CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The unaudited interim consolidated financial statements of Union Carbide Corporation and its subsidiaries (the "Corporation" or "UCC") were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented.

The Corporation is a wholly owned subsidiary of The Dow Chemical Company ("Dow"). In accordance with the accounting guidance for earnings per share, the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.

The Corporation’s business activities comprise components of Dow’s global operations rather than stand-alone operations. Dow conducts its worldwide operations through global businesses. Because there are no separable reportable business segments for UCC under the accounting guidance related to segment reporting and no detailed business information is provided to a chief operating decision maker regarding the Corporation’s stand-alone operations, the Corporation’s results are reported as a single operating segment.

Intercompany transactions and balances are eliminated in consolidation. Transactions with the Corporation’s parent company, Dow, and other Dow subsidiaries have been reflected as related company transactions in the consolidated financial statements. See Note 11 for further discussion.

These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016.

Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017, Dow and E. I. du Pont de Nemours and Company ("DuPont") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Dow and DuPont became subsidiaries of DowDuPont (the "Merger"). See Note 12 for additional information.

Significant Accounting Policy Update

Integration and Separation Costs

The Corporation classifies expenses related to the Merger as integration and separation costs. Merger-related costs include: costs incurred to prepare for and close the Merger, post-Merger integration expenses and costs incurred to prepare for the separation of Dow’s agriculture business, specialty products business and materials science business.

Changes in Financial Statement Presentation

Consolidated Statements of Cash Flows

In the first quarter of 2017, the Corporation made a change to the consolidated statements of cash flows to include a new line under "Operating Activities" entitled "Asbestos-related payments." The new line captures cash payments made for asbestos-related claim and resolution activity as well as asbestos-related defense and processing costs (effective as of the fourth quarter of 2016 as a result of an accounting policy change).

In the third quarter of 2017, the Corporation changed the presentation to the consolidated statements of cash flows to conform to the presentation that was adopted for DowDuPont. "Net period pension benefit cost" are now separately reported and have been reclassified from "Other assets and liabilities." Prior periods have been updated to conform to the current year presentation and are summarized below:



Summary of Changes to the Consolidated Statements of Cash Flows	Nine Months Ended Sep 30, 2016
In millions	As filed		Updated
Operating Activities
Net periodic pension benefit cost	$	—	$	21
Asbestos-related payments	$	—	$	(39	)
Other assets and liabilities	$	254	$	272

Consolidated Statements of Income

In the third quarter of 2017, the Corporation changed the presentation of certain line items on the face of the consolidated statements of income to conform to the presentation that was adopted for DowDuPont. Costs associated with integration and separation activities are now separately reported as “Integration and separation costs” and “Interest income” has been reclassified to “Sundry income (expense) - net.” The changes were retrospectively applied and are summarized below:



Summary of Changes to the Consolidated Statements of Income	Three Months Ended						Nine Months Ended
	Sep 30, 2016			Sep 30, 2016			Sep 30, 2016		Sep 30, 2016
In millions	As Filed			Updated			As Filed		Updated
Sundry income (expense) - net	$	(14	)	$	(10	)	$	10	$	20
Interest income	$	4		$	—		$	10	$	—