| **UNITED                  STATES**                                                                                                                 |
|----------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES                  AND EXCHANGE COMMISSION**                                                                                            |
| **Washington,                  D.C. 20549**                                                                                                        |
|                                                                                                                                               |
| **FORM                  10-K**                                                                                                                     |
|                                                                                                                                               |
| **Annual                  Report Pursuant to Section 13 or 15(d) of the Securities and Exchange                  Act                  of 1934:**   |
| **For                  the fiscal year ended****December                  31, 2006**                                                               |
| **Commission                  file number****333-100047**                                                                                          |
|                                                                                                                                               |
| **KRONOS                  INTERNATIONAL, INC.**                                                                                                    |
| **(Exact                  name of Registrant as specified in its                  charter)**                                                       |
|                                                                                                                                               |
| **    DELAWARE** **     **                                                                       | ** ****   22-2949593   ** |
| **(State                  or other jurisdiction of****incorporation                  or organization)**                                            | **(IRS                  Employer Identification No.)** |
| ** **                                                                                                                                    |
| **5430                  LBJ Freeway, Suite 1700**                                                                                                  |
| **       Dallas,                  Texas                  75240-2697       ** |
| **(Address                  of principal executive offices)**                                                                                      |
|                                                                                                                                               |
| **Registrant's                  telephone number, including area code:****(972) 233-1700**                                                    |

**No        securities are registered pursuant to Section 12(b) of the        Act.**

**No        securities are registered pursuant to Section 12(g) of the        Act.**

**Indicate        by check mark:**

**If        the Registrant is a well-known seasoned issuer, as defined in Rule 405 of        the        Securities Act. Yes **
** **
**        No **
** X  **

**If        the Registrant is not required to file reports pursuant to Section 13 or        Section        15(d) of the Act. Yes **
** **
**        No **
** X  **

**Whether        the Registrant (1) has filed all reports required to be filed by Section        13 or        15(d) of the Securities Exchange Act of 1934 during the preceding 12 months        and        (2) has been subject to such filing requirements for the past 90 days. Yes        **
**X **
**        No **
**   **

**Whether        the Registrant is a large accelerated filer, an accelerated filer or a        non-accelerated filer (as defined in Rule 12b-2 of the Act). Large accelerated        filer **
**   **
**        Accelerated filer **
**  **
**        Non-accelerated filer **
** X **

**Whether        the Registrant is a shell company (as defined in Rule 12b-2 of the Act).        Yes**
**   **
**        No **
** X**
** **

**No        common stock was held by nonaffiliates of the Registrant as of June 30, 2006        (the last business day of the Registrant's most recently-completed second        fiscal        quarter).**

**As        of February 28, 2007, 2,968 shares of the Registrant's common stock were        outstanding. **

**The        Registrant is a wholly-owned subsidiary of Kronos Worldwide, Inc. (File No.        1-31763) and meets the conditions set forth in General Instructions I(1)        (a) and        (b) and is therefore filing this Form 10-K with the reduced disclosure format.        **

**Documents        incorporated by reference**

**None.        **

----

**TABLE        OF CONTENTS**

| **Part                  I**                                                                                                                                                      |                                                                                                                         | **Page** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                             |                                                                                                                         |     |
| Item                  1.                                                                                                                                                         | Business                                                                                                                     | 4        |
| Item                  1A.                                                                                                                                                        | Risk                  Factors                                                                                                | 9        |
| Item                  1B.                                                                                                                                                        | Unresolved                  Staff comments                                                                                   | 11       |
| Item                  2.                                                                                                                                                         | Properties                                                                                                                   | 11       |
| Item                  3.                                                                                                                                                         | Legal                  Proceedings                                                                                           | 12       |
| Item                  4.                                                                                                                                                         | Submission                  of Matters to a Vote of Security Holders*                                                        | 12       |
|                                                                                                                                                                             |                                                                                                                         |     |
|                                                                                                                                                                             |                                                                                                                         |     |
| **Part                  II**                                                                                                                                                     |                                                                                                                         |     |
|                                                                                                                                                                             |                                                                                                                         |     |
| Item                  5.                                                                                                                                                         | Market                  for our Common Equity and Related Stockholder Matters                                                | 12       |
| Item                  6.                                                                                                                                                         | Selected                  Financial Data                                                                                     | 13       |
| Item                  7.                                                                                                                                                         | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operation | 15       |
| Item                  7A.                                                                                                                                                        | Quantitative                  and Qualitative Disclosures about Market Risk                                                  | 30       |
| Item                  8.                                                                                                                                                         | Financial                  Statements and Supplementary Data                                                                 | 31       |
| Item                  9.                                                                                                                                                         | Changes                  in and Disagreements with Accountants on Accounting and Financial                  Disclosures      | 31       |
| Item                  9A.                                                                                                                                                        | Controls                  and Procedures                                                                                     | 31       |
| Item                  9B.                                                                                                                                                        | Other                  Information                                                                                           | 32       |
|                                                                                                                                                                             |                                                                                                                         |     |
| **Part                  III**                                                                                                                                                    |                                                                                                                         |     |
|                                                                                                                                                                             |                                                                                                                         |     |
| Item                  10.                                                                                                                                                        | Directors                  and Executive Officers of the Registrant*                                                         | 32       |
| Item                  11.                                                                                                                                                        | Executive                  Compensation*                                                                                     | 32       |
| Item                  12.                                                                                                                                                        | Security                  Ownership of Certain Beneficial Owners and Management*                                             | 32       |
| Item                  13.                                                                                                                                                        | Certain                  Relationships and related transactions*                                                             | 32       |
| Item                  14.                                                                                                                                                        | Principal                  Accounting Fees and Services                                                                      | 32       |
|                                                                                                                                                                             |                                                                                                                         |     |
| **Part                  IV**                                                                                                                                                     |                                                                                                                         |     |
|                                                                                                                                                                             |                                                                                                                         |     |
| Item                  15.                                                                                                                                                        | Exhibits                  and Financial Statement Schedules                                                                  | 33       |
|                                                                                                                                                                             |                                                                                                                         |     |
| **Signatures**                                                                                                                                                                   |                                                                                                                         |
|                                                                                                                                                                             |                                                                                                                         |     |
| *                  We meet the conditions set forth in the General Instructions I                  (1)(a) and                  (b) and have therefore omitted these items.  |                                                                                                                         |

----

**Forward-Looking        Information**

| ·   | Future                supply and demand for our products |
|--------------------|----------------------------------------------------------|
| ·   | The                extent of the dependence of certain of our businesses on certain                market                sectors |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                cyclicality of our businesses |
|--------------------|--------------------------------------------------|
| ·   | Customer                inventory levels (such as the extent to which our customers may,                from time                to time, accelerate purchases of titanium dioxide pigments                (“TiO2”)                in advance of anticipated price increases or defer purchases of                TiO2                in                advance of anticipated price decreases) |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Changes                in raw material and other operating costs (such as energy                costs) |
|--------------------|--------------------------------------------------------------------------------------------------------|
| ·   | The                possibility of labor disruptions |
|--------------------|-----------------------------------------------------|
| ·   | General                global economic and political conditions (such                as changes in the level of gross domestic product in various regions                of                the world and the impact of such changes on demand for TiO2) |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Competitive                products and substitute products |
|--------------------|-------------------------------------------------------------|
| ·   | Customer                and competitor strategies |
|--------------------|---------------------------------------------------|
| ·   | Potential                consolidation of our competitors |
|--------------------|-----------------------------------------------------------|
| ·   | The                impact of pricing and production                decisions |
|--------------------|------------------------------------------------------------------------------|
| ·   | Competitive                technology positions |
|--------------------|-------------------------------------------------|
| ·   | The                introduction of trade barriers |
|--------------------|---------------------------------------------------|
| ·   | Fluctuations                in currency exchange rates (such as changes in the exchange rate                between                the U.S. dollar and each of the euro, the Norwegian kroner and the                Canadian dollar) |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Operating                interruptions (including, but not limited to, labor disputes, leaks,                natural disasters, fires, explosions, unscheduled or unplanned downtime                and transportation interruptions) |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                timing and amounts of insurance                recoveries |
|--------------------|------------------------------------------------------------------------------|
| ·   | Our                ability to renew or refinance credit                facilities |
|--------------------|-----------------------------------------------------------------------------------|
| ·   | The                ultimate outcome of income tax audits, tax settlement initiatives                or other                tax matters |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                ultimate ability to utilize income tax attributes, the benefits of                which                have been recognized under the “more-likely-than-not” recognition                criteria |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Environmental                matters (such                as those requiring compliance with emission and discharge standards                for                existing and new facilities) |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Government                laws and regulations and possible changes                therein |
|--------------------|--------------------------------------------------------------------------------------------|
| ·   | The                ultimate resolution of pending litigation |
|--------------------|--------------------------------------------------------------|
| ·   | Possible                future litigation |
|--------------------|-------------------------------------------|

**PART        I**

**ITEM        1.**
**BUSINESS**

**General**

| ·   | We                also own and operate an ilmenite mine in Norway pursuant to a governmental                concession with an unlimited term. Ilmenite is a raw material used                directly as a feedstock by some sulfate-process TiO2                plants, including all of our European sulfate-process plants. We                also sell                ilmenite ore to third-parties some of whom are our competitors. The                mine                has estimated reserves that are expected to last at least 50 years. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | We                also manufacture and sell iron-based chemicals, which are co-products                and                processed co-products of the TiO2                pigment production process. These co-product chemicals are marketed                through our Ecochem division, and are used primarily as treatment                and                conditioning agents for industrial effluents and municipal wastewater                as                well as in the manufacture of iron pigments, cement and agricultural                products. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | We                also manufacture and sell titanium oxychloride, which is a side-stream                product from the production of TiO2.                Titanium oxychloride is used in specialty applications in the formulation                of pearlescent pigments, production of electroceramic capacitors                for cell                phones and other electronic devices. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Manufacturing        and operation**

*Kronos*
*TM*

*Chloride        production process*
***.***

*Sulfate        production process.*

**Raw        materials**

| **Production                  Process/Raw Material**                                             | **Quantities                  of Raw Materials****      Procured                  or Mined      ** |
|--------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                             | **(In                  thousands of metric tons)**                                                                                                             |
|                                                                                             |                                                                                                                                                           |
| Chloride                  process plants - purchased                  slag or natural rutile ore |  307                                                                                                                                                      |
|                                                                                             |                                                                                                                                                           |
| Sulfate                  process plants - raw                  ilmenite ore mined internally     |  319                                                                                                                                                      |

**Competition**

**Research        and development**

**Patents        and trademarks**

*Kronos*

**Major        customers**

**Seasonality**

**Employees        **

**Regulatory        and environmental matters**

**Website        and other available information**

**ITEM        1A. RISK FACTORS**

**Demand        for, and prices of, certain of our products are cyclical and we may experience        prolonged depressed market conditions for our products, which may result        in        reduced earnings or operating losses. **

**We        sell several of our products in mature and highly competitive industries        and        face price pressures in the markets in which we operate, which may result        in        reduced earnings or operating losses.**

**Higher        costs or limited availability of our raw materials may reduce our earnings        and        decrease liquidity. **

**Our        leverage may impair our financial condition or limit our ability to operate        our        businesses. **

| ·   | making                it more difficult for us to satisfy our obligations with respect                to our                liabilities; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | increasing                our vulnerability to adverse general economic and industry                conditions; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|
| ·   | requiring                that a portion of our cash flows from operations be used for the                payment                of interest on our debt, which reduces our ability to use our cash                flow to                fund working capital, capital expenditures, dividends on our common                stock,                acquisitions and general corporate                requirements; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | limiting                our ability to obtain additional financing to fund future working                capital,                capital expenditures, acquisitions and general corporate                requirements; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | limiting                our flexibility in planning for, or reacting to, changes in our business                and the industry in which we operate; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | placing                us at a competitive disadvantage relative to other less leveraged                competitors. |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

**ITEM        1B. UNRESOLVED STAFF COMMENTS**

**ITEM        2.**
**PROPERTIES**

| **Location**                            | **Description**                                                                 |
|-----------------------------------------|---------------------------------------------------------------------------------|
| Leverkusen,                  Germany    | TiO2                  production,                  Chloride and sulfate process |
| Nordenham,                  Germany     | TiO2                  production, Sulfate process                               |
| Langerbrugge,                  Belgium  | TiO2                  production, Chloride process                              |
| Fredrikstad,                  Norway    | TiO2                  production, Sulfate process                               |
| Hauge                  i Dalane, Norway | Ilmenite                  mine                                                  |

**ITEM 3.**
**LEGAL        PROCEEDINGS**

**ITEM 4.**
**SUBMISSION        OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**PART        II**

| **ITEM 5.** | **MARKET                  FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER                  MATTERS** |
|------------------|-------------------------------------------------------------------------------------------------------------|

| **ITEM                  6.** | **SELECTED                  FINANCIAL DATA** |
|------------------------------|----------------------------------------------|

*Accounting        for Planned Major Maintenance Activities*

|                                                                                                                                                                            |   | **Years                  ended December 31, ** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                                                                                                                            |   | **2002**                                            |   | **2003** |   | **2004** |   | **2005** |   | **2006(6)** |   |
|                                                                                                                                                                            |   | **(As                  adjusted)**                  |   | **(As                  adjusted)** |   | **(As                  adjusted)** |   | **(As                  adjusted)** |   |   |   |
|                                                                                                                                                                            |   | **(In                  millions, except ratios)**   |   |
|                                                                                                                                                                            |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *STATEMENTS                  OF OPERATIONS DATA:*                                                                                                                               |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  sales                                                                                                                                                      |   | $                                                   | 579.7  |   | $ | 715.9 |   | $ | 808.0 |   | $ | 850.9 |   | $ | 914.2 |   |
| Gross                  margin(1)                                                                                                                                                |   |                                                | 125.9  |   |   | 199.5 |   |   | 197.8 |   |   | 238.4 |   |   | 223.1 |   |
| Net                  income(2)                                                                                                                                                  |   |                                                | 52.5   |   |   | 82.1 |   |   | 325.6 |   |   | 60.3 |   |   | 73.7 |   |
|                                                                                                                                                                            |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *BALANCE                  SHEET DATA (at year end):*                                                                                                                            |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                                                                                                                   |   | $                                                   | 611.3  |   | $ | 750.5 |   | $ | 985.2 |   | $ | 955.3 |   | $ | 1,080.6 |   |
| Long-term                  debt including current maturities                                                                                                                    |   |                                                | 325.9  |   |   | 356.7 |   |   | 533.2 |   |   | 453.8 |   |   | 529.8 |   |
| Stockholder’s                  equity (deficit) (3)                                                                                                                       |   |                                                | 77.7   |   |   | 113.1 |   |   | 207.7 |   |   | 183.3 |   |   | 211.4 |   |
|                                                                                                                                                                            |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *STATEMENTS                  OF CASH FLOW DATA:*                                                                                                                                |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  cash provided (used) by:                                                                                                                                   |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  activities                                                                                                                                           |   | $                                                   | 68.2   |   | $ | 104.8 |   | $ | 142.3 |   | $ | 92.7 |   | $ | 62.5 |   |
| Investing                  activities                                                                                                                                           |   |                                                | (29.7  | ) |   | (31.7 | ) |   | (34.2 | ) |   | (35.8 | ) |   | (47.1 | ) |
| Financing                  activities                                                                                                                                           |   |                                                | (57.5  | ) |   | (54.9 | ) |   | (129.9 | ) |   | (8.5 | ) |   | (31.1 | ) |
|                                                                                                                                                                            |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TiO2*OPERATING STATISTICS:*                                                                                                                                                     |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                  volume*                                                                                                                                                  |   |                                                | 297    |   |   | 310 |   |   | 336 |   |   | 326 |   |   | 353 |   |
| Production                  volume*                                                                                                                                             |   |                                                | 293    |   |   | 320 |   |   | 328 |   |   | 335 |   |   | 348 |   |
| Production                  rate as a percentage of capacity                                                                                                                    |   |                                                | 93     | % |   | Full |   |   | Full |   |   | Full |   |   | Full |   |
|                                                                                                                                                                            |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *OTHER                  FINANCIAL DATA**:*                                                                                                                                      |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                  of earnings to combined                            fixed charges and preferred dividends(unaudited)(4) |   |                                                | 1.5    |   |   | 3.3 |   |   | 2.6 |   |   | 3.6 |   |   | 2.0 |   |
| Ratio                  of earnings to                             fixed charges (unaudited) (5)                               |   |                                                | 2.7    |   |   | 3.3 |   |   | 2.6 |   |   | 3.6 |   |   | 2.0 |   |

| *   | Metric                tons in thousands |
|---------------|-----------------------------------------|
| (1)   | Gross                margin as presented above is greater than amounts previously reported                by                $.4 million in 2002 and 2003. See Note 15 to our Consolidated Financial                Statements. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | Net                income as presented above differs from amounts previously reported                by                $.2                million in 2002 and $.3                million in 2003. See Note 15                to                our Consolidated Financial Statements. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)   | Stockholder’s                equity as presented above is greater than amounts previously reported                by                $.9 million at December 3, 2002 and $1.5 million at December 31,                2003. See                Note 15 to our Consolidated Financial                Statements. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)   | Fixed                charges represents, as applicable, the sum of (i) total interest                expense                and (ii) the interest component of rent expense (calculated as one-third                of rent expense). Earnings represents, as applicable, the sum of                (i) fixed                charges, (ii) income before income taxes and minority interest and                (iii)                amortization of capitalized interest. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)   | Combined                fixed charges and preferred dividends represents, as applicable,                the sum                of (i) total interest expense, (ii) preferred stock dividends and                accretion and (iii) the interest component of rent expense (calculated                as                one-third of rent expense). Earnings represents, as applicable, the                sum of                (i) combined fixed charges, (ii) income before income taxes and minority                interest and (iii) amortization of capitalized interest. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)   | We                adopted Statement of Financial Accounting Standards No. 158 effective                December 31, 2006. See Note 15 to our Consolidated Financial                Statements. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **ITEM 7.** | **MANAGEMENT'S                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                  OPERATIONS** |
|------------------|-----------------------------------------------------------------------------------------------------------------------------|

**Business        overview**

| ·   | our                TiO2                selling prices, |
|--------------------|--------------------------------------------------------|
| ·   | foreign                currency exchange rates (particularly the exchange rate for the U.S.                dollar relative to the euro), |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | our                TiO2                sales and production volumes, and |
|--------------------|--------------------------------------------------------------------------|
| ·   | manufacturing                costs, particularly maintenance and energy-related                expenses. |
|--------------------|----------------------------------------------------------------------------------------------------------|

**Executive        summary**

**Critical        accounting policies and estimates**

| ·   | We                recognize an impairment charge associated with our long-lived assets,                including property and equipment, whenever we determine that recovery                of                such long-lived asset is not probable. Such determination is made                in                accordance with the 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. We do not assess our property and equipment for impairment                unless certain impairment indicators, as defined, are present. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | We                maintain various defined benefit pension plans. The amounts recognized                as                defined benefit pension expenses, and the reported amounts of prepaid                and                accrued pension costs, are actuarially determined based on several                assumptions, including discount rates, expected rates of returns                on plan                assets and expected health care trend rates. Variances from these                actuarially assumed rates will result in increases or decreases,                as                applicable, in the recognized pension obligations, pension expenses                and                funding requirements. These assumptions are more fully described                below                under “Defined Benefit Pension Plans”. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | We                record a valuation allowance to reduce our deferred income tax assets                to                the amount that is believed to be realized under the                "more-likely-than-not" recognition criteria. While we have 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 we may change our estimate of the amount of the                deferred income tax assets that would "more-likely-than-not" be realized                in the future, 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.                For                example, we have substantial net operating loss carryforwards in                Germany                (the equivalent of $701 million for German corporate purposes and                $247                million for German trade tax purposes at December 31, 2006). During                2004,                we concluded that the more-likely-than-not recognition criteria had                been                met with respect to the income tax benefit associated with our net                operating loss carryforwards in Germany. Prior to the complete utilization                of such carryforwards, it is possible that we might conclude the                benefit                of such carryforwards would no longer meet the "more-likely-than-not"                recognition criteria, at which point we would be required to recognize                a                valuation allowance against the then-remaining tax benefit associated                with                the carryforwards. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | We                record accruals for legal, income tax and other contingencies when                estimated future expenditures associated with such contingencies                and                commitments 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). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Comparison        of 2006 to 2005 Results of Operations**

|                                                          |   | **    Year                      ended December 31,    ** |                  |
|---------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|-----------------------|
|                                                          |   | **    2005    **                                         |                  | **    2006    ** |   |
|                                                          |   | **(Dollars                      in millions)**                                                   |                  |
|                                                          |   |                                                                                             |                  |   |   |   |   |   |   |   |   |   |   |
| Net                      sales                                |   | $                                                                                                | 850.9                 |   |   | 100% |   | **$** | **914.2** |   |   | **100                      %** |   |
| Cost                      of sales**                          |   |                                                                                             | 612.4                 |   |   | 72% |   |   | **691.2** |   |   | **76%** |   |
| Gross                      margin**                           |   |                                                                                             | 238.5                 |   |   | 28% |   |   | **223.0** |   |   | **24                      %** |   |
| Other                      operating income and expenses, net |   |                                                                                             | 100.2                 |   |   | 12% |   |   | **115.6** |   |   | **13%** |   |
| Income                      from operations**                 |   | $                                                                                                | 138.3                 |   |   | 16% |   | **$** | **107.4** |   |   | **11%** |   |
|                                                          |   |                                                                                             |                  |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                                                                             |                  |   |   |   |   |   |   |   |   | Percent |   |
|                                                          |   |                                                                                             |                  |   |   |   |   |   |   |   |   | Change |   |
| TiO2                      operating statistics:               |   |                                                                                             |                  |   |   |   |   |   |   |   |   |  |   |
| Sales                      volumes*                           |   |                                                                                             | 326    |   |   |   |   |   | 353    |   |   | **8                      %** |   |
| Production                      volumes*                      |   |                                                                                             | 335    |   |   |   |   |   | 348    |   |   | **4                      %** |   |
|                                                          |   |                                                                                             |                  |   |   |   |   |   |   |   |   |   |  |
| Percent                      change in net sales:             |   |                                                                                             |                  |   |   |   |   |   |   |   |   |   |   |
| TiO2                      product pricing                     |   |                                                                                             |                  |   |   |   |   |   |   |   |   | **-1                      %** |   |
| TiO2                      sales volumes                       |   |                                                                                             |                  |   |   |   |   |   |   |   |   | **8                      %** |   |
| TiO2                      product mix                         |   |                                                                                             |                  |   |   |   |   |   |   |   |   | **-                      %** |   |
| Changes                      in currency exchange rates       |   |                                                                                             |                  |   |   |   |   |   |   |   |   | **-%** |   |
|                                                          |   |                                                                                             |                  |   |   |   |   |   |   |   |   |   |   |
| Total                                                         |   |                                                                                             |                  |   |   |   |   |   |   |   |   | **7%** |   |

*Net        sales - *

*Cost        of sales -*

*Income        from operations - *

*Other        non-operating income (expense) *

*Provision        for income taxes*
*(benefit)        *

| ·   | an                income tax benefit of $21.7 million resulting from a favorable resolution                of certain income tax audits in Germany that resulted in an increase                in                the amount of our German trade tax net operating loss                carryforward; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | an                income                tax benefit of $10.7 million resulting from the reduction in our                income                tax contingency reserves related to favorable developments with income                tax                audits in Belgium, Norway and Germany;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | an                income                tax benefit of $1.4 million related to the favorable resolution of                certain                income tax audit issues in Germany and                Belgium. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | an                income tax benefit of $7.7 million for the aggregate effect of favorable                developments with respect to income tax audits in Belgium; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                charge of $17.5 million for the unfavorable effect related to the                loss of                certain of our German income tax attributes. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Comparison        of 2005 to 2004 Results of Operations**

|                                                        |   | **    Year                    ended December 31,    ** |                  |
|-------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|-----------------------|
|                                                        |   | **    2004    **                                       |                  | **    2005    ** |   |
|                                                        |   | **(Dollars                    in millions)**                                                   |                  |
|                                                        |   |                                                                                           |                  |   |   |   |   |   |   |   |   |   |   |
| Net                    sales                                |   | $                                                                                              | 808.0                 |   |   | 100% |   | **$** | **850.9** |   |   | **100%** |   |
| Cost                    of sales**                          |   |                                                                                           | 610.2                 |   |   | 76% |   |   | **612.4** |   |   | **                     72%** |   |
| Gross                    margin**                           |   |                                                                                           | 197.8                 |   |   | 24% |   |   | **238.5** |   |   | **                     28%** |   |
| Other                    operating income and expenses, net |   |                                                                                           | 100.9                 |   |   | 12% |   |   | **100.2** |   |   | **                     12%** |   |
| Income                    from operations**                 |   | $                                                                                              | 96.9                  |   |   | 12% |   | **$** | **138.3** |   |   | **                     16%** |   |
|                                                        |   |                                                                                           |                  |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |                                                                                           |                  |   |   |   |   |   |   |   |   | **Percent** |   |
|                                                        |   |                                                                                           |                  |   |   |   |   |   |   |   |   | **Change** |   |
| TiO2                    operating statistics:               |   |                                                                                           |                  |   |   |   |   |   |   |   |   |  |   |
| Sales                    volumes*                           |   |                                                                                           | 336    |   |   |   |   |   | **326**    |    |   | **                     -3%** |   |
| Production                    volumes*                      |   |                                                                                           | 328    |   |   |   |   |   | **335**    |   |   | **                      2%** |   |
|                                                        |   |                                                                                           |                  |   |   |   |   |   |   |   |   |   |   |
| Percent                    change in net sales:             |   |                                                                                           |                  |   |   |   |   |   |   |   |   |   |   |
| TiO2                    product pricing                     |   |                                                                                           |                  |   |   |   |   |   |   |   |   | **   5%** |   |
| TiO2                    sales volumes                       |   |                                                                                           |                  |   |   |   |   |   |   |   |   | ** -3%** |   |
| TiO2                    product mix                         |   |                                                                                           |                  |   |   |   |   |   |   |   |   | **                      2%** |   |
| Changes                    in currency exchange rates       |   |                                                                                           |                  |   |   |   |   |   |   |   |   | **   1%** |   |
|                                                        |   |                                                                                           |                  |   |   |   |   |   |   |   |   |   |   |
| Total                                                       |   |                                                                                           |                  |   |   |   |   |   |   |   |   | **                       5%** |   |

*Net        sales - *

*Cost        of sales - *

*Income        from operations - *

*Other        non-operating income (expense) *

*Provision        for income taxes *

| ·   | an                income tax benefit of $7.7 million for the aggregate effect of favorable                developments with respect to income tax audits principally in Belgium                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                charge of $17.5 million for the unfavorable effect related to the                loss of                certain of our German income tax attributes. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Effects        of foreign currency exchange rates**

|                                                             | **Year                  ended December 31,**                                        |
|------------------------------------------------------------------|-------------------------------------------------------------------------------------|
|                                                             | **2004 vs.                  2005**                                             |   | **2006 vs.                  2005** |
|                                                             | **  Increase                  (decrease), in millions   ** |
| Impact                  on:                                      |                                                                                |   |   |
|                       Net sales              | $13                                                                                 |   | $                  (2) |
|                       Income from operations |  10                                                                            |   |                     (12)  |

**Outlook**

**LIQUIDITY        AND CAPITAL RESOURCES**

**Consolidated        cash flows**

***Operating        activities***

| ·   | lower                income from operations in 2006 of $30.9                million; |
|--------------------|--------------------------------------------------------------------------------------|
| ·   | payment                of the $20.9 million call premium as a result of the May 2006 prepayment                of our 8.875% Senior Secured Notes, which is required to be included                in                cash flows from operating activities; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | higher                cash paid for income taxes in 2006 of $14.5 million, in part due                to the                net payment of $19.2 million in 2006 associated with the settlement                of                prior year income tax audits; offset by |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | lower                cash paid for interest in 2006 of $9.0 million, primarily as a result                of                the May 2006 redemption of our 8.875% Senior Secured Notes and the                April                2006 issuance of our lower interest 6.5% Senior Secured Notes (which                will                pay interest semi annually in April and October; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                lower amount of net cash used from relative changes in our inventories,                receivables, payables and accruals of $16.7 million in 2006 due primarily                to relative changes in our accounts payable and accrued liabilities                and                inventory levels, as discussed below. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | higher                income from operations in 2005 of $41.4                million; |
|--------------------|---------------------------------------------------------------------------------------|
| ·   | a                lower amount of net cash provided from changes in our inventories,                receivables, payables, accruals and accounts with affiliates in 2005                of                $61.4 million as discussed below; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | higher                cash paid for interest in 2005 of $7.5 million due principally to                the                issuance of euro 90 million principal amount of the 8.875% Senior                Secured                Notes in November 2004; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | higher                cash paid for income taxes in 2005 of $43.8 million, due primarily                to net                refunds of German income taxes of $23.8 million received in                2004. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Investing        activities***

***Financing        activities***
* *

| ·   | issued                euro 400 million principal amount of 6.5% Notes at 99.306% ($498.5                million                when issued); and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | redeemed                our euro 375 million principal amount of 8.875% Senior Secured Notes                ($470.5 million when redeemed) using the proceeds from the issuance                of the                6.5% Notes. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | repaid                the outstanding balance of euro 10 million ($12.9 million when repaid)                under our three-year euro 80 million secured revolving credit facility                (“European Credit Facility”); and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | entered                into additional capital lease agreements for certain mining equipment                for                the equivalent of approximately $4.4                million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | issued                an additional euro 90 million principal amount of our Senior Secured                Notes                at 107% of par (equivalent to $130 million when issued); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | borrowed,                at our operating subsidiaries in Germany, Belgium and Norway, an                aggregate                of euro 90 million ($112 million when borrowed) of borrowings under                our                European Credit Facility, of which euro 80 million ($100 million)                was                subsequently repaid; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | transferred                an aggregate of euro 163.1 million ($209.5 million) to Kronos in                return                for two promissory notes. We have classified these notes receivable                as a                separate component of our stockholder’s equity. See Note 10 to our                Consolidated Financial Statements. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Outstanding        debt obligations and borrowing availability**

| ·   | euro                400 million principal amount of our 6.5% Senior Secured Notes ($525.0                million at December 31, 2006) due in                2013; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | approximately                $4.8 million of other indebtedness. |
|--------------------|------------------------------------------------------------------|

**Liquidity**

***Capital        Expenditures***

***Off-balance        sheet financing***

***Cash,        cash equivalents, restricted cash and restricted marketable debt securities***

**Related        party transactions **

**Commitments        and contingencies**

**Recent        accounting pronouncements**

**Debt        and other contractual commitments**

|                                                              |   | **                 Payment                  due                  date                ** |     |
|-------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|  **Contractual                  commitment**                 |   |  **2007**                                                                                                                                                                                                                                               |     |  **2008/2009** |   |  **2010/2011** |   | **2012                  and**** after ** |   |  **Total** |   |
|                                                              |   | **(In                  millions)**                                                                                                                                                                                                                           |     |
|                                                              |   |                                                                                                                                                                                                                                                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Indebtedness                                                      |   | **$**                                                                                                                                                                                                                                                        | **.9**   |   | **$** | **1.9** |   | **$** | **2.0** |   | **$** | **525.0** |   | **$** | **529.8** |   |
|                                                              |   |                                                                                                                                                                                                                                                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest                  on indebtedness |   |                                                                                                                                                                                                                                                         | **34.4** |   |   | **68.8** |   |   | **68.8** |   |   | **45.8** |   |   | **217.8** |   |
|                                                              |   |                                                                                                                                                                                                                                                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  leases                                 |   |                                                                                                                                                                                                                                                         | **3.7**  |   |   | **5.1** |   |   | **2.8** |   |   | **19.9** |   |   | **31.5** |   |
|                                                              |   |                                                                                                                                                                                                                                                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                  asset acquisitions                         |   |                                                                                                                                                                                                                                                         | **19.5** |   |   | **-** |   |   | **-** |   |   | **-** |   |   | **19.5** |   |
|                                                              |   |                                                                                                                                                                                                                                                         |          |   |   |  |   |   |  |   |   |  |   |   |   |   |
| Estimated                  tax obligations                        |   |                                                                                                                                                                                                                                                         | **10.1** |   |   | **-** |   |   | **-** |   |   | **-** |   |   | **10.1** |   |
|                                                              |   |                                                                                                                                                                                                                                                         |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   | **$**                                                                                                                                                                                                                                                        | **68.6** |   | **$** | **75.8** |   | **$** | **73.6** |   | **$** | **590.7** |   | **$** | **808.7** |   |

**Defined        benefit pension plans**

*Employer’s        Accounting for Pensions*

|    | **Discount                  rates used for:**                                                 |
|---------|-----------------------------------------------------------------------------------------------|
|    | **Obligations                  at****December                  31, 2004 and expense in 2005** |   | **Obligations                  at****December                  31, 2005 and expense in 2006** |   | **Obligations                  at****December                  31, 2006 and expense in 2007** |
|    |                                                                                          |   |   |   |   |
| Germany | 5.0%                                                                                          |   | 4.0% |   | 4.5% |
| Norway  | 5.0%                                                                                          |   | 4.5% |   | 4.8% |

| ·   | In                Germany, the composition of our plan assets is established to satisfy                the                requirements of the German insurance commissioner. The plan asset                allocation at December 31, 2006 was 23% to equity managers, 48% to                fixed                income managers, 14% to real estate and 15% to other investments                (2005 -                23%, 48%, 14% and 15%, respectively). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | In                Norway, we currently have a plan asset target allocation of 14% to                equity                managers, 65% to fixed income managers and the remainder primarily                to                liquid investments such as money markets. The expected long-term                rate of                return for such investments is approximately 8%, 4.5% to 6% and 2.5%,                respectively. The plan asset allocation at December 31, 2006 was                13% to                equity managers, 64% to fixed income managers and the remaining 23%                primarily to cash and liquid investments (2005 - 16%, 62% and 22%,                respectively). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    |   | **  2004  ** |   | **  2005  ** |   | **  2006  ** |
|---------|--------|----------------------------------|--------|----------------------------------|--------|----------------------------------|
|    |   |                             |   |                             |   |                             |
| Germany |   | 6.0%                             |   | 5.5%                             |   | 5.3%                             |
| Norway  |   | 6.0%                             |   | 5.5%                             |   | 5.0%                             |

**Foreign        operations **

----

**ITEM        7A. **
**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**General        **

**Interest        rates**

|                                                                               |   | **       Amount       ** |   |                                      |   |                                         |   |
|------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|----------------------------------------------|--------|
|  **Indebtedness**                                                             |   | **Carrying****  value **                                                        |   | **Fair****  value  ** |   | **Interest****  rate  ** |   | **Maturity****  date  ** |   |
|                                                                               |   | **(In                  millions)**                                                             |   |                                      |   |                                         |   |
|                                                                               |   |                                                                                           |   |                                      |   |                                         |   |   |   |   |   |   |   |
| Fixed-rate                    indebtedness - euro-denominated Senior Secured Notes |   | $                                                                                              | 525.0  |                                      | $      | 512.5                                        |   |   | 6.5 | % |   | 2013 |   |

**Foreign        currency exchange rates**

**Other**

**ITEM 8.**
**FINANCIAL        STATEMENTS AND SUPPLEMENTARY DATA**

**ITEM 9.**
**CHANGES        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL        DISCLOSURE**

**ITEM 9A.**
**CONTROLS        AND PROCEDURES**

**Evaluation        of Disclosure Controls and Procedures**

**Internal        Control Over Financial Reporting**

| ·   | Pertain                to the maintenance of records that in reasonable detail accurately                and                fairly reflect the transactions and dispositions of our assets, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Provide                reasonable assurance that transactions are recorded as necessary                to permit                preparation of financial statements in accordance with GAAP, and                that                receipts and expenditures are being made only in accordance with                authorizations of management and directors,                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Provide                reasonable assurance regarding prevention or timely detection of                an                unauthorized acquisition, use or disposition of assets that could                have a                material effect on our Condensed Consolidated Financial Statements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Changes        in Internal Control Over Financial Reporting**

**ITEM 9B.**
**OTHER        INFORMATION**

----

**PART        III**

**ITEM 10.**
**DIRECTORS        EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

**ITEM 11.**
**EXECUTIVE        COMPENSATION**

**ITEM 12.**
**SECURITY        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

**ITEM 13.**
**CERTAIN        RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR        INDEPENDENCE**

**ITEM 14.**
**PRINCIPAL        ACCOUNTING FEES AND SERVICES**

|                                |   | **December                    31,**   |      |
|-------------------------------------|--------|---------------------------------------|-----------|
|                                |   | **2005**                              |      | **2006** |   |
|                                |   | **(In                    thousands)** |      |
|                                |   |                                  |      |   |   |   |   |
| Audit(1)                            |   | **$**                                 | **1,523** |   | **$** | **1,699** |   |
| Audit                    related(2) |   |                                  | **19**    |   |   | **18** |   |
| Tax(3)                              |   |                                  | **21**    |   |   | **5** |   |
|                                |   |                                  |      |   |   |   |   |
| Total                               |   | **$**                                 | **1,563** |   | **$** | **1,722** |   |

| 1)   | Fees                for the following services: |
|----------------|-------------------------------------------------|
| a)   | audits                of our consolidated year-end financials statements for each                year; |
|----------------|--------------------------------------------------------------------------------------------------------|
| b)   | reviews                of the unaudited quarterly financial statements appearing in our                Form                10-Q’s for each of the first three quarters of each                year; |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| c)   | consents                and assistance with registration statements filed with the                Commission; |
|----------------|---------------------------------------------------------------------------------------------------------------|
| d)   | normally                provided statutory or regulatory filings or engagements for each                year;                and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|
| e)   | the                estimated out-of-pocket costs PwC incurred in providing all of such                services for which we reimburse PwC. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| 2)   | Fees                for assurance and related services reasonably related to the audit                or                review of our financial statements for each year. These services                include                employee benefit plan audits, accounting consultations and attest                services                concerning financial accounting and reporting standards and advice                concerning internal controls. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3)   | Fees                for tax compliance, tax advice and tax planning                services. |
|----------------|----------------------------------------------------------------------------------------------|

----

**PART        IV**

**ITEM        15.**
**EXHIBITS        AND FINANCIAL STATEMENT SCHEDULES**

**The        Registrant**

**Financial        Statements of Guarantors**

| 3.1 |   | Certificate                  of Incorporation of the Registrant - incorporated by reference                  to Exhibit                  3.1 to the Registrant’s Registration Statement on Form S-4 (File No.                  333-100047). |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 |   | Certificate                  of Amendment to Certificate of Incorporation of the Registrant,                  dated                  March 15, 1989 - incorporated by reference to Exhibit 3.2 to the                  Registrant’s Registration Statement on Form S-4 (File No. 333-100047). |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.3 |   | Certificate                  of Amendment to Certificate of Incorporation of the Registrant,                  dated                  January 1, 1999 - incorporated by reference to Exhibit 3.3 to the                  Registrant’s Registration Statement on Form S-4 (File No. 333-100047). |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.4 |   | Certificate                  of Amendment to Certificate of Incorporation of the Registrant,                  dated                  February 8, 1999 - incorporated by reference to Exhibit 3.4 to                  the                  Registrant’s Registration Statement on Form S-4 (File No. 333-100047). |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.5 |   | Certificate                  of Amendment to Certificate of Incorporation of the Registrant,                  dated                  December 15, 1999 - incorporated by reference to Exhibit 3.5 to the                  Registrant’s Registration Statement on Form S-4 (File No. 333-100047). |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.6 |   | Amended                  and Restated Bylaws of the Registrant - incorporated by reference                  to                  Exhibit 3.6 to the Registrant’s Registration Statement on Form S-4 (File                  No. 333-100047).  |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1 | Indenture                  governing the 6.5% Senior Secured Notes due 2013, dated as                  of April 11, 2006, between Kronos International, Inc. and The Bank                  of New York, as trustee (incorporated by reference to Exhibit 4.1                  to the                  Registrant’s Current Report on Form 8-K (File No. 333-100047) that was                  filed with the U.S. Securities and Exchange Commission on April                  11,                  2006). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Form                  of certificate of Series A 6.5% Senior Secured Note due 2013 (incorporated                  by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K                  (File No. 333-100047) that was filed with the U.S. Securities and                  Exchange                  Commission on April 11, 2006). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.3 | Form                  of certificate of Series B 6.5% Senior Secured Note due 2013 (incorporated                  by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K                  (File No. 333-100047) that was filed with the U.S. Securities and                  Exchange                  Commission on April 11, 2006). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.4 | Purchase                  Agreement dated April 5, 2006 between Kronos International, Inc.                  and                  Deutsche Bank AG London (incorporated by reference to Exhibit 4.1                  to the                  Registrant’s Current Report on Form 8-K (File No. 333-100047) that was                  filed with the U.S. Securities and Exchange Commission on April                  11,                  2006). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.5 | Registration                  Rights Agreement dated as of April 11, 2006 between Kronos International,                  Inc. and Deutsche Bank AG London (incorporated by reference to                  Exhibit 4.5                  to the Registrant’s Current Report on Form 8-K (File No. 333-100047) that                  was filed with the U.S. Securities and Exchange Commission on April                  11,                  2006) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.6 | Collateral                  Agency Agreement, dated April 11, 2006, among The Bank of New York,                  U.S.                  Bank, N.A. and Kronos International, Inc. (incorporated by reference                  to                  Exhibit 4.6 to the Registrant’s Current Report on Form 8-K (File No.                  333-100047) that was filed with the U.S. Securities and Exchange                  Commission on April 11, 2006). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.7 | Security                  Over Shares Agreement, dated April 11, 2006, between Kronos International,                  Inc. and The Bank of New York (incorporated by reference to Exhibit                  4.7 to                  the Registrant’s Current Report on Form 8-K (File No. 333-100047) that was                  filed with the U.S. Securities and Exchange Commission on April                  11,                  2006). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.8 | Pledge                  of Shares (shares in Kronos Denmark ApS), dated April 11, 2006,                  between                  Kronos International, Inc. and U.S. Bank, N.A. (incorporated by                  reference                  to Exhibit 4.8 to the Registrant’s Current Report on Form 8-K (File No.                  333-100047) that was filed with the U.S. Securities and Exchange                  Commission on April 11, 2006). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.9 | Pledge                  Agreement (shares in Societe Industrielle du Titane S.A.), dated                  April 11,                  2006, between Kronos International, Inc. and U.S. Bank, N.A. (incorporated                  by reference to Exhibit 4.9 to the Registrant’s Current Report on Form 8-K                  (File No. 333-100047) that was filed with the U.S. Securities and                  Exchange                  Commission on April 11, 2006) |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.10 | Share                Pledge Agreement (shares in Kronos Titan GmbH), dated April 11, 2006,                between Kronos International, Inc. and U.S. Bank, N.A. (incorporated                by                reference to Exhibit 4.10 to the Registrant’s Current Report on Form 8-K                (File No. 333-100047) that was filed with the U.S. Securities and                Exchange                Commission on April 11, 2006).  |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 |   | Euro                  80,000,000 Facility Agreement, dated June 25, 2002, among Kronos                  Titan                  GmbH & Co. OHG, Kronos Europe S.A./N.V., Kronos Titan A/S and Titania                  A/S, as borrowers, Kronos Titan GmbH & Co. OHG, Kronos Europe                  S.A./N.V. and Kronos Norge AS, as guarantors, Kronos Denmark ApS,                  as                  security provider, Deutsche Bank AG, as mandated lead arranger,                  Deutsche                  Bank Luxembourg S.A., as agent and security agent, and KBC Bank                  NV, as                  fronting bank, and the financial institutions listed in Schedule                  1                  thereto, as lenders - incorporated by reference to Exhibit 10.1                  to the                  Quarterly Report on Form 10-Q of NL Industries, Inc. for the quarter                  ended                  June 30, 2002. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 |   | First                  Amendment Agreement, dated September 3, 2004, Relating to a Facility                  Agreement dated June 25, 2002 among Kronos Titan GmbH, Kronos Europe                  S.A./N.V., Kronos Titan AS and Titania A/S, as borrowers, Kronos                  Titan                  GmbH, Kronos Europe S.A./N.V. and Kronos Norge AS, as guarantors,                  Kronos                  Denmark ApS, as security provider, with Deutsche Bank Luxembourg                  S.A.,                  acting as agent - incorporated by reference to Exhibit 10.8 to                  the                  Registration Statement on Form S-1 of Kronos Worldwide, Inc. (File                  No.                  333-119639). |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3 |   | Second                  Amendment Agreement Relating to a Facility Agreement dated June                  25, 2002                  executed as of June 14, 2005 by and among Deutsche Bank AG, as                  mandated                  lead arranger, Deutsche Bank Luxembourg S.A. as agent, the participating                  lenders, Kronos Titan GmbH, Kronos Europe S.A./N.V, Kronos Titan                  AS,                  Kronos Norge AS, Titania AS and Kronos Denmark ApS - incorporated                  by                  reference to Exhibit 10.1 of the Registrant’s Form 8-K dated June 14,                  2005. Certain schedules, exhibits, annexes and similar attachments                  to this                  Exhibit 10.3 have not been filed; upon request, the Reporting Persons                  will                  furnish supplementally to the Commission a copy of any omitted                  exhibit,                  annex or attachment.  |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 |   | Lease                  Contract, dated June 21, 1952, between Farbenfabriken Bayer                  Aktiengesellschaft and Titangesellschaft mit beschrankter Haftung                  (German                  language version and English translation thereof) - incorporated                  by                  reference to Exhibit 10.14 to the Annual Report on Form 10-K of                  NL                  Industries, Inc. for the year ended December 31, 1985. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5 |   | Contract                  on Supplies and Services, dated as of June 30, 1995, among Bayer                  AG,                  Kronos Titan-GmbH & Co. OHG and the Registrant (English translation                  from German language document) - incorporated by reference to Exhibit                  10.1                  to Quarterly Report on Form 10-Q of NL Industries, Inc. for the                  quarter                  ended September 30, 1995. |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Amendment                  dated August 11, 2003 to the Contract on Supplies and Services                  among Bayer                  AG, Kronos Titan-GmbH & Co. OHG and Kronos International (English                  translation of German language document) - incorporated by reference                  to                  Exhibit 10.32 of the Registration statement on Form 10 of the Registrant                  (File No. 001-31763). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 |   | Master                  Technology Exchange Agreement, dated as of October 18, 1993, among                  Kronos,                  Inc., Kronos Louisiana, Inc., the Registrant, Tioxide Group Limited                  and                  Tioxide Group Services Limited - incorporated by reference to Exhibit                  10.8                  to the Quarterly Report on Form 10-Q of NL Industries, Inc. for                  the                  quarter ended September 30, 1993. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 |   | Intercorporate                  Services Agreement, dated as of January 1, 2005, among Kronos Worldwide,                  Inc., Kronos (US), Inc., Kronos International, Inc. and Kronos                  Canada,                  Inc. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.9 |   | Tax                  Agreement, dated as of May 28, 2002, between Kronos, Inc. and the                  Registrant - incorporated by reference to Exhibit 10.7 to the Registrant’s                  Registration Statement on Form S-4 (File No. 333-100047). |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.10 |   | Services                  Agreement, dated as of January 1, 2004, among Kronos International,                  Inc.,                  Kronos Europe S.A./N.V., Kronos (US), Inc., Kronos Titan GmbH,                  Kronos                  Denmark ApS, Kronos Canada, Inc., Kronos Limited, Societe Industrielle                  Du                  Titane, S.A., Kronos B.V., Kronos Titan AS and Titania AS. |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.11 |   | Form                  of Assignment and Assumption Agreement, dated as of January 1,                  1999,                  between Kronos, Inc. (formerly known as Kronos (USA), Inc.) and                  the                  Registrant - incorporated by reference to Exhibit 10.9 to the Registrant’s                  Registration Statement on Form S-4 (File No. 333-100047). |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 |   | Form                  of Cross License Agreement, effective as of January 1, 1999, between                  Kronos Inc. (formerly known as Kronos (USA), Inc.) and the Registrant                  -                  incorporated by reference to Exhibit 10.10 to the Registrant’s                  Registration Statement on Form S-4 (File No. 333-100047). |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.13* |   | NL                  Industries, Inc. 1998 Long-Term Incentive Plan - incorporated by                  reference                  to Appendix A to the Proxy Statement on Schedule 14A of NL Industries,                  Inc. for the annual meeting of shareholders held on May 6, 1998. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.14* |   | Form                  of Kronos Worldwide, Inc. Long-Term Incentive Plan - incorporated                  by                  reference to Exhibit 10.4 of Kronos Worldwide, Inc.’s Registration                  Statement on Form 10 (File No.                  001-31763). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.15* |   | Form                  of Indemnity Agreement between the Registrant and the officers                  and                  directors of the Registrant - incorporated by reference to Exhibit                  10.12                  to the Registrant’s Registration Statement on Form S-4 (File No.                  333-100047). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.16* | Summary                  of Consulting Arrangement, beginning on August 1, 2003, between                  Lawrence                  A. Wigdor and Kronos Worldwide, Inc. - incorporated by reference                  to                  Exhibit 10.50 to NL Industries, Inc.’s Annual Report on Form 10-K for the                  year ended December 31, 2004. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.17 | Agency                  Agreement, dated as of January 1, 2004, among Kronos International,                  Inc.,                  Kronos Titan GmbH, Kronos Europe S.A./N.V., Kronos Canada, Inc.,                  Kronos                  Titan AS and Societe Indutrielle Du Titane,                  S.A. |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Titanium                  Dioxide Products and Titanium Chemicals Distribution Agreement,                  dated as                  of January 1, 2005, among Kronos Titan GmbH, Kronos Europe S.A./N.V.,                  Kronos Canada, Inc., Kronos Titan AS, Kronos (US), Inc., Kronos                  Denmark                  ApS, Kronos Titan GmbH, Kronos Limited, Societe Industrielle Du                  Titane,                  S.A. and Kronos B.V. |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.19 | Raw                  Material Purchase and Sale Agreement, dated as of January 1, 2004,                  among                  Kronos (US), Inc., Kronos Titan GmbH, Kronos Europe S.A./N.V. and                  Kronos                  Canada, Inc. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 |   | Promissory                  note in the amount of euro 65,000,000, dated as of October 12,                  2004                  between the Registrant and Kronos Worldwide,                  Inc. |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Promissory                  note in the amount of euro 98,094,875, dated as of November 26,                  2004                  between the Registrant and Kronos Worldwide,                  Inc. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12.1 | Statements                  of Computation of Ratio of Earnings to Combined Fixed Charges and                  Preferred Dividends |
|------|------------------------------------------------------------------------------------------------------------------------------------|

| 12.2 | Statements                  of Computation of Ratio of Earnings to Fixed Charges |
|------|----------------------------------------------------------------------------------|

| 31.1 | Certification. |
|------|----------------|

| 31.2 | Certification. |
|------|----------------|

| 32.1 | Certification. |
|------|----------------|

| * | Management                  contract, compensatory plan or arrangement |
|---|------------------------------------------------------------------------|

----

| s/                    Andrew                    Kasprowiak                      |   | /s/                    Gregory M. Swalwell                                                                                                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| Andrew                    Kasprowiak, March 13, 2007                                                                                                            |   | Gregory                    M. Swalwell, March 13, 2007                                                                                                |
| (Director)                                                                                                                                                      |   | (Vice                    President, Finance; Principal Financial Officer)                                                                             |
|                                                                                                                                                            |   |                                                                                                                                                  |
|                                                                                                                                                            |   |                                                                                                                                                  |
| s/                    Dr. Ulfert                    Fiand                  |   | /s/                    Volker                    Roth                 |
| Dr.                    Ulfert Fiand, March 13, 2007                                                                                                             |   | Volker                    Roth, March 13, 2007                                                                                                        |
| (Director)                                                                                                                                                      |   | (Director)                                                                                                                                            |
|                                                                                                                                                            |   |                                                                                                                                                  |
|                                                                                                                                                            |   |                                                                                                                                                  |
|                                                                                                                                                            |   | /s/ Tim                    C. Hafer                                                                                                              |
|                                                                                                                                                            |   | Tim                    C. Hafer, March 13, 2007                                                                                                       |
|                                                                                                                                                            |   | (Vice                    President, Controller, Principal Accounting                    Officer)                                                      |

----

| **KRONOS                    INTERNATIONAL, INC.**                                                                                                                                                                                                                                                   |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                |     |
| **Annual                    Report on Form 10-K**                                                                                                                                                                                                                                                   |     |
|                                                                                                                                                                                                                                                                                                |     |
| **Items                    8, 15(a) and 15(c)**                                                                                                                                                                                                                                                     |     |
|                                                                                                                                                                                                                                                                                                |     |
| **Index                    of Financial Statements and Schedules**                                                                                                                                                                                                                                  |     |
|                                                                                                                                                                                                                                                                                                |     |
|                                                                                                                                                                                                                                                                                                |     |
| **Financial                    Statements**                                                                                                                                                                                                                                                         | **Page** |
|                                                                                                                                                                                                                                                                                                |     |
| Report                    of Independent Registered Public Accounting Firm                                                                                                                                                                                                                          | F-2      |
|                                                                                                                                                                                                                                                                                                |     |
| Consolidated                    Balance Sheets - December 31, 2005 (As adjusted); andDecember                    31, 2006                                                                                                                                                                           | F-3      |
|                                                                                                                                                                                                                                                                                                |     |
| Consolidated                    Statements of Income -                                                                                                                                                                                                                                              |     |
| Years                    ended December 31, 2004 and 2005 (As adjusted); andYear                    ended December 31, 2006                                                                                                                                                                         | F-5      |
|                                                                                                                                                                                                                                                                                                |     |
| Consolidated                    Statements of Comprehensive Income (Loss) -                                                                                                                                                                                                                         |     |
| Years                    ended December 31, 2004 and 2005 (As adjusted); andYear                    ended December 31, 2006                                                                                                                                                                         | F-6      |
|                                                                                                                                                                                                                                                                                                |     |
| Consolidated                    Statements of Stockholder’s Equity -                                                                                                                                                                                                                          |     |
| Years                    ended December 31, 2004 and 2005 (As adjusted); andYear                    ended December 31, 2006                                                                                                                                                                         | F-7      |
|                                                                                                                                                                                                                                                                                                |     |
| Consolidated                    Statements of Cash Flows -                                                                                                                                                                                                                                          |     |
| Years                    ended December 31, 2004 and 2005 (As adjusted); andYear                    ended December 31, 2006                                                                                                                                                                         | F-8      |
|                                                                                                                                                                                                                                                                                                |     |
| Notes                    to Consolidated Financial Statements                                                                                                                                                                                                                                       | F-10     |
|                                                                                                                                                                                                                                                                                                |     |
| **Financial                    Statement Schedule**                                                                                                                                                                                                                                                 |     |
|                                                                                                                                                                                                                                                                                                |     |
| Schedule                    I - Condensed Financial Information of Registrant                                                                                                                                                                                                                       | S-1      |
|                                                                                                                                                                                                                                                                                                |     |
| Schedules                    II, III and IV are omitted either                    because they are not applicable or the required amounts are either                    not                    material, or are presented in the notes to our Consolidated Financial                    Statements. |     |
|                                                                                                                                                                                                                                                                                                |     |
| **Other                    Financial Statements filed pursuant to Rule 3-16 of Regulation                    S-X**                                                                                                                                                                                  |     |
|                                                                                                                                                                                                                                                                                                |     |
| Financial                    Statements of Kronos Titan GmbH                                                                                                                                                                                                                                        | FA-1     |
|                                                                                                                                                                                                                                                                                                |     |
| Financial                    Statements of Kronos Denmark ApS                                                                                                                                                                                                                                       | FB-1     |

----

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          BALANCE SHEETS**

**December          31, 2005 and 2006**

**(In          thousands, except share data)**

|  **ASSETS**                                                  |   |                                 |    |     |   |
|-------------------------------------------------------------------|--------|--------------------------------------|---------|----------|--------|
|                                                              |   | **2005**                             |    | **2006** |   |
|                                                              |   | **(As                    adjusted)** |    |     |   |
|                                                              |   |                                 |    |     |   |   |   |
| Current                    assets:                                |   |                                 |    |     |   |   |   |
| Cash                    and cash equivalents                      |   | $                                    | 63,284  |     | **$**  | **52,820** |   |
| Restricted                    cash                                |   |                                 | 1,355   |     |   | **1,480** |   |
| Accounts                    and other receivables                 |   |                                 | 120,182 |     |   | **151,640** |   |
| Receivables                    from affiliates                    |   |                                 | 1,952   |     |   | **1,610** |   |
| Refundable                    income taxes                        |   |                                 | 1,053   |     |   | **1,360** |   |
| Inventories                                                       |   |                                 | 185,348 |     |   | **195,078** |   |
| Prepaid                    expenses                               |   |                                 | 2,680   |     |   | **3,948** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Total                    current assets                           |   |                                 | 375,854 |     |   | **407,936** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Other                    assets:                                  |   |                                 |    |     |   |   |   |
| Deferred                    financing costs, net                  |   |                                 | 7,722   |     |   | **8,829** |   |
| Restricted                    marketable debt securities          |   |                                 | 2,572   |     |   | **2,814** |   |
| Pension                    asset                                  |   |                                 | 6,108   |     |   | **-** |   |
| Deferred                    income taxes                          |   |                                 | 213,275 |     |   | **264,377** |   |
| Other                                                             |   |                                 | 960     |     |   | **1,049** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Total                    other assets                             |   |                                 | 230,637 |     |   | **277,069** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Property                    and equipment:                        |   |                                 |    |     |   |   |   |
| Land                                                              |   |                                 | 30,288  |     |   | **34,285** |   |
| Buildings                                                         |   |                                 | 138,925 |     |   | **156,850** |   |
| Equipment                                                         |   |                                 | 644,271 |     |   | **740,677** |   |
| Mining                    properties                              |   |                                 | 68,163  |     |   | **82,140** |   |
| Construction                    in progress                       |   |                                 | 12,112  |     |   | **15,581** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Total                    property and equipment                   |   |                                 | 893,759 |     |   | **1,029,533** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Less                    accumulated depreciation and amortization |   |                                 | 544,984 |     |   | **633,969** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Net                    property and equipment                     |   |                                 | 348,775 |     |   | **395,564** |   |
|                                                              |   |                                 |    |     |   |   |   |
| Total                    assets                                   |   | $                                    | 955,266 |     | **$**  | **1,080,569** |   |
|                                                              |   |                                 |    |     |   |   |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          BALANCE SHEETS (CONTINUED)**

**December          31, 2005 and 2006**

**(In          thousands, except share data)**

|  **LIABILITIES                    AND STOCKHOLDER’S EQUITY**                                            |   |                                 |       |     |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|----------|--------|
|                                                                                                               |   | **2005**                             |       | **2006** |   |
|                                                                                                               |   | **(As                    adjusted)** |       |     |   |
| Current                    liabilities:                                                                            |   |                                 |       |     |   |   |   |
| Current                    maturities of long-term debt                                                            |   | $                                    | 958        |     | **$**  | **912** |   |
| Accounts                    payable and accrued liabilities                                                        |   |                                 | 115,912    |     |   | **115,338** |   |
| Payable                    to affiliates                                                                           |   |                                 | 14,882     |     |   | **10,174** |   |
| Income                    taxes                                                                                    |   |                                 | 21,799     |     |   | **10,095** |   |
| Deferred                    income taxes                                                                           |   |                                 | 4,993      |     |   | **1,751** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Total                    current liabilities                                                                       |   |                                 | 158,544    |     |   | **138,270** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Noncurrent                    liabilities:                                                                         |   |                                 |       |     |   |   |   |
| Long-term                    debt                                                                                  |   |                                 | 452,865    |     |   | **528,886** |   |
| Deferred                    income taxes                                                                           |   |                                 | 19,265     |     |   | **14,446** |   |
| Accrued                    pension cost                                                                            |   |                                 | 125,766    |     |   | **172,800** |   |
| Other                                                                                                              |   |                                 | 15,434     |     |   | **14,682** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Total                    noncurrent liabilities                                                                    |   |                                 | 613,330    |     |   | **730,814** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Minority                    interest                                                                               |   |                                 | 75         |     |   | **41** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Stockholder’s                    equity:                                                                     |   |                                 |       |     |   |   |   |
| Common                    stock, $100 par value; 100,000 shares authorized; 2,968 shares                    issued |   |                                 | 297        |     |   | **297** |   |
| Additional                    paid-in capital                                                                      |   |                                 | 1,944,185  |     |   | **1,944,185** |   |
| Retained                    deficit                                                                                |   |                                 | (1,338,102 | )        |   | **(1,314,633** | **)** |
| Notes                    receivable from affiliate                                                                 |   |                                 | (209,526   | )        |   | **(209,526** | **)** |
| Accumulated                    other comprehensive loss:                                                           |   |                                 |       |     |   |   |   |
| Currency                    translation                                                                            |   |                                 | (129,892   | )        |   | **(99,312** | **)** |
| Defined                    benefit pension plans                                                                   |   |                                 | (83,645    | )        |   | **(109,567** | **)** |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Total                    stockholder’s equity                                                                |   |                                 | 183,317    |     |   | **211,444** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |
| Total                    liabilities and stockholder’s equity                                                |   | $                                    | 955,266    |     | **$**  | **1,080,569** |   |
|                                                                                                               |   |                                 |       |     |   |   |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF INCOME**

**Years          ended December 31, 200**
**4,          2005 and 2006**

**(In          thousands)**

|                                                                |   | **2004**                             |     | **2005** |   | **2006** |   |
|---------------------------------------------------------------------|--------|--------------------------------------|----------|----------|--------|----------|--------|
|                                                                |   | **(As                    adjusted)** |     |     |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Net                    sales                                        |   | $                                    | 807,970  |     | $      | 850,873  |   | **$** | **914,228** |   |
| Cost                    of sales                                    |   |                                 | 610,196  |     |   | 612,434  |   |   | **691,150** |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Gross                    margin                                     |   |                                 | 197,774  |     |   | 238,439  |   |   | **223,078** |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Selling,                    general and administrative expense      |   |                                 | 104,110  |     |   | 110,185  |   |   | **116,944** |   |
| Other                    operating income (expense):                |   |                                 |     |     |   |     |   |   |   |   |
| Currency                    transaction gains (losses), net         |   |                                 | (2,243   | )        |   | 4,090    |   |   | **(4,449** | **)** |
| Disposition                    of property and equipment            |   |                                 | (895     | )        |   | (1,395   | )      |   | **(1,845** | **)** |
| Royalty                    income                                   |   |                                 | 6,034    |     |   | 6,827    |   |   | **7,224** |   |
| Other                    income                                     |   |                                 | 426      |     |   | 576      |   |   | **392** |   |
| Other                    expense                                    |   |                                 | (72      | )        |   | (86      | )      |   | **(106** | **)** |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Income                    from operations                           |   |                                 | 96,914   |     |   | 138,266  |   |   | **107,350** |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Other                    income (expense):                          |   |                                 |     |     |   |     |   |   |   |   |
| Interest                    income from affiliates                  |   |                                 | 2,767    |     |   | 18,943   |   |   | **18,843** |   |
| Trade                    interest income                            |   |                                 | 1,147    |     |   | 951      |   |   | **2,209** |   |
| Other                    interest income                            |   |                                 | -        |     |   | -        |   |   | **830** |   |
| Securities                    transaction gain                      |   |                                 | -        |     |   | 5,439    |   |   | **-** |   |
| Loss                    on prepayment of debt                       |   |                                 | -        |     |   | -        |   |   | **(22,311** | **)** |
| Interest                    expense                                 |   |                                 | (36,692  | )        |   | (43,950  | )      |   | **(40,953** | **)** |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Income                    before income taxes and minority interest |   |                                 | 64,136   |     |   | 119,649  |   |   | **65,968** |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Provision                    (benefit) for income taxes             |   |                                 | (261,468 | )        |   | 59,383   |   |   | **(7,716** | **)** |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Minority                    interest                                |   |                                 | 53       |     |   | 12       |   |   | **9** |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |
| Net                    income                                       |   | $                                    | 325,551  |     | $      | 60,254   |   | **$** | **73,675** |   |
|                                                                |   |                                 |     |     |   |     |   |   |   |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

**Years          ended December 31, **
**2004,          2005 and 2006**

**(In          thousands)**

|                                                              |   | **2004**                             |    | **2005**                             |   | **2006** |   |
|-------------------------------------------------------------------|--------|--------------------------------------|---------|--------------------------------------|--------|----------|--------|
|                                                              |   | **(As                    adjusted)** |    | **(As                    adjusted)** |   |     |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |
| Net                    income                                     |   | $                                    | 325,551 |                                 | $      | 60,254   |   | **$** | **73,675** |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |
| Other                    comprehensive (loss) income, net of tax: |   |                                 |    |                                 |   |     |   |   |   |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |
| Defined                    benefit pension plans                  |   |                                 | 4,803   |                                 |   | (54,051  | )      |   | **8,206** |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |
| Currency                    translation                           |   |                                 | 33,759  |                                 |   | (30,586  | )      |   | **30,580** |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |
| Total                    other comprehensive income (loss)        |   |                                 | 38,562  |                                 |   | (84,637  | )      |   | **38,786** |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |
| Comprehensive                    income (loss)                    |   | $                                    | 364,113 |                                 | $      | (24,383  | )      | **$** | **112,461** |   |
|                                                              |   |                                 |    |                                 |   |     |   |   |   |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF STOCKHOLDER’S EQUITY**

**Years          ended December 31, **
**2004,          2005 and 2006**

**(In          thousands)**

|                                                              |   |       |   |           |   |                                 |   |           |       | **Accumulated                    other** |   |        |   |
|-------------------------------------------------------------------|--------|------------|--------|----------------|--------|--------------------------------------|--------|----------------|------------|------------------------------------------|--------|-------------|--------|
|                                                              |   |       |   |           |   |                                 |   | **Notes**      |       | **comprehensive**                        |   | **Total**   |   |
|                                                              |   |       |   | **Additional** |   | **Retained**                         |   | **receivable** |       | **income                    (loss)**     |   | **common**  |   |
|                                                              |   | **Common** |   | **paid-in**    |   | **earnings**                         |   | **from**       |       | **Currency**                             |   | **Pension** |   | **stockholder’s** |   |
|                                                              |   | **stock**  |   | **capital**    |   | **(deficit)**                        |   | **affiliates** |       | **translation**                          |   | **plans**   |   | **equity** |   |
|                                                              |   |       |   |           |   | **(As                    adjusted)** |   |           |       | **(As                    adjusted)**     |   |        |   | **(As                    adjusted)** |   |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2003:                  |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| As                    previously reported                         |   | $          | 297    |           | $      | 1,944,185                            |   | $              | (1,665,098 | )                                        | $      | -           |   | $ | (133,425 | ) | $ | (34,397 | ) | $ | 111,562 |   |
| Change                    in accounting principle                 |   |       | -      |           |   | -                                    |   |           | 1,191      |                                     |   | -           |   |   | 360 |   |   | - |   |   | 1,551 |   |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Balance                    as adjusted                            |   |       | 297    |           |   | 1,944,185                            |   |           | (1,663,907 | )                                        |   | -           |   |   | (133,065 | ) |   | (34,397 | ) |   | 113,113 |   |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Net                    income*                                    |   |       | -      |           |   | -                                    |   |           | 325,551    |                                     |   | -           |   |   | - |   |   | - |   |   | 325,551 |   |
| Other                    comprehensive income (loss), net of tax* |   |       | -      |           |   | -                                    |   |           | -          |                                     |   | -           |   |   | 33,759 |   |   | 4,803 |   |   | 38,562 |   |
| Change                    in notes receivable from affiliates     |   |       | -      |           |   | -                                    |   |           | -          |                                     |   | (209,526    | )      |   | - |   |   | - |   |   | (209,526 | ) |
| Cash                    dividends                                 |   |       | -      |           |   | -                                    |   |           | (60,000    | )                                        |   | -           |   |   | - |   |   | - |   |   | (60,000 | ) |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2004                   |   |       | 297    |           |   | 1,944,185                            |   |           | (1,398,356 | )                                        |   | (209,526    | )      |   | (99,306 | ) |   | (29,594 | ) |   | 207,700 |   |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Net                    income*                                    |   |       | -      |           |   | -                                    |   |           | 60,254     |                                     |   | -           |   |   | - |   |   | - |   |   | 60,254 |   |
| Other                    comprehensive loss, net of tax*          |   |       | -      |           |   | -                                    |   |           | -          |                                     |   | -           |   |   | (30,586 | ) |   | (54,051 | ) |   | (84,637 | ) |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2005                   |   |       | 297    |           |   | 1,944,185                            |   |           | (1,338,102 | )                                        |   | (209,526    | )      |   | (129,892 | ) |   | (83,645 | ) |   | 183,317 |   |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Net                    income                                     |   |       | -      |           |   | -                                    |   |           | 73,675     |                                     |   | -           |   |   | - |   |   | - |   |   | 73,675 |   |
| Other                    comprehensive loss, net of tax           |   |       | -      |           |   | -                                    |   |           | -          |                                     |   | -           |   |   | 30,580 |   |   | 8,206 |   |   | 38,786 |   |
| Cash                    dividends                                 |   |       | -      |           |   | -                                    |   |           | (50,206    | )                                        |   | -           |   |   |  |   |   |  |   |   | (50,206 | ) |
| Adoption                    of SFAS No. 158                       |   |       | -      |           |   | -                                    |   |           | -          |                                     |   | -           |   |   | - |   |   | (34,128 | ) |   | (34,128 | ) |
|                                                              |   |       |   |           |   |                                 |   |           |       |                                     |   |        |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2006                   |   | $          | 297    |           | $      | 1,944,185                            |   | $              | (1,314,633 | )                                        | $      | (209,526    | )      | $ | (99,312 | ) | $ | (109,567 | ) | $ | 211,444 |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF CASH FLOWS**

**Years          ended December 31, **
**2004,          2005 and 2006**

**(In          thousands)**

|                                                                                                                                          |   |     |                                       |     |   |                                 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------------------------------------------|----------|--------|--------------------------------------|--------|
|                                                                                                                                          |   | **2004** |                                       | **2005** |   | **2006**                             |   |
|                                                                                                                                               |   |     | **(As                    adjusted)**  |     |   | **(As                    adjusted)** |   |   |   |   |
| Cash                    flows from operating activities:                                                                                      |   |     |                                       |     |   |                                 |   |   |   |   |
| Net                    income                                                                                                                 |   | $        | 325,551                                    |     | $      | 60,254                               |   | **$** | **73,675** |   |
| Depreciation                    and amortization                                                                                              |   |     | 37,726                                     |     |   | 36,504                               |   |   | **36,755** |   |
| Loss                    on prepayment of debt                                                                                                 |   |     | -                                          |     |   | -                                    |   |   | **22,311** |   |
| Call                    premium paid                                                                                                          |   |     | -                                          |     |   | -                                    |   |   | **(20,898** | **)** |
| Noncash                    interest expense                                                                                                   |   |     | 2,044                                      |     |   | 2,566                                |   |   | **1,848** |   |
| Deferred                    income taxes                                                                                                      |   |     | (274,137                                   | )        |   | 30,969                               |   |   | **(27,913** | **)** |
| Minority                    interest                                                                                                          |   |     | 53                                         |     |   | 12                                   |   |   | **9** |   |
| Net                    loss from disposition of property and equipment                                                                        |   |     | 895                                        |     |   | 1,395                                |   |   | **1,845** |   |
| Securities                    transaction gain                                                                                                |   |     | -                                          |     |   | (5,439                               | )      |   | **-** |   |
| Defined                    benefit pension plan expense greater (less) than cash funding                                                      |   |     | (800                                       | )        |   | (2,335                               | )      |   | **3,167** |   |
| Other,                    net                                                                                                                 |   |     | 987                                        |     |   | (1,839                               | )      |   | **(952** | **)** |
| Change                    in assets and liabilities:                                                                                          |   |     |                                       |     |   |                                 |   |   |   |   |
| Accounts                    and other receivables                                                                                             |   |     | (6,227                                     | )        |   | (9,641                               | )      |   | **(14,310** | **)** |
| Inventories                                                                                                                                   |   |     | 11,582                                     |     |   | (38,938                              | )      |   | **11,357** |   |
| Prepaid                    expenses                                                                                                           |   |     | (233                                       | )        |   | (228                                 | )      |   | **(1,070** | **)** |
| Accounts                    payable and accrued liabilities                                                                                   |   |     | 28,503                                     |     |   | 10,159                               |   |   | **(76** | **)** |
| Income                    taxes                                                                                                               |   |     | 25,557                                     |     |   | 7,917                                |   |   | **(15,752** | **)** |
| Accounts                    with affiliates                                                                                                   |   |     | (6,103                                     | )        |   | 4,674                                |   |   | **(5,783** | **)** |
| Other                    noncurrent assets                                                                                                    |   |     | 1,981                                      |     |   | (690                                 | )      |   | **239** |   |
| Other                    noncurrent liabilities                                                                                               |   |     | (5,124                                     | )        |   | (2,636                               | )      |   | **(1,922** | **)** |
|                                                                                                                                          |   |     |                                       |     |   |                                 |   |   |   |   |
| Net                    cash provided by operating activities                                                                                  |   |     | 142,255                                    |     |   | 92,704                               |   |   | **62,530** |   |
|                                                                                                                                          |   |     |                                       |     |   |                                 |   |   |   |   |
| Cash                    flows from investing activities:                                                                                      |   |     |                                       |     |   |                                 |   |   |   |   |
| Capital                    expenditures                                                                                                       |   |     | (33,679                                    | )        |   | (39,522                              | )      |   | **(47,160** | **)** |
| Purchase                    of interest in subsidiary                                                                                         |   |     | (575                                       | )        |   | -                                    |   |   | **-** |   |
| Proceeds                    from disposal of interest in Norwegian smelting operation                                                         |   |     | -                                          |     |   | 3,542                                |   |   | **-** |   |
| Change                    in restricted cash equivalents and restricted marketable debt                    securities,                    net |   |     | (70                                        | )        |   | 129                                  |   |   | **(33** | **)** |
| Other,                    net                                                                                                                 |   |     | 99                                         |     |   | 37                                   |   |   | **50** |   |
|                                                                                                                                          |   |     |                                       |     |   |                                 |   |   |   |   |
| Net                    cash used by investing activities                                                                                      |   |     | (34,225                                    | )        |   | (35,814                              | )      |   | **(47,143** | **)** |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF CASH FLOWS (CONTINUED)**

**Years          ended December 31, **
**2004,          2005 and 2006**

**(In          thousands)**

|                                                                                                                                                                  |   | **2004** |     | **2005** |   | **2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|----------|----------|--------|----------|--------|
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Cash                      flows from financing activities:                                                                                                            |   |     |     |     |   |     |   |   |   |   |
| Indebtedness:                                                                                                                                                         |   |     |     |     |   |     |   |   |   |   |
| Borrowings                                                                                                                                                            |   | $        | 241,648  |     | $      | 4,620    |   | **$** | **498,658** |   |
| Principal                      payments                                                                                                                               |   |     | (100,073 | )        |   | (13,159  | )      |   | **(470,662** | **)** |
| Deferred                      financing fees                                                                                                                          |   |     | (1,989   | )        |   | -        |   |   | **(8,890** | **)** |
| Loans                      to affiliates                                                                                                                              |   |     | (209,524 | )        |   | -        |   |   | **-** |   |
| Dividends                      paid                                                                                                                                   |   |     | (60,000  | )        |   | -        |   |   | **(50,206** | **)** |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Net                      cash used by financing activities                                                                                                            |   |     | (129,938 | )        |   | (8,539   | )      |   | **(31,100** | ) |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Cash                      and cash equivalents - net change from:                                                                                                     |   |     |     |     |   |     |   |   |   |   |
| Operating,                      investing and financing activities                                                                                                    |   |     | (21,908  | )        |   | 48,351   |   |   | **(15,713** | **)** |
| Currency                      translation                                                                                                                             |   |     | 2,292    |     |   | (2,572   | )      |   | **5,249** |   |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
|                                                                                                                                                                  |   |     | (19,616  | )        |   | 45,779   |   |   | **(10,464** | **)** |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Balance                      at beginning of year                                                                                                                     |   |     | 37,121   |     |   | 17,505   |   |   | **63,284** |   |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Balance                      at end of year                                                                                                                           |   | $        | 17,505   |     | $      | 63,284   |   | **$** | **52,820** |   |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Supplemental                      disclosures - cash paid (received) for:                                                                                             |   |     |     |     |   |     |   |   |   |   |
| Interest                                                                                                                                                              |   | $        | 33,425   |     | $      | 40,912   |   | **$** | **31,951** |   |
| Income                      taxes                                                                                                                                     |   |     | (23,776  | )        |   | 20,033   |   |   | **34,540** |   |
|                                                                                                                                                                  |   |     |     |     |   |     |   |   |   |   |
| Inventories                      received as partial consideration for disposal of interest                      in Norwegian                      smelting operation |   | $        | -        |     | $      | 1,897    |   | **$** | **-** |   |

----

**K**
**RONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note          1 -**
**Summary          of significant accounting policies:**

***Organization          and basis of presentation***
**.          **

***Management’s          estimates***
*.          *

***Principles          of consolidation***

***Translation          of foreign currencies***

***Derivatives          and hedging activities***
*Accounting          for Derivative Instruments and Hedging Activities, *

***Cash          and cash equivalents***

***Restricted          marketable debt securities***
*.          *

***Accounts          receivable***

***Property          and equipment and depreciation***

*Accounting          for the Impairment or Disposal of Long-Lived Assets.*

***Long-term          debt***

***Employee          benefit plans.***

***Income          taxes***

***Net          sales***

***Inventories          and cost of sales***

**Selling,          general and administrative expenses; shipping and handling          costs.**

**Note          2 -**
**Geographic          information:**
** **

|                                            |   | **    Years                    ended December 31, ** |    |
|-------------------------------------------------|--------|-------------------------------------------------------------------------------|---------|
|                                            |   | **2004**                                                                      |    | **2005** |   | **2006** |   |
|                                            |   | **(In                    thousands)**                                    |
| Geographic                    areas             |   |                                                                          |    |   |   |   |   |   |   |   |
|                                            |   |                                                                          |    |   |   |   |   |   |   |   |
| Net                    sales - point of origin: |   |                                                                          |    |   |   |   |   |   |   |   |
| Germany                                         |   | $                                                                             | 576,138 |   | $ | 613,081 |   | **$** | **671,986** |   |
| Belgium                                         |   |                                                                          | 186,445 |   |   | 186,951 |   |   | **192,821** |   |
| Norway                                          |   |                                                                          | 144,492 |   |   | 160,529 |   |   | **173,529** |   |
| Eliminations                                    |   |                                                                          | (99,105 | ) |   | (109,688 | ) |   | **(124,108** | **)** |
|                                            |   |                                                                          |    |   |   |   |   |   |   |   |
|                                            |   | $                                                                             | 807,970 |   | $ | 850,873 |   | **$** | **914,228** |   |

----

|                                                 |   | **    Years                    ended December 31, ** |    |
|------------------------------------------------------|--------|-------------------------------------------------------------------------------|---------|
|                                                 |   | **2004**                                                                      |    | **2005** |   | **2006** |   |
|                                                 |   | **(In                    thousands)**                                         |    |
| Net                    sales - point of destination: |   |                                                                          |    |   |   |   |   |   |   |   |
|                                                 |   |                                                                          |    |   |   |   |   |   |   |   |
| Europe                                               |   | $                                                                             | 666,271 |   | $ | 689,516 |   | **$** | **728,598** |   |
| North                    America                     |   |                                                                          | 42,015  |   |   | 51,922 |   |   | **54,399** |   |
| Other                                                |   |                                                                          | 99,684  |   |   | 109,435 |   |   | **131,231** |   |
|                                                 |   |                                                                          |    |   |   |   |   |   |   |   |
|                                                 |   | $                                                                             | 807,970 |   | $ | 850,873 |   | **$** | **914,228** |   |

|                                                                                    |   | **   December                    31,  ** |    |
|-----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|
|                                                                                    |   | **2005**                                                          |    | **2006** |   |
|                                                                                    |   | **(In                    thousands)**                             |    |
|                                                                                    |   |                                                              |    |   |   |   |   |
| Identifiable                    assets - net                    property and equipment: |   |                                                              |    |   |   |   |   |
|                                                                                    |   |                                                              |    |   |   |   |   |
| Germany                                                                                 |   | $                                                                 | 235,932 |   | **$** | **262,541** |   |
| Belgium                                                                                 |   |                                                              | 57,943  |   |   | **63,991** |   |
| Norway                                                                                  |   |                                                              | 54,759  |   |   | **68,833** |   |
| Other                                                                                   |   |                                                              | 141     |   |   | **199** |   |
|                                                                                    |   |                                                              |    |   |   |   |   |
|                                                                                    |   | $                                                                 | 348,775 |   | **$** | **395,564** |   |

**Note          3 -**
**Accounts          and other receivables:**

|                                                     |   | **   December                    31,  ** |    |
|----------------------------------------------------------|--------|-------------------------------------------------------------------|---------|
|                                                     |   | **2005**                                                          |    | **2006** |   |
|                                                     |   | **(In                    thousands)**                             |    |
|                                                     |   |                                                              |    |   |   |   |   |
| Trade                    receivables                     |   | $                                                                 | 110,268 |   | **$** | **137,298** |   |
| Insurance                    claims                      |   |                                                              | 26      |   |   | **37** |   |
| Recoverable                    VAT and other receivables |   |                                                              | 11,317  |   |   | **15,692** |   |
| Allowance                    for doubtful accounts       |   |                                                              | (1,429  | ) |   | **(1,387** | **)** |
|                                                     |   |                                                              |    |   |   |   |   |
|                                                     |   | $                                                                 | 120,182 |   | **$** | **151,640** |   |

**Note          4 -**
**Inventories**

|                                 |   | **   December                    31,  ** |    |
|--------------------------------------|--------|-------------------------------------------------------------------|---------|
|                                 |   | **2005**                                                          |    | **2006** |   |
|                                 |   | **(In                    thousands)**                             |    |
|                                 |   |                                                              |    |   |   |   |   |
| Raw                    materials     |   | $                                                                 | 42,807  |   | **$** | **37,198** |   |
| Work                    in process   |   |                                                              | 13,654  |   |   | **18,612** |   |
| Finished                    products |   |                                                              | 98,004  |   |   | **100,689** |   |
| Supplies                             |   |                                                              | 30,883  |   |   | **38,579** |   |
|                                 |   |                                                              |    |   |   |   |   |
|                                 |   | $                                                                 | 185,348 |   | **$** | **195,078** |   |

----

**Note          5 -**
**Accounts          payable and accrued liabilities:**

|                                 |   | ** December                    31, ** |    |
|--------------------------------------|--------|-------------------------------------------------|---------|
|                                 |   | **2005**                                        |    | **2006** |   |
|                                 |   | **(As                    adjusted)**            |    |   |   |
|                                 |   | **(In                    thousands)**           |    |
|                                 |   |                                            |    |   |   |   |   |
| Accounts                    payable  |   | $                                               | 61,009  |   | **$** | **65,900** |   |
| Employee                    benefits |   |                                            | 27,147  |   |   | **17,136** |   |
| Accrued                    interest  |   |                                            | 117     |   |   | **7,255** |   |
| Other                                |   |                                            | 27,639  |   |   | **25,047** |   |
|                                 |   |                                            |    |   |   |   |   |
|                                 |   | $                                               | 115,912 |   | **$** | **115,338** |   |

**Note          6 -**
**Long-term          debt:**

|                                           |   | ** **** December                    31,  ** |    |
|------------------------------------------------|--------|------------------------------------------------------------|---------|
|                                           |   | **2005**                                                   |    | **2006** |   |
|                                           |   | **(In                    thousands)**                      |    |
|                                           |   |                                                       |    |   |   |   |   |
| Long-term                    debt:             |   |                                                       |    |   |   |   |   |
| 8.875%                    Senior Secured Notes |   | $                                                          | 449,298 |   | **$** | **-** |   |
| 6.5%                    Senior Secured Notes   |   |                                                       | -       |   |   | **525,003** |   |
| Other                                          |   |                                                       | 4,525   |   |   | **4,795** |   |
|                                           |   |                                                       |    |   |   |   |   |
|                                           |   |                                                       | 453,823 |   |   | **529,798** |   |
| Less                    current maturities     |   |                                                       | 958     |   |   | **912** |   |
|                                           |   |                                                       |    |   |   |   |   |
|                                           |   | $                                                          | 452,865 |   | **$** | **528,886** |   |

*Senior          Secured*
*          Notes*

*Credit          Facility - *

| **Years                    ending December 31,** |   | **Amount**                            |        |
|--------------------------------------------------|--------|---------------------------------------|-------------|
|                                             |   | **(In                    thousands)** |        |
|                                             |   |                                  |        |   |
| 2007                                             |   | **$**                                 | **912**     |   |
| 2008                                             |   |                                  | **923**     |   |
| 2009                                             |   |                                  | **954**     |   |
| 2010                                             |   |                                  | **986**     |   |
| 2011                                             |   |                                  | **1,019**   |   |
| 2012                    and thereafter           |   |                                  | **525,004** |   |
|                                             |   |                                  |        |   |
|                                             |   | **$**                                 | **529,798** |   |

**Restrictions.          **

**Note          7 - Income taxes:**

|                                                                                                                        |   | **  Years                    ended December 31,  ** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                        |   | **2004**                                                                |   | **2005** |   | **2006** |   |
|                                                                                                                        |   | **(As                    adjusted)**                                    |   | **(As                    adjusted)** |   |   |   |
|                                                                                                                        |   | **(In                    millions)**                                    |   |
| Pre-tax                    income (loss):                                                                                   |   |                                                                    |   |   |   |   |   |   |   |   |
| Germany                                                                                                                     |   | $                                                                       | 30.1   |   | $ | 65.0 |   | **$** | **18.5** |   |
| Other                    non-U.S.                                                                                           |   |                                                                    | 34.0   |   |   | 54.6 |   |   | **47.5** |   |
|                                                                                                                        |   |                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                        |   | $                                                                       | 64.1   |   | $ | 119.6 |   | **$** | **66.0** |   |
|                                                                                                                        |   |                                                                    |   |   |   |   |   |   |   |   |
| Expected                    tax expense (benefit), at U.S. federal                    statutory income tax rate of 35%      |   | $                                                                       | 22.4   |   | $ | 41.9 |   | **$** | **23.1** |   |
| Non-U.S.                    tax rates                                                                                       |   |                                                                    | .4     |   |   | .5 |   |   | **(1.5** | **)** |
| Incremental                    tax and rate differences on equity in earnings of non-tax group                    companies |   |                                                                    | -      |   |   | - |   |   | **.5** |   |
| Adjustment                    of German tax attribute                                                                       |   |                                                                    | -      |   |   | 17.5 |   |   | **(21.7** | **)** |
| Nondeductible                    expenses                                                                                   |   |                                                                    | 4.2    |   |   | 4.6 |   |   | **4.2** |   |
| Change                    in deferred income tax valuation allowance, net                                                   |   |                                                                    | (280.7 | ) |   | - |   |   | **-** |   |
| Tax                    contingency reserve adjustment, net                                                                  |   |                                                                    | (4.6   | ) |   | (7.7 | ) |   | **(10.7** | **)** |
| Assessment                    (refund) of prior year income taxes                                                           |   |                                                                    | (2.6   | ) |   | 2.1 |   |   | **(1.4** | **)** |
| Other,                    net                                                                                               |   |                                                                    | (.6    | ) |   | .5 |   |   | **(.2** | **)** |
|                                                                                                                        |   |                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                        |   | $                                                                       | (261.5 | ) | $ | 59.4 |   | **$** | **(7.7** | **)** |
| Components                    of income tax expense (benefit):                                                              |   |                                                                    |   |   |   |   |   |   |   |   |
| Currently                    payable (refundable):                                                                          |   |                                                                    |   |   |   |   |   |   |   |   |
| Germany                                                                                                                     |   | $                                                                       | (.2    | ) | $ | 10.8 |   | **$** | **5.0** |   |
| Other                    non - U.S.                                                                                         |   |                                                                    | 12.8   |   |   | 17.6 |   |   | **15.2** |   |
|                                                                                                                        |   |                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                        |   |                                                                    | 12.6   |   |   | 28.4 |   |   | **20.2** |   |
| Deferred                    income taxes (benefit):                                                                         |   |                                                                    |   |   |   |   |   |   |   |   |
| Germany                                                                                                                     |   |                                                                    | (270.5 | ) |   | 31.4 |   |   | **(23.5** | **)** |
| Other                    non - U.S.                                                                                         |   |                                                                    | (3.6   | ) |   | (.4 | ) |   | **(4.4** | **)** |
|                                                                                                                        |   |                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                        |   |                                                                    | (274.1 | ) |   | 31.0 |   |   | **(27.9** | **)** |
|                                                                                                                        |   |                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                        |   | $                                                                       | (261.5 | ) | $ | 59.4 |   | **$** | **(7.7** | **)** |

----

|                                                                                                   |   | **  Years                    ended December 31,  ** |   |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                   |   | **2004**                                                                |   | **2005** |   | **2006** |   |
|                                                                                                   |   | **(As                    adjusted)**                                    |   | **(As                    adjusted)** |   |   |   |
|                                                                                                   |   | **(In                    millions)**                                    |   |
| Comprehensive                    provision for income taxes (benefit) allocable to:                    |   |                                                                    |   |   |   |   |   |   |   |   |
| Net                    income                                                                          |   | $                                                                       | (261.5 | ) | $ | 59.4 |   | **$** | **(7.7** | **)** |
| Other                    comprehensive income - Defined                    benefit pension liabilities |   |                                                                    | (8.1   | ) |   | (32.4 | ) |   | **6.7** |   |
|                                                                                                   |   |                                                                    |   |   |   |   |   |   |   |   |
| Adoption                    of SFAS No. 158                                                            |   |                                                                    | -      |   |   | - |   |   | **(18.6** | **)** |
|                                                                                                   |   |                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                   |   | $                                                                       | (269.6 | ) | $ | 27.0 |   | **$** | **(19.6** | **)** |

|                                                                      |   | **             December                      31,            ** |   |
|---------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                      |   | **       2005      **                                                                                                      |   | **      2006     ** |   |
|                                                                      |   | **Assets**                                                                                                                                                                                  |   | **Liabilities** |   | **Assets** |   | **Liabilities** |   |
|                                                                      |   | **(As                      adjusted**                                                                                                                                                       |   |   |   |   |   |
|                                                                      |   | **(In                      millions)**                                                                                                                                                      |   |
|                                                                      |   |                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Tax                      effect of temporary differences related to:      |   |                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Inventories                                                               |   | $                                                                                                                                                                                           | 1.6    |   | $ | (4.5 | ) | **$** | **1.5** |   | **$** | **(3.1** | **)** |
| Property                      and equipment                               |   |                                                                                                                                                                                        | 25.5   |   |   | (20.5 | ) |   | **20.7** |   |   | **(22.8** | **)** |
| Pension                      asset                                        |   |                                                                                                                                                                                        | -      |   |   | (35.6 | ) |   | **-** |   |   | **(36.7** | **)** |
| Accrued                      pension cost                                 |   |                                                                                                                                                                                        | 51.9   |   |   | - |   |   | **64.2** |   |   | **-** |   |
| Other                      accrued liabilities and deductible differences |   |                                                                                                                                                                                        | 25.6   |   |   | - |   |   | **27.8** |   |   | **-** |   |
| Other                      taxable differences                            |   |                                                                                                                                                                                        | -      |   |   | (29.5 | ) |   | **-** |   |   | **(20.2** | **)** |
| Tax                      loss and tax credit carryforwards                |   |                                                                                                                                                                                        | 174.5  |   |   | - |   |   | **216.8** |   |   | **-** |   |
| Adjusted                      gross deferred tax assets (liabilities)     |   |                                                                                                                                                                                        | 279.1  |   |   | (90.1 | ) |   | **331.0** |   |   | **(82.8** | **)** |
| Netting                      of items by tax jurisdiction                 |   |                                                                                                                                                                                        | (65.8  | ) |   | 65.8 |   |   | **(66.6** | **)** |   | **66.6** |   |
|                                                                      |   |                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                                                                                                                                                                                        | 213.3  |   |   | (24.3 | ) |   | **264.4** |   |   | **(16.2** | **)** |
| Less                      net current deferred tax asset (liability)      |   |                                                                                                                                                                                        | -      |   |   | (5.0 | ) |   | **-** |   |   | **(1.8** | **)** |
|                                                                      |   |                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Net                      noncurrent deferred tax asset (liability)        |   | $                                                                                                                                                                                           | 213.3  |   | $ | (19.3 | ) | **$** | **264.4** |   | **$** | **(14.4** | **)** |

|                                                                                                                                                                                                                                                                                  |   | **Year                      ended December 31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                  |   | **2004**                                         |   | **2005** |   | **2006** |   |
|                                                                                                                                                                                                                                                                                  |   | **(In                      millions)**           |   |
|                                                                                                                                                                                                                                                                                  |   |                                             |   |   |   |   |   |   |   |   |
| Increase                      (decrease) in valuation allowance:                                                                                                                                                                                                                      |   |                                             |   |   |   |   |   |   |   |   |
| Recognition                      of certain deductible tax attributes for which the benefit                      had not                      previously been recognized under the “more-likely-than-not” recognition                      criteria                       |   | $                                                | (280.7 | ) | **$** | **-** |   | **$** | **-** |   |
| Foreign                      currency translation                                                                                                                                                                                                                                     |   |                                             | (3.0   | ) |   | **-** |   |   | **-** |   |
| 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 |   |                                             | 121.0  |   |   | **-** |   |   | **-** |   |
|                                                                                                                                                                                                                                                                                  |   |                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                  |   | $                                                | (162.7 | ) | **$** | **-** |   | **$** | **-** |   |

| ·   | We                    previously received a preliminary tax assessment related to 1993                    from the                    Belgian tax authorities proposing tax deficiencies, including                    related                    interest, of approximately euro 6 million. The Belgian tax authorities                    filed a lien on the fixed assets of our Belgian TiO2                    operations in connection with their assessment. This lien did                    not                    interfere with on-going operations at the facility. We filed                    a protest to                    this assessment, and in July 2006 the Belgian tax authorities                    withdrew the                    assessment. The lien was subsequently released. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                    Norwegian tax authorities previously notified us of their intent                    to assess                    tax deficiencies of approximately kroner 12 million relating                    to the years                    1998 through 2000. We objected to this proposed assessment, and                    in May                    2006 the Norwegian tax authorities withdrew the assessment. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note          8 - Employee benefit plans:**

***Defined          contribution plans***
**.**

***Defined          benefit plans***
**.**

----

|                                                                    |   | **Years                      ended December 31,** |     |
|-------------------------------------------------------------------------|--------|---------------------------------------------------|----------|
|                                                                    |   | **2005**                                          |     | **2006** |   |
|                                                                    |   | **(In                      thousands)**           |     |
| Change                      in projected benefit obligations ("PBO"):   |   |                                              |     |   |   |   |   |
| Benefit                      obligations at beginning of the year       |   | $                                                 | 307,582  |   | **$** | **352,577** |   |
| Service                      cost                                       |   |                                              | 5,885    |   |   | **5,494** |   |
| Interest                      cost                                      |   |                                              | 14,038   |   |   | **15,009** |   |
| Participant                      contributions                          |   |                                              | 1,469    |   |   | **1,454** |   |
| Actuarial                      losses (gain)                            |   |                                              | 84,365   |   |   | **(15,433** | **)** |
| Change                      in foreign currency exchange rates          |   |                                              | (43,954  | ) |   | **39,230** |   |
| Benefits                      paid                                      |   |                                              | (16,808  | ) |   | **(17,457** | **)** |
|                                                                    |   |                                              |     |   |   |   |   |
| Benefit                      obligations at end of the year             |   | $                                                 | 352,577  |   | **$** | **380,874** |   |
|                                                                    |   |                                              |     |   |   |   |   |
| Change                      in plan assets:                             |   |                                              |     |   |   |   |   |
| Fair                      value of plan assets at beginning of the year |   | $                                                 | 196,573  |   | **$** | **176,896** |   |
| Actual                      return on plan assets                       |   |                                              | 7,132    |   |   | **8,615** |   |
| Employer                      contributions                             |   |                                              | 13,323   |   |   | **18,537** |   |
| Participant                      contributions                          |   |                                              | 1,469    |   |   | **1,454** |   |
| Change                      in foreign currency exchange rates          |   |                                              | (24,793  | ) |   | **20,029** |   |
| Benefits                      paid                                      |   |                                              | (16,808  | ) |   | **(17,457** | **)** |
|                                                                    |   |                                              |     |   |   |   |   |
| Fair                      value of plan assets at end of year           |   | $                                                 | 176,896  |   | **$** | **208,074** |   |
|                                                                    |   |                                              |     |   |   |   |   |
| Accumulated                      benefit obligations                    |   | $                                                 | 316,274  |   | **$** | **321,286** |   |
|                                                                    |   |                                              |     |   |   |   |   |
| Funded                      status at end of the year:                  |   |                                              |     |   |   |   |   |
| Plan                      assets less than PBO                          |   | $                                                 | (175,681 | ) | **$** | **(172,800** | **)** |
| Unrecognized                      actuarial losses                      |   |                                              | 175,482  |   |   | **170,445** |   |
| Unrecognized                      prior service cost                    |   |                                              | 5,550    |   |   | **5,643** |   |
| Unrecognized                      net transition obligations            |   |                                              | 749      |   |   | **717** |   |
|                                                                    |   |                                              |     |   |   |   |   |
|                                                                    |   | $                                                 | 6,100    |   | **$** | **4,005** |   |
|                                                                    |   |                                              |     |   |   |   |   |
| Amounts                      recognized in the balance sheet:           |   |                                              |     |   |   |   |   |
| Unrecognized                      net pension obligations               |   | $                                                 | 6,108    |   | **$** | **-** |   |
| Accrued                      pension costs:                             |   |                                              |     |   |   |   |   |
| Current                                                                 |   |                                              | (10,314  | ) |   | **-** |   |
| Noncurrent                                                              |   |                                              | (125,766 | ) |   | **(172,800** | **)** |
| Accumulated                      other comprehensive loss               |   |                                              | 136,072  |   |   | **176,805** |   |
|                                                                    |   |                                              |     |   |   |   |   |
|                                                                    |   | $                                                 | 6,100    |   | **$** | **4,005** |   |

----

|                                                          |   | **                      Years ended December 31,  ** |    |
|---------------------------------------------------------------|--------|---------------------------------------------------------------------|---------|
|                                                          |   | **2004**                                                            |    | **2005** |   | **2006** |   |
|                                                          |   | **(In                    thousands)**                               |    |
| Net                    periodic pension cost:                 |   |                                                                |    |   |   |   |   |   |   |   |
| Service                    cost benefits                      |   | $                                                                   | 5,398   |   | $ | 5,885 |   | **$** | **5,494** |   |
| Interest                    cost on PBO                       |   |                                                                | 14,132  |   |   | 14,038 |   |   | **15,009** |   |
| Expected                    return on plan assets             |   |                                                                | (12,318 | ) |   | (12,051 | ) |   | **(11,150** | **)** |
| Amortization                    of prior service cost         |   |                                                                | 463     |   |   | 482 |   |   | **480** |   |
| Amortization                    of net transition obligations |   |                                                                | 368     |   |   | 107 |   |   | **99** |   |
| Recognized                    actuarial losses                |   |                                                                | 2,335   |   |   | 3,035 |   |   | **7,768** |   |
|                                                          |   |                                                                |    |   |   |   |   |   |   |   |
|                                                          |   | $                                                                   | 10,378  |   | $ | 11,496 |   | **$** | **17,700** |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | **     December                    31,     ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
| **                                                Rate                                                    ** | **2005**                                                                                        | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                            |   |
| Discount                    rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 4.1%                                                                                            | **4.6%** |
| Increase                    in future compensation levels                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2.8%                                                                                            | **3.0%** |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | **     Years                    ended December                    31,    ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|
| **                                                Rate                                                    ** | **2004**                                                                                                                      | **2005** | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                          |   |   |
| Discount                    rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 5.3%                                                                                                                          | 5.0% | **4.1%** |
| Increase                    in future compensation levels                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2.8%                                                                                                                          | 2.8% | **2.8%** |
| Long-term                    return on plan assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 6.4%                                                                                                                          | 6.0% | **5.5%** |

| ·   | In                    Germany, the composition of our plan assets is established to                    satisfy the                    requirements of the German insurance commissioner. The                    plan asset allocation at December 31, 2006 was 23% to equity                    managers, 48%                    to fixed income managers, 14% to real estate and other investments                    15%                    (2005 - 23%, 48%, 14% and 15%, respectively).  |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                    Norway, we currently have a plan asset target allocation of 14%                    to equity                    managers, 65% to fixed income managers and the remainder primarily                    to                    liquid investments such as money markets. The expected long-term                    rate of                    return for such investments is approximately 8%, 4.5% and 4%,                    respectively. The                    plan asset allocation at December 31, 2006 was 13% to equity                    managers, 64%                    to fixed income managers and the remaining 23% primarily to cash                    and                    liquid investments (2005 - 16%, 62% and 22%,                    respectively). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                             |   |                                                 |                                        |
|--------------------------------------------------|--------|------------------------------------------------------|---------------------------------------------|
| **Years                    ending December 31,** |   | **    Amount   ** |                                        |
|                                             |   |                                                 | **(In                    thousands)**  |   |
| 2007                                             |   | $                                                    | 18,003                                      |   |
| 2008                                             |   |                                                 | 17,907                                      |   |
| 2009                                             |   |                                                 | 15,073                                      |   |
| 2010                                             |   |                                                 | 15,130                                      |   |
| 2011                                             |   |                                                 | 15,311                                      |   |
| 2012                    to 2016                  |   |                                                 | 85,782                                      |   |

***New          accounting standard.***
*Employer’s          Accounting for Pension,*
*Employers          Accounting for Postretirement Benefits other than Pensions, *

|                                                                                                                            |   | **Before                    application****of                    SFAS****No.                    158** |      |    **Adjustments** |   | **After                    application of SFAS****No.                    158** |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|-----------|-----------------------------------|--------|--------------------------------------------------------------------------------|--------|
|                                                                                                                            |   | **(In                    thousands)**                                                                 |      |
|                                                                                                                            |   |                                                                                                  |      |                              |   |                                                                           |   |   |   |   |
| Assets:                                                                                                                         |   |                                                                                                  |      |                              |   |                                                                           |   |   |   |   |
| Current                    deferred income tax asset                                                                            |   | $                                                                                                     | 3,018     |                              | $      | (3,018                                                                         | )      | $ | - |   |
| Total                    current assets                                                                                         |   |                                                                                                  | 410,954   |                              |   | (3,018                                                                         | )      |   | 407,936 |   |
| Unrecognized                    net pension obligations                                                                         |   |                                                                                                  | 4,386     |                              |   | (4,386                                                                         | )      |   | - |   |
| Noncurrent                    deferred income tax asset                                                                         |   |                                                                                                  | 247,101   |                              |   | 17,276                                                                         |   |   | 264,377 |   |
| Total                    other assets                                                                                           |   |                                                                                                  | 264,179   |                              |   | 12,890                                                                         |   |   | 277,069 |   |
| Total                    assets                                                                                                 |   |                                                                                                  | 1,070,697 |                              |   | 9,872                                                                          |   |   | 1,080,569 |   |
|                                                                                                                            |   |                                                                                                  |      |                              |   |                                                                           |   |   |   |   |
| Liabilities:                                                                                                                    |   |                                                                                                  |      |                              |   |                                                                           |   |   |   |   |
| Current                    accrued pension costs                                                                                |   |                                                                                                  | 11,590    |                              |   | (11,590                                                                        | )      |   | - |   |
| Current                    deferred income taxes                                                                                |   |                                                                                                  | 215       |                              |   | 1,536                                                                          |   |   | 1,751 |   |
| Total                    current liabilities                                                                                    |   |                                                                                                  | 148,324   |                              |   | (10,054                                                                        | )      |   | 138,270 |   |
| Noncurrent                    accrued pension costs                                                                             |   |                                                                                                  | 112,845   |                              |   | 59,955                                                                         |   |   | 172,800 |   |
| Noncurrent                    deferred income taxes                                                                             |   |                                                                                                  | 20,347    |                              |   | (5,901                                                                         | )      |   | 14,446 |   |
| Total                    noncurrent liabilities                                                                                 |   |                                                                                                  | 676,760   |                              |   | 54,054                                                                         |   |   | 730,814 |   |
|                                                                                                                            |   |                                                                                                  |      |                              |   |                                                                           |   |   |   |   |
| Stockholders’                    equity:                                                                                  |   |                                                                                                  |      |                              |   |                                                                           |   |   |   |   |
| Accumulated                    other comprehensive income                    - minimum pension liability                        |   |                                                                                                  | (75,439   | )                                 |   | 75,439                                                                         |   |   | - |   |
| Accumulated                    other comprehensive income                    - defined benefit pension                    plans |   |                                                                                                  | -         |                              |   | (109,567                                                                       | )      |   | (109,567 | ) |
| Total                    accumulated other comprehensive income                                                                 |   |                                                                                                  | (174,751  | )                                 |   | (34,128                                                                        | )      |   | (208,879 | ) |
| Total                    stockholders’ equity                                                                             |   |                                                                                                  | 245,572   |                              |   | (34,128                                                                        | )      |   | 211,444 |   |
| Total                    liabilities and stockholders’ equity                                                             |   |                                                                                                  | 1,070,697 |                              |   | 9,872                                                                          |   |   | 1,080,569 |   |

**Note          9 - Other noncurrent liabilities:**

|                                             |   | ** **** December                    31,  ** |   |
|--------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                             |   | **2005**                                                   |   | **2006** |   |
|                                             |   | **(In                    thousands)**                      |   |
|                                             |   |                                                       |   |   |   |   |   |
| Insurance                    claims and expenses |   | $                                                          | 1,255  |   | **$** | **1,463** |   |
| Employee                    benefits             |   |                                                       | 4,735  |   |   | **6,887** |   |
| Other                                            |   |                                                       | 9,444  |   |   | **6,332** |   |
|                                             |   |                                                       |   |   |   |   |   |
|                                             |   | $                                                          | 15,434 |   | **$** | **14,682** |   |

**Note          10 - Common stock and notes receivable from affiliates:**

***NL          common stock options held by employees of the Company***
*.          *

***Common          stock dividends***
*.          *

***Notes          receivable from affiliates - contra equity***
*.          *
* *

**Note          11 - Related party transactions:**

|                                                     |   | ** ****                     December 31,**  |   |
|----------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                     |   | **2005**                                                   |   | **2006** |   |
|                                                     |   | **(In                    thousands)**                      |   |
|                                                     |   |                                                       |   |   |   |   |   |
| Current                    receivables from affiliates:  |   |                                                       |   |   |   |   |   |
| Kronos                    Canada (“KC”)      |   | $                                                          | 1,948  |   | **$** | **1,421** |   |
| Other                                                    |   |                                                       | 4      |   |   | **189** |   |
|                                                     |   |                                                       |   |   |   |   |   |
|                                                     |   | $                                                          | 1,952  |   | **$** | **1,610** |   |
|                                                     |   |                                                       |   |   |   |   |   |
| Current                    payables to affiliate:        |   |                                                       |   |   |   |   |   |
| Kronos                    (US), Inc. (“KUS”) |   | $                                                          | 14,882 |   | **$** | **10,174** |   |

**Note          12 - Commitments and contingencies:**

***Environmental          matters.***

***Litigation          matters.***

***Concentrations          of credit risk***

***Long-term          contracts***

***Operating          leases***

| **Years                    ending December 31,** |   | **Amount**                            |       |
|--------------------------------------------------|--------|---------------------------------------|------------|
|                                             |   | **(In                    thousands)** |       |
|                                             |   |                                  |       |   |
| 2007                                             |   | **$**                                 | **3,681**  |   |
| 2008                                             |   |                                  | **2,947**  |   |
| 2009                                             |   |                                  | **2,153**  |   |
| 2010                                             |   |                                  | **1,606**  |   |
| 2011                                             |   |                                  | **1,165**  |   |
| 2012                    and thereafter           |   |                                  | **19,930** |   |
|                                             |   |                                  |       |   |
|                                             |   | **$**                                 | **31,482** |   |

**Income          taxes.**

**Note          13 - Securities transaction gain:**

**Note          14 - Financial instruments:**

|                                                                                                                                                                                                       |   | **December                    31,**  |   | **December                    31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                       |   | **2005**                             |   | **2006**                            |   |
|                                                                                                                                                                                                       |   | **Carrying****amount**               |   | **Fair****value**                   |   | **Carrying****amount** |   |  **Fair****value** |   |
|                                                                                                                                                                                                       |   | **(In                    millions)** |   |
|                                                                                                                                                                                                       |   |                                 |
| Cash,                    cash equivalents, restricted cash and current and noncurrent                    restricted                    marketable debt securities                                          |   | $                                    | 67.2   |                                | $      | 67.2 |   | **$** | **57.1** |   | **$** | **57.1** |   |
|                                                                                                                                                                                                       |   |                                 |   |                                |   |   |   |   |   |   |   |   |   |
| Long-term                    debt:                                                                                                                                                                         |   |                                 |   |                                |   |   |   |   |   |   |   |   |   |
|                               Fixed rate with market quotes -                                                                                            |   |                                 |   |                                |   |   |   |   |   |   |   |   |   |
|                           8.875%                    Senior Secured Notes |   | $                                    | 449.3  |                                | $      | 463.6 |   | **$** | **-** |   | **$** | **-** |   |
|                                              6.5% Senior Secured Notes        |   |                                 | -      |                                |   | - |   |   | **525.0** |   |   | **512.5** |   |

**Note          15 - Recent accounting pronouncements:**

***Variable          interest entities.***
*Consolidation          of Variable Interest Entities, an interpretation of ARB No. 51*

***Inventory          Costs***
** **
*Inventory          Costs, an amendment of ARB No. 43, Chapter 4,*

***Stock          options.***
* *
*Share-Based          Payment,*
*Accounting          for Stock Issued to Employees. *

***Planned          Major Maintenance Activities.***
** **

|                                                               |   | **Years                    ended December 31,**                 |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|
|                                                               |   | **2004**                                                        |   | **2005** |   |
|                                                               |   | **(In                    thousands, except per share amounts)** |   |
| Increase                    (decrease) in:                         |   |                                                            |   |   |   |   |   |
| Cost                    of sales (repairs and maintenance expense) |   | $                                                               | 637    |   | $ | (744 | ) |
| Provision                    (benefit) for income taxes            |   |                                                            | (208   | ) |   | 276 |   |
| Net                    income                                      |   |                                                            | (429   | ) |   | 468 |   |
|                                                               |   |                                                            |   |   |   |   |   |
| Other                    comprehensive income - foreign currency   |   |                                                            | 98     |   |   | (172 | ) |
| Total                    comprehensive income                      |   |                                                            | (331   | ) |   | 296 |   |

|                                                                                   |   | **December                    31, 2005** |   |
|----------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                   |   | **(In                    thousands)**    |   |
|                                                                                   |   |                                     |   |   |
| Decrease                    in accrued maintenance costs                               |   | $                                        | 2,373  |   |
| Increase                    in current deferred income tax                             |   |                                     | 857    |   |
| Decrease                    in retained deficit                                        |   |                                     | 1,230  |   |
| Decrease                    in accumulated other comprehensive loss - foreign currency |   |                                     | 286    |   |
| Increase                    in total stockholders’ equity                        |   |                                     | 1,516  |   |

**                Pension and OPEB plans**

*                 *
***Quantifying          Financial Statement Misstatements***

***Fair          Value Measurements.***
** **
*Fair          Value Measurements*

***Uncertain          Tax Positions.***
**           **
*Accounting          for Uncertain Tax Positions, *
*Accounting          for Income Taxes, *
*.*
~~s~~

***Fair          Value Option.***

----

**Note          16 -**
**Quarterly          results of operations (unaudited):**

|                                                  |   | ** Quarter                    ended**                       |   |
|-------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|
|                                                  |   | **March                    31**                                            |   | **June                    30** |   | **Sept.                    30** |   | **Dec.                    31** |   |
|                                                  |   | **(In                    millions)**                                       |   |
|                                                  |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| ***Year                    ended December 31, 2005*** |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Net                    sales                          |   | $                                                                          | 209.5  |   | $ | 227.6 |   | $ | 206.0 |   | $ | 207.8 |   |
| Gross                    margin*                      |   |                                                                       | 63.9   |   |   | 70.0 |   |   | 54.7 |   |   | 49.8 |   |
| Net                    income*                        |   |                                                                       | 19.2   |   |   | 28.2 |   |   | 6.1 |   |   | 6.7 |   |
|                                                  |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| ***Year                    ended December 31, 2006*** |   |                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Net                    sales                          |   | $                                                                          | 208.6  |   | $ | 248.5 |   | $ | 233.7 |   | $ | 223.4 |   |
| Gross                    margin*                      |   |                                                                       | 53.5   |   |   | 57.8 |   |   | 52.6 |   |   | 59.2 |   |
| Net                    income*                        |   |                                                                       | 13.4   |   |   | 9.6 |   |   | 9.3 |   |   | 41.4 |   |

|                                            |   | **                         Quarter ended**                       |   |
|-------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|
| **Increase/Decrease:**                          |   | **March                    31**                                                                     |   | **June                    30** |   | **Sept.                    30** |   | **Dec.                    31** |   |
|                                            |   | **(In                    millions)**                                                                |   |
|                                            |   |                                                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Year                    Ended December 31, 2005 |   |                                                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Gross                    margin                 |   | $                                                                                                   | 1.5    |   | $ | (.5 | ) | $ | (.5 | ) | $ | .2 |   |
| Net                    income                   |   |                                                                                                | 1.0    |   |   | (.3 | ) |   | (.3 | ) |   | .1 |   |
|                                            |   |                                                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Year                    Ended December 31, 2006 |   |                                                                                                |   |   |   |   |   |   |   |   |   |   |   |
| Gross                    margin                 |   | $                                                                                                   | .4     |   | $ | (.3 | ) | $ | .5 |   | $ | - |   |
| Net                    income                   |   |                                                                                                | .3     |   |   | (.2 | ) |   | .3 |   |   | - |   |

----

**KRONOS        INTERNATIONAL**
**,        INC. AND SUBSIDIARIES**

**SCHEDULE        I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT**

**Condensed        Balance Sheets**

**December        31, 2005 and 2006**

**(In        thousands)**

|                                                      |   | **2005**                           |    | **2006** |   |
|-----------------------------------------------------------|--------|------------------------------------|---------|----------|--------|
|                                                      |   | **(As                  adjusted)** |    |     |   |
| Current                  assets:                          |   |                               |    |     |   |   |   |
| Cash                  and cash equivalents                |   | $                                  | 9,622   |     | **$**  | **3,264** |   |
| Accounts                  and notes receivable            |   |                               | 9,013   |     |   | **10,262** |   |
| Receivable                  from affiliates               |   |                               | 36,210  |     |   | **51,671** |   |
| Deferred                  income taxes                    |   |                               | 68      |     |   | **-** |   |
| Other                                                     |   |                               | 56      |     |   | **118** |   |
|                                                      |   |                               |    |     |   |   |   |
| Total                  current assets                     |   |                               | 54,969  |     |   | **65,315** |   |
|                                                      |   |                               |    |     |   |   |   |
| Other                  assets:                            |   |                               |    |     |   |   |   |
| Investment                  in subsidiaries               |   |                               | 464,893 |     |   | **507,219** |   |
| Deferred                  income taxes                    |   |                               | 168,642 |     |   | **217,208** |   |
| Other                                                     |   |                               | 7,399   |     |   | **8,757** |   |
| Property                  and equipment, net              |   |                               | 5,814   |     |   | **6,809** |   |
|                                                      |   |                               |    |     |   |   |   |
| Total                  other assets                       |   |                               | 646,748 |     |   | **739,993** |   |
|                                                      |   |                               |    |     |   |   |   |
|                                                      |   | $                                  | 701,717 |     | **$**  | **805,308** |   |
|                                                      |   |                               |    |     |   |   |   |
| Current                  liabilities:                     |   |                               |    |     |   |   |   |
| Payable                  to affiliates                    |   | $                                  | 34,715  |     | **$**  | **31,128** |   |
| Accounts                  payable and accrued liabilities |   |                               | 3,865   |     |   | **14,355** |   |
| Income                  taxes                             |   |                               | 29,483  |     |   | **22,190** |   |
| Deferred                  income taxes                    |   |                               | 14      |     |   | **9** |   |
|                                                      |   |                               |    |     |   |   |   |
| Total                  current liabilities                |   |                               | 68,077  |     |   | **67,682** |   |
|                                                      |   |                               |    |     |   |   |   |
| Noncurrent                  liabilities:                  |   |                               |    |     |   |   |   |
| Long-term                  debt                           |   |                               | 449,298 |     |   | **525,003** |   |
| Other                                                     |   |                               | 1,025   |     |   | **1,179** |   |
|                                                      |   |                               |    |     |   |   |   |
| Total                  noncurrent liabilities             |   |                               | 450,323 |     |   | **526,182** |   |
|                                                      |   |                               |    |     |   |   |   |
| Stockholder’s                  equity               |   |                               | 183,317 |     |   | **211,444** |   |
|                                                      |   |                               |    |     |   |   |   |
|                                                      |   | $                                  | 701,717 |     | **$**  | **805,308** |   |
|                                                      |   |                               |    |     |   |   |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**SCHEDULE          I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT          (CONTINUED)**

**Condensed          Statements of Income**

**Years          ended December 31, 2004, 2005 and 2006**

**(In          thousands)**

|                                                      |   | **2004**                           |     | **2005** |   | **2006** |   |
|-----------------------------------------------------------|--------|------------------------------------|----------|----------|--------|----------|--------|
|                                                      |   | **(As                  adjusted)** |     |     |   |
| Revenues                  and other income:               |   |                               |     |     |   |     |   |   |   |   |
| Net                  sales                                |   | $                                  | 40,038   |     | $      | 47,682   |   | **$** | **50,627** |   |
| Equity                  in earnings of subsidiaries       |   |                               | 65,620   |     |   | 91,170   |   |   | **54,890** |   |
| Interest                  income from affiliates          |   |                               | 2,782    |     |   | 18,947   |   |   | **19,665** |   |
| Royalty                  income                           |   |                               | 18,508   |     |   | 19,187   |   |   | **20,161** |   |
| Currency                  translation gains (losses), net |   |                               | (575     | )        |   | 248      |   |   | **(91** | **)** |
| Other                  income, net                        |   |                               | 71       |     |   | 1        |   |   | **79** |   |
|                                                      |   |                               |     |     |   |     |   |   |   |   |
|                                                      |   |                               | 126,444  |     |   | 177,235  |   |   | **145,331** |   |
|                                                      |   |                               |     |     |   |     |   |   |   |   |
| Costs                  and expenses:                      |   |                               |     |     |   |     |   |   |   |   |
| Cost                  of sales                            |   |                               | 21,371   |     |   | 26,995   |   |   | **28,483** |   |
| General                  and administrative               |   |                               | 28,351   |     |   | 30,929   |   |   | **34,250** |   |
| Loss                  on prepayment of debt               |   |                               | -        |     |   | -        |   |   | **22,311** |   |
| Interest                  expense                         |   |                               | 33,772   |     |   | 42,212   |   |   | **39,759** |   |
| Interest                  expense to affiliates           |   |                               | 5,754    |     |   | 10,302   |   |   | **3,888** |   |
|                                                      |   |                               |     |     |   |     |   |   |   |   |
|                                                      |   |                               | 89,248   |     |   | 110,438  |   |   | **128,691** |   |
|                                                      |   |                               |     |     |   |     |   |   |   |   |
| Income                  before income taxes               |   |                               | 37,196   |     |   | 66,797   |   |   | **16,640** |   |
|                                                      |   |                               |     |     |   |     |   |   |   |   |
| Provision                  for income taxes (benefit)     |   |                               | (288,355 | )        |   | 6,543    |   |   | **(57,035** | **)** |
|                                                      |   |                               |     |     |   |     |   |   |   |   |
| Net                  income                               |   | $                                  | 325,551  |     | $      | 60,254   |   | **$** | **73,675** |   |
|                                                      |   |                               |     |     |   |     |   |   |   |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**SCHEDULE          I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT          (CONTINUED)**

**Condensed          Statements of Cash Flows**

**Years          ended December 31, 2004, 2005 and 2006**

**(In          thousands)**

|                                                                                                           |   | **2004**                           |     | **2005** |   | **2006** |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------|----------|----------|--------|----------|--------|
|                                                                                                           |   | **(As                  adjusted)** |     |     |   |
| Cash                  flows from operating activities:                                                         |   |                               |     |     |   |     |   |   |   |   |
| Net                  income                                                                                    |   | $                                  | 325,551  |     | $      | 60,254   |   | **$** | **73,675** |   |
| Cash                  distributions from subsidiaries                                                          |   |                               | 50,902   |     |   | -        |   |   | **50,618** |   |
| Loss                  on prepayment of debt                                                                    |   |                               | -        |     |   | -        |   |   | **22,311** |   |
| Call                  premium paid                                                                             |   |                               | -        |     |   | -        |   |   | **(20,898** | **)** |
| Noncash                  interest expense                                                                      |   |                               | 1,487    |     |   | 2,124    |   |   | **1,581** |   |
| Deferred                  income taxes                                                                         |   |                               | (276,806 | )        |   | 21,827   |   |   | **(28,752** | **)** |
| Equity                  in earnings of subsidiaries                                                            |   |                               | (65,620  | )        |   | (91,170  | )      |   | **(54,890** | **)** |
| Other,                  net                                                                                    |   |                               | (637     | )        |   | (719     | )      |   | **3,256** |   |
| Net                  change in assets and liabilities                                                          |   |                               | 25,963   |     |   | 11,901   |   |   | **(20,713** | **)** |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Net                  cash provided by operating activities                                                     |   |                               | 60,840   |     |   | 4,217    |   |   | **26,188** |   |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Cash                  flows from investing activities:                                                         |   |                               |     |     |   |     |   |   |   |   |
| Capital                  expenditures                                                                          |   |                               | (1,544   | )        |   | (1,493   | )      |   | **(1,904** | **)** |
| Collection                  of loans to affiliates                                                             |   |                               | 88,656   |     |   | -        |   |   |   |   |
| Purchase                  of interest in subsidiaries                                                          |   |                               | (575     | )        |   | -        |   |   |   |   |
| Other,                  net                                                                                    |   |                               | -        |     |   | -        |   |   | **(48** | **)** |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Net                  cash provided (used) by investing activities                                              |   |                               | 86,537   |     |   | (1,493   | )      |   | **(1,952** | **)** |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Cash                  flows from financing activities:                                                         |   |                               |     |     |   |     |   |   |   |   |
| Indebtedness:                                                                                                  |   |                               |     |     |   |     |   |   |   |   |
| Borrowings                                                                                                     |   |                               | 129,524  |     |   | -        |   |   | **498,658** |   |
| Deferred                  financing fees                                                                       |   |                               | (1,989   | )        |   | -        |   |   | **(470,513** | **)** |
| Loans                  to affiliates                                                                           |   |                               | (209,524 | )        |   | -        |   |   | **(8,890** | **)** |
| Dividends                  paid                                                                                |   |                               | (60,000  | )        |   | -        |   |   | **(50,206** | **)** |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Net                  cash used by financing activities                                                         |   |                               | (141,989 | )        |   | -        |   |   | **(30,951** | **)** |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Net                  change during the year from operating investing and financing                  activities |   |                               | 5,388    |     |   | 2,724    |   |   | **(6,715** | **)** |
| Currency                  translation                                                                          |   |                               | 347      |     |   | 615      |   |   | **357** |   |
| Balance                  at beginning of year                                                                  |   |                               | 548      |     |   | 6,283    |   |   | **9,622** |   |
|                                                                                                           |   |                               |     |     |   |     |   |   |   |   |
| Balance                  at end of year                                                                        |   | $                                  | 6,283    |     | $      | 9,622    |   | **$** | **3,264** |   |

----

**KRONOS          INTERNATIONAL, INC. AND SUBSIDIARIES**

**SCHEDULE          I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT          (CONTINUED)**

**Notes          to Condensed Financial Information**

**Note        1 -**
**Basis        of presentation:**

**Note        2 - Investment in and advances to subsidiaries:**

|                                                                 |   | **  December                  31,  ** |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                                 |   | **2005**                                                  |   | ** ****2006** |   |
|                                                                 |   | **(In                  thousands)**                       |   |
| Current:                                                             |   |                                                      |   |   |   |   |   |
| Receivable                  from:                                    |   |                                                      |   |   |   |   |   |
| Kronos                  Titan GmbH (“TG”) - income taxes |   | $                                                         | 30,172 |   | **$** | **44,593** |   |
| Kronos                  Chemie GmbH - income taxes                   |   |                                                      | 582    |   |   | **1,399** |   |
| Kronos                  Titan A/S                                    |   |                                                      | 1,575  |   |   | **1,907** |   |
| Kronos                  Europe S.A./N.V                              |   |                                                      | 1,721  |   |   | **1,805** |   |
| Kronos                  Canada                                       |   |                                                      | 1,716  |   |   | **1,407** |   |
| Titania                  A/S                                         |   |                                                      | 431    |   |   | **507** |   |
| Other                                                                |   |                                                      | 13     |   |   | **53** |   |
|                                                                 |   |                                                      |   |   |   |   |   |
|                                                                 |   | $                                                         | 36,210 |   | **$** | **51,671** |   |
| Payable                  to:                                         |   |                                                      |   |   |   |   |   |
| TG                                                                   |   |                                                      | 32,833 |   |   | **27,621** |   |
| KCH                                                                  |   |                                                      | 1,826  |   |   | **3,447** |   |
| Kronos                  (US), Inc.                                   |   |                                                      | -      |   |   | **54** |   |
| Other                                                                |   |                                                      | 56     |   |   | **6** |   |
|                                                                 |   |                                                      |   |   |   |   |   |
|                                                                 |   | $                                                         | 34,715 |   | **$** | **31,128** |   |

|                                                      |   | **December                    31,**   |    |
|-----------------------------------------------------------|--------|---------------------------------------|---------|
|                                                      |   | **2005**                              |    | **2006** |   |
|                                                      |   | **(As                    adjusted)**  |    |   |   |
|                                                      |   | **(In                    thousands)** |    |
|                                                      |   |                                  |    |   |   |   |   |
| Investment                    in:                         |   |                                  |    |   |   |   |   |
| TG                                                        |   | $                                     | 278,854 |   | **$** | **299,558** |   |
| Kronos                    Denmark ApS (“KDK”) |   |                                  | 163,201 |   |   | **179,445** |   |
| Other                                                     |   |                                  | 22,838  |   |   | **28,216** |   |
|                                                      |   |                                  |    |   |   |   |   |
|                                                      |   | $                                     | 464,893 |   | **$** | **507,219** |   |

|                                                                          |   | **Years                  ended December 31,** |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                          |   | **2004**                                      |   | **2005** |   | **2006** |   |
|                                                                          |   | **(As                  adjusted)**            |   |   |   |
|                                                                          |   | **(In                  thousands)**           |   |
|                                                                          |   |                                          |   |   |   |   |   |   |   |   |
| Equity                  in income from continuing operations of subsidiaries: |   |                                          |   |   |   |   |   |   |   |   |
| TG                                                                            |   | $                                             | 40,937 |   | $ | 52,254 |   | **$** | **17,144** |   |
| KDK                                                                           |   |                                          | 23,429 |   |   | 35,875 |   |   | **33,727** |   |
| Other                                                                         |   |                                          | 1,254  |   |   | 3,041 |   |   | **4,019** |   |
|                                                                          |   |                                          |   |   |   |   |   |   |   |   |
|                                                                          |   | $                                             | 65,620 |   | $ | 91,170 |   | **$** | **54,890** |   |

**Note        3 -**
**Long-term        debt:**

|                                         |   | ** **** December                  31,  ** |    |
|----------------------------------------------|--------|----------------------------------------------------------|---------|
|                                         |   | **2005**                                                 |    | **2006** |   |
|                                         |   | **(In                  thousands)**                      |    |
|                                         |   |                                                     |    |   |   |   |   |
| Long-term                  debt:             |   |                                                     |    |   |   |   |   |
| 8.875%                  Senior Secured Notes |   | $                                                        | 449,298 |   | **$** | **-** |   |
| 6.5%                  Senior Secured Notes   |   |                                                     | -       |   |   | **525,003** |   |
|                                         |   |                                                     |    |   |   |   |   |
|                                         |   |                                                     | 449,298 |   |   | **525,003** |   |
| Less                  current maturities     |   |                                                     | -       |   |   | **-** |   |
|                                         |   |                                                     |    |   |   |   |   |
|                                         |   | $                                                        | 449,298 |   | **$** | **525,003** |   |

*Senior          Secured*
* Notes*

| **KRONOS                  TITAN GMBH AND SUBSIDIARIES**                                 |
|-----------------------------------------------------------------------------------------|
|                                                                                    |
| **Index                  of Consolidated Financial Statements**                         |
|                                                                                    |   |
|                                                                                    |   |
| **Financial                  Statements**                                               | **Pages** |
|                                                                                    |   |
| Report                  of Independent Registered Public Accounting Firm                | FA-2 |
|                                                                                    |   |
| Consolidated                  Balance Sheets -                                          |   |
| December                  31, 2005 (As adjusted); andDecember                  31, 2006 | FA-3 |
|                                                                                    |   |
| Consolidated                  Statements of Income -                                    |   |
| Years                  ended December 31, 2004 and 2005 (As adjusted); and              |   |
| Year                  ended December 31, 2006                                           | FA-5 |
|                                                                                    |   |
| Consolidated                  Statements of Comprehensive Income (Loss) -               |   |
| Years                  ended December 31, 2004 and 2005 (As adjusted); and              |   |
| Year                  ended December 31, 2006                                           | FA-6 |
|                                                                                    |   |
| Consolidated                  Statements of Owner’s Equity -                      |   |
| Years                  ended December 31, 2004 and 2005 (As adjusted); and              |   |
| Year                  ended December 31, 2006                                           | FA-7 |
|                                                                                    |   |
| Consolidated                  Statements of Cash Flows -                                |   |
| Years                  ended December 31, 2004 and 2005 (As adjusted); and              |   |
| Year                  ended December 31, 2006                                           | FA-8 |
|                                                                                    |   |
| Notes                  to Consolidated Financial Statements                             | FA-9 |

----

**KRONOS          TITAN GMBH AND SUBSIDIARIES**

**CONSOLIDATED          BALANCE SHEETS**

**December          31, 2005 and 2006**

**(In          thousands)**

| **ASSETS**                                                      |   | ** 2005 **               |    | ** 2006 ** |   |
|-----------------------------------------------------------------|--------|------------------------------------|---------|----------------------|--------|
|                                                            |   | **(As                  adjusted)** |    |                 |   |
| Current                  assets:                                |   |                               |    |                 |   |   |   |
| Cash                  and cash equivalents                      |   | $                                  | 50,765  |                 | **$**  | **43,780** |   |
| Accounts                  and notes receivable                  |   |                               | 73,059  |                 |   | **92,595** |   |
| Receivable                  from affiliates                     |   |                               | 43,021  |                 |   | **30,327** |   |
| Refundable                  income taxes                        |   |                               | 14,695  |                 |   | **23,607** |   |
| Inventories                                                     |   |                               | 113,677 |                 |   | **118,696** |   |
| Prepaid                  expenses                               |   |                               | 1,629   |                 |   | **2,100** |   |
|                                                            |   |                               |    |                 |   |   |   |
| Total                  current assets                           |   |                               | 296,846 |                 |   | **311,105** |   |
|                                                            |   |                               |    |                 |   |   |   |
| Other                  assets:                                  |   |                               |    |                 |   |   |   |
| Unrecognized                  net pension obligations           |   |                               | 3,000   |                 |   | **-** |   |
| Deferred                  income taxes                          |   |                               | 47,044  |                 |   | **49,758** |   |
| Other                                                           |   |                               | 808     |                 |   | **742** |   |
|                                                            |   |                               |    |                 |   |   |   |
| Total                  other assets                             |   |                               | 50,852  |                 |   | **50,500** |   |
|                                                            |   |                               |    |                 |   |   |   |
| Property                  and equipment:                        |   |                               |    |                 |   |   |   |
| Land                                                            |   |                               | 13,460  |                 |   | **15,406** |   |
| Buildings                                                       |   |                               | 101,151 |                 |   | **114,367** |   |
| Machinery                  and equipment                        |   |                               | 434,895 |                 |   | **502,520** |   |
| Construction                  in progress                       |   |                               | 9,853   |                 |   | **7,534** |   |
|                                                            |   |                               |    |                 |   |   |   |
|                                                            |   |                               | 559,359 |                 |   | **639,827** |   |
|                                                            |   |                               |    |                 |   |   |   |
| Less                  accumulated depreciation and amortization |   |                               | 332,840 |                 |   | **387,630** |   |
|                                                            |   |                               |    |                 |   |   |   |
| Net                  property and equipment                     |   |                               | 226,519 |                 |   | **252,197** |   |
|                                                            |   |                               |    |                 |   |   |   |
|                                                            |   | $                                  | 574,217 |                 | **$**  | **613,802** |   |

----

**KRONOS          TITAN GMBH AND SUBSIDIARIES**

**CONSOLIDATED          BALANCE SHEETS (CONTINUED)**

**December          31, 2005 and 2006**

**(In          thousands)**

| **LIABILITIES                  AND OWNERS’ EQUITY**          |   | ** 2005 **               |    | ** 2006 ** |   |
|--------------------------------------------------------------------|--------|------------------------------------|---------|----------------------|--------|
|                                                               |   | **(As                  adjusted)** |    |                 |   |
|                                                               |   |                               |    |                 |   |   |   |
| Current                  liabilities:                              |   |                               |    |                 |   |   |   |
| Accounts                  payable and accrued liabilities          |   | $                                  | 70,797  |                 | **$**  | **57,577** |   |
| Payables                  to affiliates                            |   |                               | 75,447  |                 |   | **87,206** |   |
| Deferred                  income taxes                             |   |                               | 3,961   |                 |   | **1,508** |   |
|                                                               |   |                               |    |                 |   |   |   |
| Total                  current liabilities                         |   |                               | 150,205 |                 |   | **146,291** |   |
|                                                               |   |                               |    |                 |   |   |   |
| Noncurrent                  liabilities:                           |   |                               |    |                 |   |   |   |
| Note                  payable to affiliate                         |   |                               | 11,239  |                 |   | **-** |   |
| Accrued                  pension cost                              |   |                               | 120,872 |                 |   | **157,597** |   |
| Other                                                              |   |                               | 13,047  |                 |   | **10,356** |   |
|                                                               |   |                               |    |                 |   |   |   |
| Total                  noncurrent liabilities                      |   |                               | 145,158 |                 |   | **167,953** |   |
|                                                               |   |                               |    |                 |   |   |   |
| Owner’s                  equity:                             |   |                               |    |                 |   |   |   |
| Subscribed                  capital                                |   |                               | 12,496  |                 |   | **12,496** |   |
| Paid                  in capital                                   |   |                               | 227,037 |                 |   | **228,605** |   |
| Retained                  earnings                                 |   |                               | 43,027  |                 |   | **37,049** |   |
| Accumulated                  other comprehensive income (loss):    |   |                               |    |                 |   |   |   |
| Currency                  translation                              |   |                               | 69,155  |                 |   | **110,572** |   |
| Defined                  benefit pension plans                     |   |                               | (72,861 | )                    |   | **(89,164** | **)** |
|                                                               |   |                               |    |                 |   |   |   |
| Total                  owner’s equity                        |   |                               | 278,854 |                 |   | **299,558** |   |
|                                                               |   |                               |    |                 |   |   |   |
|                                                               |   | $                                  | 574,217 |                 | **$**  | **613,802** |   |
|                                                               |   |                               |    |                 |   |   |   |
| Commitments                  and contingencies (Notes 6, 7 and 12) |   |                               |    |                 |   |   |   |

----

**KRONOS          TITAN GMBH AND SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF INCOME**

**Years          ended December 31, 2004, 2005 and 2006**

**(In          thousands)**

|                                                         |   | **2004**                           |    | **2005** |   | **2006** |   |
|--------------------------------------------------------------|--------|------------------------------------|---------|----------|--------|----------|--------|
|                                                         |   | **(As                  adjusted)** |    |     |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Net                  sales                                   |   | $                                  | 552,216 |     | $      | 584,219  |   | **$** | **641,212** |   |
| Cost                  of sales                               |   |                               | 451,956 |     |   | 462,497  |   |   | **535,425** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Gross                  margin                                |   |                               | 100,260 |     |   | 121,722  |   |   | **105,787** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Selling,                  general and administrative expense |   |                               | 47,824  |     |   | 50,140   |   |   | **52,707** |   |
| Other                  operating income (expense):           |   |                               |    |     |   |     |   |   |   |   |
| Currency                  transaction gains (losses), net    |   |                               | (2,533  | )        |   | 3,906    |   |   | (3,736 | ) |
| Disposition                  of property and equipment       |   |                               | (293    | )        |   | (1,080   | )      |   | **(1,489** | ) |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Income                  from operations                      |   |                               | 49,610  |     |   | 74,408   |   |   | **47,855** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Other                  income (expense):                     |   |                               |    |     |   |     |   |   |   |   |
| Trade                  interest income                       |   |                               | 949     |     |   | 733      |   |   | **1,907** |   |
| Interest                  and other income from affiliates   |   |                               | 8,813   |     |   | 13,224   |   |   | **6,672** |   |
| Interest                  and other expense to affiliates    |   |                               | (304    | )        |   | (791     | )      |   | (1,375 | ) |
| Interest                  expense                            |   |                               | (651    | )        |   | (595     | )      |   | **(272** | ) |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Income                  before income taxes                  |   |                               | 58,417  |     |   | 86,979   |   |   | **54,787** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Provision                  for income taxes                  |   |                               | 17,480  |     |   | 34,725   |   |   | **37,643** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Net                  income                                  |   | $                                  | 40,937  |     | $      | 52,254   |   | **$** | **17,144** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |

----

**KRONOS        TITAN GMBH AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

**Years        ended December 31, 2004, 2005 and 2006**

**(In        thousands)**

|                                                            |   | ** 2004 **               |   | ** 2005 ** |   | ** 2006 ** |   |
|-----------------------------------------------------------------|--------|------------------------------------|--------|----------------------|--------|----------------------|--------|
|                                                            |   | **(As                  adjusted)** |   |                 |   |
|                                                            |   |                               |   |                 |   |                 |   |
|                                                            |   |                               |   |                 |   |                 |   |   |   |   |
| Net                  income                                     |   | $                                  | 40,937 |                 | $      | 52,254               |   | **$** | **17,144** |   |
|                                                            |   |                               |   |                 |   |                 |   |   |   |   |
| Other                  comprehensive income (loss), net of tax: |   |                               |   |                 |   |                 |   |   |   |   |
| Defined                  benefit pension plans                  |   |                               | 4,400  |                 |   | (53,451              | )      |   | **3,355** |   |
| Currency                  translation adjustment                |   |                               | 36,538 |                 |   | (43,191              | )      |   | **41,417** |   |
|                                                            |   |                               |   |                 |   |                 |   |   |   |   |
| Total                  other comprehensive income               |   |                               | 40,938 |                 |   | (96,642              | )      |   | **44,772** |   |
|                                                            |   |                               |   |                 |   |                 |   |   |   |   |
| Comprehensive                  income                  (loss)   |   | $                                  | 81,875 |                 | $      | (44,388              | )      | **$** | **61,916** |   |

----

**KRONOS        TITAN GMBH AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF OWNER’S EQUITY**

**Years        ended December 31, 2004, 2005 and 2006**

**(In        thousands)**

|                                                       |   |                                        |   |                    |   |                                                       |   | **Accumulated                    other** |    |                  |   |
|------------------------------------------------------------|--------|---------------------------------------------|--------|-------------------------|--------|------------------------------------------------------------|--------|------------------------------------------|---------|-----------------------|--------|
|                                                       |   |                                        |   |                    |   |                                                       |   | **Comprehensive**                        |    |                  |   |
|                                                       |   | **Owners’                    Equity** |   | **Retained**            |   | **   income (loss)   ** |   |                                     |    |
|                                                       |   | **Subscribed**                              |   | **Paid-in**             |   | **earnings**                                               |   | **Currency**                             |    | **Pension**           |   |   |   |
|                                                       |   | ** capital **                     |   | ** capital ** |   | **(deficit)**                                              |   | **translation**                          |    | ** plans ** |   | **  Total  ** |   |
|                                                       |   |                                        |   |                    |   | **(As                    adjusted)**                       |   | **(As                    adjusted)**     |    |                  |   | **(As                    adjusted)** |   |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |
| Balance                    at December 31, 2003:           |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| As                    previously reported                  |   | $                                           | 12,496 |                    | $      | 376,634                                                    |   | $                                        | -       |                  | $      | 75,524 |   | $ | (23,810 | ) | $ | 440,844 |   |
| Change                    in accounting principle          |   |                                        | -      |                    |   | -                                                          |   |                                     | 499     |                  |   | 284 |   |   | - |   |   | 783 |   |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                    as adjusted                     |   |                                        | 12,496 |                    |   | 376,634                                                    |   |                                     | 499     |                  |   | 75,808 |   |   | (23,810 | ) |   | 441,627 |   |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Net                    income*                             |   |                                        | -      |                    |   | -                                                          |   |                                     | 40,937  |                  |   | - |   |   | - |   |   | 40,937 |   |
| Dividends                    paid                          |   |                                        | -      |                    |   | -                                                          |   |                                     | (50,663 | )                     |   | - |   |   | - |   |   | (50,663 | ) |
| Other                    comprehensive income, net of tax* |   |                                        | -      |                    |   | -                                                          |   |                                     | -       |                  |   | 36,538 |   |   | 4,400 |   |   | 40,938 |   |
| Noncash                    capital transaction             |   |                                        | -      |                    |   | (149,597                                                   | )      |                                     | -       |                  |   | - |   |   | - |   |   | (149,597 | ) |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2004*           |   |                                        | 12,496 |                    |   | 227,037                                                    |   |                                     | (9,227  | )                     |   | 112,346 |   |   | (19,410 | ) |   | 323,242 |   |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Net                    income*                             |   |                                        | -      |                    |   | -                                                          |   |                                     | 52,254  |                  |   | - |   |   | - |   |   | 52,254 |   |
| Other                    comprehensive income, net of tax* |   |                                        | -      |                    |   | -                                                          |   |                                     | -       |                  |   | (43,191 | ) |   | (53,451 | ) |   | (96,642 | ) |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2005*           |   |                                        | 12,496 |                    |   | 227,037                                                    |   |                                     | 43,027  |                  |   | 69,155 |   |   | (72,861 | ) |   | 278,854 |   |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Net                    income                              |   |                                        | -      |                    |   | -                                                          |   |                                     | 17,144  |                  |   | - |   |   | - |   |   | 17,144 |   |
| Dividends                    paid                          |   |                                        | -      |                    |   | -                                                          |   |                                     | (23,122 | )                     |   | - |   |   | - |   |   | (23,122 | ) |
| Noncash                    capital transaction             |   |                                        | -      |                    |   | 1,568                                                      |   |                                     | -       |                  |   | - |   |   | - |   |   | 1,568 |   |
| Other                    comprehensive income, net of tax  |   |                                        | -      |                    |   | -                                                          |   |                                     | -       |                  |   | 41,417 |   |   | 3,355 |   |   | 44,772 |   |
| Adoption                    of SFAS No. 158                |   |                                        | -      |                    |   | -                                                          |   |                                     | -       |                  |   | - |   |   | (19,658 | ) |   | (19,658 | ) |
|                                                       |   |                                        |   |                    |   |                                                       |   |                                     |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2006            |   | $                                           | 12,496 |                    | $      | 228,605                                                    |   | $                                        | 37,049  |                  | $      | 110,572 |   | $ | (89,164 | ) | $ | 299,558 |   |

----

**KRONOS        TITAN GMBH AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

**Years        ended December 31, **
**2004,        2005 and 2006**

**(In        thousands)**

|                                                                                                          |   | **2004**                                   |     | **2005** |   | **2006** |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|----------|----------|--------|----------|--------|
|                                                                                                          |   | **(As                          adjusted)** |     |     |   |
|                                                                                                          |   |                                       |     |     |   |     |   |
| Cash                          flows from operating activities:                                                |   |                                       |     |     |   |     |   |   |   |   |
| Net                          income                                                                           |   | $                                          | 40,937   |     | $      | 52,254   |   | **$** | **17,144** |   |
| Depreciation,                          depletion and amortization                                             |   |                                       | 23,583   |     |   | 20,980   |   |   | **20,637** |   |
| Noncash                          interest expense                                                             |   |                                       | 200      |     |   | 141      |   |   | **98** |   |
| Deferred                          income taxes                                                                |   |                                       | 6,151    |     |   | 9,467    |   |   | **5,112** |   |
| Net                          loss from disposition of property and equipment                                  |   |                                       | 293      |     |   | 1,080    |   |   | **1,489** |   |
| Pension,                          net                                                                         |   |                                       | (4,540   | )        |   | (3,328   | )      |   | **(326** | **)** |
| Other,                          net                                                                           |   |                                       | 167      |     |   | 155      |   |   | **(422** | **)** |
| Change                          in assets and liabilities:                                                    |   |                                       |     |     |   |     |   |   |   |   |
| Accounts                          and notes receivable                                                        |   |                                       | (3,205   | )        |   | (9,294   | )      |   | **(8,080** | **)** |
| Inventories                                                                                                   |   |                                       | 5,837    |     |   | (26,334  | )      |   | **7,897** |   |
| Prepaid                          expenses                                                                     |   |                                       | 559      |     |   | (144     | )      |   | **(84** | **)** |
| Accounts                          payable and accrued liabilities                                             |   |                                       | 13,751   |     |   | 5,351    |   |   | **(7,824** | **)** |
| Income                          taxes                                                                         |   |                                       | 126,599  |     |   | (13,859  | )      |   | **(11,276** | **)** |
| Accounts                          with affiliates                                                             |   |                                       | (82,855  | )        |   | 29,420   |   |   | **24,714** |   |
| Other                          noncurrent assets                                                              |   |                                       | (146     | )        |   | 109      |   |   | **52** |   |
| Other                          noncurrent liabilities                                                         |   |                                       | (5,334   | )        |   | (713     | )      |   | **(4,316** | **)** |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Net                          cash provided by operating activities                                            |   |                                       | 121,997  |     |   | 65,285   |   |   | **44,815** |   |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Cash                          flows from investing activities - capital                          expenditures |   |                                       | (20,396  | )        |   | (22,896  | )      |   | **(22,199** | **)** |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Cash                          flows from financing activities:                                                |   |                                       |     |     |   |     |   |   |   |   |
| Indebtedness:                                                                                                 |   |                                       |     |     |   |     |   |   |   |   |
| Borrowings                                                                                                    |   |                                       | 49,984   |     |   | -        |   |   | **-** |   |
| Principal                          payments                                                                   |   |                                       | (49,984  | )        |   | -        |   |   | **-** |   |
| Loans                          from affiliates:                                                               |   |                                       |     |     |   |     |   |   |   |   |
| Loans                                                                                                         |   |                                       | 11,597   |     |   | 4,860    |   |   | **-** |   |
| Repayments                                                                                                    |   |                                       | (88,656  | )        |   | -        |   |   | **(10,919** | **)** |
| Dividends                          paid                                                                       |   |                                       | -        |     |   | -        |   |   | **(23,122** | **)** |
| Cash                          distributions                                                                   |   |                                       | (50,663  | )        |   | -        |   |   | **-** |   |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Net                          cash provided (used) by financing activities                                     |   |                                       | (127,722 | )        |   | 4,860    |   |   | **(34,041** | **)** |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Cash                          and cash equivalents - net change from:                                         |   |                                       |     |     |   |     |   |   |   |   |
| Operating,                          investing and financing activities                                        |   |                                       | (26,121  | )        |   | 47,249   |   |   | **(11,425** | **)** |
| Currency                          translation                                                                 |   |                                       | 1,706    |     |   | (2,928   | )      |   | **4,440** |   |
| Balance                          at beginning of year                                                         |   |                                       | 30,859   |     |   | 6,444    |   |   | **50,765** |   |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Balance                          at end of year                                                               |   | $                                          | 6,444    |     | $      | 50,765   |   | **$** | **43,780** |   |
|                                                                                                          |   |                                       |     |     |   |     |   |   |   |   |
| Supplemental                          disclosures:                                                            |   |                                       |     |     |   |     |   |   |   |   |
| Cash                          paid (received) for:                                                            |   |                                       |     |     |   |     |   |   |   |   |
| Interest                                                                                                      |   | $                                          | 626      |     | $      | 516      |   | **$** | **170** |   |
| Income                          taxes                                                                         |   |                                       | (132,629 | )        |   | 6,517    |   |   | **25,423** |   |

----

**KRONOS          TITAN GMBH AND SUBSIDIARIES**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note          1 - Organization and basis of presentation:**

**Note        2 - Summary of significant accounting policies:**

***Management’s        estimates.***
* *

***Principles        of consolidation.***
*Consolidation        of Variable Interest Entities, an interpretation of ARB No. 51,*

***Translation        of foreign currencies***
*.        *

***Derivatives        and hedging activities.***
* *
*Accounting        for Derivative Instruments and Hedging Activities, *

***Cash        equivalents***
**.**

***Accounts        receivable***
**.**

***Property        and equipment and depreciation.***

*Accounting        for the Impairment or Disposal of Long-Lived Assets.*

***Long-term        debt***
**.**

***Employee        benefit plans***
**.**

***Income        taxes***
*.        *

***Net        sales***
**.**

***Inventories        and cost of sales.***
*.*

***Selling,        general and administrative expenses; shipping and handling        costs.***
* *
* *

**Note        3 - Accounts and notes receivable:**

|                                                   |   | **December                  31,**   |   |
|--------------------------------------------------------|--------|-------------------------------------|--------|
|                                                   |   | **2005**                            |   | **2006** |   |
|                                                   |   | **(In                  thousands)** |   |
|                                                   |   |                                |   |   |   |   |   |
| Trade                  receivables                     |   | $                                   | 69,019 |   | **$** | **85,011** |   |
| Recoverable                  VAT and other receivables |   |                                | 5,189  |   |   | **8,794** |   |
| Allowance                  for doubtful accounts       |   |                                | (1,149 | ) |   | **(1,210** | **)** |
|                                                   |   |                                |   |   |   |   |   |
|                                                   |   | $                                   | 73,059 |   | **$** | **92,595** |   |

**Note        4 - Inventories:**

|                               |   | **December                  31,**   |    |
|------------------------------------|--------|-------------------------------------|---------|
|                               |   | **2005**                            |    | **2006** |   |
|                               |   | **(In                  thousands)** |    |
|                               |   |                                |    |   |   |   |   |
| Raw                  materials     |   | $                                   | 21,386  |   | **$** | **18,117** |   |
| Work                  in process   |   |                                | 11,884  |   |   | **16,030** |   |
| Finished                  products |   |                                | 65,242  |   |   | **65,524** |   |
| Supplies                           |   |                                | 15,165  |   |   | **19,025** |   |
|                               |   |                                |    |   |   |   |   |
|                               |   | $                                   | 113,677 |   | **$** | **118,696** |   |

----

**Note        5 - Accounts payable and accrued liabilities:**

|                                  |   | **December                  31,**   |   |
|---------------------------------------|--------|-------------------------------------|--------|
|                                  |   | **2005**                            |   | **2006** |   |
|                                  |   | **(As****adjusted)**                |   |   |   |
|                                  |   | **(In                  thousands)** |   |
|                                  |   |                                |   |   |   |   |   |
| Accounts                  payable     |   | $                                   | 39,206 |   | **$** | **37,133** |   |
| Accrued                  liabilities: |   |                                |   |   |   |   |   |
| Employee                  benefits    |   |                                | 16,632 |   |   | **5,301** |   |
| Waste                  acid recovery  |   |                                | 9,149  |   |   | **8,836** |   |
| Other                                 |   |                                | 5,810  |   |   | **6,307** |   |
|                                  |   |                                |   |   |   |   |   |
|                                  |   | $                                   | 70,797 |   | **$** | **57,577** |   |

**Note        6 - Long-term debt:**

*Credit        Facility - *

*Senior        Secured Notes*

----

**Note        7 - Income taxes:**

|                                                                                            |   | **Years                  ended December 31,** |   |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                            |   | **2004**                                      |   | **2005** |   | **2006** |   |
|                                                                                            |   | **(As                  adjusted)**            |   |   |   |
|                                                                                            |   | **(In                  thousands)**           |   |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
| Pretax                  income                                                                  |   | $                                             | 58,417 |   | $ | 86,979 |   | **$** | **54,787** |   |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
| Expected                  tax expense                                                           |   | $                                             | 15,422 |   | $ | 22,962 |   | **$** | **14,464** |   |
| Trade                  income tax                                                               |   |                                          | 7,791  |   |   | 11,196 |   |   | **7,062** |   |
| German                  tax refund                                                              |   |                                          | (2,508 | ) |   | - |   |   | **-** |   |
| Assessment                  of prior year income taxes                                          |   |                                          | -      |   |   | - |   |   | **15,483** |   |
| Change                  in deferred income tax valuation allowance, net                         |   |                                          | (3,146 | ) |   | - |   |   | **-** |   |
| Tax                  contingency reserve adjustment                                             |   |                                          | -      |   |   | 1,387 |   |   | **81** |   |
| Other,                  net                                                                     |   |                                          | (79    | ) |   | (820 | ) |   | **553** |   |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
| Income                  tax expense                                                             |   | $                                             | 17,480 |   | $ | 34,725 |   | **$** | **37,643** |   |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
| Provision                  for income taxes:                                                    |   |                                          |   |   |   |   |   |   |   |   |
| Current                  income tax expense                                                     |   | $                                             | 11,329 |   | $ | 25,258 |   | **$** | **32,531** |   |
| Deferred                  income tax expense                                                    |   |                                          | 6,151  |   |   | 9,467 |   |   | **5,112** |   |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                            |   | $                                             | 17,480 |   | $ | 34,725 |   | **$** | **37,643** |   |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
| Comprehensive                  provision (benefit) for income taxes allocable to:               |   |                                          |   |   |   |   |   |   |   |   |
| Pretax                  income                                                                  |   | $                                             | 17,480 |   | $ | 34,725 |   | **$** | **37,643** |   |
| Other                  comprehensive loss -Defined                  benefit pension liabilities |   |                                          | (8,081 | ) |   | (32,649 | ) |   | **4,220** |   |
| Adoption                  of SFAS No. 158                                                       |   |                                          | -      |   |   | - |   |   | **(12,722** | **)** |
|                                                                                            |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                            |   | $                                             | 9,399  |   | $ | 2,076 |   | **$** | **29,141** |   |

|                                                                               |   | **              December                  31,              ** |    |
|------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                               |   | **       2005        **                                                                                                        |    | **                                       2006        ** |   |
|                                                                               |   | **Assets**                                                                                                                                                                                                |    | **Liabilities** |   | **Assets** |   | **Liabilities** |   |
|                                                                               |   | **(As                  Adjusted)**                                                                                                                                                                        |    |   |   |   |   |
|                                                                               |   |                                                                                                                                                                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Tax                  effect of temporary differences relating                  to: |   |                                                                                                                                                                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Inventories                                                                        |   | $                                                                                                                                                                                                         | -       |   | $ | (2,375 | ) | **$** | **-** |   | **$** | **(1,267** | **)** |
| Property                  and equipment                                            |   |                                                                                                                                                                                                      | 26,362  |   |   | - |   |   | **20,409** |   |   | **-** |   |
| Pension                  asset                                                     |   |                                                                                                                                                                                                      | -       |   |   | (24,398 | ) |   | **-** |   |   | **(27,114** | **)** |
| Accrued                  pension cost                                              |   |                                                                                                                                                                                                      | 47,420  |   |   | - |   |   | **57,827** |   |   | **-** |   |
| Other                  taxable differences                                         |   |                                                                                                                                                                                                      | -       |   |   | (3,926 | ) |   | **-** |   |   | **(1,605** | **)** |
|                                                                               |   |                                                                                                                                                                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Gross                  deferred tax assets (liabilities)                           |   |                                                                                                                                                                                                      | 73,782  |   |   | (30,699 | ) |   | **78,236** |   |   | **(29,986** | **)** |
|                                                                               |   |                                                                                                                                                                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Reclassification,                  principally netting by tax jurisdiction         |   |                                                                                                                                                                                                      | (26,738 | ) |   | 26,738 |   |   | **(28,478** | **)** |   | **28,478** |   |
|                                                                               |   |                                                                                                                                                                                                      |    |   |   |   |   |   |   |   |   |   |   |
| Net                  total deferred tax liabilities                                |   |                                                                                                                                                                                                      | 47,044  |   |   | (3,961 | ) |   | **49,758** |   |   | **(1,508** | )  |
| Net                  current deferred tax liabilities                              |   |                                                                                                                                                                                                      | -       |   |   | (3,961 | ) |   | **-** |   |   | **(1,508** | **)** |
|                                                                               |   |                                                                                                                                                                                                      |    |   |   |   |   |   |   |   |   |  |   |
| Net                  noncurrent deferred tax asset                                 |   | $                                                                                                                                                                                                         | 47,044  |   | $ | - |   | **$** | **49,758** |   | **$** | **-** |   |

**Note        8 - Employee benefit plans:**

----

|                                                                          |   | **December                  31,**   |          |
|-------------------------------------------------------------------------------|--------|-------------------------------------|---------------|
|                                                                          |   | **2005**                            |          | **2006** |   |
|                                                                          |   | **(In                  thousands)** |          |
| Change                  in projected benefit obligations (“PBO”): |   |                                |          |   |   |   |   |
| Benefit                  obligations at beginning of year                     |   | $                                   | 232,308       |   | **$** | **279,940** |   |
| Service                  cost                                                 |   |                                | 3,742         |   |   | **3,139** |   |
| Interest                  cost                                                |   |                                | 10,540        |   |   | **11,684** |   |
| Participant                  contributions                                    |   |                                | 1,316         |   |   | **1,311** |   |
| Actuarial                  losses                                             |   |                                | 81,199        |   |   | **(11,189** | **)** |
| Benefits                  paid                                                |   |                                | (35,385       | ) |   | **(14,114** | **)** |
| Change                  in currency exchange rates                            |   |                                |  (13,780 | ) |   | ** 32,079** |   |
|                                                                          |   |                                |          |   |   |   |   |
| Benefit                  obligations at end of year                           |   | $                                   | 279,940       |   | **$** | **302,850** |   |
|                                                                          |   |                                |          |   |   |   |   |
| Change                  in fair value of plan assets:                         |   |                                |          |   |   |   |   |
| Fair                  value of plan assets at beginning of year               |   | $                                   | 136,919       |   | **$** | **122,029** |   |
| Actual                  return on plan assets                                 |   |                                | 4,596         |   |   | **7,045** |   |
| Employer                  contributions                                       |   |                                | 11,182        |   |   | **14,443** |   |
| Participant                  contributions                                    |   |                                | 1,316         |   |   | **1,311** |   |
| Change                  in currency exchange rates                            |   |                                | (18,204       | ) |   | **14,539** |   |
| Benefits                  paid                                                |   |                                | (13,780       | ) |   | ** (14,114** | **)** |
|                                                                          |   |                                |          |   |   |   |   |
| Fair                  value of plan assets at end of year                     |   | $                                   | 122,029       |   | **$** | **145,253** |   |
|                                                                          |   |                                |          |   |   |   |   |
| Accumulated                  benefit obligations                              |   | $                                   | 255,400       |   | **$** | **258,654** |   |
|                                                                          |   |                                |          |   |   |   |   |
| Funded                  status at year end:                                   |   |                                |          |   |   |   |   |
| Plan                  assets less than PBO                                    |   | $                                   | (157,911      | ) | **$** | **(157,597** | **)** |
| Unrecognized                  actuarial loss                                  |   |                                | 147,873       |   |   | **144,764** |   |
| Unrecognized                  prior service cost                              |   |                                | 3,000         |   |   | **3,140** |   |
|                                                                          |   |                                |          |   |   |   |   |
|                                                                          |   | $                                   | (7,038        | ) | **$** | **(9,693** | **)** |
|                                                                          |   |                                |          |   |   |   |   |
| Amounts                  recognized in the balance sheet:                     |   |                                |          |   |   |   |   |
| Unrecognized                  net pension obligations                         |   | $                                   | 3,000         |   | **$** | **-** |   |
| Accrued                  pension cost:                                        |   |                                |          |   |   |   |   |
| Current                                                                       |   |                                | (9,858        | ) |   | **-** |   |
| Noncurrent                                                                    |   |                                | (120,872      | ) |   | **(157,597** | **)** |
| Accumulated                  other comprehensive loss                         |   |                                |  120,692 |   |   | ** 147,904** |   |
|                                                                          |   |                                |          |   |   |   |   |
|                                                                          |   | $                                   | (7,038        | ) | **$** | **(9,693** | **)** |

----

|                                                        |   | **  Years                  ended December 31,  ** |   |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|
|                                                        |   | **2004**                                                              |   | **2005** |   | **2006** |   |
|                                                        |   | **(In                  thousands)**                                   |   |
|                                                        |   |                                                                  |   |   |   |   |   |   |   |   |
| Net                  periodic pension cost:                 |   |                                                                  |   |   |   |   |   |   |   |   |
| Service                  cost benefits                      |   | $                                                                     | 3,289  |   | $ | 3,742 |   | **$** | **3,139** |   |
|                      Interest cost on PBO    |   |                                                                  | 10,558 |   |   | 10,540 |   |   | **11,684** |   |
| Expected                  return on plan assets             |   |                                                                  | (9,448 | ) |   | (8,841 | ) |   | **(7,951** | **)** |
| Amortization                  of prior service cost         |   |                                                                  | 196    |   |   | 200 |   |   | **199** |   |
| Amortization                  of net transition obligations |   |                                                                  | 69     |   |   | - |   |   | **-** |   |
| Recognized                  actuarial losses                |   |                                                                  | 782    |   |   | 1,644 |   |   | **6,172** |   |
|                                                        |   |                                                                  |   |   |   |   |   |   |   |   |
|                                                        |   | $                                                                     | 5,446  |   | $ | 7,285 |   | **$** | **13,243** |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | **  December                  31, ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
| **                                                                        Rate                                                             ** | **2005**                                            |   | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                |   |   |
| Discount                  rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 4.0%                                                |   | 4.5% |
| Increase                  in future compensation levels                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 2.8%                                                |   | 3.0% |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** Years                  ended December 31, ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | **2004**                                                  | **2005** | **2006** |
| **                                                                        Rate                                                            ** |                                                      |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                      |   |   |
| Discount                  rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 5.3%                                                      | 5.0% | 4.0% |
| Increase                  in future compensation levels                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 2.8%                                                      | 2.8% | 2.8% |
| Long-term                  return on plan assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 6.5%                                                      | 6.0% | 5.5% |

|                                           |   |                                                 |                                |
|------------------------------------------------|--------|------------------------------------------------------|-------------------------------------|
| **Years                  ending December 31,** |   | **    Amount   ** |                                |
|                                                |   |                                                 | **(In                  thousands)** |   |
| 2007                                           |   | $                                                    | 13,486                              |   |
| 2008                                           |   |                                                 | 13,541                              |   |
| 2009                                           |   |                                                 | 11,827                              |   |
| 2010                                           |   |                                                 | 11,980                              |   |
| 2011                                           |   |                                                 | 12,064                              |   |
| 2012                  to 2016                  |   |                                                 | 62,614                              |   |

***New        accounting standard.***
*Employer’s        Accounting for Pensions, *
*Employers        Accounting for Postretirement Benefits other than Pensions, *

----

|                                                                                                         |   | **Before                    application****of                    SFAS****No.                    158** |    |    **Adjustments** |   | **After                    application of SFAS****No.                    158** |   |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|---------|-----------------------------------|--------|--------------------------------------------------------------------------------|--------|
|                                                                                                         |   | **(In                    thousands)**                                                                 |    |
|                                                                                                         |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Assets:                                                                                                      |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Current                    deferred income tax asset                                                         |   | $                                                                                                     | 3,046   |                              | $      | (3,046                                                                         | )      | $ | - |   |
| Total                    current assets                                                                      |   |                                                                                                  | 314,151 |                              |   | (3,046                                                                         | )      |   | 311,105 |   |
| Net                    pension asset                                                                         |   |                                                                                                  | 3,140   |                              |   | (3,140                                                                         | )      |   | - |   |
| Noncurrent                    deferred income tax asset                                                      |   |                                                                                                  | 32,482  |                              |   | 17,276                                                                         |   |   | 49,758 |   |
| Total                    other assets                                                                        |   |                                                                                                  | 42,697  |                              |   | 14,136                                                                         |   |   | 56,833 |   |
| Total                    assets                                                                              |   |                                                                                                  | 609,045 |                              |   | 11,090                                                                         |   |   | 620,135 |   |
|                                                                                                         |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Liabilities:                                                                                                 |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Current                    accrued pension costs                                                             |   |                                                                                                  | 11,590  |                              |   | (11,590                                                                        | )      |   | - |   |
| Current                    deferred income taxes                                                             |   |                                                                                                  | -       |                              |   | 1,508                                                                          |   |   | 1,508 |   |
| Total                    current liabilities                                                                 |   |                                                                                                  | 156,373 |                              |   | (10,082                                                                        | )      |   | 146,291 |   |
| Noncurrent                    accrued pension costs                                                          |   |                                                                                                  | 116,767 |                              |   | 40,830                                                                         |   |   | 157,597 |   |
| Total                    noncurrent liabilities                                                              |   |                                                                                                  | 127,123 |                              |   | 40,830                                                                         |   |   | 167,953 |   |
|                                                                                                         |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Owner’s                    equity:                                                                     |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Accumulated                    other comprehensive income                    - minimum pension liability     |   |                                                                                                  | (69,506 | )                                 |   | 69,506                                                                         |   |   | - |   |
| Accumulated                    other comprehensive income                    - defined benefit pension plans |   |                                                                                                  |    |                              |   | (89,164                                                                        | )      |   | (89,164 | ) |
| Total                    accumulated other comprehensive income                                              |   |                                                                                                  | 41,066  |                              |   | (19,658                                                                        | )      |   | 21,408 |   |
| Total                    stockholders’ equity                                                          |   |                                                                                                  | 325,549 |                              |   | (19,658                                                                        | )      |   | 305,891 |   |
| Total                    liabilities and stockholders’ equity                                          |   |                                                                                                  | 609,045 |                              |   | 11,090                                                                         |   |   | 620,135 |   |

**Note        9 - Other noncurrent liabilities:**

|                                      |   | **December                  31,**   |   |
|-------------------------------------------|--------|-------------------------------------|--------|
|                                      |   | **2005**                            |   | **2006** |   |
|                                      |   | **(In                  thousands)** |   |
|                                      |   |                                |   |   |   |   |   |
| Employee                  benefits        |   | $                                   | 3,842  |   | **$** | **4,149** |   |
| Insurance                  claims expense |   |                                | 1,124  |   |   | **1,319** |   |
| Other                                     |   |                                | 8,081  |   |   | **4,888** |   |
|                                      |   |                                |   |   |   |   |   |
|                                      |   | $                                   | 13,047 |   | **$** | **10,356** |   |
|                                      |   |                                |   |   |   |   |   |

**Note        10 - Related party transactions:**

|                                        |   | **December                  31,**   |   |
|---------------------------------------------|--------|-------------------------------------|--------|
|                                        |   | **2005**                            |   | **2006** |   |
|                                        |   | **(In                  thousands)** |   |
|                                        |   |                                |   |   |   |   |   |
| Receivable                  from:           |   |                                |   |   |   |   |   |
| KII                                         |   | $                                   | 32,833 |   | **$** | **27,621** |   |
| Other                  affiliates           |   |                                | 10,188 |   |   | **2,706** |   |
|                                        |   |                                |   |   |   |   |   |
|                                        |   | $                                   | 43,021 |   | **$** | **30,327** |   |
|                                        |   |                                |   |   |   |   |   |
| Current                  payable to:        |   |                                |   |   |   |   |   |
| KII                  - income taxes         |   | $                                   | 30,173 |   | **$** | **44,593** |   |
| TIA                                         |   |                                | 25,090 |   |   | **25,382** |   |
| Other                  affiliates           |   |                                | 20,184 |   |   | **17,231** |   |
|                                        |   |                                |   |   |   |   |   |
|                                        |   | $                                   | 75,447 |   | **$** | **87,206** |   |
|                                        |   |                                |   |   |   |   |   |
| Noncurrent                  payables to KDK |   | $                                   | 11,239 |   | **$** | **-** |   |

**Note        11 - NL common stock options held by our employees:**

**Note        12 - Commitments and contingencies:**

***Environmental,        product liability and litigation matters.***

***Concentrations        of credit risk***
**.**

***Operating        leases***
**.**

|  **Years                ending December 31,** |   | **Amount**                          |   |
|----------------------------------------------------|--------|-------------------------------------|--------|
|                                               |   | **(in                  thousands)** |   |
|                                               |   |                                |   |   |
| 2007                                               |   | $                                   | 2,528  |   |
| 2008                                               |   |                                | 1,979  |   |
| 2009                                               |   |                                | 1,821  |   |
| 2010                                               |   |                                | 1,500  |   |
| 2011                                               |   |                                | 1,105  |   |
| 2012                  and thereafter               |   |                                | 19,859 |   |
|                                               |   |                                |   |   |
|                                               |   | $                                   | 28,792 |   |

***Purchase        commitments***
*.        *

**Note        13 - Financial instruments:**

|                                       |   | **              December                  31,                                ** |   |
|--------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                       |   | **      2005       **                                                                                                                                      |   | **      2006       ** |   |
|                                       |   | **Carrying**                                                                                                                                                                                                                |   | **Fair** |   | **Carrying** |   | **Fair** |   |
|                                       |   | **amount**                                                                                                                                                                                                                  |   | **value** |   | **amount** |   | **value** |   |
|                                       |   | **(In                  millions)**                                                                                                                                                                                          |   |
|                                       |   |                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents |   | $                                                                                                                                                                                                                           | 50.8   |   | $ | 50.8 |   | $ | 43.8 |   | $ | 43.8 |   |
|                                       |   |                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Note                  payable to affiliate |   |                                                                                                                                                                                                                        | 11.2   |   |   | 11.2 |   |   | - |   |   | - |   |

**Note        14- Recent accounting pronouncements:**

***Variable        interest entities.***
*Consolidation        of Variable Interest Entities, an interpretation of ARB No. 51*

***Inventory        Costs***
** **
*Inventory        Costs, an amendment of ARB No. 43, Chapter 4,*

***Stock        options.***
* *
*Share-Based        Payment,*
*Accounting        for Stock Issued to Employees. *

***Planned        Major Maintenance Activities.***
** **

|                                                             |   | **Years                  ended December 31,**                 |   |
|------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                             |   | **2004**                                                      |   | **2005** |   |
|                                                             |   | **(In                  thousands, except per share amounts)** |   |
| Increase                  (decrease) in:                         |   |                                                          |   |   |   |   |   |
| Cost                  of sales (repairs and maintenance expense) |   | $                                                             | 68     |   | $ | (61 | ) |
| Provision                  (benefit) for income taxes            |   |                                                          | (27    | ) |   | 40 |   |
| Net                  income                                      |   |                                                          | (41    | ) |   | 21 |   |
|                                                             |   |                                                          |   |   |   |   |   |
| Other                  comprehensive income - foreign currency   |   |                                                          | 66     |   |   | (92 | ) |
| Total                  comprehensive income                      |   |                                                          | 25     |   |   | (71 | ) |

|                                                                                 |   | **December                  31, 2005** |   |
|--------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                 |   | **(In                  thousands)**    |   |
|                                                                                 |   |                                   |   |   |
| Decrease                  in accrued maintenance costs                               |   | $                                      | 1,190  |   |
| Increase                  in current deferred income tax                             |   |                                   | 453    |   |
| Increase                  in retained earnings                                       |   |                                   | 479    |   |
| Increase                  in accumulated other comprehensive loss - foreign currency |   |                                   | 258    |   |
| Increase                  in total owner’s equity                              |   |                                   | 737    |   |

**Pension        and OPEB plans**

*              *
***Quantifying        Financial Statement Misstatements***

***Fair        Value Measurements.***
** **
*Fair        Value Measurements*

***Uncertain        Tax Positions.***
**         **
*Accounting        for Uncertain Tax Positions, *
*Accounting        for Income Taxes, *
*.*
~~s~~

***Fair        Value Option.***

----

| **KRONOS                    DENMARK APS AND SUBSIDIARIES**                                  |
|---------------------------------------------------------------------------------------------|
|                                                                                        |
| **Index                    of Consolidated Financial Statements**                           |
|                                                                                        |   |
|                                                                                        |   |
| **Financial                    Statements**                                                 |   |
|                                                                                        |   |
| Report                    of Independent Registered Public Accounting Firm                  | FB-2 |
|                                                                                        |   |
| Consolidated                    Balance Sheets -                                            | FB-3 |
| December                    31, 2005 (As adjusted); andDecember                    31, 2006 |   |
|                                                                                        |   |
| Consolidated                    Statements of Income -                                      |   |
| Years                    ended December 31, 2004 and 2005 (As adjusted); and                |   |
| Year                    ended December 31, 2006                                             | FB-5 |
|                                                                                        |   |
| Consolidated                    Statements of Comprehensive Income -                        |   |
| Years                    ended December 31, 2004 and 2005 (As adjusted); and                |   |
| Year                    ended December 31, 2006                                             | FB-6 |
|                                                                                        |   |
| Consolidated                    Statements of Stockholder’s Equity -                  |   |
| Years                    ended December 31, 2004 and 2005 (As adjusted); and                |   |
| Year                    ended December 31, 2006                                             | FB-7 |
|                                                                                        |   |
| Consolidated                    Statements of Cash Flows -                                  |   |
| Years                    ended December 31, 2004 and 2005 (As adjusted); and                |   |
| Year                    ended December 31, 2006                                             | FB-8 |
|                                                                                        |   |
| Notes                    to Consolidated Financial Statements                               | FB-10 |

----

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        BALANCE SHEETS**

**December        31, 2005 and 2006**

**(In        thousands, except share data)**

| **ASSETS**                                                      |   | **2005** |    | **2006** |   |
|-----------------------------------------------------------------|--------|----------|---------|----------|--------|
|                                                            |   |     |    |     |   |
| Current                  assets:                                |   |     |    |     |   |   |   |
| Cash                  and cash equivalents                      |   | $        | 1,042   |     | **$**  | **3,544** |   |
| Restricted                  cash                                |   |     | 1,355   |     |   | **1,480** |   |
| Accounts                  and notes receivable                  |   |     | 17,319  |     |   | **20,093** |   |
| Receivable                  from affiliates                     |   |     | 27,493  |     |   | **39,670** |   |
| Refundable                  income taxes                        |   |     | 205     |     |   | **-** |   |
| Inventories                                                     |   |     | 69,506  |     |   | **74,960** |   |
| Prepaid                  expenses                               |   |     | 900     |     |   | **1,641** |   |
|                                                            |   |     |    |     |   |   |   |
| Total                  current assets                           |   |     | 117,820 |     |   | **141,388** |   |
|                                                            |   |     |    |     |   |   |   |
|                                                            |   |     |    |     |   |   |   |
| Other                  assets:                                  |   |     |    |     |   |   |   |
| Note                  receivable from affiliate                 |   |     | 11,239  |     |   | **-** |   |
| Other                                                           |   |     | 6,153   |     |   | **3,145** |   |
|                                                            |   |     |    |     |   |   |   |
| Total                  other assets                             |   |     | 17,392  |     |   | **3,145** |   |
|                                                            |   |     |    |     |   |   |   |
|                                                            |   |     |    |     |   |   |   |
| Property                  and equipment:                        |   |     |    |     |   |   |   |
| Land                                                            |   |     | 16,829  |     |   | **18,880** |   |
| Buildings                                                       |   |     | 36,995  |     |   | **41,613** |   |
| Machinery                  and equipment                        |   |     | 176,849 |     |   | **201,699** |   |
| Mining                  properties                              |   |     | 68,163  |     |   | **82,140** |   |
| Construction                  in progress                       |   |     | 1,964   |     |   | **7,796** |   |
|                                                            |   |     |    |     |   |   |   |
|                                                            |   |     | 300,800 |     |   | **352,128** |   |
| Less                  accumulated depreciation and amortization |   |     | 188,090 |     |   | **219,296** |   |
|                                                            |   |     |    |     |   |   |   |
| Net                  property and equipment                     |   |     | 112,710 |     |   | **132,832** |   |
|                                                            |   |     |    |     |   |   |   |
|                                                            |   | $        | 247,922 |     | **$**  | **277,365** |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        BALANCE SHEETS (CONTINUED)**

**December        31, **
**2005        and 2006**

**(In        thousands, except share data)**

| **LIABILITIES                  AND STOCKHOLDER’S EQUITY**                                                                                               |   | **2005**                           |    | **2006** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|----------|--------|
|                                                                                                                                                          |   | **(As                  adjusted)** |    |     |   |
|                                                                                                                                                          |   |                               |    |     |   |
| Current                  liabilities:                                                                                                                         |   |                               |    |     |   |   |   |
| Current                  maturities of long-term debt                                                                                                         |   | $                                  | 958     |     | **$**  | **912** |   |
| Accounts                  payable and accrued liabilities                                                                                                     |   |                               | 37,221  |     |   | **38,641** |   |
| Payable                  to affiliates                                                                                                                        |   |                               | 9,058   |     |   | **10,649** |   |
| Income                  taxes                                                                                                                                 |   |                               | 6,564   |     |   | **10,009** |   |
| Deferred                  income taxes                                                                                                                        |   |                               | 2,596   |     |   | **1,615** |   |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
| Total                  current liabilities                                                                                                                    |   |                               | 56,397  |     |   | **61,826** |   |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
| Noncurrent                  liabilities:                                                                                                                      |   |                               |    |     |   |   |   |
| Long-term                  debt                                                                                                                               |   |                               | 3,567   |     |   | **3,883** |   |
| Deferred                  income taxes                                                                                                                        |   |                               | 19,266  |     |   | **14,448** |   |
| Accrued                  pension costs                                                                                                                        |   |                               | 4,129   |     |   | **14,615** |   |
| Other                                                                                                                                                         |   |                               | 1,362   |     |   | **3,148** |   |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
| Total                  noncurrent liabilities                                                                                                                 |   |                               | 28,324  |     |   | **36,094** |   |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
| Stockholder's                  equity:                                                                                                                        |   |                               |    |     |   |   |   |
| Common                  stock - 100 Danish kroner par value; 10,000 shares authorized;                  10,000                  shares issued and outstanding |   |                               | 136     |     |   | **136** |   |
| Additional                  paid-in capital                                                                                                                   |   |                               | 216,996 |     |   | **216,996** |   |
| Accumulated                  deficit                                                                                                                          |   |                               | (33,462 | )        |   | **(26,686** | **)** |
| Accumulated                  other comprehensive loss:                                                                                                        |   |                               |    |     |   |   |   |
| Currency                  translation                                                                                                                         |   |                               | (10,555 | )        |   | **8,243** |   |
| Defined                  benefit pension plans                                                                                                                |   |                               | (9,914  | )        |   | **(19,244** | **)** |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
| Total                  stockholder's equity                                                                                                                   |   |                               | 163,201 |     |   | **179,445** |   |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
|                                                                                                                                                          |   | $                                  | 247,922 |     | **$**  | **277,365** |   |
|                                                                                                                                                          |   |                               |    |     |   |   |   |
| Commitments                  and contingencies (Notes 7, 8 and 12)                                                                                            |   |                               |    |     |   |   |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF INCOME**

**Years        ended December 31, 2004, 2005 and 2006**

**(In        thousands)**

|                                                         |   | **2004**                           |    | **2005** |   | **2006** |   |
|--------------------------------------------------------------|--------|------------------------------------|---------|----------|--------|----------|--------|
|                                                         |   | **(As                  adjusted)** |    |     |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Net                  sales                                   |   | $                                  | 345,962 |     | $      | 364,865  |   | **$** | **384,382** |   |
| Cost                  of sales                               |   |                               | 285,471 |     |   | 290,391  |   |   | **312,173** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Gross                  margin                                |   |                               | 60,491  |     |   | 74,474   |   |   | **72,209** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Selling,                  general and administrative expense |   |                               | 23,874  |     |   | 24,868   |   |   | **25,464** |   |
| Other                  operating income (expense):           |   |                               |    |     |   |     |   |   |   |   |
| Currency                  transaction gains (losses), net    |   |                               | 980     |     |   | 173      |   |   | **(399** | **)** |
| Disposition                  of property and equipment       |   |                               | (596    | )        |   | (220     | )      |   | **(322** | **)** |
| Other,                  net                                  |   |                               | 286     |     |   | 489      |   |   | **285** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Income                  from operations                      |   |                               | 37,287  |     |   | 50,048   |   |   | **46,309** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Other                  income (expense):                     |   |                               |    |     |   |          |   |   |   |   |
| Trade                  interest income                       |   |                               | 73      |     |   | 88       |   |   | **109** |   |
| Securities                  transaction gain                 |   |                               | -       |     |   | 5,439    |   |   | **-** |   |
| Other                  income from affiliates                |   |                               | 202     |     |   | 387      |   |   | **927** |   |
| Interest                  and other expense to affiliates    |   |                               | (2,943  | )        |   | (2,572   | )      |   | **(2,519** | **)** |
| Interest                  expense                            |   |                               | (1,529  | )        |   | (1,142   | )      |   | **(925** | **)** |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Income                  before income taxes                  |   |                               | 33,090  |     |   | 52,248   |   |   | **43,901** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Provision                  for income taxes                  |   |                               | 9,661   |     |   | 16,373   |   |   | **10,174** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |
| Net                  income                                  |   | $                                  | 23,429  |     | $      | 35,875   |   | **$** | **33,727** |   |
|                                                         |   |                               |    |     |   |     |   |   |   |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF COMPREHENSIVE INCOME**

**Years        ended December 31, 2004, 2005 and 2006**

**(In        thousands)**

|                                                            |   | **2004**                           |   | **2005** |   | **2006** |   |
|-----------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                            |   | **(As                  adjusted)** |   |     |   |
|                                                            |   |                               |   |     |   |     |   |   |   |   |
| Net                  income                                     |   | $                                  | 23,429 |     | $      | 35,875   |   | **$** | **33,727** |   |
|                                                            |   |                               |   |     |   |     |   |   |   |   |
| Other                  comprehensive income (loss), net of tax: |   |                               |   |     |   |     |   |   |   |   |
| Currency                  translation                           |   |                               | 13,921 |     |   | (20,349  | )      |   | **18,798** |   |
| Defined                  benefit pension plans                  |   |                               | 1,188  |     |   | (643     | )      |   | **5,135** |   |
|                                                            |   |                               |   |     |   |     |   |   |   |   |
| Total                  other comprehensive income               |   |                               | 15,109 |     |   | (20,992  | )      |   | **23,933** |   |
|                                                            |   |                               |   |     |   |     |   |   |   |   |
| Comprehensive                  income                           |   | $                                  | 38,538 |     | $      | 14,883   |   | **$** | **57,660** |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF STOCKHOLDER'S EQUITY**

**Years        ended December 31, 2004, 2005 and 2006**

**(In        thousands)**

|                                                     |   |       |   |           |   |                               |   | **Accumulated                  other**           |    |                  |   |
|----------------------------------------------------------|--------|------------|--------|----------------|--------|------------------------------------|--------|--------------------------------------------------|---------|-----------------------|--------|
|                                                     |   |       |   |           |   |                               |   | **comprehensive                  income (loss)** |    |                  |   |
|                                                     |   |       |   | **Additional** |   |                               |   |                                             |    |                  |   |   |   |
|                                                     |   | **Common** |   | **paid-in**    |   | **Accumulated**                    |   | **Currency**                                     |    | **Pension**           |   |   |   |
|                                                     |   | **stock**  |   | **capital**    |   | **deficit**                        |   | **translation**                                  |    | ** plans ** |   | **Total** |   |
|                                                     |   |       |   |           |   | **(As                  adjusted)** |   | **(As                  adjusted)**               |    |                  |   | **(As                  adjusted)** |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2003:           |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| As                  previously reported                  |   | $          | 136    |           | $      | 216,996                            |   | $                                                | (93,459 | )                     | $      | (4,204 | ) | $ | (10,459 | ) | $ | 109,010 |   |
| Change                  in accounting principle          |   |       | -      |           |   | -                                  |   |                                             | 693     |                  |   | 77 |   |   | - |   |   | 770 |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                  as adjusted                     |   |       | 136    |           |   | 216,996                            |   |                                             | (92,766 | )                     |   | (4,127 | ) |   | (10,459 | ) |   | 109,780 |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Net                  income*                             |   |       | -      |           |   | -                                  |   |                                             | 23,429  |                  |   | - |   |   | - |   |   | 23,429 |   |
| Other                  comprehensive income, net of tax* |   |       | -      |           |   | -                                  |   |                                             | -       |                  |   | 13,921 |   |   | 1,188 |   |   | 15,109 |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2004*           |   |       | 136    |           |   | 216,996                            |   |                                             | (69,337 | )                     |   | 9,794 |   |   | (9,271 | ) |   | 148,318 |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Net                  income*                             |   |       | -      |           |   | -                                  |   |                                             | 35,875  |                  |   | - |   |   | - |   |   | 35,875 |   |
| Other                  comprehensive income, net of tax* |   |       | -      |           |   | -                                  |   |                                             | -       |                  |   | (20,349 | ) |   | (643 | ) |   | (20,992 | ) |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005*           |   |       | 136    |           |   | 216,996                            |   |                                             | (33,462 | )                     |   | (10,555 | ) |   | (9,914 | ) |   | 163,201 |   |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Net                  income                              |   |       | -      |           |   | -                                  |   |                                             | 33,727  |                  |   | - |   |   | - |   |   | 33,727 |   |
| Other                  comprehensive income, net of tax  |   |       | -      |           |   | -                                  |   |                                             | -       |                  |   | 18,798 |   |   | 5,135 |   |   | 23,933 |   |
| Dividends                                                |   |       | -      |           |   | -                                  |   |                                             | (26,951 | )                     |   | - |   |   | - |   |   | (26,951 | ) |
| Adoption                  of SFAS No. 158                |   |       | -      |           |   | -                                  |   |                                             | -       |                  |   | - |   |   | (14,465 | ) |   | (14,465 | ) |
|                                                     |   |       |   |           |   |                               |   |                                             |    |                  |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2006            |   | $          | 136    |           | $      | 216,996                            |   | $                                                | (26,686 | )                     | $      | 8,243 |   | $ | (19,244 | ) | $ | 179,445 |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

**Years        ended December 31, 2004, 2005 and 2006**

**(In        thousands)**

|                                                                                                                                                                         |   | **2004**                                 |    | **2005** |   | **2006** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|----------|--------|----------|--------|
|                                                                                                                                                                         |   | **(As                        adjusted)** |    |     |   |
|                                                                                                                                                                         |   |                                     |    |     |   |     |   |
| Cash                        flows from operating activities:                                                                                                                 |   |                                     |    |     |   |     |   |   |   |   |
| Net                        income                                                                                                                                            |   | $                                        | 23,429  |     | $      | 35,875   |   | **$** | **33,727** |   |
| Depreciation                        and amortization                                                                                                                         |   |                                     | 12,041  |     |   | 13,379   |   |   | **14,188** |   |
| Noncash                        interest expense                                                                                                                              |   |                                     | 358     |     |   | 302      |   |   | **169** |   |
| Deferred                        income taxes                                                                                                                                 |   |                                     | (3,165  | )        |   | (29      | )      |   | **(4,556** | **)** |
| Securities                        transaction gain                                                                                                                           |   |                                     | -       |     |   | (5,439   | )      |   | **-** |   |
| Net                        loss (gain) from disposition of property and equipment                                                                                            |   |                                     | 596     |     |   | 220      |   |   | **322** |   |
| Pension,                        net                                                                                                                                          |   |                                     | 4,372   |     |   | 1,469    |   |   | **1,280** |   |
| Change                        in assets and liabilities:                                                                                                                     |   |                                     |    |     |   |          |   |   |   |   |
| Accounts                        and notes receivable                                                                                                                         |   |                                     | (967    | )        |   | (1,727   | )      |   | **(378** | **)** |
| Inventories                                                                                                                                                                  |   |                                     | 6,500   |     |   | (12,685  | )      |   | **1,903** |   |
| Prepaid                        expenses                                                                                                                                      |   |                                     | 17      |     |   | (104     | )      |   | **(886** | **)** |
| Accounts                        payable and accrued liabilities                                                                                                              |   |                                     | 3,699   |     |   | 4,640    |   |   | **(1,056** | **)** |
| Income                        taxes                                                                                                                                          |   |                                     | (453    | )        |   | 2,379    |   |   | **932** |   |
| Accounts                        with affiliates                                                                                                                              |   |                                     | (37,220 | )        |   | (13,683  | )      |   | **(6,675** | **)** |
| Other                        noncurrent assets                                                                                                                               |   |                                     | 2,257   |     |   | (552     | )      |   | **14** |   |
| Other                        noncurrent liabilities                                                                                                                          |   |                                     | (1,420  | )        |   | (1,936   | )      |   | **2,457** |   |
|                                                                                                                                                                         |   |                                     |    |     |   |     |   |   |   |   |
| Net                        cash provided by operating activities                                                                                                             |   |                                     | 10,044  |     |   | 22,109   |   |   | **41,441** |   |
|                                                                                                                                                                         |   |                                     |    |     |   |     |   |   |   |   |
| Cash                        flows from investing activities:                                                                                                                 |   |                                     |    |     |   |     |   |   |   |   |
| Capital                        expenditures                                                                                                                                  |   |                                     | (11,725 | )        |   | (15,044  | )      |   | **(22,852** | **)** |
| Loans                        to affiliates                                                                                                                                   |   |                                     | (11,597 | )        |   | -        |   |   |   |   |
|                            Proceeds from disposal of interest in Norwegian smelting                        operation                                          |   |                                     | -       |     |   | 3,542    |   |   | **-** |   |
|                            Change in restricted cash equivalents and restricted marketable                        debt                        securities, net |   |                                     | (70     | )        |   | 129      |   |   | **(33** | **)** |
|                            Proceeds from disposition of property and equipment                                                                                |   |                                     | 100     |     |   | 29       |   |   | **30** |   |
|                                                                                                                                                                         |   |                                     |    |     |   |     |   |   |   |   |
| Net                        cash used by investing activities                                                                                                                 |   |                                     | (23,292 | )        |   | (11,344  | )      |   | **(22,855** | **)** |
|                                                                                                                                                                         |   |                                     |    |     |   |     |   |   |   |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS (CONTINUED)**

**Years        ended December 31, 2003, 2004 and 2005**

**(In        thousands)**

|                                                                                                                                                                                 |   | **2004** |    | **2005** |   | **2006**    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|-------------|--------|
|                                                                                                                                                                                 |   |     |    |     |   |        |   |
|                                                                                                                                                                                 |   |     |    |     |   |        |   |   |   |   |
| Cash                  flows from financing activities:                                                                                                                               |   |     |    |     |   |        |   |   |   |   |
| Indebtedness:                                                                                                                                                                        |   |     |    |     |   |        |   |   |   |   |
| Borrowings                                                                                                                                                                           |   | $        | 62,140  |     | **$**  | **4,620**   |   | **$** | **-** |   |
| Principal                  payments                                                                                                                                                  |   |     | (50,089 | )        |   | **(13,159** | **)**  |   | **(150** | **)** |
| Dividends                  paid                                                                                                                                                      |   |     | -       |     |   | **-**       |   |   | **(26,951** | **)** |
| Loans                  to affiliates - repayments                                                                                                                                    |   |     | -       |     |   | **-**       |   |   | **10,919** |   |
| Loans                  from affiliates - repayments                                                                                                                                  |   |     | -       |     |   | **(4,648**  | **)**  |   | **-** |   |
|                                                                                                                                                                                 |   |     |    |     |   |        |   |   |   |   |
|                                      Net cash provided (used) by financing activities |   |     | 12,051  |     |   | **(13,187** | **)**  |   | **(16,182** | **)** |
|                                                                                                                                                                                 |   |     |    |     |   |        |   |   |   |   |
| Cash                  and cash equivalents:                                                                                                                                          |   |     |    |     |   |        |   |   |   |   |
| Net                  change during the year from:                                                                                                                                    |   |     |    |     |   |        |   |   |   |   |
| Operating,                  investing and financing activities                                                                                                                       |   |     | (1,197  | )        |   | **(2,422**  | **)**  |   | **2,404** |   |
| Currency                  translation                                                                                                                                                |   |     | 82      |     |   | **(102**    | **)**  |   | **98** |   |
| Balance                  at beginning of period                                                                                                                                      |   |     | 4,681   |     |   | **3,566**   |   |   | **1,042** |   |
|                                                                                                                                                                                 |   |     |    |     |   |        |   |   |   |   |
| Balance                  at end of period                                                                                                                                            |   | $        | 3,566   |     | **$**  | **1,042**   |   | **$** | **3,544** |   |
|                                                                                                                                                                                 |   |     |    |     |   |        |   |   |   |   |
| Supplemental                  disclosures:                                                                                                                                           |   |     |    |     |   |        |   |   |   |   |
| Cash                  paid for:                                                                                                                                                      |   |     |         |     |   |             |   |   |  |   |
| Interest                                                                                                                                                                             |   | $        | 4,198   |     | **$**  | **446**     |   | **$** | **380** |   |
| Income                  taxes                                                                                                                                                        |   |     | 13,331  |     |   | **13,885**  |   |   | **11,762** |   |
|                                                                                                                                                                                 |   |     |    |     |   |        |   |   |   |   |
| Inventories                  received as partial consideration for disposal of interest in Norwegian                  smelting operation                                             |   | $        | -       |     | **$**  | **1,897**   |   | **$** | **-** |   |

----

**KRONOS        DENMARK **
**APS**
**        AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note        1 - Organization and basis of presentation:**

**Note        2 - Summary of significant accounting policies:**

***Management’s        estimates.***
* *

***Principles        of consolidation.***
* *

***Translation        of foreign currencies.***
* *

**Derivatives        and hedging activities.**
* *
*“Accounting        for Derivative Instruments and Hedging Activities,”*
* *

***Cash        and cash equivalents***
**.**

***Restricted        marketable debt securities.***
* *

***Accounts        receivable***
**.**

***Property        and equipment and depreciation***
**.        **

*Accounting        for the Impairment or Disposal of Long-Lived Assets.*

***Long-term        debt***
**.**

***Employee        benefit plans.***

***Income        taxes***
**.**

***Net        sales.***

***Inventories        and cost of sales***
**.**

***Selling,        general and administrative expenses; shipping and handling        costs.***
* *

**Note        3 - Accounts and notes receivable:**

|                                                   |   | **December                  31,**   |      |
|--------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                   |   | **2005**                            |      | **2006** |   |
|                                                   |   | **(In                  thousands)** |      |
|                                                   |   |                                |      |   |   |   |   |
| Trade                  receivables                     |   | $                                   | 13,992    |   | **$** | **16,063** |   |
| Recoverable                  VAT and other receivables |   |                                | 3,349     |   |   | **4,054** |   |
| Allowance                  for doubtful accounts       |   |                                |  (22 | ) |   | ** (24** | **)** |
|                                                   |   |                                |      |   |   |   |   |
|                                                   |   | $                                   | 17,319    |   | **$** | **20,093** |   |

----

**Note        4 - Inventories:**

|                               |   | **December                  31,**   |   |
|------------------------------------|--------|-------------------------------------|--------|
|                               |   | **2005**                            |   | **2006** |   |
|                               |   | **(In                  thousands)** |   |
|                               |   |                                |   |   |   |   |   |
| Raw                  materials     |   | $                                   | 21,359 |   | **$** | **19,019** |   |
| Work                  in process   |   |                                | 1,771  |   |   | **2,581** |   |
| Finished                  products |   |                                | 30,659 |   |   | **33,806** |   |
| Supplies                           |   |                                | 15,717 |   |   | **19,554** |   |
|                               |   |                                |   |   |   |   |   |
|                               |   | $                                   | 69,506 |   | **$** | **74,960** |   |

**Note        5 - Other noncurrent assets:**

|                                                   |   | **December                  31,**   |   |
|--------------------------------------------------------|--------|-------------------------------------|--------|
|                                                   |   | **2005**                            |   | **2006** |   |
|                                                   |   | **(In                  thousands)** |   |
|                                                   |   |                                |   |   |   |   |   |
| Unrecognized                  net pension obligations  |   | $                                   | 3,108  |   | **$** | **-** |   |
| Restricted                  marketable debt securities |   |                                | 2,572  |   |   | **2,814** |   |
| Deferred                  financing costs, net         |   |                                | 400    |   |   | **266** |   |
| Other                                                  |   |                                | 73     |   |   | **65** |   |
|                                                   |   |                                |   |   |   |   |   |
|                                                   |   | $                                   | 6,153  |   | **$** | **3,145** |   |

**Note        6 - Accounts payable and accrued liabilities:**

|                                  |   | **December                  31,**   |   |
|---------------------------------------|--------|-------------------------------------|--------|
|                                  |   | **2005**                            |   | **2006** |   |
|                                  |   | **(As                  adjusted)**  |   |   |   |
|                                  |   | **(In                  thousands)** |   |
|                                  |   |                                |   |   |   |   |   |
| Accounts                  payable     |   | $                                   | 20,048 |   | **$** | **23,447** |   |
| Accrued                  liabilities: |   |                                |        |   |   |   |   |
| Employee                  benefits    |   |                                | 9,664  |   |   | **8,982** |   |
| Other                                 |   |                                | 7,509  |   |   | **6,212** |   |
|                                  |   |                                |   |   |   |   |   |
|                                  |   | $                                   | 37,221 |   | **$** | **38,641** |   |

**Note        7 - Notes payable and long-term debt:**

|                                          |   | **December                  31,**   |      |
|-----------------------------------------------|--------|-------------------------------------|-----------|
|                                          |   | **2005**                            |      | **2006** |   |
|                                          |   | **(In                  thousands)** |      |
|                                          |   |                                |      |   |   |   |   |
| Long-term                  debt - other  |   | $                                   | 4,525     |   | $ | **4,795** |   |
| Less                  current maturities      |   |                                |  958 |   |   | **912** |   |
|                                          |   |                                |      |   |   |   |   |
|                                          |   | $                                   | 3,567     |   | **$** | **3,883** |   |

*Credit        Facility - *

*Senior        Secured Notes*

| Years                  ending December 31, |   | **   Amount   ** |   |
|--------------------------------------------|--------|------------------------------------------------|--------|
|                                       |   | **(In                  thousands)**            |   |
|                                       |   |                                           |   |   |
| 2007                                       |   | $                                              | 912    |   |
| 2008                                       |   |                                           | 923    |   |
| 2009                                       |   |                                           | 954    |   |
| 2010                                       |   |                                           | 986    |   |
| 2011                                       |   |                                           | 1,020  |   |
|                                       |   |                                           |   |   |
|                                       |   | $                                              | 4,795  |   |

----

**Note        8 - Income taxes:**

|                                                                                             |   | **Years                  ended December 31,** |   |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                             |   | **2004**                                      |   | **2005** |   | **2006** |   |
|                                                                                             |   | **(As                  adjusted)**            |   |   |   |
|                                                                                             |   | **(In                  thousands)**           |   |
| Pretax                  income (loss):                                                           |   |                                          |   |   |   |   |   |   |   |   |
| Denmark                                                                                          |   | $                                             | (101   | ) | $ | 526 |   | **$** | **634** |   |
| Non-Denmark                                                                                      |   |                                          | 33,191 |   |   | 51,722 |   |   | **43,267** |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                             |   | $                                             | 33,090 |   | $ | 52,248 |   | **$** | **43,901** |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
| Expected                  tax expense                                                            |   | $                                             | 9,927  |   | $ | 14,629 |   | **$** | **12,293** |   |
| Non-Denmark                  tax rates                                                           |   |                                          | 517    |   |   | 1,405 |   |   | **889** |   |
| Non                  deductible expenses                                                         |   |                                          | -      |   |   | 281 |   |   | **290** |   |
| Tax                  contingency reserve adjustment                                              |   |                                          | (125   | ) |   | (653 | ) |   | **(2,446** | **)** |
| Other,                  net                                                                      |   |                                          | (658   | ) |   | 711 |   |   | **(852** | **)** |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
| Income                  tax expense                                                              |   | $                                             | 9,661  |   | $ | 16,373 |   | **$** | **10,174** |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
| Provision                  for income taxes:                                                     |   |                                          |   |   |   |   |   |   |   |   |
| Current                  income tax expense:                                                     |   |                                          |   |   |   |   |   |   |   |   |
| Denmark                                                                                          |   | $                                             | 2      |   | $ | 224 |   | **$** | **176** |   |
| Non-Denmark                                                                                      |   |                                          | 12,824 |   |   | 16,178 |   |   | **14,554** |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                          | 12,826 |   |   | 16,402 |   |   | **14,730** |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
| Deferred                  income tax expense (benefit):                                          |   |                                          |   |   |   |  |   |   |  |   |
| Denmark                                                                                          |   |                                          | (139   | ) |   | (644 | ) |   | **(2,454** | **)** |
| Non-Denmark                                                                                      |   |                                          | (3,026 | ) |   | 615 |   |   | **(2,102** | **)** |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                          | (3,165 | ) |   | (29 | ) |   | **(4,556** | **)** |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                             |   | $                                             | 9,661  |   | $ | 16,373 |   | **$** | **10,174** |   |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
| Comprehensive                  provision for income taxes allocable to:                          |   |                                          |   |   |   |   |   |   |   |   |
| Pretax                  income                                                                   |   | $                                             | 9,661  |   | $ | 16,373 |   | **$** | **10,174** |   |
| Other                  comprehensive loss - Defined                  benefit pension liabilities |   |                                          | 5      |   |   | 180 |   |   | **2,564** |   |
| Adoption                  of SFAS No. 158                                                        |   |                                          | -      |   |   | - |   |   | **(5,898** | **)** |
|                                                                                             |   |                                          |   |   |   |   |   |   |   |   |
|                                                                                             |   | $                                             | 9,666  |   | $ | 16,553 |   | **$** | **6,840** |   |

----

|                                                                       |   | **December                  31, ** |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                       |   | **2005**                                |   | **2006** |   |
|                                                                       |   | **Assets**                              |   | **Liabilities** |   | **Assets** |   | **Liabilities** |   |
|                                                                       |   | **(As                  adjusted)**      |   |   |   |   |   |
|                                                                       |   | **(In                  thousands)**     |   |
|                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Tax                  effect of temporary differences relating to:          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Inventories                                                                |   | $                                       | 72     |   | $ | (2,067 | ) | **$** | **42** |   | **$** | **(1,766** | **)** |
| Property                  and equipment                                    |   |                                    | -      |   |   | (18,199 | ) |   | **-** |   |   | **(19,238** | **)** |
| Pension                  asset                                             |   |                                    | -      |   |   | (3,659 | ) |   | **-** |   |   | **(1,903** | **)** |
| Accrued                  pension cost                                      |   |                                    | 3,883  |   |   | - |   |   | **5,844** |   |   | **-** |   |
| Accrued                  liabilities and other deductible differences      |   |                                    | 1,420  |   |   | - |   |   | **1,682** |   |   | **-** |   |
| Other                  taxable differences                                 |   |                                    | -      |   |   | (3,312 | ) |   | **-** |   |   | **(724** | **)** |
|                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Gross                  deferred tax assets (liabilities)                   |   |                                    | 5,375  |   |   | (27,237 | ) |   | **7,568** |   |   | **(23,631** | **)** |
|                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification,                  principally netting by tax jurisdiction |   |                                    | (5,375 | ) |   | 5,375 |   |   | **(7,568** | **)** |   | **7,568** |   |
|                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net                  total deferred tax liabilities                        |   |                                    | -      |   |   | (21,862 | ) |   | **-** |   |   | **(16,063** | **)** |
| Net                  current deferred tax liabilities                      |   |                                    | -      |   |   | (2,596 | ) |   | **-** |   |   | **(1,615** | **)** |
|                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net                  noncurrent deferred tax liabilities                   |   | $                                       | -      |   | $ | (19,266 | ) | **$** | **-** |   | **$** | **(14,448** | **)** |
|                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                                                                                                                                                                                          |   | **       December                  31,      ** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                          |   | ** 2004 **                                                                                            |   | ** 2005 ** |   | ** 2006 ** |   |
|                                                                                                                                                                                                                                                          |   | **(In                  thousands)**                                                                             |   |
|                                                                                                                                                                                                                                                          |   |                                                                                                            |   |   |   |   |   |   |   |   |
| Balance                  at beginning of year                                                                                                                                                                                                                 |   | $                                                                                                               | 683    |   | $ | - |   | **$** | **-** |   |
| Increase                  in certain deductible temporary differences which we believe do                  not meet                  the “more-likely-than-not” recognition criteria                                                              |   |                                                                                                            | -      |   |   | - |   |   | **-** |   |
| Foreign                  currency translation                                                                                                                                                                                                                 |   |                                                                                                            | -      |   |   | - |   |   | **-** |   |
| Offset                  to the change in gross deferred income tax assets due principally                  to                  redeterminations of certain tax attributes and implementation of                  certain                  planning strategies |   |                                                                                                            | (683   | ) |   | - |   |   | **-** |   |
|                                                                                                                                                                                                                                                          |   |                                                                                                            |   |   |   |   |   |   |   |   |
| Balance                  at end of year                                                                                                                                                                                                                       |   | $                                                                                                               | -      |   | $ | - |   | **$** | **-** |   |

| ·   | We                  previously received a preliminary tax assessment related to 1993                  from the                  Belgian tax authorities proposing tax deficiencies, including related                  interest, of approximately euro 6 million. The Belgian tax authorities                  filed a lien on the fixed assets of our Belgian TiO2                  operations in connection with their assessment. This lien did not                  interfere with on-going operations at the facility. We filed a                  protest to                  this assessment, and in July 2006 the Belgian tax authorities withdrew                  the                  assessment. The lien was subsequently released. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                  Norwegian tax authorities previously notified us of their intent                  to assess                  tax deficiencies of approximately kroner 12 million relating to                  the years                  1998 through 2000. We objected to this proposed assessment, and                  in May                  2006 the Norwegian tax authorities withdrew the                  assessment. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note        9 - Employee benefit plans:**

|                                                                          |   | **December                  31,**   |    |
|-------------------------------------------------------------------------------|--------|-------------------------------------|---------|
|                                                                          |   | **2005**                            |    | **2006** |   |
|                                                                          |   | **(In                  thousands)** |    |
|                                                                          |   |                                |    |   |   |   |   |
| Change                  in projected benefit obligations (“PBO”): |   |                                |    |   |   |   |   |
| Benefit                  obligations at beginning of year                     |   | $                                   | 72,361  |   | **$** | **69,776** |   |
| Service                  cost                                                 |   |                                | 2,133   |   |   | **2,343** |   |
| Interest                  cost                                                |   |                                | 3,345   |   |   | **3,177** |   |
| Participant                  contributions                                    |   |                                | 149     |   |   | **139** |   |
| Actuarial                  gains (losses)                                     |   |                                | 2,933   |   |   | **(4,196** | **)** |
| Change                  in currency exchange rates                            |   |                                | (8,259  | ) |   | **6,753** |   |
| Benefits                  paid                                                |   |                                | (2,886  | ) |   | **(3,206** | **)** |
|                                                                          |   |                                |    |   |   |   |   |
| Benefit                  obligations at end of year                           |   | $                                   | 69,776  |   | **$** | **74,786** |   |
|                                                                          |   |                                |    |   |   |   |   |
| Change                  in fair value of plan assets:                         |   |                                |    |   |   |   |   |
| Fair                  value of plan assets at beginning of year               |   | $                                   | 57,754  |   | **$** | **52,822** |   |
| Actual                  return on plan assets                                 |   |                                | 2,203   |   |   | **1,398** |   |
| Employer                  contributions                                       |   |                                | 1,977   |   |   | **3,831** |   |
| Participant                  contributions                                    |   |                                | 149     |   |   | **139** |   |
| Change                  in currency exchange rates                            |   |                                | (6,375  | ) |   | **5,187** |   |
| Benefits                  paid                                                |   |                                | (2,886  | ) |   | **(3,206** | **)** |
|                                                                          |   |                                |    |   |   |   |   |
| Fair                  value of plan assets at end                  of year    |   | $                                   | 52,822  |   | **$** | **60,171** |   |
|                                                                          |   |                                |    |   |   |   |   |
| Accumulated                  benefit obligations                              |   | $                                   | 58,000  |   | **$** | **59,627** |   |
|                                                                          |   |                                |    |   |   |   |   |
| Funded                  status at year end:                                   |   |                                |    |   |   |   |   |
| Plan                  assets less than PBO                                    |   | $                                   | (16,954 | ) | **$** | **(14,615** | **)** |
| Unrecognized                  actuarial loss                                  |   |                                | 26,024  |   |   | **24,181** |   |
| Unrecognized                  prior service cost                              |   |                                | 2,550   |   |   | **2,503** |   |
| Unrecognized                  net transition obligation                       |   |                                | 770     |   |   | **717** |   |
|                                                                          |   |                                |    |   |   |   |   |
|                                                                          |   | $                                   | 12,390  |   | **$** | **12,786** |   |
|                                                                          |   |                                |    |   |   |   |   |
| Amounts                  recognized in the balance sheet:                     |   |                                |    |   |   |   |   |
| Unrecognized                  net pension obligations                         |   | $                                   | 3,108   |   | **$** | **-** |   |
| Accrued                  pension cost:                                        |   |                                |    |   |   |   |   |
| Current                                                                       |   |                                | (456    | ) |   | **-** |   |
| Non                  current                                                  |   |                                | (4,129  | ) |   | **(14,615** | **)** |
| Accumulated                  other comprehensive loss                         |   |                                | 13,867  |   |   | **27,401** |   |
|                                                                          |   |                                |    |   |   |   |   |
|                                                                          |   | $                                   | 12,390  |   | **$** | **12,786** |   |

----

|                                                        |   | **Years                  ended December 31,** |   |
|-------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                        |   | **2004**                                      |   | **2005** |   | **2006** |   |
|                                                        |   | **(In                  thousands)**           |   |
|                                                        |   |                                          |   |   |   |   |   |   |   |   |
| Net                  periodic pension cost:                 |   |                                          |   |   |   |   |   |   |   |   |
| Service                  cost benefits                      |   | $                                             | 2,096  |   | $ | 2,133 |   | **$** | **2,343** |   |
| Interest                  cost on PBO                       |   |                                          | 3,436  |   |   | 3,345 |   |   | **3,177** |   |
| Expected                  return on plan assets             |   |                                          | (2,815 | ) |   | (3,142 | ) |   | **(3,087** | **)** |
| Amortization                  of prior service cost         |   |                                          | 267    |   |   | 282 |   |   | **281** |   |
| Amortization                  of net transition obligations |   |                                          | 321    |   |   | 129 |   |   | **121** |   |
| Recognized                  actuarial losses                |   |                                          | 1,428  |   |   | 1,276 |   |   | **1,458** |   |
|                                                        |   |                                          |   |   |   |   |   |   |   |   |
|                                                        |   | $                                             | 4,733  |   | $ | 4,023 |   | **$** | **4,293** |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | **December                    31,** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
| **                                                          Rate                                             ** | **2005**                            |   | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                |   |   |
| Discount                    rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 4.4%                                |   | 4.7% |
| Increase                    in future compensation levels                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 3.0%                                |   | 3.0% |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **Years                    ended December 31,** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|
| **                                                           Rate                                             ** | **2004**                                        | **2005** | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                            |   |   |
| Discount                    rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 5.5%                                            | 5.0% | 4.4% |
| Increase                    in future compensation levels                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 3.0%                                            | 3.0% | 3.0% |
| Long-term                    return on plan assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 6.0%                                            | 6.0% | 5.5% |

|                                           |   |                                                 |                                      |
|------------------------------------------------|--------|------------------------------------------------------|-------------------------------------------|
| **Years                  ending December 31,** |   | **    Amount   ** |                                      |
|                                                |   |                                                 | **(In                  thousands)**  |   |
| 2007                                           |   | $                                                    | 4,421                                     |   |
| 2008                                           |   |                                                 | 4,263                                     |   |
| 2009                                           |   |                                                 | 3,135                                     |   |
| 2010                                           |   |                                                 | 3,021                                     |   |
| 2011                                           |   |                                                 | 3,106                                     |   |
| 2012                  to 2016                  |   |                                                 | 22,279                                    |   |

***New        accounting standard.***
*Employer’s        Accounting for Pensions, *
*Employers        Accounting for Postretirement Benefits other than Pensions, *

|                                                                                                         |   | **Before                    application****of                    SFAS****No.                    158** |    |    **Adjustments** |   | **After                    application of SFAS****No.                    158** |   |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|---------|-----------------------------------|--------|--------------------------------------------------------------------------------|--------|
|                                                                                                         |   | **(In                    thousands)**                                                                 |    |
|                                                                                                         |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Assets:                                                                                                      |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Pension                    asset                                                                             |   | $                                                                                                     | 1,246   |                              | $      | (1,246                                                                         | )      | $ | - |   |
| Unrecognized                    net pension obligations                                                      |   |                                                                                                  | 5,800   |                              |   | (5,800                                                                         | )      |   | - |   |
| Total                    other assets                                                                        |   |                                                                                                  | 10,191  |                              |   | (7,046                                                                         | )      |   | 3,145 |   |
| Total                    assets                                                                              |   |                                                                                                  | 284,411 |                              |   | (7,046                                                                         | )      |   | 277,365 |   |
|                                                                                                         |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Liabilities:                                                                                                 |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Current                    accrued pension costs                                                             |   |                                                                                                  | 52      |                              |   | (52                                                                            | )      |   | - |   |
| Total                    current liabilities                                                                 |   |                                                                                                  | 61,878  |                              |   | (52                                                                            | )      |   | 61,826 |   |
| Noncurrent                    accrued pension costs                                                          |   |                                                                                                  | 1,246   |                              |   | 13,369                                                                         |   |   | 14,615 |   |
| Noncurrent                    deferred income taxes                                                          |   |                                                                                                  | 20,346  |                              |   | (5,898                                                                         | )      |   | 14,448 |   |
| Total                    noncurrent liabilities                                                              |   |                                                                                                  | 28,623  |                              |   | 7,471                                                                          |   |   | 36,094 |   |
|                                                                                                         |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Owner’s                    equity:                                                                     |   |                                                                                                  |    |                              |   |                                                                           |   |   |   |   |
| Accumulated                    other comprehensive income                    - minimum pension liability     |   |                                                                                                  | (4,779  | )                                 |   | 4,779                                                                          |   |   | - |   |
| Accumulated                    other comprehensive income                    - defined benefit pension plans |   |                                                                                                  | -       |                              |   | (19,244                                                                        | )      |   | (19,244 | ) |
| Total                    accumulated other comprehensive income                                              |   |                                                                                                  | 3,364   |                              |   | (14,465                                                                        | )      |   | (11,101 | ) |
| Total                    stockholders’ equity                                                          |   |                                                                                                  | 193,910 |                              |   | (14,465                                                                        | )      |   | 179,445 |   |
| Total                    liabilities and stockholders’ equity                                          |   |                                                                                                  | 284,411 |                              |   | (7,046                                                                         | )      |   | 277,365 |   |

**Note        10 - Related party transactions:**

** **

**Note        11 - NL common stock options held by our employees: **

**Note        12 - Commitments and contingencies: **

***Environmental        matters.***
* *

***Litigation        matters.***

***Concentrations        of credit risk***
**.**

***Long-term        contracts***
*.        *

***Operating        leases.***
* *

|                  **Years                  ending December 31,** |   | **    ****Amount    ** |   |
|----------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                 |   | **(in                  thousands)**                            |   |
|                                                                 |   |                                                           |   |   |
| 2007                                                                 |   | $                                                              | 571    |   |
| 2008                                                                 |   |                                                           | 565    |   |
| 2009                                                                 |   |                                                           | 278    |   |
| 2010                                                                 |   |                                                           | 103    |   |
| 2011                                                                 |   |                                                           | 60     |   |
| 2012                  and thereafter                                 |   |                                                           | 72     |   |
|                                                                 |   |                                                           |   |   |
|                                                                 |   | $                                                              | 1,649  |   |

**Note        13 - Securities transaction gain:**

**Note        14 - Financial instruments:**

|                                                                                                                                       |   | **                    December                  31,                ** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                       |   | **          2005         **                                                                                                                                |   | **         2006          ** |   |
|                                                                                                                                       |   | **Carrying**                                                                                                                                                                                                                                              |   | **Fair** |   | **Carrying** |   | **Fair** |   |
|                                                                                                                                       |   | **Amount**                                                                                                                                                                                                                                                |   | **Value** |   | **Amount** |   | **Value** |   |
|                                                                                                                                       |   | **(In                  millions)**                                                                                                                                                                                                                        |   |
|                                                                                                                                       |   |                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |
| Cash,                  cash equivalents, restricted cash equivalents and noncurrent restricted                  marketable debt securities |   | $                                                                                                                                                                                                                                                         | 5.0    |   | $ | 5.0 |   | **$** | **7.8** |   | **$** | **7.8** |   |
|                                                                                                                                       |   |                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |
| Other                  fixed rate debt                                                                                                     |   | $                                                                                                                                                                                                                                                         | 4.5    |   | $ | 4.5 |   | **$** | **4.8** |   | **$** | **4.8** |   |

**Note        15 - Recent accounting pronouncements:**

***Variable        interest entities.***
*Consolidation        of Variable Interest Entities, an interpretation of ARB No. 51*

***Inventory        Costs***
** **
*Inventory        Costs, an amendment of ARB No. 43, Chapter 4,*

***Stock        options.***
* *
*Share-Based        Payment,*
*Accounting        for Stock Issued to Employees. *

***Planned        Major Maintenance Activities.***
** **

|                                                             |   | **Years                  ended December 31,**                 |   |
|------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                             |   | **2004**                                                      |   | **2005** |   |
|                                                             |   | **(In                  thousands, except per share amounts)** |   |
| Increase                  (decrease) in:                         |   |                                                          |   |   |   |   |   |
| Cost                  of sales (repairs and maintenance expense) |   | $                                                             | 569    |   | $ | (684 | ) |
| Provision                  (benefit) for income taxes            |   |                                                          | (182   | ) |   | 236 |   |
| Net                  income                                      |   |                                                          | (387   | ) |   | 448 |   |
|                                                             |   |                                                          |   |   |   |   |   |
| Other                  comprehensive income - foreign currency   |   |                                                          | 31     |   |   | (79 | ) |
| Total                  comprehensive income                      |   |                                                          | (356   | ) |   | 369 |   |

----

|                                                                                 |   | **December                  31, 2005** |   |
|--------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                 |   | **(In                  thousands)**    |   |
|                                                                                 |   |                                   |   |   |
| Decrease                  in accrued maintenance costs                               |   | $                                      | 1,185  |   |
| Increase                  in current deferred income tax                             |   |                                   | 402    |   |
| Decrease                  in retained deficit                                        |   |                                   | 754    |   |
| Decrease                  in accumulated other comprehensive loss - foreign currency |   |                                   | 29     |   |
| Increase                  in total stockholder’s equity                        |   |                                   | 783    |   |

**Pension        and OPEB plans**

*              *
***Quantifying        Financial Statement Misstatements***

***Fair        Value Measurements.***
** **
*Fair        Value Measurements*

***Uncertain        Tax Positions.***
**         **
*Accounting        for Uncertain Tax Positions, *
*Accounting        for Income Taxes, *
*.*
~~s~~

***Fair        Value Option.***