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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 28, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number
333-146093





Momentive Performance Materials Inc.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                                     
|-------------------------------------------------------------- |  | ----------------------------------------------------
|Delaware                                                       |  | 20-5748297                                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. EmployerIdentification No.)                 
|                                                               | 
|22 Corporate Wood Blvd., 2nd Fl
Albany, NY 12211               |  | (518) 533-4600                                      
|(Address of principal executive offices including zip code)    |  | (Registrants telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  | x |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes  ̈ No x

The number of shares of common stock of the Company, par value $0.01 per share, outstanding as of the close of business on May 4,
2010 was 100 shares, all of which were held by Momentive Performance Materials Holdings Inc.









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TABLE OF CONTENTS



|           |  |                                                                                                                             |  |     
|---------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                             |  | Page
|           |  |                                                                                                                            
|Part I     |  | Financial Information                                                                                                       |  |     
|           |  |                                                                                                                            
|Item 1.    |  | Financial Statements                                                                                                        |  |     
|           |  | Condensed Consolidated Balance Sheets as of March 28, 2010 and December 31, 2009                                            |  | 3   
|           |  | Condensed Consolidated Statements of Operations for the Fiscal Three-month Periods Ended March 28, 2010 and
 March 29, 2009 |  | 4   
|           |  | Condensed Consolidated Statements of Cash Flows for the Fiscal Three-month Periods Ended March 28, 2010 and
 March 29, 2009 |  | 5   
|           |  | Notes to Condensed Consolidated Financial Statements                                                                        |  | 6   
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                       |  | 20  
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                                  |  | 28  
|Item 4.    |  | Controls and Procedures                                                                                                     |  | 28  
|           |  |                                                                                                                            
|Part II    |  | Other Information                                                                                                           |  |     
|           |  |                                                                                                                            
|Item 1.    |  | Legal Proceedings                                                                                                           |  | 29  
|Item 1A.   |  | Risk Factors                                                                                                                |  | 29  
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 29  
|Item 3.    |  | Defaults Upon Senior Securities                                                                                             |  | 29  
|Item 4.    |  | Removed and Reserved                                                                                                        |  | 29  
|Item 5.    |  | Other Information                                                                                                           |  | 29  
|Item 6.    |  | Exhibits                                                                                                                    |  | 30  
|           | 
|Signatures |  | 31                                                                                                                         



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MOMENTIVE PERFORMANCE MATERIALS INC.

Condensed Consolidated Balance Sheets (Unaudited)

(Dollar amounts in thousands)



|                                                                                                                                                         |  |               |            |   |                  |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | ---------- | -
|                                                                                                                                                         |  | March 28,2010 |            |   | December 31,2009 |           
|Assets                                                                                                                                                   |  |               |            |   |                  |            |  
|Current assets:                                                                                                                                          |  |               |            |   |                  |            |  
|Cash and cash equivalents                                                                                                                                |  | $             | 186,630    |   |                  | 210,284    |  
|Receivables, net (note 4)                                                                                                                                |  |               | 418,582    |   |                  | 380,522    |  
|Due from affiliates                                                                                                                                      |  |               | 6,946      |   |                  | 8,936      |  
|Inventories (note 5)                                                                                                                                     |  |               | 353,746    |   |                  | 349,143    |  
|Prepaid expenses                                                                                                                                         |  |               | 9,979      |   |                  | 8,494      |  
|Income tax receivable                                                                                                                                    |  |               | 7,542      |   |                  | 8,607      |  
|Deferred income taxes (note 7)                                                                                                                           |  |               | 11,490     |   |                  | 10,444     |  
|Other current assets                                                                                                                                     |  |               | 7,578      |   |                  | 5,256      |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total current assets                                                                                                                                     |  |               | 1,002,493  |   |                  | 981,686    |  
|Property and equipment (net of accumulated depreciation and amortization of $611,155 and $588,781 at March 28, 2010 and
December 31, 2009, respectively) |  |               | 1,116,702  |   |                  | 1,165,575  |  
|Other long-term assets                                                                                                                                   |  |               | 60,861     |   |                  | 64,494     |  
|Deferred income taxes (note 7)                                                                                                                           |  |               | 37,654     |   |                  | 41,540     |  
|Investments in nonconsolidated affiliates                                                                                                                |  |               | 582        |   |                  | 586        |  
|Intangible assets (net of accumulated amortization of $139,759 and $134,044 at March 28, 2010 and December 31, 2009,
respectively)                       |  |               | 602,742    |   |                  | 639,403    |  
|Goodwill                                                                                                                                                 |  |               | 401,751    |   |                  | 413,548    |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total assets                                                                                                                                             |  | $             | 3,222,785  |   |                  | 3,306,832  |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|                                                                                                                                                         |  |              
|Liabilities and Shareholders Deficit                                                                                                                    |  |               |            |   |                  |            |  
|Current liabilities:                                                                                                                                     |  |               |            |   |                  |            |  
|Trade payables                                                                                                                                           |  | $             | 289,143    |   |                  | 269,751    |  
|Accrued expenses and other liabilities                                                                                                                   |  |               | 150,716    |   |                  | 161,457    |  
|Accrued interest                                                                                                                                         |  |               | 63,912     |   |                  | 15,868     |  
|Due to affiliates                                                                                                                                        |  |               | 2,266      |   |                  | 2,779      |  
|Accrued income taxes                                                                                                                                     |  |               | 9,731      |   |                  | 11,110     |  
|Deferred income taxes (note 7)                                                                                                                           |  |               | 31,888     |   |                  | 34,522     |  
|Current installments of long-term debt (note 6)                                                                                                          |  |               | 25,556     |   |                  | 97,977     |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total current liabilities                                                                                                                                |  |               | 573,212    |   |                  | 593,464    |  
|                                                                                                                                                         |  |              
|Long-term debt (note 6)                                                                                                                                  |  |               | 2,884,141  |   |                  | 2,955,480  |  
|Other liabilities                                                                                                                                        |  |               | 59,616     |   |                  | 64,221     |  
|Pension liabilities (note 9)                                                                                                                             |  |               | 209,388    |   |                  | 208,738    |  
|Deferred income taxes (note 7)                                                                                                                           |  |               | 62,223     |   |                  | 63,241     |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total liabilities                                                                                                                                        |  |               | 3,788,580  |   |                  | 3,885,144  |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|                                                                                                                                                         |  |              
|Shareholders deficit:                                                                                                                                   |  |               |            |   |                  |            |  
|Common stock                                                                                                                                             |  |               |           |   |                  |           |  
|Additional paid-in capital                                                                                                                               |  |               | 601,965    |   |                  | 601,732    |  
|Accumulated deficit                                                                                                                                      |  |               | (1,367,160 | ) |                  | (1,363,750 | )
|Accumulated other comprehensive income (note 8)                                                                                                          |  |               | 195,587    |   |                  | 180,060    |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total Momentive Performance Materials Inc. shareholders deficit                                                                                         |  |               | (569,608   | ) |                  | (581,958   | )
|                                                                                                                                                         |  |              
|Noncontrolling interests (note 8)                                                                                                                        |  |               | 3,813      |   |                  | 3,646      |  
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total shareholders deficit                                                                                                                              |  |               | (565,795   | ) |                  | (578,312   | )
|                                                                                                                                                         |  |               |            |   |                  |            |  
|Total liabilities and shareholder's deficit                                                                                                              |  | $             | 3,222,785  |   |                  | 3,306,832  |  
|                                                                                                                                                         |  |               |            |   |                  |            |  

See accompanying notes to condensed consolidated financial statements.



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MOMENTIVE PERFORMANCE MATERIALS INC.

Condensed Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands)



|                                                              |  |                                 |         |   |               |          |  
|------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------- | -------- | -
|                                                              |  | Fiscal three-month period ended |        
|                                                              |  | March 28,2010                   |         |   | March 29,2009 |         
|Net sales                                                     |  | $                               | 604,807 |   |               | 418,059  |  
|Costs and expenses:                                           |  |                                 |         |   |               |          |  
|Cost of sales, excluding depreciation                         |  |                                 | 377,054 |   |               | 311,482  |  
|Selling, general and administrative expenses                  |  |                                 | 100,641 |   |               | 92,479   |  
|Depreciation and amortization expenses                        |  |                                 | 46,779  |   |               | 49,599   |  
|Research and development expenses                             |  |                                 | 15,733  |   |               | 15,986   |  
|Restructuring and other costs (note 2(c))                     |  |                                 | 1,264   |   |               | 11,282   |  
|                                                              |  |                                 |         |   |               |          |  
|Operating income (loss)                                       |  |                                 | 63,336  |   |               | (62,769  | )
|Other income (expense):                                       |  |                                 |         |   |               |          |  
|Interest income                                               |  |                                 | 428     |   |               | 988      |  
|Interest expense                                              |  |                                 | (61,010 | ) |               | (66,304  | )
|Other (expense) income, net                                   |  |                                 | (336    | ) |               | 9,973    |  
|                                                              |  |                                 |         |   |               |          |  
|Income (loss) before income taxes                             |  |                                 | 2,418   |   |               | (118,112 | )
|Income taxes (benefit) (note 7)                               |  |                                 | 5,663   |   |               | (20,645  | )
|                                                              |  |                                 |         |   |               |          |  
|Net loss                                                      |  |                                 | (3,245  | ) |               | (97,467  | )
|Net (income) loss attributable to the noncontrolling interest |  |                                 | (165    | ) |               | 648      |  
|                                                              |  |                                 |         |   |               |          |  
|Net loss attributable to Momentive Performance Materials Inc. |  | $                               | (3,410  | ) |               | (96,819  | )
|                                                              |  |                                 |         |   |               |          |  

See accompanying notes to condensed consolidated financial statements.



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MOMENTIVE PERFORMANCE MATERIALS INC.

Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands)



|                                                                                          |  |                                 |         |   |               |         |  
|----------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------- | ------- | -
|                                                                                          |  | Fiscal three-month period ended |        
|                                                                                          |  | March 28,2010                   |         |   | March 29,2009 |        
|Cash flows from operating activities:                                                     |  |                                 |         |   |               |         |  
|Net loss                                                                                  |  | $                               | (3,245  | ) |               | (97,467 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                                 |         |   |               |         |  
|Depreciation and amortization                                                             |  |                                 | 46,779  |   |               | 49,599  |  
|Amortization of debt discount and issuance costs                                          |  |                                 | 4,279   |   |               | 2,544   |  
|Deferred income taxes                                                                     |  |                                 | 471     |   |               | (23,954 | )
|Stock-based compensation expense                                                          |  |                                 | 233     |   |               | 192     |  
|Change in unrealized loss (gain) on derivative instruments                                |  |                                 | 541     |   |               | (5,293  | )
|Changes in operating assets and liabilities:                                              |  |                                 |         |   |               |         |  
|Receivables                                                                               |  |                                 | (50,436 | ) |               | 49,699  |  
|Inventories                                                                               |  |                                 | (14,086 | ) |               | 21,690  |  
|Due to/from affiliates                                                                    |  |                                 | 2,250   |   |               | (889    | )
|Prepaid expenses and other assets                                                         |  |                                 | 60      |   |               | (1,271  | )
|Trade payables                                                                            |  |                                 | 26,096  |   |               | (91,851 | )
|Accrued expenses and other liabilities                                                    |  |                                 | 39,418  |   |               | 45,544  |  
|Accrued income taxes                                                                      |  |                                 | (35     | ) |               | 15,839  |  
|Pension liabilities                                                                       |  |                                 | 5,299   |   |               | (82     | )
|                                                                                          |  |                                 |         |   |               |         |  
|Net cash provided by (used in) operating activities                                       |  |                                 | 57,624  |   |               | (35,700 | )
|                                                                                          |  |                                 |         |   |               |         |  
|                                                                                          |  |                                
|Cash flows from investing activities:                                                     |  |                                 |         |   |               |         |  
|Capital expenditures                                                                      |  |                                 | (11,100 | ) |               | (8,769  | )
|Purchases of intangible assets                                                            |  |                                 | (656    | ) |               | (967    | )
|                                                                                          |  |                                 |         |   |               |         |  
|Net cash used in investing activities                                                     |  |                                 | (11,756 | ) |               | (9,736  | )
|                                                                                          |  |                                 |         |   |               |         |  
|                                                                                          |  |                                
|Cash flows from financing activities:                                                     |  |                                 |         |   |               |         |  
|Net decrease in short-term borrowings                                                     |  |                                 |        |   |               | (1,813  | )
|Proceeds from long-term debt                                                              |  |                                 |        |   |               | 91,971  |  
|Payments of long-term debt                                                                |  |                                 | (75,000 | ) |               | (187    | )
|Funds remitted to joint venture                                                           |  |                                 |        |   |               | (4,900  | )
|                                                                                          |  |                                 |         |   |               |         |  
|                                                                                          |  |                                
|Net cash (used in) provided by financing activities                                       |  |                                 | (75,000 | ) |               | 85,071  |  
|                                                                                          |  |                                 |         |   |               |         |  
|                                                                                          |  |                                
|(Decrease) increase in cash and cash equivalents                                          |  |                                 | (29,132 | ) |               | 39,635  |  
|                                                                                          |  |                                
|Effect of exchange rate changes on cash                                                   |  |                                 | 5,478   |   |               | 920     |  
|                                                                                          |  |                                
|Cash and cash equivalents, beginning of period                                            |  |                                 | 210,284 |   |               | 340,542 |  
|                                                                                          |  |                                 |         |   |               |         |  
|                                                                                          |  |                                
|Cash and cash equivalents, end of period                                                  |  | $                               | 186,630 |   |               | 381,097 |  
|                                                                                          |  |                                 |         |   |               |         |  

See accompanying notes to condensed consolidated financial statements.



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MOMENTIVE PERFORMANCE MATERIALS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands)

(1) Business and Basis of Presentation

Momentive Performance Materials Inc. (the Company) was incorporated in Delaware on September 6, 2006 as a wholly-owned subsidiary of
Momentive Performance Materials Holdings Inc. (Holdings and together with its subsidiaries the Momentive Group) for the purpose of acquiring the assets and stock of various subsidiaries of General Electric Company (GE) that comprised GEs
Advanced Materials (GEAM or the Predecessor ) business. Prior to November 21, 2006, the Company was known as Nautilus Holdings Intermediate Corp. The acquisition was completed on December 3, 2006 (the Acquisition). Holdings outstanding
shares are owned approximately 88% by affiliates of Apollo Management VI, L.P. (Apollo), 10% by GE Capital Equity Investments, Inc. and 2% by certain current and former employees and other service providers of the Company. GEAM was comprised of two
businesses, GE Silicones and GE Quartz, and was an operating unit within the Industrial segment of GE.

The Company is
comprised of two business segments, Silicones and Quartz. The Silicones segment (Silicones) is a global organization engaged in the manufacture, sale and distribution of silanes, specialty silicones and urethane additives. The Quartz segment
(Quartz), also a global business, is engaged in the manufacture, sale and distribution of high-purity fused quartz and ceramic materials. The Company is headquartered in Albany, New York.

Momentive Performance Materials Inc. is comprised of the following legal entities and their wholly-owned subsidiaries: Momentive
Performance Materials USA Inc.; Momentive Performance Materials Worldwide Inc.; Momentive Performance Materials China SPV Inc.; Juniper Bond Holdings I LLC; Juniper Bond Holdings II LLC; Juniper Bond Holdings III LLC; and Juniper Bond Holdings IV
LLC.

In the Americas, Silicones has manufacturing facilities in Waterford, New York; Sistersville, West Virginia; New Smyrna
Beach, Florida; Itatiba, Brazil; and custom elastomers compounding operations in Chino, California and Garrett, Indiana. In the Americas, Quartz manufactures in Strongsville, Ohio; Willoughby, Ohio; Richmond Heights, Ohio and Newark, Ohio. A
majority of the manufacturing personnel in Waterford, New York; Sistersville, West Virginia and Willoughby, Ohio are covered by collective bargaining agreements.

Silicones has manufacturing facilities outside the Americas in Leverkusen, Germany; Nantong, China; Ohta, Japan; Rayong, Thailand;
Shanghai, China; Shenzhen, China; Songjiang, China; Bergen op Zoom, Netherlands; Lostock, U.K.; Termoli, Italy; Antwerp, Belgium and Chennai, India. Quartz non-U.S. manufacturing facilities are located in Kozuki, Japan; Wuxi, China and
Geesthacht, Germany. In Europe, employees at the Leverkusen, Bergen op Zoom, Termoli, and Geesthacht facilities are covered by collective bargaining agreements.

The collective bargaining agreements that cover Willoughby, Ohio, Waterford, New York and Sistersville, West Virginia facilities will
expire in June 2010, June 2010 and July 2010, respectively. The Company does not have other significant collective bargaining agreements that will expire during 2010.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the unaudited condensed consolidated financial statements do
not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair
presentation, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2009. Results for the interim periods
are not necessarily indicative of results for the full year. The balance sheet data as of December 31, 2009 was derived from audited consolidated financial statements as of December 31, 2009 but does not include all of the information and
notes required by U.S. GAAP for complete financial statements.

We evaluated subsequent events through May 5, 2010, the
date of financial statement issuance.

(2) Summary of Significant Accounting Policies

The following is an update of the significant accounting policies followed by the Company.

(a) Consolidation

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries as of
March 28, 2010 and December 31, 2009, and for the fiscal three-month periods ended March 28, 2010 and March 29, 2009. Noncontrolling interests represent the noncontrolling shareholders proportionate share of the equity



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in the consolidated joint venture affiliates. All significant intercompany balances and transactions, including profit and loss as a result of those transactions, have been eliminated in the
consolidation.

(b) Income Taxes

For the fiscal three-month periods ended March 28, 2010 and March 29, 2009, the Companys provision for income taxes was
calculated by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items such as the gain on
exchange of debt). Discrete items are recorded in the period in which they are incurred.

Income taxes are accounted for under
the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment dates. A valuation allowance is established, as needed, to reduce deferred tax assets to the
amount expected to be realized.

(c) Restructuring and other costs

Included in restructuring and other costs are costs related to restructuring (primarily severance payments associated with workforce
reductions), consulting services associated with transformation savings, and initial stand-alone activities.

For the fiscal
three-month periods ended March 28, 2010 and March 29, 2009, the Company recognized restructuring of $140 and $15,336, respectively, and other costs of $1,124 and $(4,054), respectively. Other costs of $(4,054) for the fiscal three-month
period ended March 29, 2009 included a one-time benefit reduction and wage tax credits of $5,419. The following table sets forth the changes in the restructuring reserve, which is recorded in accrued expenses and other liabilities on the
condensed consolidated balance sheets:



|                                         |  |           |         |   |        |        |   |       |   |         |  
|---------------------------------------- |  | --------- | ------- | - | ------ | ------ | - | ----- | - | ------- | -
|                                         |  | Silicones |         |   | Quartz |        |   | Total |  
|                                         |  |           |        
|Balance as of January 1, 2009            |  | $         | 16,269  |   |        | 522    |   |       | $ | 16,791  |  
|Additions                                |  |           | 15,758  |   |        | 6,280  |   |       |   | 22,038  |  
|Cash payments                            |  |           | (24,683 | ) |        | (3,643 | ) |       |   | (28,326 | )
|Foreign currency translation adjustments |  |           | 675     |   |        | 177    |   |       |   | 852     |  
|                                         |  |           |         |   |        |        |   |       |   |         |  
|                                         |  |           |        
|Balance as of December 31, 2009          |  |           | 8,019   |   |        | 3,336  |   |       |   | 11,355  |  
|Additions                                |  |           | 140     |   |        |       |   |       |   | 140     |  
|Cash payments                            |  |           | (3,435  | ) |        | (2,067 | ) |       |   | (5,502  | )
|Foreign currency translation adjustments |  |           | (228    | ) |        |       |   |       |   | (228    | )
|                                         |  |           |        
|                                         |  |           |         |   |        |        |   |       |   |         |  
|Balance as of March 28, 2010             |  | $         | 4,496   |   |        | 1,269  |   |       | $ | 5,765   |  
|                                         |  |           |         |   |        |        |   |       |   |         |  

Our restructuring costs for the period are primarily related to our Business Optimization program. Due to
the global economic slowdown, the Company experienced significant year-over-year decreases in sales in the fourth quarter of 2008 and into 2009. As a result of the Companys continued focus on streamlining its cost structure to enhance the
Companys profitability and in response to the economic crisis, the Company initiated a restructuring program to increase the efficiency of its operations and control labor costs. Costs for the program were primarily incurred through the end of
2009, with the related payments occurring throughout 2009 and into 2010. The Company incurred approximately $35,022 of costs ($28,742 for Silicones and $6,280 for Quartz) since the inception of the program in the fourth quarter of 2008.

(d) Use of Estimates

The preparation of the unaudited condensed consolidated financial statements requires management of the Company to make a number of
estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and
expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangibles, valuation allowances for receivables, inventories, deferred income tax assets
and assets and obligations related to employee benefits. Actual results could differ from those estimates.



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(e) Recently Issued Accounting Standards

In January 2010, the FASB issued ASU 2010-6, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures About Fair
Value Measurements. This ASU requires new disclosures regarding transfers and activity within the three levels of fair value hierarchy, as well as enhanced disclosures regarding the class of assets disclosed and the inputs and valuation
techniques used to determine fair value. This ASU is effective for interim and annual periods beginning after December 15, 2009. The Company adopted the provisions of this ASU and it did not have a material impact to its consolidated financial
statements.

Effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter, the Consolidations Topic, ASC 810-10, requires an enterprise to perform an analysis to determine whether the enterprises
variable interest or interests give it a controlling financial interest in a variable interest entity, and requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. The Company adopted the
provisions of this ASC and it did not have a material impact to its consolidated financial statements.

Effective as of the
beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter, the Transfers and Servicing
Topic, ASC 860-10, intends to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer
on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. This ASC must be applied to transfers occurring on or after the effective date. The Company
adopted the provisions of this ASC and it did not have a material impact to its consolidated financial statements.

(f)
Fair Value of Financial Instruments

The Companys financial instruments consist principally of cash and cash
equivalents, accounts receivable and accounts payable and accrued expenses. Carrying amounts approximate fair value due to the short-term maturity of these instruments. The fair value of long-term debt is disclosed in Note 3.

(3) Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy exists, which requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are:



| | Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------



| | Level 2 | Quoted prices for similar assets or liabilities in active markets; or observable prices which are based on observable market data, based on, directly or
indirectly market-corroborated inputs. The Companys level 2 liabilities included interest rate swaps and natural gas derivative contracts that are traded in an active exchange market.
| | ------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Level 3 | Unobservable inputs that are supported by little or no market activity and are developed based on the best information available in the circumstances.
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------------



8



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##### Table of Contents

The following table presents assets and liabilities at March 28, 2010 that the Company
measures at fair value on a recurring basis, by level within the fair value hierarchy:



|                                 |  |         |   |         |     |         |   |       |    
|-------------------------------- |  | ------- | - | ------- | --- | ------- | - | ----- | ---
|                                 |  | Level 1 |   | Level 2 |     | Level 3 |   | Total
|Assets                           |  |         |   |         |     |         |   |       |    
|Natural gas derivative contracts |  | $       |  |         | 268 |         |  |       | 268
|                                 |  |         |   |         |     |         |   |       |    
|Total assets at fair value       |  | $       |  |         | 268 |         |  |       | 268
|                                 |  |         |   |         |     |         |   |       |    
|                                 |  |         |   |        
|                                 |  | Level 1 |   | Level 2 |     | Level 3 |   | Total
|Liabilities                      |  |         |   |         |     |         |   |       |    
|Interest rate swap               |  | $       |  |         | 382 |         |  |       | 382
|Natural gas derivative contracts |  |         |  |         | 338 |         |  |       | 338
|                                 |  |         |   |         |     |         |   |       |    
|Total liabilities at fair value  |  | $       |  |         | 720 |         |  |       | 720
|                                 |  |         |   |         |     |         |   |       |    

The following table presents assets and liabilities at
December 31, 2009 that the Company measures at fair value on a recurring basis, by level within the fair value hierarchy:



|                                 |  |         |   |         |       |         |   |       |      
|-------------------------------- |  | ------- | - | ------- | ----- | ------- | - | ----- | -----
|                                 |  | Level 1 |   | Level 2 |       | Level 3 |   | Total
|Assets                           |  |         |   |         |       |         |   |       |      
|Natural gas derivative contracts |  | $       |  |         | 451   |         |  |       | 451  
|                                 |  |         |   |         |       |         |   |       |      
|Total assets at fair value       |  | $       |  |         | 451   |         |  |       | 451  
|                                 |  |         |   |         |       |         |   |       |      
|                                 |  |         |   |        
|                                 |  | Level 1 |   | Level 2 |       | Level 3 |   | Total
|Liabilities                      |  |         |   |         |       |         |   |       |      
|Interest rate swap               |  | $       |  |         | 1,037 |         |  |       | 1,037
|Natural gas derivative contracts |  |         |  |         | 260   |         |  |       | 260  
|                                 |  |         |   |         |       |         |   |       |      
|Total liabilities at fair value  |  | $       |  |         | 1,297 |         |  |       | 1,297
|                                 |  |         |   |         |       |         |   |       |      

The fair value of the natural gas derivative contracts
and interest rate swap generally reflects the estimated amounts that the Company would receive or pay, on a pre-tax basis, to terminate the contracts and swap at the reporting date based on broker quotes for the same or similar instruments.
Counterparties to these contracts are highly rated financial institutions, none of which experienced any significant downgrades in the fiscal three-month period ended March 28, 2010 that would reduce the receivable amount owed, if any, to the
Company.

At March 28, 2010, the Company estimates that the $1,624,377 of outstanding fixed rate senior notes had a fair
value of approximately $1,566,584; the $1,025,836 of outstanding variable rate term loans had a fair value of approximately $942,310; the $167,872 of outstanding fixed rate second-lien senior secured notes with a $200,000 aggregate principal amount
had a fair value of approximately $224,000; and the fair value of the $6,147 outstanding medium term loan, the $60,465 outstanding construction project financing loan and $25,000 borrowing under the revolving credit facility were approximately the
same as their outstanding balances. The Company determined the estimated fair value amounts by using available market information for the senior notes and commonly accepted valuation methodologies for the term loans. However, considerable judgment
is required in interpreting market data to develop estimates of fair value. Accordingly, the fair value estimates presented herein are not necessarily indicative of the amount that the Company or the debt-holders could realize in a current market
exchange. The use of different assumptions, changes in market conditions and/or estimation methodologies may have a material effect on the estimated fair value.



9



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##### Table of Contents

(4) Receivables, net

Receivables consisted of the following at March 28, 2010 and December 31, 2009:



|                                |  |               |         |   |                  |         |  
|------------------------------- |  | ------------- | ------- | - | ---------------- | ------- | -
|                                |  | March 28,2010 |         |   | December 31,2009 |        
|                                |  |              
|Trade                           |  | $             | 362,831 |   |                  | 324,429 |  
|Other:                          |  |               |         |   |                  |         |  
|VAT                             |  |               | 26,339  |   |                  | 34,646  |  
|Advances                        |  |               | 14,361  |   |                  | 7,867   |  
|Other                           |  |               | 20,276  |   |                  | 18,740  |  
|                                |  |               |         |   |                  |         |  
|                                |  |              
|                                |  |               | 423,807 |   |                  | 385,682 |  
|                                |  |              
|Allowance for doubtful accounts |  |               | (5,225  | ) |                  | (5,160  | )
|                                |  |               |         |   |                  |         |  
|                                |  |              
|Total receivables, net          |  | $             | 418,582 |   |                  | 380,522 |  
|                                |  |               |         |   |                  |         |  

(5) Inventories

Inventories consisted of the following at March 28, 2010 and December 31, 2009:



|                                  |  |               |         |                  |        
|--------------------------------- |  | ------------- | ------- | ---------------- | -------
|                                  |  | March 28,2010 |         | December 31,2009
|                                  |  |              
|Raw materials and work in process |  | $             | 112,534 |                  | 112,643
|Finished goods                    |  |               | 241,212 |                  | 236,500
|                                  |  |               |         |                  |        
|                                  |  |              
|Total inventories                 |  | $             | 353,746 |                  | 349,143
|                                  |  |               |         |                  |        

(6) Indebtedness

As of March 28, 2010, the Company had $25,000 outstanding under the revolving credit facility. The borrowings accrued interest at a
weighted average rate of 4.00% per annum as of March 28, 2010. The outstanding letters of credit under the revolving credit facility at March 28, 2010 were $39,032, leaving unused borrowing capacity of $235,968. Outstanding letters of
credit issued under the synthetic letter of credit facility at March 28, 2010 were $33,641, leaving unused capacity of $309.

At March 28, 2010, the Company was in compliance with the covenants of the credit agreement and note indentures.

(7) Income Taxes

The
effective tax rate was 234.20% and 17.48% for the fiscal three-month periods ended March 28, 2010 and March 29, 2009, respectively. The change in the effective tax rate was primarily due to a change in the amount of income (loss) before
income taxes, changes in the tax rates applied in the various jurisdictions in which the Company operates, current period foreign exchange gains and the maintenance of a full valuation allowance against a substantial amount of the Companys net
deferred tax assets. The valuation allowance, which relates to deferred tax assets (primarily in the U.S., Germany and Japan), was established and maintained based on the Companys assessment that the net deferred tax assets will likely not be
realized.



10



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##### Table of Contents

(8) Comprehensive Income (Loss)

The balances for each classification of comprehensive income (loss) are as follows:



|                                                                                 |  |                                 |        |   |               |          |  
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------- | -------- | -
|                                                                                 |  | Fiscal three-month period ended |       
|                                                                                 |  | March 28,2010                   |        |   | March 29,2009 |         
|Net loss                                                                         |  | $                               | (3,245 | ) |               | (97,467  | )
|Foreign currency translation                                                     |  |                                 | 15,238 |   |               | (22,829  | )
|Other comprehensive income adjustments, net                                      |  |                                 | 291    |   |               | (1,495   | )
|                                                                                 |  |                                 |        |   |               |          |  
|Comprehensive income (loss)                                                      |  |                                 | 12,284 |   |               | (121,791 | )
|                                                                                 |  |                                
|Net (income) loss attributable to the noncontrolling interest                    |  |                                 | (165   | ) |               | 648      |  
|Foreign currency translation attributable to the noncontrolling interest         |  |                                 | (2     | ) |               | 314      |  
|                                                                                 |  |                                 |        |   |               |          |  
|Comprehensive income (loss) attributable to Momentive Performance Materials Inc. |  | $                               | 12,117 |   |               | (120,829 | )
|                                                                                 |  |                                 |        |   |               |          |  

The following table details changes in shareholders deficit, including changes in equity (deficit)
attributable to the Momentive Performance Materials Inc. shareholder and changes in equity attributable to the noncontrolling interests:



|                                              |  |       |             |   |                                                                                  |   |                    |         |  |                                      |   |                                           |         |  |      
|--------------------------------------------- |  | ----- | ----------- | - | -------------------------------------------------------------------------------- | - | ------------------ | ------- |  | ------------------------------------ | - | ----------------------------------------- | ------- |  | -----
|                                              |  | Total |             |   | Equity (deficit) attributable
toMomentive Performance Materials Inc. shareholder |   |                   
|                                              |  |       | Commonstock |   | Additionalpaid-incapital                                                         |   | Accumulateddeficit |         |  | Accumulated othercomprehensiveincome |   | Equity attribute tononcontrollingInterest
|Balance at January 1, 2010                    |  | $     | (578,312    | ) |                                                                                  |  |                    | 601,732 |  | (1,363,750                           | ) |                                           | 180,060 |  | 3,646
|Stock option activity and other               |  |       | 233         |   |                                                                                  |  |                    | 233     |  |                                     |   |                                           |        |  |     
|Comprehensive income (loss):                  |  |       |             |   |                                                                                  |   |                    |         |  |                                      |   |                                           |         |  |      
|Net income (loss)                             |  |       | (3,245      | ) |                                                                                  |  |                    |        |  | (3,410                               | ) |                                           |        |  | 165  
|Foreign currency translation adjustment - net |  |       | 15,238      |   |                                                                                  |  |                    |        |  |                                     |   |                                           | 15,236  |  | 2    
|Other comprehensive income adjustment - net   |  |       | 291         |   |                                                                                  |  |                    |        |  |                                     |   |                                           | 291     |  |     
|                                              |  |       |             |   |                                                                                  |   |                    |         |  |                                      |   |                                           |         |  |      
|Balance at March 28, 2010                     |  | $     | (565,795    | ) |                                                                                  |  |                    | 601,965 |  | (1,367,160                           | ) |                                           | 195,587 |  | 3,813
|                                              |  |       |             |   |                                                                                  |   |                    |         |  |                                      |   |                                           |         |  |      



|                                              |  |       |          |   |                                                                                  |   |                          |         |                    |            |   |                                      |         |   |                                           |       |  
|--------------------------------------------- |  | ----- | -------- | - | -------------------------------------------------------------------------------- | - | ------------------------ | ------- | ------------------ | ---------- | - | ------------------------------------ | ------- | - | ----------------------------------------- | ----- | -
|                                              |  |       |          |   | Equity (deficit) attributable
toMomentive Performance Materials Inc. shareholder |   |                          |         |                   
|                                              |  | Total |          |   | Commonstock                                                                      |   | Additionalpaid-incapital |         | Accumulateddeficit |            |   | Accumulated othercomprehensiveincome |         |   | Equity attribute tononcontrollingInterest |      
|Balance at January 1, 2009                    |  | $     | (541,142 | ) |                                                                                  |  |                          | 601,017 |                    | (1,321,963 | ) |                                      | 175,960 |   |                                           | 3,844 |  
|Stock option activity and other               |  |       | 122      |   |                                                                                  |  |                          | 122     |                    |           |   |                                      |        |   |                                           |      |  
|Comprehensive income (loss):                  |  |       |          |   |                                                                                  |   |                          |         |                    |            |   |                                      |         |   |                                           |       |  
|Net income (loss)                             |  |       | (97,467  | ) |                                                                                  |  |                          |        |                    | (96,819    | ) |                                      |        |   |                                           | (648  | )
|Foreign currency translation adjustment - net |  |       | (22,829  | ) |                                                                                  |  |                          |        |                    |           |   |                                      | (22,515 | ) |                                           | (314  | )
|Other comprehensive income adjustment - net   |  |       | (1,495   | ) |                                                                                  |  |                          |        |                    |           |   |                                      | (1,495  | ) |                                           |      |  
|                                              |  |       |          |   |                                                                                  |   |                          |         |                    |            |   |                                      |         |   |                                           |       |  
|Balance at March 29, 2009                     |  | $     | (662,811 | ) |                                                                                  |  |                          | 601,139 |                    | (1,418,782 | ) |                                      | 151,950 |   |                                           | 2,882 |  
|                                              |  |       |          |   |                                                                                  |   |                          |         |                    |            |   |                                      |         |   |                                           |       |  



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##### Table of Contents

(9) Pension Plans and Other Postretirement Benefits

The following are the components of the Companys net pension and postretirement benefit expense for the fiscal three-month periods
ended March 28, 2010 and March 29, 2009:



|                                             |  |                                 |        |   |                |       |   |               |       |   |               |       |  
|-------------------------------------------- |  | ------------------------------- | ------ | - | -------------- | ----- | - | ------------- | ----- | - | ------------- | ----- | -
|                                             |  | Pension                         |        |   | Postretirement |      
|                                             |  | Fiscal three-month period ended |       
|                                             |  | March 28,2010                   |        |   | March 29,2009  |       |   | March 28,2010 |       |   | March 29,2009 |      
|Service cost                                 |  | $                               | 5,371  |   |                | 5,386 |   |               | 326   |   |               | 350   |  
|Interest cost                                |  |                                 | 2,123  |   |                | 1,884 |   |               | 1,163 |   |               | 1,141 |  
|Amortization of prior service cost (benefit) |  |                                 | (217   | ) |                | (214  | ) |               | 328   |   |               | 328   |  
|Expected return on plan assets               |  |                                 | (1,213 | ) |                | (837  | ) |               |      |   |               |      |  
|Amortization of actuarial gain               |  |                                 | (292   | ) |                | (189  | ) |               | (28   | ) |               | (31   | )
|Other                                        |  |                                 | 444    |   |                | (126  | ) |               |      |   |               |      |  
|                                             |  |                                 |        |   |                |       |   |               |       |   |               |       |  
|                                             |  | $                               | 6,216  |   |                | 5,904 |   |               | 1,789 |   |               | 1,788 |  
|                                             |  |                                 |        |   |                |       |   |               |       |   |               |       |  

In 2010, the Company expects to contribute approximately $14,321 and $2,768 to the Companys Domestic
and Foreign plans, respectively. The Company contributed $3,100 to its Domestic plans during the fiscal three-month period ended March 28, 2010.

(10) Financial Instruments

The Companys business and activities expose it to a variety of market risks, including risks related to changes in commodity prices,
foreign-currency exchange rates and interest rates. These financial exposures are monitored and managed by the Company as an integral part of its risk management program. This program recognizes the unpredictability of financial and commodity
markets and seeks to reduce the potentially adverse effects that market volatility could have on operating results. As part of its risk management strategy, the Company uses derivative instruments to protect cash flows from fluctuations caused by
volatility in currency exchange rates, commodity prices and interest rates.

Cash Flow Hedges

The Companys commodity price risk management strategy is to use derivative instruments to minimize significant unanticipated
earnings fluctuations that may arise from volatility in commodity prices. Price fluctuations in commodities, mainly in natural gas, can cause the actual prices paid to natural gas vendors to differ from anticipated cash outlays. The Companys
energy risk management strategy is to use derivative instruments to minimize significant unanticipated manufacturing cost fluctuations that may arise from volatility in natural gas prices. The Company uses commodity swap contracts to manage these
risks.

The Companys interest rate risk management strategy is to use derivative instruments to minimize significant
unanticipated earnings fluctuations that may arise from volatility in interest rates of the Companys borrowings and to manage the interest rate sensitivity of its debt.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the
derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instruments representing
either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

In accordance with the Companys policy, the maximum term over which the Company may hedge exposures to the variability of cash flow
(for all forecasted transactions, excluding interest payments on variable-rate debt) is 18 months for commodity hedges. No cash flow hedges were discontinued during the fiscal three-month period ended March 28, 2010.

Derivatives Not Designated as Hedging Instruments

The Company uses commodity forward and option contracts to hedge a portion of its anticipated cash payments to natural gas vendors in the
U.S., which can fluctuate based on changes in natural gas prices. These contracts do not meet the provisions required to qualify for hedge accounting treatment. Accordingly, the gain or loss on these derivatives is recognized in current earnings.

Financial instruments are neither held nor issued by the Company for trading purposes. The Companys natural gas hedge
contracts and interest rate swap contract do not contain any credit related contingent features and accordingly, the Company is not required to post any collateral.



12



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##### Table of Contents

The notional amounts of the Companys derivative instruments outstanding as of
March 28, 2010, were as follows:



|                                           |  |                 |        
|------------------------------------------ |  | --------------- | -------
|                                           |  | Notional Amount
|Derivatives Designated as Hedges:          |  |                 |        
|Interest Rate Swap contract                |  | $               | 185,000
|Natural Gas Hedge Contracts                |  |                 | 954    
|                                           |  |                 |        
|Total Derivatives Designated as Hedges     |  | $               | 185,954
|                                           |  |                 |        
|                                           | 
|Derivatives Not Designated as Hedges:      |  |                 |        
|Natural Gas Option Contracts               |  | $               | 8,556  
|                                           |  |                 |        
|Total Derivatives Not Designated as Hedges |  | $               | 8,556  
|                                           |  |                 |        

The fair values of the Companys derivative
instruments outstanding as of March 28, 2010, were as follows:



|                                           |  |                                        |  |            |    
|------------------------------------------ |  | -------------------------------------- |  | ---------- | ---
|                                           |  | Balance Sheet Location                 |  | Fair Value
|Asset Derivatives:                         |  |                                        |  |            |    
|Derivatives Not Designated as Hedges:      |  |                                        |  |            |    
|Natural Gas Option Contracts               |  | Other current assets                   |  | $          | 268
|                                           |  |                                        |  |            |    
|Total Derivatives Not Designated as Hedges |  |                                        |  |            | 268
|                                           |  |                                        |  |            |    
|                                           |  |                                       
|Total Asset Derivatives                    |  |                                        |  | $          | 268
|                                           |  |                                        |  |            |    
|                                           |  |                                       
|Liability Derivatives:                     |  |                                        |  |            |    
|Derivatives Designated as Hedges:          |  |                                        |  |            |    
|Interest Rate Swap contract                |  | Accrued expenses and other liabilities |  | $          | 382
|Natural Gas Hedge Contracts                |  | Accrued expenses and other liabilities |  |            | 338
|                                           |  |                                        |  |            |    
|Total Derivatives Designated as Hedges     |  |                                        |  |            | 720
|                                           |  |                                        |  |            |    
|                                           |  |                                       
|Total Liability Derivatives                |  |                                        |  | $          | 720
|                                           |  |                                        |  |            |    

The gains and losses on the Companys derivative
instruments during the fiscal three-month period ended March 28, 2010 were as follows:



|                                                 |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|------------------------------------------------ |  | ---------------------------------------------------------------- | --- | - | ----------------------------------- | ------------------------------------- | ------------------------------------------- | - | ------ | -
|                                                 |  | Amount of Gain or(Loss) Recognized inAOCI (EffectivePortion)
(1) |     |   | Income Statement
Classification (2) |                                       | Amount of Gain or(Loss) Recognizedin Income |  
|Asset Derivatives:                               |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Derivatives Not Designated as Hedges:            |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Natural Gas Option Contracts                     |  | $                                                                |    |   |                                     | Other income (expense)                |                                             | $ | (739   | )
|                                                 |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Total Asset Derivatives Not Designated as Hedges |  |                                                                  |    |   |                                     |                                       |                                             |   | (739   | )
|                                                 |  |                                                                  |    
|Liability Derivatives:                           |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Derivatives Designated as Hedges:                |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Interest Rate Swap contract                      |  |                                                                  | 655 |   |                                     | Interest Expense                      |                                             |   | (1,041 | )
|Natural Gas Hedge Contracts                      |  |                                                                  | (78 | ) |                                     | Cost of sales, excluding depreciation |                                             |   | (218   | )
|                                                 |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Total Liability Derivatives Designated as Hedges |  |                                                                  | 577 |   |                                     |                                       |                                             |   | (1,259 | )
|                                                 |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  
|Total Derivatives                                |  | $                                                                | 577 |   |                                     |                                       |                                             | $ | (1,998 | )
|                                                 |  |                                                                  |     |   |                                     |                                       |                                             |   |        |  



|(1) | Accumulated other comprehensive income (loss) (AOCI)
|--- | ----------------------------------------------------

|(2) | For derivatives designated as cash flow hedges, this represents the effective portion of the gain (loss) reclassified from AOCI into income during the period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

(11) Operating Segments

The Company operates in two independent business segments: Silicones and Quartz. The Silicones segment is engaged in the manufacture, sale
and distribution of silanes, specialty silicones and urethane additives. The Quartz segment is engaged in the manufacture, sale and distribution of high-purity fused quartz and ceramic materials. The Companys operating segments are organized
based on the nature of the products they serve. The segments are managed separately because each business requires different technology and marketing strategies.

An update of the accounting policies of the Silicones and Quartz segments are as described in the summary of significant accounting
policies in Note 2.



|                                                |  |           |         |   |        |         |   |                              |        |   |       |         |  
|----------------------------------------------- |  | --------- | ------- | - | ------ | ------- | - | ---------------------------- | ------ | - | ----- | ------- | -
|                                                |  | Silicones |         |   | Quartz |         |   | Corporate andother items (c) |        |   | Total |        
|Fiscal three-month period ended March 28, 2010: |  |           |         |   |        |         |   |                              |        |   |       |         |  
|Net sales (a)                                   |  | $         | 538,704 |   |        | 66,103  |   |                              |       |   |       | 604,807 |  
|Operating income (loss) (b)                     |  |           | 58,410  |   |        | 12,553  |   |                              | (7,627 | ) |       | 63,336  |  
|Depreciation and amortization                   |  |           | 39,960  |   |        | 6,819   |   |                              |       |   |       | 46,779  |  
|Interest expense and other financial charges    |  |           | 61,008  |   |        | 2       |   |                              |       |   |       | 61,010  |  
|Interest income                                 |  |           | 387     |   |        | 41      |   |                              |       |   |       | 428     |  
|Provision for income taxes                      |  |           | 2,513   |   |        | 3,150   |   |                              |       |   |       | 5,663   |  
|Capital expenditures                            |  |           | 9,792   |   |        | 1,308   |   |                              |       |   |       | 11,100  |  
|                                                |  |           |         |  
|                                                |  | Silicones |         |   | Quartz |         |   | Corporate andother items (c) |        |   | Total |        
|Fiscal three-month period ended March 29, 2009: |  |           |         |   |        |         |   |                              |        |   |       |         |  
|Net sales (a)                                   |  | $         | 384,472 |   |        | 33,587  |   |                              |       |   |       | 418,059 |  
|Operating income (loss) (b) (d)                 |  |           | (55,601 | ) |        | (11,842 | ) |                              | 4,674  |   |       | (62,769 | )
|Depreciation and amortization                   |  |           | 41,980  |   |        | 7,619   |   |                              |       |   |       | 49,599  |  
|Interest expense and other financial charges    |  |           | 66,181  |   |        | 123     |   |                              |       |   |       | 66,304  |  
|Interest income                                 |  |           | 923     |   |        | 65      |   |                              |       |   |       | 988     |  
|Provision for income taxes                      |  |           | (21,262 | ) |        | 617     |   |                              |       |   |       | (20,645 | )
|Capital expenditures                            |  |           | 7,474   |   |        | 1,295   |   |                              |       |   |       | 8,769   |  



|(a) | There were no intersegment sales during the fiscal three-month periods ended March 28, 2010 or March 29, 2009, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(b) | A reconciliation of the segment operating income (loss) to income (loss) before income taxes would include interest income, interest expense and other income (expense),
net as presented in the Condensed Consolidated Statements of Operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Corporate and other items include pension and postretirement expenses and headquarter costs, net of corporate assessments.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(d) | Operating income (loss) for the fiscal three-month period ended March 29, 2009 for the Silicones and Quartz segments reflects the correction of an error in
presentation previously reported. In the condensed consolidated financial statements for the fiscal three-month period ended March 29, 2009, Silicones operating loss was understated by $13,281 and Quartz operating loss was overstated by the
same amount. This error in presentation was corrected in the condensed consolidated financial statements for fiscal three-month period ended September 29, 2009 and reflected in the consolidated financial statements for the year ended
December 31, 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The following tables show data by geographic area. Net sales are based on the location of
the operation recording the final sale to the customer. Total long-lived assets consist of property and equipment, net of accumulated depreciation and amortization, intangible assets, net of accumulated amortization, and goodwill.



|                  |  |                                 |         |                |        
|----------------- |  | ------------------------------- | ------- | -------------- | -------
|                  |  | Fiscal three-month period ended
|                  |  | March 28, 2010                  |         | March 29, 2009
|Net sales:        |  |                                 |         |                |        
|United States     |  | $                               | 194,472 |                | 143,478
|Canada            |  |                                 | 10,455  |                | 8,167  
|Pacific           |  |                                 | 193,015 |                | 117,484
|Europe            |  |                                 | 185,434 |                | 131,780
|Mexico and Brazil |  |                                 | 21,431  |                | 17,150 
|                  |  |                                 |         |                |        
|                  |  | $                               | 604,807 |                | 418,059
|                  |  |                                 |         |                |        





|                         |  |               |           |                  |          
|------------------------ |  | ------------- | --------- | ---------------- | ---------
|                         |  | March 28,2010 |           | December 31,2009
|Total long-lived assets: |  |               |           |                  |          
|United States            |  | $             | 615,514   |                  | 628,302  
|Canada                   |  |               | 18,480    |                  | 23,976   
|Pacific                  |  |               | 794,693   |                  | 807,589  
|Europe                   |  |               | 684,866   |                  | 750,958  
|Mexico and Brazil        |  |               | 7,642     |                  | 7,701    
|                         |  |               |           |                  |          
|                         |  | $             | 2,121,195 |                  | 2,218,526
|                         |  |               |           |                  |          

(12) Guarantor/Non-Guarantor Subsidiary Financial Information

The Company has outstanding $200.0 million in aggregate principal amount of second-lien senior notes, $716.6 million in
aggregate principal amount of senior notes, 245.2 million in aggregate principal amount of Euro senior notes, $203.1 million in aggregate principal amount of senior toggle notes and $381.9 million in aggregate principal amount of senior
subordinated notes. The notes are fully, jointly, severally and unconditionally guaranteed by the Companys domestic subsidiaries (the guarantor subsidiaries). The following condensed consolidated financial information presents the Condensed
Consolidated Balance Sheets as of March 28, 2010 and December 31, 2009, the Condensed Consolidated Statements of Operations for the fiscal three-month periods ended March 28, 2010 and March 29, 2009 and Condensed Consolidated
Statements of Cash Flows for the fiscal three-month periods ended March 28, 2010 and March 29, 2009 of (i) Momentive Performance Materials Inc. (Parent); (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries;
and (iv) the Company on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for
purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The guarantor subsidiaries are 100% owned by Parent and all guarantees are full and
unconditional. Additionally, substantially all of the assets of the guarantor subsidiaries and certain non-guarantor subsidiaries are pledged under the senior secured credit facility, and consequently will not be available to satisfy the claims of
the Companys general creditors.



15



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##### Table of Contents

Condensed Consolidated Balance Sheet as of March 28, 2010:



|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|------------------------------------------------------------------------- |  | ------ | ---------- | - | --------------------- | --------- | - | ------------------------- | --------- | - | ------------ | ---------- | - | ------------ | ---------- | -
|                                                                          |  | Parent |            |   | GuarantorSubsidiaries |           |   | Non-GuarantorSubsidiaries |           |   | Eliminations |            |   | Consolidated |           
|Assets                                                                    |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Current assets:                                                           |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Cash and cash equivalents                                                 |  | $      | 28,862     |   |                       | 4,207     |   |                           | 153,561   |   |              |           |   |              | 186,630    |  
|Receivables, net                                                          |  |        |           |   |                       | 122,663   |   |                           | 295,919   |   |              |           |   |              | 418,582    |  
|Due from affiliates                                                       |  |        |           |   |                       | 102,731   |   |                           | 39,325    |   |              | (135,110   | ) |              | 6,946      |  
|Inventories                                                               |  |        |           |   |                       | 164,956   |   |                           | 205,283   |   |              | (16,493    | ) |              | 353,746    |  
|Prepaid expenses                                                          |  |        |           |   |                       | 4,305     |   |                           | 5,674     |   |              |           |   |              | 9,979      |  
|Income tax receivable                                                     |  |        |           |   |                       | 2,839     |   |                           | 4,703     |   |              |           |   |              | 7,542      |  
|Deferred income taxes                                                     |  |        |           |   |                       | 1         |   |                           | 7,744     |   |              | 3,745      |   |              | 11,490     |  
|Other current assets                                                      |  |        |           |   |                       | 1,701     |   |                           | 5,877     |   |              |           |   |              | 7,578      |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total current assets                                                      |  |        | 28,862     |   |                       | 403,403   |   |                           | 718,086   |   |              | (147,858   | ) |              | 1,002,493  |  
|Property and equipment, net                                               |  |        |           |   |                       | 519,660   |   |                           | 597,042   |   |              |           |   |              | 1,116,702  |  
|Other long-term assets                                                    |  |        | 32,635     |   |                       |          |   |                           | 28,226    |   |              |           |   |              | 60,861     |  
|Deferred income taxes                                                     |  |        |           |   |                       |           |   |                           | 37,654    |   |              |           |   |              | 37,654     |  
|Investments in nonconsolidated affiliates                                 |  |        |           |   |                       |          |   |                           | 582       |   |              |           |   |              | 582        |  
|Investment in affiliates                                                  |  |        | 1,353,731  |   |                       | (252,751  | ) |                           |          |   |              | (1,100,980 | ) |              |           |  
|Intercompany borrowing                                                    |  |        |           |   |                       | 1,002,394 |   |                           | 79,999    |   |              | (1,082,393 | ) |              |           |  
|Intangible assets, net                                                    |  |        |           |   |                       | 95,854    |   |                           | 506,888   |   |              |           |   |              | 602,742    |  
|Goodwill                                                                  |  |        |           |   |                       |          |   |                           | 401,751   |   |              |           |   |              | 401,751    |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total assets                                                              |  | $      | 1,415,228  |   |                       | 1,768,560 |   |                           | 2,370,228 |   |              | (2,331,231 | ) |              | 3,222,785  |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|                                                                          |  |        |            |   |                      
|Liabilities and Shareholders Equity (deficit)                            |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Current liabilities:                                                      |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Trade payables                                                            |  | $      |           |   |                       | 78,386    |   |                           | 210,757   |   |              |           |   |              | 289,143    |  
|Accrued expenses and other liabilities                                    |  |        | 382        |   |                       | 66,999    |   |                           | 83,335    |   |              |           |   |              | 150,716    |  
|Accrued interest                                                          |  |        | 61,493     |   |                       | 50        |   |                           | 2,369     |   |              |           |   |              | 63,912     |  
|Due to affiliates                                                         |  |        |            |   |                       | 37,181    |   |                           | 100,195   |   |              | (135,110   | ) |              | 2,266      |  
|Accrued income taxes                                                      |  |        |           |   |                       |          |   |                           | 9,731     |   |              |           |   |              | 9,731      |  
|Deferred income taxes                                                     |  |        |           |   |                       |          |   |                           | 31,888    |   |              |           |   |              | 31,888     |  
|Current installments of long-term debt                                    |  |        |           |   |                       |          |   |                           | 25,556    |   |              |           |   |              | 25,556     |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total current liabilities                                                 |  |        | 61,875     |   |                       | 182,616   |   |                           | 463,831   |   |              | (135,110   | ) |              | 573,212    |  
|                                                                          |  |        |            |   |                      
|Long-term debt                                                            |  |        | 1,792,249  |   |                       | 25,000    |   |                           | 1,066,892 |   |              |           |   |              | 2,884,141  |  
|Other liabilities                                                         |  |        |           |   |                       | 7,022     |   |                           | 52,594    |   |              |           |   |              | 59,616     |  
|Pension liabilities                                                       |  |        |           |   |                       | 116,823   |   |                           | 92,565    |   |              |           |   |              | 209,388    |  
|Intercompany Borrowings                                                   |  |        | 121,332    |   |                       | 79,999    |   |                           | 881,062   |   |              | (1,082,393 | ) |              |           |  
|Deferred income taxes                                                     |  |        |           |   |                       | 1         |   |                           | 62,222    |   |              |           |   |              | 62,223     |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total liabilities                                                         |  |        | 1,975,456  |   |                       | 411,461   |   |                           | 2,619,166 |   |              | (1,217,503 | ) |              | 3,788,580  |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|                                                                          |  |        |            |   |                      
|Shareholders equity (deficit):                                           |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Additional paid-in capital                                                |  |        | 601,965    |   |                       | 2,097,858 |   |                           | 526,808   |   |              | (2,624,666 | ) |              | 601,965    |  
|Accumulated deficit                                                       |  |        | (1,357,780 | ) |                       | (936,728  | ) |                           | (965,612  | ) |              | 1,892,960  |   |              | (1,367,160 | )
|Accumulated other comprehensive income                                    |  |        | 195,587    |   |                       | 195,969   |   |                           | 186,053   |   |              | (382,022   | ) |              | 195,587    |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total Momentive Performance Materials Inc. shareholders equity (deficit) |  |        | (560,228   | ) |                       | 1,357,099 |   |                           | (252,751  | ) |              | (1,113,728 | ) |              | (569,608   | )
|                                                                          |  |        |            |   |                      
|Noncontrolling interests                                                  |  |        |           |   |                       |          |   |                           | 3,813     |   |              |           |   |              | 3,813      |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total shareholders equity (deficit)                                      |  |        | (560,228   | ) |                       | 1,357,099 |   |                           | (248,938  | ) |              | (1,113,728 | ) |              | (565,795   | )
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total liabilities and shareholders equity (deficit)                      |  | $      | 1,415,228  |   |                       | 1,768,560 |   |                           | 2,370,228 |   |              | (2,331,231 | ) |              | 3,222,785  |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  



16



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##### Table of Contents

Condensed Consolidated Balance Sheet as of December 31, 2009:



|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|------------------------------------------------------------------------- |  | ------ | ---------- | - | --------------------- | --------- | - | ------------------------- | --------- | - | ------------ | ---------- | - | ------------ | ---------- | -
|                                                                          |  | Parent |            |   | GuarantorSubsidiaries |           |   | Non-GuarantorSubsidiaries |           |   | Eliminations |            |   | Consolidated |           
|Assets                                                                    |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Current assets:                                                           |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Cash and cash equivalents                                                 |  | $      | 57,077     |   |                       | 9,514     |   |                           | 143,693   |   |              |           |   |              | 210,284    |  
|Receivables, net                                                          |  |        |           |   |                       | 97,560    |   |                           | 282,962   |   |              |           |   |              | 380,522    |  
|Due from affiliates                                                       |  |        | 3          |   |                       | 86,470    |   |                           | 26,677    |   |              | (104,214   | ) |              | 8,936      |  
|Inventories                                                               |  |        |           |   |                       | 158,054   |   |                           | 206,041   |   |              | (14,952    | ) |              | 349,143    |  
|Prepaid expenses                                                          |  |        |           |   |                       | 5,351     |   |                           | 3,143     |   |              |           |   |              | 8,494      |  
|Income tax receivable                                                     |  |        |           |   |                       | 2,651     |   |                           | 5,956     |   |              |           |   |              | 8,607      |  
|Deferred income taxes                                                     |  |        |           |   |                       | 1         |   |                           | 7,818     |   |              | 2,625      |   |              | 10,444     |  
|Other current assets                                                      |  |        |           |   |                       | 4,704     |   |                           | 552       |   |              |           |   |              | 5,256      |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total current assets                                                      |  |        | 57,080     |   |                       | 364,305   |   |                           | 676,842   |   |              | (116,541   | ) |              | 981,686    |  
|Property and equipment, net                                               |  |        |           |   |                       | 530,715   |   |                           | 634,860   |   |              |           |   |              | 1,165,575  |  
|Other long-term assets                                                    |  |        | 34,341     |   |                       |          |   |                           | 30,153    |   |              |           |   |              | 64,494     |  
|Deferred income taxes                                                     |  |        |           |   |                       |          |   |                           | 41,540    |   |              |           |   |              | 41,540     |  
|Investments in nonconsolidated affiliates                                 |  |        |           |   |                       |          |   |                           | 586       |   |              |           |   |              | 586        |  
|Investment in affiliates                                                  |  |        | 1,318,105  |   |                       | (244,329  | ) |                           |          |   |              | (1,073,776 | ) |              |           |  
|Intercompany borrowing                                                    |  |        |           |   |                       | 1,024,896 |   |                           | 72,234    |   |              | (1,097,130 | ) |              |           |  
|Intangible assets, net                                                    |  |        |           |   |                       | 97,587    |   |                           | 541,816   |   |              |           |   |              | 639,403    |  
|Goodwill                                                                  |  |        |           |   |                       |          |   |                           | 413,548   |   |              |           |   |              | 413,548    |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total assets                                                              |  | $      | 1,409,526  |   |                       | 1,773,174 |   |                           | 2,411,579 |   |              | (2,287,447 | ) |              | 3,306,832  |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Liabilities and Shareholders Equity (Deficit)                            |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Current liabilities:                                                      |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Trade payables                                                            |  | $      |           |   |                       | 70,498    |   |                           | 199,253   |   |              |           |   |              | 269,751    |  
|Accrued expenses and other liabilities                                    |  |        | 1,040      |   |                       | 65,087    |   |                           | 95,330    |   |              |           |   |              | 161,457    |  
|Accrued interest                                                          |  |        | 15,342     |   |                       | 244       |   |                           | 282       |   |              |           |   |              | 15,868     |  
|Due to affiliates                                                         |  |        |           |   |                       | 21,944    |   |                           | 85,049    |   |              | (104,214   | ) |              | 2,779      |  
|Accrued income taxes                                                      |  |        |           |   |                       |          |   |                           | 11,110    |   |              |           |   |              | 11,110     |  
|Deferred income taxes                                                     |  |        |           |   |                       |          |   |                           | 34,522    |   |              |           |   |              | 34,522     |  
|Current installments of long-term debt                                    |  |        |           |   |                       | 75,000    |   |                           | 22,977    |   |              |           |   |              | 97,977     |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total current liabilities                                                 |  |        | 16,382     |   |                       | 232,773   |   |                           | 448,523   |   |              | (104,214   | ) |              | 593,464    |  
|Long-term debt                                                            |  |        | 1,818,051  |   |                       | 25,000    |   |                           | 1,112,429 |   |              |           |   |              | 2,955,480  |  
|Other liabilities                                                         |  |        |           |   |                       | 7,109     |   |                           | 57,112    |   |              |           |   |              | 64,221     |  
|Pension liabilities                                                       |  |        |           |   |                       | 114,584   |   |                           | 94,154    |   |              |           |   |              | 208,738    |  
|Intercompany borrowings                                                   |  |        | 148,092    |   |                       | 72,234    |   |                           | 876,804   |   |              | (1,097,130 | ) |              |           |  
|Deferred income taxes                                                     |  |        |           |   |                       | 1         |   |                           | 63,240    |   |              |           |   |              | 63,241     |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total liabilities                                                         |  |        | 1,982,525  |   |                       | 451,701   |   |                           | 2,652,262 |   |              | (1,201,344 | ) |              | 3,885,144  |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Shareholders equity (deficit):                                           |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Additional paid-in capital                                                |  |        | 601,732    |   |                       | 2,097,626 |   |                           | 529,961   |   |              | (2,627,587 | ) |              | 601,732    |  
|Accumulated deficit                                                       |  |        | (1,354,791 | ) |                       | (957,250  | ) |                           | (945,511  | ) |              | 1,893,802  |   |              | (1,363,750 | )
|Accumulated other comprehensive income                                    |  |        | 180,060    |   |                       | 181,097   |   |                           | 171,221   |   |              | (352,318   | ) |              | 180,060    |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total Momentive Performance Materials Inc. shareholders equity (deficit) |  |        | (572,999   | ) |                       | 1,321,473 |   |                           | (244,329  | ) |              | (1,086,103 | ) |              | (581,958   | )
|Noncontrolling interests                                                  |  |        |           |   |                       |          |   |                           | 3,646     |   |              |           |   |              | 3,646      |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total shareholders equity (deficit)                                      |  |        | (572,999   | ) |                       | 1,321,473 |   |                           | (240,683  | ) |              | (1,086,103 | ) |              | (578,312   | )
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  
|Total liabilities and shareholders equity (deficit)                      |  | $      | 1,409,526  |   |                       | 1,773,174 |   |                           | 2,411,579 |   |              | (2,287,447 | ) |              | 3,306,832  |  
|                                                                          |  |        |            |   |                       |           |   |                           |           |   |              |            |   |              |            |  



17



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##### Table of Contents

Condensed Consolidated Statements of Operations for the fiscal three-month periods ended
March 28, 2010 and March 29, 2009:



|                                                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|---------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | ------- | - | ------------------------- | ------- | - | ------------ | -------- | - | ------------ | ------- | -
|                                                                       |  | Fiscal three-month period ended March 28, 2010 |        
|                                                                       |  | Parent                                         |         |   | GuarantorSubsidiaries |         |   | Non-GuarantorSubsidiaries |         |   | Eliminations |          |   | Consolidated |        
|Net sales                                                              |  | $                                              |        |   |                       | 256,094 |   |                           | 462,726 |   |              | (114,013 | ) |              | 604,807 |  
|Costs and expenses:                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|Cost of sales, excluding depreciation                                  |  |                                                |        |   |                       | 167,418 |   |                           | 322,108 |   |              | (112,472 | ) |              | 377,054 |  
|Selling, general and administrative expenses                           |  |                                                | (27,998 | ) |                       | 40,247  |   |                           | 89,656  |   |              |         |   |              | 101,905 |  
|Depreciation and amortization expenses                                 |  |                                                |        |   |                       | 19,541  |   |                           | 27,238  |   |              |         |   |              | 46,779  |  
|Research and development expenses                                      |  |                                                |        |   |                       | 10,393  |   |                           | 5,340   |   |              |         |   |              | 15,733  |  
|                                                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|Operating income (loss)                                                |  |                                                | 27,998  |   |                       | 18,495  |   |                           | 18,384  |   |              | (1,541   | ) |              | 63,336  |  
|Other income (expense):                                                |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|Interest income                                                        |  |                                                | 10      |   |                       | 23,451  |   |                           | 1,750   |   |              | (24,783  | ) |              | 428     |  
|Interest expense                                                       |  |                                                | (51,521 | ) |                       | (616    | ) |                           | (33,656 | ) |              | 24,783   |   |              | (61,010 | )
|Other income (expense), net                                            |  |                                                | 20,524  |   |                       | (20,780 | ) |                           | 341     |   |              | (421     | ) |              | (336    | )
|                                                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|Income (loss) before income taxes                                      |  |                                                | (2,989  | ) |                       | 20,550  |   |                           | (13,181 | ) |              | (1,962   | ) |              | 2,418   |  
|Income taxes (benefit)                                                 |  |                                                |        |   |                       | 28      |   |                           | 6,755   |   |              | (1,120   | ) |              | 5,663   |  
|                                                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|Net income (loss)                                                      |  |                                                | (2,989  | ) |                       | 20,522  |   |                           | (19,936 | ) |              | (842     | ) |              | (3,245  | )
|Net income attributable to noncontrolling interests                    |  |                                                |        |   |                       |        |   |                           | (165    | ) |              |         |   |              | (165    | )
|                                                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  
|Net income (loss) attributable to Momentive Performance Materials Inc. |  | $                                              | (2,989  | ) |                       | 20,522  |   |                           | (20,101 | ) |              | (842     | ) |              | (3,410  | )
|                                                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |          |   |              |         |  



|                                                              |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|------------------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | ------- | - | ------------------------- | ------- | - | ------------ | ------- | - | ------------ | -------- | -
|                                                              |  | Fiscal three-month period ended March 29, 2009 |        
|                                                              |  | Parent                                         |         |   | GuarantorSubsidiaries |         |   | Non-GuarantorSubsidiaries |         |   | Eliminations |         |   | Consolidated |         
|Net sales                                                     |  | $                                              |        |   |                       | 190,977 |   |                           | 301,139 |   |              | (74,057 | ) |              | 418,059  |  
|Costs and expenses:                                           |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|Cost of sales, excluding depreciation                         |  |                                                |        |   |                       | 137,999 |   |                           | 244,839 |   |              | (71,356 | ) |              | 311,482  |  
|Selling, general and administrative expenses                  |  |                                                | (15,228 | ) |                       | 34,745  |   |                           | 84,244  |   |              |        |   |              | 103,761  |  
|Depreciation and amortization                                 |  |                                                |        |   |                       | 23,681  |   |                           | 25,918  |   |              |        |   |              | 49,599   |  
|Research and development expenses                             |  |                                                |        |   |                       | 10,310  |   |                           | 5,676   |   |              |        |   |              | 15,986   |  
|                                                              |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|Operating income (loss)                                       |  |                                                | 15,228  |   |                       | (15,758 | ) |                           | (59,538 | ) |              | (2,701  | ) |              | (62,769  | )
|Other income (expense):                                       |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|Interest income                                               |  |                                                |        |   |                       | 24,003  |   |                           | 1,924   |   |              | (24,939 | ) |              | 988      |  
|Interest expense                                              |  |                                                | (53,158 | ) |                       | (2,638  | ) |                           | (35,447 | ) |              | 24,939  |   |              | (66,304  | )
|Other income (expense), net                                   |  |                                                | (56,133 | ) |                       | (61,306 | ) |                           | 10,748  |   |              | 116,664 |   |              | 9,973    |  
|                                                              |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|Income (loss) before income taxes                             |  |                                                | (94,063 | ) |                       | (55,699 | ) |                           | (82,313 | ) |              | 113,963 |   |              | (118,112 | )
|Income taxes (benefit)                                        |  |                                                |        |   |                       | 432     |   |                           | (21,133 | ) |              | 56      |   |              | (20,645  | )
|                                                              |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|Net loss                                                      |  |                                                | (94,063 | ) |                       | (56,131 | ) |                           | (61,180 | ) |              | 113,907 |   |              | (97,467  | )
|Net loss attributable to the noncontrolling interest          |  |                                                |        |   |                       |        |   |                           | 648     |   |              |        |   |              | 648      |  
|                                                              |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  
|Net loss attributable to Momentive Performance Materials Inc. |  | $                                              | (94,063 | ) |                       | (56,131 | ) |                           | (60,532 | ) |              | 113,907 |   |              | (96,819  | )
|                                                              |  |                                                |         |   |                       |         |   |                           |         |   |              |         |   |              |          |  



18



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##### Table of Contents

Condensed Consolidated Statement of Cash Flows for the fiscal three-month period ended March 28, 2010:



|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|--------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | ------- | - | ------------------------- | ------- | - | ------------ | - | ------------ | ------- | -
|                                                    |  | Fiscal three-month period ended March 28, 2010 |        
|                                                    |  | Parent                                         |         |   | GuarantorSubsidiaries |         |   | Non-GuarantorSubsidiaries |         |   | Eliminations |   | Consolidated |        
|                                                    |  |                                                |         |   |                      
|Net cash provided by (used in) operating activities |  | $                                              | 24,724  |   |                       | 43,083  |   |                           | (10,183 | ) |              |  |              | 57,624  |  
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|Cash flows from investing activities:               |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|Capital expenditures                                |  |                                                |        |   |                       | (6,848  | ) |                           | (4,252  | ) |              |  |              | (11,100 | )
|Purchase of intangible assets                       |  |                                                |         |   |                       | (527    | ) |                           | (129    | ) |              |   |              | (656    | )
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|                                                    |  |                                                |         |   |                      
|Net cash used in investing activities               |  |                                                |        |   |                       | (7,375  | ) |                           | (4,381  | ) |              |  |              | (11,756 | )
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|Cash flows from financing activities:               |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|Dividends paid within MPM Inc., net                 |  |                                                |        |   |                       | 3,153   |   |                           | (3,153  | ) |              |  |              |        |  
|Payments of long term debt                          |  |                                                |         |   |                       | (75,000 | ) |                           |        |   |              |  |              | (75,000 | )
|Net borrowings with affiliates                      |  |                                                | (25,446 | ) |                       | 30,832  |   |                           | (5,386  | ) |              |  |              |        |  
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|                                                    |  |                                                |         |   |                      
|Net cash used in financing activities               |  |                                                | (25,446 | ) |                       | (41,015 | ) |                           | (8,539  | ) |              |  |              | (75,000 | )
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|                                                    |  |                                                |         |   |                      
|Decrease in cash and cash equivalents               |  |                                                | (722    | ) |                       | (5,307  | ) |                           | (23,103 | ) |              |  |              | (29,132 | )
|Effect of exchange rate changes on cash             |  |                                                | (27,493 | ) |                       |        |   |                           | 32,971  |   |              |  |              | 5,478   |  
|Cash and cash equivalents, beginning of period      |  |                                                | 57,077  |   |                       | 9,514   |   |                           | 143,693 |   |              |  |              | 210,284 |  
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  
|Cash and cash equivalents, end of period            |  | $                                              | 28,862  |   |                       | 4,207   |   |                           | 153,561 |   |              |  |              | 186,630 |  
|                                                    |  |                                                |         |   |                       |         |   |                           |         |   |              |   |              |         |  

Condensed Consolidated Statement of Cash Flows for the fiscal three-month period ended March 29, 2009:



|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|--------------------------------------------------- |  | ---------------------------------------------- | ------- | - | --------------------- | -------- | - | ------------------------- | ------- | - | ------------ | - | ------------ | ------- | -
|                                                    |  | Fiscal three-month period ended March 29, 2009 |        
|                                                    |  | Parent                                         |         |   | GuarantorSubsidiaries |          |   | Non-GuarantorSubsidiaries |         |   | Eliminations |   | Consolidated |        
|                                                    |  |                                                |         |   |                      
|Net cash (used in) provided by operating activities |  | $                                              | 4,289   |   |                       | 2,909    |   |                           | (42,898 | ) |              |  |              | (35,700 | )
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Cash flows from investing activities:               |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Capital expenditures                                |  |                                                |        |   |                       | (3,572   | ) |                           | (5,197  | ) |              |  |              | (8,769  | )
|Purchases of intangible assets                      |  |                                                |        |   |                       | (572     | ) |                           | (395    | ) |              |  |              | (967    | )
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Net cash used in investing activities               |  |                                                |        |   |                       | (4,144   | ) |                           | (5,592  | ) |              |  |              | (9,736  | )
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Cash flows from financing activities:               |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Capital contribution to affiliates                  |  |                                                |        |   |                       | (4,925   | ) |                           | 4,925   |   |              |  |              |        |  
|Net change in short-term borrowings                 |  |                                                |        |   |                       |         |   |                           | (1,813  | ) |              |  |              | (1,813  | )
|Proceeds from long-term debt                        |  |                                                |        |   |                       | 90,000   |   |                           | 1,971   |   |              |  |              | 91,971  |  
|Payments of long-term debt                          |  |                                                |        |   |                       |         |   |                           | (187    | ) |              |  |              | (187    | )
|Funds remitted to joint venture                     |  |                                                |        |   |                       |         |   |                           | (4,900  | ) |              |  |              | (4,900  | )
|Net borrowings with affiliates                      |  |                                                | 258,941 |   |                       | (283,562 | ) |                           | 24,621  |   |              |  |              |        |  
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Net cash provided by (used in) financing activities |  |                                                | 258,941 |   |                       | (198,487 | ) |                           | 24,617  |   |              |  |              | 85,071  |  
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|                                                    |  |                                                |         |   |                      
|(Decrease) increase in cash and cash equivalents    |  |                                                | 263,230 |   |                       | (199,722 | ) |                           | (23,873 | ) |              |  |              | 39,635  |  
|Effect of exchange rate changes on cash             |  |                                                | (15,161 | ) |                       |         |   |                           | 16,081  |   |              |  |              | 920     |  
|Cash and cash equivalents, beginning of period      |  |                                                | 1,894   |   |                       | 200,667  |   |                           | 137,981 |   |              |  |              | 340,542 |  
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  
|Cash and cash equivalents, end of period            |  | $                                              | 249,963 |   |                       | 945      |   |                           | 130,189 |   |              |  |              | 381,097 |  
|                                                    |  |                                                |         |   |                       |          |   |                           |         |   |              |   |              |         |  



19



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

The following discussion of our results of operations and financial condition should be read in conjunction with the financial
statements and notes thereto included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2009.

Forward-Looking and Cautionary Statements

Certain statements included in this report may constitute forward-looking statements within the meaning of and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, our management may
from time to time make oral forward-looking statements. All statements other than statements of historical facts are statements that could be forward-looking statements. Forward-looking statements may be identified by the words believe,
expect, anticipate, project, plan, estimate, will or intend and similar words or expressions. These forward-looking statements reflect our current views with respect
to future events and are based on currently available financial, economic and competitive data and our current business plans. Actual results could vary materially depending on risks and uncertainties that may affect our operations, markets,
services, prices and other factors. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: our substantial leverage; limitations in operating our business
contained in the documents governing our indebtedness, including the restrictive covenants therein; the continuation and strength of the global economic recovery; changes in prices and availability of raw materials and key intermediates; rising
energy costs, increases in interest rates; fluctuations in currency exchange rates; changes in government regulation or the costs of compliance with such regulation; our reliance on patents, unpatented proprietary know-how and trade secrets; risks
of exposure of workers, customers or users of end-products to hazardous materials; and disputes with the unions or works councils to which our employees belong and other factors listed under Risk Factors in this Quarterly Report on Form
10-Q. For a more detailed discussion of these and other risk factors, see our Annual Report on Form 10-K for the year ended December 31, 2009 and Part II, Item 1A of this Quarterly Report on Form 10-Q. All forward-looking statements are
expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update or revise
any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Critical
Accounting Policies

Our principal accounting policies are described under the Notes to Condensed Consolidated
Financial StatementsSummary of Significant Accounting Policies. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and
liabilities and, in some instances, the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. We have discussed our most significant estimates and assumptions in our Annual Report on
Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission. There have been no material changes to our critical accounting policies or in such estimates and assumptions.

Recently Issued Accounting Standards

In January 2010, the FASB issued ASU 2010-6, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures About Fair
Value Measurements. This ASU requires new disclosures regarding transfers and activity within the three levels of fair value hierarchy, as well as enhanced disclosures regarding the class of assets disclosed and the inputs and valuation
techniques used to determine fair value. This ASU is effective for interim and annual periods beginning after December 15, 2009. We adopted the provisions of this ASU and it did not have a material impact on our consolidated financial
statements.

Effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter, the Consolidations Topic, ASC 810-10, requires an enterprise to perform an analysis to determine whether the enterprises
variable interest or interests give it a controlling financial interest in a variable interest entity, and requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. We adopted the provisions of
this ASC and it did not have a material impact on our consolidated financial statements.

Effective as of the beginning of the
first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter, the Transfers and Servicing Topic, ASC 860-10,
intends to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. This ASC must be applied to transfers occurring on or after the effective date. We adopted the provisions of
this ASC and it did not have a material impact on our consolidated financial statements.



20



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##### Table of Contents

Business Outlook

Our business continued to improve in the first quarter of 2010 as the global economic recovery gained traction. Although the global
recession severely impacted our fiscal 2009 results, with sales and Adjusted EBITDA declining by approximately 21% and 25%, respectively, our sales and Adjusted EBITDA have rebounded considerably since the first quarter of 2009 but our sales have
not yet returned to normalized pre-recessionary levels. In the first quarter of 2010, Adjusted EBITDA on a sequential basis increased by approximately 10% versus the fourth quarter of 2009 building on improvements in previous quarters but sales
declined slightly by 0.4%, primarily as a result of normal seasonality in our Silicones business. The recovery in our Adjusted EBITDA over the last four quarters has been primarily driven by a sales increase, the success of our cost cuttings actions
and lower raw material costs. Customer spending, although much improved, remains cautious and dependent on continued economic growth. Demand in a few of our end markets, most notably the construction, textiles, and furniture sectors, is also still
relatively weak. Geographically, recovery in our business has occurred fastest in South Asia and generally across all emerging markets. Although we expect to continue to see improved volumes in 2010 due to the global economic recovery, raw
materials prices, which began to rise in the first quarter, will likely further increase throughout the year. While there remains uncertainty in the marketplace about the strength of the global recovery and the extent of inflationary pressures
going forward, we expect to generate much higher year-over-year sales and Adjusted EBITDA in 2010 as compared to 2009, as last years results were significantly weighed down by the global recession, especially in the first half of the
year. In 2010, we will continue to focus on growth in our specialties business, improving our productivity and controlling costs.

Results
of Operations

The following table sets forth certain historical consolidated financial information, in both dollars and
percentages of net sales, for the fiscal three-month periods ended March 28, 2010 and March 29, 2009:

Fiscal
three-month period ended March 28, 2010 compared to fiscal three-month period ended March 29, 2009 (Unaudited)



|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|------------------------------------------------------------- |  | ----------------------------------- | ----- | - | --------------- | ----- | -- |  | - | ------ | - |  | ----- | --
|                                                              |  | For fiscal three-month period ended |      
|                                                              |  | M arch 28, 2010                     |       |   | M arch 29, 2009 |      
|                                                              |  |                                     |       |  
|Net sales                                                     |  | $                                   | 604.8 |   |                 | 100.0 | %  |  | $ | 418.1  |   |  | 100.0 | % 
|Costs and expenses:                                           |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Cost of sales, excluding depreciation                         |  |                                     | 377.1 |   |                 | 62.3  | %  |  |   | 311.5  |   |  | 74.5  | % 
|Selling, general and administrative expenses                  |  |                                     | 147.4 |   |                 | 24.4  | %  |  |   | 142.1  |   |  | 34.0  | % 
|Research and development expenses                             |  |                                     | 15.7  |   |                 | 2.6   | %  |  |   | 16.0   |   |  | 3.8   | % 
|Restructuring and other costs                                 |  |                                     | 1.3   |   |                 | 0.2   | %  |  |   | 11.3   |   |  | 2.7   | % 
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Operating income (loss)                                       |  |                                     | 63.3  |   |                 | 10.5  | %  |  |   | (62.8  | ) |  | (15.0 | )%
|Other income (expenses)                                       |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Interest expense, net                                         |  |                                     | (60.6 | ) |                 | (10.0 | )% |  |   | (65.2  | ) |  | (15.6 | )%
|Other (expense) income, net                                   |  |                                     | (0.3  | ) |                 | (0.1  | )% |  |   | 10.0   |   |  | 2.4   | % 
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Income (loss) before income taxes                             |  |                                     | 2.4   |   |                 | 0.4   | %  |  |   | (118.0 | ) |  | (28.2 | )%
|Income taxes                                                  |  |                                     | 5.7   |   |                 | 0.9   | %  |  |   | (20.6  | ) |  | (4.9  | )%
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Net loss                                                      |  |                                     | (3.3  | ) |                 | (0.5  | )% |  |   | (97.4  | ) |  | (23.3 | )%
|                                                              |  |                                     |       |  
|Net (income) loss attributable to the noncontrolling interest |  |                                     | (0.1  | ) |                 |      |    |  |   | 0.6    |   |  | 0.1   | % 
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Net loss attributable to Momentive Performance Materials Inc. |  | $                                   | (3.4  | ) |                 | (0.6  | )% |  | $ | (96.8  | ) |  | (23.3 | )%
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|                                                              |  |                                     |       |  
|Net Sales by Segment                                          |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Silicones                                                     |  | $                                   | 538.7 |   |                 | 89.1  | %  |  | $ | 384.5  |   |  | 92.0  | % 
|Quartz                                                        |  |                                     | 66.1  |   |                 | 10.9  | %  |  |   | 33.6   |   |  | 8.0   | % 
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   
|Total                                                         |  | $                                   | 604.8 |   |                 | 100.0 | %  |  | $ | 418.1  |   |  | 100.0 | % 
|                                                              |  |                                     |       |   |                 |       |    |  |   |        |   |  |       |   

Net Sales. Net sales in the fiscal three-month period ended March 28, 2010 were
$604.8 million, compared to $418.1 million for the same period in 2009, an increase of 44.7%. The increase was primarily due to an increase in sales volume of 44.1% and favorable exchange rate fluctuations of 2.2%, partially offset by a decrease in
selling prices. Foreign exchange impacts were primarily related to the weakening in the U.S. dollar against the Euro.

Net
sales for our Silicones segment in the fiscal three-month period ended March 28, 2010 were $538.7 million, compared to $384.5 million for the same period in 2009, an increase of 40.1%. The increase was primarily due to an increase in sales
volume of 39.7% and favorable exchange rate fluctuations of 2.4%, partially offset by a decrease in selling prices. Sales volume for our Silicones segment was positively impacted on a year-over-year basis by stronger demand in the automotive,
construction, textiles, and furniture sectors. Compared to the fourth quarter of 2009, however, net sales for our Silicones segment declined by 2.2% primarily due to normal seasonality and fluctuations in foreign exchange rates.



21



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We continue to focus on providing more high-value specialty products to our customers versus
lower-margin commoditized or core products. Demand for specialty products was impacted less by the recession compared to core products. We anticipate core products, however, to recover at a faster pace than specialty products in the upcoming
quarters as consumer demand improves.

Net sales for our Quartz segment in the fiscal three-month period ended March 28,
2010 were $66.1 million, compared to $33.6 million for the same period in 2009, an increase of 96.7%. The increase was primarily a result of strong overall demand on a year-over-year basis for semiconductor related products. Compared to the fourth
quarter of 2009, net sales for our Quartz segment grew 17.2% primarily due to improved semiconductor demand on a sequential basis as production levels continued to recover at chipmakers. We expect further sequential improvement in semiconductor
related product sales in the second quarter of 2010.

Cost of Sales, excluding depreciation. Cost of
sales, excluding depreciation, in the fiscal three-month period ended March 28, 2010 was $377.1 million, compared to $311.5 million for the same period in 2009, an increase of 21.1%. The increase was primarily due to higher sales volume of
44.1%, partially offset by significantly higher factory leverage, deflation in raw material and energy related costs of 2.8%, and savings from restructuring and cost actions.

Cost of sales, excluding depreciation, for our Silicones segment was $341.0 million, compared to $288.6 million for the same period in
2009, an increase of 18.2%. The increase was primarily due to higher sales volume of 39.7%, partially offset by favorable factory leverage and lower raw material and energy related costs of 3.1%.

Cost of sales, excluding depreciation, for our Quartz segment was $36.0 million, compared to $22.9 million for the same period in 2009,
an increase of 57.2%. The increase was primarily due to higher sales volume of 94.9%, partially offset by favorable factory leverage and savings from restructuring and cost actions.

Selling, General and Administrative Expenses. Selling, general and administrative expenses in the fiscal three-month
period ended March 28, 2010 were $147.4 million, compared to $142.1 million for the same period in 2009, an increase of 3.7%. The increase was primarily due to unfavorable fluctuations in foreign currency exchange rates, partially offset by
lower depreciation and amortization expense.

Research and Development Expenses. Research and development
expenses in the fiscal three-month period ended March 28, 2010 were $15.7 million, compared to $16.0 million for the same period in 2009, a decrease of 1.9%. The decrease was primarily due to timing of program expenditures related to new
projects, efficiencies and other cost reduction initiatives.

Restructuring and Other Costs.Restructuring and
other costs in the fiscal three-month period ended March 28, 2010 were $1.3 million, compared to $11.3 million for the same period in 2009. For the fiscal three-month period ended March 28, 2010, these costs were comprised of restructuring
costs (primarily severance payments associated with previously announced workforce reductions) of $0.1 million and other costs (primarily one-time payments for services) of $1.2 million. For the fiscal three-month period ended March 29, 2009,
these costs were comprised of restructuring costs of $15.3 million and other costs of $(4.0) million. Other costs of $(4.0) million for the fiscal three-month period ended March 29, 2009 included a one-time benefit reduction and wage tax
credits of $5.4 million. See Note 2(c) to the condensed consolidated financial statements for additional disclosure.

Interest Expense, net. Interest expense, net in the fiscal three-month period ended March 28, 2010 was $60.6
million, compared to $65.2 million for the same period in 2009, a decrease of 7.1%. The decrease was primarily due to overall lower interest rates on our variable-rate term loans and lower average borrowings under our revolving credit facility.

Other (Expense) Income, net.Other expense, net in the fiscal three-month period ended March 28, 2010 was
an expense of $0.3 million, compared to income of $10.0 million for the same period in 2009. For the fiscal three-month period ended March 28, 2010, other expense, net included an unrealized loss on natural gas hedging of $0.5 million. For the
fiscal three-month period ended March 29, 2009, other income, net included an unrealized gain of $6.0 million and a realized gain of $4.0 million related to foreign currency forward contracts.

Income taxes. The effective tax rate was 234.20% and 17.48% for the fiscal three-month periods ended March 28,
2010 and March 29, 2009, respectively. The change in the effective tax rate was primarily due to a change in the amount of income (loss) before income taxes, changes in the tax rates applied in the various jurisdictions in which we operate,
current period foreign exchange gains and the maintenance of a full valuation allowance against a substantial amount of our net deferred tax assets. The valuation allowance, which relates to deferred tax assets (primarily in the U.S., Germany and
Japan), was established and maintained based on our assessment that the net deferred tax assets will likely not be realized.

Net loss attributable to Momentive Performance Materials Inc. Net loss in the fiscal three-month period ended
March 28, 2010 was $3.4 million, compared to $96.8 million for the same period in 2009. The change was a result of the effects described above.



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Liquidity and Capital Resources



|                                                                                                 |  |                                 |       |   |                |       |  
|------------------------------------------------------------------------------------------------ |  | ------------------------------- | ----- | - | -------------- | ----- | -
|                                                                                                 |  | Fiscal three-month period ended |      
|                                                                                                 |  | March 28, 2010                  |       |   | March 29, 2009 |      
|                                                                                                 |  | (dollars in millions)           |      
|Cash provided by (used in) operating activities                                                  |  | $                               | 57.6  |   |                | (35.7 | )
|Cash used in investing activities                                                                |  |                                 | (11.7 | ) |                | (9.7  | )
|Cash (used in) provided by financing activities                                                  |  |                                 | (75.0 | ) |                | 85.0  |  
|                                                                                                 |  |                                 |       |   |                |       |  
|                                                                                                 |  |                                
|(Decrease) increase in cash and cash equivalents, before effect of exchange rate changes on cash |  | $                               | (29.1 | ) |                | 39.6  |  
|                                                                                                 |  |                                 |       |   |                |       |  

Operating activities.Cash provided by operating activities was $57.6 million in the fiscal
three-month period ended March 28, 2010, compared to cash used in operating activities of $35.7 million in the fiscal three-month period ended March 29, 2009. Cash provided by operating activities in the fiscal three-month period ended
March 28, 2010 was primarily due to increases in operating income, accounts payable and accrued expenses primarily due to higher material purchases related to economic recovery, partially offset by increases in accounts receivables (due to the
timing of sales) and higher inventory levels to support continued economic growth. Cash used in operating activities in the fiscal three-month period ended March 29, 2009 was primarily due to a decline in operating income and decreases in
accounts payable (primarily due to lower material purchases and capital projects in the quarter), partially offset by decreases in accounts receivables and inventory as a result of management efforts to reduce working capital requirements.

Investing activities. Cash used in investing activities was $11.7 million in the fiscal three-month period
ended March 28, 2010, compared to $9.7 million in the fiscal three-month period ended March 29, 2009. Cash used in investing activities in the fiscal three-month period ended March 28, 2010 primarily consisted of ongoing expenditures
for environmental, health and safety compliance and maintenance projects. During the fiscal three-month period ended March 29, 2009, management made a concerted effort to preserve cash as a result of economic conditions impacting our industry
and reduced capital spending.

Financing activities. Cash used in financing activities was $75.0 million in the
fiscal three-month period ended March 28, 2010, compared to cash provided by financing activities of $85.0 million in the fiscal three-month period ended March 29, 2009. Cash used in financing activities in the fiscal three-month period
ended March 28, 2010 consisted of principal payments of $75.0 million under our revolving credit facility. Cash provided by financing activities in the fiscal three-month period ended March 29, 2009 primarily consisted of an additional
$90.0 million draw down under our revolving credit facility, partially offset by a $4.9 million capital contribution to our siloxane joint venture in Jiande, China.

For 2010, we expect the following significant cash outflows: net principal payments of $75 million under our revolving credit
facility, cash interest payments on our Second Lien Notes, Senior Notes, Senior Toggle Notes and Senior Subordinated Notes due in the second quarter ($85 million) and fourth quarter ($85 million assuming we continue to elect to pay PIK interest on
our Senior Toggle Notes) of approximately $170 million in total, annual cash principal (due quarterly) and interest payments (due monthly) related to our variable rate term loans of approximately $11 million and $32 million, respectively,
annual cash principal (due semi-annually) and interest payments (due quarterly) related to our China Construction Bank construction loan of approximately $11 million and $3 million, respectively, annual global pension fund contributions of
approximately $17 million, payments on our restructuring reserves of approximately $11 million and annual cash income tax payments estimated at $12 million. Capital spending in 2010 is expected to be between $90 million and $110 million,
excluding restructuring activities. We expect to fund these significant outflows with cash on-hand and cash generated from operations.



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Liquidity

Our primary sources of liquidity are cash on hand, cash flow from operations and funds available under a senior secured credit facility.
Our primary continuing liquidity needs are to finance our working capital, capital expenditures and debt service obligations.

We had $2,909.7 million of indebtedness at March 28, 2010. Accordingly, we have significant debt service obligations.

Our senior secured credit facility at March 28, 2010 consists of two variable-rate term loans in an aggregate principal amount of
approximately $1,025.8 million, a $300.0 million revolving credit facility that includes borrowing capacity available for letters of credit of up to $100.0 million, and a $34.0 million synthetic letter of credit facility. One of our term loans is
denominated in euros. There were $25.0 million of borrowings outstanding under the revolving credit facility as of March 28, 2010. The outstanding letters of credit under the revolving credit facility at March 28, 2010 were $39.0 million,
leaving unused borrowing capacity of $236.0 million. Outstanding letters of credit issued under the synthetic letter of credit facility at March 28, 2010 were $33.6 million, leaving unused capacity of $0.4 million.

Principal repayments on our term loans are due and payable in quarterly installments of approximately $2.7 million (depending on exchange
rates), representing 0.25% of the original principal amounts, on the last day of each calendar quarter. The remaining balance of the term loans will be due and payable in full on December 4, 2013. The revolving credit facility is available
until December 3, 2012. The synthetic letter of credit facility amortizes at a rate of $350,000 per annum, 1% of the original commitment, and is due and payable in full on December 4, 2013. We must also prepay the term loans, subject to
certain exceptions, with (1) 50% (which percentage may be reduced depending on the achievement of certain ratios of our net first-lien secured indebtedness to Adjusted EBITDA) of excess cash flow (as defined in the credit agreement) less the
amount of certain voluntary prepayments as described in the credit agreement (beginning with the second half of the fiscal year ending December 31, 2007); (2) 100% of the net cash proceeds of any incurrence of debt other than excluded debt
issuances (as defined in the credit agreement) and (3) 100% of the net cash proceeds of all non-ordinary course asset sales and casualty and condemnation events, to the extent the Company does not reinvest or commit to reinvest those proceeds
in assets to be used in its business or to make certain other permitted investments within 15 months (and, if committed to be reinvested, actually reinvested within 36 months). We did not have excess cash flow under the terms of our credit agreement
in calendar year 2008 and 2009. On March 31,2010, the interest rate swap that we entered into during 2008 matured. Under this interest rate swap, we received one-month LIBOR and paid a fixed rate of 2.48% on a notional value of $185.0 million.
We designated the interest rate swap as a cash flow hedge of variable interest rate risk associated with the first $185.0 million of our U.S. dollar denominated term loan (tranche B-1).

As of March 28, 2010, we have outstanding $200.0 million in aggregate principal amount of
121/2% Second-Lien Senior Secured Notes due 2014
(the Second Lien Notes), $716.6 million in aggregate principal amount of
93/4% Senior Notes due 2014 (the Dollar
Fixed-Rate Notes), 245.2 million in aggregate principal amount of 9% Senior Notes due 2014 (the Euro Fixed-Rate Notes and together with the Dollar Fixed-Rate Notes, the Senior Notes), $203.1 million in
aggregate principal amount of 101/8% /
107/8% Senior Toggle Notes due 2014 (the
Senior Toggle Notes), and $381.9 million in aggregate principal amount of
111/2% Senior Subordinated Notes due 2016 (the
Senior Subordinated Notes). The Second Lien Notes, Dollar Fixed-Rate Notes, the Euro Fixed-Rate Notes, the Senior Toggle Notes and the Senior Subordinated Notes are five separate series of notes issued under separate indentures,
including for purposes of, among other things, payments of principal and interest, events of default and consents to amendments to the applicable indenture and the applicable notes.

The Second Lien Notes are guaranteed on a senior secured basis by each of our U.S. subsidiaries that is a borrower or guarantor under our
existing senior secured credit facility described above. The Second Lien Notes are secured by a second-priority security interest in certain assets of the Company and such U.S. subsidiaries, which interest is junior in priority to the liens on
substantially the same collateral securing our existing senior secured credit facility. The Second Lien Notes mature on June 15, 2014 and bear interest at a rate per annum of 12.5%, payable semiannually on June 15 and December 15 of
each year, commencing on December 15, 2009.

The Senior Notes are unsecured senior obligations of the
Company, which mature on December 1, 2014. The Senior Notes are guaranteed on an unsecured senior basis by each of our U.S. subsidiaries that is a borrower or guarantor under our senior secured credit facility. The portion of the Senior Notes
which represent Dollar Fixed-Rate Notes and Euro Fixed-Rate Notes bear interest at a rate per annum of 93/4% and 9%, respectively, payable semiannually on June 1 and December 1 of each year.

The Senior Toggle Notes are unsecured senior obligations of the Company, which mature on December 1, 2014. The
Senior Toggle Notes are guaranteed on an unsecured senior basis by each of our U.S. subsidiaries that is a borrower or guarantor under our senior secured credit facility. Interest on the Senior Toggle Notes is payable semiannually on June 1 and
December 1 of each year. For any interest payment period after the initial interest payment period and through December 1, 2010, we may, at our option, elect to pay interest on the Senior Toggle Notes (1) entirely in cash (Cash
Interest) or (2) entirely by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing additional Senior Toggle Notes (PIK Interest). We must elect the form of interest payment with respect to each
interest period by delivering a notice to the trustee prior to the beginning of each interest period. After December 1, 2010, we are required to make all interest payments on the Senior Toggle Notes entirely in cash. Cash Interest on the Senior
Toggle Notes accrues at a rate of 101/8% per
annum. PIK Interest on the Senior Toggle Notes accrues at a rate of
107/8% per



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annum. Prior to December 1, 2009, we made the permitted election under the indenture governing the Senior Toggle Notes to pay interest that is due on June 1, 2010 as PIK Interest.
Previously, we also made this pay-in-kind election for the interest payments due on December 1, 2009, June 1, 2009 and December 1, 2008, increasing the outstanding balance of the Senior Toggle Notes by approximately $10.5 million,
$17.2 million and $16.3 million on such dates, respectively. For future interest periods beginning prior to December 1, 2010, pursuant to the terms of the Senior Toggle Notes, interest on the Senior Toggle Notes will remain due and payable as
elected during the immediately preceding interest rate period unless we make a new election prior to the beginning of the applicable interest period. Under the indenture for the Senior Toggle Notes, we are required to redeem for cash a portion of
the Senior Toggle Notes equal to the Mandatory Principal Redemption Amount (as defined below) on June 1, 2012. The redemption price for the portion of the Senior Toggle Notes required to be redeemed will be 100% of the principal
amount of the Senior Toggle Notes plus any accrued interest thereon on the date of redemption. The Mandatory Principal Redemption Amount means the portion of the Senior Toggle Notes required to be redeemed to prevent such notes from
being treated as an applicable high yield discount obligation within the meaning of Section 163(i)(l) of the Internal Revenue Code. We currently estimate that the payment of interest in the form of PIK Interest will result in us
being required to redeem between $35 million and $45 million of the Senior Toggle Notes pursuant to those provisions.

The Senior Subordinated Notes are unsecured senior subordinated obligations of the Company, which mature on
December 1, 2016. The Senior Subordinated Notes are guaranteed on an unsecured senior subordinated basis by each of our U.S. subsidiaries that is a borrower or guarantor under our senior secured credit facility. Each Senior Subordinated Note
bears interest at 111/2% per annum, payable
semiannually on June 1 and December 1 of each year.

Our senior secured credit facility contains various restrictive
covenants that prohibit us and/or restrict our ability to prepay indebtedness, including our Second Lien Notes, Senior Notes, Senior Toggle Notes and Senior Subordinated Notes (collectively, the notes). If there are any borrowings under
the revolving credit agreement (or outstanding letters of credit that have not been cash collateralized), our credit facility requires us to maintain a specified net first-lien indebtedness to Adjusted EBITDA ratio. See Covenants under our
Senior Secured Credit Facility and the Notes below. In addition, our senior secured credit facility and notes, among other things, restrict our ability to incur indebtedness or liens, make investments or declare or pay any dividends. However,
all of these restrictions are subject to significant exceptions.

Our ability to make scheduled payments of principal, to pay
interest on, or to refinance our indebtedness, including the notes, or to fund planned capital expenditures, will depend on our ability to generate cash in the future. This ability is subject to general economic, financial, competitive, legislative,
regulatory and other factors that may be beyond our control.

Based on our current assessment of the economic outlook, we
believe that cash flow from operations and available cash, together with available borrowings under our senior secured credit facility, will be adequate to meet our liquidity needs for the next twelve months.

We cannot assure investors, however, that our business will generate sufficient cash flow from operations or that borrowings will be
available to us under our senior secured credit facility in an amount sufficient to enable us to pay our indebtedness, including the notes issued, or to fund our other liquidity needs. In addition, upon the occurrence of certain events, such as a
change of control, we could be required to repay or refinance our indebtedness. We cannot assure investors that we will be able to refinance any of our indebtedness, including our senior secured credit facility and the notes issued, on commercially
reasonable terms or at all.

Potential Debt Repurchases and Other Transactions

From time to time, depending upon market, pricing and other conditions, as well as on our cash balances and liquidity, we or our
affiliates, including Apollo, may seek to acquire (and have acquired) notes or other indebtedness of Momentive through open market purchases, privately negotiated transactions, tender offers, redemption or otherwise, upon such terms and at such
prices as we or our affiliates may determine (or as may be provided for in the indentures governing the notes), for cash or other consideration. In addition, we have considered and will continue to evaluate potential transactions to reduce net debt,
such as debt for debt exchanges and other transactions. There can be no assurance as to which, if any, of these alternatives or combinations thereof we or our affiliates may choose to pursue in the future as the pursuit of any alternative will
depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our financing documents.

Contractual Obligations

Information related to our contractual obligations at December 31, 2009 can be found in our Annual Report on Form 10-K for the year
ended December 31, 2009 filed with the Securities and Exchange Commission. There have been no material changes in our contractual obligations to our previous disclosures made on this matter.



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Effect of Inflation

Inflation in general did not negatively impact our operating results during the fiscal three-month period ended March 28, 2010
compared to the same period in 2009. We cannot assure investors, however, that we will not be affected by inflation in the future. While we have been able to partially or completely offset inflation by increasing selling prices and implementing cost
reduction actions in the past, we cannot assure investors that we will be able to do so in the future.

Covenants under our Senior Secured
Credit Facility and the Notes

The credit agreement governing our senior secured credit facility and the indentures
governing the notes contain various covenants that limit our ability to, among other things:



| |  |  | incur or guarantee additional debt;
| | - |  | -----------------------------------



| |  |  | pay dividends and make other distributions to our stockholders;
| | - |  | ---------------------------------------------------------------



| |  |  | create or incur certain liens;
| | - |  | ------------------------------



| |  |  | make certain loans, acquisitions, capital expenditures or investments;
| | - |  | ----------------------------------------------------------------------



| |  |  | engage in sales of assets and subsidiary stock;
| | - |  | -----------------------------------------------



| |  |  | enter into sale/leaseback transactions;
| | - |  | ---------------------------------------



| |  |  | enter into transactions with affiliates; and
| | - |  | --------------------------------------------



| |  |  | transfer all or substantially all of our assets or enter into merger or consolidation transactions.
| | - |  | ---------------------------------------------------------------------------------------------------

In addition, at any time that loans or letters of credit are outstanding (and not cash collateralized) thereunder, our revolving credit
facility (which is part of our senior secured credit facility) requires us to maintain a specified net first-lien indebtedness to Adjusted EBITDA ratio, referred to as the Senior Secured Leverage Ratio. Specifically, the ratio of our
Total Senior Secured Net Debt (as defined in the credit agreement governing the senior secured credit facility) to trailing twelve-month Adjusted EBITDA (as adjusted per the credit agreement governing the senior secured credit facility)
may not exceed 4.25 to 1 as of the last day of any fiscal quarter. On March 28, 2010, we were in compliance with the senior secured leverage ratio maintenance covenant, the other covenants under the credit agreement governing the senior secured
credit facility and the covenants under the indentures governing the notes.

Financial Measures that Supplement GAAP

EBITDA consists of earnings before interest, taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry
and we present EBITDA to enhance your understanding of our operating performance. We use EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a
liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Adjusted EBITDA
is defined as EBITDA further adjusted for unusual items and other pro forma adjustments permitted in calculating covenant compliance in the credit agreement governing our credit facilities and indentures governing the notes to test the
permissibility of certain types of transactions. Adjusted EBITDA as presented in the table below corresponds to the definition of EBITDA calculated on a Pro Forma Basis used in the credit agreement and substantially conforms
to the definition of EBITDA calculated on a pro forma basis used in the indentures. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our
results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working
capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash
requirements for the assets being depreciated and amortized that may have to be replaced in the future; (f) management fees that may be paid to Apollo; or (g) the impact of earnings or charges resulting from matters that we and the lenders
under our secured senior credit facility may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in
calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses can
represent the reduction of cash that could be used for other corporate purposes. Further, as included in the calculation of Adjusted EBITDA below, the measure allows us to add estimated cost savings and operating synergies related to operational
changes ranging from restructuring to acquisitions to dispositions as if such event occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event and/or exclude one-time transition
expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred.

EBITDA and
Adjusted EBITDA are not measurements of financial performance under U.S. GAAP, and our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA or



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Adjusted EBITDA, which are non-GAAP financial measures, as an alternative to operating or net income, determined in accordance with U.S. GAAP, as an indicator of our operating performance,
or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of our cash flows or as a measure of liquidity.

The following table reconciles net loss attributable to Momentive Performance Materials Inc. to EBITDA and Adjusted EBITDA (as calculated
under our credit agreement and as substantially calculated under our indentures) for the periods presented:



|                                                                               |  |     |  |                                 |       |   |                |       |  
|------------------------------------------------------------------------------ |  | --- |  | ------------------------------- | ----- | - | -------------- | ----- | -
|                                                                               |  |     |  | Fiscal three-month period ended |      
|                                                                               |  |     |  | March 28, 2010                  |       |   | March 29, 2009 |      
|                                                                               |  |     |  | (dollars in millions)           |      
|Net loss attributable to Momentive Performance Materials Inc.                  |  |     |  | $                               | (3.4  | ) |                | (96.8 | )
|Interest expense, net                                                          |  |     |  |                                 | 60.6  |   |                | 65.2  |  
|Income taxes                                                                   |  |     |  |                                 | 5.7   |   |                | (20.6 | )
|Depreciation and amortization                                                  |  |     |  |                                 | 46.8  |   |                | 49.6  |  
|                                                                               |  |     |  |                                 |       |   |                |       |  
|                                                                               |  |     | 
|EBITDA                                                                         |  |     |  |                                 | 109.7 |   |                | (2.6  | )
|                                                                               |  |     |  |                                 |       |   |                |       |  
|                                                                               |  |     | 
|Noncontrolling interest                                                        |  | (a) |  |                                 | 0.1   |   |                | (0.6  | )
|Restructuring and non-recurring                                                |  | (b) |  |                                 | 1.3   |   |                | 11.3  |  
|Cost Savings and Inventory Optimization                                        |  | (c) |  |                                 |      |   |                | 12.4  |  
|Non cash and purchase accounting effects                                       |  | (d) |  |                                 | 7.0   |   |                | (1.0  | )
|Management fee and other                                                       |  | (e) |  |                                 | (1.0  | ) |                | 0.7   |  
|                                                                               |  |     |  |                                 |       |   |                |       |  
|Adjusted EBITDA                                                                |  |     |  | $                               | 117.1 |   |                | 20.2  |  
|                                                                               |  |     |  |                                 |       |   |                |       |  
|                                                                               |  |     | 
|Total Senior Secured Net Debt at March 28, 2010                                |  |     |  | $                               | 874.3 |   |                |       |  
|Senior Secured Leverage Ratio for the twelve-month period ended March 28, 2010 |  |     |  |                                 | 2.30  |   |                |       |  
|Adjusted EBITDA for the twelve-month period ended March 28, 2010               |  |     |  |                                 | 380.9 |   |                |       |  



|(a) | Reflects the elimination of noncontrolling interests resulting from the Shenzhen joint venture.
|--- | -----------------------------------------------------------------------------------------------

|(b) | Relates primarily to restructuring and non-recurring costs.
|--- | -----------------------------------------------------------

|(c) | Represents estimated cost savings, on a pro forma basis, from initiatives implemented or being implemented by management. For the fiscal three-month period ended
March 29, 2009, estimated cost savings includes facility rationalizations and headcount reductions.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Non-cash items include the effects of (i) stock-based compensation expense, (ii) purchase accounting, (iii) non-cash mark-to-market revaluation of
foreign currency forward contracts and unrealized gains or losses on revaluations of the U.S. dollar denominated debt of our foreign subsidiaries and the Euro denominated debt of our U.S. subsidiary, (iv) unrealized natural gas derivative gains
or losses, and (v) reserve changes and impairment charges. For the fiscal three-month period ended March 28, 2010, non-cash items include: (i) stock-based compensation expense of $0.2, (ii) unrealized foreign currency
exchange loss of $6.3, and (iii) unrealized loss on natural gas hedges of $0.5. For the fiscal three-month period ended March 29, 2009, non-cash items include: (i) stock-based compensation expense of $0.2; (ii) unrealized gain of
$6.0 on foreign currency forward contracts, unrealized foreign currency exchange loss of $4.0, and (iii) unrealized loss on natural gas hedges of $0.7.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Management Fees and Other include (i) management and other fees to Apollo and affiliates, and (ii) the exclusion of our unrestricted subsidiary.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risks.
|------- | ------------------------------------------------------------

Information regarding our market risk as of December 31, 2009 was provided in our Annual Report on Form 10-K for the year ended
December 31, 2009. There have been no material changes to such disclosure.



|Item 4. | Controls and Procedures.
|------- | ------------------------

We maintain disclosure controls and procedures (as defined in Rules 13(a)-15(e) or 15(d)-15(e) under the Securities Exchange Act of 1934,
as amended (the Exchange Act)), that are designed to ensure that information required to be disclosed in our reports filed or furnished under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the applicable SEC rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as
appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

We carried out the evaluation required by paragraph (b) of the Exchange Act Rules 13(a)-15 or 15(d)-15, under the
supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is (1) accumulated and communicated to
management, including our CEO and CFO, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms.

There have been no changes in our internal control over financial reporting that occurred during the fiscal three-month period ended
March 28, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



28



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##### Table of Contents

Part II. Other Information.



|Item 1. | Legal Proceedings.
|------- | ------------------

There
have been no material changes to our previous disclosures on this matter.



|Item 1A. | Risk Factors.
|-------- | -------------

There have
been no material changes to our previous disclosures on this matter.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | Removed and Reserved.
|------- | ---------------------



|Item 5. | Other Information.
|------- | ------------------

Not
applicable.



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##### Table of Contents

|Item 6. | Exhibits.
|------- | ---------

INDEX TO
EXHIBITS



|              |  |                                                                                          
|------------- |  | -----------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                              
|              | 
|31.1*         |  | Rule 13a-14(a)/15d-14(a) certification of Principal Executive Officer                    
|              | 
|31.2*         |  | Rule 13a-14(a)/15d-14(a) certification of Principal Financial Officer                    
|              | 
|32*           |  | Section 1350 certification of Principal Executive Officer and Principal Financial Officer



|* | Filed herewith
|- | --------------



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

May 5, 2010



MOMENTIVE PERFORMANCE MATERIALS INC.BY:

/s/    JONATHAN D.
RICHJonathan D. RichChief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant in the capacities and on the dates indicated below.



|                                                |  |                                                                               |  |            
|----------------------------------------------- |  | ----------------------------------------------------------------------------- |  | -----------
|Signature                                       |  | Title                                                                         |  | Date       
|                                                |  |                                                                              
|/s/ JONATHAN D. RICH
Jonathan D. Rich           |  | Chief Executive Officer, President and Director (Principal Executive Officer) |  | May 5, 2010
|                                                |  |                                                                              
|/s/ ANTHONY S. COLATRELLA
Anthony S. Colatrella |  | Chief Financial Officer (Principal Financial Officer)                         |  | May 5, 2010
|                                                |  |                                                                              
|/s/ WILLIAM L. TORRENCE
William L. Torrence     |  | Controller (Principal Accounting Officer)                                     |  | May 5, 2010



31