In this Section:

• "Dow Chemical: Risks for Investors" Report
• Proxy Analyst Presentation

Dow Chemical: Risks for Investors

Key Issues for Strategic Investors:

• Overall Market Risk: Dow could be pressed by markets and regulations to reduce its production and marketing focus on organochlorine chemicals as well as many other chemicals in its product portfolio. Mounting scientific findings regarding organochlorine toxins, dioxins & furans in particular, could result in more momentum for widespread phase-out of the company’s products such as vinyl chloride monomers (used in PVC plastics), as well as many of the company’s pesticides.

In addition, plasticizers such as phthalates have phase-out risk as well which could affect Dow’s plastic-related
business. As the practice of testing of human blood and other tissues for the presence of these substances grows, the result may be material levels of tort liability should the company be linked to negative health impacts caused by “persistent bioaccumulating toxins” (PBTs). Many of the company’s products or pollutants associated with their manufacture, use and disposal are PBTs. Dow’s business strategy appears to be fully committed to the further development of organochlorine chemicals and other chemicals with attendant PBT risk profile.

• Agent Orange: The recent Supreme Court decision (Stephenson v. Dow Chemical et al. June 9, 2003) may open the door for Vietnam veterans not covered under a previous settlement in 1984 to pursue compensation with Dow Chemical for health risks associated with the chemical defoliant commonly known as Agent Orange. Given the number of claims and the extent of damage alleged to be caused by Agent Orange, the proceedings could result in sizable ongoing liability.

Numerous foreign veterans groups and Vietnamese citizens affected by Agent Orange exposure are also seeking compensation from manufacturers.

• Bhopal: The Bhopal disaster is an ongoing concern with significant potential to harm the company’s reputation or pose material liabilities, as well as constrain investment in Asia. Continuing and heated controversy over reparations to victims, deaths and birth defects related to methyl isocyanate exposure, and pollution of the city’s water supply could result in potential legal liability. Dow’s wholly owned subsidiary, Union Carbide has been deemed an “absconder from justice” for failing to appear before the courts in India to face criminal charges stemming from the disaster. Efforts are underway in India to have the courts place responsibility on Dow to require Union Carbide to appear as a defendant in the criminal case. The $2.18 trillion market currently under SRI management world-wide may remove Dow as a potential investment as a result of these controversies. Dow management has flatly claimed that it has no liability associated with these matters, but our review indicates that it appears to have settled on an inadequate strategy to address the issue prior to merging with Union Carbide.

• Contamination in Michigan: Dow may incur potentially material liability related to dioxin contamination of more than 22 miles of the Tittabawassee River as well as sections of the Saginaw River and Saginaw Bay in Michigan. A class-action lawsuit involving more than 300 plaintiffs is currently in discovery. In the 2003 10K, Dow has reported an accrued $54 million in remedial liabilities for Midland – which appears inadequate to reflect the range of potential liabilities associated with this matter.

• Semi-conductor Worker Liability: Union Carbide, a wholly owned subsidiary of Dow since 2001, is currently involved in litigation stemming from the semiconductor industry, to which it is a supplier, involving claims of worker exposure to hazardous chemicals.

• Current Financial Obligations: The above issues, added to Dow’s well known obligations under asbestos and breast implant litigation, and a $10.7 billion in debt and a debt-to-capital ratio of 53%, point to further strain on company reserves and thus increase the potential financial risks associated with Dow’s overall product and environmental liability scenario.

The report can be accessed here.

Proxy Analyst Presentation

This presentation was made to ISS about the 2005 shareholder resolution. The presentation was prepared and presented by:

Shelley Alpern, Trillium Asset Management

Sanford Lewis, Attorney,

Marc Brammer, Innovest Strategic Value Advisors

The presentation can be accessed here