UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(In thousands of dollars, except per share data)

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

(1) Reflects the cash proceeds on the transaction which were used to repay $250 million of Crompton’s 8.5% long-term notes and $262.7 million of other long-term debt outstanding, pay premiums of $23.8 million relating to the early extinguishment of the 8.5% notes, fund the outstanding accounts receivable securitization related to OSI of $31.6 million and contribute $75 million to certain Crompton pension plans.

(2) Reflects GESC assets acquired and liabilities assumed.

(3) Reflects the present value of the minimum contingent quarterly payments of $105 million to be received from GE over the three-year period following the close of the transaction. An additional $145 million can be earned based on the combined performance of GE’s existing silicones business and the OSI business acquired by GE, but this amount has not been reflected in the pro forma combined financial statements.

(4) Reflects an adjustment to write-off the goodwill associated with OSI and certain other OSI related assets and liabilities which were not sold in the transaction.

(5) Reflects the estimated current and deferred income tax effect on the gain on the transaction, on the premium relating to the early extinguishment of debt and on the $75 million contribution to certain Crompton pension plans. Such amounts are based on the applicable statutory tax rates.

(6) Reflects the write-off of deferred transaction costs.

(7) Reflects the excess of retained accounts receivable over retained accounts payable attributable to OSI that is payable to GE.

(8) Reflects an adjustment to accrue for expenses associated with the transaction, including investment banking, legal, audit, consulting fees and other costs.

(9) Reflects the pro forma gain of $102.9 million recorded on the transaction, net of tax, based on assets and liabilities held for sale as of 6/30/03.

(10) Reflects the impact of the premium paid on the early extinguishment of debt of $23.8 million, net of taxes of $9.3 million recorded at the applicable statutory tax rate.

(11) Reflects the write-off of the cumulative translation adjustment associated with certain foreign locations exclusively or predominantly engaged in the OSI business.

(12) Reflects certain reclassifications made to conform to Crompton’s presentation.

(13) Reflects adjustments to pension expense due to the assumed contribution of $75 million of the proceeds from the transaction to certain Crompton pension plans.

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(14) The pro forma combined statements of operations do not reflect adjustments to cost of products sold for purchases of certain products purchased by GESC from an affiliate at less than market price. In accordance with the transaction contract, Crompton will purchase such products at substantially market price, which will result in an annual increase to cost of products sold of approximately $5 million.

(15) The reduction in interest expense for the pro forma periods ending June 30, 2003 and December 31, 2002 are based on the assumed use of proceeds as of January 1, 2003 and January 1, 2002, respectively. These assumptions vary from the actual use of proceeds subsequent to the transaction and from the assumed use of proceeds reflected on the Unaudited Pro Forma Combined Balance Sheet as of June 30, 2003 as noted in Note (1) above. The outstanding debt balances assumed to be reduced with the proceeds from the transaction and the assumed residual cash balances are shown in the table below. The table also shows the related interest expense savings associated with the debt reductions based on the applicable interest rates.