Exhibit 99.1





                              INFORMATION STATEMENT

Dear NL Industries, Inc. Shareholder:



     On November 6, 2003, the Board of Directors of NL Industries,  Inc.  ("NL")
formally  approved a distribution  to NL  shareholders  of  approximately  23.85
million  shares  of the  common  stock of  Kronos  Worldwide,  Inc.  ("Kronos"),
representing  approximately  48.7% of the outstanding  shares of common stock of
Kronos.  Kronos  is  currently  a  wholly-owned  subsidiary  of  NL.  After  the
distribution,  NL and its  affiliates  will own  approximately  92.5% of Kronos'
common  stock and  shareholders  who are not  affiliates  of Kronos will own the
remaining  7.5%. As a holder of NL common  stock,  you will receive one share of
Kronos  common stock for every two shares of NL common stock that you own at the
close of business on November 17, 2003, the record date for the distribution. No
fractional  shares of Kronos common stock will be issued. If you would otherwise
be entitled to a fractional  share,  you will receive a check for the cash value
thereof.  We  are  sending  you  this  information  statement  to  describe  the
distribution of Kronos stock.



     A SHAREHOLDER  VOTE IS NOT REQUIRED FOR THE  DISTRIBUTION  TO OCCUR. WE ARE
NOT ASKING YOU FOR A PROXY,  AND WE REQUEST THAT YOU DO NOT SEND US A PROXY.  In
addition,  you do not need to pay any cash or other consideration for the shares
of Kronos  common stock that you receive,  nor will you be required to surrender
or exchange your existing shares of NL common stock, or take any other action in
order to receive  Kronos common  stock.  The number of shares of NL common stock
that you  currently  own will not  change as a result of the  distribution.  THE
DISTRIBUTION OF KRONOS COMMON STOCK WILL BE A TAXABLE DIVIDEND UNDER U.S. INCOME
TAX LAWS AND WILL  GENERALLY  BE TAXED AT RECENTLY  ENACTED  FAVORABLE  DIVIDEND
RATES IF RECEIVED BY INDIVIDUAL SHAREHOLDERS.


     There has been no trading  market  for Kronos  common  stock.  However,  we
expect that a limited market for Kronos common stock,  commonly known as a "when
issued"  trading  market,  will develop on or shortly before the record date for
the distribution.  Kronos has applied for the listing of its common stock on the
New York Stock Exchange and expects that its common stock will be traded on such
exchange under the trading symbol "KRO."


     This information  statement contains information about the distribution and
about Kronos.

                                    Sincerely,


                                    Harold C. Simmons
                                    Chairman of the Board and
                                    Chief Executive Officer



     As you review this information statement, you should carefully consider the
matters  described  in "Risk  Factors"  beginning  on page 8 in  evaluating  the
benefits and risks of holding or disposing of shares of Kronos common stock that
you will receive in the distribution.


     This  information  statement  does not  constitute  an offer to sell or the
solicitation of an offer to buy any securities.

     Neither the  Securities and Exchange  Commission  nor any state  securities
commission has approved or disapproved of these securities or determined if this
information  statement  is  truthful  or  complete.  Any  representation  to the
contrary is a criminal offense.


     The date of this  information  statement is November  10,  2003,  and it is
being mailed to NL shareholders on or about November 17, 2003.


<PAGE>




<TABLE>
<CAPTION>
                                TABLE OF CONTENTS



                                                Page


<S>                                              <C>
SUMMARY...........................................1

RISK FACTORS......................................8

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS.....15

THE DISTRIBUTION..................................16

     Reasons for the Distribution.................16
     Description of the Distribution..............17
     Results of the Distribution..................19
     Material U.S. Federal Income Tax
       Consequences of the Distribution...........19
     Listing and Trading of Kronos Common
       Stock......................................21

RELATIONSHIPS AMONG NL, KRONOS
   AND THEIR AFFILIATES AFTER THE DISTRIBUTION....22

     Distribution Agreement.......................23
     Intercorporate Services Agreement............25
     Tax Sharing Agreement........................25

DIVIDEND POLICY...................................25

SELECTED FINANCIAL DATA...........................26

MANAGEMENT'S DISCUSSION AND
   ANALYSIS OF FINANCIAL CONDITION
   AND RESULTS OF OPERATIONS......................28

     Critical Accounting Policies and Estimates...28
     Results of Operations........................29
     Liquidity and Capital Resources..............36
     Quantitative and Qualitative Disclosures
       About Market Risk..........................44
     Non-GAAP Financial Measures..................46

BUSINESS..........................................47

     General......................................47
     Industry.....................................47
     Products and Operations......................47
     Manufacturing Process and Raw Materials......48
     TiO2 Manufacturing Joint Venture.............49
     Competition..................................49

                                                Page

     Research and Development.....................50
     Patents and Trademarks.......................50
     Foreign Operations...........................50
     Customer Base and Annual Seasonality.........50
     Employees....................................51
     Regulatory and Environmental Matters.........51
     Properties...................................52
     Legal Proceedings............................52

MANAGEMENT........................................53

     Directors and Officers.......................53
     Board Committees.............................55
     Compensation of Directors....................55
     Compensation of Executive Officers...........55
     Stock Option Exercises and Holdings..........57
     Pension Plans................................57
     Kronos 2003 Long-Term Incentive Plan.........58
     Compensatory Arrangements....................58
     Compensation Committee Interlocks and
       Insider Participation......................58

PRINCIPAL STOCKHOLDERS............................59

     Ownership of NL and Kronos Commo
       Stock......................................59
     Ownership of Valhi Common Stock..............61

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....63

DESCRIPTION OF CAPITAL STOCK......................66

     Common Stock.................................66
     Preferred Stock..............................66
     Provisions That May Have an Anti-Takeover
       Effect.....................................67
     Liability and Indemnification of Directors
       and Officers...............................68
     Stockholder Approval of Certain Business     69
       Combinations...............................69
     Transfer Agent...............................69

WHERE YOU CAN FIND MORE
   INFORMATION....................................69

INDEX OF FINANCIAL STATEMENTS.....................F-1
</TABLE>





                                       i
<PAGE>


                                     SUMMARY


     This  summary  highlights   selected   information  from  this  information
statement but does not contain all details concerning the distribution of Kronos
common  stock,  including  information  that may be  important to you. To better
understand the  distribution,  you should  carefully read this entire  document.
References in this  document to NL mean NL  Industries,  Inc. and  references to
Kronos  mean  Kronos  Worldwide,  Inc.  The  market  data  in  this  information
statement,  including  growth  rates and  information  relating to our  relative
position in the industry,  are based on internal  surveys,  market  research and
other publicly-available information.  Although we believe that such third party
sources  are  reliable,  we have not  independently  verified  the  accuracy  or
completeness of this information.


Who We Are


     NL,  organized as a New Jersey  corporation  in 1891,  conducts its primary
operations  through  Kronos,  a Delaware  corporation  and one of its  principal
wholly-owned  subsidiaries.  In  September  2003,  Kronos  changed its name from
Kronos,  Inc. to Kronos  Worldwide,  Inc.  Kronos is the world's  fifth  largest
producer of titanium dioxide  pigments,  or TiO2, with an estimated 12% share of
worldwide TiO2 sales volume in 2002. TiO2 is a pigment used to whiten,  brighten
and add opacity to thousands of commonly used products, such as paints, plastics
and paper, as well as fibers, rubber,  ceramics,  inks and cosmetics.  There are
currently  no  effective  substitutes  for TiO2  for use in these  applications.
Approximately  one-half of Kronos' 2002 sales volume was in Europe, where Kronos
is the second  largest  producer of TiO2.  In 2002,  Kronos had an estimated 18%
share of European TiO2 sales volume and an estimated 14% share of North American
TiO2 sales volume.



     At November 10, 2003, Valhi, Inc. ("Valhi") and Tremont LLC ("Tremont"),  a
wholly owned subsidiary of Valhi, held an aggregate of approximately 85% of NL's
outstanding common stock. At November 10, 2003, Contran Corporation  ("Contran")
and its subsidiaries held approximately 90% of Valhi's outstanding common stock.
Substantially  all of  Contran's  outstanding  voting  stock  is held by  trusts
established for the benefit of certain  children and  grandchildren of Harold C.
Simmons,  of which Mr. Simmons is the sole trustee.  Mr. Simmons is the Chairman
of the Board of each of Contran,  Valhi and  Tremont,  the Chairman of the Board
and  Chief  Executive  Officer  of NL  and,  as of  the  distribution  date,  is
anticipated  to be the  Chairman  of the Board and Chief  Executive  Officer  of
Kronos,  and  may be  deemed  to  control  each  such  company.  See  "Principal
Stockholders."


The Distribution



     NL will  distribute  approximately  23.85  million  shares of Kronos common
stock,  representing  approximately  48.7% of the  outstanding  shares of Kronos
common stock, to its shareholders. After the distribution, NL and its affiliates
will own  approximately  92.5% of Kronos' common stock and  shareholders who are
not affiliates of Kronos will own the remaining  7.5%. Each NL shareholder as of
the close of  business on November  17,  2003,  which is the record date for the
distribution, will receive one share of Kronos common stock for every two shares
of NL common  stock held as of the record  date.  NL and Kronos  expect that the
distribution will take place on or about December 8, 2003,  although  completion
of the distribution is contingent upon the satisfaction of conditions  described
in the distribution  agreement.  See  "Relationships  Among NL, Kronos and Their
Affiliates After the Distribution--Distribution  Agreement." THE DISTRIBUTION OF
KRONOS COMMON STOCK WILL BE A TAXABLE  DIVIDEND  UNDER U.S.  INCOME TAX LAWS AND
WILL GENERALLY BE TAXED AT RECENTLY ENACTED FAVORABLE DIVIDEND RATES IF RECEIVED
BY INDIVIDUAL SHAREHOLDERS.




     In the  distribution,  shares of Kronos  common  stock shall  initially  be
distributed in book-entry form through Kronos' direct  registration  system.  As
soon as practicable on or after the distribution  date, NL's transfer agent will
provide NL's  shareholders a statement showing such  shareholder's  ownership of
Kronos  common  stock  along  with a check for any  fractional  shares of Kronos
common stock to which the shareholder would otherwise be entitled. For NL common
stock held through a broker,  bank or other  nominee,  the  transfer  agent will


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<PAGE>


credit the registered  nominee's  account with shares of Kronos common stock and
the dollar amount of any  fractional  shares of Kronos common stock to which the
holder is entitled,  which in turn should be credited to the  holder's  account.
Following the distribution,  any record holder of Kronos common stock may obtain
a physical stock  certificate  representing  the holder's shares at no charge by
contacting Kronos' transfer agent.



     Immediately  prior  to  the  distribution  of  Kronos  common  stock  to NL
shareholders, Kronos will declare and pay a dividend to NL in the form of a $200
million  long-term  note  payable  to NL (the  "Term  Note").  The Term  Note is
intended to provide NL with  liquidity  which  should  enable NL to, among other
things, explore  diversification  opportunities beyond the scope of its existing
assets and business.  The terms of the Term Note are described in "Relationships
Among NL,  Kronos  and  Their  Affiliates  After the  Distribution--Distribution
Agreement--Term Note."


Questions and Answers About the Distribution and Kronos

Q:   Why is the distribution being made?


A:   The Board of Directors of NL has determined that the distribution is in the
     best interests of NL and its shareholders.  Through the recapitalization of
     Kronos and distribution of approximately 48.7% of the outstanding shares of
     Kronos common stock, NL believes significant benefits will be achieved.


     First,  it is believed  that Kronos will be recognized in the TiO2 industry
     and the  financial  markets  as an entity  whose  business  operations  are
     distinct from NL. Investors,  suppliers,  customers and employees worldwide
     will be able to view and evaluate the Kronos business independently from NL
     and its  historical  operations,  and  acquire  a direct  equity  ownership
     interest in Kronos. The separation and resulting public company recognition
     should enhance the ability of Kronos to capitalize on the Kronos brand name
     and to develop separate business relationships and strategies distinct from
     operating as a wholly-owned  subsidiary of NL, which is expected to enhance
     Kronos' global competitive position.

     Second,  NL will retain a significant  equity ownership  interest in Kronos
     and will continue to benefit from the affiliate group holding a controlling
     interest in a public  company  serving the global  TiO2  market.  As Kronos
     continues  to grow and  develop  its TiO2  business  separate  from NL, the
     potential  long-term  investment  return  to NL  and  its  shareholders  is
     anticipated  to  increase.   In  2002,   Kronos   International,   Inc.,  a
     wholly-owned   subsidiary  of  Kronos  ("KII"),  issued  (euro)285  million
     aggregate  principal  amount of 8.875%  Senior  Secured Notes due 2009 (the
     "KII Senior Notes"),  primarily in the European financial market.  Proceeds
     of such financing were used in part to repay  intercompany debt owed by KII
     to Kronos, which in turn was used to repay intercompany debt owed by Kronos
     to NL. NL used a portion of such  proceeds  to repay all of its third party
     long-term   indebtedness  with  the  balance  used  for  general  corporate
     purposes. As demonstrated by KII's successful public debt offering in 2002,
     and the  continuing  market  interest in such debt, as well as other recent
     financing  arrangements  entered  into by KII and its  subsidiaries,  it is
     believed that the equity of Kronos will also be attractive to the financial
     markets. It is further believed that with a separate public trading market,
     the Kronos common stock retained by NL will provide  significant  increased
     value to NL as a result of the anticipated favorable valuation of Kronos in
     the financial markets. NL over time could sell a portion of its holdings of
     Kronos common stock in the  established  trading market or more readily use
     such stock as collateral for future credit  arrangements if such additional
     liquidity is determined to be beneficial to NL in the future.


     Third,  NL believes  that the  distribution  will  provide it with  greater
     opportunity  for  diversification  of its holdings and business  interests.
     Through  its  future  diversification  efforts,  NL may be able to  provide
     potentially  more consistent and stable financial  performance  compared to
     its current  holdings.  In order to  accomplish  a  diversification  of its
     holdings,  it is believed NL will require  additional sources of liquidity.
     As a result of the 2002  public  debt  offering by KII,  and  repayment  of
     intercompany debts, NL achieved additional  liquidity while discharging all
     of its long-term debt obligations.  Through the recapitalization of Kronos,
     NL will receive significant additional consideration through the payment of
     a  dividend  in the form of the  Term  Note,  which  will  provide  NL with


                                       2
<PAGE>


     additional  financial  resources  and  liquidity.  The  results of the 2002
     financing activities and the dividend of the Term Note effectively converts
     a portion  of NL's  investment  in Kronos  into a more  liquid  form  (with
     respect to the proceeds  received from the 2002 financing  activities)  and
     into a more senior  position (with respect to the Term Note) that will also
     provide  additional  liquidity  to NL,  which  should  enable NL to explore
     diversification  opportunities  beyond the scope of its existing assets and
     business.  Additionally,  the  distribution  of Kronos  common stock should
     enhance NL's ability to increase its  liquidity  through  potential  future
     sales of a portion of its remaining  holdings of Kronos common stock or the
     use  of  Kronos   common  stock  as   collateral   for  any  future  credit
     arrangements.  Upon the  completion  of the  distribution,  NL will explore
     diversification  opportunities  beyond the scope of its existing  business,
     which  should  reduce the risks  inherent  in  continuing  to  conduct  its
     operations  primarily  in a  single  highly  competitive  industry  that is
     capital intensive and subject to significant  historically  cyclical demand
     and pricing variations.


Q:   Should I send in my NL stock certificates for exchange?

A:   No, the distribution is not an exchange.  Holders of NL common stock should
     not send stock certificates to NL, Kronos or the distribution agent.

Q:   Will NL shareholders vote on the distribution?

A:   No.  The  vote  of  NL's  shareholders  is not  required  to  complete  the
     distribution.

Q:   How will fractional shares be treated?


A:   On or after the distribution  date, the  distribution  agent will aggregate
     all fractional  shares,  sell them on the open market at prevailing  market
     prices  and  distribute  the  aggregate   proceeds   ratably  to  those  NL
     shareholders  otherwise entitled to receive fractional shares. As a result,
     each holder of NL common stock who would otherwise be entitled to receive a
     fractional  share  will  receive  cash for  those  fractional  shares  less
     applicable  withholding  taxes  and a pro  rata  portion  of the  aggregate
     brokerage  commission payable in connection with the sale of the fractional
     shares.  The  distribution  agent  will  in its  sole  discretion,  without
     influence from Contran,  Valhi, NL or Kronos,  determine when, how, through
     which  broker-dealer  and at what price to make its sales of the aggregated
     fractional shares. Neither the distribution agent nor the broker-dealers it
     uses will be affiliates of Contran, Valhi, NL or Kronos.


Q:   What do shareholders need to do to participate in the distribution?

A:   Nothing.  The  distribution  agent will distribute  shares of Kronos common
     stock to NL shareholders without shareholders having to take any action.

Q:   Why am I receiving this information statement?

A:   This information  statement is being provided solely to furnish information
     to shareholders of NL who will receive shares of Kronos common stock in the
     distribution.  It is  not,  and is not  intended  to be  construed  as,  an
     inducement or encouragement to buy or sell any Kronos or NL securities.  We
     believe that the  information  contained in this  information  statement is
     accurate as of the date set forth on the cover,  and neither the mailing of
     this  information  statement nor the delivery of Kronos common stock in the
     distribution will create any implication to the contrary. Changes may occur
     after that date, and we will not update the  information  contained  herein
     except in the normal course of public disclosure obligations and practices.
     You should carefully review the information provided in this document.

Q:   Will the distribution change the number of shares I own in NL?

A:   No. The  distribution  will not change the number of NL common  shares that
     you own and after the distribution you will own the same percent of NL that
     you owned  immediately  prior to the  distribution.  Immediately  after the
     distribution,  NL's  shareholders  will  continue  to own their  respective
     proportionate  interests in NL and Kronos.  However,  shareholders will now
     own their interests in these businesses through their ownership of stock in
     each of two public companies.

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<PAGE>

Q:   Are there risks to  continuing  to own Kronos  common stock  following  the
     distribution?

A:   Yes. The  separation of Kronos from NL presents  risks  relating to Kronos'
     common stock being publicly traded for the first time. Also,  Kronos' Board
     of Directors will make independent  determinations regarding whether to pay
     dividends  and, if so, the amount and frequency of such dividend  payments.
     In addition, Kronos' business is subject to both general and specific risks
     relating to its operations.  Many of these risks are described in the "Risk
     Factors" section beginning on page 8. We encourage you to read that section
     carefully.

Q:   Will Kronos common stock be publicly traded?


A:   Kronos has  applied  for the  listing  of its common  stock on the New York
     Stock  Exchange.  Kronos expects that its common stock will be approved for
     listing on the New York Stock  Exchange  under the trading symbol "KRO" and
     that regular trading will begin on or about the distribution date.



     Before  regular  trading  begins,  Kronos expects that a limited market for
     shares of its  common  stock,  commonly  known as a "when  issued"  trading
     market,  will  develop  on or  shortly  before  the  record  date  for  the
     distribution.  The term "when-issued" means that shares can be traded prior
     to the  time of the  distribution.  Even  though  when-issued  trading  may
     develop,  none of these trades will settle prior to the  effective  date of
     the  distribution,  and if the distribution does not occur, all when-issued
     trading will be null and void.


Q:   Will the distribution affect the trading price of my NL common stock?

A:   Probably.  After the  distribution,  NL common  stock will  continue  to be
     listed on the NYSE  under the  symbol  "NL,"  and the  trading  price of NL
     common stock will likely be lower than the trading price  immediately prior
     to the distribution.  Moreover, until the market has evaluated NL after the
     distribution,   the  trading   price  of  NL  common  stock  may  fluctuate
     significantly.

Q:   Will the  distribution  affect the amount of dividends that I receive on my
     NL  common  stock,  and  does  Kronos  expect  to pay a  regular  quarterly
     dividend?



A:   Maybe. Prior to the distribution,  NL's regular quarterly dividend was $.20
     per NL  share.  NL's  board of  directors  has  declared  a fourth  quarter
     dividend  of  $.20  per NL  share,  payable  on  December  29,  2003  to NL
     shareholders of record as of December 12, 2003. The payment of dividends in
     the  future by both NL and Kronos is  subject  to the  discretion  of their
     respective  boards of  directors,  and  various  factors,  including  those
     discussed below on page 8 under "Risk  Factors--Various  factors may hinder
     the declaration and payment of dividends following the distribution."



Q:   What if I want to sell my NL common stock or Kronos  common stock after the
     distribution?

A:   Unless  you are an  affiliate  of NL or  Kronos,  you are free to sell your
     shares of NL common  stock or Kronos  common  stock.  However,  you  should
     consult with your financial and tax advisors as to the  implications of any
     sales.  Neither NL nor Kronos is making any recommendation on the purchase,
     retention or sale of shares of NL common stock or Kronos common  stock.  If
     you do decide to buy or sell any shares of NL or Kronos common  stock,  you
     should make sure your broker, bank or other nominee understands whether you
     want to buy or sell NL common stock, Kronos common stock or both.

Q:   What is likely to be the initial trading price of Kronos common stock?

A:   Prior to the  distribution,  there has been no  trading  market  for Kronos
     common  stock and, as a result,  it is  difficult  to predict the prices at
     which Kronos common stock might trade. After the distribution,  NL, Tremont

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<PAGE>

     and Valhi will own a total of approximately 92.5% of the outstanding shares
     of Kronos common stock and other  stockholders will own approximately  7.5%
     of the outstanding Kronos shares. Kronos expects that its common stock will
     trade on the New York Stock Exchange. Neither NL nor Kronos can predict the
     extent to which investors' interest will lead to a liquid trading market or
     whether  the market  price of Kronos  common  stock will be  volatile.  The
     combined  trading  prices of Kronos  common stock and NL common stock after
     the  distribution  may be less than,  equal to or greater  than the current
     trading price of NL common  stock.  The market price of Kronos common stock
     could fluctuate  significantly  for many reasons,  including in response to
     the risk factors listed in this information  statement  beginning on page 8
     or  for  reasons  unrelated  to  Kronos'  specific  performance.  See  "The
     Distribution--Reasons   for  the  Distribution"  and  "Risk  Factors--Risks
     Relating  to the  Distribution--There  has been no prior  market for Kronos
     common  stock,  and it is  difficult  to predict the prices at which Kronos
     common stock might trade."

Q:   How will NL and Kronos be related after the distribution?




A:   Immediately following the distribution,  NL will own approximately 51.3% of
     Kronos common stock and Valhi and Tremont will own a total of approximately
     41.2% of Kronos  common  stock.  In addition,  a majority of the members of
     Kronos' Board of Directors  will also serve on NL's Board of Directors.  NL
     is currently in compliance  with,  and as of the  distribution  date Kronos
     will comply with, all New York Stock Exchange rules regarding  interlocking
     directorates and independence of directors.  Kronos will also have the $200
     million Term Note  outstanding to NL. See  "Relationships  Among NL, Kronos
     and Their Affiliates After the Distribution."


Q:   What are the conditions to the distribution becoming effective?

A:   The  completion  of the  distribution  depends on the  satisfaction  of the
     following conditions:

     o    the  SEC  has  declared  Kronos'  registration  statement  on  Form 10
          effective, and there has been no suspension,  withdrawal or stop-order
          in effect with respect  thereto and no proceeding for that purpose has
          been instituted by the SEC;

     o    the New York Stock  Exchange  has  approved  the listing of the Kronos
          common stock, subject to official notice of issuance;

     o    the actions and filings with regard to state  securities  and blue sky
          laws of the United  States (and any  comparable  law under any foreign
          jurisdiction)  have been  taken and,  where  applicable,  have  become
          effective or accepted;

     o    there has been no order,  injunction  or decree issued by any court or
          agency  of  competent   jurisdiction  or  other  legal  constraint  or
          prohibition   preventing   the   consummation   of  the   transactions
          contemplated by the distribution agreement in effect;

     o    all  material  consents  and  governmental   approvals   necessary  to
          consummate the transactions contemplated by the distribution agreement
          have been obtained and are in full force and effect;

     o    the NL Board of Directors is satisfied that the distribution is lawful
          under applicable state and federal law;

     o    the NL  Board of  Directors  has  approved  the  distribution  and not
          abandoned  or  revoked  the   distribution  at  any  time  before  the
          completion of the distribution;

     o    Kronos' amended and restated  certificate of incorporation and bylaws,
          substantially  as filed as  exhibits to the Form 10 and  described  in
          this information statement, are in effect;

     o    the  various  ancillary   agreements  described  in  this  information
          statement  have been  executed and  delivered by the parties  thereto,
          including:

          o    the Tax Sharing Agreement among Contran, Valhi and Kronos; and

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<PAGE>


          o    the Intercorporate Services Agreement between Contran and Kronos;


     o    no other events or developments  have occurred  subsequent to the date
          of the distribution  agreement such that, in the judgment of NL, would
          result in the  distribution  having an adverse  effect on NL or on the
          shareholders of NL; and

     o    the distribution agreement has not been terminated.

Q:   Can NL decide not to complete the distribution?

A:   Yes. NL may cancel the distribution for any reason at any time before it is
     completed.

Q:   Will I be taxed on the distribution under U.S. federal income tax laws?

A:   Yes. NL  shareholders  who  receive  shares of Kronos  common  stock in the
     distribution will receive a taxable dividend in an amount equal to the fair
     market value of Kronos common stock received.  For NL shareholders that are
     not  corporations,  this  amount  will  generally  be taxable at  favorable
     dividend rates under recently enacted  legislation.  For shareholders  that
     are  corporations,  the  distribution  will  be  subject  to the  corporate
     dividends  received  deduction but may result in a basis  reduction to such
     shareholder's  NL stock and/or gain  recognition.  Each NL shareholder  who
     receives  cash in lieu of a  fractional  Kronos  share will be  required to
     recognize a  short-term  gain or loss equal to the  difference  between the
     cash so received  and the portion of the tax basis in Kronos  common  stock
     that is  allocable to the  fractional  share.  You should  consult your tax
     advisor as to the particular tax  consequences to you of the dividend.  You
     should also review the discussion  under "The  Distribution--Material  U.S.
     Federal Income Tax Consequences of the Distribution" that begins on page 19
     of this information statement.

Q:   Will NL or Kronos be taxed on the  distribution  under U.S.  federal income
     tax laws?

A:   Yes.  NL  will be  required  to  recognize  a  taxable  gain  equal  to the
     difference  between  the fair market  value of the shares of Kronos  common
     stock  distributed  at the time of the  distribution  and NL's adjusted tax
     basis in such stock,  which tax basis is expected to be nominal at the time
     of the  distribution.  NL currently  intends to defer payment of the income
     tax owed on such taxable gain,  and instead NL currently  intends to offset
     against such payment the amount of any future income tax attributes.  It is
     anticipated that such future income tax attributes would eventually  offset
     the amount otherwise payable. There are no direct or indirect corporate tax
     consequences  to Kronos as a result of the  distribution.  You should  also
     review the discussion under "The Distribution--Material U.S. Federal Income
     Tax Consequences of the Distribution."

Q:   Will Contran  still have voting  control  over,  and will Harold C. Simmons
     still be deemed to control, Kronos following the distribution?

A:   Yes. As of the date of this information statement:

     o    Contran owned, directly or through subsidiaries,  approximately 90% of
          Valhi's outstanding common stock;

     o    Valhi  and  Tremont  owned  a  total  of  approximately  85%  of  NL's
          outstanding common stock;

     o    Valhi owned 100% of Tremont's outstanding membership interests; and

     o    NL owned 100% of Kronos' outstanding common stock.

     Substantially all of Contran's  outstanding  voting stock is held by trusts
     established for the benefit of certain children and grandchildren of Harold
     C.  Simmons,  of which Mr.  Simmons  is sole  trustee.  Mr.  Simmons is the

                                       6
<PAGE>

     Chairman of the Board of each of Contran,  Valhi and Tremont,  the Chairman
     of the Board and Chief Executive  Officer of NL and, as of the distribution
     date, is  anticipated  to be the Chairman of the Board and Chief  Executive
     Officer of Kronos, and may be deemed to control each such company.

     After the distribution is completed, we expect that:

     o    Contran's ownership in Valhi will remain at 90%;

     o    Valhi's and  Tremont's  aggregate  ownership in NL will remain at 85%;
          and


     o    Valhi and Tremont  will own a total of 41.2% of Kronos and NL will own
          51.3% of Kronos.


     Therefore,  after the  distribution  is  complete,  Contran will still have
     voting  control  over,  and Mr.  Simmons  will still be deemed to  control,
     Kronos. Please read "Principal  Stockholders"  beginning on page 59 of this
     information statement.

Q:   Who is acting as the distribution agent?


A:   EquiServe Trust Co., N.A.
     150 Royall Street
     Canton, Massachusetts 02021


Q:   Where can NL shareholders get more information?


A:   You may direct questions to Gregory M. Swalwell,  Vice President,  Finance,
     NL Industries,  Inc., Three Lincoln Centre,  5430 LBJ Freeway,  Suite 1700,
     Dallas,  Texas  75240-2697,  telephone  number (972)  233-1700,  or you may
     contact the distribution agent for the distribution at (781) 575-2725.


                                  RISK FACTORS

     You should  carefully  consider each of the following  risks,  which Kronos
believes are the principal risks that it faces, and all of the other information
in  this  information  statement.  Some of the  following  risks  relate  to the
distribution of Kronos common stock to NL shareholders,  including the impact of
such distribution on NL. Other risks relate to Kronos' business,  the securities
markets and  ownership  of Kronos  common  stock.  Kronos'  business may also be
adversely  affected by risks and  uncertainties not presently known to Kronos or
that Kronos currently believes are immaterial. If any of the following risks and
uncertainties  develop into actual  events,  this could have a material  adverse
effect on Kronos'  business,  financial  condition or results of operations.  If
this occurs, the trading price of Kronos common stock could decline, and you may
lose all or part of your investment in Kronos, NL or both companies.

Risks Relating to the Distribution

     Kronos' historical  financial  information may not be indicative of Kronos'
future performance.

     Kronos'  historical  financial  information  included  in this  information
statement  may  not be  indicative  of  its  future  performance  and  does  not
necessarily reflect Kronos' financial  position,  results of operations and cash
flows during each of the periods  presented if Kronos had  outstanding  publicly
traded  equity  securities.  If Kronos had  outstanding  publicly  traded equity
securities  during all of 2002,  Kronos  estimates that its total expenses would
have been approximately  $600,000 to $800,000 higher than those reflected in its
historical consolidated financial statements. The increase in expenses includes,
without  limitation,  increased public company compliance costs, audit and legal

                                       7
<PAGE>

expenses and  accounting  and payroll  costs.  The foregoing  estimate of higher
expenses is not necessarily an accurate  measure of what Kronos'  expenses would
have been in 2002 or will be in the future.  Kronos'  actual  expenses  could be
higher or lower. The costs that Kronos actually incurs in the future will depend
on the market for these  services when they are actually  purchased and the size
and nature of Kronos' future operations.  The financial  information included in
this  information  statement  does not  reflect  any  changes  that may occur in
Kronos' financial condition and operations as a result of the distribution.

     There has been no prior market for Kronos common stock, and it is difficult
to predict the prices at which Kronos common stock might trade.


     Prior to the  distribution,  there has been no  trading  market  for Kronos
common stock. Immediately after the distribution, NL, Tremont and Valhi will own
a total of approximately  92.5% of the outstanding shares of Kronos common stock
and the other stockholders will own approximately 7.5% of the outstanding Kronos
shares.  Kronos  expects  that its common stock will trade on the New York Stock
Exchange.  Neither  NL nor  Kronos can  predict  the extent to which  investors'
interest  will lead to a liquid  trading  market or whether the market  price of
Kronos common stock will be volatile. While it is expected that a limited market
for Kronos common stock,  commonly known as a "when issued" trading market, will
develop on or shortly before the record date for the distribution,  until Kronos
common stock is fully  distributed and an orderly trading market  develops,  the
prices  at  which   trading  in  Kronos   common  stock  occurs  may   fluctuate
significantly.  The term "when-issued"  means that shares can be traded prior to
the time of the distribution.  Even though when-issued trading may develop, none
of these trades will settle prior to the effective date of the distribution. See
"The  Distribution--Listing  and Trading of Kronos Common Stock." Neither NL nor
Kronos can provide any assurance as to an appropriate  value or initial  trading
price for  Kronos  common  stock.  Determining  the  proper  price of any equity
security is very subjective and different investors will have different opinions
regarding  price and will apply  varying  pricing  methodologies.  The  combined
trading prices of Kronos common stock and NL common stock after the distribution
may be less  than,  equal to or greater  than the  current  trading  price of NL
common  stock.  The prices at which shares of Kronos  common stock trade will be
determined  based  on the  composite  of  pricing  expectations  of  all  market
participants  and may be influenced by many  factors,  including,  among others,
Kronos'  performance  and  prospects,  quarter to quarter  variations in Kronos'
actual or  anticipated  financial  results  or those of other  companies  in the
industries or the markets that Kronos serves,  investor perception of Kronos and
the TiO2  industry,  the depth and  liquidity  of the market  for Kronos  common
stock, Kronos' business and the industry in which it operates,  Kronos' dividend
policy,   general   financial   and  other  market   conditions,   domestic  and
international  economic conditions,  and the impact of factors described in this
"Risk Factors" section. In addition, the stock market in general has experienced
extreme  price and volume  fluctuations  that have  affected the market price of
many stocks that have often been unrelated or  disproportionate to the operating
performance  of  these  companies.  See  "The   Distribution--Reasons   for  the
Distribution" and "--Listing and Trading of Kronos Common Stock."


     The  trading  price of NL  common  stock  will  likely  decline  after  the
distribution.


     After the  distribution,  NL common  stock will  continue  to be listed for
trading on the New York Stock Exchange under the symbol "NL." As a result of the
distribution,  absent  other  action,  the  trading  price  of NL  common  stock
immediately  following  the  distribution  will likely be lower than the trading
price of NL common stock immediately  prior to the  distribution.  The prices at
which  shares of NL common  stock  will  trade  after  the  distribution  may be
influenced  by many  factors,  including,  among others,  NL's  performance  and
prospects,  the  success  of its  diversification  efforts,  quarter  to quarter
variations  in NL's  actual  or  anticipated  future  results  or those of other
companies in the industries or markets that NL serves,  investor  perceptions of
NL and the TiO2 industry,  the depth and liquidity of the market for NL's common
stock,  NL's  business  and the  industry in which it  operates,  NL's  dividend
policy,   general   financial   and  other  market   conditions,   domestic  and
international  conditions,  the  cyclicality  of the TiO2 industry (as discussed
below),  global economic and political  conditions,  global productive capacity,
customer  inventory  levels,  changes  in  product  pricing,  changes in product
costing,  changes in foreign  currency  exchange rates,  competitive  technology
positions,  operating  interruptions  (including,  but  not  limited  to,  labor
disputes,  leaks,  fires,  explosions,   unscheduled  downtime,   transportation
interruptions,  war and  terrorist  activities),  the  ultimate  outcome of NL's
pending or possible future litigation and the outcome of tax controversies.



                                       8
<PAGE>


     Significant sales of Kronos common stock following the distribution, or the
perception that such sales might occur, could depress the market price of Kronos
common stock.


     Approximately  3.6 million  shares of Kronos  common stock will be eligible
for immediate  resale in the public market.  Any sale of significant  amounts of
Kronos  shares in the  public  market  as a  percentage  of the total  number of
outstanding  shares  of  Kronos  common  stock  held by  non-affiliates,  or the
perception that such sales might occur,  whether as a result of the distribution
or otherwise,  could depress the market price of Kronos common stock. Neither NL
nor Kronos is able to predict whether significant amounts of Kronos common stock
will  be  sold  in  the  open  market  following  the  distribution.   See  "The
Distribution--Listing and Trading of Kronos Common Stock."


     Various agreements relating to the distribution contain indemnification and
payment obligations for NL and Kronos that neither party may be able to satisfy,
which could result in increased expenses and liabilities for NL and Kronos.

     The  distribution  agreement  between  Kronos  and NL and the  tax  sharing
agreement  among Contran,  Valhi and Kronos  allocate  responsibility  among the
parties  to  the  agreements  for  various  liabilities  and  obligations.   The
distribution agreement provides that each party will indemnify the other against
claims arising out of the distribution agreement and claims arising out of their
respective  businesses  before  and  after  the  distribution.  The tax  sharing
agreement  provides  that each party will  indemnify  the others with respect to
certain taxes  attributable  to their  respective  businesses  arising before or
after the distribution.  In addition,  under the existing tax sharing agreements
between  NL and  Valhi and  between  NL and  Kronos,  each  party has  agreed to
continue to indemnify the other with respect to the taxes  attributable to their
respective  businesses,  whether  arising  before  or  after  the  distribution.
However,  the  availability  of such  indemnities  will  depend  upon the future
financial  strength of NL,  Contran,  Valhi and Kronos.  NL,  Contran,  Valhi or
Kronos  may not be in a  financial  position  to fund such  indemnities  if they
should arise,  which could result in increased  expenses and liabilities for one
or any of them. See  "Relationships  Among NL, Kronos and Their Affiliates After
the Distribution."

     Some  provisions  may  discourage a third party from  acquiring  control of
Kronos.

     It could be difficult for a potential  bidder to acquire Kronos because NL,
Tremont and Valhi together will own  approximately  92.5% of Kronos common stock
after the distribution. In addition, Kronos' amended and restated certificate of
incorporation  and  bylaws  contain  provisions  that  may  discourage  takeover
attempts.  In particular,  these documents  permit Kronos' Board of Directors to
issue,  without  stockholder  approval,  preferred  stock with such terms as the
Board may determine.  The ownership of Kronos common stock by its affiliates and
these provisions are likely to increase the cost or difficulty for a third party
to acquire control of Kronos or may discourage acquisition bids altogether.  See
"Principal Stockholders" and "Description of Capital  Stock--Provisions That May
Have an Anti-Takeover Effect."

Risks Related to Kronos' Business


     Demand for and  prices of  Kronos'  products  are  cyclical  and Kronos may
experience  prolonged  depressed market  conditions for its products,  which may
adversely affect its financial condition and results of operations.



     Substantially  all of  Kronos'  revenue is  attributable  to sales of TiO2.
Pricing  within the global TiO2  industry  over the long term is  cyclical,  and
changes in industry economic  conditions,  especially in Western  industrialized
nations,  can  significantly  impact Kronos'  earnings and operating cash flows.
Kronos'  average TiO2 selling price on a billing  currency basis (which excludes
the effect of foreign currency translation) increased from the preceding quarter
during each of the third and fourth  quarters  of 2002 and the first  quarter of
2003,  reversing the downward trend in prices that began in the first quarter of
2001 and  continued  through the first  quarter of 2002.  Kronos'  average  TiO2


                                       9
<PAGE>


selling  prices in the second  quarter of 2003 were flat  compared  to the first
quarter of 2003.  Industry-wide  demand for TiO2  strengthened  throughout 2002,
with full year demand  estimated  as 9% higher than the previous  year.  This is
believed to have been the result of economic  growth and  restocking of customer
inventory levels.  Volume demand in 2003 is expected to increase moderately over
2002  levels.  Kronos  cannot  guarantee  that it will  not be  affected  by any
existing  or  future  cyclical  changes  or that  such  conditions  will  not be
sustained or further  aggravated  by  anticipated  or  unanticipated  changes in
economic conditions or other events.



     The demand for TiO2 during a given year is also subject to annual  seasonal
fluctuations. TiO2 sales are generally higher in the first half of the year than
in the second half of the year due in part to the  increase in paint  production
in the spring to meet the spring and summer painting season demand.


     Kronos sells its products in a mature and highly  competitive  industry and
faces price pressure in the markets in which it operates.

     The  global  markets  in which  Kronos  operates  its  business  are highly
competitive. Competition is based on a number of factors, such as price, product
quality  and  service.  Some of  Kronos'  competitors  may be able to drive down
prices for Kronos' products because they have costs that are lower than Kronos'.
In addition,  some of Kronos'  competitors'  financial,  technological and other
resources may be greater than Kronos',  and such  competitors may be better able
to withstand changes in market  conditions.  Kronos'  competitors may be able to
respond more quickly than Kronos can to new or emerging technologies and changes
in customer  requirements.  Further,  consolidation  of Kronos'  competitors  or
customers in any of the industries in which Kronos  competes may have an adverse
effect on Kronos.  The  occurrence  of any of these events could have a material
adverse  effect  on  Kronos'  business,   financial  condition  and  results  of
operations or cash flows.

     Kronos is subject to many  environmental  and safety  regulations  that may
result in unanticipated costs or liabilities.

     Kronos is subject to  extensive  laws,  regulations,  rules and  ordinances
relating to pollution,  the protection of the environment and the use or cleanup
of  hazardous  substances  and  wastes.  Kronos  may  incur  substantial  costs,
including  fines,  damages  and  criminal  penalties  or  civil  sanctions,   or
experience  interruptions in its operations for actual or alleged  violations or
compliance  requirements  arising under  environmental  laws. Kronos' operations
could result in violations under environmental  laws,  including spills or other
releases of hazardous  substances to the environment.  Some of Kronos' operating
facilities are in densely  populated urban areas or in industrial areas adjacent
to other operating facilities.  In the event of a catastrophic incident,  Kronos
could  incur  material  costs as a result  of  addressing  such an event  and in
implementing  measures to prevent  such  incidents.  Given the nature of Kronos'
business, violations of environmental laws may result in restrictions imposed on
Kronos' operating  activities,  substantial fines,  penalties,  damages or other
costs,  including as a result of private  litigation,  any of which could have a
material adverse effect on Kronos'  business,  financial  condition,  results of
operations or cash flows.

     In addition,  Kronos could incur  significant  expenditures  to comply with
existing or future  environmental laws. Costs relating to environmental  matters
will be subject  to  evolving  regulatory  requirements  and will  depend on the
timing of  promulgation  and  enforcement  of  specific  standards  that  impose
requirements on Kronos' operations.  Kronos cannot,  therefore,  assure you that
costs beyond those currently anticipated will not be required under existing and
future environmental laws.

     Kronos has a limited  number of  suppliers  for some of its raw  materials,
which could negatively affect it.

     Kronos has a limited number of suppliers for some of its raw materials. The
number of sources for, and availability of, certain raw materials is specific to
the particular  geographical region in which a facility is located. In addition,
in 2002,  Kronos  purchased  titanium-bearing  ores from three  suppliers  under
multiple-year  agreements.  If one of these  suppliers  were  unable to meet its
obligations  under  present  supply  arrangements,  Kronos could suffer  reduced
supplies or incur increased prices for its raw materials.

     NL and its affiliates may have conflicts of interest with Kronos, and these
conflicts could adversely affect Kronos' business.



     After the distribution,  NL, Valhi and Tremont will own approximately 92.5%
of the outstanding shares of Kronos common stock and approximately  92.5% of the
voting  power  of  Kronos.  For so long as NL and its  affiliates  retain  their


                                       10
<PAGE>


ownership  of Kronos  shares,  they will  have the  power to  influence  Kronos'
business strategy,  including  decisions relating to the pursuit of transactions
and commercial opportunities. In addition, as of the distribution date, although
each of Kronos and NL will have independent  non-employee  directors  serving on
their respective  boards of directors,  it is anticipated that a majority of the
members  of NL's  Board  of  Directors  will  also  serve  on  Kronos'  Board of
Directors.  NL is currently in compliance with, and as of the distribution  date
Kronos  will  comply  with,  all  New  York  Stock   Exchange  rules   regarding
interlocking  directorates  and  independence  of directors.  Certain  executive
officers of NL also serve as  executive  officers of Kronos.  See  "Management."
Furthermore, under intercorporate service agreements between Contran and Kronos,
Contran will provide certain management,  financial and administrative  services
to Kronos on a fee basis. These  circumstances  could create potential conflicts
of interest when Kronos'  directors and management are faced with decisions that
could have different implications for NL and Kronos.  Examples of these types of
decisions might include the resolution of disputes arising out of the agreements
governing the relationship between NL and Kronos following the distribution, the
issuance of additional securities,  Kronos' payment of dividends, the pursuit of
specific business opportunities available to Kronos or NL or other circumstances
in which  Kronos or NL may have  adverse  interests.  Also,  the  appearance  of
conflicts, even if such conflicts do not materialize, might adversely affect the
public's perception of Kronos following the distribution. No specific procedures
are in place that govern the treatment of transactions  among Kronos and related
entities,   although  such  entities  may  implement   specific   procedures  as
appropriate  for  particular   transactions.   In  addition,   under  applicable
principles  of law, in the absence of  stockholder  ratification  or approval by
directors  who may be deemed  disinterested,  transactions  involving  contracts
among  companies  under common  control must be fair to all companies  involved.
Furthermore,  directors of companies owe fiduciary duties of good faith and fair
dealing  to  all  stockholders  of the  companies  for  which  they  serve.  See
"Relationships Among NL, Kronos and Their Affiliates After the Distribution" and
"Certain Relationships and Related Transactions." Both Kronos' and NL's Board of
Directors will include non-employee  directors.  It is anticipated that at least
one such  non-employee  director on each  company's  board of directors will not
serve on the other company's board,  and it is currently  anticipated that these
non-employee  directors  will resolve any conflicts of interests  that may arise
between Kronos and NL.




     Kronos could be adversely affected if NL suffers adverse  consequences from
environmental and other claims.


     Kronos is currently  wholly-owned by NL, and after the distribution will be
owned approximately  51.3% by NL. NL has been named as a defendant,  potentially
responsible party ("PRP"), or both, pursuant to the Comprehensive  Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act, and similar state laws in approximately 70 governmental
and private actions  associated with waste disposal sites,  mining locations and
facilities  currently  or  previously  owned,  operated  or  used  by NL or  its
subsidiaries,  or  their  predecessors,   certain  of  which  are  on  the  U.S.
Environmental  Protection Agency's Superfund National Priorities List or similar
state  lists.  NL is also a defendant in a number of legal  proceedings  seeking
damages for personal  injury and property  damage arising out of the sale in the
United States of lead pigments used in the  manufacture of paint decades ago. To
NL's  knowledge,  none of the lead pigment claims have resulted in a judgment or
settlement in favor of any claimant since these claims first arose approximately
seventeen years ago.



     Neither Kronos nor its subsidiaries  have ever been subject to any of these
environmental,  lead pigment or other claims  against NL.  Neither Kronos nor NL
believes  that there is any basis for the  assertion of any such claims  against
Kronos.   Nevertheless,   judgments  against  NL  could  have  indirect  adverse
consequences  for Kronos.  Such events  could impose  economic  hardships on NL,
which in turn could make future  financings,  including  bank  borrowings,  more
difficult  for  Kronos and its  subsidiaries  and also  could  adversely  affect
Kronos'  customers'  perceptions  of Kronos as an  affiliate of NL. In addition,
judgments  against NL might force NL to divest its remaining equity ownership of
Kronos to raise  cash,  which  could  result in a change of control of Kronos or
depress the market price of Kronos common stock.


     Kronos' business may be adversely affected by international  operations and
fluctuations in currency exchange rates.

                                       11
<PAGE>


     Kronos   conducts  a  significant   portion  of  its  business  in  several
jurisdictions  outside  of the United  States  and is subject to risks  normally
associated with international operations. These risks include the impact of such
operations  on the prices that Kronos  receives for its products and the need to
convert  currencies  that  Kronos  may  receive  for some of its  products  into
currencies  required to pay some of its debt, or into currencies in which Kronos
purchases certain raw materials or pays for certain services, all of which could
result in a gain or loss  depending on  fluctuations  in exchange  rates.  Other
risks of  international  operations  include trade barriers,  tariffs,  exchange
controls,  national and regional  labor  strikes,  social and  political  risks,
general  economic  risks,  required  compliance  with a variety of foreign laws,
including tax laws,  and the  difficulty in enforcing  agreements and collecting
receivables through foreign legal systems.

     If Kronos'  patents are declared  invalid or its trade secrets become known
to competitors, Kronos' and NL's ability to compete may be adversely affected.

     Protection  of  Kronos'  proprietary   processes,   apparatuses  and  other
technology is important to its business. Consequently, Kronos relies on judicial
enforcement  for  protection of its patents,  and there can be no assurance that
any of Kronos'  patents will not be  challenged,  invalidated,  circumvented  or
rendered unenforceable.  Furthermore, if any pending patent application filed by
Kronos does not result in an issued patent,  or if patents are issued to Kronos,
but such patents do not provide  meaningful  protection of Kronos'  intellectual
property,  then the use of any such intellectual property by Kronos' competitors
could have a material adverse effect on Kronos' business,  financial  condition,
results of operations or cash flows. Additionally,  Kronos' competitors or other
third parties may obtain  patents that restrict or preclude  Kronos'  ability to
lawfully produce or sell its products in a competitive manner,  which could have
a material adverse effect on Kronos' business,  financial condition,  results of
operations or cash flows.

     Kronos  also  relies on  unpatented  proprietary  know-how  and  continuing
technological  innovation  and other trade  secrets to develop and  maintain its
competitive   position.   Although   it  is  Kronos'   practice  to  enter  into
confidentiality  agreements to protect its intellectual property,  because these
confidentiality  agreements  may be breached,  such  agreements  may not provide
sufficient  protection  for Kronos' trade secrets or  proprietary  know-how,  or
adequate  remedies may not be available in the event of an  unauthorized  use or
disclosure of such trade secrets and know-how. In addition,  others could obtain
knowledge of such trade secrets through independent  development or other access
by legal means. The failure of Kronos' patents or confidentiality  agreements to
protect its  processes,  apparatuses,  technology,  trade secrets or proprietary
know-how  could have a material  adverse effect on Kronos'  business,  financial
condition,  results of  operations  or cash  flows.  Because NL has a  perpetual
license to use Kronos' proprietary  processes,  apparatuses and other technology
in its business,  any failure by Kronos to protect its  processes,  apparatuses,
technology,  trade secrets or proprietary know-how could have a material adverse
effect on NL's  business,  financial  condition,  results of  operations or cash
flows.

     Kronos' leverage may impair its financial condition.


     Kronos currently has, and after the  distribution  will continue to have, a
significant  amount of debt. As of June 30, 2003, after giving effect to Kronos'
$200  million  dividend  to NL in the  form  of the  Term  Note,  Kronos'  total
consolidated debt would be $561 million, consisting of the following:



     o    (euro)285 million ($326 million) of the KII Senior Notes;



     o    (euro)30 million ($34 million)  outstanding under KII's  subsidiaries'
          revolving credit facility;



     o    $200 million under the Term Note payable to NL, the terms of which are
          described  below  under  "Relationships  Among  NL,  Kronos  and Their
          Affiliates After the Distribution--Distribution Agreement--Term Note";
          and



     o    $1 million of other debt.

                                       12
<PAGE>


     Subject to specified  limitations,  the indenture  governing the KII Senior
Notes permits KII and its subsidiaries to incur additional debt. In addition, as
of June 30, 2003, KII's  subsidiaries  had unused borrowing  availability of the
equivalent of approximately  $55 million  ((euro)48  million) under their credit
facility, and certain of Kronos' U.S. subsidiaries had approximately $45 million
available under their credit facility.


     Kronos' current and future level of debt could have important  consequences
to you, including:

     o    increasing  Kronos'  vulnerability  to adverse  general  economic  and
          industry conditions;

     o    requiring  that a  substantial  portion  of  Kronos'  cash  flow  from
          operations be used for the payment of interest on its debt,  including
          the Term Note due to NL,  therefore  reducing  its  ability to use its
          cash flow to fund working capital, capital expenditures, acquisitions,
          dividends and general corporate requirements;

     o    limiting Kronos' ability to obtain additional financing to fund future
          working  capital,  capital  expenditures,   acquisitions  and  general
          corporate requirements;

     o    limiting Kronos'  flexibility in planning for, or reacting to, changes
          in its business and the industry in which it operates; and

     o    placing  Kronos at a competitive  disadvantage  relative to other less
          leveraged competitors.

     Kronos'  ability to generate  sufficient  cash to meet its debt service and
operating  needs  depends  on many  factors,  some of which are  beyond  Kronos'
control.

     Kronos'  ability to make  payments  on and  refinance  its debt and to fund
planned  capital  expenditures  depends on its future  ability to generate  cash
flow. To some extent,  this ability is subject to general  economic,  financial,
competitive,  legislative  and  regulatory  and other  factors  that are  beyond
Kronos'  control.  In  addition,  Kronos'  ability  to  borrow  funds  under its
subsidiaries'  credit facility in the future will depend on these  subsidiaries'
ability to maintain  specified  financial  ratios and satisfy certain  financial
covenants  contained in the credit  agreement for Kronos'  subsidiaries'  credit
facility.  Kronos  cannot  assure you that its business  will generate cash flow
from  operations  or that it will have adequate  access to credit  facilities in
amounts  sufficient to enable Kronos to pay its debt or to fund other  liquidity
needs.  As a result,  Kronos may need to refinance  all or a portion of its debt
before  maturity,  and it is likely that Kronos will need to refinance  all or a
portion of its debt on maturity.  KII's subsidiaries' three-year credit facility
and Kronos' U.S.  subsidiaries'  three-year credit facility both mature in 2005.
Kronos  cannot  assure you that it will be able to refinance  any of its debt on
favorable  terms,  if at all. Any inability to generate  sufficient cash flow or
refinance  Kronos' debt on favorable terms could have a material  adverse effect
on its financial condition.

     Various  factors  may  hinder the  declaration  and  payment  of  dividends
following the distribution.

     The payment of dividends is subject to the  discretion  of Kronos' Board of
Directors,  and  various  factors  may  cause  Kronos  to  determine  not to pay
dividends.   Such  factors  include  Kronos'  financial  position,   results  of
operations,  capital  requirements  and liquidity,  any loan or other  agreement
restrictions,  governmental requirements and such other factors as Kronos' Board
of  Directors  may  consider  relevant.  Kronos'  assets  consist  primarily  of
investments in its operating subsidiaries.  Kronos' cash flow and its ability to
pay dividends  depend upon cash dividends and  distributions  or other transfers
from its  subsidiaries.  In addition,  any payment of dividends,  distributions,
loans or  advances  by  Kronos'  subsidiaries  to  Kronos  could be  subject  to
restrictions  on or taxation of  dividends  or  repatriation  of earnings  under
applicable  local law,  monetary  transfer  restrictions  and  foreign  currency
exchange regulations in the jurisdictions in which Kronos' subsidiaries operate,
and any  restrictions  imposed by the  current and future  debt  instruments  of
Kronos' subsidiaries. Such payments to Kronos by its subsidiaries are contingent
upon its subsidiaries' earnings. See "Dividend Policy."

                                       13
<PAGE>

     Covenant restrictions may limit Kronos' ability to operate its business.

     Kronos and its  subsidiaries  are  subject  to  obligations  under  various
financing  arrangements  that contain,  among other things,  covenants  that may
restrict  Kronos'  ability to finance  future  operations or capital needs or to
engage in other  business  activities.  These  covenants  include,  among  other
things, restrictions on Kronos' and its subsidiaries' ability to:

     o    borrow money, pay dividends or make distributions;

     o    purchase or redeem stock;

     o    make investments and extend credit;

     o    engage in transactions with affiliates;

     o    engage in sale-leaseback transactions;

     o    freely distribute the proceeds from certain asset sales;

     o    effect a consolidation or merger or sell, transfer, lease or otherwise
          dispose of all or substantially all of its assets; and

     o    create liens on its assets.

     In addition,  these financing  arrangements require Kronos' subsidiaries to
maintain  specified  financial ratios and satisfy certain financial tests, which
may require  that action be taken to reduce debt or to act in a manner  contrary
to  Kronos'  long-term  business  objectives.  Events  beyond  Kronos'  control,
including  changes in  general  business  and  economic  conditions,  may affect
Kronos'  ability to meet those financial  ratios and satisfy  certain  financial
covenants.  Kronos  cannot  assure you that it will meet those tests or that the
lenders  will waive any  failure to meet those  tests.  A breach of any of these
covenants would result in a default under one or more of these credit facilities
and any acceleration of debt obligations under the European subsidiaries' credit
facility may result in a default  under the  indenture  governing the KII Senior
Notes. If an event of default under KII's subsidiaries'  credit facility occurs,
the lenders could elect to declare all amounts outstanding thereunder,  together
with accrued interest, to be immediately due and payable.



                                       14
<PAGE>


                  SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

     The  statements  contained  in  this  information  statement  that  are not
historical facts, including, but not limited to, statements found in the section
entitled  "Risk   Factors,"  are   forward-looking   statements  that  represent
management's  beliefs and assumptions based on currently available  information.
Forward-looking  statements include the information  concerning Kronos' possible
or  assumed  future  results  of  operations,   business  strategies,  need  for
financing,  competitive  position,  potential  growth  opportunities,  potential
operating  performance  improvements,  ability to retain and recruit  personnel,
benefits resulting from Kronos' distribution from NL, the effects of competition
and the effects of future legislation or regulations. Forward-looking statements
include all statements  that are not  historical  facts and can be identified by
the use of forward-looking  terminology such as the words "believes," "intends,"
"may,"  "will,"  "should,"  "anticipates,"  "expects,"  "could,"  or  comparable
terminology or by discussions of strategy or trends.  Although  Kronos  believes
that  the  expectations   reflected  in  such  forward-looking   statements  are
reasonable,  it cannot give any assurances that these expectations will prove to
be correct. Such statements by their nature involve risks and uncertainties that
could  significantly  affect expected  results,  and actual future results could
differ materially from those described in such forward-looking statements.


     Among  the  factors  that  could  cause  actual  future  results  to differ
materially  are the  risks  and  uncertainties  discussed  in  this  information
statement. While it is not possible to identify all factors, Kronos continues to
face many risks and uncertainties including, but not limited to, the cyclicality
of the titanium  dioxide  industry,  global  economic and political  conditions,
global  productive  capacity,  customer  inventory  levels,  changes  in product
pricing, changes in product costing, changes in foreign currency exchange rates,
competitive technology positions,  operating interruptions  (including,  but not
limited to, labor disputes,  leaks,  fires,  explosions,  unscheduled  downtime,
transportation  interruptions,  war  and  terrorist  activities),  the  ultimate
outcome  of  NL's  pending  or  possible  future  lead  pigment  litigation  and
legislative  developments related to the lead pigment litigation and the outcome
of other  litigation  and tax  controversies.  Should one or more of these risks
materialize (or the  consequences of such a development  worsen),  or should the
underlying  assumptions prove incorrect,  actual results could differ materially
from those  expected.  NL and Kronos  disclaim any  intention or  obligation  to
update  publicly  or  revise  such  statements   whether  as  a  result  of  new
information, future events or otherwise.


     The risk factors discussed in "Risk Factors" could cause Kronos' results to
differ materially from those expressed in forward-looking statements.  There may
also be other risks and  uncertainties  that Kronos is unable to predict at this
time or that Kronos does not now expect to have a material adverse impact on its
business.



                                       15

<PAGE>


                                THE DISTRIBUTION

Reasons for the Distribution


     The Board of Directors of NL has determined that the distribution is in the
best  interests  of NL and its  shareholders.  Through the  recapitalization  of
Kronos and  distribution of  approximately  48.7% of the  outstanding  shares of
Kronos common stock, NL believes significant benefits will be achieved.


     First,  it is believed  that Kronos will be recognized in the TiO2 industry
and the financial  markets as an entity whose  business  operations are distinct
from NL. Investors, suppliers, customers and employees worldwide will be able to
view and evaluate the Kronos business  independently  from NL and its historical
operations,  and  acquire a direct  equity  ownership  interest  in Kronos.  The
separation and resulting public company  recognition  should enhance the ability
of Kronos  to  capitalize  on the  Kronos  brand  name and to  develop  separate
business  relationships and strategies distinct from operating as a wholly-owned
subsidiary  of NL,  which is  expected  to enhance  Kronos'  global  competitive
position.

     Second,  NL will retain a significant  equity ownership  interest in Kronos
and will  continue to benefit from the  affiliate  group  holding a  controlling
interest in a public company serving the global TiO2 market. As Kronos continues
to grow and develop its TiO2 business separate from NL, the potential  long-term
investment  return to NL and its  shareholders  is anticipated  to increase.  In
2002, KII issued (euro)285 million aggregate  principal amount of the KII Senior
Notes,  primarily in the European  financial market.  Proceeds of such financing
were used in part to repay  intercompany  debt owed by KII to  Kronos,  which in
turn was used to repay intercompany debt owed by Kronos to NL. NL used a portion
of such proceeds to repay all of its third party long-term indebtedness with the
balance used for general corporate purposes. As demonstrated by KII's successful
public debt offering in 2002, and the continuing  market  interest in such debt,
as well as  other  recent  financing  arrangements  entered  into by KII and its
subsidiaries,  it is believed  that the equity of Kronos will also be attractive
to the financial  markets.  It is further  believed that with a separate  public
trading market, the Kronos common stock retained by NL will provide  significant
increased  value to NL as a result of the  anticipated  favorable  valuation  of
Kronos in the  financial  markets.  NL over  time  could  sell a portion  of its
holdings  of  Kronos  common  stock in the  established  trading  market or more
readily use such stock as  collateral  for future  credit  arrangements  if such
additional liquidity is determined to be beneficial to NL in the future.


     Third,  NL believes  that the  distribution  will  provide it with  greater
opportunity for diversification of its holdings and business interests.  Through
its future  diversification  efforts, NL may be able to provide potentially more
consistent and stable financial performance compared to its current holdings. In
order to accomplish a  diversification  of its holdings,  it is believed NL will
require  additional  sources of  liquidity.  As a result of the 2002 public debt
offering by KII, and repayment of  intercompany  debts,  NL achieved  additional
liquidity while discharging all of its long-term debt  obligations.  Through the
recapitalization of Kronos, NL will receive significant additional consideration
through  the  payment  of a dividend  in the form of the Term  Note,  which will
provide NL with additional financial resources and liquidity. The results of the
2002 financing activities and the dividend of the Term Note effectively converts
a portion of NL's  investment in Kronos into a more liquid form (with respect to
the proceeds received from the 2002 financing activities) and into a more senior
position  (with  respect  to the Term Note)  that will also  provide  additional
liquidity  to NL,  which  should,  among  other  things,  enable  NL to  explore
diversification  opportunities  beyond  the  scope of its  existing  assets  and
business.  Additionally,  the distribution of Kronos common stock should enhance
NL's  ability to increase  its  liquidity  through  potential  future sales of a
portion of its  remaining  holdings of Kronos  common stock or the use of Kronos
common  stock  as  collateral  for any  future  credit  arrangements.  Upon  the
completion of the distribution,  NL will explore  diversification  opportunities
beyond  the  scope of its  existing  business,  which  should  reduce  the risks
inherent in  continuing to conduct its  operations  primarily in a single highly
competitive  industry  that is capital  intensive  and  subject  to  significant
historically cyclical demand and pricing variations.


     Prior to the  distribution,  there has been no  trading  market  for Kronos
common stock. After the distribution,  NL, Tremont and Valhi will own a total of
approximately  92.5% of the  outstanding  shares of Kronos  common stock and the
other stockholders will own approximately 7.5% of the outstanding Kronos shares.

                                       16
<PAGE>

Kronos expects that its common stock will trade on the New York Stock  Exchange.
Neither NL nor Kronos can predict the extent to which  investors'  interest will
lead to a liquid  trading  market or whether the market  price of Kronos  common
stock will be volatile or provide any  assurance as to an  appropriate  value or
initial  trading price for Kronos common stock.  Determining the proper price of
any  equity  security  is very  subjective  and  different  investors  will have
different opinions regarding price and will apply varying pricing methodologies.
The combined trading prices of Kronos common stock and NL common stock after the
distribution  may be less than,  equal to or greater  than the  current  trading
price of NL common  stock.  The prices at which  shares of Kronos  common  stock
trade will be determined  based on the composite of pricing  expectations of all
market  participants  and may be influenced by many  factors,  including,  among
others,  Kronos'  performance  and prospects,  quarter to quarter  variations in
Kronos' actual or anticipated  financial  results or those of other companies in
the industries or the markets that Kronos serves,  investor perception of Kronos
and the TiO2  industry,  the depth and liquidity of the market for Kronos common
stock, Kronos' business and the industry in which it operates,  Kronos' dividend
policy,   general   financial   and  other  market   conditions,   domestic  and
international  economic  conditions,  and the impact of factors described in the
"Risk Factors" section of this  information  statement.  In addition,  the stock
market in general has  experienced  extreme price and volume  fluctuations  that
have affected the market price of many stocks and that have often been unrelated
or disproportionate to the operating  performance of these companies.  See "Risk
Factors--Risks  Relating to the Distribution--There has been no prior market for
Kronos common  stock,  and it is difficult to predict the prices at which Kronos
common stock might trade" and " The  Distribution--Listing and Trading of Kronos
Common Stock."

Description of the Distribution

     The following diagram illustrates the current ownership structure of Kronos
(ownership is 100% unless otherwise noted).




[graph inserted here which shows (i) Contran's  90.2%  ownership of Valhi,  (ii)
Valhi and Tremont's  84.5% aggregate  ownership in NL, (iii) other  stockholders
15.4% ownership of NL and (iv) NL's 100% ownership of Kronos]




(a)  Includes  63.1% held by Valhi and 21.4%  held by  Tremont,  a  wholly-owned
     subsidiary of Valhi.



     Contran   directly   and   indirectly   through  its   subsidiaries   holds
approximately  90.2% of Valhi's  outstanding common stock.  Substantially all of
Contran's outstanding voting stock is held by trusts established for the benefit
of certain  children and  grandchildren  of Harold C.  Simmons.  See  "Principal
Stockholders" and note 1 to Kronos' audited  consolidated  financial  statements
included in this information statements.

     The  distribution  will be accomplished by NL issuing  approximately  23.85
million shares of Kronos common stock,  representing  approximately 48.7% of the
outstanding  shares of  Kronos  common  stock,  to its  shareholders.  After the
distribution,  NL and its  affiliates  will own  approximately  92.5% of Kronos'
common  stock and  shareholders  who are not  affiliates  of Kronos will own the
remaining  7.5%. The following  diagram  illustrates  the expected effect of the
distribution  on the  ownership  structure of Kronos  (ownership  is 100% unless
otherwise noted).  [note - also add the Contran box in the following chart - and
have the arrow from Contran to Valhi with the 90.2% label]




                                       17
<PAGE>



[graph inserted here which shows (i) Contran's  90.2%  ownership of Valhi,  (ii)
Valhi and Tremont's  84.5% aggregate  ownership in NL, (iii) other  stockholders
15.4%  ownership  of NL,  (iv) NL's 51.3%  ownership  of Kronos,  (iv) Valhi and
Tremont's 41.2% aggregate  ownership of Kronos and (vi) other  stockholders 7.5%
ownership of Kronos]



(a)  Includes  63.1% held by Valhi and 21.4%  held by  Tremont,  a  wholly-owned
     subsidiary of Valhi.




(b)  Includes  30.8% held by Valhi and 10.4%  held by  Tremont,  a  wholly-owned
     subsidiary of Valhi.


     Contran directly and indirectly through its subsidiaries hold approximately
90.2% of  Valhi's  outstanding  common  stock.  Substantially  all of  Contran's
outstanding  voting  stock is held by  trusts  established  for the  benefit  of
certain  children  and  grandchildren  of  Harold  C.  Simmons.  See  "Principal
Stockholders" and note 1 to Kronos' audited  consolidated  financial  statements
included in this information statement.



     On November 6, 2003,  the Board of  Directors  of NL formally  approved the
distribution.  Each NL  shareholder  as of the close of  business on November 17
2003, which is the record date for the  distribution,  will receive one share of
Kronos  common  stock  for every two  shares of NL common  stock  held as of the
record date.  NL and Kronos expect that the  distribution  will take place on or
about December 8, 2003,  although  completion of the  distribution is contingent
upon the satisfaction of conditions described in the distribution agreement. See
"Relationships Among NL, Kronos and Their Affiliates After the Distribution."


     In determining the structure and  appropriateness of the distribution,  the
NL Board,  together with  management,  considered  various legal and  structural
considerations,  including the financial  position of Kronos and NL prior to and
after the  distribution.  The NL Board also considered the  desirability for the
distribution  initially to result in there being  outstanding  approximately the
same  number  of  shares  of  Kronos  common  stock  as the  current  number  of
outstanding shares of NL common stock. The NL Board also considered standards of
the New York Stock  Exchange  as well as a  desirable  trading  price for Kronos
common stock.  Based on the estimated  number of holders of NL common stock, the
NL Board  concluded  that a one-for-two  distribution  ratio should  satisfy the
listing requirements of the New York Stock Exchange.


     In the  distribution,  shares of Kronos  common  stock shall  initially  be
distributed in book-entry form through Kronos' direct  registration  system.  As
soon as practicable on or after the distribution  date, NL's transfer agent will
provide NL's  shareholders a statement showing such  shareholder's  ownership of
Kronos  common  stock  along  with a check for any  fractional  shares of Kronos
common stock to which the shareholder would otherwise be entitled. For NL common
stock held through a broker,  bank or other  nominee,  the  transfer  agent will
credit the registered  nominee's  account with shares of Kronos common stock and
the dollar amount of any  fractional  shares of Kronos common stock to which the
holder is entitled,  which in turn should be credited to the  holder's  account.
Following the distribution,  any record holder of Kronos common stock may obtain
a physical stock  certificate  representing  the holder's shares at no charge by
contacting Kronos' transfer agent. See "Description of Capital Stock."



     NL will not distribute any fractional shares of Kronos common stock as part
of  the  distribution.   Instead,   on  or  after  the  distribution  date,  the
distribution agent will aggregate all fractional  shares,  sell them on the open
market at prevailing  market prices and distribute  the aggregate  proceeds less
applicable  taxes and a pro rata portion of the aggregate  brokerage  commission
payable in connection with the sale of the fractional shares ratably to those NL
shareholders  otherwise  entitled to fractional  shares.  See  "--Material  U.S.
Federal Income Tax  Consequences  of the  Distribution"  for a discussion of the
United States  federal  income tax treatment of proceeds from  fractional  share
interests. The distribution agent will in its sole discretion, without influence
from  Contran,  Valhi,  NL  or  Kronos,   determine  when,  how,  through  which


                                       18
<PAGE>


broker-dealer  and at what price to make its sales of the aggregated  fractional
shares.  Neither the distribution  agent nor the  broker-dealers it uses will be
affiliates  of  Contran,  Valhi,  NL or  Kronos.  None  of  NL,  Kronos  or  the
distribution  agent can  guarantee  any  minimum  sale price for the  fractional
shares of Kronos  common  stock.  Neither NL nor Kronos will pay any interest on
the proceeds from the sale of aggregated  fractional shares.  Neither NL, Kronos
nor any of their  affiliates  will receive any of the proceeds  from the sale of
fractional shares.


     No vote of NL  shareholders  is required or sought in  connection  with the
distribution,  and NL shareholders will have no appraisal or dissenters'  rights
in connection with the distribution.

     No NL shareholder will be required to pay cash or other  consideration  for
any shares of Kronos common stock received in the distribution,  or to surrender
or exchange shares of NL common stock.

Results of the Distribution



     After the  distribution,  Kronos will be a separate public  company,  owned
approximately  92.5% in the aggregate by NL,  Tremont and Valhi.  As a result of
the distribution,  Kronos expects to have approximately  6,000 holders of record
and approximately 48.9 million shares of Kronos common stock outstanding,  based
on the  number  of NL record  shareholders  and the  distribution  ratio and the
number of  outstanding  shares of NL common stock as of the close of business on
November  10,  2003.  The actual  number of shares of Kronos  common stock to be
distributed will be determined as of the record date. The distribution  will not
affect the number of  outstanding  shares of NL common stock or the rights of NL
shareholders.



Material U.S. Federal Income Tax Consequences of the Distribution

         General

     The following is a summary  description of the material  federal income tax
consequences  of the  distribution.  This  summary is not intended as a complete
description  of all of the tax  consequences  of the  distribution  and does not
discuss tax consequences under the laws of state,  local or foreign  governments
or any other  jurisdiction  other than the federal income tax laws of the United
States.   Moreover,  the  following  discussion  may  not  apply  to  particular
categories of holders  subject to special tax treatment under the federal income
tax  laws,  including,  without  limitation,   insurance  companies,   financial
institutions,  broker-dealers,  estates, trusts, tax-exempt organizations,  real
estate investment  trusts,  regulated  investment  companies,  non-United States
holders,  or persons  that will hold their  shares of Kronos  common  stock as a
position in a straddle,  as part of a synthetic security or hedge, or as part of
a conversion  transaction or other integrated  investment,  other than a capital
asset.  This summary does not include a description of any  alternative  minimum
tax consequences that may be applicable to the receipt of Kronos shares pursuant
to the  distribution.  This summary  assumes that you hold your shares of Kronos
common  stock as a capital  asset  within the  meaning  of  section  1221 of the
Internal  Revenue  Code of 1986,  as  amended,  or the  "Code." In this  regard,
special  rules  not  discussed  in  this  summary  may  apply  to  some  of NL's
shareholders.

     The following  discussion is based on currently existing  provisions of the
Code,   existing,   proposed  and  temporary  Treasury  Department   regulations
promulgated  under  the  Code  and  current  administrative  rulings  and  court
decisions.  All of the foregoing are subject to change,  which may or may not be
retroactive, and any of these changes could affect the validity of the following
discussion.

     Please consult your tax advisor as to the particular  tax  consequences  to
you of the distribution described herein, including the applicability and effect
of any state,  local or foreign tax laws, and the possible effects of changes in
applicable tax laws.

                                       19
<PAGE>

         Consequences of the Distribution

     Each  shareholder  of NL  receiving  shares of Kronos  common  stock in the
distribution  generally will be treated as if the shareholder received a taxable
distribution  in an amount equal to the fair market value of Kronos common stock
received.  Since the amount of the distribution will not exceed NL's current and
accumulated  earnings  and profits,  the  distribution  will be a dividend.  The
taxation  of the  dividend  to a NL  shareholder  will  depend  on  whether  the
shareholder is a corporation.  If the shareholder is a corporation,  such amount
will be taxable as ordinary income,  subject to the corporate dividends received
deduction.  However, for such shareholder,  if the distribution is treated as an
"extraordinary  dividend"  pursuant to Code section 1059, then such  shareholder
may be required to reduce its basis in its NL stock and/or  recognize gain up to
the amount of the dividends  received  deduction claimed on the distribution.  A
shareholder  that is a corporation  should  consult its tax advisor to determine
whether the  distribution  will be treated as an  extraordinary  dividend to the
shareholder.  If the  shareholder is not a corporation,  under recently  enacted
legislation,  such  amount  will  generally  be  taxable  at the more  favorable
dividend rate (15% in most cases) if the  shareholder  has held its NL stock for
more than 60 days  during  the  120-day  period  beginning  60 days  before  the
ex-dividend date. Otherwise, such amount will be taxable as ordinary income. The
favorable  dividend  rate  applies  only  with  respect  to  dividends  that the
non-corporate  shareholder  does not treat as  investment  income under  section
163(d)(4)(B) of the Code.

     Each shareholder's initial tax basis in the Kronos common stock received by
the shareholder will be equal to the fair market value of such stock at the time
of the distribution.

     Each  shareholder  who receives  cash as a result of the sale of fractional
shares of Kronos  stock by the  distribution  agent  will be  treated as if such
fractional   share  had  been  received  by  the  shareholder  as  part  of  the
distribution and then sold by the shareholder. Accordingly, the shareholder will
recognize  short-term  gain or loss equal to the difference  between the cash so
received  and the portion of the tax basis in Kronos  stock that is allocable to
the fractional share.

     NL will be  required  to  recognize  taxable  gain  or  loss  equal  to the
difference  between the fair market value of the Kronos common stock distributed
at the time of the distribution and NL's adjusted tax basis in such stock, which
tax  basis  is  expected  to be  nominal  at the  time of the  distribution.  NL
currently  intends to defer payment of the income tax owed on such taxable gain,
and instead NL  currently  intends to offset  against such payment the amount of
any future income tax attributes.  It is anticipated that such future income tax
attributes would eventually  offset the amount otherwise  payable.  There are no
direct  or  indirect  corporate  tax  consequences  to Kronos as a result of the
distribution.

     Back-Up Withholding Requirements

     NL is required to withhold federal income tax at a rate of 30% with respect
to payments such as dividends,  interest or proceeds from the sale of stock made
to  (a)  persons  who  do  not  have  a  social   security  number  or  taxpayer
identification number, (b) persons that the IRS has determined have a history of
evading  federal  income tax or (c) persons who have  refused to furnish NL with
information sufficient to enable it to comply with its applicable federal income
tax  information  reporting  obligations.  Such  withholding is known as back-up
withholding.  Back-up  withholding  is not an additional tax and may be refunded
(or credited against the  shareholder's  U.S.  federal income tax liability,  if
any),  provided  that  required  information  is furnished to NL.  United States
information  reporting  requirements  and  back-up  withholding  may apply to NL
shareholders  and Kronos  stockholders  with respect to  dividends  paid on, and
proceeds from the taxable sale,  exchange or other  disposition of, NL or Kronos
common stock unless the holder:

     o    is a corporation or comes within certain other exempt categories, and,
          when required, demonstrates these facts; or

     o    provides a correct  taxpayer  identification  number,  certifies  that
          there  has been no loss of  exemption  from  back-up  withholding  and
          otherwise  complies  with  applicable   requirements  of  the  back-up
          withholding rules.

                                       20
<PAGE>


     You may be subject to penalties  imposed by the IRS if you do not supply NL
with your correct taxpayer  identification  number.  You should consult your tax
advisor as to your qualification for exemption from back-up  withholding and the
procedure for obtaining such an exemption. If information-reporting requirements
apply to you, the amount of  dividends  paid with respect to your shares will be
reported annually to the IRS and to you.

Listing and Trading of Kronos Common Stock


     There has been no public market for Kronos common stock.  An active trading
market may not develop or be sustained in the future.  However,  Kronos  expects
that a limited  market for shares of Kronos  common stock,  commonly  known as a
"when issued" trading market,  will develop on or shortly before the record date
for the  distribution.  The term  "when-issued"  means that shares can be traded
prior to the time of the  distribution  of the shares.  Even though  when-issued
trading may develop,  none of these  trades would settle prior to the  effective
date  of  the  distribution,  and  if  the  distribution  does  not  occur,  all
when-issued trading will be null and void. Kronos has applied for the listing of
its common stock on the New York Stock  Exchange  under the trading symbol "KRO"
and believes  that Kronos  common stock will be acceptable to the New York Stock
Exchange for listing. Beginning on the first New York Stock Exchange trading day
after the  distribution,  Kronos  expects  that its common stock will trade on a
"regular"  basis. The term "regular" refers to trading after a security has been
issued and  typically  involves  a  transaction  that  settles on the third full
business day following the date of a transaction.


     Prior to the  distribution,  there has been no  trading  market  for Kronos
common stock. After the distribution,  NL, Tremont and Valhi will own a total of
approximately  92.5% of the  outstanding  shares of Kronos  common stock and the
other stockholders will own approximately 7.5% of the outstanding Kronos shares.
Kronos  expects that its common stock will trade on the New York Stock  Exchange
and in the over-the-counter  market in the United States.  Neither NL nor Kronos
can  predict  the  extent  to which  investors'  interest  will lead to a liquid
trading  market or  whether  the  market  price of Kronos  common  stock will be
volatile.  While it is expected  that a limited  market for Kronos common stock,
commonly known as a "when issued" trading  market,  will develop near the record
date,  until Kronos  common stock is fully  distributed  and an orderly  trading
market  develops,  the prices at which trading in Kronos common stock occurs may
fluctuate  significantly.  Neither NL nor Kronos can provide any assurance as to
an  appropriate  value  or  initial  trading  price  for  Kronos  common  stock.
Determining  the proper  price of any equity  security  is very  subjective  and
different  investors will have different opinions regarding price and will apply
varying  pricing  methodologies.  The combined  trading  prices of Kronos common
stock and NL common stock after the  distribution  may be less than, equal to or
greater than the current  trading price of NL common stock.  The prices at which
shares of Kronos common stock trade will be determined based on the composite of
pricing  expectations of all market  participants  and may be influenced by many
factors, including, among others, Kronos' performance and prospects,  quarter to
quarter  variations in Kronos' actual or anticipated  financial results or those
of other companies in the industries or the markets that Kronos serves, investor
perception  of Kronos  and the TiO2  industry,  the depth and  liquidity  of the
market for Kronos  common stock,  Kronos'  business and the industry in which it
operates,   Kronos'  dividend  policy,   general   financial  and  other  market
conditions,  domestic and international  economic conditions,  and the impact of
factors  described in the "Risk Factors" section of this information  statement.
In  addition,  the stock  market in general has  experienced  extreme  price and
volume  fluctuations that have affected the market price of many stocks and that
have often been unrelated or  disproportionate  to the operating  performance of
these companies.  See "Risk  Factors--There  has been no prior market for Kronos
common  stock,  and it is difficult to predict the prices at which Kronos common
stock might trade."


     Approximately  3.6  million  shares of  Kronos  common  stock  that will be
distributed  to NL  shareholders  will be  eligible  for  immediate  resale.  In
transactions  similar to the  distribution,  it is not unusual for a significant
redistribution  of shares  to occur  during  the first few weeks or even  months
following  completion of the transaction because of the differing objectives and
strategies  of  investors  who  acquire  shares  of Kronos  common  stock in the
transaction.  Kronos is not able to predict whether  significant  amounts of its
common stock will be sold in the open market  following the distribution or what
effect  these sales may have on prices at which  Kronos  common stock may trade.
Any sale of significant amounts of Kronos common stock in the public market as a
percentage of the total number of outstanding shares of Kronos common stock held
by non-affiliates,  or the perception that such sales might occur,  whether as a
result of the  distribution  or  otherwise,  could  depress the market  price of
Kronos common stock.

                                       21
<PAGE>


     Shares of Kronos common stock received in the  distribution by "affiliates"
(as defined  under Rule 144 under the  Securities  Act of 1933,  as amended (the
"Securities  Act"))  will  not  be  freely  transferable.  Persons  who  can  be
considered   Kronos'   affiliates  after  the  distribution   generally  include
individuals  or  entities  that  directly,  or  indirectly  through  one or more
intermediaries,  control,  are  controlled by, or are under common control with,
Kronos, and include some of Kronos' officers and directors. Affiliates of Kronos
may only sell common stock received in the distribution:


     o    under a  registration  statement  that  the  Securities  and  Exchange
          Commission  (the "SEC") has declared  effective  under the  Securities
          Act; or

     o    under an exemption from registration under the Securities Act, such as
          the  exemption   afforded  by  SEC  Rule  144,   which,   among  other
          requirements,   limits  sales  by  affiliates  based  on  the  average
          four-week trading volume or 1% of the outstanding common stock.


     NL expects that its common stock will meet the continued  listing standards
of the New York Stock  Exchange and that its common stock will continue to trade
on a regular basis under the symbol "NL" following the  distribution.  NL common
stock  may  also  trade  on  a   when-issued   basis,   reflecting   an  assumed
post-distribution  value for NL common stock.  When-issued  trading in NL common
stock,  if  available,  could last from on or about the record date  through the
effective date of the distribution. If when-issued trading in NL common stock is
available, NL shareholders may trade their existing NL common stock prior to the
effective date of the  distribution in either the  when-issued  market or in the
regular market for NL common stock.  If a shareholder  trades in the when-issued
market, it will have no obligation to transfer to a purchaser of NL common stock
the Kronos  common stock such  shareholder  receives in the  distribution.  If a
shareholder  trades in the regular market,  the shares of NL common stock traded
after the record date will be accompanied by due bills  representing  the Kronos
common stock to be distributed in the distribution. If when-issued trading in NL
common  stock is not  available,  the NL common  stock  will  only  trade in the
regular market during the period from the record date through the effective date
of the distribution.

     If a when-issued market for NL common stock develops, an additional listing
for NL common stock will appear on the New York Stock Exchange.  Differences may
exist  between  the  combined  value of  when-issued  Kronos  common  stock plus
when-issued NL common stock and the price of NL common stock during this period.
Until the market has fully  analyzed the operations of NL without the operations
of  Kronos,   the  prices  at  which  NL  common  stock  trades  may   fluctuate
significantly.

     You should  consider  consulting  your  financial and tax advisors prior to
making any decision with respect to the purchase, retention or sale of shares of
NL  common  stock  or  Kronos  common   stock.   Neither  NL  nor  Kronos  makes
recommendations  on the purchase,  retention or sale of your shares of NL common
stock or Kronos common stock.

   RELATIONSHIPS AMONG NL, KRONOS AND THEIR AFFILIATES AFTER THE DISTRIBUTION

     This  section of the  information  statement  summarizes  certain  material
agreements, including certain intercorporate services, indemnification,  tax and
other  matters,  relating  to the  distribution  between  NL,  Kronos  and their
affiliates that will govern the ongoing  relationships  after the  distribution.
Additional or modified agreements,  arrangements and transactions may be entered
into among NL,  Kronos and their  affiliated  entities  after the  distribution.
Kronos' business consists of the businesses  previously  conducted by the Kronos
subsidiary  of  NL.  On an  overall  basis,  Kronos'  business  will  constitute
substantially  the same  business  as that  previously  conducted  by the Kronos
subsidiary of NL. You should also read the agreements,  forms of which have been
filed  as  exhibits  to the  registration  statement  on Form 10 of  which  this
information statement forms a part.


                                       22


<PAGE>
Distribution Agreement

     The distribution  agreement provides that the following  conditions must be
satisfied  or  waived  before  or as of the  date  of the  distribution  for the
distribution to occur:

     o    the  SEC  has  declared  Kronos'  registration  statement  on  Form 10
          effective, and there has been no suspension,  withdrawal or stop-order
          in effect with respect  thereto and no proceeding for that purpose has
          been instituted by the SEC;

     o    the New York Stock  Exchange  has  approved  the listing of the Kronos
          common stock, subject to official notice of issuance;

     o    the actions and filings with regard to state  securities  and blue sky
          laws of the United  States (and any  comparable  law under any foreign
          jurisdiction)  have been  taken and,  where  applicable,  have  become
          effective or accepted;

     o    there has been no order,  injunction  or decree issued by any court or
          agency  of  competent   jurisdiction  or  other  legal  constraint  or
          prohibition   preventing   the   consummation   of  the   transactions
          contemplated by the distribution agreement in effect;

     o    all  material  consents  and  governmental   approvals   necessary  to
          consummate the transactions contemplated by the distribution agreement
          have been obtained and are in full force and effect;

     o    the NL Board of Directors is satisfied that the distribution is lawful
          under applicable state and federal law;

     o    the NL  Board of  Directors  has  approved  the  distribution  and not
          abandoned  or  revoked  the   distribution  at  any  time  before  the
          completion of the distribution;

     o    Kronos' amended and restated  certificate of incorporation and bylaws,
          as filed as exhibits to the Form 10 and described in this  information
          statement, are in effect;

     o    the  various  ancillary   agreements  described  in  this  information
          statement  have been  executed and  delivered by the parties  thereto,
          including:

     o    the Tax Sharing Agreement among Contran, Valhi and Kronos; and


     o    the Intercorporate Services Agreement between Contran and Kronos;


     o    no other events or developments  have occurred  subsequent to the date
          of the distribution  agreement such that, in the judgment of NL, would
          result in the  distribution  having an adverse  effect on NL or on the
          shareholders of NL; and

     o    the distribution agreement has not been terminated.

     Mutual Releases and Indemnification


     In the  distribution  agreement,  effective  as of the  distribution  date,
Kronos  and NL have  released  and  discharged  each other and  certain  related
parties from all liabilities  existing or arising from acts and events occurring
or failing to occur or alleged to have  occurred  or to have failed to occur and
all conditions existing or alleged to have existed on or before the distribution
date, other than, among other things,  liabilities provided in or resulting from
continuing agreements between NL and Kronos.



                                       23
<PAGE>


     Kronos has agreed to  indemnify NL and certain  persons  related to NL from
and against any and all damages,  losses,  liabilities and expenses relating to,
arising out or resulting from, among other things:



     o    Kronos' or any other person's  failure to discharge any liability (the
          "Kronos  Liabilities")  relating to,  arising out of or resulting from
          Kronos'  operation  of the titanium  dioxide and related  business and
          operations,  each as conducted on the  distribution  date (the "Kronos
          Business");



     o    the Kronos  Business,  all assets used in  connection  with the Kronos
          Business and the Kronos Liabilities; and



     o    a  material  breach  by Kronos of the  distribution  agreement  or the
          various ancillary agreements described in this information statement.



     NL has agreed to  indemnify  Kronos and certain  persons  related to Kronos
from and against any and all damages, losses,  liabilities and expenses relating
to, arising out or resulting from, among other things:



     o    NL's or any other person's failure to discharge any liability relating
          to,  arising out of or resulting  from the  operation of NL's business
          (excluding the Kronos Business);



     o    NL's business (excluding the Kronos Business); and



     o    a material breach by NL of the  distribution  agreement or the various
          ancillary agreements described in this information statement.


     None of  these  indemnities  applies  to  indemnification  for  income  tax
liabilities,  which are  addressed in the tax sharing  agreement  among  Kronos,
Contran  and  Valhi   described   below  under  "Tax  Sharing   Agreement."  The
distribution  agreement  also  includes  procedures  for notice  and  payment of
indemnification  claims and generally  provides that the indemnifying  party may
assume  the  defense  of  a  claim  or  suit  brought  by  a  third  party.  Any
indemnification amount paid under the indemnities will be paid net of the amount
of any  insurance  or other  amounts that would be payable by any third party to
the  indemnified  party  in the  absence  of the  indemnity.  In  addition,  the
distribution  agreement  provides  that if  indemnification  is  unavailable  or
insufficient to hold the indemnified party harmless, the indemnifying party will
contribute to the amount paid or payable in a manner  appropriate to reflect all
relevant equitable considerations.

     Term Note


     Immediately  prior  to the  distribution,  Kronos  will  declare  and pay a
dividend to NL in the form of the $200 million Term Note.  The Term Note payable
to NL will be unsecured and will bear interest at 9% per annum.  Interest on the
Term Note will be payable  quarterly  with the  principal  and all  accrued  and
unpaid  interest due at maturity on December 31, 2010. The Term Note is intended
to, among other  things,  provide NL with  liquidity to explore  diversification
opportunities beyond the scope of its existing assets and business.


     Stock Options

     The Board of Directors of NL has  authorized  an  adjustment  to the option
exercise price for all outstanding employee and non-employee director options to
purchase NL common  stock in an amount per share  equal to the taxable  value of
the  distribution  of shares of Kronos  common stock for each share of NL common
stock.  In  addition,  to the  extent  that  NL  makes  any  adjustments  to its
outstanding options as a result of the distribution, similar adjustments will be
made to the NL options held by Kronos employees.

     Access to Information; Provision of Witnesses; Confidentiality

     Under the distribution agreement,  Kronos and NL will allow the other party
and their specified representatives  reasonable access to all records in Kronos'

                                       24
<PAGE>

or its  possession  relating to the  business  and affairs of the other party as
reasonably  required.  Access  will be  allowed  for  such  purposes  as  audit,
accounting,  litigation,  disclosure reporting and regulatory  compliance.  Each
party will also use reasonable  efforts to make available to the other party and
its  accountants,  counsel and other  designated  representatives,  upon written
request, its directors, officers, employees and representatives as witnesses and
will otherwise  cooperate with the other party in connection with any proceeding
arising  out of its or the other  party's  business  and  operations  before the
distribution.  Subject to limited  exceptions,  Kronos,  NL and their respective
directors,  officers,  employees,  agents, consultants and advisors will hold in
strict  confidence  all  information in its or their  possession  concerning the
other party.

     Transaction Expenses

     The distribution  agreement provides for each of NL and Kronos to pay their
own respective expenses in connection with the distribution.

Intercorporate Services Agreement


     The  distribution  agreement  provides  that  prior  to  completion  of the
distribution,  Kronos will enter into a intercorporate  services  agreement with
Contran pursuant to which Contran will provide certain management, financial and
administrative services to Kronos on a fee basis.


Tax Sharing Agreement

     Effective  on the date of the  distribution,  Kronos  will no  longer  be a
member of the  consolidated  income tax group of which NL is the common  parent,
and Kronos  will remain a member of the  consolidated  income tax group of which
Valhi is the common parent. The tax sharing agreement between NL and Kronos will
terminate on the effective  date of the  distribution  and will be replaced by a
tax  sharing  agreement  among  Kronos,  Contran  and  Valhi.  The  terms of the
Kronos/Contran/Valhi  tax sharing agreement will be substantially similar to the
terms of the terminated NL/Kronos tax sharing agreement.  In accordance with the
group's policy for the intercompany  allocation of federal income taxes,  Kronos
will compute its tax payments to or receive  payments  from Valhi in the amounts
it would have paid to or received from the Internal  Revenue  Service had Kronos
not been a member of the  consolidated  income  tax group of which  Valhi is the
common parent. Kronos' separate company provisions and payments will be computed
using the elections made by Contran.

                                 DIVIDEND POLICY



     The  declaration  and payment of dividends is subject to the  discretion of
Kronos'  Board of  Directors,  and any  determination  as to the payment of such
dividends,  as well as the type and amount of such  dividends,  will  depend on,
among other  things,  Kronos'  results of operations  and  financial  condition,
general  economic and business  conditions,  Kronos' cash  requirements  for its
businesses  and other  factors  deemed  relevant by Kronos'  Board of Directors.
Kronos  cannot  provide any assurance  that any  dividends  will be declared and
paid.




                                       25

<PAGE>
                             SELECTED FINANCIAL DATA


     The following selected historical  financial data of Kronos with respect to
the years ended December 31, 2000, 2001 and 2002 and as of December 31, 2001 and
2002, is derived from, and should be read in conjunction  with,  Kronos' audited
consolidated  financial statements included in this information  statement.  The
selected  historical  financial  data for the years ended  December 31, 1998 and
1999 and for the six months ended June 30, 2002 and 2003, and as of December 31,
1998,  1999 and  2000 and June 30,  2003,  is  derived  from  Kronos'  unaudited
consolidated  financial  statements.  The selected historical financial data for
the six months ended June 30, 2002 and 2003 and as of June 30,  2003,  should be
read in  conjunction  with the unaudited  consolidated  financial  statements of
Kronos included in this information  statement.  Operating  results for 2002 and
2003 interim  periods are not  necessarily  indicative of the operating  results
that  Kronos  will  experience  for the entire  year.  The  selected  historical
financial data set forth below should be read in conjunction with  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included  in this  information  statement.  The  earnings  per  share  and  cash
dividends per share data presented below has been restated to give effect to the
September  2003  change in  Kronos'  capital  structure  discussed  in Note 1 to
Kronos' consolidated financial statements included in this information statement
in which the 1,000 shares of Kronos' common stock  previously  outstanding  were
reclassified in the form of a stock split into approximately 48.9 million shares
of Kronos' common stock. The selected historical financial data reflects Kronos'
results as it has historically  been operated as a part of NL, and these results
may not be indicative of Kronos' future performance as a publicly traded company
following the distribution.



<TABLE>
<CAPTION>
                                                              Year Ended December 31,                    Six Months
                                            -----------------------------------------------------      Ended June 30,
                                               1998       1999       2000      2001       2002          2002      2003
                                            ---------- ------------------------------- ----------    -----------------
                                                                (in millions, except per share data)


INCOME STATEMENT DATA:
<S>                                         <C>        <C>        <C>       <C>        <C>         <C>       <C>
   Net sales................................$    894.7 $   908.4  $   922.3 $   835.1  $    875.2  $   429.3 $    519.6
   Net income(1).............................     63.7     125.9      130.2     154.5        66.3       40.3       58.5
   Net income per share......................     1.30      2.57       2.66      3.16        1.35        .82       1.19
   Cash dividends per share..................      .31       .61       1.12       .62        2.27        -          .14

BALANCE SHEET DATA at period end:
   Total assets.............................$  1,015.4 $   973.6  $   893.4 $   910.1  $    988.5  $ 1,000.2 $  1,014.3
   Notes payable and long-term debt,
     including current maturities............    608.0     340.4      266.1     242.7       370.5      325.0      361.2
   Common stockholder's equity...............     65.3     310.9      346.6     378.5       314.2      411.4      353.4
</TABLE>

--------------


(1)  Net income in 1998  includes an $8.2 million  income tax benefit  resulting
     from the refund of certain  prior-year German dividend  withholding  taxes.
     Net income in 1999 includes a $57.7 million  income tax benefit  related to
     (i) a favorable resolution of Kronos'  previously-reported  tax contingency
     in Germany  ($29.1  million) and (ii) a net  reduction in Kronos'  deferred
     income tax asset  valuation  allowance  due to a change in the  estimate of
     Kronos'  ability  to  utilize  certain  income  tax  attributes  under  the
     "more-likely-than-not"    recognition   criteria   ($28.6   million).   See
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations"  for a discussion  of certain  unusual items  occurring  during
     2000, 2001 and 2002 and the first six months of 2002 and 2003.



                                       26

<PAGE>



     The following  selected  unaudited pro forma  financial data of Kronos with
respect to the year ended  December  31, 2002 and the six months  ended June 30,
2003,  and as of June 30,  2003,  has been derived  from,  and should be read in
conjunction with, Kronos' Unaudited Pro Forma Condensed  Consolidated  Financial
Statements  and the June 30, 2003  Unaudited  Pro Forma Balance  Sheet,  both of
which are included in this information statement. While such Unaudited Pro Forma
Condensed  Consolidated Financial Statements is based on adjustments that Kronos
deems appropriate and that were factually supported based on currently available
data,  the pro forma  information  may not be indicative of what actual  results
would have been, nor does this information  purport to present Kronos' financial
results for future periods.


<TABLE>

<CAPTION>
                                                              Year ended     Six months ended
                                                           December 31, 2002  June 30, 2003
                                                         (In millions, except per share data)

INCOME STATEMENT DATA:
<S>                                                         <C>                <C>
   Net sales .............................................  $   875.2          $   519.6
   Net income ............................................       41.0               52.6
   Net income per share ..................................        .84               1.08

BALANCE SHEET DATA at period end:
   Total assets ..........................................        N/A          $ 1,014.3
   Notes payable and long-term debt, including current
     maturities ..........................................        N/A              561.2
   Common stockholder's equity ...........................        N/A              153.4
</TABLE>



                                       27
<PAGE>


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

Critical Accounting Policies and Estimates

     The  accompanying   "Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results  of  Operations"  are based  upon  Kronos'  consolidated
financial  statements,  which have been  prepared in accordance  with  generally
accepted  accounting  principles in the U.S. ("GAAP").  The preparation of these
financial statements requires Kronos to make estimates and judgments 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
amount of revenues  and  expenses  during the  reported  period.  On an on-going
basis,  Kronos  evaluates its  estimates,  including  those related to inventory
reserves,  the  recoverability  of other  long-lived  assets,  pension and other
postretirement  benefit  obligations  and the underlying  actuarial  assumptions
related thereto,  and the realization of deferred income tax assets and accruals
for income tax and other contingencies. Kronos bases its estimates on historical
experience and on various other  assumptions  that are believed to be reasonable
under  the  circumstances,  the  results  of which  form the  basis  for  making
judgments  about the  reported  amounts of  assets,  liabilities,  revenues  and
expenses.  Actual  results may differ from  previously-estimated  amounts  under
different assumptions or conditions.

     Kronos believes the following critical  accounting policies affect its more
significant  judgments and estimates used in the preparation of its consolidated
financial statements:

     o    Inventory   allowances.   Kronos   provides   reserves  for  estimated
          obsolescence  or  unmarketable  finished goods  inventory equal to the
          difference  between the cost of  inventory  and the  estimated  market
          value based upon assumptions  about future demand for its products and
          market conditions. If actual market conditions are less favorable than
          those  projected by management,  additional  finished goods  inventory
          reserves  may be  required.  Kronos  provides  reserves  for tools and
          supplies  inventory  generally  based on both  historical and expected
          future usage requirements.

     o    Impairments  of  long-lived  assets.  Kronos  recognizes an impairment
          charge associated with its long-lived  assets,  including property and
          equipment,  whenever it determines  that  recovery of such  long-lived
          asset is not probable.  Such  determination is made in accordance with
          applicable GAAP requirements associated with the long-lived asset, and
          is based upon,  among other things,  estimates of the amount of future
          net cash flows to be generated by the  long-lived  asset and estimates
          of the  current  fair  value of the  asset.  Adverse  changes  in such
          estimates  of future net cash flows or  estimates  of fair value could
          result in an inability to recover the carrying value of the long-lived
          asset,   thereby  possibly   requiring  an  impairment  charge  to  be
          recognized in the future.

          Under  applicable  GAAP (Statement of Financial  Accounting  Standards
          ("SFAS")  No.  144,  "Accounting  for the  Impairment  or  Disposal of
          Long-Lived  Assets"),  property  and  equipment  is not  assessed  for
          impairment  unless  certain  impairment  indicators,  as defined,  are
          present.  During 2002, no such impairment indicators were present with
          respect to Kronos' net property and equipment.

     o    Deferred  income tax valuation  allowance.  Kronos records a valuation
          allowance to reduce its deferred  income tax assets to the amount that
          is  believed  to  be  realizable   under  the   "more-likely-than-not"
          recognition  criteria.  While  Kronos has  considered  future  taxable
          income and ongoing  prudent and feasible tax  planning  strategies  in
          assessing the need for a valuation  allowance,  it is possible that in
          the  future  Kronos  may  change  its  estimate  of the  amount of the
          deferred  income  tax  assets  that  would  "more-likely-than-not"  be
          realized,  resulting in an adjustment to the deferred income tax asset
          valuation  allowance  that  would  either  increase  or  decrease,  as
          applicable,  reported net income in the period such change in estimate
          was made.

     o    Defined  benefit  pension and  postretirement  benefit plans.  Kronos'
          defined  benefit  pension  and  postretirement   benefits  other  than
          pensions  ("OPEB")  expenses and obligations  are calculated  based on

                                       28
<PAGE>

          several estimates, including discount rates, expected rates of returns
          on plan assets and expected  healthcare  trend rates.  Kronos  reviews
          these rates annually with the assistance of its actuaries. See further
          discussion  of  the  potential   effect  of  these  estimates  in  the
          Assumptions on Defined  Benefit  Pension Plans and OPEB Plans sections
          in the Liquidity and Capital  Resources  section of this  Management's
          Discussion  and  Analysis  of  Financial   Condition  and  Results  of
          Operations.

     o    Other  contingencies.  Kronos  records an  accrual  for income tax and
          other contingencies when estimated future expenditures associated with
          such contingencies become probable,  and the amounts can be reasonably
          estimated.   However,   new  information  may  become  available,   or
          circumstances  (such as applicable laws and  regulations)  may change,
          thereby resulting in an increase or decrease in the amount required to
          be accrued for such matters  (and  therefore a decrease or increase in
          reported net income in the period of such change).

     Other significant accounting policies and use of estimates are described in
the Notes to Kronos' audited consolidated  financial statements included in this
information statement.

Results of Operations

         General


     As  discussed  below,  average TiO2  selling  prices in billing  currencies
(which  excludes the effects of foreign  currency  translation)  were  generally
increasing during most of 2000, were generally decreasing during all of 2001 and
the first  quarter of 2002,  were flat during the second  quarter of 2002,  were
generally  increasing during the third and fourth quarters of 2002 and the first
quarter of 2003 and were generally flat during the second quarter of 2003.


     Many  factors  influence  TiO2 pricing  levels,  including  (i)  competitor
actions,  (ii) industry capacity,  (iii) worldwide demand growth,  (iv) customer
inventory  levels and purchasing  decisions and (v) relative  changes in foreign
currency  exchange  rates.  Kronos believes that the TiO2 industry has long-term
growth potential, as discussed in "Business--Industry" and "--Competition."




     Sales and Income from Operations - Six Months Ended June 30, 2002 and 2003






<TABLE>
<CAPTION>
                                                                        Six months ended                   %
                                                                            June 30,                    Change
                                                              ------------------------------------- ----------------
                                                                      2002               2003
                                                              --------------------- ---------------
                                                                (In millions, except percentages and metric tons)

<S>                                                              <C>                   <C>                  <C>

Net sales                                                        $    429.3            $    519.6          +21%
Cost of sales                                                         332.5                 386.1          +16%
                                                                 ----------            ----------
  Gross margin                                                         96.8                 133.5          +38%

Seling, general and administrative expense                             49.6                  60.4          +22%
Currency transaction gains (losses), net                               (1.5)                 (3.8)
Corporate expense                                                      (1.5)                 (1.7)
Other operating income (expense), net                                    .6                    .1
                                                                 ----------            ----------
  Income from operations                                         $     44.8            $     67.7          +51%
                                                                 ==========            ==========



                                       29
<PAGE>


TiO2 operating statistics:
  Percentage change in average selling price:
    Using actual foreign currency exchange rates                                                           +18%
    Impact of changes in foreign currency exchange rates                                                   -12%
                                                                                                           ----
    In billing currencies                                                                                   +6%
                                                                                                           ====

    Sales volume (metric tons in thousands)                           235                240                +2%
    Production volume (metric tons in thousands)                      219                237                +8%
</TABLE>



     Kronos' sales and income from operations  increased $90.3 million (21%) and
$22.9 million (51%),  respectively,  in the first six months of 2003 compared to
the first six months of 2002 due primarily to higher average TiO2 selling prices
as well as higher TiO2 sales and production  volumes  partially offset by higher
operating costs  (particularly  energy costs,  which increased by  approximately
$5.3  million).  Excluding the effect of  fluctuations  in the value of the U.S.
dollar  relative to other  currencies,  Kronos'  average TiO2  selling  price in
billing  currencies in the first six months of 2003 was 6% higher than the first
six months of 2002.  When  translated  from billing  currencies to U.S.  dollars
using actual foreign currency  exchange rates  prevailing  during the respective
periods,  Kronos'  average TiO2  selling  prices in the first six months of 2003
increased 18% compared to the first six months of 2002.




     Kronos' sales are  denominated  in various  currencies,  including the U.S.
dollar,  the euro, other major European  currencies and the Canadian dollar. The
disclosure  of the  percentage  change in Kronos'  average TiO2 selling price in
billing  currencies  (which excludes the effects of fluctuations in the value of
the U.S.  dollar  relative  to other  currencies)  is  considered  a  "non-GAAP"
financial measure under regulations of the SEC. The disclosure of the percentage
change in Kronos'  average TiO2 selling  prices  using actual  foreign  currency
exchange rates prevailing  during the respective  periods is considered the most
directly  comparable  financial  measure presented in accordance with accounting
principles  generally  accepted in the United  States ("GAAP  measure").  Kronos
discloses  percentage  changes in its average TiO2 prices in billing  currencies
because Kronos believes such disclosure provides useful information to investors
to allow them to analyze such  changes  without the impact of changes in foreign
currency exchange rates,  thereby facilitating  period-to-period  comparisons of
the realtive  changes in average  selling prices in the actual  various  billing
currencies.  Generally,  when the U.S.  dollar  either  strengthens  or  weakens
against other  currencies,  the percentage  change in average  selling prices in
billing currencies will be higher or lower,  respectively,  than such percentage
changes would be using actual  exchange rates  prevailing  during the respective
periods.  The difference  between the 18% change in Kronos' average TiO2 selling
prices  during the first six months of 2003 as  compared to the first six months
of 2002 using actual  foreign  currency  exchange  rates  prevailing  during the
respective  periods (the GAAP measure) and the 6%  percentage  change in Kronos'
average TiO2 selling price in billing  currencies (the non-GAAP  measure) during
such periods is due to the effect of changes in foreign currency exchange rates.
The above  table  presents  in a tabular  format  (i) the  percentage  change in
Kronos' average TiO2 selling prices using actual foreign currency exchange rates
prevailing during the respective periods (the GAAP measure), (ii) the percentage
change in Kronos' average TiO2 selling price in billing currencies (the non-GAAP
measure)  and (iii) the  percentage  change due to  changes in foreign  currency
exchange  rates (or the  reconciling  item between the non-GAAP  measure and the
GAAP measure).


     Kronos'  TiO2  sales  volume in the  first  six  months of 2003 was a first
six-month  record and was 2% higher  than the first six months of 2002.  Kronos'
TiO2  production  volume in the first six months of 2003, also a first six-month
record, was 8% higher than the first six months of 2002, with operating rates at
near full capacity in 2003 compared to 98% of capacity in 2002.  These increases
in TiO2 sales and production  volume  increased  income from  operations by $6.5
million and $10.1  million,  respectively,  while the  increase in average  TiO2
selling prices increased income from operations by $20.6 million.


     Kronos' cost of sales increased $53.6 million (16%) in the first six months
of 2003  compared  to the first six months of 2002.  Kronos'  cost of sales as a
percentage of net sales  decreased 4% in the first six months of 2003  primarily
due to the higher average selling prices and higher production volume, partially
offset by the higher energy costs.  Kronos' selling,  general and administrative
expenses  in the  first six  months of 2003  increased  $10.7  million  (22%) as
compared to the first six months of 2002 due to higher distribution  expenses in
the first six months of 2003 of $2.7  million  associated  with the higher sales
volume,  as well as the impact of relative changes in foreign currency  exchange
rates  which  increased  Kronos'  expenses in the 2003 period as compared to the
same period in 2002. Kronos' selling,  general and administrative  expenses were
approximately  12% of sales in both the first  six  months of 2003 and the first
six months of 2002.


     Kronos'  gross  margin  increased  $36.7  million  (38%) from the first six
months  of 2002 to the first six  months of 2003 due to the net  effects  of the
changes in sales and cost of sales during such periods.

     Other operating  income  (expenses)  were comprised  principally of foreign
currency transaction gains and losses, and the intercorporate  service agreement
charges (included in corporate  expense) discussed in Note 17 to Kronos' audited
consolidated financial statements included in this information statement.

     Kronos expects that its income from  operations in 2003 will be higher than
in 2002 primarily due to higher  average TiO2 selling  prices,  slightly  higher




                                       30
<PAGE>



sales  volumes  and  higher  production  volumes,  partially  offset  by  higher
operating costs (particularly  energy costs).  Kronos' TiO2 production volume in
2003 is expected to be higher than Kronos' 2003 TiO2 sales volume, with finished
goods  inventories  rising  modestly.  Kronos'  expectations  as to  its  future
prospects  of Kronos  and the TiO2  industry  are based upon a number of factors
beyond Kronos' control,  including  worldwide growth of gross domestic  product,
competition in the market place,  unexpected or  earlier-than-expected  capacity
additions by competitors  and  technological  advances.  If actual  developments
differ  from  Kronos'  expectations,  Kronos'  results  of  operations  could be
unfavorably affected.


     Kronos has  substantial  operations and assets  located  outside the United
States (primarily in Germany, Belgium, Norway and Canada). As discussed above, a
significant  amount of Kronos' sales generated from its non-U.S.  operations are
denominated  in currencies  other than the U.S.  dollar,  principally  the euro,
other major European currencies and the Canadian dollar. In addition,  a portion
of Kronos' sales  generated from its non-U.S.  operations are denominated in the
U.S. dollar. Certain raw materials,  primarily  titanium-containing  feedstocks,
are  purchased  in U.S.  dollars,  while  labor and other  production  costs are
denominated  primarily in local  currencies.  Consequently,  the translated U.S.
dollar  value of Kronos'  foreign  sales and  operating  results  are subject to
currency  exchange rate  fluctuations  which may  favorably or adversely  impact
reported earnings and may affect the comparability of period-to-period operating
results. Overall, fluctuations in the value of the U.S. dollar relative to other
currencies,  primarily the euro, increased Kronos' sales in the first six months
of 2003 by a net $54.4 million compared to the same period in 2002. Fluctuations
in the value of the U.S. dollar relative to other currencies  similarly impacted
Kronos' foreign currency-denominated operating expenses. Kronos' operating costs
that are not denominated in the U.S. dollar,  when translated into U.S. dollars,
were higher in the first six months of 2003  compared to the first six months of
2002. Overall,  the net impact of currency exchange rate fluctuations  decreased
Kronos'  income from  operations by $2.4 million in the first six months of 2003
when compared to the year-earlier period.




     Sales and Income from  Operations--Years  Ended December 31, 2000, 2001 and
2002




<TABLE>
<CAPTION>
                                                         Years ended December 31,                 % Change
                                                  --------------------------------------- --------------------------
                                                      2000        2001          2002       2001-00      2002-01
                                                  ----------- ------------  ------------- ------------ -------------
                                                              (In millions)

<S>                                                  <C>        <C>            <C>               <C>          <C>
Net sales                                            $  922.3   $  835.1       $  875.2         -9%          +5%
Cost of sales                                           610.4      578.1          671.8         -5%         +16%
                                                     --------   --------       --------
  Gross margin                                          311.9      257.0          203.4        -18%         -21%

Selling, general and administrative expense             107.6       98.7          107.7         -8%          +9%
Insurance recoveries, net                                 -          7.2            -
Currency transaction gains (losses), net                  6.5        1.2            (.5)
Corporate expense                                        (7.0)      (4.9)          (3.3)
Other operating income (expense), net                     (.6)        .2            (.4)
                                                     --------   --------       --------
  Income from operations                             $  203.2   $  162.0       $   91.5        -20%         -44%
                                                     ========   ========       ========
TiO2 operating statistics:
  Percent change in average selling prices:
    Using actual foreign currency exchange rates                                                -5%          -7%
    Impact of changes in foreign currency
     exchange rates                                                                             +2%          -2%
                                                                                               ----         ----
    In billing currencies                                                                       -3%          -9%
                                                                                               ====         ====

    Sales volume (metric tons in thousands)             436        402            455           -8%         +13%
    Production volume (metric tons in thousands)        441        412            442           -6%          +7%
    Production rate as a percent of capacity           Full         91%            96%
</TABLE>



     Kronos'  sales  increased  $40.1  million (5%) in 2002 compared to 2001 due
primarily  to higher TiO2 sales  volumes,  offset by lower  average TiO2 selling
prices.  Kronos'  record TiO2 sales volumes in 2002 were 13% higher  compared to
2001 primarily due to higher  volumes in European and North American  markets of
14% and 17%,  respectively.  By volume,  approximately  one-half of Kronos' 2002
TiO2 sales volumes were attributable to markets in Europe, with 39% attributable
to North America and the balance to export markets. The lower TiO2 sales volumes
in 2001 were due in part to the effect of a fire at Kronos' Leverkusen,  Germany
facility in March 2001 that disrupted operations discussed in Note 15 to Kronos'
audited   consolidated   financial   statements  included  in  this  information
statement.




     Kronos'  income  from  operations  declined  $70.5  million  (44%)  in 2002
compared  to 2001 as the effect of lower  average  TiO2  selling  prices  (which
decreased  income from  operations by $81.4 million) more than offset the effect
of higher TiO2 sales and production  volumes (which  combined  increased  income
from operations by $46.7 million). The effect of the higher sales and production
volumes was offset in part by the


                                       31
<PAGE>



$27.3 million of business  interruption  proceeds received in 2001, as discussed
below.  Excluding  the effect of  fluctuations  in the value of the U.S.  dollar
relative to other currencies,  Kronos' average TiO2 selling price in 2002 was 9%
lower than 2001,  with prices lower in all major regions.  While Kronos' average
TiO2 selling  prices had  generally  been  declining  during all of 2001 and the
first quarter of 2002, and were flat during the second quarter of 2002,  average
TiO2  selling  prices  increased  during the third and fourth  quarters of 2002.
Kronos' average TiO2 selling prices in the fourth quarter of 2002 were 2% higher
compared to the third quarter of the year,  with increases in all major markets.
When  translated  from billing  currencies to U.S.  dollars using actual foreign
currency  exchange  rates  prevailing  during the  respective  periods,  Kronos'
average  TiO2  selling  prices  in 2002  decreased  7%  compared  to  2001.  The
difference between the 7% decrease in Kronos' average TiO2 selling prices during
2002 as compared to 2001 using actual foreign currency exchange rates prevailing
during the respective periods (the GAAP measure) and the 9% percentage  decrease
in Kronos'  average  TiO2  selling  price in billing  currencies  (the  non-GAAP
measure) during such periods is due to the effect of changes in foreign currency
exchange rates. As discussed above,  Kronos discloses  percentage changes in its
average TiO2 prices in billing currencies beause Kronos believes such disclosure
provides  useful  information to investors to allow them to analyze such changes
without  the  impact of  changes  in foreign  currency  exchange  rates,  theeby
facilitating  period-to-period  comparisons  of the relative  changes in average
selling  prices in the  actual  various  billing  currencies.  The  above  table
presents in a tabular format (i) the percentage  change in Kronos'  average TiO2
selling prices using actual foreign currency  exchange rates  prevailing  during
the respective periods (the GAAP measure), (ii) the percentage change in Kronos'
average TiO2 selling  price in billing  currencies  (the  non-GAAP  measure) and
(iii) the percentage  change due to changes in foreign  currency  exchange rates
(or the reconciling item between the non-GAAP measure and the GAAP measure).





     Kronos'  record  TiO2  production  volume in 2002 was 7% higher  than 2001.
Kronos'  operating rates in 2001 were lower as compared to 2002 primarily due to
lost production resulting from the Leverkusen fire.



     Kronos'  income from  operations in 2001 includes $27.3 million of business
interruption  insurance proceeds as payment for losses (unallocated period costs
and lost margin)  caused by the  Leverkusen  fire. The effects of the lower TiO2
sales and  production  volumes were offset in part by the business  interruption
insurance  proceeds.  Of such $27.3 million of business  interruption  insurance
proceeds,  $20.1  million was recorded as a reduction of cost of sales to offset
unallocated  period costs that resulted from lost production,  and the remaining
$7.2  million,  presenting  recovery  of lost  margin,  was  recorded  in  other
operating  income  (as  shown on the table  above).  The  business  interruption
insurance  proceeds  distorted the income from operations  margin  percentage in
2001 as there  are no sales  associated  with the $7.2  million  of lost  margin
recognized.  See Note 15 to Kronos' audited  consolidated  financial  statements
included in this information statement.


     Kronos also  recognized  insurance  recoveries of $29.1 million in 2001 for
property  damage and related  cleanup and other  extra  expenses  related to the
Leverkusen  fire,  resulting  in an  insurance  gain of  $17.5  million,  as the
insurance  recoveries  exceeded the carrying value of the property destroyed and
the  cleanup and other  extra  expenses  incurred.  Such  insurance  gain is not
reported  as a  component  of income  from  operations  but is included in other
income and expense. Kronos does not expect to recognize any additional insurance
recoveries  related  to the  Leverkusen  fire.  See Note 15 to  Kronos'  audited
consolidated financial statements included in this information statement.




     Kronos' cost of sales  increased  $93.8  million  (16%) in 2002 compared to
2001 due to the higher sales volume partially offset by lower unit costs,  which
resulted  primarily from the higher production levels. The effects of lower TiO2
sales and  production  volumes in 2001 were  partially  offset by receipt of the
business  interruption  proceeds  discussed  above.  Kronos' cost of sales, as a
percentage of net sales, increased from 69% in 2001 to 77% in 2002 primarily due
to the impact on net sales of the lower average selling prices  partially offset
by lower unit costs. Kronos' selling, general and administrative expenses ("SG&A
expenses") increased $9.0 million (9%) in 2002 as compared to 2001 primarily due
to higher  distribution  expenses  ($600,000)  associated  with the higher sales
volume in 2002 and higher  administrative  expenses of $5.8 million,  as well as
the impact of  relative  changes  in  foreign  currency  exchange  rates,  which
increased  Kronos'  expenses  in 2002  compared  to  2001.  SG&A  expenses  were
approximately 12% of sales in both 2001 and 2002.


     Kronos' gross margin decreased $53.6 million (21%) from 2001 to 2002 due to
the net effects of the changes in sales and cost of sales during such periods.


     Kronos'  sales  decreased  $87.2  million (9%) in 2001 compared to 2000 due
primarily  to lower TiO2 sales  volumes and lower TiO2 average  selling  prices.
Excluding the effect of fluctuations in the value of the U.S. dollar relative to
other  currencies,  Kronos' average TiO2 selling prices (in billing  currencies)
during  2001 were 3% lower  compared  to 2000,  with  prices  lower in all major
regions.  When translated from billing  currencies to U.S.  dollars using actual
foreign  currency  exchange  rates  prevailing  during the  respective  periods,
Kronos'  average TiO2 selling  prices in 2001 decreased 5% compared to 2000. The
difference between the 5% decrease in Kronos' average TiO2 selling prices during

                                       32
<PAGE>


2001 as compared to 2000 using actual foreign currency exchange rates prevailing
during the respective  periods (the GAAP measure) and the 3% decrease in Kronos'
average TiO2 selling price in billing  currencies (the non-GAAP  measure) during
such periods is due to the effect of change in foreign currency  exchange rates.
As discussed  above,  Kronos  discloses  percentage  changes in its average TiO2
prices in billing  currencies  because Kronos believes such disclosure  provides
useful  information  to investors to allow them to analyze such changes  without
the impact of changes in foreign currency exchange rates,  thereby  facilitating
period-to-period  comparisons of the relative  changes in average selling prices
in the actual various billing currencies.  The above table presents in a tabular
format (i) the  percentage  change in Kronos'  average TiO2 selling prices using
actual foreign currency exchange rates prevailing during the respective  periods
(the GAAP measure),  (ii) the percentage  change in Kronos' average TiO2 selling
price in billing  currencies  (the  non-GAAP  measure) and (iii) the  percentage
change due to changes in foreign  currency  exchange  rates (or the  reconciling
item between the non-GAAP measure and the GAAP measure).

     Kronos'  TiO2 sales  volumes  in 2001 were 8% lower  than the prior  record
sales  volumes of 2000,  primarily  due to lower  volumes in North  America  and
Europe of 6% and 13%, respectively.



     Kronos'  income from  operations  in 2001  decreased  $41.2  million  (20%)
compared  to 2000 due  primarily  to the lower TiO2 sales  volumes  and  average
selling prices as well as lower TiO2 production volume.  Kronos' TiO2 production
volume was 6% lower in 2001  compared to the prior record  production  volume in
2000.  The lower  production  volume in 2001 was due primarily to the effects of
the Leverkusen fire. The lower average TiO2 selling prices decreased income from
operations by $19.2 million in 2001 compared to 2000, while the lower TiO2 sales
and production  volumes  decreased  income from  operations by $22.3 million and
$21.8  million,  respectively.  The  effect  of the lower  sales and  production
volumes  was  offset  in part by the  $27.3  million  of  business  interruption
proceeds received in 2001, as discussed above.




     Kronos' cost of sales decreased $32.4 million (5%) in 2001 compared to 2000
primarily due to the lower sales volume,  partially offset by higher unit costs,
which resulted primarily from lower production levels. Kronos' cost of sales, as
a percentage of net sales,  increased  from 66% in 2000 to 69% in 2001 primarily
due to the impact on net sales of the lower  average  selling  prices and higher
unit costs, partially offset by business interruption insurance recoveries.


     Kronos' gross margin decreased $54.9 million (18%) from 2000 to 2001 due to
the net effects of the changes in sales and cost of sales during such periods.


     Kronos' SG&A  expenses  decreased by $8.9 million (8%) in 2001  compared to
2000 due to lower selling expenses ($3.2 million) associated with the lower 2001
sales volume and lower  administrative  expenses of $3.7 million, as well as the
effect of relative changes in foreign currency  exchange rates,  which decreased
Kronos'  expenses in 2001 as compared to 2000. SG&A expenses were  approximately
12% of sales in both 2000 and 2001.


     Other operating income (expense) in each period were comprised  principally
of foreign currency transaction gains and losses, and the intercorporate service
agreement  charges  (included  in  corporate  expenses)  discussed in Note 17 to
Kronos' audited  consolidated  financial statements included in this information
statement.  In addition,  corporate  expenses in 2001  included  $1.5 million of
German real estate  transfer  taxes  associated  with a legal  restructuring  of
Kronos' German operations.



     Pricing  within the TiO2  industry  is  cyclical,  and  changes in industry
economic conditions can significantly impact Kronos' earnings and operating cash
flows.  The average TiO2  selling  price index (using 1983 = 100) of 142 in 2002
was 9% lower  than the 2001  index of 156 (2001 was 3% lower than the 2000 index
of 161). In comparison, the 2002 index was 19% below the 1990 price index of 176
and 9% higher  than the 1993 price index of 130.  Many  factors  influence  TiO2
pricing  levels,  including  industry  capacity,  worldwide  demand  growth  and
customer inventory levels and purchasing decisions.


     Kronos' efforts to debottleneck its production facilities to meet long-term
demand continue to prove successful. Kronos expects its TiO2 production capacity
will  increase by about 10,000 metric tons  (primarily  at its  chloride-process
facilities),  with  moderate  capital  expenditures,  to increase its  aggregate
production capacity to about 480,000 metric tons during 2005.



     As discussed  above,  Kronos has substantial  operations and assets located
outside the United States  (primarily in Germany,  Belgium,  Norway and Canada).
Overall,  fluctuations  in the  value  of the  U.S.  dollar  relative  to  other
currencies,  primarily  the euro,  increased  Kronos' sales in 2002 by a net $21
million  compared to 2001,  and decreased  Kronos' sales by a net $19 million in
2001  compared  to 2000.  Overall,  the net  impact of  currency  exchange  rate
fluctuations  decreased  Kronos' income from  operations by $1.6 million in 2002
compared to 2001, and decreased  Kronos' income from  operations by $8.2 million
in 2001 compared to 2000.



         Other Income (Expense) Items


     The following table sets forth certain  information  regarding other income
and expense items for the years ended  December 31, 2000,  2001 and 2002 and the
six months ended June 30, 2002 and 2003.



                                       33
<PAGE>


<TABLE>

<CAPTION>
                                                        Years ended December 31,           Six months ended June 30,
                                                --------------------------------------   ----------------------------
                                                    2000          2001          2002         2002           2003
                                                -----------   ------------   ---------   -----------  ---------------
                                                                            (In thousands)
<S>                                             <C>            <C>          <C>           <C>          <C>
Interest income from affiliates...............  $   20,250     $   33,379   $   20,754    $   17,475   $      723
Trade interest income                                2,333          2,332        1.709           555          361
Other interest income                               1,078             349          702            71           74
Insurance recoveries, net.....................       --            17,468       --            --             --
Currency transaction gain.....................       --            --            6,271         6,271         --
Interest expense..............................      (2,005)        (4,305)     (16,837)       (1,698)     (16,350)
Interest expense to affiliates................     (28,979)       (22,969)     (12,290)      (12,167)        (703)
                                                ----------     ----------   ----------    ----------   ----------
                                                $   (7,323)    $   26,254   $      309    $   10,507   $  (15,895)
                                                ==========     ==========   ==========    ==========   ==========
</TABLE>


     Kronos has certain loans to  affiliates,  more fully  described in Notes 11
and 13 to Kronos' audited  consolidated  financial  statements  included in this
information statement. Period-to-period changes in the amount of interest income
on such loans to affiliates is due to changes in the average outstanding balance
of such loans during the  respective  periods.  Period-to-period  changes in the
amount of trade and other  interest  income is due  primarily  to changes in the
average amount of funds available for investment.



     The insurance recoveries, net of $17.5 million in 2001 related to insurance
proceeds  received from property damage  resulting from the Leverkusen  fire, as
the  insurance  proceeds  received  exceeded the carrying  value of the property
destroyed  and  cleanup  costs   incurred.   See  Note  15  to  Kronos'  audited
consolidated financial statements included in this information statement.


     The $6.3 million foreign  currency  transaction gain in 2002 relates to the
extinguishment of certain intercompany indebtedness associated with the offering
of the KII  Senior  Notes in June 2002.  See Notes 2 and 10 to  Kronos'  audited
consolidated financial statements included in this information statement.


     Interest  expense on third-party debt was $14.7 million higher in the first
six  months of 2003  compared  to the first  six  months of 2002,  and was $12.5
million  higher in 2002  compared to 2001,  due primarily to the issuance of the
KII Senior  Notes in 2002 as well as  borrowings  under KII  subsidiaries'  bank
credit facility  entered into in 2002.  Interest expense on third-party debt was
$2.3 million  higher in 2001 compared to 2000 due to higher levels of bank debt.
Interest  expense on third-party  debt is expected to be higher in 2003 compared
to 2002 due to  higher  outstanding  levels of debt,  partially  offset by lower
average interest rates.

     Interest expense on affiliate debt was $11.5 million lower in the first six
months of 2003  compared to the first six months of 2002,  and was $10.7 million
lower in 2002  compared to 2001 and $6.0 million lower in 2001 compared to 2000,
due primarily to lower average  balances of outstanding debt owed to affiliates.
See "--Liquidity and Capital Resources--Financing Cash Flows."


         Provision for Income Taxes

     The principal reasons for the difference between the U.S. Federal statutory
income tax rates and Kronos' effective income tax rates are explained in Note 14
to  Kronos'  audited   consolidated   financial   statements  included  in  this
information statement. Kronos' operations are conducted on a worldwide basis and
the geographic mix of income can  significantly  impact Kronos' effective income
tax rate. In 2002,  Kronos'  effective  income tax rate varied from the normally
expected rate in part due to a reduction in the Belgian  income tax rate and the


                                       34
<PAGE>

recognition of certain  deductible tax assets which  previously did not meet the
"more-likely-than-not"  recognition  criteria. In 2001, Kronos' effective income
tax rate varied from the normally  expected rate primarily due to the geographic
mix of income and the recognition of certain German income tax attributes  which
previously  did not meet the  "more-likely-than-not"  recognition  criteria.  In
2000,  Kronos'  effective income tax rate varied from the normally expected rate
primarily due to the geographic mix of income,  changes in the German income tax
"base"  rate  and  the  recognition  of  certain  deductible  tax  assets  which
previously did not meet the "more-likely-than-not" recognition criteria. Also in
2000,  Kronos  recognized  certain  one-time  benefits  related  to  German  tax
settlements.

     Kronos and its  qualifying  subsidiaries  are members of NL's  consolidated
U.S.  federal  income tax group (the "NL Tax Group").  As a member of the NL Tax
Group,  Kronos is a party to a tax sharing  agreement (the "NL Tax  Agreement").
Effective January 1, 2001, the NL Tax Group,  including Kronos,  was included in
the  consolidated  U.S. federal tax return of Contran (the "Contran Tax Group").
As a member of the  Contran Tax Group,  NL is a party to a separate  tax sharing
agreement (the "Contran Tax Agreement"). The Contran Tax Agreement provides that
NL and its qualifying  subsidiaries,  including Kronos,  compute their provision
for U.S. income taxes on a  separate-company  basis using the tax elections made
by Contran. Pursuant to the NL Tax Sharing Agreement and using the tax elections
made by  Contran,  Kronos  makes  payments to or  receives  payments  from NL in
amounts it would have paid to or received from the U.S. Internal Revenue Service
had it not  been a  member  of the NL  Tax  Group  but  instead  was a  separate
taxpayer.  Refunds are limited to amounts  previously paid under the tax sharing
agreement.


     Following the completion of NL's  distribution  of 48.7% of the outstanding
shares of Kronos  common  stock to NL  shareholders,  Kronos and its  qualifying
subsidiaries  would no longer be members of the NL Tax Group, but Kronos and its
qualifying subsidiaries would remain as members of the Contran Tax Group. Kronos
would  enter  into a new tax  sharing  agreement  with  Valhi and  Contran  (the
"Kronos/Contran/Valhi  Tax Agreement").  The  Kronos/Contran/Valhi Tax Agreement
will contain similar terms to the NL Tax Agreement.


         Other


     Related Party Transactions.  Kronos is a party to certain transactions with
related parties. See "Liquidity and Capital Resources--Investing Cash Flows" and
Note 17 to Kronos' audited  consolidated  financial  statements included in this
information statement.


     Recently Adopted Accounting  Principles.  As described in Note 2 to Kronos'
audited   consolidated   financial   statements  included  in  this  information
statement,  Kronos adopted Statement of Financial  Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations," effective January 1, 2003.

Liquidity and Capital Resources


     Kronos'  consolidated  cash flows from  operating,  investing and financing
activities  for the years ended  December  31,  2000,  2001 and 2002 and the six
months ended June 30, 2002 and 2003 are presented below.


<TABLE>
<CAPTION>
                                                                                                Six months ended
                                                        Years ended December 31,                     June 30,
                                                -----------------------------------------  --------------------------
                                                    2000           2001          2002          2002          2003
                                                ------------   -------------   ----------  -----------     ----------
                                                                            (In millions)
Net cash provided (used) by:
<S>                                             <C>            <C>           <C>           <C>           <C>
   Operating activities                         $     154.7    $     135.7   $     109.9   $      40.1   $      29.3
   Investing activities.......................        (31.0)         (33.7)        (33.4)        (11.2)        (14.7)
   Financing activities.......................       (172.2)         (99.0)        (93.9)         33.1         (27.4)
                                                -----------    -----------   -----------   -----------   -----------
Net cash provided (used) by operating,
   investing and financing activities.........  $     (48.5)   $       3.0   $     (17.4)  $      62.0   $     (12.8)
                                                ===========    ===========   ===========   ===========   ===========

</TABLE>


         Operating Cash Flows

     Certain items included in the  determination of net income do not represent
current inflows or outflows of cash. For example,  insurance recoveries,  net of
$17.5 million in 2001,  are excluded from the  determination  of operating  cash
flow.  These  insurance  proceeds are shown in the statement of cash flows under


                                       35
<PAGE>

investing  activities  to partially  offset the cash  outflow  impact of capital
expenditures  related to the Leverkusen  sulfate plant  reconstruction.  Certain
other items included in the  determination  of net income have an impact on cash
flows  from  operating  activities,  but the  impact of such  items on cash will
differ from their  impact on net income.  For  example,  the amount of income or
expense recorded for pension and OPEB assets and obligations  (which depend upon
a number of factors,  including actuarial assumptions used to value obligations)
will generally  differ from the outflows of cash for such benefits.  See Note 12
to  Kronos'  audited   consolidated   financial   statements  included  in  this
information statement.

     The TiO2 industry is cyclical and changes in economic conditions within the
industry  significantly  impact the earnings and operating cash flows of Kronos.
Cash flow from  operations  is  considered  the primary  source of liquidity for
Kronos.  Changes in TiO2 pricing,  production volume and customer demand,  among
other things, could significantly affect the liquidity of Kronos.


     Relative changes in assets and liabilities generally result from the timing
of production,  sales, purchases and income tax payments.  Such relative changes
can  significantly  impact the  comparability  of cash flow from operations from
period to period,  as the income  statement  impact of such items may occur in a
different period from when the underlying cash transaction  occurs. For example,
raw  materials  may be  purchased  in one  period,  but the payment for such raw
materials may occur in a subsequent period. Similarly,  inventory may be sold in
one period,  but the cash collection of the receivable may occur in a subsequent
period.


     Cash flows from  operating  activities  decreased from $40.1 million in the
first six months of 2002 to $29.3 million in the first six months of 2003.  This
$10.8  million  decrease  was due  primarily to the net effect of (i) higher net
income of $18.2 million, (ii) migher depreciation expense of $4.0 million, (iii)
noncash  interest  income  of $14.6  million  in the  first  six  months of 2002
compared  to nil in the first six months of 2003,  (iv) $21.1  million of higher
refundable  income taxes in the first six months of 2003 and (v) a higher amount
of net cash used to fund changes in Kronos' inventories,  receivables,  payables
and accounts  with  affiliates of $27.3 million in the first six months of 2003.
Relative changes in accounts receivable are affected by, among other things, the
timing of sales and the collection of the resutling receivable. Relative changes
in inventories  and accounts  payable and accrued  liabilities  are affected by,
among other  things,  the timing of raw material  purchases  and the payment for
such purchases and the relative  difference  between production volume and sales
volume.

     Cash flows from operating  activities decreased from $135.7 million in 2001
to $109.9 million in 2002. This $25.8 million  decrease was due primarily to the
net effects of (i) lower net income of $88.2 million,  (ii) higher  depreciation
expense of $3.2 million,  (ii) $15.0 million higher  deferred income tax expense
in 2002 as compared to 2001, (iv) insurance recoveries,  net of $17.5 million in
2001 as compared to nil in 2002, (v) lower  distributions  from the manufacuting
joint  venture  of $3.4  million  in 2002 and (vi) a higher  amount  of net cash
generated from relative changes in Kronos'  inventories,  receivables,  payables
and  accounts  with  affiliates  of $22.9  million in 2002 as  compared to 2001.
Relative changes in accounts receivable are affected by, among other things, the
timing of sale and the collection of the resulting receivable.  Relative changes
in inventories  and accounts  payable and accrued  liabilities  are affected by,
among other  things,  the timing of raw material  purchases  and the payment for
such pruchases and the relative  difference  between production volume and sales
volume.



     Cash flows from operating  activities decreased from $154.7 million in 2000
to $135.7 million in 2001. This $19.0 million  decrease was due primarily to the
net effect of (i) higher net income of $24.3 million, (ii) lower deferred income
tax expense of $16.1  million in 2001 as compared to 2000,  and $15.9 million of
higher  net  cash  used  related  to cash  income  tax  payments,  (iii)  higher
distributions from the manufacturing joint venture of $3.8 million in 2001, (iv)
insurance  recoveries,  net of $17.5  million in 2001 as compared to nil in 2000
and (v) a lower  amount  of net cash  used  from  relative  changes  in  Kronos'
inventories,  receivables, payables and accounts with affiliates of $3.4 million
in 2001 as  compared  to 2000.  Relative  changes  in  accounts  receivable  are
affected by, among other things,  the timing of sales and the  collection of the
resulting  receivable.  Relative changes in inventories and accounts payable and
accrued  liabilities  are  affected by,  among other  things,  the timing of raw
material  purchases  and  the  payment  for  such  purchases  and  the  relative
difference between production volume and sales volume.


                                       36
<PAGE>

         Investing Cash Flows


     Kronos'  capital  expenditures  were $12.1 million and $13.8 million in the
first six months of 2002 and 2003,  respectively.  Capital expenditures in first
six months of 2002 included approximately $2.2 million related to reconstruction
of Kronos' Leverkusen, Germany sulfate plant damaged in the March 2001 fire.


     Kronos' capital  expenditures  were $31.1 million,  $53.7 million and $32.6
million in 2000, 2001 and 2002,  respectively.  Capital expenditures in 2001 and
2002 included an aggregate of $22.3 million and $3.1 million,  respectively, for
the rebuilding of Kronos'  Leverkusen,  Germany sulfate plant.  In 2001,  Kronos
received $23.4 million of insurance  proceeds for property damage resulting from
the  Leverkusen  fire and paid $3.2  million of expenses  related to repairs and
clean-up costs.  Capital  expenditures at LPC were approximately $4.0 million in
each  of  2000,   2001  and  2002  and  are  not  included  in  Kronos'  capital
expenditures.

     Kronos'  capital  expenditures  during  the past  three  years  include  an
aggregate of  approximately  $18.2  million  ($5.0  million in 2002) for Kronos'
ongoing environmental protection and compliance programs. Kronos' estimated 2003
capital expenditures are $34.0 million and include approximately $5.0 million in
the area of environmental protection and compliance.

         Financing Cash Flows

     In March 2002,  Kronos repaid $25 million in principal  amount of affiliate
indebtedness to NL. In June 2002,  Kronos repaid $169 million  principal amount,
plus accrued  interest of affiliate  indebtedness  to NL, with proceeds from the
offering of the KII Senior Notes discussed below. See Notes 10 and 11 to Kronos'
audited   consolidated   financial   statements  included  in  this  information
statement.

     In June 2002,  KII issued  (euro)285  million ($280 million when issued and
$297 million at December 31, 2002) principal amount of the KII Senior Notes. The
KII Senior Notes are collateralized by first priority liens on 85% of the common
stock or other equity interests of certain of KII's first tier subsidiaries. The
KII Senior Notes are issued  pursuant to an indenture  that contains a number of
covenants and restrictions that, among other things, restrict the ability of KII
and its subsidiaries to incur debt, incur liens or merge or consolidate with, or
sell or transfer all or  substantially  all of their assets to, another  entity.
The  indenture  further  restricts  the  ability of KII to pay  dividends  under
certain  circumstances.  See Note 10 to Kronos' audited  consolidated  financial
statements included in this information statement.

     In June 2002,  Kronos' primary operating  subsidiaries in Germany,  Belgium
and Norway  entered into a new three-year  (euro)80  million  secured  revolving
credit facility  ("European Credit Facility") and borrowed (euro)13 million ($13
million) and NOK 200 million ($26 million) which, along with available cash, was
used to repay and terminate  KII's short term notes payable  ($53.2 million when
paid).  In  the  third  and  fourth  quarters  of  2002,  Kronos  repaid  a  net
euro-equivalent  (euro)12.7  million  ($12.4  million  when paid) and  (euro)1.7
million ($1.6 million when paid), respectively, of the European Credit Facility.
See Note 10 to Kronos' audited  consolidated  financial  statements  included in
this information statement.

     In September  2002,  Kronos'  U.S.  operating  subsidiaries  entered into a
three-year $50 million  asset-based  revolving  credit  facility  ("U.S.  Credit
Facility").  As of December 31, 2002, no borrowings were  outstanding  under the
U.S. Credit Facility and Borrowing  Availability was  approximately $30 million.
See Note 10 to Kronos' audited  consolidated  financial  statements  included in
this information statement.

     In March 2003,  Kronos  borrowed  (euro)15.0  million  ($16.1  million when
borrowed) under the European Credit Facility.  In April 2003,  Kronos repaid NOK
80 million  (approximately  $11  million  when paid) under the  European  Credit
Facility.


     At December  31,  2002,  Kronos had  borrowed a net $44.6  million  from NL
Environmental Management Services, Inc. ("EMS"), a majority-owned  subsidiary of
NL, under the terms of a $55 million revolving credit facility entered into with
EMS in 2002.  During  the  first  six  months of 2003,  Kronos  repaid  this net


                                       37
<PAGE>

outstanding  balance in full,  and the revolving  credit  agreement with EMS was
terminated  on June  30,  2003.  See  Note 11 to  Kronos'  audited  consolidated
financial statements included in this information statement.

     Deferred  financing  costs of $10.7 million for the KII Senior  Notes,  the
European  Credit  Facility and the U.S. Credit Facility are being amortized over
the life of the  respective  agreements  and are  included  in other  noncurrent
assets. As of June 30, 2002, the deferred financing costs totaled $9.3 million.


     In 2001,  Kronos  repaid  (euro)7.6  million  ($6.5  million when paid) and
(euro)16.4   million   ($14.9   million   when  paid),   respectively,   of  its
euro-denominated short-term debt with excess cash flow from operations.


     In 2000,  Kronos repaid  (euro)17.9  million  ($16.7 million when paid) and
(euro)13.0   million   ($12.2   million   when  paid),   respectively,   of  its
euro-denominated  short-term  debt with cash flow from  operations.  In  January
2000,  Kronos repaid a $43.0  million  short-term  affiliate  note payable to NL
Capital Corporation ("NLCC"). Prior to January 31, 2000, NLCC was a wholly-owned
subsidiary  of  NL.  See  Note  20 to  Kronos'  audited  consolidated  financial
statements  included in this  information  statement.  In December 2000,  Kronos
borrowed $43 million of  short-term  non-U.S.  dollar-denominated  bank debt and
used the  proceeds  along with cash on hand to redeem $50 million (par value) of
NL's 11.75% Senior Secured Notes.

     Other than  operating  lease  commitments  disclosed  in Note 18to  Kronos'
audited   consolidated   financial   statements  included  in  this  information
statement, Kronos is not party to any off-balance sheet financing arrangements.

     Dividends paid by Kronos to NL during 2000, 2001 and 2002 and the first six
months of 2003 totaled $55.0  million,  $30.5  million,  $111.0 million and $7.0
million, respectively.

     Cash flows related to capital  contributions  and other  transactions  with
affiliates aggregated net cash outflows of $40.0 million,  $47.5 million,  $73.7
million and $29.1 million in 2000,  2001, 2002 and the first six months of 2002,
respectively, and aggregated a net cash inflow of $19.7 million in the first six
months of 2003.  Such amounts  related  principally to loans that Kronos made to
affiliates  (such notes  receivable from affiliates being reported as reductions
to Kronos' stockholder's equity, and therefore considered financing cash flows).
Additionally, settlement of the above-mentioned notes receivable from affiliates
was not currently  contemplated in the foreseeable  future. In July 2002, Kronos
transferred certain such notes receivable from affiliates to NL, and as a result
Kronos will no longer report cash flows related to certain such notes receivable
from affiliates.

          Cash, Cash Equivalents, Restricted Cash and Restricted Marketable Debt
          Securities and Borrowing Availability


     At June 30, 2003, Kronos had current cash and cash equivalents  aggregating
$29.6  million,   current  restricted  cash  equivalents  of  $1.0  million  and
noncurrent  restricted  marketable  debt  securities  of $2.0  million.  Of such
aggregate $32.6 million amount, $20.9 million was held by non-U.S. subsidiaries.
At June 30, 2003, certain of Kronos' subsidiaries had $102 million available for
borrowing  with  approximately  $57  million  available  under  non-U.S.  credit
facilities  (including  $55 million  under the  European  Credit  Facility)  and
approximately  $45 million  under the U.S.  Credit  Facility.  At June 30, 2003,
Kronos had complied with all financial covenants governing its debt agreements.


     Based upon  Kronos'  expectations  for the TiO2  industry  and  anticipated
demands on Kronos' cash  resources as discussed  herein,  Kronos expects to have
sufficient  liquidity  to meet its  obligations  including  operations,  capital
expenditures, debt service and dividends. To the extent that actual developments
differ from Kronos' expectations, Kronos' liquidity could be adversely affected.

         Income Taxes

     A reduction in the German "base"  income tax rate from 30% to 25%,  enacted
in October 2000,  became effective  January 1, 2001. The reduction in the German
income tax rate  resulted in $5.7 million of deferred  income tax expense in the
fourth quarter of 2000 due to a reduction of Kronos'  deferred  income tax asset
related to certain German tax attributes.

     A reduction in the Belgian  income tax rate from 40.17% to 33.99%,  enacted
in December 2002, became effective January 1, 2003. The reduction in the Belgian
income tax rate  resulted in a $2.3  million  decrease  in  deferred  income tax


                                       38
<PAGE>

expense in the fourth  quarter of 2002 due to a  reduction  of Kronos'  deferred
income tax liabilities related to certain Belgian temporary differences.

     Certain of Kronos' tax returns in various U.S.  and non-U.S.  jurisdictions
are  being  examined  and tax  authorities  have  proposed  or may  propose  tax
deficiencies,  including penalties and interest.  See Note 14 to Kronos' audited
consolidated financial statements included in this information statement.


     Kronos has received  preliminary tax assessments for the years 1991 to 1997
from the Belgian tax authorities  proposing tax deficiencies,  including related
interest, of approximately  (euro)10.1 million ($11.6 million at June 30, 2003).
Kronos has filed protests to the assessments for the years 1991 to 1997.  Kronos
is in  discussions  with  the  Belgian  tax  authorities  and  believes  that  a
significant  portion of the assessments is without merit. In April 2003,  Kronos
received a  notification  from the Belgian tax  authorities  of their  intent to
assess a tax deficiency related to 1999. The anticipated  assessment,  including
interest, is expected to approximate (euro)13.1 million ($15 million at June 30,
2003).  Kronos believes the proposed assessment related to 1999 is without merit
and in April 2003 filed a written  response in opposition to the notification of
intent to assess.



     In 2002,  Kronos received a notification from the Norwegian tax authorities
of their intent to assess tax  deficiencies  of  approximately  NOK 12.2 million
($1.7  million at June 30,  2003)  relating  to 1998  through  2000.  Kronos has
objected to this proposed  assessment in a written response to the Norwegian tax
authorities.



     In the first  quarter of 2003,  Kronos was  notified by the German  Federal
Fiscal Court (the "Court") that the Court had ruled in Kronos' favor  concerning
a claim for refund  suit in which  Kronos  sought  refunds  of prior  taxes paid
during the periods 1990 through 1997.  Kronos has filed certain  amended  German
tax returns and expects to file additional  amended German tax returns  claiming
such tax  refunds  for all years  affected  by the  Court's  decision,  which is
expected to result in a net refund of taxes and  interest of  approximately  $40
million. Receipt of the German tax refunds is subject to satisfaction of various
procedural requirements, including a review and acceptance of the amended German
tax  returns  by  the  German  tax  authorities.  Certain  of  these  procedural
requirements  were  satisfied  in the second  quarter of 2003 with  respect to a
portion  of the  refund  claim,  and in July  2003 the  German  tax  authorities
refunded Kronos a portion of the total anticipated  refund. The portion received
in July was  (euro)21.5  million  ($24.6  million  using June 30, 2003  exchange
rates).  Kronos has reflected this tax refund in its second quarter 2003 results
of operations. Kronos expects to receive the remaining refunds over the next six
to nine  months,  a portion  of which may  result in an  additional  income  tax
benefit.


     No  assurance  can be given that  Kronos'  tax  matters  will be  favorably
resolved  due  to  the  inherent   uncertainties   involved  in  court  and  tax
proceedings.  Kronos  believes  that  it  has  provided  adequate  accruals  for
additional taxes and related  interest expense which may ultimately  result from
all such  examinations  and  believes  that  the  ultimate  disposition  of such
examinations  should not have a material adverse effect on Kronos'  consolidated
financial position, results of operations or liquidity.


     At June 30, 2003,  Kronos had the equivalent of approximately  $470 million
of income tax loss  carryforwards in Germany with no expiration  date.  However,
Kronos has provided a deferred tax valuation allowance against substantially all
of these income tax loss carryforwards because Kronos currently believes that it
does not meet the  "more-likely-than-not"  recognition  criteria.  In 2002,  the
German  federal  government  proposed  certain  changes  to its  income tax law,
including  certain  changes  that would have imposed  limitations  on the annual
utilization of income tax loss carryforwards.  Such proposal, if enacted,  would
have significantly  affected Kronos' 2003 and future income tax expense and cash
tax payments.  In April 2003, the German federal government passed a new tax law


                                       39
<PAGE>


which does not contain the provision that would have  restricted the utilization
of tax loss carryforwards.  Furthermore, the provisions contained in the new law
are not expected to  materially  impact  Kronos'  income tax expense or cash tax
payments.  On August 1, 2003, the German federal government proposed new tax law
amendments that, among other things, re-introduced the limitations on the annual
utilization of income tax loss carryforwards, to become effective in 2004. There
can be no assurance that these  proposed law amendments  will be enacted and, if
enacted,  when they would become  effective.  Similar to the 2002  proposal,  if
enacted as proposed,  these amendments would significantly affect Kronos' future
income tax expense and cash tax payments.



     At June 30, 2003, Kronos had net deferred tax liabilities of $86.9 million.
Kronos  operates  in  numerous  tax  jurisdictions,  in  certain of which it has
temporary  differences  that  net  to  deferred  tax  assets  (before  valuation
allowance).  Kronos has  provided a deferred tax  valuation  allowance of $166.0
million at June 30, 2003,  principally related to Germany,  partially offsetting
deferred   tax  assets  that  Kronos   believes  do  not   currently   meet  the
"more-likely-than-not" recognition criteria.


     Environmental Matters and Litigation


     See   "Business--Legal   Proceedings"   and  Note  18  to  Kronos'  audited
consolidated financial statements included in this information statement.


     Foreign Operations


     As discussed above,  Kronos has substantial  operations located outside the
United States for which the  functional  currency is not the U.S.  dollar.  As a
result,  the reported  amount of Kronos' assets and  liabilities  related to its
non-U.S.  operations,  and  therefore  Kronos'  consolidated  net  assets,  will
fluctuate based upon changes in currency  exchange rates. As of January 1, 2001,
the functional currency of Kronos' German,  Belgian, Dutch and French operations
have been converted to the euro from their respective  national  currencies.  At
June 30,  2003,  Kronos  had  substantial  net assets  denominated  in the euro,
Canadian dollar, Norwegian kroner and United Kingdom pound sterling.


     New Accounting Principles Not Yet Adopted

     See Note 2 to Kronos' audited consolidated financial statements included in
this information statement.

     Other

     Kronos periodically evaluates its liquidity requirements,  alternative uses
of capital,  capital needs and availability of resources in view of, among other
things,  its  dividend  policy,   its  debt  service  and  capital   expenditure
requirements  and estimated  future  operating  cash flows.  As a result of this
process,  Kronos in the past has sought,  and in the future may seek, to reduce,
refinance,  repurchase or restructure  indebtedness;  raise additional  capital;
issue additional  securities;  repurchase shares of its common stock; modify its
dividend policy; restructure ownership interests; sell interests in subsidiaries
or other assets;  or take a  combination  of such steps or other steps to manage
its  liquidity  and capital  resources.  In the normal  course of its  business,
Kronos may review opportunities for the acquisition,  divestiture, joint venture
or other business combinations in the chemicals or other industries,  as well as
the  acquisition  of  interests  in  related  companies.  In  the  event  of any
acquisition or joint venture  transaction,  Kronos may consider using  available
cash,  issuing equity  securities or increasing its  indebtedness  to the extent
permitted by the  agreements  governing  Kronos'  existing  debt. See Note 10 to
Kronos' audited  consolidated  financial statements included in this information
statement.

     Summary of Debt and Other Contractual Commitments



     As more  fully  described  in the  notes to  Kronos'  audited  consolidated
financial statements included in this information  statement,  Kronos is a party
to  various  debt,   lease  and  other  agreements   which   contractually   and
unconditionally  commit Kronos to pay certain  amounts in the future.  See Notes
10, 11 and 18 to Kronos' audited  consolidated  financial statements included in
this information statement.  Kronos' obligations related to the long-term supply
contract  for the  purchase  of  chloride-process  TiO2  feedstock  and  certain
landfills are more fully  described in Note 18 to Kronos'  audited  consolidated
financial statements included in this information statement. The following table
summarizes such contractual  commitments that are unconditional both in terms of
timing and amount by the type and date of payment as of December 31, 2002.


                                       40
<PAGE>


<TABLE>
<CAPTION>
                                                     Unconditional Payment Due Date
                                ----------------------------------------------------------------------
Contractual Commitment                  2003             2004-2005        2006-2007     2008 and after       Total
------------------------------  ----------------  --------------------  -------------  ---------------   -------------
                                                                    (In millions)

<S>                              <C>                  <C>               <C>            <C>                <C>
Indebtedness                     $       1.3          $      72.1       $        .2    $     296.9        $     370.5
Property and equipment                   6.4                 -                -                -                  6.4
Operating leases                         4.4                  6.4               3.4           18.9               33.1

Long-term supply contract
 for the purchase of
 chloride-process TiO2 feedstock       172.0                308.0             145.0           -                 625.0

Landfills                                1.3                  2.1             -                3.1                6.5
                                 -----------          -----------       -----------    -----------        -----------
                                 $     185.4          $     388.6       $     148.6    $     318.9        $   1,041.5
                                 ===========          ===========       ===========    ===========        ===========
</TABLE>



     The  timing  and  amount   shown  for   Kronos'   commitments   related  to
indebtedness,  property and equipment  and  operating  leases are based upon the
contractual   payment  amount  and  the   contractual   payment  date  for  such
commitments.  The timing and amount shown for Kronos'  commitment related to the
long-term supply contract is based upon Kronos' current estimate of the quantity
of  feedstock  that  will  be  purchased  in each  time  period  shown,  and the
contractual  payment  that  would be due  based  upon such  estimated  purchased
quantity.  The actual  amount of feedstock  purchased,  and therefore the actual
amount that would be payable by Kronos,  may vary from such  estimated  amounts.
The timing and amount shown for Kronos'  commitment related to certain landfills
is based upon Kronos'  current  estimate of when such payments will be made. The
actual timing of such payments may vary  depending upon the actual timing of the
closure activities for such landfills.


     Assumptions on Defined Benefit Pension Plans and OPEB Plans

     Defined Benefit  Pension Plans.  Kronos  maintains  various defined benefit
pension  plans in Europe and Canada.  Kronos  accounts  for its defined  benefit
pension plans using SFAS No. 87,  "Employer's  Accounting for  Pensions."  Under
SFAS No. 87,  defined  benefit  pension  plan  expense  and  prepaid and accrued
pension  cost  are  each  recognized  based on  certain  actuarial  assumptions,
principally the assumed  discount rate, the assumed  long-term rate of return on
plan  assets and the  assumed  increase in future  compensation  levels.  Kronos
recognized  consolidated defined benefit pension plan expense of $4.5 million in
2000,  $5.0  million  in 2001 and $7.1  million  in 2002.  The amount of funding
requirements  for these defined  benefit  pension plans is generally  based upon
applicable regulation, and will generally differ from pension expense recognized
under SFAS No. 87 for financial reporting purposes. Contributions made by Kronos
to all of its defined  benefit  pension plans  aggregated  $8.2 million in 2000,
$7.4 million in 2001 and $9.0 million in 2002.

     The discount rates Kronos utilizes for determining  defined benefit pension
expense and the related pension  obligations are based on current interest rates
earned on long-term  bonds that receive one of the two highest  ratings given by
recognized  rating agencies in the applicable  country where the defined benefit
pension  benefits are being paid.  In  addition,  Kronos  receives  advice about
appropriate   discount  rates  to  use  based  upon   discussions  with  Kronos'
third-party  actuaries,  who may in some cases utilize their own market indices.
The discount rates are adjusted as of each valuation  date  (September  30th for
Kronos' plans) to reflect  then-current  interest rates on such long-term bonds.
Such discount  rates are used to determine  the  actuarial  present value of the
pension  obligations  as of December 31st of that year,  and such discount rates
are also used to determine  the interest  component of defined  benefit  pension
expense for the following year.

     At December  31,  2002,  approximately  63%,  11% and 17% of the  projected
benefit  obligations  for all of  Kronos'  defined  benefit  pension  plans were
attributable  to  Germany,  Canada  and  Norway,  respectively.  Because  Kronos
maintains  defined  benefit  pension  plans in several  different  countries and
because the interest rate  environment  differs from country to country,  Kronos
uses several  different  discount rate  assumptions in  determining  its defined
benefit pension plan obligations and expense.

                                       41
<PAGE>

     Kronos used the following  discount rates for its defined  benefit  pension
plans:

<TABLE>
<CAPTION>
                                             Obligation at        Obligation at           Obligation at
                                           December 31, 2000    December 31, 2001       December 31, 2002
                                          and expense in 2001  and expense in 2002     and expense in 2003
                                          -------------------  -------------------     -------------------

<S>                                              <C>                    <C>                     <C>
  Germany..............................          6.0%                   5.8%                    5.5%
  Canada...............................          7.5%                   7.3%                    7.0%
  Norway...............................          6.0%                   6.0%                    6.0%
</TABLE>

     The  assumed  long-term  rate of  return  on  plan  assets  represents  the
estimated  average rate of earnings  expected to be earned on the funds invested
or to be invested  in the plans'  assets  provided to fund the benefit  payments
inherent in the projected benefit obligation. Unlike the discount rate, which is
adjusted each year based on changes in current  long-term  interest  rates,  the
assumed  long-term  rate of return on plan  assets will not  necessarily  change
based upon the actual,  short-term  performance  of the plan assets in any given
year.  Defined  benefit  pension  expense  each year is based  upon the  assumed
long-term  rate of return on plan assets for each plan and the actual fair value
of the plan  assets as of the  beginning  of the year.  Differences  between the
expected  return on plan  assets  for a given  year and the  actual  return  are
deferred  and  amortized  over future  periods  based  either upon the  expected
average  remaining  service life of the active plan  participants (for plans for
which  benefits  are still  being  earned by active  employees)  or the  average
remaining  life  expectancy  of the inactive  participants  (for plans for which
benefits are not still being earned by active employees).

     At December 31, 2002, approximately 59%, 10% and 22% of the plan assets for
all of Kronos'  defined  benefit  pension  plans were  attributable  to Germany,
Canada and  Norway,  respectively.  Because  Kronos  maintains  defined  benefit
pension  plans in  several  different  countries,  because  the plan  assets  in
different  countries are invested in a different mix of investments  and because
the long-term rates of return for different  investments  differ from country to
country,  Kronos uses several different  long-term rates of return on plan asset
assumptions in determining its defined benefit pension plan expense.

     In  determining  the  expected  long-term  rate of  return  on  plan  asset
assumptions,  Kronos  considers the long-term  asset mix (e.g.  equity vs. fixed
income) for the assets for each of its plans and the expected long-term rates of
return for such asset  components.  In addition,  Kronos  receives  advice about
appropriate long-term rates of return to use based upon discussions with Kronos'
third-party actuaries. Such assumed asset mixes are summarized below:

     o    In Germany,  the  composition of plan assets is established to satisfy
          the  requirements of the German  insurance  commissioner.  The current
          plan asset  allocation at December 31, 2002 was 30% to equity managers
          and 70% to fixed income managers.

     o    In Canada,  Kronos currently has a plan asset target allocation of 65%
          to equity managers and 35% to fixed income managers,  with an expected
          long-term rate of return for such investments to average approximately
          125 basis points above the  applicable  equity or fixed income  index.
          The current  plan asset  allocation  at  December  31, 2002 was 54% to
          equity managers and 46% to fixed income managers.

     o    In Norway,  Kronos currently has a plan asset target allocation of 15%
          to equity managers and 85% to fixed income managers,  with an expected
          long-term rate of return for such  investments of approximately 8% and
          6%,  respectively.  The current plan asset  allocation at December 31,
          2002 was 13% to equity managers and 87% to fixed income managers.

     Kronos regularly reviews its actual asset allocation for each of its plans,
and will periodically  rebalance the investments in each plan to more accurately
reflect the targeted allocation when considered appropriate.

     Kronos' assumed long-term rates of return on plan assets for 2000, 2001 and
2002 were as follows:


                                       42
<PAGE>

<TABLE>
<CAPTION>
                                     2000                           2001                           2002
                         ------------------------------ ------------------------------  ----------------------------

<S>                                  <C>                            <C>                            <C>
  Germany                            7.5%                           7.3%                           6.8%
  Canada                             8.0%                           7.8%                           7.0%
  Norway                             7.0%                           7.0%                           7.0%
</TABLE>

     Kronos  currently  expects to utilize the same  long-term rate of return on
plan asset  assumptions  in 2003 as it used in 2002 for purposes of  determining
the 2003 defined benefit pension plan expense.

     To the extent that a plan's particular  pension benefit formula  calculates
the pension benefit in whole or in part based upon future  compensation  levels,
the projected  benefit  obligation and the pension expense will be based in part
upon expected increases in future compensation  levels. For all of Kronos' plans
for which the  benefit  formula is so  calculated,  Kronos  generally  bases the
assumed  expected  increase in future  compensation  levels  based upon  average
long-term inflation rates for the applicable country.

     In addition to the actuarial  assumptions  discussed above,  because Kronos
maintains  defined  benefit  pension  plans  outside  the  U.S.  the  amount  of
recognized defined benefit pension expense and the amount of prepaid and accrued
pension cost will vary based upon relative changes in foreign currency  exchange
rates.

     Based on the  actuarial  assumptions  described  above and Kronos'  current
expectation  for what actual  average  foreign  currency  exchange rates will be
during 2003, Kronos expects its defined benefit pension expense will approximate
$8  million in 2003.  In  comparison,  Kronos  expects  to be  required  to make
approximately $12 million of contributions to such plans during 2003.

     Defined benefit  pension  expense and the amount  recognized as prepaid and
accrued pension costs are based upon the actuarial  assumptions discussed above.
Kronos  believes  all of the  actuarial  assumptions  used  are  reasonable  and
appropriate.  If Kronos had lowered the assumed discount rate by 25 basis points
for all of its  plans as of  December  31,  2002,  Kronos'  aggregate  projected
benefit  obligation would have increased by  approximately  $9.4 million at that
date, and Kronos'  defined benefit pension expense would be expected to increase
by  approximately  $1.3 million  during 2003.  Similarly,  if Kronos lowered the
assumed  long-term  rate of return on plan assets by 25 basis  points for all of
its plans, Kronos' defined benefit pension expense would be expected to increase
by approximately $.5 million during 2003.

     OPEB  Plans.  Certain  of  Kronos'  subsidiaries  in the  U.S.  and  Canada
currently  provide certain health care and life insurance  benefits for eligible
retired  employees.  Kronos  accounts  for such OPEB costs  under SFAS No.  106,
"Employers  Accounting for  Postretirement  Benefits other than Pensions." Under
SFAS No. 106, OPEB expense and accrued OPEB costs are based on certain actuarial
assumptions,  principally  the assumed  discount  rate and the  assumed  rate of
increases  in future  health care costs.  Kronos  recognized  consolidated  OPEB
expense  (income)  of nil in 2000,  $(.1)  million in 2001 and $(.3)  million in
2002.  Similar to defined benefit pension  benefits,  the amount of funding will
differ  from the  expense  recognized  for  financial  reporting  purposes,  and
contributions to the plans to cover benefit payments  aggregated $1.0 million in
2000, $1.2 million in 2001 and $1.0 million in 2002.

     The assumed discount rates Kronos utilizes for determining OPEB expense and
the related  accrued OPEB  obligation  is generally  based on the same  discount
rates Kronos utilizes for its Canadian defined benefit pension plans.

     In estimating the health care cost trend rate,  Kronos considers its actual
healthcare  cost  experience,  future benefit  structures,  industry  trends and
advice from its  third-party  actuaries.  During  each of the past three  years,
Kronos  has  assumed  that the  relative  increase  in health  care  costs  will
generally  trend downward over the next several years,  reflecting,  among other
things,   assumed  increases  in  efficiency  in  the  health  care  system  and
industry-wide cost containment  initiatives.  For example, at December 31, 2002,
the  expected  rate of  increase in future  health care costs  ranges from 9% in
2003, declining to 5.5% in 2007 and thereafter.

                                       43
<PAGE>

     Based on the  actuarial  assumptions  described  above and Kronos'  current
expectation  for what actual  average  foreign  currency  exchange rates will be
during 2003,  Kronos expects its OPEB expense  (income) will  approximate  $(.2)
million  in  2003.  In  comparison,  Kronos  expects  to  be  required  to  make
approximately $1.3 million of contributions to such plans during 2003.

     OPEB expense and the amount recognized as accrued OPEB costs are based upon
the actuarial  assumptions discussed above. Kronos believes all of the actuarial
assumptions  used are  reasonable  and  appropriate.  If Kronos had  lowered the
assumed  discount  rate by 25  basis  points  for all of its  OPEB  plans  as of
December 31, 2002,  Kronos'  aggregate  accumulated  OPEB obligation  would have
increased by  approximately  $.3 million at that date,  and Kronos' OPEB expense
would be expected to increase by a nil amount  during  2003.  Similarly,  if the
assumed  future  health  care cost  trend rate had been  increased  by 100 basis
points,   Kronos'   accumulated   OPEB   obligation   would  have  increased  by
approximately  $.8 million at December  31, 2002,  and OPEB  expense  would have
increased by $.1 million in 2002.

Quantitative and Qualitative Disclosures About Market Risk

         General

     Kronos is exposed to market risk from changes in currency  exchange  rates,
interest rates and equity security prices.  In the past, Kronos has periodically
entered into  interest rate swaps or other types of contracts in order to manage
a portion of its interest rate market risk. Otherwise,  Kronos has not generally
entered into forward or option  contracts to manage such market  risks,  nor has
Kronos entered into any such contract or other type of derivative instrument for
trading  purposes.  Kronos was not a party to any forward or  derivative  option
contracts related to currency exchange rates,  interest rates or equity security
prices at  December  31,  2001 or 2002.  See Notes 2 and 19 to  Kronos'  audited
consolidated financial statements included in this information statement.

         Interest Rates

     Kronos is exposed to market risk from changes in interest rates,  primarily
related to indebtedness.  At December 31, 2002,  Kronos' aggregate  indebtedness
was  split  between  81% of  fixed-rate  instruments  and  19% of  variable-rate
borrowings (2001 - 81% fixed-rate and 19%  variable-rate).  The large percentage
of fixed-rate debt instruments  minimizes earnings volatility which would result
from changes in interest rates. The following table presents  principal  amounts
and weighted-average  interest rates, by contractual maturity dates, for Kronos'
aggregate  indebtedness at December 31, 2001 and 2002. At December 31, 2002, all
outstanding  fixed-rate  indebtedness was denominated in euros (2001 - all fixed
rate   indebtedness   denominated  in  U.S.   dollars),   and  all   outstanding
variable-rate  indebtedness was denominated in either euros, Norwegian kroner or
U.S.   dollars.   Information   shown   below  for  such  euro-  and   Norwegian
kroner-denominated  indebtedness is presented in its U.S.  dollar  equivalent at
December 31, 2002 using that date's  exchange  rate of .96 euro per U.S.  dollar
(2001 - 1.13 euro per U.S.  dollar) and 6.99  Norwegian  kroner per U.S.  dollar
(2001  -  9.02   Norwegian   kroner   per  U.S.   dollar).   Certain   Norwegian
kroner-denominated  capital  leases  totaling  $1.9  million  in 2002  have been
excluded from the table below.

<TABLE>
<CAPTION>
                                                                   Amount
                                                        ------------------------------
                                                           Carrying         Fair         Interest       Maturity
         Indebtedness                                       value          value           rate           date
         ------------                                   ------------------------------ -------------- --------------
                                                                (In millions)
Fixed-rate indebtedness (euro-denominated):
<S>                                                      <C>             <C>                <C>             <C>
    KII Senior Notes                                     $    296.9      $   299.9          8.875%          2009
                                                        ------------------------------ --------------
                                                              296.9          299.9          8.875%
                                                        ------------------------------ --------------
Variable-rate indebtedness:
    European Credit Facility:
        euro-denominated                                       15.6           15.6          4.8%            2005
        Norwegian kroner-denominated                           11.5           11.5          8.9%            2005
    Note payable to affiliate (U.S. dollar denominated)        44.6           44.6          3.1%            2005
                                                        ------------------------------ --------------
                                                               71.7           71.7          4.4%
                                                        ------------------------------ --------------
                                                         $    368.6      $   371.6          8.0%
                                                        ============================== ==============
</TABLE>

                                       44
<PAGE>



     At December 31, 2001,  fixed-rate  indebtedness  aggregated  $194.0 million
(fair value - $194.9 million) with a  weighted-average  interest rate of 11.75%;
variable  rate  indebtedness  at  such  date  aggregated  $46.2  million,  which
approximated fair value, with a weighted-average  interest rate of 5.45%. All of
such fixed rate indebtedness was denominated in U.S. dollars. Such variable rate
indebtedness  was denominated in the euro (52%) and the Norwegian  kroner (48%).
Certain  Norwegian  kroner-denominated  capital leases  totaling $2.5 million at
December 31, 2001 have been excluded from the above analysis.

         Currency Exchange Rates

     Kronos is exposed to market risk arising from changes in currency  exchange
rates as a result of manufacturing and selling its products worldwide.  Earnings
are primarily  affected by fluctuations in the value of the U.S. dollar relative
to the euro,  Canadian  dollar,  Norwegian  kroner and the United  Kingdom pound
sterling.  See  Item 7.  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations" for a discussion of risks and uncertainties
related to the conversion of certain of these currencies to the euro.

     At December 31, 2002, Kronos had $312.5 million of indebtedness denominated
in euros (2001 - $24.0 million) and $11.5 million of indebtedness denominated in
Norwegian  kroner (2001 - $22.2  million).  The  potential  increase in the U.S.
dollar  equivalent  of  the  principal  amount  outstanding   resulting  from  a
hypothetical 10% adverse change in exchange rates would be  approximately  $32.4
million (2001 - $4.6 million).

         Other

     Kronos believes there are certain  shortcomings in the sensitivity analyses
presented above,  which analyses are required under the SEC's  regulations.  For
example,  the  hypothetical  effect of changes in interest rates discussed above
ignores the potential  effect on other variables which affect Kronos' results of
operations and cash flows,  such as demand for Kronos'  products,  sales volumes
and selling prices and operating  expenses.  Contrary to the above  assumptions,
changes in interest rates rarely result in  simultaneous  parallel  shifts along
the yield curve. Accordingly, the amounts presented above are not necessarily an
accurate  reflection  of the potential  losses  Kronos would incur  assuming the
hypothetical changes in market prices were actually to occur.

     The above  discussion and estimated  sensitivity  analysis  amounts include
forward-looking  statements of market risk which assume hypothetical  changes in
market prices. Actual future market conditions could differ materially from such
assumptions.   Accordingly,   such  forward-looking  statements  should  not  be
considered to be projections by Kronos of future events, gains or losses.

Non-GAAP Financial Measures

     In an effort to provide  investors with  additional  information  regarding
Kronos'  results as determined by GAAP,  Kronos has disclosed  certain  non-GAAP
information which Kronos believes provides useful information to investors:


     As discussed above, Kronos discloses percentage changes in its average TiO2
prices in billing  currencies,  which  excludes the effects of foreign  currency
translation.  Such  disclosure of the percentage  change in Kronos' average TiO2
selling price in billing currencies is considered a "non-GAAP" financial measure
under regulations of the SEC. The disclosure of the percentage change in Kronos'
average  TiO2  selling  prices  using actual  foreign  currency  exchange  rates
prevailing  during  the  respective  periods  is  considered  the most  direclty
comparable GAAP measure. Kronos discloses percentage changes in its average TiO2
prices in billing  currencies  because Kronos believes such disclosure  provides
useful  information  to investors to allow them to analyze such changes  without
the impact of changes in foreign currency exchange rates,  thereby  facilitating
period-to-period  comparisons of the relative  changes in average selling prices
in the actual various billing currencies. Generally, when the U.S. dollar either
strengthens  or weakens  against  other  currencies,  the  percentage  change in
average  selling  prices  in  billing   currencies  will  be  higher  or  lower,
respectively,  than such percentage  changes would be used actual exchange rates
prevailing during the respective periods.


                                       45
<PAGE>

                                    BUSINESS

General

     Kronos is the world's fifth largest  producer of TiO2 with an estimated 12%
share of worldwide TiO2 sales volume in 2002.  Approximately one-half of Kronos'
2002 sales volume was in Europe,  where Kronos is the second largest producer of
TiO2.

Industry

     Titanium  dioxide  pigments  are  chemical   products  used  for  imparting
whiteness, brightness and opacity to a wide range of products, including paints,
plastics,  paper,  fibers and ceramics.  TiO2 is considered a  "quality-of-life"
product  with demand  affected by changes in gross  domestic  product in various
regions of the world.


     Pricing within the global TiO2 industry over the long term is cyclical, and
changes in industry economic  conditions,  especially in Western  industrialized
nations,  can  significantly  impact Kronos'  earnings and operating cash flows.
Kronos'  average TiO2 selling price on a billing  currency basis  increased from
the preceding  quarter during each of the third and fourth  quarters of 2002 and
the first quarter of 2003,  reversing the downward trend in prices that began in
the first  quarter  of 2001 and  continued  through  the first  quarter of 2002.
Kronos'  average  TiO2  selling  prices in the second  quarter of 2003 were flat
compared  to  the  first  quarter  of  2003.   Industry-wide   demand  for  TiO2
strengthened  throughout 2002, with full year demand estimated as 9% higher than
the previous year.  This is believed to have been the result of economic  growth
and restocking of customer  inventory levels.  Volume demand in 2003 is expected
to increase moderately over 2002 levels.


     Kronos has an  estimated  18% share of  European  TiO2 sales  volume and an
estimated 14% share of North American TiO2 sales volume.  Per capita consumption
of TiO2 in the United States and Western  Europe far exceeds that in other areas
of the world and these  regions  are  expected  to  continue  to be the  largest
consumers  of TiO2.  Significant  regions for TiO2  consumption  could emerge in
Eastern Europe,  the Far East or China if the economies in these regions develop
to the point  that  quality-of-life  products,  including  TiO2,  are in greater
demand.  Kronos believes that, due to its strong presence in Western Europe,  it
is well  positioned to  participate  in growth in consumption of TiO2 in Eastern
Europe. Geographic segment information is contained in Note 3 to Kronos' audited
consolidated financial statements included in this information statement.

Products and Operations

     TiO2 is produced in two crystalline forms: rutile and anatase.  Rutile TiO2
is a more tightly bound crystal that has a higher  refractive index than anatase
TiO2 and, therefore,  provides better opacification and tinting strength in many
applications.  Although many end-use  applications  can use either form of TiO2,
rutile TiO2 is the preferred form for use in coatings, plastics and ink. Anatase
TiO2 has a bluer  undertone  and is less  abrasive  than rutile TiO2,  and it is
often preferred for use in paper, ceramics, rubber and man-made fibers.

     Kronos believes that there are no effective  substitutes for TiO2. However,
extenders such as kaolin clays,  calcium carbonate and polymeric  opacifiers are
used in a number of Kronos' markets. Generally,  extenders are used to reduce to
some extent the  utilization of  higher-cost  TiO2. The use of extenders has not
significantly  changed TiO2 consumption  over the past decade because,  to date,
extenders  generally  have failed to match the  performance  characteristics  of
TiO2. As a result, Kronos believes that the use of extenders will not materially
alter the growth of the TiO2 business in the foreseeable future.

     Kronos  currently  produces over 40 different  TiO2 grades,  sold under the
Kronos  trademark,  which  provide a variety of  performance  properties to meet
customers' specific  requirements.  Kronos' major customers include domestic and
international paint, plastics and paper manufacturers.

     Kronos is one of the  world's  leading  producers  and  marketers  of TiO2.
Kronos and its distributors and agents sell and provide  technical  services for
its  products to over 4,000  customers  with the majority of sales in Europe and

                                       46
<PAGE>

North America.  TiO2 is  distributed by rail,  truck and ocean carrier in either
dry or slurry form.  Kronos'  manufacturing  facilities  are located in Germany,
Canada,  Belgium  and  Norway  and Kronos  owns a  one-half  interest  in a TiO2
manufacturing  joint venture located in Louisiana,  U.S.A.  Kronos has sales and
marketing   activities  in  over  100  countries   worldwide.   Kronos  and  its
predecessors  have  produced and marketed  TiO2 in North  America and Europe for
over 80 years. As a result,  Kronos believes that it has developed  considerable
expertise and efficiency in the manufacture,  sale,  shipment and service of its
products  in  domestic  and  international  markets.  By  volume,  approximately
one-half of Kronos'  2002 TiO2 sales were to Europe,  with 39% to North  America
and the balance to export markets.


     Kronos  is also  engaged  in the  mining  and sale of  ilmenite  ore (a raw
material  used as a feedstock  by  sulfate-process  TiO2  plants)  pursuant to a
governmental  concession with an unlimited term that allows Kronos to operate an
ilmenite mine in Norway.  The ore body, owned by the Norwegian  government,  has
estimated ilmenite reserves that are expected to last at least 20 years.  Kronos
is also  engaged  in the  manufacture  and sale of  iron-based  water  treatment
chemicals  (derived  from  co-products  of the  pigment  production  processes).
Kronos' water treatment  chemicals (marketed under the name Ecochem) are used as
treatment  and  conditioning  agents  for  industrial  effluents  and  municipal
wastewater, and in the manufacture of iron pigments.


Manufacturing Process and Raw Materials

     TiO2 is  manufactured  by Kronos  using both the  chloride  process and the
sulfate process.  Approximately  72% of Kronos' current  production  capacity is
based on its  chloride  process  which  generates  less waste  than the  sulfate
process.  The chloride process is a continuous process in which chlorine is used
to extract rutile TiO2. In general,  the chloride  process requires less capital
investment,  labor and energy  than the  sulfate  process.  Because  much of the
chlorine is  recycled  and higher  titanium-containing  feedstock  is used,  the
chloride  process  produces less waste.  The sulfate process is a batch chemical
process that uses  sulfuric acid to extract TiO2.  Sulfate  technology  normally
produces either anatase or rutile pigment. Once an intermediate TiO2 pigment has
been produced by either the chloride or sulfate process,  it is '"finished" into
products  with  specific  performance  characteristics  for  particular  end-use
applications  through  proprietary  processes involving various chemical surface
treatments and intensive milling and micronizing.

     Due to environmental factors and customer considerations, the proportion of
TiO2  industry  sales  represented  by  chloride-process  pigments has increased
relative to sulfate-process pigments and, in 2002,  chloride-process  production
facilities represented approximately 62% of industry capacity.

     Kronos  produced  a company  record  442,000  metric  tons of TiO2 in 2002,
compared  to 412,000  metric tons  produced  in 2001 and 441,000  metric tons in
2000. Kronos' average production  capacity  utilization rate in 2002 was 96%, up
from 91% in 2001.  Capacity  utilization  rates in 2001 were down due in part to
lost sulfate  production  volume  resulting  from the  Leverkusen  fire.  Kronos
believes its current  annual  attainable  production  capacity is  approximately
470,000 metric tons,  including its one-half interest in the joint venture-owned
Louisiana plant (see "TiO2  Manufacturing  Joint  Venture").  Kronos expects its
production  capacity  will be  increased  by  approximately  10,000  metric tons
primarily  at its  chloride  facilities,  with  moderate  capital  expenditures,
bringing Kronos' capacity to approximately 480,000 metric tons during 2005.

     The primary raw materials used in the TiO2 chloride  production process are
titanium-containing  feedstock derived from beach sand ilmenite,  natural rutile
ore,  chlorine  and  coke.  Chlorine  and coke are  available  from a number  of
suppliers.  Titanium-containing  feedstock  suitable  for  use in  the  chloride
process  is  available  from a limited  number of  suppliers  around  the world,
principally in Australia, South Africa, Canada, India and the United States.

     Kronos purchases slag refined from ilmenite sand from Richards Bay Iron and
Titanium  (Proprietary)  Limited (South Africa),  a 51%-owned  subsidiary of Rio
Tinto plc (U.K.),  under a long-term  supply contract that expires at the end of
2007.  Natural rutile ore is purchased  primarily from Iluka Resources,  Limited
(Australia)  under a long-term  supply contract that expires at the end of 2004.
Kronos does not expect to encounter  difficulties obtaining long-term extensions
to existing  supply  contracts  prior to the  expiration of the  contracts.  Raw
materials purchased under these contracts and extensions thereof are expected to
meet Kronos' chloride feedstock requirements over the next several years.

                                       47
<PAGE>

     The primary raw materials used in the TiO2 sulfate  production  process are
titanium-containing  feedstock  derived  primarily  from  rock  and  beach  sand
ilmenite  and  sulfuric  acid.  Sulfuric  acid is  available  from a  number  of
suppliers. Titanium-containing feedstock suitable for use in the sulfate process
is  available  from a limited  number of  suppliers  around the world,  with the
principal active sources currently located in Norway, Canada,  Australia,  India
and  South  Africa.  As  one of  the  few  vertically  integrated  producers  of
sulfate-process  pigments, Kronos operates a rock ilmenite mine in Norway, which
provided  all of Kronos'  feedstock  for its  European  sulfate-process  pigment
plants in 2002. For its Canadian  sulfate-process  plant,  Kronos also purchases
sulfate grade slag primarily from Q.I.T. Fer et Titane Inc.  (Canada),  a wholly
owned  subsidiary of Rio Tinto Iron & Titanium,  Inc.,  under a long-term supply
contract that expires at the end of 2006.

     Kronos believes the availability of titanium-containing  feedstock for both
the  chloride and sulfate  processes  is adequate  for the next  several  years.
Kronos  does not expect to  experience  any  interruptions  of its raw  material
supplies  because of its  long-term  supply  contracts.  However,  political and
economic  instability in certain  countries from which Kronos  purchases its raw
material  supplies could  adversely  affect the  availability of such feedstock.
Should  Kronos'  vendors not be able to meet their  contractual  obligations  or
should Kronos be otherwise unable to obtain necessary raw materials,  Kronos may
incur  higher costs for raw  materials  or may be required to reduce  production
levels,  which may have a material adverse effect on Kronos' financial position,
results of operations or liquidity.

TiO2 Manufacturing Joint Venture

     Subsidiaries of Kronos and Huntsman International Holdings LLC ("Huntsman")
each own a 50%-interest  in a  manufacturing  joint venture,  Louisiana  Pigment
Company ("LPC"). LPC owns and operates a chloride-process  TiO2 plant located in
Lake Charles,  Louisiana.  Production from the plant is shared equally by Kronos
and Huntsman (the "Partners") pursuant to separate offtake agreements.

     A  supervisory  committee,  composed  of  four  members,  two of  whom  are
appointed by each  Partner,  directs the  business and affairs of LPC  including
production  and output  decisions.  Two  general  managers,  one  appointed  and
compensated  by each Partner,  manage the operations of the joint venture acting
under the direction of the supervisory committee.

     The  manufacturing  joint  venture  operates  on a  break-even  basis  and,
accordingly,  Kronos reports no equity in earnings of the joint venture. Kronos'
cost for its  share  of the TiO2  produced  is equal to its  share of the  joint
venture's costs.  Kronos' share of net costs is reported as cost of sales as the
related  TiO2  acquired  from the joint  venture is sold.  See Note 7 to Kronos'
audited   consolidated   financial   statements  included  in  this  information
statement.

Competition

     The TiO2 industry is highly  competitive.  Kronos competes primarily on the
basis of price,  product quality and technical service,  and the availability of
high  performance  pigment grades.  Although  certain TiO2 grades are considered
specialty  pigments,  the majority of Kronos'  grades and  substantially  all of
Kronos' production are considered  commodity pigments with price generally being
the most significant  competitive factor. Kronos believes that it is the leading
seller of TiO2 in several countries, including Germany and Canada.

     Kronos' principal competitors are E.I. du Pont de Nemours & Co. ("DuPont");
Millennium  Chemicals,  Inc.;  Huntsman;  Kerr-McGee  Corporation;  and Ishihara
Sangyo Kaisha, Ltd. Kronos' five largest  competitors have estimated  individual
shares of  worldwide  TiO2  production  capacity  ranging from 24% to 5%, and an
estimated  aggregate 70% share of worldwide TiO2 production  volume.  DuPont has
about one-half of total U.S. TiO2 production  capacity and is Kronos'  principal
North American competitor.

     Capacity additions that are the result of construction of greenfield plants
in the worldwide TiO2 market require  significant  capital and substantial  lead
time, typically three to five years in Kronos' experience.  As no new plants are
currently under construction,  additional greenfield capacity is not expected in

                                       48
<PAGE>

the next three to five years, but industry  capacity can be expected to increase
as Kronos and its  competitors  debottleneck  existing  plants.  In  addition to
potential capacity additions, certain competitors have either idled or shut down
facilities.  Based on the factors described in "Industry" above,  Kronos expects
that  the  average   annual   increase  in  industry   capacity  from  announced
debottlenecking  projects will be less than the average annual demand growth for
TiO2 over the next three to five years.

     No  assurance  can be given  that  future  increases  in the TiO2  industry
production  capacity and future average annual demand growth rates for TiO2 will
conform to Kronos'  expectations.  If actual  developments  differ from  Kronos'
expectations,  Kronos and the TiO2 industry's  performance  could be unfavorably
affected.

Research and Development

     Kronos'  expenditures  for research and development  and certain  technical
support programs averaged approximately $6 million during each of 2000, 2001 and
2002.  Research and  development  activities  are conducted  principally  at the
Leverkusen,  Germany  facility.  Such activities are directed  primarily  toward
improving both the chloride and sulfate production processes,  improving product
quality and strengthening Kronos' competitive position by developing new pigment
applications.

Patents and Trademarks

     Patents  held for  products  and  production  processes  are believed to be
important to Kronos and to the continuing business activities of Kronos.  Kronos
continually seeks patent protection for its technical developments,  principally
in the United  States,  Canada and  Europe,  and from time to time  enters  into
licensing arrangements with third parties.

     Kronos' major trademarks,  including Kronos,  are protected by registration
in  the  United  States  and  elsewhere   with  respect  to  those  products  it
manufactures and sells.

Foreign Operations


     Kronos'  chemical  businesses  have operated in non-U.S.  markets since the
1920s.  Most of Kronos'  current  production  capacity  is located in Europe and
Canada with non-U.S. net property and equipment  aggregating  approximately $399
million at June 30, 2003. Net property and equipment in the U.S.,  including 50%
of the property and  equipment  of LPC, was  approximately  $118 million at such
date.  Kronos' European  operations  include  production  facilities in Germany,
Belgium and Norway.  Approximately  $603  million of Kronos'  2002  consolidated
sales were to non-U.S. customers,  including $93 million to customers outside of
Europe and Canada.  Sales to  customers in the U.S.  aggregated  $272 million in
2002. Foreign  operations are subject to, among other things,  currency exchange
rate fluctuations and Kronos' results of operations have, in the past, been both
favorably and unfavorably  affected by fluctuations in currency  exchange rates.
Effects  of  fluctuations  in  currency  exchange  rates on  Kronos'  results of
operations are discussed in  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations."


     Political and economic  uncertainties  in certain of the countries in which
Kronos  operates  may expose it to risk of loss.  Kronos does not  believe  that
there is currently any likelihood of material loss through political or economic
instability,  seizure,  nationalization or similar event. Kronos cannot predict,
however,  whether events of this type in the future could have a material effect
on its operations.  Kronos' manufacturing and mining operations are also subject
to  extensive  and  diverse  environmental  regulation  in each  of the  foreign
countries in which they operate. See "Regulatory and Environmental Matters."


Customer Base and Annual Seasonality


     Kronos  believes that neither its  aggregate  sales nor those of any of its
principal  product groups are  concentrated in or materially  dependent upon any
single  customer  or small group of  customers.  Kronos'  largest ten  customers
accounted for approximately  25% of net sales in 2002.  Neither Kronos' business

                                       49
<PAGE>

as a whole nor that of any of its  principal  product  groups is seasonal to any
significant  extent.  Due in part to the  increase  in paint  production  in the
spring to meet the spring  and summer  painting  season  demand,  TiO2 sales are
generally  higher in the first half of the year than in the  second  half of the
year.

Employees


     As of June 30, 2003, Kronos employed approximately 2,500 persons, excluding
LPC  employees,  with  approximately  100  employees  in the  United  States and
approximately 2,400 employees outside of the United States.  Hourly employees in
production facilities worldwide,  including LPC, are represented by a variety of
labor unions,  with labor agreements  having various  expiration  dates.  Kronos
believes its labor relations are good.


Regulatory and Environmental Matters

     Certain of Kronos'  businesses  are and have been engaged in the  handling,
manufacture  or use of substances or compounds  that may be considered  toxic or
hazardous  within the meaning of  applicable  environmental  laws. As with other
companies engaged in similar businesses, certain past and current operations and
products of Kronos have the  potential to cause  environmental  or other damage.
Kronos has implemented and continues to implement  various policies and programs
in an  effort to  minimize  these  risks.  The  policy of Kronos is to  maintain
compliance  with  applicable  environmental  laws  and  regulations  at all  its
facilities  and to  strive  to  improve  its  environmental  performance.  It is
possible   that  future   developments,   such  as  stricter   requirements   of
environmental laws and enforcement policies  thereunder,  could adversely affect
Kronos' production, handling, use, storage, transportation,  sale or disposal of
such substances as well as Kronos' consolidated  financial position,  results of
operations or liquidity.

     Kronos' U.S. manufacturing operations are governed by federal environmental
and worker  health and safety laws and  regulations,  principally  the  Resource
Conservation and Recovery Act ("RCRA"),  the Occupational Safety and Health Act,
the Clean Air Act, the Clean Water Act, the Safe  Drinking  Water Act, the Toxic
Substances   Control   Act  and  the   Comprehensive   Environmental   Response,
Compensation  and  Liability  Act, as amended by the  Superfund  Amendments  and
Reauthorization  Act  ("CERCLA"),  as well as the  state  counterparts  of these
statutes.  Kronos  believes  LPC and a slurry  facility  owned by Kronos in Lake
Charles, Louisiana are in substantial compliance with applicable requirements of
these laws or  compliance  orders  issued  thereunder.  Kronos has no other U.S.
plants.  From time to time,  Kronos'  facilities  may be subject  to  regulatory
enforcement under such statutes.  Resolution of such matters typically  involves
the establishment of compliance programs. Occasionally, resolution may result in
the payment of penalties,  but to date such penalties have not involved  amounts
having a material  adverse effect on Kronos'  consolidated  financial  position,
results of operations or liquidity.

     Kronos'  European  and  Canadian   production   facilities  operate  in  an
environmental  regulatory framework in which governmental  authorities typically
are granted  broad  discretionary  powers  which  allow them to issue  operating
permits required for the plants to operate.  Kronos believes that all its plants
are in substantial compliance with applicable environmental laws.

     While the laws  regulating  operations of  industrial  facilities in Europe
vary from country to country, a common regulatory denominator is provided by the
European Union (the "EU").  Germany and Belgium are members of the EU and follow
its  initiatives.   Norway,  although  not  a  member,  generally  patterns  its
environmental  regulatory  actions  after the EU.  Kronos  believes  that it has
obtained all required  permits and is in substantial  compliance with applicable
EU requirements,  including EU Directive 92/112/EEC  regarding  establishment of
procedures for reduction and eventual  elimination of pollution  caused by waste
from the TiO2 industry.

     At all of Kronos' sulfate plant facilities other than Fredrikstad,  Norway,
Kronos recycles spent acid either through  contracts with third parties or using
Kronos' own facilities. At its Fredrikstad, Norway plant, Kronos ships its spent
acid to a third party  location  where it is treated and disposed.  Kronos has a
contract  with a  third  party  to  treat  certain  by-products  of  its  German
sulfate-process  plants.  Either party may terminate  the contract  after giving
four years advance  notice with regard to its Nordenham,  Germany  plant.  Under
certain circumstances, Kronos may terminate the contract after giving six months
notice with respect to treatment of  by-products  from the  Leverkusen,  Germany
plant.

                                       50
<PAGE>

     Kronos'  capital   expenditures   related  to  its  ongoing   environmental
protection and improvement  programs in 2002 were approximately $5 million,  and
are currently expected to be approximately $5 million in 2003.

Properties


     Kronos  currently  operates five TiO2 plants in Europe (two in  Leverkusen,
Germany;  one in Nordenham,  Germany;  one in Langerbrugge,  Belgium; and one in
Fredrikstad,  Norway).  In North  America,  Kronos has a TiO2 plant in Varennes,
Quebec,  Canada and,  through LPC, the  manufacturing  joint  venture  described
above, a one-half  interest in a TiO2 plant in Lake Charles,  Louisiana.  Kronos
operates  an  ilmenite  ore  mine  in  Hauge  i  Dalane,  Norway  pursuant  to a
governmental  concession  and also  owns a TiO2  slurry  plant in Lake  Charles,
Louisiana.  See Note 7 to  Kronos'  audited  consolidated  financial  statements
included in this information statement.



     Kronos'  principal  German operating  subsidiary  leases the land under its
Leverkusen  TiO2 production  facility  pursuant to a lease expiring in 2050. The
Leverkusen  facility,  with about  one-third of Kronos'  current TiO2 production
capacity,  is located within an extensive  manufacturing  complex owned by Bayer
AG. Rent for the Leverkusen  facility is  periodically  established by agreement
with  Bayer AG for  periods  of at least two years at a time.  Under a  separate
supplies  and  services  agreement  expiring in 2011,  Bayer  provides  some raw
materials,  including  chlorine and certain amounts of sulfuric acid,  auxiliary
and  operating  materials  and  utilities  services  necessary  to  operate  the
Leverkusen facility.  The lease and has certain  restrictions  regarding Kronos'
ability to transfer ownership or use of the Leverkusen facility.



     Kronos owns,  directly or through its joint  venture,  all of its principal
production  facilities described above, except for the land under the Leverkusen
and Fredrikstad  facilities and the ilmenite ore mine. Kronos has a governmental
concession with an unlimited term to operate the ilmenite mine in Norway.


     Kronos has under lease various corporate and administrative offices located
in the  U.S.  and  various  sales  offices  located  in the  U.S.,  France,  the
Netherlands, Denmark and the U.K.

     Kronos'  principal  executive  offices are located at Three Lincoln Centre,
5430 LBJ Freeway,  Suite 1700, Dallas, Texas 75240-2697 and its telephone number
is (972) 233-1700.

Legal Proceedings

     See "Regulatory and Environmental Matters" above.

     Kronos'  Belgian  subsidiary  and various of its Belgian  employees are the
subject of an  investigation  by Belgian  authorities  relating  to an  accident
resulting in two fatalities that occurred in its Langerbrugge,  Belgium facility
in October 2000. The investigation stage, which could ultimately result in civil
and criminal  sanctions against Kronos,  was completed in 2002. In May 2003, the
Belgian authorities  referred the proceedings against Kronos' Belgian subsidiary
and certain of its Belgium employees to the criminal court for trial. The matter
has been set for trial in October 2003.


                                       51

<PAGE>


                                   MANAGEMENT

Directors and Officers


     As  of  the  distribution   date,  the  following   persons  are  currently
anticipated to serve as Kronos'  officers and  directors.  Each of the directors
below will be elected to serve until the next annual meeting of stockholders and
his  successor  has been  elected and has been  qualified,  or until his earlier
death, resignation or removal.



<TABLE>
<CAPTION>


Name                                              Age    Principal Positions and Directorships
----                                             ----    -------------------------------------

<S>                                              <C>     <C>
Harold C. Simmons..........................      72      Chairman of the Board and Chief Executive Officer
C. H. Moore, Jr............................      64      Director
George E. Poston...........................      66      Director
Glenn R. Simmons...........................      75      Director

Dr. R. Gerald Turner.......................      57      Director
Steven L. Watson...........................      52      Director
Dr. Ulfert Fiand...........................      55      Senior Vice President, Manufacturing and Technology
H. Joseph Maas.............................      51      Senior Vice President, Sales and Marketing
Douglas C. Weaver..........................      61      Senior Vice President, Development
Robert D. Graham...........................      48      Vice President, General Counsel and Secretary
Gregory M. Swalwell........................      46      Vice President, Finance
John A. St. Wrba...........................      47      Vice President and Treasurer
Kelly D. Luttmer...........................      40      Tax Director
</TABLE>


     Harold C.  Simmons has been a director  of NL since  1986,  Chairman of the
Board of NL since 1987 and Chief  Executive  Officer of NL since July 2003.  Mr.
Simmons  has  served as  Chairman  of the Board and Chief  Executive  Officer of
Kronos since August 2003. He has been Chairman of the Board of Valhi and Contran
since prior to 1998, was Chief Executive Officer of Valhi and Contran from prior
to 1998 to 2002,  and was  President  of Valhi and Contran from prior to 1997 to
1998.  Mr.  Simmons has been an  executive  officer  and/or  director of various
companies  related to Valhi and Contran  since 1961. He is a brother of Glenn R.
Simmons.


     C. H.  Moore,  Jr. has been a director  of NL since  September  2003 and is
anticipated  to become a director  of Kronos as of the  distribution  date.  Mr.
Moore  retired  from KPMG LLP in June 2000  after 37 years in which he served in
various  capacities with the firm. Among other positions,  he served as managing
partner of the firm's Dallas,  Texas  business unit from 1990 to 1999.  Prior to
1990, Mr. Moore was  partner-in-charge  of the audit and accounting  practice of
the firm's Dallas  business unit for 12 years.  Mr. Moore is a certified  public
accountant.  It is  anticipated  that Mr.  Moore will become a member of Kronos'
Audit Committee.


     George E. Poston has been a director of NL since 2002 and is anticipated to
become a director of Kronos as of the  distribution  date.  He is  President  of
Poston Real  Estate  Co., a  privately-held  commercial  real estate  investment
company,  and  President  of Poston  Capital  Co., a  privately-held  investment
company,  since 1970.  Mr. Poston is  anticipated  to become a member of Kronos'
Audit Committee and Management Development and Compensation Committee.


     Glenn R. Simmons has been a director of NL since 1986 and is anticipated to
become a director of Kronos as of the distribution date. Mr. Simmons is Chairman
of the Board of Keystone Consolidated  Industries,  Inc.  ("Keystone"),  a steel
fabricated  wire products,  industrial wire and carbon steel rod company that is
affiliated with Contran, and CompX International Inc. ("CompX"),  a manufacturer
of  ergonomic  computer  support  systems,  precision  ball  bearing  slides and
security products that is also affiliated with Contran. Since prior to 1998, Mr.
Simmons has been Vice Chairman of the Board of Valhi and Contran. Mr. Simmons is
also a director  of  Titanium  Metals  Corporation,  an  integrated  producer of
titanium  metal products that is 40% owned by Valhi  ("TIMET").  Mr. Simmons has
been an executive  officer and/or director of various companies related to Valhi
and Contran since 1969. He is a brother of Harold C. Simmons.



                                       52
<PAGE>



     Dr.  R.  Gerald  Turner  has been a  director  of NL since  May 2003 and is
anticipated  to become a director  of Kronos as of the  distribution  date.  Dr.
Turner has served since 1995 as President of Southern  Methodist  University  in
Dallas,  Texas. He held previous executive and  administrative  positions at the
University  of   Mississippi,   the  University  of  Oklahoma,   and  Pepperdine
University.  He serves on the Board of  Directors  of J.C.  Penney and  American
Aadvantage  Funds. Dr. Turner is anticipated to become Chairman of Kronos' Audit
and Management Development and Compensation Committees.


     Steven L. Watson has been a director of NL since 2000 and is anticipated to
become a director of Kronos as of the  distribution  date.  Mr.  Watson has been
President  and a director of Valhi and Contran since 1998,  and Chief  Executive
Officer of Valhi since 2002.  Mr.  Watson is also a director of CompX,  Keystone
and TIMET.  Mr.  Watson has served as an executive  officer  and/or  director of
various companies related to Valhi and Contran since 1980.

     Dr.  Ulfert Fiand has served as Senior Vice  President,  Manufacturing  and
Technology  of  Kronos  since  August  2003.  He has  been  KII's  President  of
Manufacturing  and Technology  since 2001. Dr. Fiand joined KII in 1988, and has
served as Group Leader and Director of Chloride Process Technology,  Director of
Process Technology, and VP Production & Process Technology.

     H. Joseph Maas has served as Senior Vice President,  Sales and Marketing of
Kronos  since August 2003 and Vice  President  of Marketing  Worldwide of Kronos
since prior to 1998. Mr. Maas has served in various  positions with Kronos or NL
since 1978

     Douglas C.  Weaver  has served as Senior  Vice  President,  Development  of
Kronos  since August 2003 and Vice  President,  Business  Development  of Kronos
since prior to 1998.  Mr. Weaver has served in various  positions with Kronos or
NL since 1973.

     Robert  D.  Graham  has  served  as Vice  President,  General  Counsel  and
Secretary  of NL since  July  2003  and  Vice  President,  General  Counsel  and
Secretary of Kronos since August 2003.  Mr. Graham has served as Vice  President
of Valhi and Contran since October 2002.  From January 1997 to October 2002, Mr.
Graham  served as an executive  officer,  and most  recently as  Executive  Vice
President and General Counsel,  of Software  Spectrum,  Inc.  ("SSI").  SSI is a
global  business-to-business  software  services provider that is a wholly owned
subsidiary of Level 3  Communications,  Inc.  From 1991 to June 2002,  SSI was a
publicly held  corporation.  From 1985 to 1997,  Mr. Graham was a partner in the
law  firm  of  Locke  Purnell  Rain  Harrell  (A  Professional  Corporation),  a
predecessor to Locke Liddell and Sapp LLP.

     Gregory M. Swalwell has served as Vice President,  Finance of NL since July
2003 and as Vice  President,  Finance of Kronos since August 2003. Mr.  Swalwell
has served as Vice  President of Valhi and Contran since 1998 and  controller of
Valhi and Contran  since prior to 1998.  Mr.  Swalwell has served in  accounting
positions with various companies related to Valhi and Contran since 1988.


     John A. St. Wrba has been Vice President and Treasurer of NL since February
2003 and Treasurer of Kronos since August 2003.  Mr. St. Wrba was NL's Assistant
Treasurer  from 2002 to 2003.  From 2000 to 2002, he was Assistant  Treasurer of
Kaiser Aluminum & Chemicals Corporation.  From 1998 to 2000, Mr. St. Wrba served
as NL's Assistant Treasurer.


     Kelly D.  Luttmer  has served as Tax  Director of NL since July 2003 and as
Tax Director of Kronos since August 2003. Ms. Luttmer has served as Tax Director
of Valhi and Contran since 1998.  Prior to 1998, Ms. Luttmer served as assistant
tax  manager of Valhi and  Contran.  Ms.  Luttmer  has served in tax  accounting
positions with various companies related to Valhi and Contran since 1989.

     In addition,  Dr. Lawrence A. Wigdor,  formerly Kronos' President and Chief
Executive  Officer  since 1990,  serves as a  consultant  to Kronos with ongoing
management involvement in the TiO2 operations conducted by Kronos.


                                       53
<PAGE>

Board Committees

     As of the  distribution  date,  Kronos'  Board will  establish two standing
committees:  an Audit Committee and a Management  Development  and  Compensation
Committee,  each of  which  is  composed  entirely  of  individuals  who are not
employees of Kronos.


     Audit Committee. The principal  responsibilities of the Audit Committee are
to serve as an  independent  and  objective  party to review  Kronos'  auditing,
accounting  and financial  reporting  processes.  Kronos' Board of Directors has
adopted a written  charter for the Audit  Committee.  Each of the members of the
Audit Committee is independent within the meaning of the New York Stock Exchange
listing standards. The current members of the Audit Committee are anticipated to
be Dr. Turner (Chairman), Mr. Poston and Mr. Moore.



     Management   Development   and   Compensation   Committee.   The  principal
responsibilities of the Management Development and Compensation Committee are to
review  and make  recommendations  regarding  executive  compensation  policies,
periodically  to review and  approve  or make  recommendations  with  respect to
matters involving executive  compensation,  to take action or to review and make
recommendations to the Board regarding  employee benefit plans or programs,  and
to serve as a counseling  committee  to the Chief  Executive  Officer  regarding
matters  of key  personnel  selection,  organization  strategies  and such other
matters as the Board may from time to time direct.  The  Management  Development
and Compensation Committee also is responsible for reviewing and approving stock
option and other  stock-based  compensation  awards under Kronos' incentive plan
and for reviewing  and approving  Kronos'  target and  performance  levels under
variable compensation awards. The current members of the Management  Development
and Compensation  Committee are anticipated to be Dr. Turner  (Chairman) and Mr.
Poston.


Compensation of Directors


     Annual fees will be paid to each director who was not an employee of Kronos
or a subsidiary of Kronos  consisting of an annual retainer of $20,000 for board
members  and  $2,000 for each  committee  on which a member  serves,  payable in
quarterly  installments,  and shares of Kronos common stock granted  pursuant to
the Kronos 2003 Long-Term Incentive Plan (discussed below), the number of shares
to be  determined  based on the closing sale price of Kronos common stock on the
date  of  grant.  In  addition,  each  non-employee  director  will  receive  an
attendance  fee of $1,000 for each day during which Board or committee  meetings
are held (including  telephonic meetings) that a director attends.  Non-employee
directors will also receive a fee of $1,000 per day for each day spent on Kronos
business  at the request of the Board or the  Chairman of the Board,  other than
the day related to Board or committee meetings. Directors will be reimbursed for
reasonable  expenses  incurred in  attending  Board of Directors  and  committee
meetings.  If any  director  who is not an officer or  employee of Kronos or any
subsidiary  or  affiliate  of Kronos  dies while in active  service,  his or her
designated  beneficiary  or estate will be entitled to receive a life  insurance
benefit equal to the annual retainer then in effect.


Compensation of Executive Officers

     The summary compensation table set forth below provides summary information
for the years  ended  December  31,  2002,  2001 and 2000  regarding  annual and
long-term  compensation  awarded to,  earned by or paid to Kronos'  former Chief
Executive  Officer and one other  Kronos  executive  officer for  services  they
rendered to Kronos and its subsidiaries (the "named executive officers").

                                       54
<PAGE>


<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE(1)

                                                                                            Long-Term
                                                                                         Compensation(2)
                                                       Annual Compensation                    Awards
                                                                                        Shares Underlying
                                                                         Other Annual      Options (#)         All Other
                                    Year     Salary         Bonus        Compensation                        Compensation
   Name and Principal Position                                               (3)

<S>                                 <C>    <C>          <C>             <C>       <C>             <C>       <C>       <C>
Dr. Ulfert Fiand.................   2002   $   142,179  $    99,501     $        -0-             -0-        $        -0-
Senior Vice President               2001       117,520      182,111              -0-          6,000(4)               -0-
   Manufacturing and Technology     2000       113,977       43,596              -0-          5,000(4)               -0-

Dr. Lawrence A. Wigdor(5)........   2002       750,000      750,000(6)           68(7)           -0-            186,848(8)
Former Chief Executive              2001       750,000    1,350,000(6)        2,729(7)      100,000(4)          351,658(8)
   Officer                          2000       750,000    2,625,000(6)        6,815(7)      100,000(4)          132,038(8)
</TABLE>


----------

(1)  Certain  employees of NL provided services to Kronos during the years ended
     December  31,  2002,  2001 and 2000,  including  the  services of Robert D.
     Hardy,  Kronos'  former  chief  financial  officer,  pursuant to a Services
     Agreement  between  NL,  Kronos  and KII  dated as of  January  1, 1995 and
     amended as of April 1, 2002 (the "NL ISA").  NL's  charges to Kronos  under
     the  NL ISA  for  the  services  Mr.  Hardy  provided  to  Kronos  are  not
     specifically  identifiable to his services.  However,  KII paid Mr. Hardy a
     bonus of  $250,000 in 2001  outside of the NL ISA for  services  Mr.  Hardy
     rendered to KII. See "Certain Relationships and Related Transactions."

(2)  No shares of restricted stock were granted to the named executive  officers
     nor payouts  made to the named  executive  officers  pursuant to  long-term
     incentive  plans  during the last three years.  Therefore,  the columns for
     such compensation have been omitted.


(3)  Other  annual  compensation  for  each  of  the  named  executive  officers
     represents  perquisites  to the extent  such  amounts  are  required  to be
     reported pursuant to SEC rules.



(4)  Represents options to purchase shares of common stock of NL. Upon exercise,
     NL will bill Kronos the  difference  between  the fair market  value of the
     shares  issued upon  exercise  and the  aggregate  exercise  price for such
     shares.



(5)  Dr. Wigdor resigned as Kronos' Chief Executive  Officer in July 2003. Prior
     to his  resignation,  Dr. Wigdor was an executive  officer of NL and Kronos
     and devoted all of his business time to Kronos.  Accordingly,  Kronos paid,
     accrued or was charged for all of Dr.  Wigdor's  compensation.  Dr.  Wigdor
     currently  serves  as  a  consultant  to  Kronos  with  ongoing  management
     involvement in the TiO2 operations conducted by Kronos.



(6)  Amounts Kronos paid Dr. Wigdor pursuant to NL's variable compensation plan,
     including in certain instances, discretionary bonus amounts.



(7)  Theses amounts  represent  accruals on Dr. Wigdor's  deferred  compensation
     that exceeded 120% of the applicable federal long-term interest rate.



(8)  As shown below,  all other  compensation  for 2002,  2001, and 2000 for Dr.
     Wigdor  consisted  of (i)  matching  contributions  Kronos  made or accrued
     pursuant to the savings  feature of the NL savings  plan,  (ii)  retirement
     contributions Kronos made or accrued pursuant to the NL savings plan, (iii)
     life insurance  premiums Kronos paid and (iv) amounts Kronos paid under the
     NL Supplemental Executive Retirement Plan (the "SERP") in 2002 and 2001 and
     amounts  accrued  by  Kronos  in 2000  under the SERP and paid by Kronos in
     2001.


<TABLE>
<CAPTION>
                                                             NL Savings
                                              NL Savings        Plan
                                                 Plan        Retirement   Life Insurance     SERP
          Named Executive Officer      Year      Match      Contributions   Premiums       Payments        Total
         ---------------------------  ------ ------------   -------------- ------------  ------------  ---------

<S>                                   <C>      <C>            <C>           <C>            <C>          <C>
         Lawrence A. Wigdor......     2002     $  8,000       $ 16,600      $ 10,248       $ 152,000    $ 186,848
                                      2001        6,800         14,110        10,248         320,500      351,658
                                      2000       10,200         14,110         9,328          98,400      132,038
</TABLE>

     In 2001, NL amended the SERP to provide for the distribution of the accrued
     balance in each SERP  participant's  account and the payment of future SERP
     benefits to participants as accrued,  thus reducing Kronos' interest costs.
     In connection  with the  amendment,  in 2001 Kronos paid  $1,761,661 to Dr.
     Wigdor,  which  represented  the accrued vested balance in his SERP account
     with  interest.   These  accrued  amounts  were   previously   reported  as
     compensation in the years accrued.

                                       55
<PAGE>
Stock Option Exercises and Holdings

     The  following  table  provides  information  with  respect  to  the  named
executive officers  concerning the exercise of options during 2002 and the value
of unexercised  options held as of December 31, 2002.  The options  described in
the  following  table are  options  to  purchase  shares  of common  stock of NL
pursuant  to NL's 1998  Long-Term  Incentive  Plan.  No stock  options  or stock
appreciation rights were granted to the named executive officers during 2002.

<TABLE>
<CAPTION>
                                   AGGREGATE STOCK OPTION EXERCISES IN 2002 AND
                                        DECEMBER 31, 2002 OPTION VALUES (1)


                               Shares                           Number of Shares
                              Acquired                              Underlying               Value of Unexercised
                                 on                           Unexercised Options at         In-the-Money Options
                              Exercise         Value            December 31, 2002 (#)       at December 31, 2002 (2)
            Name                  (#)        Realized       Exercisable   Unexercisable   Exercisable   Unexercisable
---------------------------  ----------- ---------------- ----------------------------- ------------- ---------------

<S>                                <C>       <C>   <C>         <C>           <C>          <C>          <C>
Dr. Ulfert Fiand...........       -0-        $    -0-          3,000         11,000       $ 10,979     $   19,287

Dr. Lawrence A. Wigdor.....     4,547          27,846 (1)     96,000        217,600         14,040        288,207
</TABLE>
----------

(1)  In November 2002, NL entered into  agreements with Dr. Wigdor and Robert D.
     Hardy, Kronos' former chief financial officer,  among others,  whereby they
     each exercised  certain  options to purchase NL common stock and thereafter
     NL  purchased  certain of the shares  acquired  upon  exercise,  as well as
     certain  options to  purchase  NL common  stock from each of them.  For Dr.
     Wigdor, the shares he acquired upon exercise and the value he realized upon
     such exercise are reflected in the table above.  For Mr. Hardy, he acquired
     23,425 shares of NL common stock upon  exercise and realized  $127,458 upon
     such  exercise.  Dr. Wigdor and Mr. Hardy  tendered 3,000 shares and 16,344
     shares,  respectively,  of their own shares of NL common stock,  which each
     had held for at least  six  months,  to pay a portion  of the stock  option
     exercise price and to pay applicable  withholding taxes, as permitted under
     NL's  incentive  plans.  These shares were valued at the market price of NL
     common stock on the date of exercise.  In addition, NL purchased options to
     purchase  155,835  shares of NL common stock and 25,575 shares of NL common
     stock  from  Dr.   Wigdor  and  Mr.  Hardy,   respectively.   In  the  same
     transactions,  NL also  purchased  1,547 shares of NL common stock from Dr.
     Wigdor and 7,081 shares of NL common stock from Mr.  Hardy.  These  options
     were sold at a price  equal to the market  price of NL common  stock on the
     date of sale,  less the exercise price of the options,  and the shares were
     sold at the  market  price of NL  common  stock  on the  date of  sale.  In
     connection with the NL purchase of the options and shares, NL paid $655,288
     to Dr. Wigdor and $216,936 to Mr. Hardy. NL charged Kronos $580,902 for all
     of the  foregoing  transactions  related  to Dr.  Wigdor but did not charge
     Kronos anything for the foregoing transactions related to Mr. Hardy.


(2)  The value is based on the  difference  between  the  exercise  price of the
     individual stock options and the $17.00 per share closing sales price of NL
     common  stock on December 31,  2002.  At December 31, 2002,  Mr. Hardy held
     exercisable  stock options to purchase 24,000 shares of NL common stock and
     unexercisable  stock  options to purchase  86,000  shares of common  stock.
     Based on the difference  between the exercise price of the individual stock
     options and the $17.00 per share  closing sales price of NL common stock on
     December 31, 2002, the value of Mr. Hardy's  exercisable and  unexercisable
     stock   options  to  purchase  NL  common   stock  was  nil  and   $97,724,
     respectively.


Pension Plans


     The Retirement  Program of NL Industries,  Inc. for its U.S. employees (the
"Pension Plan") provides lifetime retirement benefits to eligible employees.  In
1996,  NL approved  the  suspension  of all future  accruals  under the salaried
component of the Pension  Plan.  No amounts were paid or  distributed  to any of
such persons in 2002. The estimated  accrued annual  benefits  payable under the
Pension Plan upon  retirement  at normal  retirement  age for Dr. Wigdor and Mr.
Hardy are $29,439 and $12,348, respectively.


     Dr. Fiand is eligible to receive his pension through Kronos Germany through
the Bayer  Pensionskasse  and the  Supplemental  Pension  Promise.  All of KII's
employees in Germany  (including  wage  earners) who have  contributed  for five
years and are less than 55 years of age are covered by the Bayer  Pensionskasse.
Each employee  contributes 2% of eligible  earnings  excluding  bonus, up to the
social security  contribution  ceiling  (currently  (euro)54,000)  and the Bayer
Pensionskasse   provides  a  benefit  of  44%  of  such  employee's  accumulated

                                       56
<PAGE>

contributions (with a minimum benefit of approximately  (euro)13 per month). All
of KII's  employees  in Germany who have  completed 10 years of service are also
covered by the Supplemental  Pension  Promise.  Kronos Germany accrues 11.25% of
participants'  eligible annual earnings  excluding bonus in excess of the social
security contribution ceiling, up to a maximum of (euro)98,500. The Supplemental
Pension  Promise  provides an annual  retirement  benefit of 20% of all accruals
made by Kronos Germany.  Benefits for both plans are payable upon retirement and
the  attainment  of  ages  specified  in the  plans.  No  amounts  were  paid or
distributed under these plans to Dr. Fiand in 2002. The estimated accrued annual
benefits payable upon normal  retirement at normal  retirement age for Dr. Fiand
is (euro)24,425.


Kronos 2003 Long-Term Incentive Plan



     Prior to the distribution,  Kronos' Board of Directors and sole stockholder
are each  expected to approve  the Kronos 2003  Long-Term  Incentive  Plan.  The
purpose of the Kronos 2003 Long-Term  Incentive Plan is to advance the interests
of Kronos and its stockholders by providing incentives to persons who contribute
significantly to the strategic and long-term  performance  objectives and growth
of Kronos. The plan will provide for awards or grants of shares of Kronos common
stock,  incentive and nonqualified  stock options,  stock  appreciation  rights,
restricted stock,  performance  grants and other awards at the discretion of the
Management Development and Compensation Committee.  Key individuals employed by,
or  performing  services  for  Kronos or its  parents  or  subsidiaries  will be
eligible to receive such awards,  including  individuals who may be non-employee
directors  or other  persons  who are not  employed  by Kronos or its parents or
subsidiaries.  The plan will  provide for a maximum of 150,000  shares of Kronos
common stock for awards,  subject to certain adjustments.  The underlying shares
of Kronos common stock  issuable  under the plan in any single fiscal year under
awards to an individual  may not exceed 50,000  shares.  The plan generally will
terminate on the tenth  anniversary  of its  adoption  unless  Kronos'  Board of
Directors  extends it for up to an additional five years for the grant of awards
other than incentive stock options.  Kronos has not granted any awards under the
plan and has no other equity compensation plans.


Compensatory Arrangements

     Summarized below are certain benefit arrangements,  other than arrangements
applicable  to all  employees  generally,  that  have been  established  for the
benefit of Kronos' named executive officers following the distribution.



     Concurrently  with his resignation as Chief Executive  Officer of Kronos in
July 2003,  Dr.  Wigdor  entered  into a  consultancy  arrangement  with  Kronos
pursuant to which Dr.  Wigdor will provide  ongoing  management  involvement  in
Kronos' TiO2 operations. Dr. Wigdor received $461,000 on August 1, 2003 and will
receive a monthly  payment of  $84,000  beginning  on August 1, 2003.  If Kronos
achieves 2003 segment  profit (as Kronos  defines that term  internally) of $130
million,  Kronos will pay Dr. Wigdor an additional $461,000 on February 1, 2004.
Beginning in 2004, Dr. Wigdor will receive annual discretionary bonuses that are
no less than the  average  bonus paid to the three  executives  of NL and Kronos
combined  receiving  the highest paid  bonuses for 2004 and 2005,  respectively,
excluding  the  Chief  Executive   Officer  of  NL.  If  Kronos  terminates  the
consultancy  arrangement  prior to September  30, 2005,  Dr. Wigdor will receive
eight months  compensation,  medical and dental coverage  through  September 30,
2005  and,  if  terminated  in  2004  or  after,  a  pro-rata   portion  of  his
discretionary   bonus  for  the  year  in  which  the  termination  occurs.  The
arrangement  provides Dr. Wigdor various other  benefits,  such as an office and
secretarial support at Kronos' New Jersey office.



Compensation Committee Interlocks and Insider Participation

     No member of Kronos' compensation  committee is a current or former officer
or employee of Kronos or its  subsidiaries  or has had a relationship  requiring
disclosure  by  Kronos  under  applicable  federal  securities  regulations.  No
executive  officer of Kronos served as a director or member of the  compensation
committee  of any entity that has one or more  executive  officers  serving as a
member of Kronos' Board of Directors or compensation committee.

                                       57
<PAGE>



                             PRINCIPAL STOCKHOLDERS

Ownership of NL and Kronos Common Stock



     The following  table sets forth the number of shares of NL common stock and
Kronos common stock that is beneficially owned, as defined by the regulations of
the SEC, as of November 17, 2003 and the  approximate  number and  percentage of
shares of  Kronos  common  stock  that will be  beneficially  owned  immediately
following the distribution  date,  based on the number of outstanding  shares of
Kronos common stock as of November 17, 2003 and a  distribution  of one share of
Kronos  common  stock for every two  shares of NL common  stock as of the record
date, by each of Kronos'  directors,  the named executive  officers,  all Kronos
current executive  officers and directors as a group and each other person known
to Kronos who will  beneficially own 5% or more of Kronos common stock after the
distribution.  Kronos expects to have an estimated 48.9 million shares of Kronos
common stock outstanding immediately after the completion of the distribution.




<TABLE>
<CAPTION>

                                                                                                           Percentage
                                                                Number of Shares                            of Kronos
                                                                    of Kronos                                Common
                                         Number of Shares         Common Stock      Number of Shares          Stock
                                           of NL Common             Owned on        of Kronos Common          Owned
                                          Stock Owned on      November 17, 2003     Stock Owned After       After the
                                        November 17, 2003(1)         (1)          the Distribution (1)   Distribution
                                         ------------------    -----------------  ---------------------  --------------



<S>                                       <C>                      <C>         <C>    <C>         <C>        <C>
Harold C. Simmons ......................
  NL Industries, Inc....................           -0-             48,943,049  (2)    25,091,457  (3)        51.3%
  Valhi, Inc............................  30,135,390    (3)               -0-         15,067,695  (3)        30.8%
  Tremont LLC...........................  10,215,541    (3)               -0-          5,107,770  (3)        10.4%
  Other ................................      83,475    (3)(4)            -0-             37,737  (3)(5)       *
                                          ----------               ----------         ----------             ----
                                          40,434,406    (3)(4)     48,943,049         45,304,659  (3)(5)     92.6%

C. H. Moore, Jr.........................           -0-                    -0-                -0-              -0-
George E. Poston........................         2,000                    -0-              1,000  (3)          *
Glenn R. Simmons........................        12,000  (3)(4)            -0-              2,000  (3)          *

Dr. R. Gerald Turner....................         1,000                    -0-                500  (3)          *
Steven L. Watson........................        11,000  (3)(7)            -0-              3,500  (3)          *
Dr. Lawrence A. Wigdor..................       196,800  (3)(8)            -0-              1,500  (3)          *
Dr. Ulfert Fiand........................         7,400  (9)               -0-                -0-              -0-
All current executive officers and
    directors of Kronos as a group (11    ------------
    persons)............................    40,664,606  (3)(4)            -0-         45,313,159  (3)(5)     92.6%
                                                        (6)(7)(8)(9)
                                                        (10)
</TABLE>




*    Less than 1%.

(1)  All beneficial ownership is sole and direct unless otherwise noted.

(2)  Prior to the distribution, Kronos is a wholly-owned subsidiary of NL.

                                       58
<PAGE>


(3)  Valhi and Tremont are the direct holders of approximately  63.2% and 21.4%,
     respectively,  of the  outstanding  common stock of NL. Valhi is the direct
     holder of 100% of the membership  interests of Tremont.  Valhi Group,  Inc.
     ("VGI"),  National  City  Lines,  Inc.  ("National"),  Contran,  the Harold
     Simmons  Foundation,   Inc.  (the   "Foundation"),   the  Contran  Deferred
     Compensation  Trust  No.  2 (the  "CDCT  No.  2") and The  Combined  Master
     Retirement  Trust  (the  "CMRT")  are the direct  holders of  approximately
     77.6%,  9.1%, 3.0%, 1.3%, 0.4% and 0.1%,  respectively,  of the outstanding
     shares of Valhi common stock. National, NOA, Inc. ("NOA") and Dixie Holding
     Company ("Dixie  Holding") are the direct holders of  approximately  73.3%,
     11.4% and 15.3%,  respectively,  of the  outstanding  common  stock of VGI.
     Contran and NOA are the direct  holders of  approximately  85.7% and 14.3%,
     respectively,  of the  outstanding  common stock of  National.  Contran and
     Southwest Louisiana Land Company, Inc. ("Southwest") are the direct holders
     of approximately 48.9% and 51.1%,  respectively,  of the outstanding common
     stock of NOA. Dixie Rice Agricultural  Corporation,  Inc. ("Dixie Rice") is
     the direct holder of 100% of the outstanding common stock of Dixie Holding.
     Contran is the holder of 100% of the outstanding common stock of Dixie Rice
     and  approximately  88.9% of the  outstanding  common  stock of  Southwest.
     Substantially all of Contran's  outstanding  voting stock is held by trusts
     established for the benefit of certain children and grandchildren of Harold
     C. Simmons (the  "Trusts"),  of which Mr.  Simmons is the sole trustee.  As
     sole trustee of each of the Trusts,  Mr.  Simmons has the power to vote and
     direct the  disposition  of the shares of Contran stock held by each of the
     Trusts.  Harold C. Simmons is the Chairman of the Board and Chief Executive
     Officer of NL, the  Chairman of the Board of each of Tremont,  Valhi,  VGI,
     National,  NOA, Dixie Holding, Dixie Rice, Southwest and Contran and, as of
     the  distribution  date, is anticipated to be the Chairman of the Board and
     Chief  Executive   Officer  of  Kronos.   The  Foundation   directly  holds
     approximately  1.3% of the  outstanding  shares of Valhi common stock.  The
     Foundation is a tax-exempt  foundation  organized for charitable  purposes.
     Harold C. Simmons is the Chairman of the Board of the Foundation and may be
     deemed  to  control  the   Foundation.   The  CDCT  No.  2  directly  holds
     approximately  0.4% of the outstanding  shares of Valhi common stock.  U.S.
     Bank National  Association serves as the trustee of the CDCT No. 2. Contran
     established  the CDCT No.  2 as an  irrevocable  "rabbi  trust"  to  assist
     Contran in meeting certain deferred  compensation  obligations that it owes
     to Harold C. Simmons.  If the CDCT No. 2 assets are insufficient to satisfy
     such  obligations,  Contran is  obligated  to satisfy  the  balance of such
     obligations  as they  come  due.  Pursuant  to the terms of the CDCT No. 2,
     Contran (i) retains the power to vote the shares of Valhi common stock held
     directly by the CDCT No. 2, (ii) retains dispositive power over such shares
     and (iii) may be deemed the indirect  beneficial owner of such shares.  The
     CMRT directly holds  approximately  0.1% of the outstanding shares of Valhi
     common  stock.   Valhi  established  the  CMRT  to  permit  the  collective
     investment by master  trusts that  maintain the assets of certain  employee
     benefit plans Valhi and related  companies adopt.  Harold C. Simmons is the
     sole trustee of the CMRT and a member of the trust investment committee for
     the CMRT. Valhi's board of directors selects the trustee and members of the
     trust  investment  committee  for the  CMRT.  Harold C.  Simmons,  Glenn R.
     Simmons,  Steven L. Watson,  Lawrence A. Wigdor and certain other executive
     officers of Kronos are  participants in one or more of the employee benefit
     plans  that  invest  through  the  CMRT.  Each  of such  persons  disclaims
     beneficial  ownership of the shares of Valhi common stock held by the CMRT,
     except to the extent of his individual vested beneficial interest,  if any,


                                       59
<PAGE>


     in the assets held by the CMRT.  By virtue of the  holding of the  offices,
     the stock  ownership and his services as trustee,  all as described  above,
     (a) Harold C.  Simmons may be deemed to control  such  entities and (b) Mr.
     Simmons  and  certain of such  entities  may be deemed to possess  indirect
     beneficial  ownership  of shares  directly  held by  certain  of such other
     entities.  However,  Mr. Simmons disclaims such beneficial ownership of the
     shares  beneficially  owned directly or indirectly by any of such entities,
     except to the extent of his vested beneficial  interest,  if any, in shares
     held by the CMRT and his interest as a  beneficiary  of the CDCT No. 2. Mr.
     Harold Simmons and all other  directors and executive  officers of Valhi or
     NL disclaim beneficial ownership of all shares of NL common stock or Kronos
     common stock that NL, Valhi or Tremont may directly  hold,  as  applicable.
     Valmont Insurance Company  ("Valmont"),  NL and a subsidiary of NL directly
     own  1,000,000,  3,522,967  and  1,186,200  shares of Valhi  common  stock,
     respectively.  Valhi is the direct holder of 100% of the outstanding common
     stock of  Valmont.  Pursuant to Delaware  law,  Valhi  treats the shares of
     Valhi  common  stock  that  Valmont,  NL, and the  subsidiary  of NL own as
     treasury  stock for voting  purposes.  For the  purposes of the  percentage
     calculations  herein, such shares are not deemed outstanding.  The business
     address of NL, Valhi, Tremont, VGI, National, NOA, Dixie Holding, the CMRT,
     the Foundation and Contran is Three Lincoln Centre, 5430 LBJ Freeway, Suite
     1700, Dallas,  Texas 75240-2697.  The business address of Dixie Rice is 600
     Pasquiere  Street,  Gueydan,  Louisiana  70542.  The  business  address  of
     Southwest is 402 Canal Street, Houma, Louisiana 70360.



(4)  The  shares of NL common  stock  shown as  beneficially  owned by Harold C.
     Simmons  include 69,475 shares held by Harold C. Simmons' wife with respect
     to which beneficial ownership is disclaimed by Mr. Simmons and 8,000 shares
     which Mr. Simmons has the right to acquire by exercise of options within 60
     days of November 17, 2003 under the 1998 Incentive Plan.


(5)  The shares of Kronos common stock shown as beneficially  owned by Harold C.
     Simmons  include 34,737 shares held by Harold C. Simmons' wife with respect
     to which beneficial ownership is disclaimed by Mr. Simmons.


(6)  The shares of NL common stock shown as  beneficially  owned  include  8,000
     shares  that  Glenn R.  Simmons  has the right to acquire  by  exercise  of
     options  within 60 days of  November  17,  2003 under  NL's 1998  Long-Term
     Incentive Plan (the "1998 Incentive Plan").

(7)  The shares of NL common stock shown as  beneficially  owned  include  4,000
     shares  that Mr.  Watson has the right to acquire  by  exercise  of options
     within 60 days of November 17, 2003 under the 1998  Incentive Plan and NL's
     1989 Incentive Plan (collectively, the "Incentive Plans").

(8)  The shares of NL common stock shown as  beneficially  owned include 193,800
     shares  that Dr.  Wigdor has the right to acquire  by  exercise  of options
     within 60 days of November 17, 2003 under the Incentive Plans.

(9)  The shares of NL common stock shown as  beneficially  comprise 7,400 shares
     of NL common  stock that Dr.  Fiand has the right to acquire by exercise of
     options within 60 days of November 17, 2003.

(10) The shares of NL common stock shown as  beneficially  owned include 221,200
     shares of NL common stock that all current executive officers and directors
     of Kronos as a group (11 persons)  have the right to acquire by exercise of
     options within 60 days of November 17, 2003.



Ownership of Valhi Common Stock



     The  following  table and  accompanying  notes set forth as of November 17,
2003 the beneficial  ownership,  as defined above, of Valhi common stock held by
each director of Kronos,  each named executive officer and all current executive
officers and directors of Kronos as a group. See note (3) to the ownership of NL
and Kronos common stock table above for information  concerning  individuals and
entities  who may be deemed to  indirectly  beneficially  own those shares of NL
common stock directly held by Valhi or Tremont.




<TABLE>
<CAPTION>
                                                                   Valhi Common Stock
                                                    -------------------------------------------------
                                                         Amount and Nature of
Name                                                    Beneficial Ownership(1)   Percent of Class(2)
-------------------------------------------------   ---------------------------- ---------------------
<S>                                                                <C>                       <C>
C. H. Moore, Jr............................                       -0-                       -0-
George E. Poston...........................                       -0-                       -0-
Glenn R. Simmons...........................                   113,247  (3)(4)                *
Harold C. Simmons..........................                     3,383  (3)                   *

Dr. R. Gerald Turner.......................                       -0-                       -0-
Steven L. Watson...........................                   157,246  (3)(4)                *
Dr. Lawrence A. Wigdor.....................                       -0-                       -0-
Dr. Ulfert Fiand...........................                       -0-                       -0-
All current executive officers and directors
    of Kronos as a group (11 persons)......                   360,442  (3)(4)                *
</TABLE>


-----------

                                       60
<PAGE>

*    Less than 1%.

(1)  All beneficial ownership is sole and direct unless otherwise noted.

(2)  For purposes of calculating the percent of class owned, 3,522,967 shares of
     Valhi common stock held by NL,  1,186,200 shares of Valhi common stock held
     by a subsidiary  of NL and  1,000,000  shares of Valhi common stock held by
     Valmont are excluded  from the amount of Valhi  common  stock  outstanding.
     Kronos  understands  that,  pursuant to Delaware  law,  Valhi  treats these
     excluded shares as treasury stock for voting purposes.


(3)  Excludes  certain  shares that may be deemed to be indirectly  beneficially
     owned by such individual as to which he disclaims beneficial ownership. See
     note (3) to the ownership of NL and Kronos common stock table above.



(4)  Includes  shares that such person or group could  acquire upon the exercise
     of stock options  within 60 days of  November 17, 2003.  During such 60-day
     period, options for 100,000 shares of Valhi common stock are exercisable by
     Glenn R.  Simmons,  options for 140,000  shares of Valhi  common  stock are
     exercisable  by Steven L.  Watson and  options  for 85,400  shares of Valhi
     common stock are  exercisable by all other Kronos  executive  officers as a
     group. In each case, only the shares  exercisable by the particular  option
     holder  during such 60-day  period are deemed  outstanding  for purposes of
     calculating  the  percent  of class  owned by such  holder.  For Mr.  Glenn
     Simmons,  of the shares reported that he beneficially  owns, 800 shares are
     held by his  wife in her  retirement  account,  with  respect  to  which he
     disclaims beneficial ownership.




                                       61

<PAGE>


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     Prior to the  distribution,  Kronos is a wholly-owned  subsidiary of NL. At
November 10, 2003, Valhi and Tremont held a total of  approximately  85% of NL's
outstanding common stock. At November 10, 2003, Contran, directly or through its
subsidiaries,  held  approximately  90% of  Valhi's  outstanding  common  stock.
Substantially  all of  Contran's  outstanding  voting  stock  is held by  trusts
established for the benefit of certain  children and  grandchildren of Harold C.
Simmons,  of which Mr. Simmons is the sole trustee.  Mr. Simmons is the Chairman
of the Board of each of Contran, Valhi and Tremont and the Chairman of the Board
and Chief  Executive  Officer  of NL,  and may be deemed  to  control  each such
company and Kronos.  Following the distribution date, Mr. Simmons is anticipated
to be the Chairman of the Board and Chief Executive Officer of Kronos,  and will
still  be  deemed  to  control  Kronos.  See  "Principal  Stockholders."  For  a
discussion of potential  conflicts of interest that may arise in connection with
Kronos' ownership  structure,  see "Risk Factors--NL and its affiliates may have
conflicts of interest with Kronos,  and these conflicts  could adversely  affect
Kronos' business."


     Corporations  that may be deemed to be controlled by or affiliated with Mr.
Simmons sometimes engage in (a) intercorporate  transactions such as guarantees,
management  and  expense  sharing  arrangements,  shared fee  arrangements,  tax
sharing agreements,  joint ventures,  partnerships,  loans, options, advances of
funds on open  account,  and sales,  leases and  exchanges of assets,  including
securities  issued  by  both  related  and  unrelated  parties  and  (b)  common
investment and acquisition strategies,  business combinations,  reorganizations,
recapitalizations,  securities  repurchases,  and purchases and sales (and other
acquisitions  and  dispositions)  of  subsidiaries,  divisions or other business
units,  which  transactions have involved both related and unrelated parties and
have included  transactions  which  resulted in the  acquisition  by one related
party of a publicly  held minority  equity  interest in another  related  party.
While no  transactions  of the type described above are planned or proposed with
respect to Kronos other than as set forth in this information statement,  Kronos
continuously  considers,  reviews and evaluates,  and understands  that Contran,
Valhi, Tremont and NL and related entities consider,  review and evaluate,  such
transactions.  Depending  upon  the  business,  tax and  other  objectives  then
relevant,  and  restrictions  under the indentures and other  agreements,  it is
possible  that Kronos might be a party to one or more such  transactions  in the
future.

     Kronos' policy is to engage in transactions  with related parties on terms,
in Kronos'  opinion,  no less  favorable  to Kronos than could be obtained  from
unrelated parties.



     After the distribution,  it is anticipated that a majority of NL's Board of
Directors  will also serve on Kronos'  Board of  Directors.  NL is  currently in
compliance  with, and as of the  distribution  date Kronos will comply with, all
New  York  Stock  Exchagne  rules  regarding   interlocking   directorates   and
independence  of  directors.  Certain  executive  officers  of NL also  serve as
executive officers of Kronos.  Such relationships may lead to possible conflicts
of interest.  These possible  conflicts of interest may arise from the duties of
loyalty owed by persons acting as corporate fiduciaries to two or more companies
under  circumstances  in which such  companies  may have adverse  interests.  No
specific procedures are in place that govern the treatment of transactions among
Kronos and related  entities,  although  such  entities may  implement  specific
procedures  as  appropriate  for  particular  transactions.  In addition,  under
applicable  principles  of law, in the absence of  stockholder  ratification  or
approval by directors who may be deemed  disinterested,  transactions  involving
contracts  among  companies  under common  control must be fair to all companies
involved. Furthermore, directors of companies owe fiduciary duties of good faith
and fair dealing to all stockholders of the companies for which they serve.




     Kronos  is a party to  intercorporate  services  agreements  ("ISAs")  with
various  related  parties  discussed  below.  Under the ISAs,  employees  of one
company  will  provide   certain   management,   tax  planning,   financial  and
administrative  services to the other  company on a fee basis.  Such charges are
based upon estimates of the time devoted by employees (or in certain  instances,
groups of  employees)  of the  provider  of the  services  to the affairs of the
recipient, and the compensation of such persons.


     Under  the  NL  ISA,  NL  provided   certain   management,   financial  and
administrative  services  to  Kronos  and  its  subsidiaries  on  a  fee  basis.
Intercorporate  services  fee expense  related to the NL ISA was $5.0 million in
2000,  $3.5  million in 2001 and $3.7  million in 2002,  and $1.9 million in the
first six  months of 2003.  Under  the NL ISA and  included  in the total fee NL
charged Kronos in 2000 and 2001, Kronos paid fees of approximately  $1.7 million


                                       62
<PAGE>


and $1.4 million for tax and controller services,  respectively,  which included
the amount  Kronos paid NL for the  services of Robert D. Hardy as tax  director
and  controller  of Kronos.  Under the NL ISA and  included  in the total fee NL
charged  Kronos in 2002 and the first six  months of 2003,  Kronos  paid fees of
approximately $1.4 million and $.7 million for chief financial, tax and treasury
services,  respectively,  which  included  the  amount  Kronos  paid  NL for the
services of Robert D. Hardy as chief financial  officer of Kronos.  NL's charges
to Kronos under the NL ISA for the services Mr. Hardy provided to Kronos are not
specifically  identifiable to his services.  However, KII paid Mr. Hardy a bonus
of $250,000 in 2001 outside of the NL ISA for  services  Mr.  Hardy  rendered to
KII.



     From time to time, Kronos loans funds to related parties.  See Notes 11 and
13 to  Kronos'  audited  consolidated  financial  statements  included  in  this
information statement. These loans permit Kronos to earn a higher rate of return
on cash not needed at the time for use in its operations than it could otherwise
earn.  While  such loans are of a lesser  credit  quality  than cash  equivalent
instruments otherwise available to Kronos, Kronos believes that it has evaluated
the credit risks involved,  and that those risks are reasonable and reflected in
the terms of the loans.  Interest income from  affiliates  related to such loans
was $20.3 million in 2000,  $33.4 million in 2001 and $20.8 million in 2002, and
$.7 million in the first six months of 2003.



     Interest  expense on loans from affiliates was $29.0 million in 2000, $23.0
million  in 2001 and $12.3  million  in 2002,  and $.7  million in the first six
months of 2003. See Note 11 to Kronos' audited consolidated financial statements
included in this information statement. See also "Relationships Among NL, Kronos
and Their Affiliates--Outstanding Debt to NL."



     Tall Pines Insurance  Company ("Tall  Pines"),  Valmont  Insurance  Company
("Valmont")  and EWI provide for or broker  certain of Kronos' and LPC's and its
affiliates'  insurance  policies.  A  son-in-law  of  Harold C.  Simmons  is the
Chairman of the Board of EWI.  Kronos  purchased EWI from certain  affiliates of
Contran in January 2002, and Kronos  distributed EWI to NL as a dividend in June
2003. See Notes 1 and 17 to Kronos' audited  consolidated  financial  statements
included in this  information  statement.  Consistent  with  insurance  industry
practices,  Tall Pines,  Valmont and EWI receive  commissions from the insurance
and  reinsurance  underwriters  for the  policies  that they  provide or broker.
Kronos and LPC paid approximately $5.6 million in 2000, $9.7 million in 2001 and
$10.1  million in 2002,  and $1.1  million in the first six months of 2003,  for
policies provided or brokered by Tall Pines,  Valmont and EWI. The premiums paid
by affiliates  (other than Kronos and LPC) for policies  provided or brokered by
EWI was  approximately  $7.6 million in 2002,  and $1.8 million in the first six
months of 2003. These amounts principally  included payments for reinsurance and
insurance   premiums  paid  to  unrelated  third  parties,   but  also  included
commissions paid to Tall Pines, Valmont and EWI. In Kronos' opinion, the amounts
that Kronos paid for these  insurance  policies and the allocation  among Kronos
and its affiliates of relative  insurance premiums are reasonable and similar to
those they could have obtained  through  unrelated  insurance  companies  and/or
brokers.  Kronos expects that these  relationships with Tall Pines,  Valmont and
EWI will continue through 2003.


     During  2000,  NL and an  officer of both  Kronos  and NL  entered  into an
agreement  whereby stock options held by the officer to purchase an aggregate of
100,000  shares of NL's common  stock were  exercised.  On a net basis,  NL made
aggregate  cash  payments to the officer of  approximately  $1.3  million and NL
charged Kronos an equivalent amount for stock compensation expense.

     During  2002,  NL and an  officer of both  Kronos  and NL  entered  into an
agreement  whereby stock options held by the officer to purchase an aggregate of
160,400 shares of NL's common stock were  exercised or canceled for value.  On a
net basis, NL made aggregate cash payments to the officer of  approximately  $.7
million,  and NL charged  Kronos an  equivalent  amount  for stock  compensation
expense.


     Purchases  of TiO2 from LPC were $92.5  million in 2000,  $93.4  million in
2001 and $92.4  million  in 2002,  and $53.6  million in the first six months of
2003. See Notes 7 and 17 to Kronos' audited  consolidated  financial  statements
included in this information statement.



     Kronos is a member of NL's  consolidated  U.S.  federal  income  tax group.
Kronos is  currently a party to a U.S.  federal tax sharing  agreement  with NL.
Effective January 1, 2001, NL and its qualifying subsidiaries,  including Kronos
and its qualifying  subsidiaries  were included in the consolidated U.S. federal
tax return of Contran.  As such,  Kronos is a party to a tax  sharing  agreement
that provides that Kronos will compute its provision for U.S.  income taxes on a


                                       63
<PAGE>


separate-company basis using the tax elections made by Contran.  Pursuant to the
tax sharing agreement,  Kronos makes payments to or receives payments from NL in
amounts it would have paid to or received from the U.S. Internal Revenue Service
had it not been a member of the NL's  consolidated  tax group but  instead was a
separate  taxpayer.  Pursuant to its tax sharing  agreement with NL, Kronos made
payments to NL of $11.2  million in 2000,  $7.7 million in 2001 and $5.3 million
in 2002 and no payment was made in the first six months of 2003.




                                       64
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK


     Kronos'  authorized  capital stock  consists of 60 million shares of common
stock,  par value $.01 per share,  and 100,000  shares of preferred  stock,  par
value $.01 per share.  Currently,  approximately  48.9 million shares of Kronos'
common  stock  are  outstanding.  On the  distribution  date and  following  the
distribution of  approximately  23.85 million shares of Kronos common stock held
by NL to its  shareholders,  Kronos  will have  approximately  6,000  holders of
record. No shares of Kronos' preferred stock are currently outstanding.



     The following description of Kronos' capital stock is intended as a summary
and is qualified in its entirety by reference to the First  Amended and Restated
Certificate  of  Incorporation  (the  "Certificate  of  Incorporation")  and the
Amended and Restated Bylaws (the "Bylaws") filed as exhibits to the registration
statement on Form 10, of which this  information  statement forms a part, and to
Delaware corporate law.


Common Stock

         Voting Rights

     The holders of Kronos  common  stock are  entitled to one vote per share on
all matters to be voted on by  stockholders.  Holders of Kronos common stock are
not entitled to cumulate their votes in the election of directors. Generally, at
a meeting at which a quorum is present,  all matters on which  stockholders vote
must be approved by a majority of the votes entitled to be cast by all shares of
common stock present in person or  represented  by proxy,  subject to any voting
rights granted to holders of any preferred stock.  Except as otherwise  provided
by law, and subject to any voting rights  granted to holders of any  outstanding
preferred stock, amendments to the Certificate of Incorporation must be approved
by holders of a majority of all outstanding shares of common stock.

         Dividends

     Holders of common  stock will share  ratably in any  dividend  declared  by
Kronos'  Board  of  Directors,   subject  to  any  preferential  rights  of  any
outstanding preferred stock.

         Other Rights

     In the event of any merger or  consolidation of Kronos with or into another
company in connection  with which shares of common stock are  converted  into or
exchangeable for shares of stock, other securities or property (including cash),
all holders of common stock will be entitled to receive the same kind and amount
of shares of stock and other securities and property (including cash).

     If Kronos is liquidated,  dissolved or wound up after payment to creditors,
Kronos will pay the full amounts required to be paid to holders of shares of any
outstanding  preferred  stock  before  Kronos  makes any  payments to holders of
shares of Kronos common stock.  All holders of shares of Kronos common stock are
entitled to share  ratably in any assets  available  for  distribution  to these
holders,  after all of Kronos' other creditors and preferred  stockholders  have
been satisfied.

     No shares of Kronos  common  stock may be  redeemed.  Holders  of shares of
Kronos  common stock do not have any  preemptive  rights to purchase  additional
shares of Kronos common stock.

Preferred Stock


     Kronos may issue up to  100,000  shares of  preferred  stock in one or more
classes or series  and with the terms of each class or series  stated in Kronos'
Board of Director's  resolutions providing for the designation and issue of that
class or series.  The Certificate of Incorporation  authorizes  Kronos' Board of
Directors   to   determine   the   designations,   preferences   and   relative,
participating,  optional  or other  special  rights,  and  such  qualifications,
limitations  or  restrictions  pertaining  to each class or series of  preferred
stock that Kronos issues.


                                       65
<PAGE>

     Kronos  believes that the ability of its Board of Directors to issue one or
more  series  of  preferred  stock  will  provide  Kronos  with  flexibility  in
structuring  possible future financings and  acquisitions,  and in meeting other
corporate  needs which might arise.  The authorized  shares of Kronos  preferred
stock,  as well as authorized  shares of Kronos common stock,  will be available
for issuance without further action by Kronos' stockholders,  unless such action
is required by  applicable  law or the rules of any stock  exchange or automated
quotation  system on which Kronos'  securities may be listed or traded.  The New
York  Stock  Exchange  currently  requires   shareholder   approval  in  several
instances,  including  where the present or  potential  issuance of shares could
result in an increase in the number of shares of common stock,  or in the amount
of  voting  securities,  outstanding  of at least  20%.  If  Kronos  stockholder
approval  is not  required  for the  issuance of shares of  preferred  or common
stock,  Kronos'  Board  of  Directors  may  determine  not to  seek  stockholder
approval.

Provisions That May Have an Anti-Takeover Effect

     Some  provisions  of  the  Certificate  of  Incorporation  and  the  Bylaws
summarized  below may be deemed to have an  anti-takeover  effect and may delay,
deter or prevent a tender offer or takeover attempt that some, or a majority, of
Kronos'  stockholders  might  believe to be in their best  interests or in which
stockholders  might  receive a premium  for their  stock  over the  then-current
market price of such stock.

         Board of Directors

     The Bylaws  provide  that,  subject  to any rights of holders of  preferred
stock to elect additional directors under specified circumstances, the number of
directors of Kronos  consisting  of one or more members shall be fixed from time
to time by resolution adopted by the affirmative vote of a majority of the Board
of Directors  or pursuant to the action of the  stockholders.  In addition,  the
Certificate  of  Incorporation   and  the  Bylaws  provide  that  newly  created
directorships  resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors  resulting  from death,  resignation,
disqualification  or  removal  may be  filled  only  by a  majority  vote of the
directors then in office.

         Amendments to the Certificate of Incorporation and Bylaws

     The  Certificate of  Incorporation  generally  provides that the Bylaws and
certain  provisions of the Certificate of Incorporation may be altered,  amended
or repealed by the  affirmative  vote of the holders of at least the majority of
Kronos' securities entitled to vote in the election of directors. The Bylaws may
be altered, amended or repealed by a majority vote of Kronos' Board of Directors
or its stockholders.

         Preferred Stock

     Kronos'  Board of Directors  could issue a series of  preferred  stock that
could,  depending on the terms of such series,  delay, defer or prevent a change
in control of Kronos.  Kronos' Board of Directors will make any determination to
issue such shares based on its  judgment as to the best  interests of Kronos and
its  stockholders.  Kronos'  Board  of  Directors,  in so  acting,  could  issue
preferred  stock  having  terms that could  discourage  an  acquisition  attempt
through which an acquiror may be able to change the composition of Kronos' Board
of  Directors,  including a tender offer or other  transaction  that some,  or a
majority, of Kronos' stockholders might believe to be in their best interests or
in  which  stockholders  might  receive  a  premium  for  their  stock  over the
then-current market price of such stock.

     Advance Notice Provisions for Stockholder Proposals or Director Nominations

     For stockholder  proposals or director  nominations to be brought before an
annual  meeting  of  stockholders,  the  Bylaws  require  that the  proposal  or
nomination  must be delivered or mailed to the  principal  executive  offices of
Kronos  no later  than 45 days  prior to the  earlier  of the date (as if in the
current year) on which notice of the date of the last annual  meeting was mailed
or public disclosure of the date the meeting was made. If Kronos did not mail or
publicly  disclose  the date of the last annual  meeting or Kronos has moved the
date of the annual  meeting by 30 days from the date of the last annual  meeting

                                       66
<PAGE>

(as if in the current  year),  the  stockholder  proposal or nomination  must be
delivered or mailed to the principal  executive  offices of Kronos no later than
90 days prior to the  meeting.  With  respect to an election of  directors to be
held at a special meeting of stockholders, stockholder director nominations must
be delivered  or mailed to the  principal  executive  offices of Kronos no later
than the tenth day  following  the date on which notice of such meeting is first
given to stockholders.

Liability and Indemnification of Directors and Officers

     Delaware General  Corporation Law, the Certificate of Incorporation and the
Bylaws  contain   provisions   relating  to  the  limitation  of  liability  and
indemnification of Kronos' directors and officers.


     The Certificate of  Incorporation  provides that Kronos'  directors are not
personally  liable to Kronos or its stockholders for monetary damages for breach
of  their  fiduciary  duties  as  directors,  except  for such  liability  as is
expressly not subject to limitation  under  Delaware  corporate law, as the same
exists or may be amended to further limit or eliminate such liability.  Existing
Delaware  law permits the  elimination  or  limitation  of  directors'  personal
liability to Kronos or its stockholders for monetary damages for breach of their
fiduciary duties as directors, except liability for:


     o    any  breach  of  a  director's  duty  of  loyalty  to  Kronos  or  its
          stockholders;

     o    acts  or  omissions  not  in  good  faith  or  involving   intentional
          misconduct or a knowing violation of law;

     o    any  transaction  from  which a  director  derived  improper  personal
          benefit;

     o    the unlawful payment of dividends; and

     o    unlawful stock repurchases or redemptions.

     Because  of these  exculpation  provisions,  stockholders  may be unable to
recover  monetary  damages  against  directors  for  actions  taken by them that
constitute  negligence  or that  otherwise  violate  their  fiduciary  duties as
directors,  although it may be possible to obtain  injunctive or other equitable
relief with respect to such actions.  If equitable remedies are not available to
stockholders,  stockholders  may not have an effective remedy against a director
in connection with the director's conduct.

     The Certificate of Incorporation provides as follows:

     o    Kronos must, to the fullest extent permitted by law, indemnify any and
          all of its officers and directors;


     o    Kronos may, to the fullest  extent  permitted by law or to such lesser
          extent as is determined  in the  discretion of the Board of Directors,
          indemnify all other persons; and


     o    Kronos may advance expenses to all persons to whom it has the power to
          indemnify.

     The Bylaws provide as follows:

     o    Kronos must indemnify its directors and officers to the fullest extent
          permitted under Delaware law;

     o    Kronos must advance reasonable expenses (including attorneys' fees) of
          a director or officer  for an  indemnifiable  claim upon  receipt of a
          written  affirmation  by the  director  or  officer of his or her good
          faith belief that he or she has met the standard of conduct  necessary
          for  indemnification  and a written undertaking by or on behalf of the
          director  or officer to repay such  amount if it shall  ultimately  be
          determined  that he or she is not entitled to by indemnified by Kronos
          as authorized in the Bylaws;

                                       67
<PAGE>

     o    if Kronos  receives  a claim for  indemnification  of  expenses  of an
          indemnifiable  claim and does not pay the claim  within 30 days of its
          receipt, the claimant may bring suit to recover the unpaid amount and,
          if successful in whole or in part,  the claimant will also be entitled
          to be paid the expenses of prosecuting such claim; and

     o    Kronos may grant rights of indemnification and advancement of expenses
          to any person who is not at the time a current  director or officer of
          Kronos.

     Additionally,  Kronos will seek to obtain directors and officers  liability
insurance prior to the distribution.


Stockholder Approval of Certain Business Combinations



     In its  original  certificate  of  incorporation  and in  the  amended  and
restated  Certificate of  Incorporation,  Kronos has expressly elected not to be
governed by Section 203 of the Delaware  General  Corporation  Law.  Section 203
prohibits a Delaware corporation from engaging in certain business  combinations
with an "interested  stockholder"  for three years  following the date that such
person becomes an interested stockholder. With certain exceptions, an interested
stockholder  is a  person  or  entity  who  or  which  owns  15%  or  more  of a
corporation's  outstanding  voting  stock or is an affiliate or associate of the
corporation  and was the owner of 15% or more of such  voting  stock at any time
within the previous  three years.  Because Kronos has elected not to be governed
by Section 203, Section 203 will not apply to Kronos.


Transfer Agent

     The transfer agent and registrar for Kronos common stock is EquiServe Trust
Co., N.A. The contact information for the transfer agent and registrar is:


         EquiServe Trust Co., N.A.
         150 Royall Street
         Canton, Massachusetts  02021


                       WHERE YOU CAN FIND MORE INFORMATION


     This information statement is part of a Form 10 registration statement that
Kronos  filed with the SEC  relating to the shares of Kronos  common stock to be
distributed  to NL  shareholders.  As  allowed by SEC  rules,  this  information
statement does not contain all of the information  that you can find in the Form
10 or the  exhibits  to the Form 10. You can get a copy of the Form 10 (SEC File
No. 001-31763):


     o    at the Public  Reference Room of the SEC, Room 1024,  Judiciary Plaza,
          450 Fifth Street, N.W., Washington, D.C. 20549; and

     o    from the Internet site that the SEC  maintains at  http://www.sec.gov,
          which contains  reports,  proxy and  information  statements and other
          information regarding issuers that file electronically with the SEC.

     You may obtain  information on the operation of the SEC's Public  Reference
Room by calling the SEC at 1-800-SEC-0330.


     After  the  distribution,  Kronos  will be  required  to  comply  with  the
reporting  requirements  of the  Exchange  Act and to file with the SEC reports,
proxy  statements  and  other  information  as  required  by the  Exchange  Act.
Additionally,  Kronos  will be  required to provide  annual  reports  containing
audited  financial  statements to its stockholders in connection with its annual
meetings  of  stockholders.   After  the  distribution,   these  reports,  proxy
statements and other information will be available to be inspected and copied at


                                       68
<PAGE>

the  public  reference  facilities  of the SEC or  obtained  by mail or over the
Internet from the SEC, as described above.  Kronos expects to receive  approval,
subject to official  notice of issuance,  to have its common stock listed on the
New York Stock  Exchange  under the  symbol  "KRO."  When  Kronos  common  stock
commences trading on the New York Stock Exchange, such reports, proxy statements
and other information will be available for inspection at the offices of the New
York Stock Exchange, 11 Wall Street, New York, New York 10005.


                                      * * *

     This  information  statement  is being  provided  to you  solely to furnish
information to shareholders of NL who will receive shares of Kronos common stock
in the  distribution.  It is not,  and is not  intended to be  construed  as, an
inducement or  encouragement  to buy or sell any of Kronos or NL securities.  We
believe that the information contained in this information statement is accurate
as of the  date  set  forth  on the  cover,  and  neither  the  mailing  of this
information   statement   nor  the  delivery  of  Kronos  common  stock  in  the
distribution  will create any  implication  to the  contrary.  Changes may occur
after that date, and we will not update the information  contained herein except
in the normal course of public disclosure obligations and practices.

     Neither NL nor Kronos has authorized  anyone to give you any information or
to make any representation  about the distribution or the companies that differs
from or adds to the information  contained in this  information  statement or in
the documents NL has publicly  filed with the SEC.  Therefore,  if anyone should
give you any different or additional information, you should not rely on it.



                                       69

<PAGE>



<TABLE>
<CAPTION>
                             KRONOS WORLDWIDE, INC.
                          INDEX OF FINANCIAL STATEMENTS

                                                                         Pages
Kronos Worldwide, Inc. Unaudited Pro Forma Condensed Consolidated
Financial Statements:
------------------------------------------------------------------------------

<S>                                                                   <C>
Summary................................................................    FA-1
Unaudited Pro Forma Condensed Consolidated Statements of Income--
   Year ended December 31, 2002 and
   Six Months Ended June 30, 2003.................................    FA-2/FA-3
Notes to Unaudited Pro Forma Condensed Consolidated
   Statements of Income...........................................    FA-4/FA-5

Kronos Worldwide, Inc. Consolidated Financial Statements:
Report of Independent Auditors.........................................    FB-2
Consolidated Balance Sheets-- December 31, 2001 and 2002;
    June 30, 2003 (unaudited); Pro Forma
   June 30, 2003 (unaudited)...........................................    FB-3
Consolidated Statements of Income-- Years ended
    December 31, 2000, 2001 and 2002; Six months ended.................    FB-5
    June 30, 2002 (unaudited) and 2003 (unaudited)
Consolidated Statements of Comprehensive Income-- Years
    ended December 31, 2000, 2001 and 2002;..........................      FB-6
   Six months ended June 30, 2002 (unaudited) and 2003 (unaudited)
Consolidated Statement of Stockholder's Equity-- Years
    ended December 31, 2000, 2001 and 2002; Six ........................   FB-7
   months ended June 30, 2003 (unaudited)
Consolidated Statements of Cash Flows-- Years ended
   December 31, 2000, 2001 and 2002; Six months ........................   FB-8
   ended June 30, 2002 (unaudited) and 2003 (unaudited)

Notes to Consolidated Financial Statements......................    FB-11/FB-40


</TABLE>



                                      F-1
<PAGE>

     KRONOS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


     The Unaudited Pro Forma Condensed Consolidated Statements of Income for the
year ended December 31, 2002 and the six months ended June 30, 2003 gives effect
to  Kronos'  distribution  of the Term  Note and  other  transactions  involving
Kronos' capital structure and indebtedness, as if such transactions had occurred
on January 1, 2002. You should read this information in conjunction with the:


     o    accompanying  notes to the Unaudited Pro Forma Condensed  Consolidated
          Financial Statements; and


     o    audited consolidated financial statements of Kronos for the year ended
          December 31, 2002, the unaudited  consolidated financial statements of
          Kronos for the six months  ended June 30, 2003 and the  unaudited  pro
          forma  consolidated  balance sheet of Kronos as of June 30, 2003, each
          of which are included elsewhere in this information statement.


     The unaudited pro forma  condensed  consolidated  financial  statements are
presented for informational purposes only and to aid you in your analysis of the
financial  aspects  of the  distribution.  The  unaudited  pro  forma  condensed
consolidated  financial  statements  have been derived  from Kronos'  historical
consolidated  financial statements.  The pro forma adjustments,  as described in
the notes that follow,  are based upon  available  information  and upon certain
assumptions that Kronos believes to be reasonable and factually supportable. The
pro  forma  condensed  consolidated  financial  statements  are not  necessarily
indicative of what Kronos' results of operations actually would have been had we
completed these transactions at the dates indicated.  In addition, the unaudited
pro forma condensed  consolidated financial statements do not purport to project
the future operating results of Kronos following the distribution.



     An  unaudited  pro  forma  condensed  consolidated  balance  sheet  is  not
presented  in  these  unaudited  pro  forma  condensed   consolidated  financial
statements. Instead, an unaudited pro forma condensed consolidated balance sheet
is presented on pages FB-2 and FB-3 of this information statement.


                                      FA-1
<PAGE>



            See accompanying notes to Unaudited Pro Forma Condensed
                        Consolidated Financial Statements


                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES
         UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
                          Year ended December 31, 2002
                     (In millions, except per share amounts)


<TABLE>
<CAPTION>
                                                                Pro forma adjustment
                                                            ---------------------------
                                              Kronos           2002                              Kronos
                                            historical     Transactions       Term Note         pro forma
                                            ----------     ------------      -----------      -----------

Revenues and other income:
<S>                                         <C>             <C>              <C>              <C>
   Net sales                                $   875.2       $     -          $     -          $   875.2
   Interest income                               20.7           (20.6)             -                 .1
   Other, net                                     7.8                              -                7.8
                                            ---------       ---------        ----------       ---------
                                                903.7           (20.6)             -              883.1
                                            ---------       ---------        ----------       ---------

Costs and expenses:
   Costs of goods sold                          671.8             -                -              671.8
   Selling, general and administrative          111.0             -                -              111.0
   Interest                                      29.1              .4             18.0             47.5
                                            ---------       ---------        ----------       ---------
                                                811.9              .4             18.0            830.3
                                            ---------       ---------        ----------       ---------
       Interest before income taxes              91.8           (21.0)           (18.0)            52.8

Provision for income taxes                       25.5            (7.4)            (6.3)            11.8
                                            ---------       ---------        ----------       ---------

       Net income                           $    66.3       $   (13.6)       $   (11.7)       $    41.0
                                            ==========      =========        =========        =========
Net income per share                        $     1.35                                        $     .84
                                            ==========                                        ==========
Shares used in the calculation of per
   share amounts
                                                 48.9                                              48.9
                                            ==========                                        ==========
</TABLE>


            See accompanying notes to Unaudited Pro Forma Condensed
                       Consolidated Financial Statements
                                      FA-2
<PAGE>



                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES
         UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
                         Six months ended June 30, 2003
                     (In millions, except per share amounts)



<TABLE>
<CAPTION>
                                                                                Pro forma
                                                               Kronos          adjustment-       Kronos pro
                                                              historical        Term Note           form
                                                             ------------     ------------       -----------

Revenues and other income:
<S>                                                           <C>                 <C>            <C>
     Net sales                                                $   519.6           $     -        $   519.6
     Interest income                                                 .7                 -               .7
     Other, net                                                    (3.3)                -             (3.3)
                                                              ---------           -------        ---------
                                                                  517.0                 -            517.0
                                                              ---------           -------        ---------

Costs and expenses:
     Cost of goods sold                                           386.1                 -            386.1
     Selling, general and administrative                           62.0                 -             62.0
     Interest                                                      17.1               9.0             26.1
                                                              ---------           -------        ---------

                                                                  465.2               9.0            474.2
                                                              ---------           -------        ---------

       Income before income taxes                                  51.8              (9.0)            42.8

Provision for income taxes                                         (6.7)             (3.1)            (9.8)
                                                              ---------           -------        ---------

     Net income                                               $    58.5           $  (5.9)       $    52.6
                                                              =========           =======        =========


Net income per share                                          $     1.19                         $    1.08
                                                              ==========                         =========

Shares used in the calculation of per share amounts                 48.9                              48.9
                                                              ==========                          ========
</TABLE>





            See accompanying notes to Unaudited Pro Forma Condensed
                       Consolidated Financial Statements
                                      FA-3

<PAGE>




                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES
    NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Basis of presentation:


     The unaudited pro forma condensed consolidated statements of income for the
year ended  December  31, 2002 and the six months  ended June 30,  2003  reflect
adjustments necessary to reflect the following transactions,  as if each of such
transactions had occurred on January 1, 2002:


     o    The June  2002  issuance  of  (euro)285  million  (approximately  $283
          million,  using the June 30, 2002 exchange rate) of 8?% Senior Secured
          Notes  ("KII  Senior  Notes")  by  Kronos  International   ("KII"),  a
          wholly-owned  subsidiary  of Kronos,  and the  application  of the net
          proceeds to repay certain  indebtedness  owed to NL  ("Indebtedness to
          NL") in the aggregate amount of $287 million  (collectively,  the "KII
          Senior Note Issuance"),

     o    The  June  2002  borrowing  of  approximately  (euro)40  million  ($40
          million) by certain  subsidiaries of KII under their revolving  credit
          facility  ("European Credit  Facility'),  and the repayment in full of
          certain  short-term  notes  payable  ($53  million)  to third  parties
          ("European  Notes  Payable") using the net proceeds from the borrowing
          plus other available cash on hand (collectively,  the "European Credit
          Facility Issuance"),

     o    The July 2002 distribution of certain long-term notes receivable ($753
          million at June 30,  2002) from NL in the form of a non-cash  dividend
          as part of a recapitalization  of Kronos (together with the KII Senior
          Note Issuance and the European  Credit  Facility  Issuance,  the "2002
          Transactions"), and


     o    The  distribution of the Term Note by Kronos to NL, as contemplated as
          part of the  distribution  of 48.7% of  Kronos'  common  stock to NL's
          shareholders as more fully described in this information statement.


Note 2 - Pro forma adjustments:

         Pro forma adjustments are summarized below.

2002 Transactions

     The $20.6 million adjustment to interest income for the year ended December
31, 2002 represents  elimination of interest income on Kronos' notes  receivable
from  affiliates  distributed  to NL in the form of a non-cash  dividend in July
2002.

     The  adjustment  to  interest  expense  related to the  issuance of the KII
Senior Notes and the European Credit Facility is comprised of the following:


<TABLE>
<CAPTION>
                                                            Year ended              Six months ended
                                                         December 31, 2002            June 30, 2003
                                                        ----------------------     ------------------
                                                                       (In millions)
Increase in interest expense:
<S>                                                     <C>                          <C>
  KII Senior Notes                                      $      11.9                  $       -
  European Credit Facility                                      1.5                          -
                                                        -----------                  ---------
                                                               13.4                          -
                                                        -----------                  ---------
Decrease in interest expenses:
  Indebtedness to NL                                           11.4                          -
  European Notes Payable                                        1.6                          -
                                                        -----------                  ---------
                                                               13.0                          -
                                                        -----------                  ---------
    Net increase                                        $        .4                  $       -
                                                        ===========                  =========
</TABLE>


                                      FA-4

<PAGE>

     The increase in interest expense related to the KII Senior Notes, issued in
June 2002, is based upon the 8.875%  interest rate on the KII Senior Notes,  and
the  (euro)285  million  principal  amount of the KII Senior Notes  issued,  and
assumed the KII Senior Notes were issued on January 1, 2002 as discussed  above.
The increase in interest  expense also is based upon the actual average exchange
rate during the period from January to June 2002 of $.89 per euro.  The increase
in interest  expense  related to the KII Senior Notes also included  $600,000 of
amortization of deferred financing costs related to the KII Senior Notes.



     The increase in interest  expense related to the European Credit  Facility,
also entered into in June 2002, is based upon average outstanding  borrowings of
$34.4 million and an assumed  interest rate of 7.86%, and assumed such borrowing
occurred  on  January  1, 2002 as  discussed  above.  The $34.4  million  amount
represented  the actual amount  initially  borrowed by Kronos under the European
Credit  Facility in June 2002. The 7.86% interest rate  represented  the average
interest  rate that would have been paid if such assumed  borrowing had occurred
on January 1, 2002.  The  increase in interest  expense  related to the European
Credit Facility also included  $100,000 of  amortization  of deferred  financing
costs related to the European  Credit  Facility.  If the 7.86% interest rate has
been increased by .125% to 7.99%,  the increase in interest  expense  related to
the European  Credit  Facility,  including  amortization  of deferred  financing
costs, would have been increased by less than $100,000.



     The reduction in interest expense related to the Indebtedness to NL and the
European  Notes  Payable,  both of which were repaid in June 2002,  assumed such
indebtedness  was repaid on January 1, 2002 as discussed  above.  These  amounts
represented the actual interest expense related to such indebtedness included in
Kronos'  historical  consolidated  results  of  operations  for the  year  ended
December 31, 2002.


     The income tax effect  associated with these adjustments to interest income
and interest expense have been calculated using applicable  statutory income tax
rates  in  the  various  tax  jurisdictions  to  which  the  pre-tax  pro  forma
adjustments relate.

Term Note


     Interest  expense  on the Term  Note (9% per  annum,  and based on the $200
million  principal  amount of the Term Note), and the related income tax benefit
using the statutory U.S. federal income tax rate of 35%.


Note 3 - Pro forma per share amounts:


     The pro forma  earnings  per share  amounts are based upon the 48.9 million
shares  of  Kronos'  common  stock  that  will  be  outstanding   following  the
recapitalization of Kronos discussed in Note 1 to Kronos' consolidated financial
statements included in this information statement.



                                      FA-5

<PAGE>

                             KRONOS WORLDWIDE, INC.

                          Index of Financial Statements

Financial Statements                                                      Pages

Report of Independent Auditors                                            FB-2


Consolidated Balance Sheets - December 31, 2001 and 2002;
     June 30, 2003 (unaudited); and Pro Forma June 30, 2003 (unaudited)   FB-3


Consolidated Statements of Income - Years ended
     December 31, 2000, 2001 and 2002; Six months ended
     June 30, 2002 (unaudited) and 2003 (unaudited)                       FB-5


Consolidated Statements of Comprehensive Income -
     Years ended December 31, 2000,
     2001 and 2002; Six months ended
     June 30, 2002 (unaudited) and 2003 (unaudited)                       FB-6


Consolidated Statements of Stockholder's Equity -
     Years ended December 31, 2000,
     2001 and 2002; Six months ended
     June 30, 2003 (unaudited)                                            FB-7


Consolidated Statements of Cash Flows - Years ended
     December 31, 2000, 2001 and 2002; Six months ended
     June 30, 2002 (unaudited) and 2003 (unaudited)                       FB-8

Notes to Consolidated Financial Statements                                FB-11








                                      FB-1


<PAGE>



                         REPORT OF INDEPENDENT AUDITORS




To the Stockholder and Board of Directors of Kronos  Worldwide,  Inc.  (formerly
known as Kronos, Inc.):



     In  our  opinion,   the  consolidated   balance  sheets  and  the  related
consolidated  statements of income,  comprehensive income,  stockholder's equity
and cash flows  present  fairly,  in all  material  respects,  the  consolidated
financial position of Kronos Worldwide, Inc. and its subsidiaries (collectively,
the  "Company") at December 31, 2002 and 2001, and the  consolidated  results of
its  operations  and its cash  flows for each of the three  years in the  period
ended  December 31, 2002 in  conformity  with  accounting  principles  generally
accepted in the United States of America.  These  financial  statements  are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.




                                                     PricewaterhouseCoopers LLP


Houston, Texas
July 28,  2003,  except for Note 1, as to
which the date is September 26, 2003









                                      FB-2


<PAGE>
                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)


<TABLE>
<CAPTION>

                                                          December 31,                     Pro Forma
                                                    --------------------       June 30,     June 30,
                      ASSETS                           2001       2002           2003        2003
                                                    ---------  ---------       --------    ---------
                                                                                  (Unaudited)
Current assets:
<S>                                                 <C>        <C>          <C>          <C>
   Cash and cash equivalents ....................   $ 54,717   $   40,685   $   29,565   $   29,565
   Restricted cash equivalents ..................       --           --            956          956
   Accounts and other receivables ...............    123,870      134,243      180,862      180,862
   Receivable from affiliates ...................         47        1,032           62           62
   Refundable income taxes ......................      1,528        1,777       25,595       25,595
   Inventories ..................................    231,056      209,882      199,760      199,760
   Prepaid expenses .............................      2,642        6,390        3,835        3,835
   Deferred income taxes ........................      4,640        4,404        4,598        4,598
                                                    --------     --------     --------     --------
      Total current assets ......................    418,500      398,413      445,233      445,233
                                                    --------     --------     --------     --------

Other assets:
   Notes receivable from NL Industries, Inc. ....       --         44,600         --           --
   Investment in TiO2 manufacturing joint venture    138,428      130,009      129,209      129,209
   Prepaid pension cost .........................     16,043       17,572       17,209       17,209
   Other ........................................     11,100       22,193       20,418       20,418
                                                    --------     --------     --------     --------
      Total other assets ........................    165,571      214,374      166,836      166,836
                                                    --------     --------     --------     --------

Property and equipment:
   Land .........................................     22,066       26,568       29,404       29,404
   Buildings ....................................    129,005      148,701      163,950      163,950
   Machinery and equipment ......................    534,089      636,336      693,089      693,089
   Mining properties ............................     48,167       65,296       63,114       63,114
   Construction in progress .....................      5,071        8,702       14,600       14,600
                                                    --------     --------     --------     --------
                                                     738,398      885,603      964,157      964,157
   Less accumulated depreciation and depletion ..    412,373      509,845      561,976      561,976
                                                    --------     --------     --------     --------
      Net property and equipment ................    326,025      375,758      402,181      402,181
                                                    --------     --------     --------     --------
                                                    $910,096   $  988,545   $1,014,250   $1,014,250
                                                    ========   ==========   ==========   ==========
</TABLE>

                                      FB-3

<PAGE>

                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      (In thousands, except per share data)


<TABLE>
<CAPTION>

                                                             December 31,                          Pro Forma
                                                         ------------------         June 30,        June 30,
         LIABILITIES AND STOCKHOLDER'S EQUITY            2001          2002           2003            2003
                                                         ----          ----        ---------       ----------
                                                                                           (Unaudited)

Current liabilities:
<S>                                                <C>            <C>            <C>            <C>
    Notes payable ..............................   $    46,201    $      --      $      --      $      --
    Current maturities of long-term debt .......         1,033          1,298            781            781
    Accounts payable and accrued liabilities ...       152,633        148,257        129,221        129,221
    Payable to affiliates ......................        11,365          7,933         11,320         11,320
    Income taxes ...............................         7,181          6,193          5,609          5,609
    Deferred income taxes ......................         1,530          3,219          1,711          1,711
                                                   -----------    -----------    -----------    -----------
     Total current liabilities .................       219,943        166,900        148,642        148,642
                                                   -----------    -----------    -----------    -----------
Noncurrent liabilities:
    Long-term debt .............................         1,465        324,608        360,444        360,444
    Notes payable to affiliates ................       194,000         44,600           --          200,000
    Deferred income taxes ......................        64,538         79,234         90,032         90,032
    Accrued pension cost .......................        25,558         33,098         35,078         35,078
    Accrued postretirement benefits cost .......        13,036         11,806         11,567         11,567
    Other ......................................        12,733         13,742         14,573         14,573
                                                   -----------    -----------    -----------    -----------
     Total noncurrent liabilities ..............       311,330        507,088        511,694        711,694
                                                   -----------    -----------    -----------    -----------
Minority interest ..............................           284            383            465            465
                                                   -----------    -----------    -----------    -----------
Stockholder's equity:
    Preferred stock - $.01 par value; 100 shares
     authorized; no shares issued or outstanding          --             --             --             --
    Common stock - $.01 par value; 60,000 shares
     authorized; 48,943 shares issued ..........           489            489            489            489
    Additional paid-in capital .................     1,060,157      1,060,157      1,060,157      1,060,157
    Retained earnings (deficit) ................       180,048       (584,909)      (558,346)      (758,346)
    Notes receivable from NL Industries, Inc. ..      (655,918)          --             --             --
    Accumulated other comprehensive loss:
     Currency translation ......................      (199,885)      (148,082)      (135,370)      (135,370)
     Pension liabilities .......................        (6,352)       (13,481)       (13,481)       (13,481)
                                                   -----------    -----------    -----------    -----------
     Total stockholder's equity ................       378,539        314,174        353,449        153,449
                                                   -----------    -----------    -----------    -----------
                                                   $   910,096    $   988,545    $ 1,014,250    $ 1,014,250
                                                   ===========    ===========    ===========    ===========
</TABLE>

Commitments and contingencies (Notes 14 and 19)

          See accompanying notes to consolidated financial statements.
                                      FB-4
<PAGE>

                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                        Six months ended
                                                      Years ended December 31,               June 30,
                                               -----------------------------------    ----------------------
                                                  2000         2001         2002         2002         2003
                                               ---------    ---------    ---------    ---------    ---------
                                                                                           (Unaudited)

<S>                                            <C>          <C>          <C>          <C>          <C>
Net sales ..................................   $ 922,319    $ 835,099    $ 875,188    $ 429,266    $ 519,604
Cost of sales ..............................     610,449      578,060      671,830      332,500      386,066
                                               ---------    ---------    ---------    ---------    ---------

        Gross margin .......................     311,870      257,039      203,358       96,766      133,538

Selling, general and administrative
  expense ..................................     107,554       98,667      107,675       49,626       60,354
Other operating income (expense):
    Currency transaction gains (losses), net       6,510        1,188         (547)      (1,451)      (3,841)
    Disposition of property and equipment ..      (1,562)        (735)        (625)         597          (44)
    Insurance recoveries, net ..............        --          7,222         --           --           --
    Other income ...........................       1,116          886          459          100          166
    Other expense ..........................        (230)         (78)        (172)        (117)         (54)
    Corporate expense ......................      (6,949)      (4,878)      (3,288)      (1,493)      (1,684)
                                               ---------    ---------    ---------    ---------    ---------

        Operating income ...................     203,201      161,977       91,510       44,776       67,727

General corporate income (expense):
    Currency transaction gain ..............        --           --          6,271        6,271         --
    Insurance recoveries, net ..............        --         17,468         --           --           --
    Interest expense .......................      (2,005)      (4,305)     (16,837)      (1,698)     (16,350)
    Interest expense to affiliates .........     (28,979)     (22,969)     (12,290)     (12,167)        (703)
    Trade interest income ..................       2,333        2,332        1,709          555          361
    Interest income from affiliates ........      20,250       33,379       20,754       17,475          723
    Other interest income ..................       1,078          349          702           71           74
                                               ---------    ---------    ---------    ---------    ---------

     Income before income taxes and
      minority interest ....................     195,878      188,231       91,819       55,283       51,832

Income tax expense (benefit) ...............      65,625       33,759       25,500       14,945       (6,674)
                                               ---------    ---------    ---------    ---------    ---------

     Income before minority interest .......     130,253      154,472       66,319       40,338       58,506

Minority interest ..........................          47           16           55           27           43
                                               ---------    ---------    ---------    ---------    ---------

     Net income ............................   $ 130,206    $ 154,456    $  66,264    $  40,311    $  58,463
                                               =========    =========    =========    =========    =========
Net income per basic and diluted share .....   $    2.66    $    3.16    $    1.35    $     .82    $    1.19
                                               =========    =========    =========    =========    =========
Basic and diluted weighted average
  shares used in the calculation of net
  income per share .........................      48,943       48,943       48,943       48,943       48,943
                                               =========    =========    =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                      FB-5
<PAGE>


                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                         Six months ended
                                                       Years ended December 31,              June 30,
                                                -----------------------------------    ------------------
                                                    2000         2001         2002       2002      2003
                                                ----------    ---------    ---------    -------   -------
                                                                                           (Unaudited)

<S>                                              <C>          <C>          <C>          <C>       <C>
Net income ...................................   $ 130,206    $ 154,456    $  66,264    $40,311   $58,463
                                                 ---------    ---------    ---------    -------   -------

Other comprehensive income (loss), net of tax:
    Minimum pension liabilities
     adjustment ..............................         691       (6,352)      (7,129)      --        --

    Currency translation adjustment ..........     (30,415)     (15,974)      51,803     51,174    12,712
                                                 ---------    ---------    ---------    -------   -------

     Total other comprehensive (loss)
        income ...............................     (29,724)     (22,326)      44,674     51,174    12,712
                                                 ---------    ---------    ---------    -------   -------

    Comprehensive income .....................   $ 100,482    $ 132,130    $ 110,938    $91,485   $71,175
                                                 =========    =========    =========    =======   =======
</TABLE>

          See accompanying notes to consolidated financial statements.
                                      FB-6
<PAGE>

                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                  Years ended December 31, 2000, 2001 and 2002
                   Six months ended June 30, 2003 (Unaudited)
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                    Notes       Accumulated other
                                                        Additional   Retained     receivable comprehensive income (loss)
                                              Common     paid-in     earnings        from      Currency      Pension
                                               stock     capital     (deficit)    affiliates  translation  liabilities    Total
                                              -------  ----------   ----------   ----------- ------------  ----------- ----------

<S>                                             <C>    <C>          <C>          <C>          <C>          <C>         <C>
Balance at December 31, 1999 ................   $489   $  483,694   $ (19,114)   $    --      $(153,496)   $   (691)   $ 310,882

Net income ..................................    --          --       130,206         --           --          --        130,206
Other comprehensive (loss) income, net of tax    --          --          --           --        (30,415)        691      (29,724)
Change in notes receivable from affiliates ..    --          --          --        (61,579)        --          --        (61,579)
Dividends declared ..........................    --          --       (55,000)        --           --          --        (55,000)
Capital contribution ........................    --       291,910        --       (240,116)        --          --         51,794
                                                ----   ----------    --------    ---------    ---------    --------    ---------
Balance at December 31, 2000 ................    489      775,604      56,092     (301,695)    (183,911)       --        346,579

Net income ..................................    --          --       154,456         --           --          --        154,456
Other comprehensive loss, net of tax ........    --          --          --           --        (15,974)     (6,352)     (22,326)
Change in notes receivable from affiliates ..    --          --          --        (69,678)        --          --        (69,678)
Dividends declared ..........................    --          --       (30,500)        --           --          --        (30,500)
Capital contribution ........................    --       284,553        --       (284,545)        --          --              8
                                                ----   ----------    --------    ---------    ---------    --------    ---------
Balance at December 31, 2001 ................    489    1,060,157     180,048     (655,918)    (199,885)     (6,352)     378,539

Net income ..................................    --          --        66,264         --           --          --         66,264
Other comprehensive income (loss), net of tax    --          --          --           --         51,803      (7,129)      44,674
Change in notes receivable from affiliates ..    --          --          --        (55,154)        --          --        (55,154)
Dividends declared:
   Cash .....................................    --          --      (120,149)        --           --          --       (120,149)
   Noncash ..................................    --          --      (711,072)     711,072         --          --           --
                                                ----   ----------    --------    ---------    ---------    --------    ---------
Balance at December 31, 2002 ................    489    1,060,157    (584,909)        --       (148,082)    (13,481)     314,174

Net income ..................................    --          --        58,463         --           --          --         58,463
Other comprehensive income ..................    --          --          --           --         12,712        --         12,712
Dividends declared: .........................    --          --          --           --           --          --           --
    Cash ....................................    --          --        (7,000)        --           --          --         (7,000)
    Noncash .................................    --          --       (24,900)        --           --          --        (24,900)
                                                ----   ----------    --------    ---------    ---------    --------    ---------
Balance at June 30, 2003 (unaudited) ........   $489   $1,060,157   $(558,346)   $    --      $(135,370)   $(13,481)   $ 353,449
                                                ====   ==========   =========    =========    =========    ========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                      FB-7
<PAGE>

                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                          Six months ended
                                                      Years ended December 31,                 June 30,
                                                 -----------------------------------    ----------------------
                                                    2000        2001          2002        2002          2003
                                                 --------     ---------    ---------    --------    ----------
                                                                                             (Unaudited)

Cash flows from operating activities:
<S>                                              <C>          <C>          <C>          <C>         <C>
Net income ...................................   $ 130,206    $ 154,456    $  66,264    $ 40,311    $ 58,463
    Depreciation and amortization ............      28,989       28,907       32,152      15,287      19,287
    Noncash interest income from affiliates ..     (21,579)     (22,201)     (20,629)    (14,552)       --
    Noncash interest expense .................        --           --            932        --         1,102
    Deferred income taxes ....................      11,901       (4,242)      10,755       7,393       5,852
    Minority interest ........................          47           16           55          27          43
    Net loss (gain) from disposition of
     property and equipment ..................       1,562          735          625        (597)         44
    Pension cost, net ........................      (3,710)      (2,332)      (1,866)     (1,931)     (1,410)
    Other postretirement benefits, net .......      (1,056)      (1,236)      (1,250)       (634)       (555)
    Distributions from TiO2 manufacturing
     joint venture, net ......................       7,550       11,313        7,950       2,250         800
    Insurance recoveries, net ................        --        (17,468)        --          --          --
    Other, net ...............................        --            261         --          --          --
Change in assets and liabilities:
    Accounts and other receivables ...........       1,541        2,507        5,547     (18,710)    (36,570)
    Inventories ..............................     (23,395)     (32,698)      42,249      68,227      25,301
    Prepaid expenses .........................        (124)        (322)        (344)       (968)      2,901
    Accounts payable and accrued liabilities .      16,973       26,274      (25,049)    (52,413)    (27,168)
    Income taxes .............................      11,705       (4,211)      (2,239)     (3,003)    (24,131)
    Accounts with affiliates .................      (3,114)        (652)      (4,440)     (3,028)      5,244
    Other noncurrent assets ..................        (458)      (1,314)          74       3,211         337
    Other noncurrent liabilities .............      (2,309)      (2,111)        (866)       (749)       (209)
                                                  --------     --------     --------    --------     -------
     Net cash provided by operating activities     154,729      135,682      109,920      40,121      29,331
                                                  --------     --------     --------    --------     -------


</TABLE>

                                     FB-8
<PAGE>

                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                         Six months ended
                                                       Years ended December 31,              June 30,
                                                -----------------------------------   ----------------------
                                                   2000        2001        2002          2002        2003
                                                ---------  ----------  -----------    ---------  -----------
                                                                                           (Unaudited)

Cash flows from investing activities:
<S>                                             <C>          <C>         <C>          <C>          <C>
    Capital expenditures ....................   $ (31,066)   $(53,656)   $ (32,571)   $ (12,073)   $(13,766)
    Property damaged by fire:
     Insurance proceeds .....................        --        23,361         --           --          --
     Other, net .............................        --        (3,205)        --           --          --
    Change in restricted cash and restricted
     marketable debt securities, net ........        --          (577)      (1,665)        --        (1,005)
    Proceeds from disposition of property and
     equipment ..............................         110         399          864          832          47
    Other, net ..............................         (33)       --           --           --          --
                                                ---------    --------     --------     --------    --------
     Net cash used by investing activities ..     (30,989)    (33,678)     (33,372)     (11,241)    (14,724)
                                                ---------    --------     --------     --------    --------
Cash flows from financing activities:
    Indebtedness:
     Borrowings .............................      44,923       1,437      335,768      319,275      16,106
     Principal payments .....................     (29,162)    (22,428)     (84,814)     (53,688)    (11,615)
     Deferred financing fees ................        --          --        (10,706)      (9,342)       --
    Dividends paid ..........................     (55,000)    (30,500)    (111,000)        --        (7,000)
    Loans from affiliates:
     Loans ..................................        --          --         44,600         --         8,000
     Repayments .............................     (93,000)       --       (194,000)    (194,000)    (52,600)
    Other capital transactions with
     affiliates, net ........................     (40,000)    (47,477)     (73,749)     (29,149)     19,700
    Other, net ..............................          (6)          3          (11)         (11)       --
                                                ---------    --------     --------     --------    --------
     Net cash (used) provided by financing
      activities ............................    (172,245)    (98,965)     (93,912)      33,085     (27,409)
                                                ---------    --------     --------     --------    --------
     Net change during the period from ......
      operating, investing and financing
      activities ............................   $ (48,505)   $  3,039    $ (17,364)    $ 61,965    $(12,802)
                                                ---------    --------     --------     --------    --------
</TABLE>


                                      FB-9
<PAGE>

                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (In thousands)


<TABLE>
<CAPTION>
                                                        Years ended                 Six months ended
                                                        December 31,                    June 30,
                                            ----------------------------------    ---------------------
                                               2000        2001        2002         2002        2003
                                            ---------   ----------  ----------    --------   ----------
                                                                                       (Unaudited)

Cash and cash equivalents:
  Net change during the period from:
   Operating, investing and financing
<S>                                         <C>          <C>         <C>         <C>          <C>
    activities ..........................   $ (48,505)   $  3,039    $(17,364)   $  61,965    $(12,802)
   Currency translation .................      (1,635)     (1,301)      3,332        3,050       1,682
                                            ---------    --------    --------    ---------    --------
                                              (50,140)      1,738     (14,032)      65,015     (11,120)

        Balance at beginning of period ..     103,119      52,979      54,717       54,717      40,685
                                            ---------    --------    --------    ---------    --------
        Balance at end of period ........   $  52,979    $ 54,717    $ 40,685    $ 119,732    $ 29,565
                                            =========    ========    ========    =========    ========
Supplemental disclosures - cash paid for:
    Interest ............................   $  32,304    $ 27,239    $ 33,169    $  18,747    $ 17,048
    Income taxes ........................      45,157      43,422      17,369        9,468       7,534
</TABLE>



          See accompanying notes to consolidated financial statements.
                                      FB-10

<PAGE>


                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation:


     Kronos Worldwide,  Inc.  ("Kronos"),  formerly known as Kronos,  Inc., is a
wholly owned subsidiary of NL Industries,  Inc. ("NL"). NL conducts its titanium
dioxide pigments  ("TiO2")  operations  through Kronos. At June 30, 2003, Valhi,
Inc. ("Valhi") and Tremont LLC ("Tremont"),  a wholly owned subsidiary of Valhi,
held an aggregate of  approximately  85% of NL's  outstanding  common stock, and
Contran  Corporation  ("Contran") and its subsidiaries held approximately 90% of
Valhi's  outstanding  common  stock.  At December 31, 2002,  (i) Contran and its
subsidiaries held  approximately 93% of Valhi's  outstanding  common stock, (ii)
Tremont  Group,  Inc.  ("Tremont  Group"),  which was 80% owned by Valhi and 20%
owned  by NL,  held  approximately  80% of the  outstanding  shares  of  Tremont
Corporation  ("Tremont  Corp.")  common stock and (iii) Valhi and Tremont  Corp.
held  63%  and  21%,  respectively,  of  the  outstanding  common  stock  of NL.
Substantially  all of  Contran's  outstanding  voting  stock  is held by  trusts
established for the benefit of certain  children and  grandchildren of Harold C.
Simmons, of which Mr. Simmons is sole trustee.  Mr. Simmons, the Chairman of the
Board and Chief  Executive  Officer of Kronos and NL as well as the  Chairman of
the Board of each of Contran,  Valhi and Tremont,  may be deemed to control each
of such companies and Kronos.


     In  January  2002,  the  Company  acquired  all of the  stock  and  limited
liability company units of EWI RE, Inc. and EWI RE, Ltd.  (collectively  "EWI"),
respectively,  for an aggregate of $9.2 million in cash,  including  acquisition
costs  of $.2  million.  An  entity  controlled  by one of  Harold  C.  Simmons'
daughters  owned a majority of EWI,  and a wholly  owned  subsidiary  of Contran
owned the  remainder  of EWI. EWI provides  reinsurance  brokerage  services for
insurance  policies of the Company,  its joint  venture and other  affiliates of
Contran as well as external third-party customers.  The purchase was approved by
a  special  committee  of  NL's  Board  of  Directors  consisting  of two of its
directors  unrelated to Contran and the Company's  Board of  Directors,  and the
purchase  price  was  negotiated  by  the  special   committee  based  upon  its
consideration  of  relevant  factors,  including  not  limited to due  diligence
performed by  independent  consultants  and an appraisal of EWI  conducted by an
independent  third party  selected by the  special  committee.  In June 2003 the
Company  distributed  its  investment in the common stock and limited  liability
company  units in EWI to NL in the form of a noncash  dividend.  The Company has
accounted  for the  distribution  of EWI as a change in accounting  entity,  and
accordingly   the  Company's   consolidated   financial   statements  have  been
retroactively restated to exclude the assets, liabilities, results of operations
and  cash  flows  of EWI  for all  periods  presented  since  the  January  2002
acquisition.  The effect of the  change in  accounting  entity on the  Company's
consolidated  net income was immaterial for 2002 and 2003, and the effect of the
change in accounting entity on the Company's  previously reported  stockholder's
equity was a reduction of approximately  $10 million.  The $9.2 million purchase
price  for  EWI is  reflected  as  part  of  "other  capital  transactions  with
affiliates, net" in the accompanying consolidated statements of cash flows.


     Information  included in the consolidated  financial statements and related
notes to the consolidated  financial  statements as of June 30, 2003 and for the
six  months  ended  June 30,  2002 and 2003,  is  unaudited.  In the  opinion of
management,  all adjustments,  consisting only of normal recurring  adjustments,
necessary  to state  fairly the  information  for the interim  periods have been
made.  The results of  operations  for the interim  periods are not  necessarily
indicative  of the  operating  results for a full year or of future  operations.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with accounting  principles generally accepted
in the U.S. ("GAAP") have been condensed or omitted for the interim periods.


     On  September  26,  2003,  Kronos  amended  and  restated  its  articles of
incorporation.  Under the amended and restated articles of incorporation,  among
other things,  (i) Kronos'  authorized  capital stock now consists of 60 million
shares of common  stock and 100,000  shares of preferred  stock,  each par value
$.01 per share,  and (ii) the 1,000 shares of Kronos'  common  stock  previously
outstanding  were  reclassified  into an aggregate of 48.9 million  shares.  The
accompanying   consolidated   financial   statements  have  been   retroactively
reclassified  to  reflect  such  changes in Kronos'  capital  structure  for all
periods  presented.  Earnings per share data for all periods  presented has been
restated to reflect the 48.9  million  shares of Kronos'  common  stock that was
outstanding  following  effectiveness  of the amended and  restated  articles of
incorporation.

                                      FB-11

<PAGE>

     In August 2003 NL announced a distribution  of  approximately  48.9% of the
outstanding  shares of Kronos' common stock to NL  shareholders in the form of a
pro-rata dividend.  In September 2003, NL determined to reduce the percentage of
Kronos'  common  stock to be  distributed  to  48.7%.  Upon  completion  of such
distribution, Valhi, Tremont and NL will own an aggregate of approximately 92.5%
of Kronos' common stock, and other NL shareholders would own the remaining 7.5%.
Immediately  prior to such  distribution,  Kronos  intends to pay a $200 million
dividend  to NL in the  form of a  long-term  note  payable.  The  $200  million
long-term note payable to NL will be unsecured,  bears interest at 9% per annum,
with interest payable quarterly and all principal due in 2010.


     The  accompanying  unaudited  pro forma  balance  sheet as of June 30, 2003
assumed Kronos had distributed the $200 million  long-term note payable to NL as
if the  transaction  had  occurred on June 30,  2003.  The  unaudited  pro forma
balance sheet does not purport to project what Kronos'  financial  position will
be in the future when Kronos actually completes these transactions.


Note 2 - Summary of significant accounting policies:


Principles of consolidation and management's estimates

     The accompanying  consolidated financial statements include the accounts of
Kronos and its majority-owned  subsidiaries  (collectively,  the "Company"). All
material   intercompany   accounts  and  balances  have  been  eliminated.   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  amount of revenues  and expenses
during the reporting period. Actual results may differ from previously estimated
amounts  under  different  assumptions  or  conditions.  The  Company  currently
believes that it has no involvement with any variable interest entity covered by
the scope of FASB  Interpretation  ("FIN")  No. 46,  "Consolidation  of Variable
Interest Entities."


Translation of foreign currencies



     Assets and liabilities of subsidiaries  whose functional  currency is other
than the U.S.  dollar are  translated at year-end rates of exchange and revenues
and expenses are translated at weighted average exchange rates prevailing during
the year. Resulting translation  adjustments are included in other comprehensive
income  (loss),  net of related  income taxes.  Currency  transaction  gains and
losses are recognized in income  currently,  and in 2002 included a $6.3 million
gain related to the extinguishment of certain intercompany  indebtedness that is
classified  as a  component  of  other  income  (expense)  in  the  accompanying
consolidated statement of income.



Cash equivalents



     Cash  equivalents   include  U.S.  Treasury   securities   purchased  under
short-term  agreements to resell and bank  deposits with original  maturities of
three months or less.


Restricted marketable debt securities

     Restricted  marketable debt securities are primarily  invested in corporate
debt  securities.  Restricted  marketable debt securities of  approximately  $.6
million  and  approximately  $2.5  million,  as of  December  31, 2001 and 2002,
respectively,  were used to support certain capital  requirements  regarding the
Company's  Norwegian  operating  subsidiaries'  defined benefit pension plans in
accordance with applicable Norwegian law. Restricted  marketable debt securities
are generally  classified as either current or noncurrent  assets depending upon
the maturity  date of each  marketable  debt  security and are carried at market
which approximates cost. See Note 6.



Inventories and cost of goods sold


     Inventories are stated at the lower of cost  (principally  average cost) or
market. Amounts are removed from inventories at average cost. Cost of goods sold
includes  costs for  materials,  packing and  finishing,  utilities,  salary and
benefits, maintenance and depreciation.

                                      FB-12

<PAGE>

Investment in TiO2 manufacturing joint venture

     Investment in a 50%-owned  manufacturing  joint venture is accounted for by
the equity method.


Property, equipment, depreciation and depletion

     Property and equipment are stated at cost. Interest costs related to major,
long-term capital projects are capitalized as a component of construction costs.
Expenditures  for   maintenance,   repairs  and  minor  renewals  are  expensed;
expenditures for major improvements are capitalized.



     The Company has a governmental concession with an unlimited term to operate
an ilmenite mine in Norway. Mining properties consist of buildings and equipment
used in the Company's Norwegian ilmenite mining operations. The Company does not
own the ilmenite reserves associated with the mine.



     Depreciation  of property and equipment  (including  mining  properties) is
computed principally by the straight-line method over the estimated useful lives
of ten to forty years for  buildings and three to twenty years for machinery and
equipment.  When events or changes in circumstances  indicate that assets may be
impaired,  an evaluation is performed to determine if an impairment exists. Such
events or changes in circumstances  include, among other things, (i) significant
current  and prior  periods or current  and  projected  periods  with  operating
losses,  (ii) a significant  decrease in the market value of an asset or (iii) a
significant  change  in the  extent  or  manner  in which an asset is used.  All
relevant  factors  are  considered.  The test for  impairment  is  performed  by
comparing the estimated  future  undiscounted  cash flows (exclusive of interest
expense)  associated  with  the  asset  to the  asset's  net  carrying  value to
determine  if a  write-down  to market  value or  discounted  cash flow value is
required.  Effective  January 1, 2002,  the  Company  commenced  accounting  for
impairment of other long-lived assets (such as property and equipment and mining
properties)  in  accordance  with  Statement of Financial  Accounting  Standards
("SFAS") No. 144 as discussed under "Accounting principles adopted in 2002."


Long-term debt and interest expense


     Amortization of deferred financing costs,  included in interest expense, is
computed by the interest method over the term of the applicable issue.


Employee benefit plans

     Accounting  and funding  policies for retirement  plans and  postretirement
benefits other than pensions ("OPEB") are described in Note 12.


     The Company has not issued any stock  options to  purchase  Kronos'  common
stock. However, certain employees of the Company have been granted options by NL
to purchase NL common stock. The Company has elected the disclosure  alternative
prescribed  by SFAS No.  123,  "Accounting  for  Stock-Based  Compensation,"  as
amended by SFAS No. 148,  "Accounting for Stock-Based  Compensation - Transition
and  Disclosure,"  and to  account  for its  stock-based  employee  compensation
related to these NL stock options in accordance with Accounting Principles Board
Opinion  ("APBO") No. 25,  "Accounting  for Stock Issued to Employees,"  and its
various  interpretations.  Under APBO No. 25, no compensation  cost is generally
recognized  for fixed stock options in which the exercise price is not less than
the market  price on the grant  date.  During the  fourth  quarter of 2002,  and
following  NL's cash  settlement  of options to purchase NL common stock held by
certain  individuals,  NL, including the Company,  commenced  accounting for its
stock options using the variable accounting method because NL could not overcome
the  presumption  that it would not similarly  cash settle its  remaining  stock
options.  Under the  variable  accounting  method,  the  intrinsic  value of all
unexercised stock options (including those with an exercise price at least equal
to the market  price on the date of grant) are accrued as an expense  over their
vesting  period,  with  subsequent  increases  (decreases)  in NL's market price
resulting in additional compensation expense (income). See Notes 13 and 17. Upon
exercise of such  options to purchase NL common  stock held by  employees of the

                                     FB-13

<PAGE>


Company,  the  Company  pays NL an amount  equal to the  difference  between the
market price of NL's common stock on the date of exercise and the exercise price
of such stock option. Aggregate compensation expense related to NL stock options
held by employees of the Company was $2.1 million in 2000,  nil in 2001 and $2.3
million in 2002, and nil in both the six months ended June 30, 2002 and 2003.

     The following  table  illustrates the effect on net income and earnings per
share if the Company had applied the fair value  recognition  provisions of SFAS
No. 123 to stock-based employee compensation.


<TABLE>
<CAPTION>
                                                                                           Six months ended
                                                          Years ended December 31,              June 30,
                                                   -----------------------------------    --------------------
                                                      2000          2001        2002       2002        2003
                                                  ------------- ------------- --------    --------   ---------
                                                                                               (Unaudited)
                                                             (In thousands, except per share amounts)

<S>                                                <C>          <C>          <C>         <C>         <C>
Net income - as reported .......................   $ 130,206    $ 154,456    $ 66,264    $ 40,311    $ 58,463
Add back:  Stock-based compensation cost, net of
   tax, included in reported net income ........       1,349         --         1,549        --          --
Deduct:  Stock-based compensation cost, net of
   tax, determined under fair value based method
   for all awards ..............................      (1,077)      (1,112)       (740)       (370)       (165)
                                                   ---------    ---------    --------    --------    --------

Net income - pro forma .........................   $ 130,478    $ 153,344    $ 67,073    $ 39,941    $ 58,298
                                                   =========    =========    ========    ========    ========
Net income per basic and diluted common share:
     As reported ...............................   $    2.66    $    3.16    $   1.35    $    .82    $   1.19
     Pro forma .................................   $    2.67    $    3.13    $   1.37    $    .82    $   1.19
</TABLE>

Environmental remediation costs

     Environmental   remediation   costs  are  accrued  when  estimated   future
expenditures  are  probable  and  reasonably  estimable.  The  estimated  future
expenditures  are  generally  not  discounted  to present  value.  Recoveries of
remediation  costs from other parties,  if any, are reported as receivables when
their receipt is deemed probable.  At December 31, 2001 and 2002, no receivables
for recoveries have been recognized.


Net sales


     The Company adopted the SEC's Staff  Accounting  Bulletin  ("SAB") No. 101,
"Revenue  Recognition in Financial  Statements,"  as amended,  in 2000.  Revenue
generally is realized or realizable and earned when all of the  requirements  of
SAB No. 101 are met, including when title and the risks and rewards of ownership
passes to the  customer  (generally  at the time the  product  is shipped to the
customer). The impact of adopting SAB No. 101 was not material.  Amounts charged
to customers  for  shipping  and  handling are included in net sales.  Sales are
stated net of price, early payment and distributor discounts and volume rebates.


Repair and maintenance costs


     The Company performs planned major maintenance  activities during the year.
Repair and maintenance costs estimated to be incurred in connection with planned
major maintenance  activities are accrued in advance and are included in cost of
goods sold.  Accrued  repair and  maintenance  costs,  included in other current
liabilities (see Note 8), was $3.4 million and $4.0 million at December 31, 2001
and 2002, respectively.



Selling, general and administrative expenses; shipping and handling costs

     Selling,  general and  administrative  expenses  include  costs  related to
marketing, sales, distribution,  shipping and handling, research and development
and  administrative  functions  such as  accounting,  treasury and finance,  and
includes costs for salary and benefits,  travel and  entertainment,  promotional
materials  and  professional  fees.  Shipping  and  handling  costs  included in
selling,  general  and  administrative  expense  were $50  million in 2000,  $49
million in 2001 and $51 million in 2002.


                                      FB-14

<PAGE>


Income taxes


     Kronos and its  qualifying  subsidiaries  are members of NL's  consolidated
U.S.  federal  income tax group (the "NL Tax Group").  As a member of the NL Tax
Group,  the  Company  is a  party  to a  tax  sharing  agreement  (the  "NL  Tax


Agreement").  Effective January 1, 2001, the NL Tax Group, including Kronos, was
included in the  consolidated  U.S.  federal tax return of Contran (the "Contran
Tax Group").  As a member of the Contran Tax Group,  NL is a party to a separate
tax sharing  agreement (the "Contran Tax Agreement").  The Contran Tax Agreement
provides that NL and its qualifying subsidiaries,  including Kronos, compute its
provision  for U.S.  income  taxes on a  separate-company  basis  using  the tax
elections  made by Contran.  Pursuant to the NL Tax Sharing  agreement and using
the tax elections made by Contran, Kronos makes payments to or receives payments
from NL in  amounts  it would have paid to or  received  from the U.S.  Internal
Revenue  Service  had it not been a member  of NL's  consolidated  tax group but
instead was a separate taxpayer.  Refunds are limited to amounts previously paid
under the tax sharing agreement.


     Following  completion  of NL's  distribution  of 48.7%  of the  outstanding
shares of Kronos  common  stock to NL  shareholders,  Kronos and its  qualifying
subsidiaries  are no longer  members  of the NL Tax  Group,  but  Kronos and its
qualifying  subsidiaries remain as members of the Contran Tax Group. Kronos will
enter  into  a  new  tax  sharing   agreement   with  Valhi  and  Contran   (the
"Kronos/Contran/Valhi Tax Agreement"). The Kronos/Contran/Valhi Tax Agreement is
expected to contain similar terms to the NL Tax Agreement.

     Deferred  income tax assets and liabilities are recognized for the expected
future tax  consequences  of  temporary  differences  between the income tax and
financial  reporting  carrying  amounts  of assets  and  liabilities,  including
investments in subsidiaries and unconsolidated affiliates not included in the NL
Tax Group.  The Company  periodically  evaluates  its deferred tax assets in the
various  taxing  jurisdictions  in which it  operates  and  adjusts  any related
valuation allowance. The Company's valuation allowance is equal to the amount of
deferred   tax   assets   which   the   Company   believes   do  not   meet  the
"more-likely-than-not" recognition criteria.


Derivatives and hedging activities

     The Company adopted SFAS No. 133,  "Accounting  for Derivative  Instruments
and Hedging  Activities,"  as amended,  effective  January 1, 2001. SFAS No. 133
establishes accounting standards for derivative  instruments,  including certain
derivative instruments embedded in other contracts,  and for hedging activities.
Under  SFAS No.  133,  all  derivatives  are  recognized  as  either  assets  or
liabilities and measured at fair value. The accounting for changes in fair value
of  derivatives  is  dependent  upon  the  intended  use of the  derivative.  As
permitted  by the  transition  requirements  of SFAS No. 133,  as  amended,  the
Company  exempted from the scope of SFAS No. 133 all host  contracts  containing
embedded  derivatives which were issued or acquired prior to January 1, 1999. At
December  31,  2001 and 2002,  the  Company  was not a party to any  significant
derivative or hedging instrument covered by SFAS No. 133. There was no impact on
the Company's financial statements from adopting SFAS No. 133.

     The Company periodically uses interest rate swaps, currency swaps and other
types of  contracts  to manage  interest  rate and  foreign  exchange  risk with
respect to  financial  assets or  liabilities.  The Company has not entered into
these  contracts for trading or  speculative  purposes in the past,  nor does it
currently  anticipate doing so in the future. The Company was not a party to any
such contracts during 2000, 2001 and 2002.


Accounting principles adopted in 2002

     The  Company  adopted  SFAS No.  144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets," effective January 1, 2002. SFAS No. 144 retains
the fundamental  provisions of existing GAAP with respect to the recognition and
measurement  of  long-lived  asset   impairment   contained  in  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." However, SFAS No. 144 provides new guidance intended to address
certain  significant   implementation  issues  associated  with  SFAS  No.  121,
including expanded guidance with respect to appropriate cash flows to be used to

                                      FB-15

<PAGE>

determine  whether  recognition of any long-lived  asset impairment is required,
and if required how to measure the amount of the  impairment.  SFAS No. 144 also
requires  that any net assets to be  disposed  of by sale to be  reported at the
lower of  carrying  value or fair  value  less  cost to sell,  and  expands  the
reporting of discontinued  operations to include any component of an entity with
operations and cash flows that can be clearly distinguished from the rest of the
entity.  The adoption of SFAS No. 144  effective  January 1, 2002 did not have a
material effect on the Company's  consolidated  financial  position,  results of
operations or liquidity.

     The Company adopted SFAS No. 145,  "Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13 and Technical  Corrections" effective
April  1,  2002.  SFAS  No.  145,  among  other  things,  eliminated  the  prior
requirement that all gains and losses from the early extinguishment of debt were
to be classified as an extraordinary  item. Upon adoption of SFAS No. 145, gains
and  losses  from the  early  extinguishment  of debt are now  classified  as an
extraordinary  item  only if they meet the  "unusual  and  infrequent"  criteria
contained in APBO No. 30. In addition,  upon adoption of SFAS No. 145, all gains
and  losses  from the  early  extinguishment  of debt that had  previously  been
classified  as an  extraordinary  item are to be reassessed to determine if they
would have met the  "unusual and  infrequent"  criteria of APBO No. 30; any such
gain or loss that would not have met the APBO No. 30 criteria are  retroactively
reclassified  and reported as a component of income before  extraordinary  item.
The adoption of SFAS No. 145  effective  January 1, 2002 did not have a material
effect on the Company's consolidated  financial positions,  results of operation
or liquidity.

     In November 2002, the FASB issued FIN No. 45,  "Guarantor's  Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness  of  Others."  FIN No. 45  requires  a  guarantor  to  recognize  a
liability at the  inception  of a guarantee  covered by the scope of FIN No. 45,
equal to the fair value of the  obligation  undertaken in issuing the guarantee.
FIN No. 45 also  expands the  disclosures  requirements  with respect to certain
guarantees. The initial recognition and measurement provisions of FIN No. 45 are
applicable on a prospective  basis for any  guarantees  issued or modified after
December  31,  2002,  while the  disclosure  requirements  were  effective  upon
issuance.  The Company is not a party to any guarantees  covered by the scope of
FIN No. 45 as of December 31, 2002.


Accounting principles adopted in 2003

     The  Company  adopted  SFAS  No.  143,  "Accounting  for  Asset  Retirement
Obligations," effective January 1, 2003. Under SFAS No. 143, the fair value of a
liability for an asset retirement obligation covered under the scope of SFAS No.
143 is  recognized  in the period in which the  liability is  incurred,  with an
offsetting increase in the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its future value, and the capitalized cost is
depreciated  over the useful life of the related asset.  Upon  settlement of the
liability,  an entity will either settle the obligation for its recorded  amount
or incur a gain or loss upon settlement.

     Under the transition provisions of SFAS No. 143, at the date of adoption on
January 1, 2003 the Company  recognized (i) an asset retirement cost capitalized
as an increase to the carrying value of its property, plant and equipment,  (ii)
accumulated  depreciation on such capitalized cost and (iii) a liability for the
asset retirement  obligation.  Amounts resulting from the initial application of
SFAS No. 143 were measured using information, assumptions and interest rates all
as of January 1, 2003. The amount  recognized as the asset  retirement  cost was
measured as of the date the asset retirement obligation was incurred. Cumulative
accretion on the asset retirement  obligation,  and accumulated  depreciation on
the asset retirement cost, were recognized for the time period from the date the
asset  retirement  cost  and  liability  would  have  been  recognized  had  the
provisions  of SFAS  No.  143 been in  effect  at the  date  the  liability  was
incurred, through January 1, 2003. The difference between the amounts recognized
as  described  above and the  associated  amounts  recognized  in the  Company's
balance sheet as of December 31, 2002 was recognized as a cumulative effect of a
change in accounting  principles  as of January 1, 2003.  The effect of adopting
SFAS No. 143 as of January 1, 2003 as summarized in the table below did not have
a material effect on the Company's consolidated  financial position,  results of
operations or liquidity  and is not  separately  recognized in the  accompanying
statement of income.

                                      FB-16

<PAGE>


<TABLE>
<CAPTION>
                                                                    Amount
                                                             -------------------
                                                                (In millions)

Increase in carrying value of net property,
 plant and equipment:
<S>                                                             <C>
   Cost                                                         $         .4
   Accumulated depreciation                                             (.1)
Decrease in liabilities previously accrued
 for closure and post closure activities                                  .3
Asset retirement obligation recognized                                  (.6)
                                                                ------------
     Net impact                                                 $         -
                                                                ============
</TABLE>

     The Company  adopted SFAS No. 146,  "Accounting  for Costs  Associated with
Exit or  Disposal  Activities,"  effective  January 1, 2003 for exit or disposal
activities initiated on or after the date of adoption. Under SFAS No. 146, costs
associated with exit  activities,  as defined,  that are covered by the scope of
SFAS No. 146 are recognized and measured  initially at fair value,  generally in
the period in which the  liability  is incurred.  Costs  covered by the scope of
SFAS No. 146  include  termination  benefits  provided  to  employees,  costs to
consolidate  facilities or relocate employees,  and costs to terminate contracts
(other than a capital lease).  The adoption of SFAS No. 146 effective January 1,
2003 did not have a  material  effect on the  Company's  consolidated  financial
position, results of operations or liquidity.



Note 3 - Geographic information:

     The Company's  operations  are  associated  with the production and sale of
TiO2.  Titanium  dioxide pigments are used to impart  whiteness,  brightness and
opacity to a wide variety of products, including paints, plastics, paper, fibers
and  ceramics.  At  December  31,  2001 and 2002,  the net  assets  of  non-U.S.
subsidiaries  included in consolidated net assets  approximated $394 million and
$159 million, respectively.


     For  geographic  information,  net  sales  are  attributed  to the place of
manufacture  (point  of  origin)  and the  location  of the  customer  (point of
destination); property and equipment are attributed to their physical location.





                                      FB-17

<PAGE>


<TABLE>
<CAPTION>
                                                  Years ended December 31,
                                          -------------------------------------
                                             2000          2001           2002
                                          ---------     ----------    ---------
                                                      (In thousands)
Geographic areas

    Net sales - point of origin:
<S>                                       <C>           <C>           <C>
 Germany .............................    $ 444,050     $ 398,470     $ 404,299
 United States .......................      313,426       278,624       291,823
 Canada ..............................      154,579       149,412       157,773
 Belgium .............................      137,829       126,782       123,760
 Norway ..............................       98,300       102,843       111,811
 Other ...............................       92,691        82,320        89,560
 Eliminations ........................     (318,556)     (303,352)     (303,838)
                                          ---------     ---------     ---------

                                          $ 922,319     $ 835,099     $ 875,188
                                          =========     =========     =========

Net sales - point of destination:
 Europe ..............................    $ 480,388     $ 425,338     $ 456,834
 United States .......................      283,327       258,347       271,865
 Canada ..............................       53,060        47,061        53,371
 Latin America .......................       27,104        25,514        19,970
 Asia ................................       45,922        46,169        47,549
 Other ...............................       32,518        32,670        25,599
                                          ---------     ---------     ---------

                                          $ 922,319     $ 835,099     $ 875,188
                                          =========     =========     =========
</TABLE>

                                      FB-18

<PAGE>

<TABLE>

<CAPTION>
                                                             December 31,
                                                     --------------------------
                                                       2001               2002
                                                     --------           -------
                                                           (In thousands)
Identifiable assets

   Net property and equipment:
<S>                                                  <C>                <C>
  Germany ................................           $182,387           $213,170
  Canada .................................             54,676             54,719
  Belgium ................................             46,841             54,625
  Norway .................................             38,549             49,737
  Other ..................................              3,572              3,507
                                                     --------           --------

                                                     $326,025           $375,758
                                                     ========           ========
</TABLE>


Note 4 - Accounts and other receivables:


<TABLE>
<CAPTION>
                                                  December 31,
                                            -----------------------     June 30,
                                               2001         2002         2003
                                            ---------    ----------   ----------
                                                                      (Unaudited)
                                                       (In thousands)

<S>                                         <C>          <C>          <C>
Trade receivables .......................   $  99,989    $ 124,044    $ 174,914
Insurance claims receivable .............      11,505          312          436
Recoverable VAT and other receivables ...      14,615       12,492        8,103
Allowance for doubtful accounts .........      (2,239)      (2,605)      (2,591)
                                            ---------    ---------    ----------
                                            $ 123,870    $ 134,243    $ 180,862
                                            =========    =========    =========
</TABLE>

Note 5 - Inventories:


<TABLE>
<CAPTION>
                                                  December 31,
                                            -----------------------     June 30,
                                               2001         2002         2003
                                            ---------    ----------   ----------
                                                                      (Unaudited)
                                                       (In thousands)


<S>                                     <C>             <C>             <C>
Raw materials ..................        $ 79,162        $ 54,077        $ 34,641
Work in process ................           9,675          15,936          16,980
Finished products ..............         117,201         109,203         114,731
  Supplies .....................          25,018          30,666          33,408
                                        --------        --------        --------
                                        $231,056        $209,882        $199,760
                                        ========        ========        ========
</TABLE>

                                      FB-19

<PAGE>

Note 6 - Other noncurrent assets:


<TABLE>
<CAPTION>
                                                        December 31,
                                                     -----------------  June 30,
                                                       2001     2002      2003
                                                     -------   -------  --------
                                                                      (Unaudited)
                                                           (In thousands)

<S>                                                  <C>       <C>       <C>
Deferred financing costs, net (see Note 10) ......   $    12   $10,550   $10,446
Unrecognized net pension obligations (see Note 12)     5,901     5,561     6,439
Restricted marketable debt securities ............       577     2,492     1,968
Other ............................................     4,610     3,590     1,565
                                                     -------   -------   -------
                                                     $11,100   $22,193   $20,418
                                                     =======   =======   =======
</TABLE>

Note 7 - Investment in TiO2 manufacturing joint venture:

     Kronos Louisiana, Inc. ("KLA"), a wholly owned subsidiary of Kronos, owns a
50% interest in Louisiana Pigment Company,  L.P. ("LPC"). LPC is a manufacturing
joint venture that is also  50%-owned by Tioxide  Americas Inc.  ("Tioxide"),  a
wholly owned  subsidiary  of Huntsman  International  Holdings  LLC, a 60%-owned
subsidiary  of Huntsman  Corporation.  LPC owns and operates a  chloride-process
TiO2 plant in Lake Charles, Louisiana.


     KLA is  required  to purchase  one-half  of the TiO2  produced by LPC.  LPC
operates on a break-even basis and,  accordingly,  the Company reports no equity
in earnings of LPC.  Kronos' cost for its share of the TiO2 produced is equal to
its share of LPC's  costs.  Kronos'  share of net costs is  reported  as cost of
sales  as  the  related  TiO2  acquired  from  LPC is  sold  to  third  parties.



     Distributions  from LPC, which generally relate to excess cash generated by
LPC  from  its  non-cash  production  costs,  and  contributions  to LPC,  which
generally  relate to cash required by LPC when it builds  working  capital,  are
reported as part of cash  generated by  operating  activities  in the  Company's
Consolidated  Statements of Cash Flows.  Such  distributions are reported net of
any  contributions  made to LPC during the periods.  Net  distributions  of $7.6
million in 2000,  $11.3  million in 2001 and $8.0 million in 2002 are stated net
of contributions of nil in 2000, $6.2 million in 2001 and $14.2 million in 2002.


     LPC made cash distributions of $15.1 million in 2000, $22.6 million in 2001
and $15.9 million in 2002, equally split between the partners.

         Summary balance sheets of LPC are shown below.

<TABLE>
<CAPTION>
                                                               December 31,
                                                         -----------------------
                                                           2001           2002
                                                         --------       --------
                                                              (In thousands)

     ASSETS

<S>                                                      <C>            <C>
Current assets ...................................       $ 45,872       $ 56,745
Property and equipment, net ......................        250,501        235,739
                                                         --------       --------
                                                         $296,373       $292,484
                                                         ========       ========
     LIABILITIES AND PARTNERS' EQUITY

Other liabilities, primarily current .............       $ 16,767       $ 29,716
Partners' equity .................................        279,606        262,768
                                                         --------       --------
                                                         $296,373       $292,484
                                                         ========       ========
</TABLE>

                                      FB-20

<PAGE>

         Summary income statements of LPC are shown below.

<TABLE>
<CAPTION>
                                                   Years ended December 31,
                                            ------------------------------------
                                              2000           2001          2002
                                            --------      ---------     --------
                                                       (In thousands)

Revenues and other income:
<S>                                         <C>           <C>           <C>
    Kronos ...........................      $ 92,530      $ 93,393      $ 92,428
    Tioxide ..........................        93,366        94,009        93,833
    Interest .........................           578           303            53
                                            --------      --------      --------
                                             186,474       187,705       186,314
                                            --------      --------      --------

Cost and expenses:
    Cost of sales ....................       186,045       187,295       185,946
    General and administrative .......           429           410           368
                                            --------      --------      --------

                                             186,474       187,705       186,314
                                            --------      --------      --------

      Net income .....................      $   --        $   --        $   --
                                            ========      ========      ========
</TABLE>



Note 8 - Accounts payable and accrued liabilities:

<TABLE>
<CAPTION>
                                                              December 31,
                                                     ---------------------------
                                                        2001              2002
                                                     --------           --------
                                                            (In thousands)

<S>                                                  <C>                <C>
Accounts payable .........................           $ 95,837           $ 89,602
                                                     --------           --------
Accrued liabilities:
   Employee benefits .....................             22,488             27,042
   Other .................................             34,308             31,613
                                                     --------           --------

                                                       56,796             58,655
                                                     --------           --------

                                                     $152,633           $148,257
                                                     ========           ========
</TABLE>

                                      FB-21

<PAGE>

Note 9 - Other noncurrent liabilities:

<TABLE>
<CAPTION>
                                                              December 31,
                                                       -------------------------
                                                         2001              2002
                                                       -------           -------
                                                             (In thousands)

<S>                                                    <C>               <C>
Insurance claims expense ...................           $ 1,465           $ 1,480
Employee benefits ..........................             3,476             4,025
Environmental costs ........................             5,662             5,921
Other ......................................             2,130             2,316
                                                       -------           -------
                                                       $12,733           $13,742
                                                       =======           =======
</TABLE>

Note 10 - Notes payable and long-term debt:

<TABLE>
<CAPTION>
                                                                December 31,
                                                           ---------------------
                                                              2001       2002
                                                           --------     --------
                                                                (In thousands)

Notes payable - Kronos International, Inc.
<S>                                                        <C>          <C>
 and subsidiaries ....................................     $ 46,201     $   --
                                                           ========     ========
Long-term debt:
   Kronos International, Inc. and subsidiaries:
     8.875% Senior Secured Notes .....................     $   --       $296,942
     Revolving credit facility .......................         --         27,077
     Other ...........................................        2,498        1,887
                                                           --------     --------
                                                              2,498      325,906
Less current maturities ..............................        1,033        1,298
                                                           --------     --------

                                                           $  1,465     $324,608
                                                           ========     ========
</TABLE>

     Notes payable at December 31, 2001,  consisted of (euro)27  million  ($24.0
million) and NOK 200 million  ($22.2  million).  Notes  payable  totaling  $53.2
million were repaid on June 28, 2002 with proceeds from the new European  Credit
Facility discussed below and available cash, and the agreements were terminated.


     In June 2002 Kronos International,  Inc. ("KII"), a wholly owned subsidiary
of Kronos,  issued (euro)285  million ($280 million when issued and $297 million
at December 31,  2002)  principal  amount of 8.875%  Senior  Secured  Notes (the
"Notes") due 2009. The Notes are  collateralized  by first priority liens on 65%
of the common  stock or other equity  interests  of certain of KII's  first-tier
subsidiaries.  The Notes are issued  pursuant to an indenture  which  contains a
number of covenants and restrictions  which,  among other things,  restricts the
ability of KII and its subsidiaries to incur debt, incur liens, pay dividends or
merge or consolidate with, or sell or transfer all or substantially all of their
assets  to  another  entity.  In  addition,  the  indenture  contains  customary
cross-default  provisions  with respect to other debt and  obligations of KII or
its  subsidiaries.  The  Notes  are  redeemable,  at KII's  option,  on or after
December 30, 2005 at  redemption  prices  ranging from 104.437% of the principal
amount,  declining to 100% on or after  December 30,  2008.  In addition,  on or
before  June  30,  2005,  KII may  redeem  up to 35% of its  Notes  with the net
proceeds  of a qualified  public  equity  offering at 108.875% of the  principal
amount.  In the event of a change of control of KII,  as  defined,  KII would be

                                      FB-22

<PAGE>

required to make an offer to purchase its Notes at 101% of the principal amount.
KII would also be required  to make an offer to purchase a specified  portion of
its  Notes at par  value in the event  KII  generates  a  certain  amount of net
proceeds from the sale of assets  outside the ordinary  course of business,  and
such net  proceeds  are not  otherwise  used  for  specified  purposes  within a
specified  time  period.  At  December  31, 2002 and June 30,  2003,  KII was in
compliance  with all the covenants,  and the quoted market price of the Notes at
December 31, 2002 was (euro)1,010 per (euro)1,000  principal  amount.  The Notes
require  cash  interest  payments  on June 30 and  December  30,  commencing  on
December  30,  2002.  KII  completed  an exchange  offer on November 18, 2002 to
exchange the Notes for registered  publicly traded notes that have substantially
identical terms as the Notes.

     In June 2002 KII's operating  subsidiaries  in Germany,  Belgium and Norway
(the "European  Borrowers"),  entered into a three-year (euro)80 million secured
revolving  credit facility  ("European  Credit  Facility").  The European Credit
Facility is available in multiple currencies,  including U.S. dollars, euros and
Norwegian  kroner.  In addition,  the European  Credit  Facility has a (euro)5.0
million sub limit  available  for issuance of letters of credit.  As of December
31, 2002,  (euro)15  million ($15.6  million) and NOK 80 million ($11.5 million)
were outstanding  under the European Credit Facility and (euro)1.8 million ($1.8
million) of letters of credit was also  outstanding  under the  European  Credit
Facility. At December 31, 2002,  approximately  (euro)52 million  (approximately
$54 million) was available for additional  borrowings.  Borrowings bear interest
at the applicable interbank market rate plus 1.75%. As of December 31, 2002, the
interest rate was 4.80% and 8.86% on the euro and Norwegian  kroner  borrowings,
respectively, and the weighted average interest rate was 6.51%.


     In March 2003 the Company  borrowed  (euro)15  million  ($16.1 million when
borrowed) under the European Credit  Facility.  In April 2003 the Company repaid
NOK 80 million (approximately $11 million when repaid) under the European Credit
Facility.


     The European Credit Facility is collateralized  by accounts  receivable and
inventory  of the European  Borrowers,  plus a limited  pledge of certain  other
assets of the Belgian  borrower.  The European Credit Facility  contains,  among
others,  various  restrictive  covenants,  including  restrictions  on incurring
liens, asset sales, additional financial indebtedness,  mergers, investments and
acquisitions,  transactions  with  affiliates  and dividends.  In addition,  the
European  Credit  Facility  contains  customary  cross-default  provisions  with
respect to other debt and  obligations  of the European  Borrowers,  KII and its
other  subsidiaries.  The European  Borrowers  were in  compliance  with all the
covenants as of December 31, 2002 and June 30, 2003.


     Under  the  cross-default  provisions  of  the  Notes,  the  Notes  may  be
accelerated  prior to their stated maturity if KII or any of KII's  subsidiaries
default under any other  indebtedness  in excess of $20 million due to a failure
to pay such  other  indebtedness  at its due date  (including  any due date that
arises  prior to the stated  maturity as a result of a default  under such other
indebtedness).  Under  the  cross-default  provisions  of  the  European  Credit
Facility,  any outstanding  borrowings under the European Credit Facility may be
accelerated  prior to their  stated  maturity if the  European  Borrowers or KII
default  under any other  indebtedness  in excess of  (euro)5  million  due to a
failure to pay such other  indebtedness  at its due date (including any due date
that arises  prior to the stated  maturity  as a result of a default  under such
other  indebtedness).  In the event the  cross-default  provisions of either the
Notes or the European Credit Facility become  applicable,  and such indebtedness
is accelerated,  the Company would be required to repay such indebtedness  prior
to their stated maturity.


     In September  2002 the Company's  U.S.  operating  subsidiaries  (the "U.S.
Borrowers") entered into a three-year $50 million  asset-based  revolving credit
facility ("U.S. Credit Facility").  Under the terms of the U.S. Credit Facility,
the amount available for borrowing is based on a formula-derived  borrowing base
using  eligible  accounts  receivable  and eligible  inventory and is subject to
maintaining   $5   million   of   minimum   excess   availability    ("Borrowing
Availability").  The maximum amount  available under the U.S. Credit Facility is
$45 million.  Borrowings bear interest at either prime rate or eurodollar  rates
plus a margin spread based on average excess  availability under the U.S. Credit
Facility or certain levels of EBITDA (as defined) of the U.S. Borrowers.  Margin
spreads range from 0.25% to 1.00% for prime rate  borrowings  and 2.00% to 2.75%
for eurodollar rate borrowings. The U.S. Credit Facility is available for future
working  capital  requirements  and  general  corporate  purposes  of  the  U.S.
Borrowers,  including  dividend  distributions.  The  U.S.  Credit  Facility  is
collateralized by accounts receivable, inventory and certain fixed assets of the
U.S. Borrowers.  The U.S. Credit Facility contains,  among other things, various
restrictive and financial covenants  including  restrictions on incurring liens,
asset sales,  mergers, and minimum EBITDA (as defined) of the U.S. Borrowers and
Kronos.  The U.S.  Borrowers  were in  compliance  with all the  covenants as of
December 31, 2002 and June 30, 2003.  As of December 31, 2002 and June 30, 2003,
no borrowings  were  outstanding  under the U.S.  Credit  Facility and Borrowing
Availability  was  approximately  $45 million  and  approximately  $45  million,
respectively.

                                      FB-23

<PAGE>

     Deferred  financing  costs of $10.7  million  for the Notes,  the  European
Credit  Facility and the U.S.  Credit Facility are being amortized over the life
of the respective  agreements and are included in other noncurrent  assets as of
December 31, 2002.

     Unused lines of credit available for borrowing under the Company's non-U.S.
credit  facilities  approximated  $57  million at December  31, 2002  (including
approximately   $54  million  under  the  European   Credit  Facility  of  which
approximately $3.2 million is available for letters of credit).

     The aggregate  maturities of long-term  debt at December 31, 2002 are shown
in the table below.

<TABLE>
<CAPTION>
Years ending December 31,                                            Amount
-------------------------                                       ---------------
                                                                 (In thousands)

         <S>                                                       <C>
         2003                                                      $      1,298
         2004                                                               279
         2005                                                            27,224
         2006                                                               145
         2007                                                                18
         2008 and thereafter                                            296,942
                                                                   ------------
                                                                   $    325,906
                                                                   ============
</TABLE>

Note 11 - Notes receivable from and payable to affiliates:

<TABLE>
                                                               December 31,
                                                         -----------------------
                                                            2001          2002
                                                         ---------      --------
                                                               (In thousands)

Notes receivable from affiliates:
<S>                                                       <C>            <C>
   Variable rate - NL .............................       $   --         $44,600
                                                          ========       =======
Notes payable to affiliates:
   11.75% First-Tier Senior Mirror Note ...........       $194,000       $  --
   Revolving credit facility ......................           --          44,600
                                                          --------       -------

                                                          $194,000       $44,600
                                                          ========       =======
</TABLE>

Notes receivable from affiliates


     At December 31, 2002, the Company had $44.6 million of loans outstanding to
NL under the terms of a $55 million  revolving credit facility entered into with
NL during  2002.  The loan bore  interest  at U.S.  LIBOR  plus  1.75%  (3.1% at
December 31, 2002), with interest payable  quarterly,  and all principal was due
on December 31, 2005.  This note  receivable  from NL is included in  noncurrent
assets  at  December  31,  2002,   as  settlement  of  the  note  was  currently
contemplated within the foreseeable future. During the first six months of 2003,
NL  repaid  a net  $19.7  million  to the  Company.  In June  2003  the  Company
distributed the remaining $24.9 million of notes receivable from affiliate to NL
in the form of a noncash  dividend.  The revolving  credit agreement with NL was
terminated on June 30, 2003.


Notes payable to affiliates

     NL had $194  million  of  11.75%  Senior  Secured  Notes  due 2003 (the "NL
Notes") at December 31, 2001.  The Company had a First-Tier  Senior  Mirror Note
(the "Mirror  Note")  payable to NL. The terms of the Mirror Note were identical
to the terms of the NL Notes with  respect to the  maturity  dates and  interest

                                      FB-24

<PAGE>

rates with interest paid semi-annually.  The Mirror Note was collateralized by a
first  priority  lien on the common stock of KII and another  subsidiary  of the
Company,  as well as the Company's  Second-Tier Senior Mirror Note ("Second-Tier
Mirror  Note")  receivable  from KII,  the terms of which were  identical to the
terms of the Mirror Note.  The  Second-Tier  Mirror Note was  eliminated  in the
Company's consolidated financial statements. The NL Notes were collateralized by
a first  priority lien on the common stock of Kronos,  the Mirror Note and other
collateral pledged by NL.

     On March 22, 2002, NL redeemed $25 million principal amount of the NL Notes
at the current call price of 100%,  and Kronos  concurrently  repaid $25 million
principal  amount of the Mirror Notes.  In addition,  immediately  following the
closing of the Notes offering (see Note 10), the Company  effectively  loaned to
NL  sufficient  funds  for NL to  redeem  in full  the  remaining  $169  million
principal  amount of the NL Notes. In accordance with the terms of the indenture
governing the NL Notes, on June 28, 2002, NL irrevocably  placed on deposit with
the trustee funds in an amount  sufficient to pay in full the  redemption  price
plus all accrued and unpaid interest due on the July 28, 2002  redemption  date.
Immediately  thereafter,  NL  was  released  from  its  obligations  under  such
indenture,  the indenture was  discharged and all collateral was released to NL.
Because NL had been released as being the primary obligor under the indenture as
of June 30, 2002, the NL Notes were  derecognized as of that date along with the
funds placed on deposit with the trustee to effect the July 28, 2002 redemption.
The  Company  recognized  a  loss  on  the  early   extinguishment  of  debt  of
approximately $1.5 million in the second quarter of 2002,  consisting  primarily
of the  interest on the Mirror Note for the period from July 1 to July 28, 2002.
Such loss was recognized as a component of interest expense. The Mirror Note was
deemed repaid in accordance with the terms and conditions of such agreement, and
the agreement was canceled.

     At December 31, 2002,  the Company had $44.6 million  outstanding  of loans
from NL  Environmental  Management  Services,  Inc.  ("EMS"),  a  majority-owned
subsidiary  of NL, under the terms of a $55 million  revolving  credit  facility
entered into with EMS in 2002.  The loan bore interest at U.S.  LIBOR plus 1.75%
(3.1% at December 31, 2002), with interest payable quarterly,  and all principal
was due on December 31, 2005.  During the first six months of 2003,  the Company
repaid this outstanding balance in full, and the revolving credit agreement with
EMS was terminated on June 30, 2003.

Note 12 - Employee benefit plans:


Company-sponsored pension plans

     The Company  maintains  various  defined  benefit and defined  contribution
pension plans  covering  substantially  all employees as well as certain  former
employees  and  retirees  of certain  business  units  formerly  operated by the
Company.  Non-U.S.  employees are covered by plans in their respective countries
and a majority of U.S.  employees are eligible to  participate in a contributory
savings plan. The Company  amended its defined  benefit pension plans in Belgium
and Norway in 2002 to exclude the admission of new  employees to the plans.  New
employees  of  these  particular   locations  are  eligible  to  participate  in
Company-sponsored defined contribution plans.

     The Company  contributes  to eligible  U.S.  employees'  accounts an amount
equal to  approximately  4% (in each of 2000,  2001 and 2002) of the  employee's
annual eligible  earnings and partially  matches  employee  contributions to the
U.S.  contributory  savings plan.  The Company also has a  nonqualified  defined
contribution  plan covering certain U.S.  executives,  and participants  receive
benefits based on a formula involving eligible  earnings.  The Company's expense
related to the U.S.  plans was $.3 million in 2000,  $.4 million in 2001 and $.2
million in 2002.

     Certain actuarial assumptions used in measuring the defined benefit pension
assets, liabilities and expenses are presented below.

<TABLE>
                                                                                 December 31,
                                                        ---------------------------------------------------------------
                                                              2000                   2001                  2002
                                                        -----------------      -----------------     ------------------
                                                                                (Percentages)

<S>                                                         <C>    <C>            <C>    <C>             <C>    <C>
Discount rate                                               6.0 to 7.8            5.8 to 7.3             5.5 to 7.0
Rate of increase in future compensation levels              3.0 to 4.5            2.8 to 4.5             2.5 to 4.5
Long-term rate of return on plan assets                     7.0 to 9.0            6.8 to 8.5             6.8 to 8.5
</TABLE>

                                      FB-25

<PAGE>



     Plan assets are  comprised  primarily of  investments  in U.S. and non-U.S.
corporate equity and debt securities,  short-term investments,  mutual funds and
group annuity contracts.

     SFAS No. 87,  "Employers'  Accounting for Pension  Costs"  requires that an
additional pension liability be recognized when the unfunded accumulated pension
benefit  obligation  exceeds the unfunded accrued pension  liability.  Variances
from  actuarially  assumed rates will change the actuarial  valuation of accrued
pension liabilities, pension expense and funding requirements in future periods.

     The  components of the net periodic  defined  benefit  pension cost are set
forth below.

<TABLE>
<CAPTION>
                                                             Years ended December 31,
                                                        --------------------------------
                                                           2000        2001        2002
                                                        ---------   ---------   --------
                                                                  (In thousands)

Net periodic pension cost:
<S>                                                     <C>         <C>         <C>
Service cost benefits ...............................   $  3,836    $  3,743    $  4,278
Interest cost on projected benefit obligation ("PBO")     12,196      12,751      13,641
Expected return on plan assets ......................    (12,553)    (12,635)    (12,778)
Amortization of prior service cost ..................        238         201         307
Amortization of net transition obligation ...........        586         563         570
Recognized actuarial losses .........................        196         399       1,126
                                                        --------    --------    --------
                                                        $  4,499    $  5,022    $  7,144
                                                        ========    ========    ========
</TABLE>

     The funded status of the  Company's  defined  benefit  pension plans is set
forth below.


<TABLE>
<CAPTION>
                                                             December 31,
                                                     --------------------------
                                                        2001            2002
                                                     ---------        ---------
                                                            (In thousands)

Change in PBO:
<S>                                                  <C>              <C>
Beginning of year ............................       $ 207,609        $ 218,162
Service cost .................................           3,743            4,278
Interest .....................................          12,751           13,641
Participant contributions ....................           1,005            1,056
Amendments ...................................           1,819             --
Actuarial loss (gain) ........................           7,340           (5,178)
Benefits paid ................................         (12,972)         (13,936)
Change in currency exchange rates ............          (3,133)          36,436
                                                     ---------         --------
 End of year .................................         218,162          254,459
                                                     ---------         --------
</TABLE>

<TABLE>
<CAPTION>
                                                            December 31,
                                                     --------------------------
                                                        2001            2002
                                                     ---------        ---------
                                                            (In thousands)

Change in fair value of plan assets:
<S>                                                    <C>              <C>
    Beginning of year                                  175,773          168,155
    Actual return on plan assets                         2,984           (2,054)
    Employer contributions                               7,354            9,010
    Participant contributions                            1,005            1,056
    Benefits paid                                      (12,972)          (13,936)
    Change in currency exchange rates                   (5,989)           27,705
                                                     ---------         --------

     End of year                                       168,155           189,936
                                                     ---------         --------
</TABLE>


                                     FB-26

<PAGE>

<TABLE>
<CAPTION>
                                                             December 31,
                                                     --------------------------
                                                        2001            2002
                                                     ---------        ---------
                                                            (In thousands)

Funded status at year end:
<S>                                                  <C>              <C>
    Plan assets less than PBO                        $ (50,007)       $  (64,523)
    Unrecognized actuarial loss                         40,316            55,807
    Unrecognized prior service cost                      4,371             4,881
    Unrecognized net transition obligation               4,536             5,247
                                                     ---------         --------

                                                     $    (784)       $    1,412
                                                     =========        ==========
Amounts recognized in the balance sheet:
    Prepaid pension cost                             $  16,043        $   17,572
    Accrued pension cost:
     Current                                            (5,682)           (6,677)
     Noncurrent                                        (25,558)          (33,098)
    Unrecognized net pension obligations                 5,901              5,561
    Accumulated other comprehensive loss                 8,512             18,054
                                                     ---------         --------

                                                     $    (784)       $    1,412
                                                     =========        ==========
</TABLE>

     Selected information related to the Company's defined benefit pension plans
that have accumulated benefit obligations in excess of fair value of plan assets
is presented  below. At December 31, 2001 and 2002, 100% and 94%,  respectively,
of the projected  benefit  obligations  of such plans relate to non-U.S.  plans.


<TABLE>
<CAPTION>

                                                              December 31,
                                                       -------------------------
                                                         2001              2002
                                                       --------         --------
                                                             (In thousands)

<S>                                                    <C>              <C>
Projected benefit obligation .................         $167,825         $204,398
Accumulated benefit obligation ...............          150,716          184,314
Fair value of plan assets ....................          119,340          142,612
</TABLE>

Incentive bonus programs

     Certain  employees are eligible to  participate  in the  Company's  various
incentive bonus programs. The programs provide for annual payments, which may be
in the form of cash or NL common stock. The amount of the annual payment paid to
an employee,  if any, is based on formulas involving the profitability of Kronos
in  relation  to the annual  operating  plan and,  for most of these  employees,
individual performance.

Postretirement benefits other than pensions

     In addition to providing pension benefits,  the Company currently  provides
certain health care and life insurance  benefits for eligible retired employees.
Certain  of the  Company's  Canadian  employees  may  become  eligible  for such
postretirement  health care and life insurance benefits if they reach retirement
age while  working for the Company.  In 1989 the Company  began phasing out such
benefits for active U.S.  employees  over a ten-year  period and U.S.  employees
retiring after 1998 are not entitled to any such  benefits.  The majority of all
retirees are required to contribute a portion of the cost of their  benefits and
certain  current  and future  retirees  are  eligible  for  reduced  health care
benefits at age 65. The Company's  policy is to fund medical  claims as they are
incurred, net of any contributions by the retirees.

                                     FB-27

<PAGE>

     For measuring the OPEB liability at December 31, 2002, the expected rate of
increase  in  health  care  costs is 9% in 2003  decreasing  to 5.5% in 2007 and
thereafter. Other weighted-average assumptions used to measure the liability and
expense are presented below.

<TABLE>
<CAPTION>
                                                               December 31,
                                                          ----------------------
                                                          2000     2001     2002
                                                          ----     ----     ----
                                                               (Percentages)

<S>                                                        <C>      <C>      <C>
Discount rate .......................................      7.3      7.0      6.5
Long-term rate for compensation increases ...........      6.0      6.0      6.0
Long-term rate of return on plan assets .............      7.7      7.7      6.0
</TABLE>

     Variances  from   actuarially   assumed  rates  will  change  accrued  OPEB
liabilities,  net  periodic  OPEB  expense  and funding  requirements  in future
periods.  If the health care cost trend rate was  increased  (decreased)  by one
percentage  point for each  year,  postretirement  benefit  expense  would  have
increased  approximately $.1 million (decreased by $.1 million) in 2002, and the
projected  benefit  obligation  at  December  31, 2002 would have  increased  by
approximately $.8 million (decreased by $.6 million).

     The  components of the Company's net periodic  postretirement  benefit cost
are set forth below.

<TABLE>
<CAPTION>
                                                    Years ended December 31,
                                              ----------------------------------
                                                2000        2001          2002
                                              -------     --------      --------
                                                        (In thousands)

Net periodic OPEB cost (benefit):
<S>                                           <C>          <C>          <C>
Service cost benefits ...................     $    84      $    94      $   103
Interest cost on PBO ....................         973          924          660
Expected return on plan assets ..........         (66)         (66)        --
Amortization of prior service cost ......      (1,055)      (1,055)      (1,055)
Recognized actuarial losses .............          24           27           27
                                              -------      -------      -------

                                              $   (40)     $   (76)     $  (265)
                                              =======      =======      =======
</TABLE>


                                     FB-28

<PAGE>

<TABLE>
<CAPTION>
                                                               December 31,
                                                        ------------------------
                                                          2001            2002
                                                        ---------      ---------
                                                              (In thousands)

Change in PBO:
<S>                                                     <C>            <C>
    Beginning of year ............................      $ 13,498       $ 11,407
    Service cost .................................            94            103
    Interest cost ................................           924            660
    Actuarial losses (gains) .....................        (1,694)           103
    Release of insurance obligations .............          --             (787)
    Benefits paid:
     Company funds ...............................        (1,006)          (985)
     Plan assets .................................          (264)          --
    Change in currency exchange rates ............          (145)            32
                                                        --------       --------

     End of year .................................        11,407         10,533
                                                        --------       --------

Change in fair value of plan assets:
    Beginning of year ............................           850            787
    Actual return on plan assets .................            47           --
    Employer contributions .......................           154           --
    Benefits paid ................................          (264)          --
    Release of insurance obligations .............          --             (787)
                                                        --------       --------

     End of year .................................           787           --
                                                        --------       --------

Funded status at year end:
    Plan assets less than PBO ....................       (10,620)       (10,533)
    Unrecognized actuarial gain ..................          (421)          (335)
    Unrecognized prior service cost ..............        (3,280)        (2,225)
                                                        --------       --------

                                                        $(14,321)      $(13,093)
                                                        ========       ========

Amounts recognized in the balance sheet:
    Current ......................................      $ (1,285)      $ (1,287)
    Noncurrent ...................................       (13,036)       (11,806)
                                                        --------       --------

                                                        $(14,321)      $(13,093)
                                                        ========       ========
</TABLE>

     Based on  communications  with a  certain  insurance  provider  of  retiree
benefits,  and consultations with the Company's actuaries,  the Company has been
released from certain life insurance  retiree benefit  obligations  totaling $.8
million as of  December  31,  2002  through  the use of an equal  amount of plan
assets.

Note 13 - Common stock and notes receivable from affiliates:


Common stock options

     The NL Industries,  Inc. 1998  Long-Term  Incentive Plan ("NL Option Plan")
provides for the discretionary  grant of restricted common stock, stock options,
stock appreciation rights ("SARs") and other incentive  compensation to officers
and other key employees of the Company.  Although  certain stock options granted
pursuant  to a similar  plan which  preceded  the NL Option  Plan  ("Predecessor
Option Plan") remain outstanding at December 31, 2002, no additional options may
be granted under the Predecessor Option Plan.

     Up to five million shares of NL common stock may be issued  pursuant to the
NL Option Plan and, at December 31, 2002,  3,651,000  shares were  available for


                                     FB-29

<PAGE>

future grants. The NL Option Plan provides for the grant of options that qualify
as  incentive  options and for options  which are not so  qualified.  Generally,
stock options and SARs (collectively, "options") are granted at a price equal to
or greater than 100% of the market price at the date of grant,  vest over a five
year  period  and expire  ten years  from the date of grant.  Restricted  stock,
forfeitable  unless  certain  periods of employment  are  completed,  is held in
escrow in the name of the grantee until the restriction period expires.  No SARs
have been granted under the NL Option Plan.

     Changes in outstanding  options granted to certain employees of the Company
pursuant to the NL Option Plan and the Predecessor Option Plan are summarized in
the table below.

<TABLE>
<CAPTION>
                                                                                Weighted-
                                                                                 average
                                                            Amount     Weighted-  fair
                                           Exercise price   payable    average   value
                                             per share        upon    exercise  at grant
                                  Shares    Low     High    exercise   price     date
                                  ------   ------- ------   --------  --------  ---------
                                         (In thousands, except per share amounts)

<S>                                <C>    <C>      <C>     <C>        <C>       <C>
Outstanding at December 31, 1999    800    $ 5.00   $24.19  $ 12,659   $ 15.82

    Granted ....................    184     14.25    14.25     2,622     14.25  $ 4.83
    Exercised ..................   (193)     5.00    17.97    (2,034)    10.53
    Forfeited ..................   (150)    24.19    24.19    (3,628)    24.19
                                  -----    ------   ------   -------   -------
Outstanding at December 31, 2000    641      5.00    21.97     9,619     15.01

    Granted ....................    216     20.11    20.51     4,344     20.11  $ 7.52
    Exercised ..................     (6)    11.28    14.25       (70)    12.43
                                  -----    ------   ------   -------   -------

Outstanding at December 31, 2001    851      5.00    21.97    13,893     16.33

    Exercised ..................   (192)     5.00    15.19    (2,715)    14.16
                                  -----    ------   ------   -------   -------

Outstanding at December 31, 2002    659    $ 8.69   $21.97  $ 11,178  $  16.96
                                  =====    ======   ======   =======   =======
</TABLE>


                                     FB-30

<PAGE>


     At December 31, 2000,  2001 and 2002 options to purchase  140,700,  261,000
and  240,400  shares,  respectively,  were  exercisable  and options to purchase
184,000 shares become exercisable in 2003. Of the exercisable  options,  options
to purchase  114,000  shares at December 31, 2002 had exercise  prices less than
NL's  December  31, 2002 quoted  market  price of $17.00 per share.  Outstanding
options at December 31, 2002 expire at various dates through 2011.



     The  following  table   summarizes  NL's  stock  options   outstanding  and
exercisable  that were held by certain  employees  of the Company as of December
31, 2002 by price range.

<TABLE>
<CAPTION>
                               Options outstanding                                       Options exercisable
--------------------------------------------------------------------------------     ---------------------------
                                                         Weighted-
                                                          average      Weighted-                        Weighted-
                                       Outstanding       remaining      average       Exercisable         average
             Range of                      at           contractual    exercise            at            exercise
          exercise prices               12/31/02           life          price         12/31/02            price
---------------------------------    --------------   -------------- ------------   ---------------  -------------


<S> <C>             <C>                   <C>               <C>    <C>                   <C>        <C>
    $   7.26   -    $    9.68             2,000             1.1    $       8.69          2,000      $       8.69
        9.68   -        12.09            68,900             5.4           11.47         47,500             11.56
       12.09   -        14.51           198,700             6.5           14.03         52,500             14.14
       14.51   -        16.93            25,200             4.8           15.46         12,000             15.75
       16.93   -        19.35            84,400             4.6           17.87         70,400             17.85
       19.35   -        21.77           250,000             7.7           20.11         32,000             20.10
       21.77   -        24.19            30,000             5.1           21.97         24,000             21.97
                                      ---------         -------    ------------       --------      ------------

                                        659,200             6.5    $      16.96        240,400      $      16.33
                                      =========         =======    ============       ========      ============
</TABLE>

     The pro forma  information  included  in Note 2 required by SFAS No. 123 is
based on an estimation of the fair value of options issued subsequent to January
1, 1995.  No options  were  granted in 2002.  The fair values of employee  stock
options were calculated  using the  Black-Scholes  stock option  valuation model
with the following  weighted  average  assumptions  for grants in 2000 and 2001:
stock price volatility of 48% and 46% in 2000 and 2001, respectively;  risk-free
rate of return of 5% in each of 2000 and  2001;  dividend  yield of 4.9% in 2000
and 4.0% in 2001;  and an expected term of 9 years in each of 2000 and 2001. For
purposes of pro forma  disclosures,  the estimated  fair value of the options is
amortized to expense over the options' vesting period.


Notes receivable from affiliates - contra equity

     Certain  long-term  notes  receivable  from  affiliates  were included as a
component of equity in  accordance  with GAAP,  as  settlement  of the affiliate
notes receivable balances was not currently  contemplated within the foreseeable
future. The notes are summarized in the following table.

<TABLE>
<CAPTION>
                                                            December 31,
                                                    ---------------------------
                                                      2001               2002
                                                    --------       ------------
                                                           (In thousands)
Notes receivable from NL:
<C>                                                 <C>            <C>
8.7% Fixed rate .............................       $106,783       $        --
6.0% Fixed rate euro-denominated ............        286,363                --
Variable rate ...............................        262,772                --
                                                    --------       -----------
                                                    $655,918       $        --
                                                    ========       ===========
</TABLE>


     The 8.7% fixed-rate note receivable from NL originally matured in 2008 with
interest payable quarterly.  The 6% fixed-rate  euro-denominated note receivable
from NL  originally  matured  in 2010  with  interest  payable  monthly.  The 6%
fixed-rate euro-denominated note receivable from NL was established in 2001 as a
result of a series of noncash  transactions  between  KII,  NL and the  Company.
Variable-rate  notes  receivable  consisted of eight individual notes from NL of
which five originally matured in 2003 and three originally matured in 2010, with
interest  rates  ranging  from U.S.  LIBOR plus .625% to U.S.  LIBOR plus 1.625%
(2.5875% to 3.5875% at December 31, 2001)  payable  semi-annually.  In July 2002
the Company  distributed  its affiliate  notes  receivable to NL totaling $711.1
million in the form of a noncash dividend.


                                     FB-31
<PAGE>

     The Company  periodically  converted interest receivable from affiliates to
notes receivable from  affiliates.  For the years ended 2000, 2001 and 2002, the
interest  transferred to notes receivable from affiliates totaled $21.6 million,
$22.2 million and $20.6 million, respectively.

     Cash flows  related to such loans  made to  affiliates  included  in contra
equity were reflected in "Other capital  transactions  with affiliates,  net" in
the accompanying consolidated statement of cash flows.

Note 14 - Income taxes:

     The components of (i) income from continuing operations before income taxes
and  minority  interest  ("pretax  income"),  (ii) the  difference  between  the
provision  for income taxes  attributable  to pretax income and the amounts that
would be expected using the U.S. federal statutory income tax rate of 35%, (iii)
the  provision  for income taxes and (iv) the  comprehensive  tax  provision are
presented below.


<TABLE>
<CAPTION>
                                                                                        Six months ended
                                                      Years ended December 31,               June 30,
                                                ----------------------------------    ----------------------
                                                   2000        2001         2002        2002        2003
                                                ---------    ---------   ----------   -------     ----------
                                                                                           (Unaudited)
                                                                       (In thousands)

Pretax income (loss):
<S>                                             <C>          <C>          <C>         <C>         <C>
    U.S .....................................   $  33,675    $  34,167    $ 24,273    $ 15,886    $  9,141
    Non-U.S .................................     162,203      154,064      67,546      39,397      42,691
                                                ---------    ---------    --------    --------    --------
                                                $ 195,878    $ 188,231    $ 91,819    $ 55,283    $ 51,832
                                                =========    =========    ========    ========    ========
Expected tax expense ........................   $  68,557    $  65,880    $ 32,137    $ 19,349    $ 18,141
Non-U.S. tax rates ..........................      (6,462)      (7,069)     (3,238)       (702)       (366)
Resolution of German income tax audits ......      (5,500)        --          --          --          --
Change in valuation allowance:
    Corporate restructuring in Germany and
     other ..................................        --        (23,247)       --          --          --
    Recognition of certain deductible tax
     attributes which previously did not meet
     the "more-likely-than-not" recognition
     criteria ...............................        (375)        --        (1,808)     (3,027)       (106)
Incremental tax on income of companies not
    included in the NL Tax Group ............       1,943          451         548         202          71
Refund of prior-year German taxes ...........        --           --          --          --       (24,564)
Rate change adjustment of deferred taxes ....       5,695         --        (2,332)       --          --
U.S. state income taxes .....................         595          542          43          43         204
Tax contingency reserve adjustments, net ....         252       (3,423)        193      (1,083)       --
Other, net ..................................         920          625         (43)        163         (54)
                                                ---------    ---------    --------    --------    --------

     Income tax expense (benefit) ...........   $  65,625    $  33,759    $ 25,500    $ 14,945    $ (6,674)
                                                =========    =========    ========    ========    ========
</TABLE>


                                     FB-32

<PAGE>


<TABLE>
<CAPTION>
                                                                                                        Six months ended
                                                                        Years ended December 31,             June 30,
                                                                  ----------------------------------    ------------------
                                                                     2000         2001       2002         2002       2003
                                                                  ---------    ---------    --------    --------  --------

                                                                                            (In thousands)

Provision for income taxes:
     Current income tax expense (benefit):
<S>                                                                <C>         <C>         <C>         <C>         <C>
        U.S. federal ...........................................   $  7,274    $  8,467    $  4,281    $  2,657    $  4,017
        U.S. state .............................................        595         542          43          43         204
        Non-U.S ................................................     45,855      28,992      10,421       4,852     (16,747)
                                                                   --------    --------    --------    --------    --------
                                                                     53,724      38,001      14,745       7,552     (12,526)
                                                                   --------    --------    --------    --------    --------
    Deferred income tax expense (benefit):
        U.S. federal ...........................................      4,569       4,021       5,203       1,822        (861)
        U.S. state .............................................       --          --          --          --          --
        Non-U.S ................................................      7,332      (8,263)      5,552       5,571       6,713
                                                                   --------    --------    --------    --------    --------

                                                                     11,901      (4,242)     10,755       7,393       5,852
                                                                   --------    --------    --------    --------    --------

                                                                   $ 65,625    $ 33,759    $ 25,500    $ 14,945    $ (6,674)
                                                                   ========    ========    ========    ========    ========

Comprehensive provision (benefit) for income taxes allocable to:
    Pretax income ..............................................   $ 65,625    $ 33,759    $ 25,500    $ 14,945    $ (6,674)
    Other comprehensive income (loss):
        Pension liabilities ....................................       --        (2,160)     (2,882)       --          --
                                                                   --------    --------    --------    --------    --------

                                                                   $ 65,625    $ 31,599    $ 22,618    $ 14,945    $ (6,674)
                                                                   ========    ========    ========    ========    ========
</TABLE>

                                     FB-33

<PAGE>


     The components of the net deferred tax liability are summarized below:


<TABLE>
<CAPTION>
                                                                             December 31,
                                                        --------------------------------------------------
                                                                   2001                     2002
                                                        ------------------------   -----------------------
                                                               Deferred tax             Deferred tax
                                                        ------------------------   -----------------------
                                                           Assets    Liabilities    Assets     Liabilities
                                                        ----------   -----------   ---------   -----------
                                                                            (In thousands)

Tax effect of temporary differences relating to:
<S>                                                     <C>          <C>          <C>          <C>
    Inventories .....................................   $   3,202    $  (2,849)   $   3,427    $  (3,302)
    Property and equipment ..........................      42,721      (54,432)      43,868      (59,058)
    Accrued postretirement benefits cost ............       4,953         --          4,516         --
    Accrued (prepaid) pension cost ..................       1,473      (21,665)       3,043      (24,785)
    Other accrued liabilities and deductible
     differences ....................................      11,993         --          9,627         --
    Other taxable differences .......................        --        (26,591)        --        (35,291)
Tax on unremitted earnings of non-U.S. subsidiaries .        --         (3,933)        --         (4,156)
Tax loss and tax credit carryforwards ...............     106,067         --        139,674         --
Valuation allowance .................................    (121,681)        --       (153,678)        --
                                                         --------     --------     --------    ---------

     Gross deferred tax assets (liabilities) ........      48,728     (109,470)      50,477     (126,592)

Reclassification, principally netting by tax
  jurisdiction ......................................     (43,402)      43,402      (44,139)      44,139
                                                         --------     --------     --------    ---------

    Net total deferred tax assets (liabilities) .....       5,326      (66,068)       6,338      (82,453)
    Net current deferred tax assets (liabilities) ...       4,640       (1,530)       4,404       (3,219)
                                                         --------     --------     --------    ---------

    Net noncurrent deferred tax assets (liabilities)$         686    $ (64,538)   $   1,934    $ (79,234)
                                                         ========    =========    =========    =========
</TABLE>

     Changes in the  Company's  deferred  income  tax  valuation  allowance  are
summarized below.

<TABLE>
<CAPTION>
                                                                             Years ended December 31,
                                                                      -------------------------------------
                                                                          2000         2001         2002
                                                                      ----------    ----------   ----------
                                                                                     (In thousands)

<S>                                                                    <C>          <C>          <C>
Balance at the beginning of year ...................................   $ 196,630    $ 155,572    $ 121,681

   Recognition of certain deductible tax attributes which previously
     did not meet the "more-likely-than-not" recognition criteria ..        (375)     (23,247)      (1,808)
   Offset to the change in gross deferred income tax assets due
     principally to redeterminations of certain tax attributes and
     implementation of certain tax planning strategies .............     (24,955)      (3,157)      12,187
   Foreign currency translation ....................................     (15,728)      (7,487)      21,618
                                                                       ---------    ---------    ---------

Balance at the end of year .........................................   $ 155,572    $ 121,681    $ 153,678
                                                                       =========    =========    =========
</TABLE>

     A reduction in the German "base"  income tax rate from 30% to 25%,  enacted
in October 2000,  became effective  January 1, 2001. The reduction in the German
income tax rate  resulted  in $5.7  million of  additional  deferred  income tax
expense  in the  fourth  quarter  of 2000 due to a  reduction  of the  Company's
deferred income tax asset related to certain German tax attributes.

     A reduction in the Belgian  income tax rate from 40.17% to 33.99%,  enacted
in December 2002, became effective January 1, 2003. The reduction in the Belgian


                                     FB-34

<PAGE>

income tax rate  resulted in a $2.3  million  decrease  in  deferred  income tax
expense  in the  fourth  quarter  of 2002 due to a  reduction  of the  Company's
deferred   income  tax  liabilities   related  to  certain   Belgian   temporary
differences.

     Certain  of  the  Company's  tax  returns  in  various  U.S.  and  non-U.S.
jurisdictions  are being  examined  and tax  authorities  have  proposed  or may
propose tax deficiencies, including penalties and interest.


     In 2002  the  Company  received  a  notification  from  the  Norwegian  tax
authorities of their intent to assess tax deficiencies of approximately NOK 12.2
million  ($1.7  million at December 31, 2002 and at June 30,  2003)  relating to
1998 through  2000.  The Company has objected to this  proposed  assessment in a
written response to the Norwegian tax authorities.


     The Company has received  preliminary tax assessments for the years 1991 to
1997 from the Belgian tax  authorities  proposing  tax  deficiencies,  including
related interest, of approximately (euro)10.1 million ($10.5 million at December
31, 2002 and $11.6 million at June 30, 2003).  The Company has filed protests to
the assessments  for the years 1991 to 1997. The Company is in discussions  with
the Belgian tax  authorities  and  believes  that a  significant  portion of the
assessments is without merit.


     In April 2003 the  Company  received a  notification  from the  Belgian tax
authorities  of their  intent to assess a tax  deficiency  related to 1999.  The
anticipated   assessment,   including  interest,   is  expected  to  approximate
(euro)13.1  million ($15.0 million at June 30, 2003).  The Company  believes the
proposed  assessment  related to 1999 is without merit and in April 2003 filed a
written response in opposition to the notification of intent to assess.


     In the first  quarter  of 2003,  the  Company  was  notified  by the German
Federal  Fiscal Court (the  "Court")  that the Court had ruled in the  Company's
favor  concerning a claim for refund suit in which the Company sought refunds of
prior taxes paid during the periods  1990  through  1997.  The Company has filed
certain amended German tax returns and expects to file additional amended German
tax  returns  claiming  such  refunds  for all  years  affected  by the  Court's
decision,  which is expected to result in an estimated total net refund of taxes
and interest of approximately $40 million.  Receipt of the German tax refunds is
subject to satisfaction of various procedural  requirements,  including a review
and acceptance of the amended German tax returns by the German tax  authorities.
Certain of these procedural requirements were satisfied in the second quarter of
2003 with respect to a portion of the refund claim,  and in July 2003 the German
tax authorities  refunded the Company a portion of the total anticipated refund.
The portion  received in July was  (euro)21.5  million ($24.6 million using June
30, 2003  exchange  rates).  The Company  has  reflected  this tax refund in its
second  quarter 2003 results of operations.  The Company  expects to receive the
remaining  refunds  over the next six to nine  months,  a  portion  of which may
result in an additional income tax benefit.

     No assurance  can be given that the Company's tax matters will be favorably
resolved  due  to  the  inherent   uncertainties   involved  in  court  and  tax
proceedings.  The Company  believes that it has provided  adequate  accruals for
additional taxes and related  interest expense which may ultimately  result from
all such  examinations  and  believes  that  the  ultimate  disposition  of such
examinations  should  not  have a  material  adverse  effect  on  the  Company's
consolidated financial position, results of operations or liquidity.

     During the fourth quarter of 2001, the Company completed a restructuring of
its German  subsidiaries,  and as a result recognized a $23.2 million net income
tax benefit  attributable  to a decrease  in the  valuation  allowance  due to a
change in estimate of the Company's ability to utilize certain German income tax
attributes that did not previously meet the  "more-likely-than-not"  recognition
criteria.


     At December 31, 2002 and at June 30, 2003,  the Company had the  equivalent
of approximately $414 million and $470 million, respectively, of income tax loss
carryforwards  in Germany  with no  expiration  date.  However,  the Company has
provided a deferred tax valuation  allowance against  substantially all of these
income tax loss carryforwards because the Company currently believes they do not
meet the "more-likely-than-not" recognition criteria. In 2002 the German federal
government  proposed  certain changes to its income tax law,  including  certain
changes that would have imposed  limitations on the annual utilization of income
tax loss  carryforwards.  Such proposal,  if enacted,  would have  significantly

                                     FB-35

<PAGE>

affected  Kronos' 2003 and future income tax expense and cash tax  payments.  In
April 2003 the  German  federal  government  passed a new tax law which does not
contain the provision  that would have  restricted  the  utilization of tax loss
carryforwards.  Furthermore,  the  provisions  contained  in the new law are not
expected to materially  impact  Kronos' income tax expense or cash tax payments.
On August 1, 2003, the German federal government proposed new tax law amendments
that, among other things, reintroduced the limitations on the annual utilization
of income tax loss  carryforwards,  to become effective in 2004. There can be no
assurance that these  proposed law  amendments  will be enacted and, if enacted,
when they would become effective.  Such proposal, if enacted as proposed,  would
significantly  affect  the  Company's  future  income tax  expense  and cash tax
payments.


     At December  31, 2002 and June 30,  2003,  the Company had net deferred tax
liabilities  of $ 76.1  million  and $86.9  million,  respectively.  The Company
operates in numerous  tax  jurisdictions,  in certain of which it has  temporary
differences that net to deferred tax assets (before  valuation  allowance).  The
Company has provided a deferred  tax  valuation  allowance of $153.7  million at
December 31, 2002 and $166.0  million at June 30, 2003,  principally  related to
Germany,  partially offsetting deferred tax assets which the Company believes do
not currently meet the "more-likely-than-not" recognition criteria.



Note 15 - Leverkusen fire and insurance claim:

     A fire on March 20,  2001  damaged a section of the  Company's  Leverkusen,
Germany 35,000 metric ton sulfate-process TiO2 plant ("Sulfate Plant") and, as a
result,  production of TiO2 at the Leverkusen  facility was halted. The fire did
not enter the Company's adjacent 125,000 metric ton chloride-process  TiO2 plant
("Chloride  Plant"),  but did damage  certain  support  equipment  necessary  to
operate that plant. The damage to the support equipment  resulted in a temporary
shutdown of the Chloride Plant.

     On  April  8,  2001,   repairs  to  the  damaged  support   equipment  were
substantially  completed and full production  resumed at the Chloride Plant. The
Sulfate Plant became  approximately 50% operational in September 2001 and became
fully operational in late October 2001. The damages to property and the business
interruption losses caused by the fire were covered by insurance as noted below,
but the effect on the financial  results of the Company on a  quarter-to-quarter
basis was impacted by the timing and amount of insurance recoveries.



     The Company  reached an agreement and settled the coverage claim  involving
the  Leverkusen  fire for $56.4 million during the fourth quarter of 2001 ($46.9
million  received as of December  31,  2001,  with the  remaining  $9.5  million
received  in  January  2002),   of  which  $27.3  million  related  to  business
interruption  and $29.1 million related to property  damage,  clean-up costs and
other extra  expenses.  The Company  recognized a $17.5 million  pre-tax gain in
2001 related to the property  damage  recovery after  deducting $11.6 million of
clean-up  costs and other extra  expenses  incurred  and the  carrying  value of
assets  destroyed  in the  fire.  The $27.3  million  of  business  interruption
proceeds recognized in 2001 were allocated between other operating income, which
reflects  recovery of lost margin  ($7.2  million) and as a reduction of cost of
sales  to  offset  unallocated  period  costs  ($20.1  million).  No  additional
recoveries related to the Leverkusen fire are expected to be received.




Note 16 - Other items:

     Advertising  costs are  expensed as incurred and were $1 million in each of
2000, 2001 and 2002.

     Research,  development  and  certain  sales  technical  support  costs  are
expensed as incurred and approximated $6 million in each of 2000, 2001 and 2002.

     Interest  capitalized in connection with long-term capital projects was nil
in each of 2000, 2001 and 2002.


Note 17- Related party transactions:

     The  Company  may  be  deemed  to  be  controlled  by  Harold  C.  Simmons.
Corporations  that may be  deemed to be  controlled  by or  affiliated  with Mr.
Simmons sometimes engage in (a) intercorporate  transactions such as guarantees,
management  and  expense  sharing  arrangements,  shared fee  arrangements,  tax
sharing agreements,  joint ventures,  partnerships,  loans, options, advances of
funds on open  account,  and sales,  leases and  exchanges of assets,  including
securities  issued  by  both  related  and  unrelated  parties  and  (b)  common
investment and acquisition strategies,  business combinations,  reorganizations,
recapitalizations,  securities  repurchases,  and purchases and sales (and other

                                     FB-36

<PAGE>

acquisitions  and  dispositions)  of  subsidiaries,  divisions or other business
units,  which  transactions have involved both related and unrelated parties and
have included  transactions  which  resulted in the  acquisition  by one related
party of a publicly  held minority  equity  interest in another  related  party.
While no  transactions  of the type described above are planned or proposed with
respect to the Company  other than as set forth in these  financial  statements,
the Company continuously considers,  reviews and evaluates, and understands that
Contran,  Valhi, NL and related  entities  consider,  review and evaluate,  such
transactions.  Depending  upon  the  business,  tax and  other  objectives  then
relevant,  and  restrictions  under the indentures and other  agreements,  it is
possible that the Company might be a party to one or more such  transactions  in
the future.

     The  Company  is a party  to  various  intercorporate  services  agreements
("ISA") with various related parties discussed below. Under the ISA's, employees
of one company will provide  certain  management,  tax  planning,  financial and
administrative  services to the other  company on a fee basis.  Such charges are
based upon estimates of the time devoted by the employees of the provider of the
services to the affairs of the recipient, and the compensation of such persons.


     The Company is a party to an intercorporate services agreement with NL ("NL
ISA")  whereby NL provides  certain  management,  financial  and  administrative
services  to the  Company on a fee basis.  Intercorporate  services  fee expense
related to the NL ISA was $5.0  million  in 2000,  $3.5  million  in 2001,  $3.7
million in 2002,  and $1.8  million and $1.9  million in the first six months of
2002 and 2003, respectively.  Following completion of NL's distribution of 48.7%
of the  outstanding  shares of Kronos  common stock to NL  shareholders,  Kronos
expects  that the NL ISA will be  amended  with terms  similar  to the  original
agreement.


     Purchases  of TiO2 from LPC were $92.5  million in 2000,  $93.4  million in
2001,  $92.4  million in 2002,  and $44.7 million and $53.6 million in the first
six months of 2002 and 2003, respectively.


     Interest income from affiliates related to notes receivable from affiliates
was $20.3  million in 2000,  $33.4 million in 2001,  $20.8 million in 2002,  and
$17.5  million  and $.7  million  in the  first  six  months  of 2002 and  2003,
respectively.  Interest  expense  to  affiliates  related  to notes  payable  to
affiliates  was $29.0 million in 2000,  $23.0 million in 2001,  $12.3 million in
2002,  and $12.2  million  and $.7  million  in the first six months of 2002 and
2003, respectively.


     Tall Pines Insurance  Company ("Tall  Pines"),  Valmont  Insurance  Company
("Valmont")  and EWI provide for or broker certain of the  Company's,  its joint
venture's and its  affiliates'  insurance  policies.  Valmont and Tall Pines are
wholly-owned  by Valhi. A son-in-law of Mr. Simmons is the Chairman of the Board
of EWI.  Consistent with insurance industry practices,  Tall Pines,  Valmont and
EWI receive commissions from the insurance and reinsurance  underwriters for the
policies  that they  provide or broker.  The Company and its joint  venture paid
approximately  $5.6 million,  $9.7 million,  $10.1 million in 2000,  2001, 2002,
respectively, and $1.1 million in each of the first six months of 2002 and 2003,
for policies  provided or brokered by Tall Pines,  Valmont and EWI. The premiums
paid by affiliates  (other than the Company and its joint  venture) for policies
provided  or  brokered  by EWI was  approximately  $7.6  million  in  2002,  and
approximately  $1.5 million and $1.8 million in the first six months of 2002 and
2003, respectively.  These amounts principally included payments for reinsurance
and  insurance  premiums  paid to unrelated  third  parties,  but also  included
commissions paid to Tall Pines,  Valmont and EWI. In the Company's opinion,  the
amounts that the Company paid for these  insurance  policies and the  allocation
among  the  Company  and its  affiliates  of  relative  insurance  premiums  are
reasonable  and  similar to those they could  have  obtained  through  unrelated
insurance companies and/or brokers. The Company expects that these relationships
with Tall Pines, Valmont and EWI will continue through 2003.

     During 2000 NL and an officer of both the  Company  and NL entered  into an
agreement  whereby stock options held by the officer to purchase an aggregate of
100,000  shares of NL's common  stock were  exercised.  On a net basis,  NL made
aggregate  cash  payments to the officer of  approximately  $1.3  million and NL
charged the Company an equivalent  amount for stock  compensation  expense.  See
Note 2.

     During 2002 NL and an officer of both the  Company  and NL entered  into an
agreement  whereby stock options held by the officer to purchase an aggregate of
160,400 shares of NL's common stock were  exercised or canceled for value.  On a
net basis, NL made aggregate cash payments to the officer of  approximately  $.7
million,  and NL charged the Company an equivalent amount for stock compensation
expense. See Note 2.

                                     FB-37

<PAGE>

     From time to time, the Company loans funds to related parties. See Notes 11
and 13.  These loans  permit the Company to earn a higher rate of return on cash
not needed at the time for use in its operations  than it could  otherwise earn.
While such loans are of a lesser credit quality than cash equivalent instruments
otherwise  available to the Company,  the Company believes that it has evaluated
the credit risks involved,  and that those risks are reasonable and reflected in
the terms of the loans.

     Amounts  receivable  from and payable to affiliates  are  summarized in the
following table.


<TABLE>
<CAPTION>
                                                   December 31,         June 30,
                                                 2001        2002         2003
                                               --------   ---------    ---------
                                                                       (Unaudited)
                                                         (In thousands)

Current receivable from affiliates:

<S>                                            <C>          <C>          <C>
     NL - income taxes ..................      $  --        $   978      $  --
     Other ..............................           47           54           62
                                               -------      -------      -------
                                               $    47      $ 1,032      $    62
                                               =======      =======      =======

Current payable to affiliates:

     NL .................................      $ 4,939      $   319      $   106
     NL - income taxes ..................           64         --          2,923
     LPC ................................        6,362        7,614        8,291
                                               -------      -------      -------

                                               $11,365      $ 7,933      $11,320
                                               =======      =======      =======
</TABLE>

     Amounts payable to LPC are generally for the purchase of TiO2 (see Note 7),
and amounts  payable to NL principally  relate to accrued  interest on affiliate
loans.


Note 18 - Commitments and contingencies:


Leases

     The Company leases, pursuant to operating leases, various manufacturing and
office space and transportation  equipment.  Most of the leases contain purchase
and/or  various  term  renewal  options at fair market and fair  rental  values,
respectively.  In most cases  management  expects  that, in the normal course of
business, leases will be renewed or replaced by other leases.

     Kronos'  principal  German operating  subsidiary  leases the land under its
Leverkusen  TiO2 production  facility  pursuant to a lease expiring in 2050. The
Leverkusen  facility,  with  approximately  one-third  of Kronos'  current  TiO2
production  capacity,  is located  within the lessor's  extensive  manufacturing
complex.  Rent  for the  Leverkusen  facility  is  periodically  established  by
agreement  with the lessor for periods of at least two years at a time.  Under a
separate supplies and services  agreement  expiring in 2011, the lessor provides
some raw  materials,  including  chlorine and certain  amounts of sulfuric acid,
auxiliary and operating  materials and utilities  services  necessary to operate
the Leverkusen facility. Both the lease and the supplies and services agreements
restrict the Company's  ability to transfer  ownership or use of the  Leverkusen
facility.

                                     FB-38

<PAGE>


     Net rent expense  aggregated $9 million in 2000, $8 million in 2001 and $10
million in 2002.  At December 31, 2002,  minimum  rental  commitments  under the
terms of noncancellable operating leases were as follows:

<TABLE>
<CAPTION>
                                                 Real Estate         Equipment
                                                 -----------         ---------
                                                         (In thousands)
Years ending December 31,

                  <S>                             <C>                <C>
                  2003                            $ 2,164            $2,232
                  2004                              2,116             1,643
                  2005                              1,692               984
                  2006                              1,424               382
                  2007                              1,414               174
                  2008 and thereafter              18,110               692
                                                  -------            ------
                                                  $26,920            $6,107
                                                  =======            ======
</TABLE>


     Approximately $16.5 million of the $26.9 million real estate minimum rental
commitment is  attributable  to the Leverkusen,  Germany  facility.  The minimum
commitment is  determined by taking the current  annual rental rate in effect at
December 31, 2002 and extending out the annual rate to the year 2050.


Purchase commitments

     The Company has long-term  supply  contracts that provide for the Company's
chloride feedstock requirements through 2006. The agreements require the Company
purchase  certain  minimum  quantities of feedstock with average  minimum annual
purchase commitments aggregating approximately $156 million.


Environmental, product liability and litigation matters

     The Company's operations are governed by various foreign environmental laws
and regulations.  Certain of the Company's  businesses are and have been engaged
in the  handling,  manufacture  or use of  substances  or compounds  that may be
considered  toxic or hazardous  within the meaning of  applicable  environmental
laws. As with other companies  engaged in similar  businesses,  certain past and
current  operations  and  products of the Company  have the  potential  to cause
environmental  or other  damage.  The Company has  implemented  and continues to
implement  various  policies and programs in an effort to minimize  these risks.
The policy of the  Company is to maintain  compliance  with  applicable  foreign
environmental  laws and  regulations  at all of its  facilities and to strive to
improve its  environmental  performance.  It is possible that future  changes in
environmental  laws  and  enforcement  policies  thereunder,  could  affect  the
Company's production, handling, use, storage,  transportation,  sale or disposal
of such  substances  as well as  adversely  affect  the  Company's  consolidated
financial position, results of operations or liquidity.


     The  Company's  production   facilities  operate  within  an  environmental
regulatory  framework in which  governmental  authorities  typically are granted
broad  discretionary  powers which allow them to issue  operating  permits under
which the plants must  operate.  The Company  believes  all of its plants are in
substantial  compliance with applicable  environmental  laws. Neither Kronos nor
any of its  subsidiaries  have been notified of any  environmental  claim in the
United  States or any foreign  jurisdiction  by the U.S.  EPA or any  applicable
foreign authority or any state, provincial or local authority.

     While the laws  regulating  operations of  industrial  facilities in Europe
vary from country to country, a common regulatory denominator is provided by the
European Union (the "EU").  Germany and Belgium are members of the EU and follow
its  initiatives.   Norway,  although  not  a  member,  generally  patterns  its
environmental  regulatory actions after the EU. The Company believes that Kronos
has  obtained  all  required  permits  and  is in  substantial  compliance  with
applicable  EU  requirements,   including  EU  Directive   92/112/EEC  regarding
establishment of procedures for reduction and eventual  elimination of pollution
caused by waste from the TiO2 industry.

                                     FB-39

<PAGE>

     At all of the Company's  sulfate plant facilities  other than  Fredrikstad,
Norway,  the Company  recycles  spent acid either  through  contracts with third
parties or using the Company's own facilities. At its Fredrikstad, Norway plant,
the Company ships its spent acid to a third party  location  where it is treated
and  disposed.  The Company has a contract  with a third party to treat  certain
by-products of its German sulfate-process plants. Either party may terminate the
contract  after giving four years advance  notice with regard to its  Nordenham,
Germany plant.  Under certain  circumstances,  Kronos may terminate the contract
after giving six months notice with respect to treatment of by-products from the
Leverkusen, Germany plant.

     The  Company  landfills  waste  generated  at its  Nordenham,  Germany  and
Langerbrugge,  Belgium  plants and mine tailings  waste  generated at its mining
facility in Norway. The Company maintains  reserves,  as required under GAAP, to
cover  the  anticipated  cost  of  closure  of  these   landfills,   which  were
approximately  $.1 million  and $.5  million as of  December  31, 2001 and 2002,
respectively.

     The Company is responsible  for certain closure costs at landfills used and
formerly used by its Leverkusen,  Germany TiO2 plants. The Company has a reserve
of  approximately  $5 million  and $6 million  related to such  landfills  as of
December 31, 2001 and 2002, respectively.

     The Company's  Belgian  subsidiary and various of its Belgian employees are
the subject of an investigation by Belgian  authorities  relating to an accident
resulting in two fatalities that occurred in its Langerbrugge,  Belgium facility
in October 2000. The investigation stage, which could ultimately result in civil
and criminal  sanctions against the Company,  was completed in 2002. In May 2003
the Belgian  authorities  referred the proceedings against the Company's Belgian
subsidiary and certain of its Belgian employees to the criminal court for trial.
The matter has been set for trial in October 2003.

     The Company is also involved in various other  environmental,  contractual,
product liability and other claims and disputes incidental to its business.

     The Company currently  believes the disposition of all claims and disputes,
individually or in the aggregate,  should not have a material  adverse effect on
the  Company's  consolidated  financial  condition,  results  of  operations  or
liquidity.


Concentrations of credit risk

     Sales of TiO2  accounted  for more  than 90% of net sales  from  continuing
operations  during each of the past three years. The remaining sales result from
the mining and sale of ilmenite ore (a raw material used in the sulfate  pigment
production process),  and the manufacture and sale of iron-based water treatment
chemicals (derived from co-products of the TiO2 production  processes).  TiO2 is
generally  sold to the paint,  plastics and paper  industries.  Such markets are
generally  considered   "quality-of-life"  markets  whose  demand  for  TiO2  is
influenced  by  the  relative  economic  well-being  of the  various  geographic
regions.  TiO2 is  sold to over  4,000  customers,  with  the top ten  customers
approximating  25% of net sales in each of the last three  years.  Approximately
one-half  of the  Company's  TiO2 sales by volume  were to Europe in each of the
past three years and  approximately  37% in 2000, 38% in 2001 and 39% in 2002 of
sales were attributable to North America.

     Consolidated cash, cash equivalents and current restricted cash equivalents
includes $17.7 million and $13.8 million  invested in U.S.  Treasury  securities
purchased under  short-term  agreements to resell at December 31, 2001 and 2002,
respectively,  of which $9.6 million and $10.4  million,  respectively,  of such
securities are held in trust for the Company by a single U.S. bank.

                                     FB-40

<PAGE>

Note 19 - Financial instruments:

     Summarized below is the estimated fair value and related net carrying value
of the Company's financial instruments.

<TABLE>
<CAPTION>
                                                    December 31,      December 31,
                                                       2001              2002
                                                  ----------------  ---------------
                                                  Carrying  Fair   Carrying    Fair
                                                   Amount   Value   Amount     Value
                                                  --------  -----  --------    -----
                                                            (In millions)
Cash, cash equivalents, and noncurrent
 restricted marketable
<S>                                               <C>      <C>      <C>      <C>
  debt securities .............................   $ 55.3   $ 55.3   $ 47.1   $ 47.1

Notes payable and long-term debt:
  Fixed rate with market quotes:
     11.75% First-Tier Senior Mirror Note to NL   $194.0   $194.9   $ --     $ --
     8.875% Senior Secured Notes ..............     --       --      296.9    299.9
    Variable rate debt ........................     48.7     48.7     29.0     29.0
    Note payable to affiliate .................     --       --       44.6     44.6
</TABLE>

     Fair value of the noncurrent  restricted  marketable  debt  securities were
based upon quoted market prices at December 31, 2001 and 2002. Fair value of the
Company's  11.75%  First-Tier  Senior  Mirror Note was based upon quoted  market
prices of the NL Notes at December 31, 2001.  Fair value of the Company's  Notes
was  based  upon  quoted  market  prices  at  December  31,  2002.   Fair  value
approximated carrying value on the Company's variable rate debt and note payable
to affiliate  because the variable  interest rate on all of such indebtedness is
deemed to  approximate  market rates.  The Company held no derivative  financial
instruments at December 31, 2001 or 2002.


Note 20 - Capital Contribution:

     On January 31, 2000, NL contributed  its investment of $291.9 million in NL
Capital Corporation  ("NLCC"),  a wholly owned subsidiary of NL, to the Company,
which  immediately  contributed  it to KII.  NLCC then merged with KII (with KII
being the surviving  corporation in the merger.) The net assets  acquired in the
merger were recorded at predecessor  carryover basis in accordance with GAAP due
to the common  control of KII and NLCC by NL.  NLCC  previously  conducted  NL's
rheological additives business which was sold in 1998.  Substantially all of the
net proceeds from the sale of the operational  assets related to the rheological
additives  business  were loaned to NL and the Company.  Subsequent to the sale,
NLCC did not conduct any  operations  and its major  assets held were such notes
receivable from affiliates.  Of the $291.9 million,  $240.1 million  represented
noncurrent  notes  receivable  from NL, which were  classified as a reduction of
stockholder's equity at the time of the merger.


                                     FB-41

<PAGE>

Note 21 - Quarterly financial data (unaudited):



<TABLE>

<CAPTION>
                                                                 Quarter ended
                                                ---------------------------------------------
                                                March 31   June 30       Sept. 30    Dec. 31
                                                --------  ---------     ----------  ---------
                                                   (In thousands, except per share amounts)
Year ended December 31, 2001:

<S>                                             <C>        <C>           <C>        <C>
    Net sales ...............................   $226,060   $220,105      $206,952   $181,982
    Cost of sales ...........................    149,902    151,320       145,945    130,893
    Net income ..............................     35,965     35,641        25,442     57,408(a)
                                                --------   --------      --------   --------

    Basic and diluted net income per share ..   $    .73   $    .73      $    .52      $1.17(a)
                                                ========   ========      ========   ========
    Basic and diluted weighted average common
     shares and potential common shares
     outstanding ............................     48,943     48,943        48,943     48,943
                                                ========   ========      ========   ========
Year ended December 31, 2002:

    Net sales ...............................   $202,357   $226,909      $234,061   $211,861
    Cost of sales ...........................    156,253    176,247       177,521    161,809
    Net income ..............................     17,038     23,273(b)     16,754      9,199
                                                --------   --------      --------   --------

    Basic and diluted net income per share ..   $    .35   $    .48(b)   $    .34      $ .19
                                                ========   ========      ========   ========
    Basic and diluted weighted average common
     shares and potential common shares
     outstanding ............................     48,943     48,943        48,943     48,943
                                                ========   ========      ========   ========


Year ending December 31, 2003:
  Net sales                                     $252,973   $266,631
  Cost of sales                                  188,417    197,649
  Net income                                      16,665     41,798
                                                --------   --------


  Basic and diluted net income per share        $    .34   $    .85
                                                ========   ========

  Basic and diluted weighted average common
   shares and potential common shares
   outstanding                                    48,943     48,943
                                                ========   ========
</TABLE>



     Quarterly  per share  amounts are  computed  independently  for each of the
quarters presented and therefore may not sum to the total for the year.



     (a)  Net income in the fourth  quarter of 2001  included  $16.6  million of
          pretax insurance recoveries for business interruption related to prior
          2001  quarters due to the  Leverkusen  fire.  Net income in the fourth
          quarter of 2001 also included  $11.6  million net of pretax  insurance
          recoveries for property  damage  related to the Leverkusen  fire and a
          $17.6 million net income tax benefit related to a restructuring of the
          Company's German subsidiaries.



     (b)  Net income in the second  quarter of 2002 included a one-time  foreign
          currency   transaction   gain  of   $6.3   million   related   to  the
          extinguishment  of certain  intercompany  indebtedness.  Net income in
          second  quarter 2002 also included  $1.5 million  pretax of additional
          interest expense related to the early  extinguishment of the Company's
          11.75% First-Tier Senior Mirror Note.



                                     FB-42