued

Essentially all employee terminations related to this program will begin during the first quarter of 2009. The program is estimated to be substantially complete in 2010. There were no cash payments related to this program in 2008.

Expected pre-tax cost savings of approximately $250 million per year are associated with the program when complete. Approximately $130 million of this savings is expected to be realized in 2009.

2007 versus 2006 COGS for the year 2007 were $21.7 billion, versus $20.6 billion in 2006, an increase of 5 percent. COGS was 74 percent of net sales for 2007 versus 75 percent for the year 2006. The 1 percentage point reduction principally reflects the absence of 2006 charges for restructuring, the effects of the company's productivity initiatives and a current year benefit from the weaker U.S. dollar due to currency exchange rate changes which increased sales at a higher rate than the rate they increased COGS. Partly offsetting these factors were increases in raw material and finished product distribution costs, as well as the absence of a 2006 benefit of $128 million in insurance recoveries.

The 2006 restructuring programs included the elimination of approximately 3,200 positions and redeployment of about 650. The company recorded a net charge of $326 million in 2006 related to employee separation costs and asset impairment charges. This included $184 million to provide severance benefits for approximately 2,800 employees involved in manufacturing, marketing and sales, administrative and technical activities. At December 31, 2008, the 2006 restructuring programs are essentially complete. Additional details related to these programs are contained in the segment reviews and in Note 5 to the Consolidated Financial Statements.

Payments from operating cash flows to terminated employees as a result of the 2006 plans totaled $47 million, $77 million, and $32 million during 2008, 2007 and 2006, respectively. Annual pre-tax cost savings of about $125 million per year are associated with the Coatings & Color Technologies program, approximately $53 million of which is reflected in COGS. Cumulative savings of approximately 100 percent, 80 percent and 35 percent was realized in 2008, 2007 and 2006, respectively.

    (Dollars in millions)                              2008          2007          2006
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     $ 3,593       $ 3,396       $ 3,255
    As a percent of net sales                             12 %          12 %          12 %

Selling, general and administrative expenses (SG&A) as a percent of sales remained constant over the three year period. Higher SG&A is primarily due to increased global commissions, selling and marketing investments related to the company's seed products and an unfavorable foreign currency impact.

          (Dollars in millions)                  2008          2007          2006
          RESEARCH AND DEVELOPMENT EXPENSE     $ 1,393       $ 1,338       $ 1,302
          As a percent of net sales                  5 %           5 %           5 %

Research and development expense (R&D) as a percent of sales remained constant over the three year period. Higher R&D in 2008 and 2007 relates to the accelerated biotechnology trait research and development in the Agriculture & Nutrition segment. The 2007 increase was partially offset by a decrease in R&D in the Coatings & Color Technologies segment as a result of consolidating research facilities as a part of its 2006 business transformation plan.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued

(Dollars in millions) 2008 2007 2006
INTEREST EXPENSE $ 376 $ 430 $ 460

Interest expense decreased $54 million in 2008 compared to 2007. The decrease in interest expense is due to lower average interest rates, partially offset by higher average borrowings. Interest expense decreased $30 million in 2007 versus 2006. This decrease was primarily due to lower average borrowing levels and higher capitalized interest, partially offset by slightly higher average interest rates.

               (Dollars in millions)            2008         2007        2006
               PROVISION FOR INCOME TAXES     $  381       $  748       $ 196
               Effective income tax rate        15.9 %       20.0 %       5.9 %

In 2008, the company recorded a tax provision of $381 million (see Note 6 to the Consolidated Financial Statements).

In 2007, the company recorded a tax provision of $748 million which included a benefit of $108 million related to tax settlements offset by net tax expense in other operating results (see Note 6 to the Consolidated Financial Statements).

In 2006, the company recorded a tax provision of $196 million which included a benefit of $272 million related to tax settlements and a $186 million benefit for reversal of tax valuation allowances related to the net deferred tax assets of certain foreign subsidiaries due to the sustained improved business performance in these subsidiaries. These tax benefits were offset by net tax expense in other operating results (see Note 6 to the Consolidated Financial Statements).

The company's current estimate of the 2009 effective income tax rate is about 26 percent, excluding tax effects of exchange gains and losses which can not be reasonably estimated at this time. See Note 6 for additional detail on items that significantly impact the company's effective tax rates.

(Dollars in millions) 2008 2007 2006 NET INCOME $ 2,007 $ 2,988 $ 3,148

2008 versus 2007 Net income for 2008 decreased $981 million, or 33 percent versus 2007. The decrease in net income is attributable to a substantial decline in sales volume, primarily occurring during the fourth quarter 2008, and higher fixed costs including restructuring and hurricane-related charges recorded in the fourth quarter 2008.

2007 versus 2006 Net income for 2007 decreased 5 percent versus 2006, primarily due to the higher effective tax rate, as well as the decrease in other income. These decreases were partially offset by a 7 percent increase in net sales, the absence of the restructuring charges taken in 2006 and a favorable foreign currency exchange impact.

Corporate Outlook
For the year 2009, the company's earnings outlook is a range of $2.00 to $2.50 per share, anticipating that the global economic recession will adversely affect the company's results. Favorable global agriculture market and competitive conditions are expected to support continued sales and earnings growth for the Agriculture & Nutrition segment. However, lower demand for the company's major polymer, chemical, material, and electronic product lines and the impact of currency are expected to limit the company's overall revenue growth. The company plans to continue its appropriate level of support for businesses expected to have above-average growth rates and margins. In addition, cash-generating actions have been implemented including spending reductions and restructuring to better align capital expenditures and costs with anticipated continuing lower global demand. For 2009, the company has set targets for capital expenditures of about $1.6 billion, and fixed cost and working capital reductions of about $730 million and $1 billion respectively.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued

Accounting Standards Issued Not Yet Adopted In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007) "Business Combinations" (SFAS 141R) which replaces SFAS No. 141. SFAS 141R addresses the recognition and measurement of identifiable assets acquired, liabilities assumed, and non-controlling interests in business combinations. SFAS 141R also requires disclosure that enables users of the financial statements to better evaluate the nature and financial effect of business combinations. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R will be adopted by the company on January 1, 2009. The company does not believe that at the time of adoption SFAS 141R will have a material impact on its Consolidated Financial Statements. This standard requires significantly different accounting treatment for business combinations than current requirements. Thus, accounting for potential future business combinations after adoption may produce a significantly different result and financial statement impact than under current standards.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51" (SFAS 160) which changes the accounting and reporting for minority interests and for the deconsolidation of a subsidiary. It also clarifies that a third-party, non-controlling interest in a consolidated subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also requires disclosure that clearly identifies and distinguishes between the interests of the parent and the interests of the non-controlling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. SFAS 160 will be adopted by the company on January 1, 2009. The company does not believe that at the time of adoption SFAS 160 will have a material impact on its Consolidated Financial Statements.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). Effective for fiscal years and interim periods beginning after November 15, 2008, the new standard requires enhanced disclosures about derivative and hedging activities that are intended to better convey the purpose of derivative use and the risks managed. SFAS 161 will not affect the company's financial position or results of operations. The new standard solely affects the disclosure of information.

In December 2008, FASB issued FASB Staff Position (FSP) FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets," which is effective for fiscal years ending after December 15, 2009. The new standard expands disclosures for assets held by employer pension and other postretirement benefit plans. FSP FAS 132(R)-1 will not affect the company's financial position or results of operations. The new standard solely affects the disclosure of information.

Critical Accounting Estimates
The company's significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. Management believes that the application of these policies on a consistent basis enables the company to provide the users of the financial statements with useful and reliable information about the company's operating results and financial condition.

The preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles in the Unites States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit obligations, income taxes, restructuring liabilities, environmental matters and litigation. Management's estimates are based on historical experience, facts and circumstances available at the time and various other assumptions that are believed to be reasonable. The company reviews these matters and reflects changes in estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the application of the company's accounting policies which could have a material effect on the company's financial position, liquidity or results of operations.

Long-term Employee Benefits
Accounting for employee benefit plans involves numerous assumptions and estimates. Discount rate and expected return on plan assets are two critical assumptions in measuring the cost and benefit obligation of the company's

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued

pension and other long-term employee benefit plans. Management reviews these two key assumptions annually as of December 31st. These and other assumptions are updated periodically to reflect the actual experience and expectations on a plan specific basis as appropriate. As permitted by GAAP, actual results that differ from the assumptions are accumulated on a plan by plan basis and to the extent that such differences exceed 10 percent of the greater of the plan obligations or the applicable plan assets, the excess is amortized over the average remaining working life of current employees.

About 80 percent of the company's benefit obligation for pensions and . . .