10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended SEPTEMBER 30, 2006

Commission File Number:  1-3433

THE DOW CHEMICAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware	38-1285128
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

2030 DOW CENTER, MIDLAND, MICHIGAN  48674

(Address of principal executive offices)  (Zip Code)

989-636-1000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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.	x Yes	o No

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

Large accelerated filer x                            Accelerated filer o                            Non-accelerated filer o

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

Class	Outstanding at September 30, 2006
Common Stock, par value $2.50 per share	955,192,111 shares

The Dow Chemical Company

QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended September 30, 2006

TABLE OF CONTENTS

		PAGE
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Consolidated Statements of Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Comprehensive Income	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	30
	Disclosure Regarding Forward-Looking Information	30
	Results of Operations	30
	Changes in Financial Condition	38
	Other Matters	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	44
Item 4.	Controls and Procedures.	45
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	46
Item 1A.	Risk Factors.	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	46
Item 6.	Exhibits.	46
SIGNATURE		48
EXHIBIT INDEX		49

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Income

	Three Months Ended				Nine Months Ended
	Sept. 30,		Sept. 30,		Sept. 30,		Sept. 30,
In millions, except per share amounts (Unaudited)	2006		2005		2006		2005
Net Sales	$	12,359	$	11,261	$	36,888	$	34,390
Cost of sales	10,600		9,610		31,027		28,247
Research and development expenses	291		264		856		790
Selling, general and administrative expenses	420		379		1,210		1,153
Amortization of intangibles	13		13		37		40
Restructuring charges	579		—		579		—
Equity in earnings of nonconsolidated affiliates	317		240		717		739
Sundry income — net	4		39		87		178
Interest income	48		42		128		98
Interest expense and amortization of debt discount	155		168		462		543
Income before Income Taxes and Minority Interests	670		1,148		3,649		4,632
Provision for income taxes	137		328		831		1,153
Minority interests’ share in income	21		19		69		60
Net Income Available for Common Stockholders	$	512	$	801	$	2,749	$	3,419
Share Data
Earnings per common share — basic	$	0.53	$	0.83	$	2.85	$	3.55
Earnings per common share — diluted	$	0.53	$	0.82	$	2.82	$	3.51
Common stock dividends declared per share of common stock	$	0.375	$	0.335	$	1.125	$	1.005
Weighted-average common shares outstanding — basic	959.1		965.2		963.5		962.1
Weighted-average common shares outstanding — diluted	969.9		978.4		975.5		974.2
Depreciation	$	492	$	454	$	1,418	$	1,378
Capital Expenditures	$	420	$	400	$	1,118	$	1,050

See Notes to the Consolidated Financial Statements.

3

The Dow Chemical Company and Subsidiaries

Consolidated Balance Sheets

	Sept. 30,			Dec. 31,
In millions (Unaudited)	2006			2005
Assets
Current Assets
Cash and cash equivalents	$	3,134		$	3,806
Marketable securities and interest-bearing deposits	35			32
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables — 2006: $132; 2005: $169)	5,278			5,124
Other	3,046			2,802
Inventories	6,118			5,319
Deferred income tax assets — current	269			321
Total current assets	17,880			17,404
Investments
Investment in nonconsolidated affiliates	2,623			2,285
Other investments	2,096			2,156
Noncurrent receivables	272			274
Total investments	4,991			4,715
Property
Property	43,374			41,934
Less accumulated depreciation	30,016			28,397
Net property	13,358			13,537
Other Assets
Goodwill	3,230			3,140
Other intangible assets (net of accumulated amortization — 2006: $612; 2005: $552)	441			443
Deferred income tax assets — noncurrent	3,486			3,658
Asbestos-related insurance receivables — noncurrent	750			818
Deferred charges and other assets	2,441			2,219
Total other assets	10,348			10,278
Total Assets	$	46,577		$	45,934
Liabilities and Stockholders’ Equity
Current Liabilities
Notes payable	$	181		$	241
Long-term debt due within one year	828			1,279
Accounts payable:
Trade	3,580			3,931
Other	1,772			1,829
Income taxes payable	642			493
Deferred income tax liabilities — current	217			201
Dividends payable	362			347
Accrued and other current liabilities	2,506			2,342
Total current liabilities	10,088			10,663
Long-Term Debt	9,199			9,186
Other Noncurrent Liabilities
Deferred income tax liabilities — noncurrent	1,084			1,395
Pension and other postretirement benefits — noncurrent	3,400			3,308
Asbestos-related liabilities — noncurrent	1,273			1,384
Other noncurrent obligations	3,387			3,338
Total other noncurrent liabilities	9,144			9,425
Minority Interest in Subsidiaries	354			336
Preferred Securities of Subsidiaries	1,000			1,000
Stockholders’ Equity
Common stock	2,453			2,453
Additional paid-in capital	777			661
Unearned ESOP shares	—			(1		)
Retained earnings	16,371			14,719
Accumulated other comprehensive loss	(1,738		)	(1,949		)
Treasury stock at cost	(1,071		)	(559		)
Net stockholders’ equity	16,792			15,324
Total Liabilities and Stockholders’ Equity	$	46,577		$	45,934

See Notes to the Consolidated Financial Statements.

4

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Cash Flows

	Nine Months Ended
	Sept. 30,			Sept. 30,
In millions (Unaudited)	2006			2005
Operating Activities
Net Income Available for Common Stockholders	$	2,749		$	3,419
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,544			1,507
Provision for deferred income tax	246			440
Earnings of nonconsolidated affiliates in excess of dividends received	(239		)	(294		)
Minority interests’ share in income	69			60
Pension contributions	(395		)	(634		)
Net (gain) loss on sales of investments	2			(15		)
Net gain on sales of property and businesses	(48		)	(54		)
Other net loss	—			37
Restructuring charges	579			—
Net gain on sale of ownership interest in nonconsolidated affiliate	—			(98		)
Tax benefit — nonqualified stock option exercises	—			66
Changes in assets and liabilities that provided (used) cash:
Accounts and notes receivable	(304		)	(29		)
Inventories	(811		)	(371		)
Accounts payable	(435		)	(604		)
Other assets and liabilities	(53		)	104
Cash provided by operating activities	2,904			3,534
Investing Activities
Capital expenditures	(1,118		)	(1,050		)
Proceeds from sales of property and businesses	69			82
Purchase of previously leased assets	(205		)	—
Investments in consolidated companies	(109		)	(105		)
Investments in nonconsolidated affiliates	(56		)	(208		)
Proceeds from sales of nonconsolidated affiliates	—			89
Distributions from nonconsolidated affiliates	4			41
Purchases of investments	(1,079		)	(725		)
Proceeds from sales of investments	1,172			687
Cash used in investing activities	(1,322		)	(1,189		)
Financing Activities
Changes in short-term notes payable	9			81
Payments on long-term debt	(598		)	(1,422		)
Proceeds from issuance of long-term debt	—			4
Purchases of treasury stock	(650		)	(48		)
Proceeds from sales of common stock	97			323
Distributions to minority interests	(54		)	(66		)
Dividends paid to stockholders	(1,044		)	(964		)
Cash used in financing activities	(2,240		)	(2,092		)
Effect of Exchange Rate Changes on Cash	(14		)	(182		)
Summary
Increase (Decrease) in cash and cash equivalents	(672		)	71
Cash and cash equivalents at beginning of year	3,806			3,108
Cash and cash equivalents at end of period	$	3,134		$	3,179

See Notes to the Consolidated Financial Statements.

5

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Comprehensive Income

	Three Months Ended						Nine Months Ended
	Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
In millions (Unaudited)	2006			2005			2006			2005
Net Income Available for Common Stockholders	$	512		$	801		$	2,749		$	3,419
Other Comprehensive Income (Loss), Net of Tax
Net unrealized gains (losses) on investments	42			(1		)	17			(15		)
Translation adjustments	(39		)	(51		)	325			(860		)
Minimum pension liability adjustments	—			—			(2		)	11
Net gains (losses) on cash flow hedging derivative instruments	(89		)	120			(129		)	152
Total other comprehensive income (loss)	(86		)	68			211			(712		)
Comprehensive Income	$	426		$	869		$	2,960		$	2,707

See Notes to the Consolidated Financial Statements.

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(Unaudited)                                                Notes to the Consolidated Financial Statements

NOTE A — CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements of The Dow Chemical Company and its subsidiaries (“Dow” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“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. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and the Current Report on Form 8-K filed on July 11, 2006, reflecting a change in the composition of the Company’s reported segments.

NOTE B — ACCOUNTING CHANGES

Accounting for Stock-Based Compensation

On January 1, 2006, the Company adopted revised Statement of Financial Accounting Standards (“SFAS”) No. 123 (“SFAS No. 123R”), “Share-Based Payment.” Because the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 123R were materially consistent under the Company’s equity plans, the adoption of this standard had an immaterial impact on the Company’s consolidated financial statements.

In November 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” The FSP, which became effective in November 2005, requires an entity to follow either the transition guidance for the additional-paid-in-capital pool as prescribed in SFAS No. 123R or the alternative transition method described in the FSP. An entity that adopts SFAS No. 123R using the modified prospective application may make a one-time election to adopt the transition method described in the FSP, and may take up to one year from the latter of its initial adoption of SFAS No. 123R or the effective date of the FSP to evaluate the available transition alternatives and make its one-time election. The Company has adopted the alternative transition method provided in the FSP for calculating the tax effects of stock-based compensation under SFAS No. 123R.

See Note H for disclosures related to stock-based compensation.

Accounting for Conditional Asset Retirement Obligations

In March 2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations,” which clarifies the term conditional asset retirement obligation as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” as a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. FIN No. 47 was effective no later than the end of fiscal years ending after December 15, 2005.

Dow has 156 manufacturing sites in 37 countries. Most of these sites contain numerous individual manufacturing operations, particularly at the Company’s larger sites. Asset retirement obligations are recorded in the period in which they are incurred and reasonably estimable, including those obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. Retirement of assets may involve such efforts as remediation and treatment of asbestos, contractually required demolition, and other related activities, depending on the nature and location of the assets, and are typically realized only upon demolition of those facilities. In identifying asset retirement obligations, the Company considers identification of legally enforceable obligations, changes in existing law, estimates of potential settlement dates and the calculation of an appropriate discount rate to be used in calculating the fair value of the obligations. Dow has a well-established global process to identify, approve and track the demolition of retired or to-be-retired facilities; no assets are retired from service until this process has been followed. Dow typically forecasts demolition projects based on the usefulness of the assets; environmental, health and safety concerns; and other similar considerations. Under this process, as demolition projects are identified and approved, reasonable estimates may then be determined for the time frames during which any related asset retirement obligations are expected to be settled. For those assets where a range of potential settlement dates may be reasonably estimated, obligations are recorded.

Assets that have not been submitted/reviewed for potential demolition activities are considered to have continued usefulness and are generally still operating “normally.” Therefore, without a plan to demolish the assets or the expectation of a plan, such as shortening the useful life of assets for depreciation purposes under the requirements of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” Dow is unable to reasonably forecast a time frame to use for present value calculations. As such, Dow has not recognized obligations for individual plants/buildings at its 156 manufacturing sites where estimates of potential settlement dates cannot be reasonably made. In addition, the Company

7

has not recognized conditional asset retirement obligations for the capping of its approximately 50 underground storage wells at Dow-owned sites when there are no plans or expectations of plans to exit the sites. Dow routinely reviews all changes to the list of items under consideration for demolition to determine if an adjustment to the value of the asset retirement obligation is required.

Adoption of FIN No. 47 on December 31, 2005 resulted in the recognition of an asset retirement obligation of $34 million and a charge of $20 million (net of tax of $12 million), which was included in “Cumulative effect of changes in accounting principles” in the fourth quarter of 2005. The discount rate used to calculate the Company’s asset retirement obligations was 4.6 percent.

In accordance with FIN No. 47, the Company has recognized conditional asset retirement obligations related to asbestos encapsulation as a result of planned demolition and remediation activities at manufacturing and administrative sites in the United States, Canada and Europe. At December 31, 2005, the aggregate carrying amount of conditional asset retirement obligations recognized by the Company was $34 million. These obligations are included in the consolidated balance sheets as “Other noncurrent obligations.”

If the conditional asset retirement obligation measurement and recognition provisions of FIN No. 47 had been in effect on January 1, 2005, the aggregate carrying amount of those obligations on that date would have been $32 million. If the amortization of asset retirement cost and accretion of asset retirement obligation provisions of FIN No. 47 had been in effect during 2005, the impact on “Income before Cumulative Effect on Changes in Accounting Principles” and “Net Income Available for Common Stockholders” would have been immaterial. Further, the impact on earnings per common share (both basic and diluted) would have been less than $0.01.

See Note E for the Company’s disclosures related to asset retirement obligations.

Other Accounting Changes

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs — an amendment of ARB No. 43, Chapter 4,” which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) and also requires that the allocation of fixed production overhead be based on the normal capacity of the production facilities. SFAS No. 151 was effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Because the Company previously used nameplate capacity to calculate product costs, the adoption of SFAS No. 151 on January 1, 2006 had an immaterial favorable impact on the Company’s consolidated financial statements in the first quarter of 2006.

In September 2005, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) with respect to EITF Issue No. 04-13, “Accounting for Purchases and Sales of Inventory with the Same Counterparty.” EITF Issue No. 04-13 is effective for new arrangements entered into, and modifications or renewals of existing arrangements, in the first interim or annual period beginning after March 15, 2006. The Company has determined that its current accounting treatment for purchases and sales of inventory with the same counterparty is consistent with the guidance in EITF Issue No. 04-13; therefore, the issue had no impact on the Company’s consolidated financial statements.

In November 2005, the FASB issued FSP Nos. FAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” which addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment. The FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in the FSP amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” SFAS No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations,” and Accounting Principles Board (“APB”) Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” The Company has reviewed the guidance of FSP Nos. FAS 115-1 and 124-1 and has determined that its practices are consistent with the FSP; therefore, the adoption of the FSP on January 1, 2006 had no impact on the Company’s consolidated financial statements.

In April 2006, the FASB issued FSP No. FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).” The guidance in this FSP was applicable prospectively to all entities (including newly created entities) and when a reconsideration event has occurred pursuant to paragraph 7 of FIN No. 46(R), beginning the first day of the first reporting period beginning after June 15, 2006. Beginning July 1, 2006, the Company will apply the guidance of this FSP as it applies FIN No. 46(R).

In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of adopting this interpretation.

8

In September 2006, the U.S. Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin (“SAB”) No. 108, which expresses the views of the SEC staff regarding the process of quantifying financial statement misstatements. SAB No. 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The guidance of this SAB is effective for annual financial statements covering the first fiscal year ending after November 15, 2006, which is December 31, 2006 for the Company. SAB No. 108 is not expected to have an impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting this Statement.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R).” This Statement, which is effective December 31, 2006 for the Company, requires employers to recognize the funded status of defined benefit postretirement plans as an asset or liability on the balance sheet and to recognize changes in that funded status through comprehensive income. SFAS No. 158 also establishes the measurement date of plan assets and obligations as the date of the employer’s fiscal year end, and provides for additional annual disclosures. Dow currently uses a December 31 measurement date for all of its plans, consistent with its fiscal year end. The Company is currently evaluating the impact of adopting this Statement.

NOTE C — INVENTORIES

The following table provides a breakdown of inventories:

Inventories In millions	Sept. 30, 2006		Dec. 31,  2005
Finished goods	$	3,367	$	2,941
Work in process	1,447		1,247
Raw materials	734		645
Supplies	570		486
Total inventories	$	6,118	$	5,319

The reserves reducing inventories from the first-in, first-out (“FIFO”) basis to the last-in, first-out (“LIFO”) basis amounted to $1,270 million at September 30, 2006 and $1,149 million at December 31, 2005.

NOTE D — GOODWILL AND OTHER INTANGIBLE ASSETS

The following table shows the carrying amount of goodwill by operating segment:

Goodwill In millions	Performance Plastics		Performance Chemicals		Agricultural Sciences		Basic Plastics		Hydrocarbons and Energy		Total
Balance at December 31, 2005	$	913	$	750	$	1,320	$	94	$	63	$	3,140
Goodwill related to acquisition of Zhejiang Omex Environmental Engineering Co. LTD	—		90		—		—		—		90
Balance at September 30, 2006	$	913	$	840	$	1,320	$	94	$	63	$	3,230

On July 11, 2006, FilmTec Corporation, a wholly owned subsidiary of the Company, completed the acquisition of Zhejiang Omex Environmental Engineering Co. LTD. The initial recording of the acquisition resulted in goodwill of $90 million. Final determination of the fair values to be assigned may result in adjustments to the preliminary values assigned at the date of acquisition.

9

The following table provides information regarding the Company’s other intangible assets:

Other Intangible Assets	At September 30, 2006							At December 31, 2005
In millions	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Intangible assets with finite lives:
Licenses and intellectual property	$	245	$	(147	)	$	98	$	264	$	(138	)	$	126
Patents	151		(117		)	34		147		(103		)	44
Software	409		(255		)	154		362		(224		)	138
Trademarks	134		(40		)	94		136		(37		)	99
Other	114		(53		)	61		86		(50		)	36
Total	$	1,053	$	(612	)	$	441	$	995	$	(552	)	$	443

In the third quarter of 2006, the Company wrote off obsolete technology assets (from “Licenses and intellectual property” in the above table) with a net book value of $18 million in conjunction with other restructuring activities (see Note F). The write-off was included in “Restructuring charges” in the consolidated statements of income and reflected in the Performance Plastics segment ($15 million) and Unallocated and Other ($3 million).

In the third quarter of 2006, the Company entered into a non-competition agreement with an estimated fair value of $31 million associated with the acquisition of Zhejiang Omex Environmental Engineering Co. LTD (included in “Other” in the above table). The amortization period is the five-year term of the agreement.

During the first nine months of 2006, the Company acquired software for $44 million. The weighted-average amortization period for the acquired software is five years.

The following table provides information regarding amortization expense:

Amortization Expense	Three Months Ended				Nine Months Ended
In millions	Sept. 30, 2006		Sept. 30, 2005		Sept. 30, 2006		Sept. 30, 2005
Other intangible assets, excluding software	$	13	$	13	$	37	$	40
Software, included in “Cost of sales”	12		10		33		32

Total estimated amortization expense for 2006 and the five succeeding fiscal years is as follows:

Estimated Amortization Expense In millions
2006	$	93
2007	82
2008	77
2009	69
2010	32
2011	14

NOTE E — COMMITMENTS AND CONTINGENT LIABILITIES

Litigation

Breast Implant Matters

On May 15, 1995, Dow Corning Corporation (“Dow Corning”), in which the Company is a 50 percent shareholder, voluntarily filed for protection under Chapter 11 of the Bankruptcy Code to resolve litigation related to Dow Corning’s breast implant and other silicone medical products. On June 1, 2004, Dow Corning’s Joint Plan of Reorganization (the “Joint Plan”) became effective and Dow Corning emerged from bankruptcy. The Joint Plan contains release and injunction provisions resolving all tort claims brought against various entities, including the Company, involving Dow Corning’s breast implant and other silicone medical products.

10

To the extent not previously resolved in state court actions, cases involving Dow Corning’s breast implant and other silicone medical products filed against the Company were transferred to the U.S. District Court for the Eastern District of Michigan (the “District Court”) for resolution in the context of the Joint Plan. On October 6, 2005, all such cases then pending in the District Court against the Company were dismissed. Should cases involving Dow Corning’s breast implant and other silicone medical products be filed against the Company in the future, they will be accorded similar treatment. It is the opinion of the Company’s management that the possibility is remote that a resolution of all future cases will have a material adverse impact on the Company’s consolidated financial statements.

As part of the Joint Plan, Dow and Corning Incorporated have agreed to provide a credit facility to Dow Corning in an aggregate amount of $300 million. The Company’s share of the credit facility is $150 million and is subject to the terms and conditions stated in the Joint Plan. At September 30, 2006, no draws had been taken against the credit facility.

DBCP Matters

Numerous lawsuits have been brought against the Company and other chemical companies, both inside and outside of the United States, alleging that the manufacture, distribution or use of pesticides containing dibromochloropropane (“DBCP”) has caused personal injury and property damage, including contamination of groundwater. It is the opinion of the Company’s management that the possibility is remote that the resolution of such lawsuits will have a material adverse impact on the Company’s consolidated financial statements.

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. At September 30, 2006, the Company had accrued obligations of $368 million for environmental remediation and restoration costs, including $30 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although the ultimate cost with respect to these particular matters could range up to twice that amount. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. At December 31, 2005, the Company had accrued obligations of $339 million for environmental remediation and restoration costs, including $41 million for the remediation of Superfund sites. The increase in accrued environmental obligations from year-end 2005 was primarily related to restructuring activities at the Company’s manufacturing facilities in Canada (see Note F to the Consolidated Financial Statements).

On June 12, 2003, the Michigan Department of Environmental Quality (“MDEQ”) issued a Hazardous Waste Operating License (the “License”) to the Company’s Midland, Michigan manufacturing site (the “Midland site”), which included provisions requiring the Company to conduct an investigation to determine the nature and extent of off-site contamination in Midland area soils; Tittabawassee and Saginaw River sediment and floodplain soils; and Saginaw Bay. The License required the Company, by August 11, 2003, to propose a detailed Scope of Work for the off-site investigation for review and approval by the MDEQ. Revised Scopes of Work were approved by the MDEQ on October 18, 2005. Discussions between the Company and the MDEQ that occurred in 2004 and early 2005 regarding how to proceed with off-site corrective action under the License resulted in the execution of the Framework for an Agreement Between the State of Michigan and The Dow Chemical Company (the “Framework”) on January 20, 2005. The Framework committed the Company to take certain immediate interim remedial actions in the City of Midland and along the Tittabawassee River, conduct certain studies, and propose a remedial investigation work plan by the end of 2005. The interim remedial actions required by the Framework are currently underway. The Company submitted Remedial Investigation Work Plans for the City of Midland and for the Tittabawassee River on December 29, 2005. By letters dated March 2, 2006 and April 13, 2006, the MDEQ provided two Notices of Deficiency (“Notices”) to the Company regarding the Remedial Investigation Work Plans. The Company responded, as required, to some of the items in the Notices on May 1, 2006, and is required to respond to the balance of the items and revise the Remedial Investigation Work Plans by December 1, 2006. On July 12, 2006, the MDEQ approved the sampling for the first six miles of the Tittabawassee River. The Framework also contemplates that the Company, the State of Michigan and other federal and tribal governmental entities will negotiate the terms of an agreement or agreements to resolve potential governmental claims against the Company related to historical off-site contamination associated with the Midland site. The Company and the governmental parties began to meet in the fall of 2005 and entered into a Confidentiality Agreement in December 2005. At the end of 2005, the Company had an accrual for off-site corrective action of $3 million (included in the total accrued obligation of $339 million at December 31, 2005) based on the range of activities that the Company proposed and discussed implementing with the MDEQ and which is set forth in the Framework. At September 30, 2006, the accrual for off-site corrective action was $12 million (included in the total accrued obligation of $368 million at September 30, 2006).

It is the opinion of the Company’s management that the possibility is remote that costs in excess of those disclosed will have a material adverse impact on the Company’s consolidated financial statements.

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Asbestos-Related Matters of Union Carbide Corporation

Union Carbide Corporation (“Union Carbide”), a wholly owned subsidiary of the Company, is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products.

Influenced by the bankruptcy filings of numerous defendants in asbestos-related litigation and the prospects of various forms of state and national legislative reform, the rate at which plaintiffs filed asbestos-related suits against various companies, including Union Carbide and Amchem, increased in 2001, 2002 and the first half of 2003. Since then, the rate of filing has significantly abated. Union Carbide expects more asbestos-related suits to be filed against Union Carbide and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

Based on a study completed by Analysis, Research & Planning Corporation (“ARPC”) in January 2003, Union Carbide increased its December 31, 2002 asbestos-related liability for pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. At each balance sheet date, Union Carbide compares current asbestos claim and resolution activity to the assumptions in the most recent ARPC study to determine whether the accrual continues to be appropriate.

In November 2004, Union Carbide requested ARPC to review Union Carbide’s historical asbestos claim and resolution activity and determine the appropriateness of updating its January 2003 study. In response to that request, ARPC reviewed and analyzed data through November 14, 2004, and again concluded that it was not possible to estimate the full range of the cost of resolving future asbestos-related claims against Union Carbide and Amchem because of various uncertainties associated with the litigation of those claims. ARPC did advise Union Carbide, however, that it was reasonable and feasible to construct a new estimate of the cost to Union Carbide of resolving current and future asbestos-related claims using the same two widely used forecasting methodologies used by ARPC in its January 2003 study, if certain assumptions were made. As a result, the following assumptions were made and then used by ARPC:

·The number of future claims to be filed annually against Union Carbide and Amchem is unlikely to exceed the level of claims experienced during 2004.

·The number of claims filed against Union Carbide and Amchem annually from 2001 to 2003 is considered anomalous for the purpose of estimating future filings.

·The number of future claims to be filed against Union Carbide and Amchem will decline at a fairly constant rate each year from 2005.

·The average resolution value for pending and future claims will be equivalent to those experienced during 2003 and 2004 (excluding settlements from closed claims filed in Madison County, Illinois with respect to future claims, as changes in the judicial environment in Madison County caused the historical experience of claims in that jurisdiction to not be predictive of results for future claims).

The resulting study completed by ARPC in January 2005 stated that the undiscounted cost to Union Carbide of resolving pending and future asbestos-related claims against Union Carbide and Amchem, excluding future defense and processing costs, through 2017 was estimated to be between approximately $1.5 billion and $2.0 billion, depending on which of two accepted methodologies was used. At December 31, 2004, Union Carbide’s recorded asbestos-related liability for pending and future claims was $1.6 billion. Based on the low end of the range in the January 2005 study, Union Carbide’s recorded asbestos-related liability for pending and future claims at December 31, 2004 would be sufficient to resolve asbestos-related claims against Union Carbide and Amchem into 2019. As in its January 2003 study, ARPC provided estimates for a longer period of time in its January 2005 study, but also reaffirmed its prior advice that forecasts for shorter periods of time are more accurate than those for longer periods of time. Based on ARPC’s studies, Union Carbide’s asbestos litigation experience, and the uncertainties surrounding asbestos litigation and legislative reform efforts, Union Carbide’s management determined that no change to the accrual was required at December 31, 2004.

In November 2005, Union Carbide requested ARPC to review Union Carbide’s 2005 asbestos claim and resolution activity and determine the appropriateness of updating the January 2005 study. In response to that request, ARPC reviewed and analyzed data through October 31, 2005. In January 2006, ARPC stated that an update of the study would not provide a more likely estimate of future events than the estimate reflected in its study of the previous year and, therefore, the estimate in that study remained applicable.

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Based on Union Carbide’s own review of the asbestos claim and resolution activity and ARPC’s response, Union Carbide determined that no change to the accrual was required at December 31, 2005. Union Carbide’s asbestos-related liability for pending and future claims was $1.5 billion at December 31, 2005. Approximately 39 percent of the recorded liability related to pending claims and approximately 61 percent related to future claims.

Based on Union Carbide’s review of 2006 activity, Union Carbide determined that no change to the accrual was required at September 30, 2006. Union Carbide’s asbestos-related liability for pending and future claims was $1.4 billion at September 30, 2006. Approximately 35 percent of the recorded liability related to pending claims and approximately 65 percent related to future claims.

At December 31, 2002, Union Carbide increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion, substantially exhausting its asbestos product liability coverage. The insurance receivable related to the asbestos liability was determined by Union Carbide after a thorough review of applicable insurance policies and the 1985 Wellington Agreement, to which Union Carbide and many of its liability insurers are signatory parties, as well as other insurance settlements, with due consideration given to applicable deductibles, retentions and policy limits, and taking into account the solvency and historical payment experience of various insurance carriers. The Wellington Agreement and other agreements with insurers are designed to facilitate an orderly resolution and collection of Union Carbide’s insurance policies and to resolve issues that the insurance carriers may raise.

Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $478 million at September 30, 2006 and $535 million at December 31, 2005. At September 30, 2006, $477 million ($398 million at December 31, 2005) of the receivable for insurance recoveries was related to insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place regarding their asbestos-related insurance coverage.

In addition, Union Carbide had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

Receivables for Costs Submitted to Insurance Carriers

In millions	Sept. 30, 2006		Dec. 31, 2005
Receivables for defense costs	$	9	$	73
Receivables for resolution costs	342		327
Total	$	351	$	400

Union Carbide expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was $1 million in the third quarter of 2006 ($24 million in the third quarter of 2005) and $29 million in the first nine months of 2006 ($56 million in the first nine months of 2005), and was reflected in “Cost of sales.”

In September 2003, Union Carbide filed a comprehensive insurance coverage case, now proceeding in the Supreme Court of the State of New York, County of New York, seeking to confirm its rights to insurance for various asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. Although Union Carbide already has settlements in place concerning coverage for asbestos claims with many of its insurers, including those covered by the 1985 Wellington Agreement, this lawsuit was filed against insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place with Union Carbide regarding their asbestos-related insurance coverage, in order to facilitate an orderly resolution and collection of such insurance policies and to resolve issues that the insurance carriers may raise. The insurance carriers are contesting this litigation. Through the third quarter of 2006, Union Carbide reached settlements with several of the carriers involved in this litigation. After a further review of its insurance policies, with due consideration given to applicable deductibles, retentions and policy limits, after taking into account the solvency and historical payment experience of various insurance carriers; existing insurance settlements; and the advice of outside counsel with respect to the applicable insurance coverage law relating to the terms and conditions of its insurance policies, Union Carbide continues to believe that its recorded receivable for insurance recoveries from all insurance carriers is probable of collection.

The amounts recorded by Union Carbide for the asbestos-related liability and related insurance receivable described above were based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries for Union Carbide to be higher or lower than those projected or those recorded.

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Because of the uncertainties described above, Union Carbide’s management cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing Union Carbide and Amchem. Union Carbide’s management believes that it is reasonably possible that the cost of disposing of Union Carbide’s asbestos-related claims, including future defense costs, could have a material adverse impact on Union Carbide’s results of operations and cash flows for a particular period and on the consolidated financial position of Union Carbide.

It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its asbestos-related claims, including future defense costs, could have a material adverse impact on the Company’s results of operations and cash flows for a particular period and on the consolidated financial position of the Company.

Synthetic Rubber Industry Matters

In 2003, the U.S., Canadian and European competition authorities initiated separate investigations into alleged anticompetitive behavior by certain participants in the synthetic rubber industry. Certain subsidiaries of the Company (but as to the investigation in Europe only) have responded, or are in the process of responding, to requests for documents and are otherwise cooperating in the investigations. Separately, related civil actions have been filed in various U.S. federal and state courts. Certain of these actions have named the Company.

On June 10, 2005, the Company received a Statement of Objections from the European Commission stating that it believed that the Company and certain subsidiaries of the Company, together with other participants in the synthetic rubber industry, engaged in conduct in violation of European competition laws. It is expected that the European Commission will seek to impose a fine on the Company, the amount of which will be calculated taking into account the gravity of the violation, the role played by the participants, the duration of their participation and their importance in the synthetic rubber industry.

Polyurethane Subpoena Matter

On February 16, 2006, the Company, among others, received a subpoena from the U.S. Department of Justice as part of an investigation of polyurethane chemicals, including methylene diphenyl diisocyanate (“MDI”), toluene diisocyanate (“TDI”) and polyols. The Company is fully cooperating with the investigation.

Other Litigation Matters

In addition to breast implant, DBCP, environmental, synthetic rubber industry, and polyurethane subpoena matters, the Company is party to a number of other claims and lawsuits arising out of the normal course of business with respect to commercial matters, including product liability, governmental regulation and other actions. Certain of these actions purport to be class actions and seek damages in very large amounts. All such claims are being contested. Dow has an active risk management program consisting of numerous insurance policies secured from many carriers at various times. These policies provide coverage that will be utilized to minimize the impact, if any, of the contingencies described above.

Summary

Except for the possible effect of Union Carbide’s asbestos-related liability described above, it is the opinion of the Company’s management that the possibility is remote that the aggregate of all claims and lawsuits will have a material adverse impact on the Company’s consolidated financial statements.

Purchase Commitments

At December 31, 2005, the Company had 15 major agreements (16 in 2004 and seven in 2003) for the purchase of ethylene-related products globally. The purchase prices are determined on a cost-of-service basis, which, in addition to covering all operating expenses and debt service costs, provides the owner of the manufacturing plants with a specified return on capital. Total purchases under these agreements were $1,175 million in 2005, $1,063 million in 2004 and $676 million in 2003. The Company’s commitments associated with all of these agreements are included in the table below.

At December 31, 2005, the Company had various outstanding commitments for take or pay and throughput agreements, including the purchase agreements referred to above. Such commitments were at prices not in excess of current market prices. The terms of all but two of these agreements extend from one to 25 years. One agreement has terms extending to 75 years; another has indefinite terms. The determinable future commitments for these latter two agreements are included for 10 years in the following table which presents the fixed and determinable portion of obligations under the Company’s purchase commitments at December 31, 2005:

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Fixed and Determinable Portion of Take or Pay and
Throughput Obligations at December 31, 2005

In millions
2006	$	2,390
2007	2,204
2008	2,031
2009	1,791
2010	1,566
2011 and beyond	6,512
Total	$	16,494

In addition to the take or pay obligations at December 31, 2005, the Company had outstanding commitments which ranged from one to six years for steam, electrical power, materials, property and other items used in the normal course of business of approximately $156 million. Such commitments were at prices not in excess of current market prices.

Guarantees

The Company provides a variety of guarantees, as described more fully in the following sections.

Guarantees

Guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others (via delivery of cash or other assets) if specified triggering events occur. With guarantees, such as commercial or financial contracts, non-performance by the guaranteed party triggers the obligation of the Company to make payments to the beneficiary of the guarantee. The majority of the Company’s guarantees relates to debt of nonconsolidated affiliates, which have expiration dates ranging from less than one year to nine years, and trade financing transactions in Latin America, which typically expire within one year of their inception.

Residual Value Guarantees

The Company provides guarantees related to leased assets specifying the residual value that will be available to the lessor at lease termination through sale of the assets to the lessee or third parties.

The following table provides a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance sheets for each type of guarantee:

Guarantees at September 30, 2006 In millions	Final Expiration	Maximum Future Payments		Recorded Liability
Guarantees	2014	$	287	$	11
Residual value guarantees	2015	1,044		6
Total guarantees		$	1,331	$	17

Guarantees at December 31, 2005 In millions	Final  Expiration	Maximum Future Payments		Recorded Liability
Guarantees	2014	$	401	$	19
Residual value guarantees	2015	1,158		5
Total guarantees		$	1,559	$	24

Asset Retirement Obligations

In accordance with SFAS No. 143, as interpreted by FIN No. 47, the Company has recognized asset retirement obligations for the following activities:  demolition and remediation activities at manufacturing sites in the United States and Europe; capping activities at landfill sites in the United States, Canada, Italy and Brazil; and asbestos encapsulation as a result of planned demolition and remediation activities at manufacturing and administrative sites in the United States, Canada and Europe. See Note B for additional information.

The aggregate carrying amount of asset retirement obligations recognized by the Company was $106 million at September 30, 2006 and $92 million at December 31, 2005.

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The following table shows changes in the aggregate carrying amount of the Company’s asset retirement obligations:

Asset Retirement Obligations
In millions	2006
Balance at January 1	$	92
Additional accruals (1)	22
Liabilities settled	(11		)
Accretion expense	1
Revisions in estimated cash flows	—
Other	2
Balance at September 30	$	106

(1)Includes $14 million for asbestos abatement related to the shutdown of assets announced in the third quarter of 2006. See Note F for additional information.

As described in Note B, the Company has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably estimated in its consolidated financial statements. It is the opinion of the Company’s management that the possibility is remote that such conditional asset retirement obligations, when estimable, will have a material adverse impact on the Company’s consolidated financial statements based on current costs.

NOTE F — RESTRUCTURING

On August 29, 2006, the Company’s Board of Directors approved a plan to shut down a number of assets around the world as the Company continues its drive to improve the competitiveness of its global operations. As a consequence of these shutdowns, which are scheduled to be completed by the end of 2008, and other optimization activities, the Company recorded pretax restructuring charges totaling $579 million in the third quarter of 2006. The charges consisted of asset write-downs and write-offs of $327 million, costs associated with exit or disposal activities of $171 million and severance costs of $81 million. The impact of the charges is shown as “Restructuring charges” in the consolidated statements of income and was reflected in the Company’s segment results as follows:

Restructuring Charges by Operating Segment

In millions	Impairment of  Long-Lived Assets and Other  Intangible Assets		Costs associated  with Exit or  Disposal Activities		Severance  Costs		Total
Performance Plastics	$	174	$	68	—		$	242
Performance Chemicals	10		1		—		11
Basic Plastics	15		1		—		16
Basic Chemicals	110		55		—		165
Unallocated and Other	18		46		$	81	145
Total	$	327	$	171	$	81	$	579

Details regarding the components of the restructuring charges are included below:

Impairment of Long-Lived Assets and Other Intangible Assets

The restructuring charges related to the write-down or write-off of assets totaled $327 million in the third quarter of 2006 and included the impact of plant closures of $250 million. The most significant plant closures will take place at Dow’s facilities in Porto Marghera, Italy, and Fort Saskatchewan and Sarnia, Canada. Details regarding these shutdowns are as follows:

·In Porto Marghera, Italy, the Company’s toluene diisocyanate (“TDI”) plant was shut down for planned maintenance in early August 2006. Business fundamentals in the TDI business remain weak due to excess global capacity. As a result, the Company decided to permanently close the facility at the end of August, resulting in a $115 million write-down of the net book value of the related buildings, machinery and equipment against the Performance Plastics segment in the third quarter of 2006.

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·Substantial capital costs would be required to address efficiency issues at the Company’s chlor-alkali and direct chlorination ethylene dichloride plants in Fort Saskatchewan, Alberta, Canada. Based on an analysis of the discounted future cash flows, management determined that an investment in these facilities could not be justified. As a result, the Company decided to shut down the facilities by the end of October 2006, resulting in a $74 million write-down of the net book value of the related buildings, machinery and equipment against the Basic Chemicals segment in the third quarter of 2006.

·Assessments by the businesses located in Sarnia, Ontario, Canada, were triggered by the recent suspension of ethylene shipments through the Cochin Pipeline, a subsidiary of BP Canada Energy Resources Company, due to safety concerns. The assessments highlighted a variety of issues related to the effectiveness, efficiency and long-term sustainability of the Sarnia-based assets. Based on these assessments, the Company decided to cease all production activity at the Sarnia site by the end of 2008 as follows:

·The low density polyethylene plant was shut down in the third quarter of 2006.

·Polystyrene production will cease by the end of 2006.

·Latex production from the UES facility and the polyols plant will shut down by year-end 2008.

The closure of manufacturing plants in 2006 resulted in a $24 million write-down of the net book value of the machinery and equipment in the third quarter of 2006 (with $11 million reflected in Performance Plastics, $10 million in Basic Plastics, and $3 million in Unallocated and Other).

In addition to the larger shutdowns described above, the restructuring charges for plant closures included $37 million related to the shutdown of several small production facilities, a terminal, and a research and development facility.

The restructuring charges in the third quarter of 2006 also included the write-off of capital project spending ($47 million) and technology assets ($18 million) which the Company determined to be of no further value, as well as spare parts and catalyst inventories ($12 million) associated with the plant closures. These write-offs were principally related to the businesses involved in the shutdown of assets and were therefore reflected in the results of various operating segments.

Costs Associated with Exit or Disposal Activities

The restructuring charges for costs associated with exit or disposal activities totaled $171 million in the third quarter of 2006 and included contract termination fees of $64 million, environmental remediation of $60 million, pension curtailment costs and termination benefits of $33 million, and asbestos abatement of $14 million.

Contract termination fees of $64 million represent the Company’s best estimate of the fair value to negotiate the settlement of the early cancellation of several supply agreements related to the shutdown of manufacturing assets within the Performance Plastics segment.

The restructuring charges for environmental remediation of $60 million and asbestos abatement of $14 million principally relate to the shutdown of the Company’s facilities in Canada. The charges were therefore reflected in various operating segments.

According to the restructuring plan for Canada, the Sarnia site will undergo a complete shutdown by the end of 2008 and the chlor-alkali and direct chlorination ethylene dichloride plants in Fort Saskatchewan will be shut down by the end of October 2006. As such, for purposes of calculating the Company’s obligation associated with Dow’s defined benefit plans in Canada, the expected years of future service of active employees has been significantly reduced. In addition, the Company is obligated to provide certain termination benefits. As a result, the restructuring charge included pension curtailment costs and termination benefits of $33 million in the third quarter of 2006. These costs were reflected in Unallocated and Other.

Severance Costs

As a result of the Company’s plans to shutdown assets around the world, and conduct other optimization activities principally in Europe, the restructuring charges recorded in the third quarter of 2006 included severance of $81 million for the separation of approximately 940 employees. Severance benefits will be provided to employees under the terms of Dow’s existing separation plans over the next three years. These costs were charged against Unallocated and Other.

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The following table summarizes the activities related to the Company’s restructuring reserve:

Restructuring Activities

In millions	Impairment of  Long-Lived Assets and Other  Intangible Assets			Costs associated with Exit or  Disposal Activities		Severance  Costs		Total
Restructuring charges incurred in third quarter of 2006	$	327		$	171	$	81	$	579
Cash payments	—			—		—		—
Non-cash adjustments	(327		)	—		—		(327		)
Reserve balance at Sept. 30, 2006	—			$	171	$	81	$	252

Dow expects to incur future costs related to its restructuring activities, as the Company continually looks for ways to enhance the efficiency and cost effectiveness of its operations, to ensure competitiveness across its businesses and across geographic areas. Future costs are expected to include demolition costs related to the closed facilities, which will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities, and pension plan settlement costs. These costs cannot be reasonably estimated at this time.

NOTE G — PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Net Periodic Benefit Cost for All Significant Plans

	Three Months Ended						Nine Months Ended
In millions	Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005
Defined Benefit Pension Plans:
Service cost	$	71		$	71		$	212		$	215
Interest cost	208			202			619			611
Expected return on plan assets	(276		)	(263		)	(824		)	(794		)
Amortization of prior service cost	5			6			15			18
Amortization of net loss	56			28			166			85
Termination benefits/curtailment costs (1)	33			—			33			—
Net periodic benefit cost	$	97		$	44		$	221		$	135
Other Postretirement Benefits:
Service cost	$	6		$	6		$	18		$	18
Interest cost	29			31			87			93
Expected return on plan assets	(7		)	(7		)	(21		)	(21		)
Amortization of prior service credit	(2		)	(2		)	(6		)	(6		)
Amortization of net loss	2			3			6			9
Net periodic benefit cost	$	28		$	31		$	84		$	93

(1)See Note F for information regarding termination benefits/curtailment costs recorded in the third quarter of 2006.

Employer Contributions

Pension Plans

The Company has defined benefit pension plans that cover employees in the United States and a number of other countries. The U.S. funded plan covering the parent company is the largest plan. Benefits are based on length of service and the employee’s three highest consecutive years of compensation.

The Company’s funding policy is to contribute to those plans when pension laws and economics either require or encourage funding. Dow expects to contribute $500 million to its pension plans in 2006. Contributions of $395 million were made in the first nine months of 2006.

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Other Postretirement Benefits

The Company provides certain health care and life insurance benefits to retired employees. The Company has one non-U.S. plan, which is insignificant; therefore, this discussion relates to the U.S. plans only. The plans provide health care benefits, including hospital, physicians’ services, drug and major medical expense coverage, and life insurance benefits. For employees hired before January 1, 1993, the plans provide benefits supplemental to Medicare when retirees are eligible for these benefits. The Company and the retiree share the cost of these benefits, with the Company portion increasing as the retiree has increased years of credited service. There is a cap on the Company portion. The Company has the ability to change these benefits at any time.

The Company funds most of the cost of these health care and life insurance benefits as incurred. Dow does not expect to contribute assets to its other postretirement benefits plan trusts in 2006. Consistent with that expectation, no contributions were made in the first nine months of 2006. Benefit payments to retirees under these plans are expected to be $201 million in 2006. Payments of $123 million were made in the first nine months of 2006.

NOTE H — STOCK-BASED COMPENSATION

Accounting for Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which replaced SFAS No. 123, “Accounting for Stock-Based Compensation,” and superseded APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This statement, which requires that the cost of all share-based payment transactions be recognized in the financial statements, established fair value as the measurement objective and required entities to apply a fair-value-based measurement method in accounting for share-based payment transactions. As issued, the statement applied to all awards granted, modified, repurchased or cancelled after July 1, 2005, and unvested portions of previously issued and outstanding awards. On April 14, 2005, the SEC announced the adoption of a new rule that amended the compliance date for SFAS No. 123R, allowing companies to implement the statement at the beginning of their next fiscal year that began after June 15, 2005, which was January 1, 2006 for the Company. Effective January 1, 2006, the Company began expensing stock-based compensation newly issued in 2006 to employees in accordance with the fair-value-based measurement method of accounting set forth in SFAS No. 123R, using the modified prospective method.

The Company grants stock-based compensation awards which vest over a specified period or upon employees meeting certain performance and retirement eligibility criteria. The Company has historically amortized these awards over the specified vesting period and recognizes any unrecognized compensation cost at the date of retirement (the “nominal vesting period approach”). The Company will continue applying the nominal vesting period approach for the remaining portion of unvested outstanding awards as of December 31, 2005. SFAS No. 123R specifies that an award is vested when the employee’s right to the award is no longer contingent upon providing additional service (the “non-substantive vesting period approach”). The Company began applying this approach to all stock-based compensation awarded after December 31, 2005. The fair value of equity instruments issued to employees is measured on the date of grant and is recognized over the vesting period or from the grant date to the date on which retirement eligibility provisions have been met and additional service is no longer required. The Company has determined that application of the nominal vesting period approach to the unvested outstanding awards at the end of 2005 and application of the non-substantive vesting period approach to stock-based compensation awarded beginning in 2006 did not have a material impact on the Company’s consolidated financial statements.

Prior to the adoption of SFAS No. 123R, the Company expensed stock options granted after January 1, 2003, when the fair value provisions of SFAS No. 123 were adopted for new grants of equity instruments (which include stock options, deferred stock grants, and subscriptions to purchase shares under the Company’s Employees’ Stock Purchase Plan [“ESPP”]) to employees. Prior to the adoption of SFAS No. 123, the Company accounted for its stock-based awards in accordance with APB Opinion No. 25. The following table provides pro forma results as if the fair-value-based measurement method had been applied to all outstanding and unvested awards, including stock options, deferred stock grants, and subscriptions to purchase shares under the Company’s ESPP, in each period presented:

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	Three Months Ended						Nine Months Ended
In millions, except per share amounts	Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005
Net income, as reported	$	512		$	801		$	2,749		$	3,419
Add: Stock-based compensation expense included in reported net income, net of tax	51			44			128			218
Deduct: Total stock-based compensation expense determined using the fair-value-based measurement method for all awards, net of tax	(51		)	(43		)	(128		)	(186		)
Pro forma net income	$	512		$	802		$	2,749		$	3,451
Earnings per share (in dollars):
Basic — as reported	$	0.53		$	0.83		$	2.85		$	3.55
Basic — pro forma	0.53			0.83			2.85			3.59
Diluted — as reported	0.53			0.82			2.82			3.51
Diluted — pro forma	0.53			0.82			2.82			3.54

Prior to 2006, the Company estimated the fair value of stock options and subscriptions to purchase shares under the ESPP using a binomial option-pricing model. Beginning in 2006, the Company is using a lattice-based option valuation model to estimate the fair value of stock options and subscriptions to purchase shares under the ESPP. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:

	Three Months Ended				Nine Months Ended
	Sept. 30, 2006		Sept. 30, 2005		Sept. 30, 2006		Sept. 30, 2005
Dividend yield	3.83	%	2.97	%	3.33	%	2.59	%
Expected volatility	27.72	%	23.34	%	25.67	%	22.22	%
Risk-free interest rate	5.11	%	3.85	%	4.55	%	3.65	%
Expected life of stock options granted during period	6 years		5 years		6 years		5 years
Life of Employees’ Stock Purchase Plan	N/A	(1)	N/A	(2)	6.6 months		5 months

(1)The annual plan for 2006 was granted in the first quarter of 2006 with a participation period of 10 months.

(2)The annual plan for 2005 was granted in the second quarter of 2005 with a participation period of 5 months

The dividend yield assumption for all periods was based on the Company’s current declared dividend as a percentage of the stock price on the grant date. The expected volatility assumption for the current year was based on an equal weighting of the historical daily volatility and current implied volatility from exchange-traded options for the contractual term of the options. The expected volatility assumption determined in the prior year was based entirely on the historical daily volatility of the Company’s stock. The risk-free interest rate in the current year was based on the weighted-average of U.S. Treasury strip rates over the contractual term of the options. The risk-free interest rate in the prior year was based on zero-coupon U.S. Treasury securities with maturities equal to the expected life of the option. Based on an analysis of historical exercise patterns, exercise rates were developed that resulted in an average life of 6 years for the current year. The expected life of the option in the prior year was based on historical data resulting in a 5-year life.

Employees’ Stock Purchase Plans

On February 13, 2003, the Board of Directors authorized a 10-year ESPP, which was approved by shareholders at the Company’s annual meeting on May 8, 2003. Prior to that authorization, annual ESPPs were authorized only by the Board of Directors. Under each annual offering, most employees are eligible to purchase shares of common stock of the Company valued at up to 10 percent of their annual base earnings. The value is determined using the plan price multiplied by the number of shares subscribed to by the employee. The plan price of the stock is set each year at no less than 85 percent of market price. Approximately 52 percent of the eligible employees enrolled in the annual plan for 2006; approximately 40 percent of the eligible employees enrolled in 2005.

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Employees’ Stock Purchase Plans Shares in thousands	Shares		Exercise Price*
Outstanding at January 1, 2006	—		—
Granted	4,398		$	35.21
Exercised	(673	)	35.21
Forfeited/Expired	(144	)	35.21
Outstanding and exercisable at September 30, 2006	3,581		$	35.21
Fair value of purchase rights granted during the period			$	7.83

*Weighted-average per share

Additional Information about ESPPs	Three Months Ended				Nine Months Ended
In millions, except per share amounts	Sept. 30, 2006		Sept. 30, 2005		Sept. 30, 2006		Sept. 30, 2005
Weighted-average fair value per share of purchase rights granted	—		—		$	7.83	$	6.77
Total compensation expense for ESPPs	$	9	$	2	$	29	$	14
Related tax benefit	$	4	$	1	$	11	$	5
Total amount of cash received from the exercise of ESPPs	$	3	$	9	$	24	$	94
Total intrinsic value of ESPPs exercised*	—		$	3	$	3	$	41
Related tax benefit	—		$	1	$	1	$	15

*Difference between the market price at exercise and the price paid by the employee to exercise the ESPPs

Stock Option Plans

Under the 1988 Award and Option Plan (the “1988 Plan”), a plan approved by stockholders, the Company may grant options or shares of common stock to its employees subject to certain annual and individual limits. The terms of the grants are fixed at the grant date. At September 30, 2006, there were 23,403,550 shares available for grant under this plan.

No additional grants will be made under the 1994 Non-Employee Directors’ Stock Plan, which previously allowed the Company to grant up to 300,000 options to non-employee directors. At September 30, 2006, there were 59,850 options outstanding under this plan.

No additional grants will be made under the 1998 Non-Employee Directors’ Stock Plan, which previously allowed the Company to grant up to 600,000 options to non-employee directors. At September 30, 2006, there were 168,150 options outstanding under this plan.

The exercise price of each stock option equals the market price of the Company’s stock on the date of grant. Options vest from one to three years, and have a maximum term of 10 years.

The following table provides year-to-date stock option activity for 2006:

Stock Options Shares in thousands; dollars in millions	Shares		Exercise Price*		Remaining Contractual Life*	Aggregate Intrinsic Value
Outstanding at January 1, 2006	45,489		$	35.42
Granted	7,715		43.64
Exercised	(2,607	)	29.44
Forfeited/Expired	(336	)	43.87
Outstanding at September 30, 2006	50,261		$	36.94	5.72 years	$	251
Exercisable at September 30, 2006	37,092		$	33.57	4.61 years	$	251

*Weighted-average per share

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Additional Information about Stock Options

	Three Months Ended				Nine Months Ended
In millions, except per share amounts	Sept. 30,  2006		Sept. 30,  2005		Sept. 30,  2006		Sept. 30,  2005
Weighted-average fair value per share of options granted	$	9.23	$	8.72	$	10.31	$	10.48
Total compensation expense for stock option plans	$	23	$	17	$	62	$	49
Related tax benefit	$	9	$	6	$	23	$	18
Total amount of cash received from the exercise of options	$	17	$	21	$	75	$	279
Total intrinsic value of options exercised*	$	6	$	12	$	31	$	192
Related tax benefit	$	2	$	4	$	11	$	71

*Difference between the market price at exercise and the price paid by the employee to exercise the options

Total unrecognized compensation cost related to unvested stock option awards was $76 million at September 30, 2006 and is expected to be recognized over a weighted-average period of 1.2 years.

Deferred and Restricted Stock

Under the 1988 Plan, the Company grants deferred stock to certain employees. The grants vest after a designated period of time, generally two to five years.

Deferred Stock

Shares in thousands	Shares		Grant Date  Fair Value*
Nonvested at January 1, 2006	5,349		$	42.13
Granted	1,398		43.36
Vested	(800	)	29.83
Canceled	(151	)	44.17
Nonvested at September 30, 2006	5,796		$	44.07

*Weighted-average per share

Additional Information about Deferred Stock

	Three Months Ended				Nine Months Ended
In millions	Sept. 30,  2006		Sept. 30,  2005		Sept. 30,  2006		Sept. 30,  2005
Grant date fair value of deferred stock vested	—		—		$	24	$	71
Total fair value of deferred stock vested	—		—		$	34	$	111
Related tax benefit	—		—		$	13	$	41
Total compensation expense for deferred stock awards	$	17	$	14	$	49	$	44
Related tax benefit	$	6	$	5	$	18	$	16

Total unrecognized compensation cost related to deferred stock awards was $126 million at September 30, 2006 and is expected to be recognized over a weighted-average period of 2.01 years. At September 30, 2006, approximately 200,000 deferred shares with a weighted-average fair value per share of $42.78 had previously vested, but were not issued. These shares are scheduled to be issued to employees within one to four years or upon retirement.

Also under the 1988 Plan, the Company has granted performance deferred stock awards that vest when the Company attains specified performance targets over a pre-determined period, generally two to five years. Compensation expense related to performance deferred stock awards is recognized over the lesser of the service or performance period. The following table shows the performance deferred stock awards granted:

Performance Deferred Stock Awards

Shares in millions	Performance Period	Target Shares Granted*	Weighted-average Fair Value per Share
2006	January 1, 2006 - December 31, 2008	0.9	$	43.66
2005	January 1, 2005 - December 31, 2007	1.0	$	53.04

* At the end of the performance period, the actual number of shares issued can range from zero to 200 percent of the target shares granted.

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The following table shows year-to-date changes in the nonvested performance deferred stock for 2006:

Performance Deferred Stock

Shares in thousands	Shares		Grant Date Fair Value*
Nonvested at January 1, 2006	6,002		$	35.83
Granted	943		43.66
Vested	—		—
Canceled	(97	)	41.45
Nonvested at September 30, 2006	6,848		$	36.83

*Weighted-average per share

Total compensation expense for performance deferred stock awards was $32 million in the third quarter of 2006 ($36 million in the third quarter of 2005) and the related tax benefit was $12 million ($13 million in the third quarter of 2005). Total compensation expense for performance deferred stock awards was $63 million in the first nine months of 2006 ($239 million in the first nine months of 2005) and the related tax benefit was $23 million ($88 million in 2005). Total unrecognized compensation cost related to performance deferred stock awards was $71 million at September 30, 2006 and is expected to be recognized over a weighted-average period of 1.05 years. At September 30, 2006, approximately 1.3 million performance deferred shares with a weighted-average fair value of $37.26 per share had previously vested, but were not issued. These shares are scheduled to be issued in April 2007.

In addition, the Company is authorized to grant up to 300,000 deferred shares of common stock to executive officers of the Company under the 1994 Executive Performance Plan.

Under the 2003 Non-Employee Directors’ Stock Incentive Plan, a plan approved by stockholders, the Company may grant up to 1.5 million shares (including options, restricted stock and deferred stock) to non-employee directors over the 10-year duration of the program, subject to an annual aggregate award limit of 25,000 shares for each individual director. In the first quarter of 2006, 53,900 stock options with a weighted-average fair value of $11.19 per share and 12,100 shares of restricted stock with a weighted-average fair value of $43.37 per share were issued under this plan. No shares were granted under this plan in the second or third quarters of 2006. The restricted stock issued under this plan cannot be sold, assigned, pledged or otherwise transferred by the non-employee director, until the director is no longer a member of the Board.

NOTE I — EARNINGS PER SHARE CALCULATIONS

Earnings Per Share Calculations	Three Months Ended Sept. 30, 2006				Three Months Ended Sept. 30, 2005
In millions, except per share amounts	Basic		Diluted		Basic		Diluted
Net income available for common stockholders	$	512	$	512	$	801	$	801
Weighted-average common shares outstanding	959.1		959.1		965.2		965.2
Add dilutive effect of stock options and awards	—		10.8		—		13.2
Weighted-average common shares for EPS calculations	959.1		969.9		965.2		978.4
Earnings per common share	$	0.53	$	0.53	$	0.83	$	0.82
Stock options and deferred stock awards excluded from EPS calculations (1)			20.6				12.4

Earnings Per Share Calculations	Nine Months Ended Sept. 30, 2006				Nine Months Ended Sept. 30, 2005
In millions, except per share amounts	Basic		Diluted		Basic		Diluted
Net income available for common stockholders	$	2,749	$	2,749	$	3,419	$	3,419
Weighted-average common shares outstanding	963.5		963.5		962.1		962.1
Add dilutive effect of stock options and awards	—		12.0		—		12.1
Weighted-average common shares for EPS calculations	963.5		975.5		962.1		974.2
Earnings per common share	$	2.85	$	2.82	$	3.55	$	3.51
Stock options and deferred stock awards excluded from EPS calculations (1)			17.5				4.9

(1)Outstanding options to purchase shares of common stock and deferred stock awards that were not included in the calculation of diluted earnings per share because the effect of including them would have been anti-dilutive.

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NOTE J — OPERATING SEGMENTS AND GEOGRAPHIC AREAS

In the first quarter of 2006, Dow made some adjustments to its segment reporting to align this reporting with recent changes in the Company’s organization and its evolving strategic business model. The reporting changes are described below and reflected in the following Corporate Profile and in the segment information for the three months and nine months ended September 30, 2006 and 2005. On July 11, 2006, the Company filed a Current Report on Form 8-K that provided revised historical information reflecting the change in the composition of the Company’s reported segments.

Specialty Plastics and Elastomers is a recently formed business unit that includes a broad range of performance plastomers and elastomers, specialty copolymers, synthetic rubber, PVDC resins and films, and specialty film substrates. Beginning in the first quarter of 2006, the results for this business are reported in Performance Plastics. The business includes Engineering Plastics, Wire and Cable, specialty films, and the elastomers businesses recently acquired from DuPont Dow Elastomers L.L.C., all of which were previously reported in Performance Plastics. In addition, the business includes polybutadiene rubber, styrene butadiene rubber and several specialty resins which were previously reported in Basic Plastics.

Peroxymeric chemicals and solution vinyl resins, which were formerly managed and reported in Performance Chemicals, are now reported in the Dow Epoxy business in Performance Plastics. Subsequent to these changes, the Company announced that it intends to exit the peroxymeric chemicals business in 2006, as part of its restructuring activities (see Note F).

Results for Dow Corning Corporation, a 50:50 joint venture, which were formerly reported in Unallocated and Other, are now reported in Performance Chemicals.

Results for SAFE-TAINER™ closed-loop delivery system, which were formerly reported in Basic Chemicals, are now reported in Performance Chemicals in the Specialty Chemicals business. SAFE-TAINER™, which is a system for delivering chlorinated solvents to the industrial cleaning industry, was previously managed as part of the Global Chlorinated Organics business, which produces chlorinated solvents.

Corporate Profile

Dow is a diversified chemical company that offers a broad range of innovative chemical, plastic and agricultural products and services to customers in more than 175 countries, helping them to provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care. In 2005, Dow had annual sales of $46 billion and employed approximately 42,000 people worldwide. The Company has 156 manufacturing sites in 37 countries and supplies more than 3,200 products grouped within the operating segments listed on the following pages.

PERFORMANCE PLASTICS

Applications: automotive interiors, exteriors, under-the-hood and body engineered systems • building and construction, thermal and acoustic insulation, roofing • communications technology, telecommunication cables, electrical and electronic connectors • footwear • home and office furnishings:  kitchen appliances, power tools, floor care products, mattresses, carpeting, flooring, furniture padding, office furniture • information technology equipment and consumer electronics • packaging, food and beverage containers, protective packaging • sports and recreation equipment • wire and cable insulation and jacketing materials for power utility and telecommunications

Dow Automotive serves the global automotive market and is a leading supplier of plastics, adhesives, sealants and other plastics-enhanced products for interior, exterior, under-the-hood, vehicle body structure and acoustical management technology solutions.  With offices and application development centers around the world, Dow Automotive provides materials science expertise and comprehensive technical capabilities to its customers worldwide.

•Products: AFFINITY™ polyolefin plastomers; AMPLIFY™ functional polymers; BETABRACE™ reinforcing composites; BETADAMP™ acoustical damping systems; BETAFOAM™ NVH and structural foams; BETAGUARD™ sealants; BETAMATE™ structural adhesives; BETASEAL™ glass bonding systems; CALIBRE™ polycarbonate resins; DOW™ polyethylene resins; DOW™ polypropylene resins and automotive components made with DOW™ polypropylene; IMPAXX™ energy management foam; Injection-molded dashmats and underhood barriers;  INSPIRE™ performance polymers; INTEGRAL™ adhesive film; ISONATE™ pure and modified methylene diphenyl diisocyanate (MDI) products; ISOPLAST™ engineering thermoplastic polyurethane resins; MAGNUM™ ABS resins; PAPI™ polymeric MDI; PELLETHANE™ thermoplastic polyurethane elastomers; Premium brake fluids and lubricants; PULSE™ engineering resins; SPECFLEX™ semi-flexible polyurethane foam systems; SPECTRIM™ reaction moldable polymers; STRANDFOAM™ polypropylene foam; VERSIFY™ plastomers and elastomers; VORANATE™ specialty isocyanates; VORANOL™ polyether polyols

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Dow Building Solutions manufactures and markets an extensive line of insulation, weather barrier, and oriented composite building solutions, as well as a line of cushion packaging foam solutions. The business is the recognized leader in extruded polystyrene (XPS) insulation, known industry-wide by its distinctive Blue color and the Dow STYROFOAM™ brand for more than 50 years. The business also manufactures foam solutions for a wide range of applications including cushion packaging, electronics protection and material handling.

•Products: EQUIFOAM™ comfort products; ETHAFOAM™ polyethylene foam; IMMOTUS™ acoustic panels; QUASH™ sound management foam; SARAN™ vapor retarder film and tape; STYROFOAM™ brand insulation products (including XPS and polyisocyanurate rigid foam sheathing products); SYMMATRIX™ oriented composites; SYNERGY™ soft touch foam; TRYMER™ polyisocyanurate foam pipe insulation; and WEATHERMATE™ weather barrier solutions (housewraps, sill pans, flashings and tapes)

Dow Epoxy is a leading global producer of epoxy resins and related products for a wide range of industries and applications such as coatings, electronics, civil engineering, and composites. With plants strategically located across four continents, the business is focused on providing customers around the world with differentiated solution-based epoxy products and innovative technologies and services.

•Products: D.E.H.™ epoxy curing agents; D.E.N.™ epoxy novolac resins; D.E.R.™ epoxy resins (liquids, solids and solutions); Epoxy intermediates (Acetone, Allyl chloride, Bisphenol-A, Epichlorohydrin, OPTIM™ synthetic glycerine and Phenol); Peroxymeric chemicals (CYRACURE™ cycloaliphatic epoxides; FLEXOL™ plasticizers; and TONE™ monomers, polyols and polymers); Specialty acrylic monomers (Glycidyl methacrylate, Hydroxyethyl acrylate and Hydroxypropyl acrylate); and UCAR™ solution vinyl resins

The Polyurethanes and Polyurethane Systems business is a leading global producer of polyurethane raw materials and polyurethane systems. Differentiated by its ability to globally supply a high-quality, consistent and complete product range, this business emphasizes both existing and new business developments while facilitating customer success with a global market and technology network.

•Products: THE ENHANCER™ and LIFESPAN™ carpet backings; FROTH-PAK™ polyurethane spray foam; GREAT STUFF™ polyurethane foam sealant; INSTA-STIK™ roof insulation adhesive; ISONATE™ MDI; PAPI™ polymeric MDI; Propylene glycol; Propylene oxide; SPECFLEX™ copolymer polyols; SYNTEGRA™ waterborne polyurethane dispersions; TILE BOND™ roof tile adhesive; VORACOR™, VORALAST™, VORALUX™ and VORASTAR™ polyurethane systems; VORANATE™ isocyanate; VORANOL™ and VORANOL™ VORACTIV™ polyether and copolymer polyols

Specialty Plastics and Elastomers is a business portfolio of specialty products including a broad range of engineering plastics and compounds, performance elastomers and plastomers, specialty copolymers, synthetic rubber, polyvinylidene chloride resins and films (PVDC), and specialty film substrates. The business serves such industries as automotive, civil construction, wire and cable, building and construction, consumer electronics and appliances, food and specialty packaging, and footwear.

•Products: AFFINITY™ polyolefin plastomers (POPs); AMPLIFY™ functional polymers; CALIBRE™ polycarbonate resins; DOW XLA™ elastic fiber; EMERGE™ advanced resins; ENGAGE™ polyolefin elastomers; FLEXOMER™ very low density polyethylene (VLDPE) resins; EXO™ Overmolding Systems; INTEGRAL™ polyolefin films; ISOPLAST™ engineering thermoplastic polyurethane resins; MAGNUM™ ABS resins; NORDEL™ hydrocarbon rubber; PELLETHANE™ thermoplastic polybutadiene rubber; Polyurethane elastomers; PRIMACOR™ copolymers; PROCITE™ polystyrene films; PULSE™ engineering resins; REDI-LINK™ polyethylene; SARAN™ PVDC resins and films; SARANEX™ barrier films; SI-LINK™ crosslinkable polyethylene; Styrene-butadiene rubber; TYRIL™ SAN resins; TYRIN™ chlorinated polyethylene resins; TRENCHCOAT™ polyolefin films; UNIGARD™ high-performance flame-retardant compounds; UNIGARD™ reduced emissions flame-retardant compounds; UNIPURGE™ purging compounds; VERSIFY™ plastomers and elastomers; Wire and cable insulation and jacketing compounds; ZETABON™ coated metal cable armor

The Technology Licensing and Catalyst business includes licensing and supply of related catalysts for the UNIPOL™ polypropylene process, the METEOR™ process for ethylene oxide (EO) and ethylene glycol (EG), the LP OXO™ process for oxo alcohols, and the QBIS™ bisphenol A process. Licensing of the UNIPOL™ polyethylene process and related catalysts, including metallocene catalysts, are handled through Univation Technologies, LLC, a 50:50 joint venture of Union Carbide.

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•Products: LP OXO™ process technology; METEOR™ EO/EG process technology and catalysts; QBIS™ bisphenol A process technology and DOWEX™ QCAT™ catalyst; SHAC™ catalysts; UNIPOL™ process technology

The Performance Plastics segment also includes a portion of the results of the Siam Group, a group of Thailand-based joint ventures.

PERFORMANCE CHEMICALS

Applications: agricultural and pharmaceutical products and processing • building materials • chemical processing and intermediates • food processing and ingredients • household products • metal cleaning • oil and gas treatment • paints, coatings, inks, adhesives, lubricants • personal care products • pulp and paper manufacturing, coated paper and paperboard • textiles and carpet • water purification

Designed Polymers is a diverse portfolio of multi-functional ingredients and polymers for numerous markets and applications. Within Designed Polymers, Dow Water Solutions is a business unit comprised of world-class brands and enabling component technologies designed to advance the science of desalination, water purification, contaminant removal and water recycling. Designed Polymers businesses also market a range of products that enhance the physical and sensory properties of end-use products in a wide range of applications including food, pharmaceuticals, oilfields, paints and coatings, personal care, and building and construction. The business also includes Advanced Electronic Materials and the results of Dowpharma, which provides the pharmaceutical and biopharmaceutical industries with products and services for drug discovery, development, manufacturing and delivery.

•Products: Acrolein derivatives; Basic nitroparaffins and nitroparaffin-based specialty chemicals of ANGUS Chemical Company, a wholly owned subsidiary of Dow; Biocides; CELLOSIZE™ hydroxyethyl cellulose; DOWEX™ ion exchange resins; ETHOCEL™ ethylcellulose resins; FILMTEC™ membranes; METHOCEL™ cellulose ethers; POLYOX™ water-soluble resins; Products for hair/skin care from Amerchol Corporation, a wholly owned subsidiary of Dow

The Dow Latex and Acrylic Monomers business is a major global supplier of synthetic latex, used for coating paper and paperboard (for magazines, catalogues and food packaging), and in decorative and industrial paints, adhesives, textile products, and construction products such as caulks and sealants, and a leading supplier of acrylic monomers.

•Products: Acrylic acid/Acrylic esters; Acrylic latex; Butadiene-vinylidene latex; DRYTECH™ superabsorbent polymers; NEOCAR™ branched vinyl ester latexes; POLYPHOBE™ rheology modifiers; Polystyrene latex; Styrene-acrylate latex; Styrene-butadiene latex; UCAR™ all-acrylic, styrene-acrylic and vinyl-acrylic latexes

The Specialty Chemicals business provides products used as functional ingredients or processing aids in the manufacture of a diverse range of products. Applications include agricultural and pharmaceutical products and processing, building and construction, chemical processing and intermediates, food processing and ingredients, household products, coatings, pulp and paper manufacturing, and transportation. Dow Haltermann Custom Processing provides contract and custom manufacturing services to other specialty chemical and agricultural chemical producers.

•Products: Alkyl alkanolamines; CARBOWAX™ polyethylene glycols and methoxypolyethylene glycols; Diphenyloxide; DOW™ polypropylene glycols; DOWFAX™, TERGITOL™ and TRITON™ surfactants; DOWTHERM™, SYLTHERM™ and UCARTHERM™ heat transfer fluids; Ethanolamines; Ethylene oxide- and propylene oxide-based glycol ethers; Ethyleneamines; Isopropanolamines; SAFE-TAINER™ closed-loop delivery system; UCAR™ deicing fluids; UCON™ fluids; VERSENE™ chelating agents; Fine and specialty chemicals from the Dow Haltermann Custom Processing business; Test and reference fuels, printing ink distillates, pure hydrocarbons and esters, and derivatives from Haltermann Products, a wholly owned subsidiary of Dow

The Performance Chemicals segment also includes the results of Dow Corning Corporation, and a portion of the results of the OPTIMAL Group and the Siam Group, all joint ventures of the Company.

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AGRICULTURAL SCIENCES

Applications: control of weeds, insects and plant diseases for agriculture and pest management • agricultural seeds and traits (genes)

Dow AgroSciences is a global leader in providing pest management, agricultural and crop biotechnology products and solutions. The business develops, manufactures and markets products for crop production; weed, insect and plant disease management; and industrial and commercial pest management. Dow AgroSciences is building a leading plant genetics and biotechnology business in agricultural seeds, traits, healthy oils, animal health, and food safety.

•Products: CLINCHER™ herbicide; DITHANE™ fungicide; LORSBAN™ insecticides; FORTRESS™ fungicide; GARLON™ herbicide; GLYPHOMAX™ herbicide; GRANITE™ herbicide, HERCULEX™ I insect protection; KEYSTONE™ herbicides; LAREDO™ fungicide; LONTREL™ herbicide; MUSTANG™ herbicide; MYCOGEN™ seeds; NATREON™ canola and sunflower oil; NEXERA™ seeds; PHYTOGEN™ brand cottonseeds; PROFUME™ gas fumigant; SENTRICON™ Termite Colony Elimination System; STARANE™ herbicide; STINGER™ herbicide; SURPASS™ herbicide; TELONE™ soil fumigant; TORDON™ herbicide; TRACER™ NATURALYTE™ insect control; VIKANE™ structural fumigant; WIDESTRIKE™ insect protection

BASIC PLASTICS

Applications: adhesives • appliances and appliance housings • agricultural films • automotive parts and trim • beverage bottles • bins, crates, pails and pallets • building and construction • coatings • consumer and durable goods • consumer electronics • disposable diaper liners • fibers and nonwovens • films, bags and packaging for food and consumer products • hoses and tubing • household and industrial bottles • housewares • hygiene and medical films • industrial and consumer films and foams • information technology • oil tanks and road equipment • plastic pipe • textiles • toys, playground equipment and recreational products • wire and cable compounds

The Polyethylene business is the world’s leading supplier of polyethylene-based solutions through sustainable product differentiation. Through the use of multiple catalyst and all process technologies, the business offers customers one of the industry’s broadest ranges of polyethylene resins via a strong global network of local experts focused on partnering for long-term success.

•Products: ASPUN™ fiber grade resins; ATTANE™ ultra low density polyethylene (ULDPE) resins; CONTINUUM™ bimodal polyethylene resins; DOW™ high density polyethylene (HDPE) resins; DOW™ low density polyethylene (LDPE) resins; DOWLEX™ polyethylene resins; ELITE™ enhanced polyethylene (EPE) resins; TUFLIN™ linear low density polyethylene (LLDPE) resins; UNIVAL™ HDPE resins

The Polypropylene business, a major global polypropylene supplier, provides a broad range of products and solutions tailored to customer needs by leveraging Dow’s leading manufacturing and application technology, research and product development expertise, extensive market knowledge and strong customer relationships.

•Products: DOW™ homopolymer polypropylene resins; DOW™ impact copolymer polypropylene resins; DOW™ random copolymer polypropylene resins; INSPIRE™ performance polymers

The Polystyrene business, the global leader in the production of polystyrene resins, is uniquely positioned with geographic breadth and participation in a diversified portfolio of applications. Through market and technical leadership and low cost capability, the business continues to improve product performance and meet customer needs.

•Products: STYRON A-TECH™ and C-TECH™ advanced technology polystyrene resins and a full line of STYRON™ general purpose polystyrene resins; STYRON™ high-impact polystyrene resins

The Basic Plastics segment also includes the results of Equipolymers and a portion of the results of EQUATE Petrochemical Company K.S.C. and the Siam Group, all joint ventures of the Company.

BASIC CHEMICALS

Applications: agricultural products • alumina • automotive antifreeze and coolant systems • carpet and textiles • chemical processing • dry cleaning • dust control • household cleaners and plastic products • inks • metal cleaning • packaging, food and beverage containers, protective packaging • paints, coatings and adhesives • personal care products • petroleum refining • pharmaceuticals • plastic pipe • pulp and paper manufacturing • snow and ice control • soaps and detergents • water treatment

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The Core Chemicals business is a leading global producer of each of its basic chemical products, which are sold to many industries worldwide, and also serve as key raw materials in the production of a variety of Dow’s performance and plastics products.

•Products: Acids; Alcohols; Aldehydes; Caustic soda; Chlorine; Chloroform; COMBOTHERM™ blended deicer; DOWFLAKE™ calcium chloride; DOWPER™ dry cleaning solvent; Esters; Ethylene dichloride (EDC); LIQUIDOW™ liquid calcium chloride; MAXICHECK™ procedure for testing the strength of reagents; MAXISTAB™ stabilizers for chlorinated solvents; Methyl chloride; Methylene chloride; Monochloroacetic acid (MCAA); Oxo products; PELADOW™ calcium chloride pellets; Perchloroethylene; Trichloroethylene; Vinyl acetate monomer (VAM); Vinyl chloride monomer (VCM); Vinylidene chloride (VDC)

The Ethylene Oxide/Ethylene Glycol business is a key supplier of ethylene glycol to MEGlobal, a 50:50 joint venture and a world leader in the manufacture and marketing of merchant monoethylene glycol and diethylene glycol. Dow also supplies ethylene oxide to internal derivatives businesses. Ethylene glycol is used in polyester fiber, polyethylene terephthalate (PET) for food and beverage container applications, polyester film and antifreeze.

•Products: Ethylene glycol (EG); Ethylene oxide (EO)

The Basic Chemicals segment also includes the results of MEGlobal and a portion of the results of EQUATE Petrochemical Company K.S.C. and the OPTIMAL Group, all joint ventures of the Company.

HYDROCARBONS AND ENERGY

Applications: polymer and chemical production • power

The Hydrocarbons and Energy business encompasses the procurement of fuels, natural gas liquids and crude oil-based raw materials, as well as the supply of monomers, power and steam for use in Dow’s global operations. Dow is the world leader in the production of olefins and aromatics.

•Products: Benzene; Butadiene; Butylene; Cumene; Ethylene; Propylene; Styrene; Power, steam and other utilities

The Hydrocarbons and Energy segment also includes the results of Compañía Mega S.A. and a portion of the results of the Siam Group, both joint ventures of the Company.

Unallocated and Other includes the results of Dow Ventures (which includes new business incubation platforms focused on identifying and pursuing new commercial opportunities); Venture Capital; the Company’s insurance operations and environmental operations; and overhead and other cost recovery variances not allocated to the operating segments.

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Operating Segments	Three Months Ended						Nine Months Ended
In millions	Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005
Sales by operating segment
Performance Plastics	$	3,463		$	3,185		$	10,398		$	9,222
Performance Chemicals	2,014			1,862			5,868			5,667
Agricultural Sciences	662			615			2,585			2,635
Basic Plastics	3,106			2,702			8,889			8,088
Basic Chemicals	1,461			1,293			4,245			4,114
Hydrocarbons and Energy	1,569			1,541			4,643			4,443
Unallocated and Other	84			63			260			221
Total	$	12,359		$	11,261		$	36,888		$	34,390
EBIT (1) by operating segment
Performance Plastics	$	144		$	582		$	1,282		$	1,547
Performance Chemicals	286			352			949			1,208
Agricultural Sciences	—			(28		)	377			469
Basic Plastics	592			423			1,561			1,774
Basic Chemicals	122			167			495			861
Hydrocarbons and Energy	—			—			—			—
Unallocated and Other	(367		)	(222		)	(681		)	(782		)
Total	$	777		$	1,274		$	3,983		$	5,077
Equity in earnings of nonconsolidated affiliates by operating segment (included in EBIT)
Performance Plastics	$	34		$	51		$	81		$	159
Performance Chemicals	91			73			275			237
Agricultural Sciences	1			—			1			—
Basic Plastics	65			46			127			158
Basic Chemicals	100			50			163			149
Hydrocarbons and Energy	26			17			68			35
Unallocated and Other	—			3			2			1
Total	$	317		$	240		$	717		$	739

(1)The Company uses EBIT (which Dow defines as earnings (loss) before interest, income taxes and minority interests) as its measure of profit/loss for segment reporting purposes.  EBIT by operating segment includes all operating items relating to the businesses; items that principally apply to the Company as a whole are assigned to Unallocated and Other.  A reconciliation of EBIT to “Net Income Available for Common Stockholders” is provided below:

	Three Months Ended				Nine Months Ended
In millions	Sept. 30, 2006		Sept. 30, 2005		Sept. 30, 2006		Sept. 30, 2005
EBIT	$	777	$	1,274	$	3,983	$	5,077
+ Interest income	48		42		128		98
- Interest expense and amortization of debt discount	155		168		462		543
- Provision for income taxes	137		328		831		1,153
- Minority interests’ share in income	21		19		69		60
Net Income Available for Common Stockholders	$	512	$	801	$	2,749	$	3,419

Transfers of products between operating segments are generally valued at cost. However, transfers of products to Agricultural Sciences from other segments are generally valued at market-based prices; the revenues generated by these transfers in the first nine months of 2006 and 2005 were immaterial and eliminated in consolidation.

Geographic Areas	Three Months Ended				Nine Months Ended
In millions	Sept. 30, 2006		Sept. 30, 2005		Sept. 30, 2006		Sept. 30, 2005
Sales by geographic area
United States	$	4,514	$	4,123	$	13,903	$	12,868
Europe	4,491		4,036		13,350		12,643
Rest of World	3,354		3,102		9,635		8,879
Total	$	12,359	$	11,261	$	36,888	$	34,390

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of The Dow Chemical Company and its subsidiaries (“Dow” or the “Company”). This section covers the current performance and outlook of the Company and each of its operating segments. The forward-looking statements contained in this section and in other parts of this document involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices and other factors as more fully discussed elsewhere and in filings with the U.S. Securities and Exchange Commission (“SEC”). These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

OVERVIEW

Dow’s management and employees continued to focus on financial discipline, lowering the total cost to serve customers and price/volume management this quarter, in an effort to further improve Dow’s financial performance. In line with these ongoing efforts, the Board of Directors approved a restructuring plan in the third quarter of 2006 for the shutdown of a number of assets around the world and other optimization activities, resulting in the recognition of pretax restructuring charges totaling $579 million in the quarter.

For the third quarter of 2006, net sales were $12.4 billion, up 10 percent from the third quarter of last year, principally due to an increase in prices, as the Company continued to face the challenges of higher feedstock and energy costs. Feedstock and energy costs rose 15 percent over the third quarter of last year, adding approximately $750 million in higher costs. Other raw material costs were also up, adding another approximately $170 million to cost of sales. Operating expenses rose in the third quarter of 2006, but remained low as a percentage of total sales. Capital spending for the quarter remained on target at $420 million, bringing year-to-date capital spending to $1.1 billion, consistent with the Company’s plan to spend approximately $1.8 billion on capital expenditures in 2006.

Dow’s results for the three-month and nine-month periods ended September 30, 2006 are discussed in further detail below.

Selected Financial Data	Three Months Ended						Nine Months Ended
In millions, except per share amounts	Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005
Net sales	$	12,359		$	11,261		$	36,888		$	34,390
Cost of sales	$	10,600		$	9,610		$	31,027		$	28,247
Percent of net sales	85.8		%	85.3		%	84.1		%	82.1		%
Research and development, and selling, general and administrative expenses	$	711		$	643		$	2,066		$	1,943
Percent of net sales	5.8		%	5.7		%	5.6		%	5.6		%
Effective tax rate	20.4		%	28.6		%	22.8		%	24.9		%
Net income available for common stockholders	$	512		$	801		$	2,749		$	3,419
Earnings per common share — basic	$	0.53		$	0.83		$	2.85		$	3.55
Earnings per common share — diluted	$	0.53		$	0.82		$	2.82		$	3.51
Operating rate percentage	87		%	84		%	85		%	84		%

RESULTS OF OPERATIONS

Net sales for the third quarter of 2006 were $12.4 billion, up 10 percent from $11.3 billion in the third quarter of last year. Compared with the same quarter of 2005, prices rose 11 percent, while volume declined 1 percent. Prices improved in all operating segments, with double-digit increases in the Basics segments, driven by the continuing significant increase in feedstock and energy costs year over year. From a geographic standpoint, prices rose in all geographic areas, with the most significant increases reported in Europe, the United States and Latin America. Compared with the third quarter of last year, the change in volume by operating segment was mixed, with increases in the Performance segments and Basic Chemicals more than offset in total by declines in Basic Plastics and Hydrocarbons and Energy. By geographic area, volume growth of 9 percent in Asia Pacific was offset by declines in the other geographic areas.

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Net sales for the first nine months of 2006 were $36.9 billion, up 7 percent from $34.4 billion in the same period last year, as prices rose 6 percent and volume increased 1 percent. Prices were up in all operating segments, except Agricultural Sciences, and in all geographic areas, except Asia Pacific, where price was essentially unchanged from last year. Year to date, volume grew in Performance Plastics (up 9 percent) and Performance Chemicals (up 3 percent), but declined in the Basics segments; volume for Agricultural Sciences was flat versus last year. Year to date, volume for Performance Plastics improved due to the addition of sales of ENGAGETM, NORDELTM and TYRINTM elastomers, acquired mid-year 2005 when Dow divested its interest in DuPont Dow Elastomers L.L.C. (“DDE”), and lump sum technology licensing revenue earned in the first quarter of 2006. For additional details regarding the change in net sales, see the Sales Volume and Price table at the end of the section entitled “Segment Results.”

Gross margin was $1.8 billion for the third quarter of 2006, up from $1.7 billion in the third quarter of last year. Gross margin improved as higher selling prices of approximately $1.2 billion and the favorable impact of improved operating rates more than offset an increase of approximately $750 million in feedstock and energy (“H&E”) costs and higher non-H&E raw material costs of approximately $170 million in the third quarter of 2006. Year to date, gross margin was $5.9 billion, compared with $6.1 billion in the first nine months of 2005.

The Company’s global plant operating rate (for its chemicals and plastics businesses) was 87 percent in the third quarter of 2006, up from 84 percent in the third quarter of 2005 when the Company’s operating rate was reduced by hurricane-related shutdowns on the U.S. Gulf Coast. For the first nine months of 2006, Dow’s global plant operating rate was 85 percent, compared with 84 percent in the same period of 2005. The Company’s operating rate for 2006 reflects the impact of planned maintenance turnarounds at several of Dow’s manufacturing facilities in the first half of the year.

Personnel count was 42,910 at September 30, 2006, up from 42,413 at December 31, 2005 and 42,821 at September 30, 2005, due to the addition of approximately 550 employees associated with the third quarter acquisition of Zhejiang Omex Environmental Engineering Co. LTD. Excluding the addition of these employees, headcount has continued to decline, as the Company has remained focused on improving organizational efficiency and financial performance. Headcount will decline further over the next two years, due to the shutdown of several manufacturing facilities around the world. See Note F to the Consolidated Financial Statements for additional information regarding the recently announced shutdowns.

Operating expenses (research and development, and selling, general and administrative expenses) totaled $711 million in the third quarter of 2006, up $68 million or 11 percent, from $643 million in the third quarter of last year. Compared with last year, research and development (“R&D”) expenses increased $27 million, and selling, general and administrative (“SG&A”) expenses increased $41 million. Approximately half of the increase in operating expenses was related to planned spending for growth initiatives within the Performance businesses. The adoption of SFAS No. 123R, which requires the allocation of a portion of stock-based compensation expense to operating expenses, accounted for about a quarter of the increase. Prior to the adoption of SFAS No. 123R on January 1, 2006, all stock-based compensation expense was reflected in “Cost of sales.” (See Notes B and H to the Consolidated Financial Statements for additional information on this accounting standard.) The balance of the increase in operating expenses was primarily related to the Company’s “Human Element” advertising campaign. For the first nine months of 2006, operating expenses totaled $2,066 million, up $123 million (6 percent) from $1,943 million in the first nine months of 2005. The increase included higher R&D expenses of $66 million and higher SG&A expenses of $57 million. Despite these increases, operating expenses remained low as a percentage of net sales.

Amortization of intangibles was $13 million in the third quarter of 2006, unchanged from the third quarter of last year. For the first nine months of 2006, amortization of intangibles was $37 million, compared with $40 million for the same period last year. See Note D to the Consolidated Financial Statements for additional information on intangible assets.

On August 29, 2006, the Company’s Board of Directors approved a plan to shut down a number of assets around the world as the Company continues its drive to improve the competitiveness of its global operations. As a consequence of these shutdowns, which are scheduled to be completed by the end of 2008, and other optimization activities, the Company recorded pretax restructuring charges totaling $579 million in the third quarter of 2006. The charges included asset write-downs and write-offs of $327 million, costs associated with exit or disposal activities of $171 million and severance costs of $81 million. The impact of the charges is shown as “Restructuring charges” in the consolidated statements of income and was reflected in the Company’s segment results as follows: Performance Plastics $242 million, Performance Chemicals $11 million, Basic Plastics $16 million, Basic Chemicals $165 million, and Unallocated and Other $145 million. When the restructuring plans have been fully implemented, the Company expects to realize ongoing annual savings of approximately $160 million. See Note F to the Consolidated Financial Statements for details on the restructuring charges.

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The following table summarizes the activities related to the Company’s restructuring reserve by component:

Restructuring Activities

In millions	Impairment of  Long-Lived Assets  and Other  Intangible Assets			Costs associated  with Exit or  Disposal Activities		Severance  Costs		Total
Restructuring charges incurred in third quarter of 2006	$	327		$	171	$	81	$	579
Cash payments	—			—		—		—
Non-cash adjustments	(327		)	—		—		(327		)
Reserve balance at Sept. 30, 2006	—			$	171	$	81	$	252

Dow’s share of the earnings of nonconsolidated affiliates was $317 million in the third quarter of 2006, compared with $240 million in the third quarter of last year. Compared with the same quarter of last year, equity earnings improved as higher earnings from EQUATE Petrochemical Company K.S.C. (“EQUATE”); Dow Corning Corporation (“Dow Corning”); the OPTIMAL Group (“OPTIMAL”); Univation Technologies, LLC (“Univation”); Compañía Mega S.A.; MEGlobal; and Siam Polyethylene Company Limited (“Siam Polyethylene”) were partially offset by the absence of equity earnings of UOP LLC (“UOP”), which the Company exited in the fourth quarter of 2005. For the first nine months of 2006, equity earnings were $717 million, compared with $739 million for the same period last year. Compared with last year, year-to-date equity earnings declined, despite improved results from Dow Corning (due in part to a favorable tax settlement reached in the second quarter of 2006), Compañía Mega S.A., MEGlobal, and Univation. The absence of equity earnings from UOP and DDE (which the Company also exited in 2005), and lower results from EQUATE, OPTIMAL, and Siam Polyethylene contributed to the decline in equity earnings. Results from EQUATE and OPTIMAL were lower in 2006 due to planned maintenance turnarounds at the joint ventures in the first quarter of this year. The maintenance turnaround at EQUATE continued into the second quarter of 2006.

Sundry income — net includes a variety of income and expense items such as the gain or loss on foreign currency exchange, dividends from investments, and gains and losses on sales of investments and assets. Sundry income — net for the third quarter of 2006 was $4 million, compared with $39 million in the same quarter of 2005 which included the impact of small gains on the sale of assets and favorable foreign exchange hedging results. Year to date, net sundry income was $87 million, compared with $178 million in the first nine months of 2005. In 2005, year-to-date net sundry income included a $70 million gain ($41 million reflected in the Basic Chemicals segment; $29 million reflected in the Basic Plastics segment) recorded in the first quarter on the sale of a portion of Union Carbide’s interest in EQUATE, a gain of $31 million associated with the divestiture of Dow’s interest in DDE and the acquisition of certain DDE assets, and a loss of $31 million associated with the early extinguishment of $845 million of debt in the second quarter.

Net interest expense (interest expense less capitalized interest and interest income) was $107 million in the third quarter of 2006, compared with $126 million in the third quarter of last year. Year-to-date, net interest expense was $334 million, down from $445 million in the first nine months of 2005. Compared with last year, net interest expense was down due to lower interest expense, reflecting a significant reduction in total debt, and higher interest income, reflecting an increase in interest rates.

The effective tax rate for the third quarter of 2006 was 20.4 percent, versus 28.6 percent for the third quarter of 2005. The Company’s effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax credits available. The tax rate for the third quarter of 2006 was favorably impacted by: a reduction in the estimated annual tax rate for 2006, caused by a revised forecast of earnings in lower tax jurisdictions relative to total earnings; a higher level of equity earnings, which are mostly taxed at the joint venture level; and the adjustment of current and deferred tax balances based on positions taken on tax returns filed in multiple jurisdictions in the third quarter. Additionally, based on tax planning strategies that were implemented in Brazil, as well as projections of future earnings, it was determined that it was more likely than not that tax loss carryforwards would be utilized, resulting in a reversal of existing valuation allowances of $73 million. Offsetting this impact was the recognition of a valuation allowance of $61 million in the third quarter resulting from enacted tax law changes in Italy, which limit the time frame during which tax loss carryforwards may be utilized. The Company determined that it was more likely than not that certain tax loss carryforwards would expire unused. In October 2006, the Italian tax authorities introduced a measure that would effectively reverse the law change limiting the use of these carryforwards. If this measure is enacted as expected, Dow will recognize the impact of reversing this valuation allowance in the period of enactment, which is expected to be the fourth quarter of 2006.

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The effective tax rate for the first nine months of 2006 was 22.8 percent, compared with 24.9 percent for the same period last year. In addition to the items described above, the effective tax rate for the first nine months of 2006 was favorably impacted by the closure of tax audit issues in the United States and by an enacted reduction in the Canadian tax rate. In the second quarter of 2005, the Company finalized its plan for the repatriation of foreign earnings subject to the requirements of the American Jobs Creation Act of 2004 (“AJCA”), resulting in a credit to the “Provision for income taxes” of $113 million. Absent this credit, the effective tax rate for the first nine months of 2005 would have been 27.3 percent.

Net income available for common stockholders was $512 million or $0.53 per share for the third quarter of 2006, compared with $801 million or $0.82 per share for the third quarter of 2005. Net income for the first nine months of 2006 was $2,749 million or $2.82 per share, compared with $3,419 million or $3.51 per share for the same period of 2005. The following tables summarize the impact of certain items recorded in the three-month and nine-month periods ended September 30, 2006 and 2005, and previously described in this section:

	Pretax Impact (1)				Impact on Net Income (2)				Impact on EPS (3)
	Three Months Ended				Three Months Ended				Three Months Ended
In millions, except per share amounts	Sept. 30, 2006			Sept. 30, 2005	Sept. 30, 2006			Sept. 30, 2005	Sept. 30, 2006			Sept. 30, 2005
Restructuring charges	$	(579	)	—	$	(438	)	—	$	(0.45	)	—

	Pretax Impact (1)						Impact on Net Income (2)						Impact on EPS (3)
	Nine Months Ended						Nine Months Ended						Nine Months Ended
In millions, except per share amounts	Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005
Restructuring charges	$	(579	)	—			$	(438	)	—			$	(0.45	)	—
Gain on sale of EQUATE shares	—			$	70		—			$	46		—			$	0.05
Loss on early extinguishment of debt	—			(31		)	—			(20		)	—			(0.02		)
AJCA repatriation of foreign earnings	—			—			—			113			—			0.12
Total	$	(579	)	$	39		$	(438	)	$	139		$	(0.45	)	$	0.15

(1)Impact on “Income before Income Taxes and Minority Interests”

(2)Impact on “Net Income Available for Common Stockholders”

(3)Impact on “Earnings per common share — diluted”

SEGMENT RESULTS

In the first quarter of 2006, Dow made some adjustments to its segment reporting to align this reporting with recent changes in the Company’s organization and its evolving strategic business model. Detailed information regarding the changes can be found in Note J to the Consolidated Financial Statements.

The Company uses EBIT (which Dow defines as earnings before interest, income taxes and minority interests) as its measure of profit/loss for segment reporting purposes. EBIT by operating segment includes all operating items relating to the businesses; items that principally apply to the Company as a whole are assigned to Unallocated. See Note J to the Consolidated Financial Statements for a reconciliation of EBIT to “Net Income Available for Common Stockholders.”

PERFORMANCE PLASTICS

Performance Plastics sales were $3,463 million in the third quarter of 2006, up 9 percent from $3,185 million in the third quarter of 2005 due to a 7 percent increase in price and a 2 percent increase in volume. EBIT of $144 million for the third quarter of 2006 reflected the negative impact of restructuring charges totaling $242 million related to the shutdown of a number of manufacturing facilities. The charges included the write-down of manufacturing assets; the write-off of obsolete capital spending, technology assets and inventories; contract termination fees; and asbestos abatement costs. The most significant charges were an asset write-off of $115 million related to the permanent closure of the Company’s toluene diisocyanate (“TDI”) plant in Porto Marghera, Italy, at the end of August, and contract termination fees of $64 million. EBIT was $582 million in the third quarter of last year. See Note F to the Consolidated Financial Statements for additional information on the restructuring charges. Compared with last year, EBIT declined as higher raw material costs, significant maintenance turnaround costs, higher operating expenses, and lower equity earnings — in addition to the

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restructuring charges — more than offset an increase in selling prices and volume. Compared with the third quarter of last year, equity earnings declined due to the sale of Union Carbide’s indirect 50 percent interest in UOP in the fourth quarter of 2005.

Dow Automotive sales for the third quarter of 2006 were up slightly from a year ago as prices rose 4 percent, including the favorable impact of currency (which accounted for half of the increase), and volume declined 3 percent. Despite double-digit volume growth in Asia Pacific and Latin America, and strong volume growth in Europe, volume declined overall due to a rapid drop in North American automotive production levels during the quarter, the result of slower sales of trucks and sport utility vehicles. EBIT for the business declined significantly from the third quarter of last year due to margin lost on the decline in North American volume, lower operating rates and higher raw material costs. In addition, higher operating expenses related to new product development and the establishment of a technical support center in Asia Pacific contributed to the decline in EBIT compared with the third quarter of 2005.

Dow Building Solutions sales for the third quarter of 2006 were up 7 percent versus the same quarter last year due to higher prices, driven by higher raw material costs. Despite strong volume growth in the eastern and southern regions of Europe, as well as Asia Pacific, volume was unchanged from the third quarter of last year as a slowdown in residential construction and competition from significantly lower priced oriented strand board resulted in lower sales of Dow’s polyisocyanurate rigid foam and extruded polystyrene sheathing in North America. EBIT was down from the same quarter of 2005 as higher raw material costs and spending on business growth initiatives exceeded the impact of price increases.

Dow Epoxy sales for the third quarter of 2006 were up significantly from the third quarter of last year, as volume grew 18 percent and prices rose 11 percent. The business benefited from tight market conditions within the industry, due in part to outages at competitors’ facilities, resulting in volume growth and price improvement across most geographic areas and product lines. Despite higher raw material costs and a restructuring charge of $9 million, EBIT for the business improved significantly from the third quarter of last year due to higher volume and improved operating rates. The restructuring charge was related to the Company’s third quarter of 2006 decision to exit the peroxymeric chemicals business.

Polyurethanes and Polyurethane Systems sales increased 5 percent from the third quarter of 2005, as a 7 percent increase in prices was partially offset by a 2 percent decline in volume. Compared with last year, price improved significantly for TDI. The decline in volume was the result of significant maintenance turnarounds which limited availability of TDI during the quarter. EBIT for the quarter was significantly reduced by restructuring charges related to the closure of the Company’s TDI manufacturing facility in Porto Marghera, Italy, at the end of August. EBIT for the business declined from the third quarter of last year due to higher raw material costs, lower operating rates, higher operating expenses, and significant maintenance spending, in addition to the restructuring charges.

Specialty Plastics and Elastomers sales for the third quarter were up 13 percent versus the third quarter of 2005 driven by an increase in prices of 7 percent and volume growth of 6 percent. Volume growth for most products in most geographic areas offset softening demand in the North American polycarbonate business. Despite higher sales, EBIT for the third quarter was down significantly from the same quarter of last year due to higher raw material costs, higher costs associated with maintenance turnarounds, lower equity earnings, and a restructuring charge of $11 million related to the shutdown of the polyethylene wax plant in Sarnia, Ontario, Canada.

Technology Licensing and Catalyst sales, which vary from quarter to quarter due to the nature of the business, were down from the third quarter of 2005. Compared with last year, EBIT declined due to lower sales and lower equity earnings. Despite an increase in earnings from Univation, equity earnings declined from last year due to the sale of Union Carbide’s indirect 50 percent interest in UOP in the fourth quarter of 2005.

For the first nine months of 2006, Performance Plastics sales were $10,398 million, up 13 percent from $9,222 million in the first nine months of 2005, driven by volume growth of 9 percent and higher prices of 4 percent. The increase in volume was due in part to the addition of ENGAGETM, NORDELTM and TYRINTM elastomers, acquired mid-year 2005 when Dow divested its interest in DDE. Excluding the acquisition of these products, volume was up 5 percent from the same period last year. Lump sum licensing revenue earned in the first quarter of 2006 contributed to the increase in volume. Performance Plastics EBIT was $1,282 million for the first nine months of 2006, down from $1,547 million from the same period in 2005, reflecting the impact of the restructuring charges of $242 million recorded in the third quarter of this year. For the first nine months of 2006, the favorable impact of higher sales was also offset by significantly higher raw material costs, higher operating expenses related to growth initiatives, higher maintenance spending and lower equity earnings.

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PERFORMANCE CHEMICALS

Performance Chemicals sales were $2,014 million in the third quarter of 2006, up 8 percent from $1,862 million in the third quarter of 2005. Compared with last year, volume increased 5 percent and price increased 3 percent. EBIT for the third quarter was $286 million, down from $352 million in the third quarter of 2005. Compared with last year, EBIT declined as the benefit of volume gains, price increases, and increased equity earnings from Dow Corning and OPTIMAL was more than offset by higher feedstock and energy costs. In addition, EBIT in the third quarter of 2006 reflected the negative impact of restructuring charges totaling $11 million (see Note F to the Consolidated Financial Statements).

Designed Polymers sales for the quarter were up 10 percent from the third quarter of 2005, reflecting a 10 percent increase in volume. Improvements in volume were broad-based with strong gains in biocides, specialty chemical products of ANGUS Chemical Company, and FILMTECTM reverse osmosis membranes. Compared with the third quarter of last year, EBIT was relatively flat as increased raw material costs offset the increase in sales. On July 11, 2006, FilmTec Corporation, a wholly owned subsidiary of the Company, completed the purchase of Zhejiang Omex Environmental Engineering Co. LTD, expanding Dow’s capabilities in the area of water purification.

Dow Latex and Acrylic Monomers sales for the quarter were up 2 percent compared with the third quarter of 2005. Prices for acrylates remain down due to recent capacity additions within the industry. Compared with last year, volume for paper and carpet latex declined principally due to weak industry fundamentals in coated paper applications. Acrylic monomer volume was strong in the United States, Europe, and Latin America. Despite a slight increase in sales and higher equity company earnings, EBIT for the third quarter of 2006 declined significantly from the same quarter last year principally due to a significant increase in feedstock and energy costs, as well as the absence of earnings from the superabsorbent polymers business, which the Company sold in July 2006.

Specialty Chemicals sales were up 18 percent compared with the third quarter of 2005, due to an 11 percent increase in volume and a 7 percent increase in price. Volume improvement was broad-based with increased sales across most product lines and all geographic areas. Volume in Asia Pacific was especially strong, supported by strong operating performance at OPTIMAL, which produces products that are sold in the region through Dow. Price increases were principally driven by higher raw material costs. Despite increases in price and volume, as well as higher equity earnings, EBIT for the third quarter of 2006 was down slightly due to higher raw material and energy costs.

Performance Chemicals sales were $5,868 million for the first nine months of 2006, up 4 percent from $5,667 million in the same period last year, reflecting a 3 percent increase in volume and a 1 percent increase in price. EBIT for the first nine months of 2006 was $949 million, compared with $1,208 million in 2005. Despite volume growth and improved equity earnings from Dow Corning, EBIT declined in 2006 due to significantly higher raw material and energy costs. In addition, EBIT for the first nine months of 2006 was negatively impacted by the restructuring charges of $11 million.

AGRICULTURAL SCIENCES

Sales for the Agricultural Sciences segment were $662 million in the third quarter of 2006, up 8 percent from $615 million in the same period last year, reflecting a 7 percent increase in volume and a 1 percent increase in price. Compared with last year, volume was especially strong in North America and Europe, due in part to a late planting cycle, which shifted sales into the third quarter, and the absence of product returns (related to the lack of soybean rust infestation) which reduced sales in the third quarter of last year. Sales of sunflower and NATREON™ canola oils and NEXERA™ canola seed improved over last year due to increased demand for oils low in trans fats. EBIT was breakeven in the third quarter of 2006, compared with a loss of $28 million in the third quarter of last year, as higher volume, improved operating rates and lower operating expenses were partially offset by an increase in raw material costs.

Agricultural Sciences sales were $2,585 million for the first nine months of 2006, down 2 percent from $2,635 million in the same period last year, reflecting a 2 percent decrease in price and flat volume. EBIT for the first nine months of 2006 was $377 million, down from $469 million in 2005 primarily due to lower selling prices and higher raw material costs.

BASIC PLASTICS

Basic Plastics sales for the third quarter of 2006 were $3,106 million, up 15 percent from $2,702 million a year ago, as prices increased 20 percent and volume declined 5 percent. Double digit price increases were reported in all geographic areas, the result of significantly higher feedstock and energy costs in the third quarter of this year. Compared with the high levels of a year ago, volume declined in all geographic areas except Asia Pacific due to a slowdown in demand late in the quarter as customers anticipated lower prices (due to a decline in oil and natural gas prices late in the third quarter of 2006). EBIT for the third quarter was $592 million, up 40 percent from $423 million in the third quarter of 2005. Significantly higher selling prices and improved equity earnings from Siam Polyethylene and EQUATE more than offset

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the impact of higher feedstock and energy costs and $16 million of restructuring charges related to the announced shutdown of the polystyrene and polyethylene manufacturing facilities in Sarnia, Ontario, Canada, in 2006 (see Note F to the Consolidated Financial Statements).

Polyethylene sales were up 17 percent from the third quarter of 2005 as prices increased 23 percent and volume decreased 6 percent. Double-digit price increases were reported in all geographic areas reflecting significantly higher feedstock and energy costs. Compared with the high levels of a year ago, volume in the third quarter of 2006 declined in most geographic areas due to a slowdown in demand late in the quarter as customers anticipated lower prices (due to a decline in oil and natural gas prices late in the third quarter of 2006). Volume increased in Asia Pacific with increased exports from the Company’s North American production facilities. Compared with last year, EBIT for the quarter increased as higher selling prices and improved equity earnings from EQUATE and Siam Polyethylene offset the impact of higher feedstock and energy costs and start up costs associated with a new linear low density polyethylene and specialty polymers production facility in Tarragona, Spain.

Polypropylene sales were up 21 percent over the third quarter of 2005, due to a 25 percent increase in prices and a 4 percent decline in volume. Double digit price increases, reflecting significantly higher feedstock and energy costs, were reported in all geographic areas. Volume improved significantly in North America from the depressed level in the third quarter last year resulting from the hurricane-related shutdown of Dow’s polypropylene manufacturing facilities along the U.S. Gulf Coast. Volume declined in Europe as a planned turnaround at the Company’s facility in Germany limited product availability. Compared with last year, EBIT declined as the higher selling prices were more than offset by higher feedstock and energy costs.

Polystyrene sales for the third quarter of 2006 were up 9 percent as prices increased 15 percent and volume declined 6 percent. Prices were significantly higher in all geographic areas as the business focused on recovering margin lost to high feedstock costs. Volume declined in all geographic areas. Anticipation of lower prices (due to a decline in oil and natural gas prices late in the third quarter of 2006) slowed customer demand late in the quarter. Volume in Europe was lower due to the fourth quarter 2005 closure of the polystyrene plant in Barry, United Kingdom, which reduced product availability in the region. EBIT declined from the third quarter of 2005 as the increase in prices failed to keep pace with the increase in feedstock and energy costs.

Basic Plastics sales for the first nine months of 2006 were $8,889 million, up 10 percent from $8,088 in the first nine months of 2005. Compared with 2005, prices were up 11 percent while volume declined 1 percent. EBIT for the first nine months of 2006 was $1,561 million, down from $1,774 million in the first nine months 2005, as price increases were not sufficient to offset the increase in feedstock and other raw material costs. EBIT for the first nine months of 2006 was also negatively impacted by restructuring charges associated with the closure of the Sarnia, Ontario, Canada polystyrene and polyethylene manufacturing facilities and lower equity earnings from EQUATE and Siam Polyethylene Co., Ltd.  EBIT for the first nine months of 2005 included a gain of $29 million associated with the sale of EQUATE shares, and a gain of $31 million associated with the divestiture of Dow’s interest in DDE and the acquisition of certain DDE assets.

BASIC CHEMICALS

Third quarter sales for the Basic Chemicals segment were $1,461 million, up 13 percent from $1,293 million in the third quarter of 2005. Prices increased 12 percent versus the third quarter last year due to higher prices for ethylene glycol, the result of a tightening of supply. Prices were up significantly for vinyl chloride monomer (“VCM”) due to continued strong industry fundamentals. Caustic soda prices were down slightly in the third quarter. Volume was up 1 percent versus the third quarter of last year with higher demand for VCM offsetting a decline in ethylene oxide / ethylene glycol (“EO/EG”) volume. Compared with last year, the improvement in volume for VCM was driven by good demand for polyvinyl chloride in all geographic areas. In August of this year, the Company announced the closure of its chlor-alkali plant in Fort Saskatchewan, Alberta, Canada, and a number of other small manufacturing facilities, as part of its restructuring activities, resulting in a charge of $165 million against the Basic Chemicals segment (see Note F to the Consolidated Financial Statements). EBIT for the segment was $122 million in the third quarter of 2006, reflecting the unfavorable impact of the charge, compared with $167 million in the third quarter of last year. Higher selling prices, improved operating rates, and stronger equity earnings from EQUATE, OPTIMAL and MEGlobal, more than offset the impact of higher feedstock costs.

For the first nine months of 2006, sales for the Basic Chemicals segment were $4,245 million, up 3 percent from $4,114 million last year. Compared with last year, volume declined 1 percent, as prices increased 4 percent. EBIT for the first nine months of 2006 was $495 million, down from $861 million in the same period last year. Results for 2006 reflect the impact of restructuring charges of $165 million. In addition, higher feedstock and energy costs significantly reduced profitability in EG, caustic soda and VCM. Results for the first nine months of 2005 included a gain of $41 million associated with the sale of EQUATE shares.

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HYDROCARBONS AND ENERGY

Hydrocarbons and Energy sales for the third quarter of 2006 were $1,569 million, up 2 percent from $1,541 million in the third quarter of 2005. Despite a 12 percent decline in volume, sales were up from last year due to a 14 percent increase in selling prices, driven by significantly higher feedstock costs. Purchased feedstock and energy costs were up 15 percent from the same period last year. Sales volume declined from the third quarter of last year, with almost all of the reduction reported in Europe. Compared to the very high levels of a year ago, volumes in Europe declined due to small unplanned outages and lower sales of refinery byproducts. For the first nine months of 2006, sales for the Hydrocarbons and Energy segment were $4,643 million, up 5 percent from $4,443 million last year, due to a 16 percent increase in price and an 11 percent decrease in volume.

The Hydrocarbons and Energy business transfers materials to Dow’s derivatives businesses at cost. As a result, EBIT for this operating segment was breakeven for the three months and nine months ended September 30, 2006 and 2005.

UNALLOCATED AND OTHER

Sales for Unallocated and Other, which primarily relate to the Company’s insurance operations, were $84 million in the third quarter of 2006, up from $63 million in the same period of 2005. Year-to-date sales were $260 million, up from $221 million in the first nine months of 2005.

Included in the results for Unallocated and Other are:

·results of insurance operations,

·gains and losses on sales of financial assets,

·stock-based compensation expense,

·changes in the allowance for doubtful receivables,

·expenses related to Dow Ventures,

·asbestos-related defense and resolution costs,

·foreign exchange hedging results, and

·overhead and other cost recovery variances not allocated to the operating segments.

EBIT for the third quarter of 2006 was a loss of $367 million, compared with a loss of $222 million for the third quarter of 2005. EBIT for the current quarter was reduced by restructuring charges of $145 million, including severance of $81 million, pension curtailment costs and termination benefits of $33 million, asset write-offs of $18 million related to the shutdown of several small facilities around the world, and asbestos abatement of $10 million and environmental remediation of $3 million related to the complete shutdown of the Company’s manufacturing site in Sarnia, Ontario, Canada. See Note F to the Consolidated Financial Statements for additional information regarding the restructuring charges recorded in the third quarter of 2006.

EBIT for the first nine months of 2006 was a loss of $681 million, compared with a loss of $782 million for the same period last year. Year-to-date results for 2006 were reduced by restructuring charges of $145 million. Compared with last year, 2006 results were favorably impacted by lower stock-based compensation expense of approximately $140 million, lower expenses related to the allowance for doubtful receivables of approximately $80 million, and improved results from the Company’s insurance operations. Results for the first nine months of last year were reduced by a $31 million loss on the early extinguishment of debt.

Sales Volume and Price by Operating Segment and Geographic Area

	Three Months Ended Sept. 30, 2006						Nine Months Ended Sept. 30, 2006
Percentage change from prior year	Volume		Price		Total		Volume		Price		Total
Operating segments
Performance Plastics	2	%	7	%	9	%	9	%	4	%	13	%
Performance Chemicals	5		3		8		3		1		4
Agricultural Sciences	7		1		8		—		(2	)	(2	)
Basic Plastics	(5	)	20		15		(1	)	11		10
Basic Chemicals	1		12		13		(1	)	4		3
Hydrocarbons and Energy	(12	)	14		2		(11	)	16		5
Total	(1	)%	11	%	10	%	1	%	6	%	7	%
Geographic area sales
United States	(1	)%	10	%	9	%	—		8	%	8	%
Europe	(4	)	15		11		—		6		6
Rest of World	1		7		8		5		4		9
Total	(1	)%	11	%	10	%	1	%	6	%	7	%

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OUTLOOK

Continued global GDP growth should drive higher demand for the chemical industry, especially in China and other emerging regions of the world. With supply growth limited, industry supply/demand balances should remain favorable. However, continued volatility in feedstock and energy costs adds uncertainty to the profit outlook.

Purchased feedstock and energy costs are expected to be lower in the fourth quarter of 2006, compared with the third quarter of 2006, although oil and gas prices are expected to continue to be volatile, which makes it difficult to predict the amount of the decline. Prices for crude oil, naphtha and ethane are expected to average somewhat lower in the fourth quarter than in the third, while U.S. natural gas prices are expected to increase going into the winter months.

The solid demand seen by many businesses in the third quarter is expected to continue into the fourth quarter of 2006, although ongoing volatility in feedstock and energy costs creates some uncertainty in relation to the dynamics of customer buying patterns. Also, seasonal demand patterns are expected to impact fourth quarter results: Agricultural Sciences and Dow Automotive volume should improve from third quarter of 2006, while Dow Building Solutions volume is likely to decline.

With relative price stability and raw material costs falling during the fourth quarter, margin recovery is expected for the Performance businesses.

2006 is turning out to be another tremendous year for Dow; 2007 is expected to be yet another very good year for Dow.

CHANGES IN FINANCIAL CONDITION

The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in the following table:

Cash Flow Summary	Nine Months Ended
In millions	Sept. 30, 2006			Sept. 30, 2005
Cash provided by (used in):
Operating activities	$	2,904		$	3,534
Investing activities	(1,322		)	(1,189		)
Financing activities	(2,240		)	(2,092		)
Effect of exchange rate changes on cash	(14		)	(182		)
Net change in cash and cash equivalents	$	(672	)	$	71

Cash provided by operating activities was lower in the first nine months of 2006 than in the same period last year due to lower earnings and an increase in working capital requirements. At September 30, 2006, total inventories were $6.1 billion, up from $5.3 billion at year-end 2005, due in part to higher costs for feedstocks and other raw materials. In 2006, inventory levels have increased from the very low levels of the second half of 2005, when production was significantly reduced by shutdowns related to hurricanes on the U.S. Gulf Coast.

Cash used in investing activities in the first nine months of 2006 increased compared with the same period last year. In the first nine months of this year, the Company acquired previously leased railcars for $205 million and increased capital expenditures $68 million. In addition, the Company paid approximately $100 million as part of the acquisition of Zhejiang Omex Environmental Engineering Co. LTD. In the first nine months of 2005, cash used in investing activities included $98 million for the acquisition of the remaining 28 percent of PBBPolisur S.A., a consolidated company, and $170 million paid to Cargill Dow LLC, a former 50:50 joint venture of the Company, partially offset by proceeds of $87 million from the sale of DDE.

Cash used in financing activities in the first nine months of 2006 increased compared with the same period last year, principally due to an increase in purchases of treasury stock (related to a share repurchase program authorized in July 2005), a decline in proceeds from sales of common stock (related to the exercise of stock options and the Employees’ Stock Purchase Plan) and an increase in dividends paid to stockholders, partially offset by lower payments on long-term debt. In the first nine months of 2005, the Company significantly reduced debt levels, including the early extinguishment of $923 million of debt.

As previously mentioned, on August 29, 2006, the Board of Directors approved a plan to shut down a number of the Company’s manufacturing facilities, and as a result, the Company recorded pretax restructuring charges totaling $579 million in the third quarter of 2006. The charges included asset write-downs and write-offs of $327 million, costs associated with exit or disposal activities of $171 million, and severance costs of $81 million. The shutdowns are scheduled to be completed by the end of 2008, resulting in cash expenditures of approximately $220 million over the

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next several years related to severance costs, contract terminations fees, asbestos abatement and environmental remediation.

Dow expects to incur future costs related to its restructuring activities, as the Company continually looks for ways to enhance the efficiency and cost effectiveness of its operations, to ensure competitiveness across its businesses and across geographic areas. Future costs are expected to include demolition costs related to the closed facilities, which will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities, and pension plan settlement costs. These costs cannot be reasonably estimated at this time.

The following tables present working capital, total debt and certain balance sheet ratios:

Working Capital In millions	Sept. 30, 2006		Dec. 31, 2005
Current assets	$	17,880	$	17,404
Current liabilities	10,088		10,663
Working capital	$	7,792	$	6,741
Current ratio	1.77:1		1.63:1
Days-sales-outstanding-in-receivables	38		39
Days-sales-in-inventory	64		59

Total Debt In millions	Sept. 30, 2006			Dec. 31, 2005
Notes payable	$	181		$	241
Long-term debt due within one year	828			1,279
Long-term debt	9,199			9,186
Total debt	$	10,208		$	10,706
Gross debt as a percent of total capitalization	36.0		%	39.1		%

As part of its ongoing financing activities, Dow has the ability to issue promissory notes under its U.S. and Euromarket commercial paper programs. At September 30, 2006, there were no commercial paper borrowings outstanding. In the event Dow has short-term liquidity needs and is unable to access these short-term markets for any reason, Dow has the ability to access liquidity through its committed and available credit facilities with various U.S. and foreign banks totaling $3.0 billion in support of its working capital requirements and commercial paper borrowings. At the beginning of 2006, these facilities included a $1.25 billion 364-day revolving credit facility, which was set to mature in April 2006, and a $1.75 billion 5-year revolving credit facility, with an April 2009 maturity date. In April 2006, these credit facilities were replaced with a $3 billion 5-year revolving credit facility which matures in April 2011.

At September 30, 2006, the Company had $3.5 billion of SEC-registered securities available for issuance under U.S. shelf registrations, Euro 1.5 billion (approximately $1.9 billion) available for issuance under the Company’s Euro Medium Term Note Program, as well as Japanese yen 50 billion (approximately $425 million) of securities available for issuance under a shelf registration filed with the Tokyo Stock Exchange on August 8, 2006.

Dow’s public debt instruments and documents for its private funding transactions contain, among other provisions, certain covenants and default provisions. At September 30, 2006, the Company was in compliance with all of these covenants and default provisions. For information on Dow’s covenants and default provisions, see Note L to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

On July 14, 2005, the Board of Directors authorized the repurchase of up to 25 million shares of Dow common stock over the period ending on December 31, 2007. During the first nine months of 2006, the Company purchased 16,826,807 shares of the Company’s common stock under this program. Since the program was authorized, the Company has purchased a total of 17,541,007 shares. On October 26, 2006, the Company announced that its Board of Directors had approved a new share buy-back program, authorizing up to $2 billion to be spent on the repurchase of the Company’s common stock. The new program will begin once the current repurchase authorization is complete. See PART II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information.

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Contractual Obligations

Information related to the Company’s contractual obligations and commercial commitments at December 31, 2005 can be found in Notes K, L, M, N and T to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. There have been no material changes in the Company’s contractual obligations or commercial commitments since December 31, 2005.

The Company also had outstanding guarantees at September 30, 2006. Additional information related to these guarantees can be found in the “Guarantees” table provided in Note E to the Consolidated Financial Statements.

Dividends

On October 30, 2006, the Company paid a quarterly dividend of $0.375 per share to stockholders of record on September 29, 2006. Since 1912, the Company has paid a cash dividend every quarter and, in each instance, Dow has maintained or increased the amount of the dividend, adjusted for stock splits. During that 94-year period, Dow has increased the amount of the quarterly dividend 46 times (approximately 12 percent of the time) and maintained the amount of the quarterly dividend approximately 88 percent of the time.

OTHER MATTERS

Accounting Changes

See Note B to the Consolidated Financial Statements for a discussion of accounting changes and recently issued accounting pronouncements.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note A to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (“2005 10-K”) describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Dow’s critical accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2005 10-K. Since December 31, 2005, there have been no material changes in the Company’s critical accounting policies.

Asbestos-Related Matters of Union Carbide Corporation

Introduction

Union Carbide Corporation (“Union Carbide”), a wholly owned subsidiary of the Company, is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products.

Influenced by the bankruptcy filings of numerous defendants in asbestos-related litigation and the prospects of various forms of state and national legislative reform, the rate at which plaintiffs filed asbestos-related suits against various companies, including Union Carbide and Amchem, increased in 2001, 2002 and the first half of 2003. Since then, the rate of filing has significantly abated. Union Carbide expects more asbestos-related suits to be filed against Union Carbide and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

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The table below provides information regarding asbestos-related claims filed against Union Carbide and Amchem:

	2006		2005
Claims unresolved at January 1	146,325		203,416
Claims filed	12,388		27,715
Claims settled, dismissed or otherwise resolved	(45,006	)	(51,928	)
Claims unresolved at September 30	113,707		179,203
Claimants with claims against both Union Carbide and Amchem	39,432		61,524
Individual claimants at September 30	74,275		117,679

Plaintiffs’ lawyers often sue dozens or even hundreds of defendants in individual lawsuits on behalf of hundreds or even thousands of claimants. As a result, the damages alleged are not expressly identified as to Union Carbide, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. In fact, there are no personal injury cases in which only Union Carbide and/or Amchem are the sole named defendants. For these reasons and based upon Union Carbide’s litigation and settlement experience, Union Carbide does not consider the damages alleged against Union Carbide and Amchem to be a meaningful factor in its determination of any potential asbestos liability.

Estimating the Liability

Based on a study completed by Analysis, Research & Planning Corporation (“ARPC”) in January 2003, Union Carbide increased its December 31, 2002 asbestos-related liability for pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. At each balance sheet date, Union Carbide compares current asbestos claim and resolution activity to the assumptions in the most recent ARPC study to determine whether the accrual continues to be appropriate.

In November 2004, Union Carbide requested ARPC to review Union Carbide’s historical asbestos claim and resolution activity and determine the appropriateness of updating its January 2003 study. In January 2005, ARPC provided Union Carbide with a report summarizing the results of its study. At December 31, 2004, Union Carbide’s recorded asbestos-related liability for pending and future claims was $1.6 billion. Based on the low end of the range in the January 2005 study, Union Carbide’s recorded asbestos-related liability for pending and future claims at December 31, 2004 would be sufficient to resolve asbestos-related claims against Union Carbide and Amchem into 2019. As in its January 2003 study, ARPC provided estimates for a longer period of time in its January 2005 study, but also reaffirmed its prior advice that forecasts for shorter periods of time are more accurate than those for longer periods of time. Based on ARPC’s studies, Union Carbide’s asbestos litigation experience, and the uncertainties surrounding asbestos litigation and legislative reform efforts, Union Carbide’s management determined that no change to the accrual was required at December 31, 2004.

In November 2005, Union Carbide requested ARPC to review Union Carbide’s 2005 asbestos claim and resolution activity and determine the appropriateness of updating the January 2005 study. In response to that request, ARPC reviewed and analyzed data through October 31, 2005. In January 2006, ARPC stated that an update of the study would not provide a more likely estimate of future events than the estimate reflected in its study of the previous year and, therefore, the estimate in that study remained applicable.

Based on Union Carbide’s own review of the asbestos claim and resolution activity and ARPC’s response, Union Carbide determined that no change to the accrual was required at December 31, 2005. Union Carbide’s asbestos-related liability for pending and future claims was $1.5 billion at December 31, 2005. Approximately 39 percent of the recorded liability related to pending claims and approximately 61 percent related to future claims.

Based on Union Carbide’s review of 2006 activity, Union Carbide determined that no change to the accrual was required at September 30, 2006. Union Carbide’s asbestos-related liability for pending and future claims was $1.4 billion at September 30, 2006. Approximately 35 percent of the recorded liability related to pending claims and approximately 65 percent related to future claims.

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Defense and Resolution Costs

The following table provides information regarding defense and resolution costs related to asbestos-related claims filed against Union Carbide and Amchem:

Defense and Resolution Costs	Nine Months Ended				Aggregate Costs
In millions	Sept. 30, 2006		Sept. 30, 2005		to Date as of  Sept. 30, 2006
Defense costs	$	45	$	55	$	464
Resolution costs	$	95	$	122	$	1,160

The average resolution payment per asbestos claimant and the rate of new claim filings has fluctuated both up and down since the beginning of 2001. Union Carbide’s management expects such fluctuations to continue in the future based upon the number and type of claims settled in a particular period, the jurisdictions in which such claims arose, and the extent to which any proposed legislative reform related to asbestos litigation is being considered.

Insurance Receivables

At December 31, 2002, Union Carbide increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion, substantially exhausting its asbestos product liability coverage. The insurance receivable related to the asbestos liability was determined by Union Carbide after a thorough review of applicable insurance policies and the 1985 Wellington Agreement, to which Union Carbide and many of its liability insurers are signatory parties, as well as other insurance settlements, with due consideration given to applicable deductibles, retentions and policy limits, and taking into account the solvency and historical payment experience of various insurance carriers. The Wellington Agreement and other agreements with insurers are designed to facilitate an orderly resolution and collection of Union Carbide’s insurance policies and to resolve issues that the insurance carriers may raise.

Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $478 million at September 30, 2006 and $535 million at December 31, 2005. At September 30, 2006, $477 million ($398 million at December 31, 2005) of the receivable for insurance recoveries was related to insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place regarding their asbestos-related insurance coverage.

In addition, Union Carbide had receivables for defense and resolution costs submitted to insurance carriers for reimbursement as follows:

Receivables for Costs Submitted to Insurance Carriers

In millions	Sept. 30, 2006		Dec. 31, 2005
Receivables for defense costs	$	9	$	73
Receivables for resolution costs	342		327
Total	$	351	$	400

Union Carbide expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was $1 million in the third quarter of 2006 ($24 million in the third quarter of 2005) and $29 million in the first nine months of 2006 ($56 in the first nine months of 2005), and was reflected in “Cost of sales.”

In September 2003, Union Carbide filed a comprehensive insurance coverage case, now proceeding in the Supreme Court of the State of New York, County of New York, seeking to confirm its rights to insurance for various asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. Although Union Carbide already has settlements in place concerning coverage for asbestos claims with many of its insurers, including those covered by the 1985 Wellington Agreement, this lawsuit was filed against insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place with Union Carbide regarding their asbestos-related insurance coverage, in order to facilitate an orderly resolution and collection of such insurance policies and to resolve issues that the insurance carriers may raise. The insurance carriers are contesting this litigation. Through the third quarter of 2006, Union Carbide reached settlements with several of the carriers involved in this litigation. After a further review of its insurance policies, with due consideration given to applicable deductibles, retentions and policy limits, after taking into account the solvency and historical payment experience of various insurance carriers; existing insurance settlements; and the advice of outside counsel with respect to the applicable insurance coverage law relating to the terms and conditions

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of its insurance policies, Union Carbide continues to believe that its recorded receivable for insurance recoveries from all insurance carriers is probable of collection.

Summary

The amounts recorded by Union Carbide for the asbestos-related liability and related insurance receivable described above were based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs and insurance recoveries for Union Carbide to be higher or lower than those projected or those recorded.

Because of the uncertainties described above, Union Carbide’s management cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing Union Carbide and Amchem. Union Carbide’s management believes that it is reasonably possible that the cost of disposing of Union Carbide’s asbestos-related claims, including future defense costs, could have a material adverse impact on Union Carbide’s results of operations and cash flows for a particular period and on the consolidated financial position of Union Carbide.

It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its asbestos-related claims, including future defense costs, could have a material adverse impact on the Company’s results of operations and cash flows for a particular period and on the consolidated financial position of the Company.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Dow’s business operations give rise to market risk exposure due to changes in foreign exchange rates, interest rates, commodity prices and other market factors such as equity prices. To manage such risks effectively, the Company enters into hedging transactions, pursuant to established guidelines and policies, which enable it to mitigate the adverse effects of financial market risk. Derivatives used for this purpose are designated as hedges per SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” where appropriate. A secondary objective is to add value by creating additional non-specific exposure within established limits and policies; derivatives used for this purpose are not designated as hedges per SFAS No. 133. The potential impact of creating such additional exposures is not material to the Company’s results.

The global nature of Dow’s business requires active participation in the foreign exchange markets. As a result of investments, production facilities and other operations on a global basis, the Company has assets, liabilities and cash flows in currencies other than the U.S. dollar. The primary objective of the Company’s foreign exchange risk management is to optimize the U.S. dollar value of net assets and cash flows, keeping the adverse impact of currency movements to a minimum. To achieve this objective, the Company hedges on a net exposure basis using foreign currency forward contracts, over-the-counter option contracts, cross-currency swaps, and nonderivative instruments in foreign currencies. Main exposures are related to assets and liabilities denominated in the currencies of Europe, Asia Pacific and Canada; bonds denominated in foreign currencies — mainly the Euro and Japanese yen; and economic exposure derived from the risk that currency fluctuations could affect the U.S. dollar value of future cash flows. The majority of the foreign exchange exposure is related to European currencies and the Japanese yen.

The main objective of interest rate risk management is to reduce the total funding cost to the Company and to alter the interest rate exposure to the desired risk profile. Dow uses interest rate swaps, “swaptions,” and exchange-traded instruments to accomplish this objective. The Company’s primary exposure is to the U.S. dollar yield curve.

Dow has a portfolio of equity securities derived from its acquisition and divestiture activity. This exposure is managed in a manner consistent with the Company’s market risk policies and procedures.

Inherent in Dow’s business is exposure to price changes for several commodities. Some exposures can be hedged effectively through liquid tradable financial instruments. Feedstocks for ethylene production and natural gas constitute the main commodity exposures. Over-the-counter and exchange traded instruments are used to hedge these risks when feasible.

Dow uses value at risk (“VAR”), stress testing and scenario analysis for risk measurement and control purposes. VAR estimates the potential gain or loss in fair market values, given a certain move in prices over a certain period of time, using specified confidence levels. On an ongoing basis, the Company estimates the maximum gain or loss that could arise in one day, given a two-standard-deviation movement in the respective price levels. These amounts are relatively insignificant in comparison to the size of the equity of the Company. The VAR methodology used by Dow is based primarily on the variance/covariance statistical model. The year-end VAR and average daily VAR for the aggregate of trading and non-trading positions for 2005 and 2004 are shown below:

Total Daily VAR at December 31*	2005				2004
In millions	Year-end		Average		Year-end		Average
Foreign exchange	$	3	$	6	$	2	$	2
Interest rate	$	55	$	65	$	80	$	87
Equity exposures, net of hedges	$	2	$	2	$	1	$	2
Commodities	$	23	$	21	$	26	$	29

*Using a 95 percent confidence level

Since December 31, 2005, there have been no material changes in the Company’s risk management policies. The Company’s daily VAR for the aggregate of trading and non-trading positions has declined from a total VAR of $83 million at December 31, 2005, to a total of $70 million at September 30, 2006. The decline was driven by a drop in the interest rate VAR from $55 million to $38 million, principally due to a reduction in the Company’s long-term debt.

For further disclosure regarding market risk, see Note I to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

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ITEM 4.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Disclosure Committee and the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15 or 15d-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

Asbestos-Related Matters of Union Carbide Corporation

No material developments regarding this matter occurred during the third quarter of 2006. For a summary of the history and current status of this matter, see Note E to the Consolidated Financial Statements; and Management’s Discussion and Analysis of Financial Condition and Results of Operations, Asbestos-Related Matters of Union Carbide Corporation.

ITEM 1A.  RISK FACTORS.

There were no material changes in the Company’s risk factors in the third quarter of 2006.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table provides information regarding purchases of the Company’s common stock by the Company during the three months ended September 30, 2006:

Issuer Purchases of Equity Securities

Period	Total number of  shares purchased	Average price  paid per share		Total number of shares  purchased as part of the Company’s publicly announced share  repurchase program (1)	Maximum number of  shares that may yet be  purchased under the  Company’s publicly  announced share  repurchase program
July 2006	886,100	$	34.38	886,100	11,388,900
August 2006	1,757,400	35.75		1,757,400	9,631,500
September 2006	2,172,507	38.91		2,172,507	7,458,993
Third quarter 2006	4,816,007	$	36.92	4,816,007	7,458,993

(1)On July 14, 2005, the Company publicly announced that the Board of Directors had authorized on that day the repurchase of up to 25 million shares of Dow common stock over the period ending on December 31, 2007.  Prior to that authorization (and since August 3, 1999 when the Board of Directors terminated its 1997 authorization which allowed the Company to repurchase shares of Dow common stock), the only shares purchased by the Company were those shares received from employees and non-employee directors to pay taxes owed to the Company as a result of the exercise of stock options or the delivery of deferred stock.

On October 26, 2006, the Company announced that its Board of Directors had approved a new share buy-back program, authorizing up to $2 billion to be spent on the repurchase of the Company’s common stock. The new program will begin once the current repurchase authorization is complete.

ITEM 6.  EXHIBITS.

See the Exhibit Index on page 49 of this Quarterly Report on Form 10-Q for exhibits filed with this report.

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Trademark Listing

The following trademarks or service marks of The Dow Chemical Company and certain affiliated companies of Dow appear in this report: AFFINITY, AMPLIFY, ASPUN, ATTANE, BETABRACE, BETADAMP, BETAFOAM, BETAGUARD, BETAMATE, BETASEAL, CALIBRE, CARBOWAX, CELLOSIZE, COMBOTHERM, CONTINUUM, CYRACURE, D.E.H., D.E.N., D.E.R., DOW, DOW XLA, DOWEX, DOWEX QCAT, DOWFAX, DOWFLAKE, DOWLEX, DOWPER, DOWTHERM, DRYTECH, ELITE, EMERGE, ENGAGE, THE ENHANCER, EQUIFOAM, ETHAFOAM, ETHOCEL, EXO, FILMTEC, FLEXOL, FLEXOMER, FROTH-PAK, GREAT STUFF, IMMOTUS, IMPAXX, INSPIRE, INSTA-STIK, INTEGRAL, ISONATE, ISOPLAST, LIFESPAN, LIQUIDOW, LP OXO, MAGNUM, MAXICHECK, MAXISTAB, METEOR, METHOCEL, NEOCAR, NORDEL, OPTIM, PAPI, PELADOW, PELLETHANE, POLYOX, POLYPHOBE, PRIMACOR, PROCITE, PULSE, QBIS, QUASH, REDI-LINK, SAFE-TAINER, SARAN, SARANEX, SHAC, SI-LINK, SPECFLEX, SPECTRIM, STRANDFOAM, STYROFOAM, STYRON, STYRON A-TECH, STYRON C-TECH, SYMMATRIX, SYNERGY, SYNTEGRA, TERGITOL, TILE BOND, TONE, TRENCHCOAT, TRITON, TRYMER, TUFLIN, TYRIL, TYRIN, UCAR, UCARTHERM, UCON, UNIGARD, UNIPOL, UNIPURGE, UNIVAL, VERSENE, VERSIFY, VORACOR, VORACTIV, VORALAST, VORALUX, VORANATE, VORANOL, VORASTAR, WEATHERMATE, ZETABON

The following trademarks or service marks of Dow AgroSciences LLC and certain affiliated companies of Dow AgroSciences LLC appear in this report: CLINCHER, DITHANE, FORTRESS, GARLON, GLYPHOMAX,  GRANITE, HERCULEX, KEYSTONE, LAREDO, LONTREL, LORSBAN, MUSTANG, MYCOGEN, NATREON, NEXERA, PHYTOGEN, PROFUME, SENTRICON, STARANE, STINGER, SURPASS, TELONE, TORDON, TRACER NATURALYTE, VIKANE, WIDESTRIKE

The following trademark of Dow Corning Corporation appears in this report: SYLTHERM

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Signature

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

THE DOW CHEMICAL COMPANY
Registrant

Date: October 31, 2006

/s/WILLIAM H. WEIDEMAN

William H. Weideman

Vice President and Controller

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Exhibit Index

EXHIBIT NO.	DESCRIPTION
10(p)	A copy of The Dow Chemical Company Elective Deferral Plan (for deferrals made through December 31, 2004), amended and restated as of September 1, 2006.
10(dd)	A copy of The Dow Chemical Company Elective Deferral Plan, Effective for Deferrals after January 1, 2005, amended and restated as of September 1, 2006.
23	Analysis, Research & Planning Corporation’s Consent.
31(a)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-100.INS	XBRL Instance Document
EX-100.SCH	XBRL Taxonomy Extension Schema Document
EX-100.SCH.1	XBRL Taxonomy Extension Schema Document
EX-100.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
EX-100.LAB	XBRL Taxonomy Extension Label Linkbase Document
EX-100.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

As a participant in the Securities and Exchange Commission’s voluntary XBRL (eXtensible Business Reporting Language) program, the Company has attached as Exhibit 100 to this Quarterly Report on Form 10-Q the complete set of financial statements, excluding the notes to the financial statements, formatted in XBRL. Pursuant to Rule 401 of Regulation S-T, users of this data are advised that the financial information contained in the XBRL-related documents is unaudited and that these are not the official publicly filed financial statements of the Company. In accordance with Rule 402 of Regulation S-T, the information in Exhibit 100 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

The purpose of submitting these XBRL-related documents is to test the related format and technology. As a result, investors should continue to rely on the official filed version of the Company’s financial statements included in PART I - FINANCIAL INFORMATION to this Quarterly Report on Form 10-Q and not rely on the information in Exhibit 100 in making investment decisions.

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EX-10.(P)

EXHIBIT 10(p)

The Dow Chemical Company
Elective Deferral Plan

ARTICLE I

PURPOSE AND EFFECTIVE DATE

The purpose of The Dow Chemical Company Elective Deferral Plan (“Plan”) is to aid The Dow Chemical Company and its subsidiaries in retaining and attracting executive employees by providing them with tax deferred savings opportunities.  The Plan provides a select group of management and highly compensated employees, within the meaning of Sections 201(2), 301(a)3 and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) and therefore exempt from Parts 2, 3, and 4 of Title I of ERISA, of The Dow Chemical Company with the opportunity to elect to defer receipt of specified portions of compensation, and to have these deferred amounts treated as if invested in specified Hypothetical Investment Benchmarks.  The Plan shall be effective for deferral elections made hereunder on or after January 1, 2001. The benefits provided under the Plan shall be provided in consideration for services to be performed after the effective date of the Plan, but prior to the executive’s retirement.

Effective December 15, 1994, The Dow Chemical Company originally adopted The Dow Chemical Company Elective Deferral Plan.  Minor amendments were made to the Plan on December 11, 1997.  On October 19, 2000 The Dow Chemical Company amended and restated the Plan, to be effective as of January 1, 2001, to read as set forth in this Plan document.  Minor amendments to the restated Plan were made on December 11, 2000, September 10, 2001, October 4, 2001, September 9, 2002, December 2, 2002, February 3, 2003, April 7, 2003, July 7, 2003, August 4, 2003 and December 10, 2003.  The Dow Chemical Company again restated the Plan on August 6, 2004, effective as of January 1, 2001, in order to clarify certain provisions of the Plan.  Minor amendments to the restated Plan were made on October 7, 2004.  Effective September 1, 2006 and January 1, 2007, The Dow Chemical Company amended the Plan to change the Hypothetical Investment Benchmarks.

ARTICLE II

DEFINITIONS

For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the con­text clearly indicates otherwise:

Section 2.01         Administrator.  “Administrator” means the Retirement Board appointed under the Dow Employees’ Pension Plan.

Section 2.02         Base Salary.  “Base Salary” means the annual base rate of pay from the Company at which a Participant is employed (excluding Performance Awards, commissions, relocation expenses, and other non-regular forms of compensation) before deductions under (A) deferrals pursuant to Section 4.02 and (B) contributions made on his or her behalf to any qualified plan maintained by any Company or to any cafeteria plan under Section 125 of the Internal Revenue Code maintained by any Company.

Section 2.03         Base Salary Deferral.  “Base Salary Deferral” means the amount of a Participant’s Base Salary which the Participant elects to have withheld on a pre-tax basis from his Base Salary and credited to his or her Deferral Account pursuant to Section 4.02.

Section 2.04         Beneficiary.  “Beneficiary” means the person, persons or entity designated by the Participant to re­ceive any benefits payable under the Plan pursuant to Article VIII.

Section 2.05         Board.  “Board” means the Board of Di­rectors of The Dow Chemical Company.

Section 2.06         Change of Control.  For purposes of this Plan, a “Change of Control” shall be deemed to have occurred upon:  (i) the dissolution or liquidation of The Dow Chemical Company; (ii) a reorganization, merger or consolidation of The Dow Chemical Company with one or more corporations as a result of which The Dow Chemical Company is not a surviving corporation; (iii) approval by the stockholders of The Dow Chemical Company of any sale, lease, exchange, or other transfer (in one or series of transactions) of all or substantially all of the assets of The Dow Chemical Company; (iv) approval by the stockholders of The Dow Chemical Company of any merger or consolidation of The Dow Chemical Company in which

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the holders of the voting stock of The Dow Chemical Company immediately before the merger or consolidation will not own fifty percent (50%) or more of the outstanding voting shares of the continuing or surviving corporation immediately after such merger or consolidation, or (v) a change of fifty-one percent (51%) (rounded to the next whole person) in the membership of the Board of Directors of The Dow Chemical Company within a twenty-four (24) month period, unless the election or nomination for election by stockholders of each new director within such period was approved by the vote of eighty-five percent (85%) (rounded to the next whole person) of the directors still in office who were in office at the beginning of the twenty-four month period.

Section 2.07         Common Stock.  “Common Stock” means the common stock of The Dow Chemical Company.

Section 2.08         Company.  “Company” means The Dow Chemical Company, its successors, any subsidiary or affiliated organizations authorized by the Board or the Retirement Board to participate in the Plan and any organization into which or with which The Dow Chemical Company may merge or consolidate or to which all or substantially all of its assets may be transferred.

Section 2.09         Deferral Account.  “Deferral Account” means the notional account established for record keeping purposes for each Participant pursuant to Article VI.

Section 2.10         Deferral Period.  “Deferral Period” is defined in Section 4.02.

Section 2.11         Deferred Amount.   “Deferred Amount” is defined in Section 4.02.

Section 2.12         Designee.  “Designee” shall mean The Dow Chemical Company’s North American Compensation Resource Center to whom the Retirement Board has delegated the authority to take action under the Plan.

Section 2.13         Disability.  “Disability” means eligibility for disability benefits under the terms of the Long-Term Disability Plan maintained by The Dow Chemical Company.  The Retirement Board, in its complete and sole discretion, shall determine a Participant’s disability.  The Administrator may require that the Participant submit to an examination on an annual basis, at the expense of the Company at which such Participant was employed, by a competent physician or medical clinic selected by the Retirement Board to confirm Disability.  On the basis of such medical evidence, the determination of the Retirement Board as to whether or not a condition of Disability exists or continues shall be conclusive.

Section 2.14         Eligible Compensation.  “Eligible Com­pensation” means any Base Salary, Performance Awards or Other Bonuses and any other monies deemed to be eligible compensation by The Dow Chemical Company.

Section 2.15         Eligible Employee.  “Eligible Employee” means a key employee of any Company who:  (i) is a United States employee or an expatriate who is paid from one of The Dow Chemical Company’s U.S. entities, (ii) is a member of the functional specialist/functional leader or global leadership job families, (iii) has a job level of L2 or higher,  (iv) is eligible for participation in the Savings Plan, (v) is designated by the Administrator as eligible to participate in the Plan as of September 30 for deferral of Base Salary and Performance Awards, and (vi) qualifies as a member of the “select group of management or highly compensated employees” under ERISA.

Section 2.16         ERISA.   “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Section 2.17         Fair Market Value.  “Fair Market Value” of a share of Common Stock means the closing price of The Dow Chemical Company’s Common Stock on the New York Stock Exchange on the most recent day on which the Common Stock was so traded that precedes the date the Fair Market Value is to be determined. The definition of Fair Market Value in this Section shall be exclusively used to determine the values of a Participant’s interest in The Dow Chemical Company Stock Index Fund (defined in Section 6.02(b)) for all relevant purposes under the Plan.

Section 2.18         Form of Payment.  “Form of Payment” means payment in one lump sum or in substantially equal monthly, quarterly or annual installments not to exceed 15 years.

Section 2.19         Hardship Withdrawal.  “Hardship Withdrawal” means the early payment of all or part of the balance in a Deferral Account(s) in the event of an Unforeseeable Emergency.

Section 2.20         Hypothetical Investment Benchmark.  “Hypothetical Investment Benchmark” shall mean the phantom investment benchmarks which are used to measure the return credited to a Participant’s Deferral Account.

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Section 2.21         Matching Contribution.  “Matching Contribution” means the amount of annual matching contribution that each Company will make to the Plan.

Section 2.22         Other Bonus.   “Other Bonus” means the amount awarded to a Participant for a Plan Year under any other incentive plan maintained by any Company that has been established and authorized as eligible for deferral.

Section 2.23         Other Deferral.  “Other Deferral” means the amount of a Participant’s Other Bonus which the Participant elects to have withheld on a pre-tax basis credited to his or her account pursuant to Section 4.02.

Section 2.24         Participant.  “Participant” means any individual who is eligible and makes an election to participate in this Plan by filing a Participation Agreement as provided in Article IV.

Section 2.25         Participation Agreement.  “Participation Agreement” means an agreement filed by a Participant in accordance with Article IV.

Section 2.26         Performance Awards.   “Performance Awards” means the amount paid in cash to the Participant by any Company in the form of annual incentive bonuses for a Plan Year.

Section 2.27         Performance Deferral.  “Performance Deferral” means the amount of a Participant’s Performance Award which the Participant elects to have withheld on a pre-tax basis from his or her Performance Award and credited to his or her account pursuant to Section 4.02.

Section 2.28         Phantom Share Units.   “Phantom Share Units” means units of deemed investment in shares of The Dow Chemical Company Common Stock so determined under Section 6.02(b).

Section 2.29         Plan Year.  “Plan Year” means a twelve-month period beginning January 1 and ending the following December 31.

Section 2.30         Retirement.  “Retirement” means normal or early retirement of a Participant from the Companies after attaining age 65 or age 50 with at least ten years of service under the Dow Employees’ Pension Plan or any other defined benefit pension plan maintained by a Company under which a Participant is eligible to receive a benefit.

Section 2.31         Retirement Board.  “Retirement Board” means the general administrator of the Plan appointed under the Dow Employees’ Pension Plan.

Section 2.32         Savings Plan.       “Savings Plan” means The Dow Chemical Company Employees’ Savings Plan as it currently exists and as it may subsequently be amended.

Section 2.33         Section 16 Participant.  “Section 16 Participant” means an officer or director of The Dow Chemical Company required to report transactions in The Dow Chemical Company securities to the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934.

Section 2.34         Termination of Employment.  “Termination of Employment” means the cessation of a Participant’s services as an employee of the Companies, whether voluntary or involuntary, for any reason other than Retirement, Disability or Death.

Section 2.35         Unforeseeable Emergency.  “Unforeseeable Emergency” means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Administrator.

Section 2.36         Valuation Date.   “Valuation Date” means the last day of each calendar month or such other date as the Administrator in its sole discretion may determine.

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ARTICLE III

ADMINISTRATION

Section 3.01         Administrator Duties. This Plan shall be administered by the Retirement Board. The Retirement Board shall consist of not less than three members who may, but need not, be employed by any Company.  Each person appointed to the Retirement Board shall signify acceptance of his or her position and may resign by delivery of a written notice to The Dow Chemical Company.  The Dow Chemical Company may remove any member at its pleasure by delivery of a written notice to the member.  In the event of any vacancy in membership, The Dow Chemical Company shall (or, if at least three members are then serving, may in its discretion) appoint a successor to fill the vacancy in office; provided, however, that the Retirement Board may exercise its full authority and discretion notwithstanding the existence of any vacancy. Members shall serve without compensation for their services.  The Retirement Board shall act by a majority of its members by vote at a meeting or by unanimous consent in writing.  If all members of the Retirement Board are not available, a quorum, consisting of three (3) members of the Retirement Board, may act by a majority of the quorum.  It may authorize one or more of its members to execute documents in its behalf.  Any person, upon written notification of the authorization, shall accept and rely upon that authorization until notified in writing that the Retirement Board has revoked the authorization.  The Retirement Board shall appoint a secretary (who may or may not be a Retirement Board member) to keep all minutes of its meetings and to receive and deliver all notices.  The secretary shall record and, where appropriate, communicate to all persons affected all delegations made by the Retirement Board of its responsibilities, any rules and procedures adopted by the Retirement Board and all other formal actions taken by the Retirement Board.  No member of the Retirement Board shall vote or act on any matter relating solely to him/herself. The Administrator may participate in a meeting of such committee by means of a conference telephone or similar communications equipment that enables all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting and waiver of notice of such meeting.

The Retirement Board shall be responsible for the administration of this Plan and shall have all powers necessary to administer this Plan, including discretionary authority to determine eligibility for benefits and to decide claims under the terms of this Plan, except to the extent that any such powers that are specially vested in any other person administering this Plan by the Administrator.  The Administrator may from time to time establish rules for the administration of this Plan, and it shall have the exclusive right to interpret this Plan and to decide any matters arising in connection with the administration and operation of this Plan.  All rules, interpretations and decisions of the Administrator shall be conclusive and binding on any Company, Participants and Beneficiaries.

The Retirement Board has delegated to the North American Compensation Resource Center responsibility for performing certain admin­istrative and ministerial functions under this Plan.  The Designee shall be responsible for determining in the first instance issues related to eligibility, Hypothetical Investment Benchmarks, distribution of Deferred Amounts, determination of account balances, crediting of hypothetical earnings and debiting of hypothetical losses and of distributions, withdrawals, deferral elections and any other duties concerning the day-to-day operation of this Plan.  The Retirement Board shall have discretion to delegate such additional duties as it may determine.  The Designee may retain and supervise outside providers, third party administrators, record keepers and professionals (including in-house professionals) to perform any or all of the duties delegated to it hereunder.

Neither The Dow Chemical Company, any other Company, a member of the Board, a member of the Retirement Board nor any Designee shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or for anything done or omitted to be done in connection with this Plan.

The Dow Chemical Company shall, to the fullest extent permitted by law, indemnify each director, officer or employee of The Dow Chemical Company (including the heirs, executors, administrators and other personal representatives of such person), each member of the Retirement Board and any Designee against expenses (including attorneys’ fees), judgments, fines, amounts paid in settlement, actually and reasonably incurred by  such person in connection with any threatened, pending or actual suit, action or proceeding (whether civil, criminal, administrative or investigative in nature or otherwise) in which such person may be involved by reason of the fact that he or she is or was serving this Plan in any capacity at the request of The Dow Chemical Company, the Administrator  or Designee.

Any expense incurred by The Dow Chemical Company or the Administrator relative to the administration of this Plan shall be paid by The Dow Chemical Company and/or may be deducted from the Deferral Accounts of the Participants as determined by the Administrator or Designee.

Section 3.02         Claim Procedure.  If a Participant or Beneficiary makes a written request alleging a right to receive payments under this Plan or alleging a right to receive an adjustment in benefits being paid under this Plan, such actions shall be treated as a claim for benefits.  All claims for benefits under this Plan shall be sent to the Designee.  If the Designee determines that any individual who has claimed a right to receive benefits, or different benefits, under this Plan is not entitled

53

to receive all or any part of the benefits claimed, the Designee shall inform the claimant in writing of such determination and the reasons therefor in terms calculated to be understood by the claimant.  The notice shall be sent within 60 days of the claim unless the Designee determines that additional time, not exceeding 60 additional days, is needed and so notifies the claimant.  The notice shall make specific reference to the pertinent Plan provisions on which the denial is based, and shall describe any additional material or information that is necessary to perfect the claim.  Such notice shall, in addition, inform the claimant of the procedure that the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim.  The claimant may within 60 days thereafter submit in writing to the Administrator a notice that the claimant contests the denial of his or her claim and desires a further review by the Administrator.  The Administrator shall within 60 days thereafter review the claim and authorize the claimant to review pertinent documents and submit issues and comments relating to the claim to the Administrator.  The Administrator will render a final decision on behalf of The Dow Chemical Company with specific reasons therefor in writing and will transmit it to the claimant within 60 days of the written request for review, unless the Administrator determines that additional time, not exceeding 60 days, is needed, and so notifies the claimant.  If the Administrator fails to respond to a claim filed in accordance with the foregoing within 60 days or any such extended period, the claim shall be deemed to have been denied.  If such determination is favorable to the claimant, it shall be binding and conclusive.  If such determination is adverse to the claimant, it shall be binding and conclusive unless the claimant notifies the Retirement Board within 90 days after the mailing or delivery to him or her by the Retirement Board of its determination that he or she intends to institute legal proceedings challenging the determination of the Retirement Board, and actually institutes such legal proceeding within 180 days after such mailing or delivery.

ARTICLE IV

PARTICIPATION

Section 4.01         Participation.  Participation in the Plan shall be limited to Eligible Employees who elect to participate in this Plan by filing a Participation Agreement with the Administrator.  A Participation Agreement must be filed on or prior to the November 30 immediately preceding the Plan Year for which it is effective.  The Administrator shall have the discretion to establish special deadlines regarding the filing of Participation Agreements for Participants. Notwithstanding the foregoing, the Retirement Board, in its sole discretion, may permit a newly eligible Participant to submit a Participation Agreement within 30 days of that employee becoming eligible, and deferrals shall commence as soon as practical thereafter.  An individual shall not be eligible to elect to participate in this Plan unless the individual is a Participant for the Plan Year for which the election is made.  In the event a Participant transfers to a subsidiary of any Company and such subsidiary does not participate in the Plan, the Participant’s Deferred Amount shall cease, and the Participant’s Deferral Account shall remain in effect until such time as the benefits are distributed as originally elected by the Participant in the Participation Agreement.

Section 4.02         Contents of Participation Agreement.  Subject to Article VII, each Participation Agreement shall set forth:  (i) the amount of Eligible Compensation for the Plan Year or performance period to which the Participation Agreement relates that is to be deferred under the Plan (the “Deferred Amount”), expressed as either a dollar amount or a percentage of the Base Salary and Performance Awards for such Plan Year or performance period; provided, that the minimum Deferred Amount for any Plan Year or performance period shall not be less than 5% (in 5%  increments) of Base Salary and/or 5% (in 5% increments) of Performance Award/Other Bonus; (ii) the maximum Deferred Amount for any Plan Year or performance period shall not exceed 50% of Base Salary and 85% of Performance Award/Other Bonus; (iii) the period after which payment of the Deferred Amount is to be made or begin to be made (the “Deferral Period”), which shall be (A) a specific future year, not greater than the year the Participant reaches age 70 ½ or (B) the period ending upon the Retirement or prior termination of employment of the Participant; and (iv) the form in which payments are to be made, which may be a lump sum or in substantially equal monthly, quarterly or annual installments not to exceed 15 years.  Participation Agreements are to be completed in a format specified by the Administrator.

Section 4.03         Modification or Revocation of Election by Participant. A Participant may not change the amount of his or her Deferred Amount during a Plan Year.  A Participant’s Participation Agreement may not be made, modified or revoked retroactively, nor may a deferral period be shortened or reduced except as expressly provided in this Plan.  For deferrals to occur from Performance Awards, the Participant must be actively employed, an eligible retiree or a member of an entire class of employees identified by the Administrator as eligible under Section 7.10.

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ARTICLE V

DEFERRED COMPENSATION

Section 5.01         Elective Deferred Compensa­tion.  Except for Section 16 Participants, the Deferred Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited to the Participant’s Deferral Account as and when such Deferred Amount would otherwise have been paid to the Participant.  For Section 16 Participants who elect to direct their Deferred Amount to the Hypothetical Investment Benchmark of The Dow Chemical Company Stock Index Fund only, the Deferred Amount of that Participant with respect to each Plan Year of participation shall be credited to the Participant’s Deferral Account in the Hypothetical Investment Benchmark of 125% of Ten Year Treasury Notes as and when such Deferred Amount would otherwise have been paid to the Participant; on a quarterly basis (on the last business day of the months of March, June, September and December), such Deferred Amount shall be reallocated to the Hypothetical Investment Benchmark of The Dow Chemical Company Stock Index Fund.  If a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay or transfer the Deferred Amounts for all such Company’s Participants to The Dow Chemical Company as and when the Deferred Amounts are withheld from a Participant’s Base Salary, Performance Award or Other Bonus.  Such forwarded Deferred Amounts will be held as part of the general assets of The Dow Chemical Company.  The earnings based on a Participant’s investment selection among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the Administrator from time to time, shall be borne by The Dow Chemical Company.  To the extent that any Company is required to withhold any taxes or other amounts from the Deferred Amount pursuant to any state, Federal or local law, such amounts shall be taken out of other compensation eligible to be paid to the Participant that is not deferred under this Plan.

Section 5.02         Vesting of Deferral Account.  Except as provided in Sections 7.03 and 7.15, a Participant shall be 100% vested in his or her Deferral Account as of each Valuation Date.

ARTICLE VI

MAINTENANCE AND INVESTMENT OF ACCOUNTS

Section 6.01         Maintenance of Accounts.  Separate Deferral Accounts shall be maintained for each Participant.  More than one Deferral Account may be maintained for a Participant as necessary to reflect (a) various Hypothetical Investment Benchmarks and/or (b) separate Participation Agreements specifying different Deferral Periods and/or forms of payment.  A Participant’s Deferral Account(s) shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan, and shall not constitute or be treated as a trust fund of any kind.  The Administrator shall determine the balance of each Deferral Account, as of each Valuation Date, by adjusting the balance of such Deferral Account as of the immediately preceding Valuation Date to reflect changes in the value of the deemed investments thereof, credits and debits pursuant to Section 6.02 and Section 7.03 and distributions pursuant to Article VII with respect to such Deferral Account since the preceding Valuation Date.

Section 6.02         Hypothetical Investment Benchmarks.  (a)  Each Participant shall be entitled to direct the manner in which his or her Deferral Accounts will be deemed to be invested, selecting among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the Administrator from time to time, and in accordance with such rules, regulations and procedures as the Administrator may estab­lish from time to time.  Notwithstanding anything to the contrary herein, earnings and losses based on a Participant’s investment elections shall begin to accrue as of the date such Participant’s Deferral Amounts are credited to his or her Deferral Accounts.    Participants, except for Section 16 Participants, can reallocate among the Hypothetical Investment Benchmarks on a daily basis.  Section 16 Participants can reallocate among the Hypothetical Investment Benchmarks in accordance with such rules, regulations and procedures as the Administrator may establish from time to time.  This reallocation capability is extended to the monies associated with deferrals for services performed on or after January 1, 2001.  Account balances from deferrals that occurred prior to January 1, 2001 will maintain the investment direction authorized under similar prior plans.  Notwithstanding the foregoing, once within 180 days after Retirement a Participant may reallocate deferrals that occurred prior to January 1, 2001 between The Dow Chemical Company Stock Index Fund and the 125% of Ten Year Treasury Note Hypothetical Investment Benchmarks.

(b) (i)   The Hypothetical Investment Benchmarks available for Deferral Accounts will include “The Dow Chemical Company Stock Index Fund.”  The Dow Chemical Company Stock Index Fund will consist of deemed investments in shares of The Dow Chemical Company Common Stock including reinvestment of dividends, stock splits and without brokerage fees.  Deferred Amounts that are deemed to be invested in The Dow Chemical Company Stock Index Fund shall be converted into Phantom Share Units based upon the Fair Market Value of the Common Stock as of the date(s) the Deferred Amounts are to be credited to a Deferral Account.  The portion of any Deferral Account that is invested in The Dow Chemical Company Stock Index Fund shall be credited, as of each dividend payment date, with additional Phantom Share Units of Common Stock with respect to cash dividends paid on the Common Stock with record dates during the period beginning on the day after the most recent preceding Valuation Date and end­ing on such Valuation Date.

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(ii)   When a reallocation or a distribution of all or a portion of a Deferral Account that is invested in The Dow Chemical Company Stock Index Fund is to be made, the balance in such a Deferral Account shall be determined by multiplying the Fair Market Value of one share of Common Stock on the most recent Valuation Date preceding the date of such reallocation or distribution by the number of Phantom Share Units to be reallocated or distributed.  Upon a distribution, the amounts in The Dow Chemical Company Stock Index Fund shall be distributed in the form of cash having a value equal to the Fair Market Value of a comparable number of actual shares of Common Stock.

(iii)   In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, or other change in the corporate structure of The Dow Chemical Company affecting Common Stock, or a sale by The Dow Chemical Company of all or part of its assets, or any distribution to stockholders other than a normal cash dividend, then the Administrator may make appropriate adjustments to the number of deemed shares credited to any Deferral Account.  The determination of the Retirement Board as to such adjustments, if any, to be made shall be conclusive.

(iv)   Notwithstanding any other provision of this Plan,  the Administrator shall adopt such procedures as it may determine are necessary to ensure that with respect to any Participant who is actually or potentially subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the crediting of deemed shares to his or her Deferral Account is deemed to be an exempt purchase for purposes of such Section 16(b), including without limitation requiring that no shares of Common Stock or cash relating to such deemed shares may be distributed for six months after being credited to such Deferral Account.

Section 6.03         Statement of Accounts. Each Participant shall be issued quarterly statements of his or her Deferral Account(s) in such form as the Administrator deems desirable, setting forth the balance to the credit of such Participant in his or her Deferral Account(s) as of the end of the most recently completed quarter.

ARTICLE VII

BENEFITS

Section 7.01         Time and Form of Payment.  At the end of the Deferral Period for each Deferral Account, The Dow Chemical Company shall pay to the Participant the balance of such Deferral Account at the time or times elected by the Participant in the applicable Participation Agreement.  If the Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay the balance of such Participant’s Deferral Account, pursuant to the terms of the Plan, and The Dow Chemical Company shall reimburse such Company for any such payments.  If the Participant has elected to receive payments from a Deferral Account in a lump sum, The Dow Chemical Company (or any other Company as described above) shall pay the balance in such Deferral Account (determined as of the most recent Valuation Date preceding the end of the Deferral Period) in a lump sum in cash on the January 31st after the end of the Deferral Period, and/or as soon as administratively feasible in the year of the payment of the Performance Award for the Performance Award deferral.  If the Participant has elected to receive payments from a Deferral Account in installments, The Dow Chemical Company (or any other Company as described above) shall make cash only payments from such Deferral Account, each of which annual amount shall consist of an amount equal to (i) the balance of such Deferral Account as of the most recent annual Valuation Date preceding the first annual payment date times (ii) a fraction, the numerator of which is one and the denominator of which is the number of remaining installment years (includ­ing the installment being paid).  The first such installment shall be paid on the January 31st after the end of the Deferral Period and each subsequent installment shall be paid on or about the anniversary of such first payment or in quarterly or monthly intervals, if selected.  Each such installment shall be deemed to be made on a pro rata basis from each of the different deemed investments of the Deferral Account (if there is more than one such deemed investment).

For Participants who elect to commence distribution of benefits upon Retirement, the lump sum cash payment or the first installment shall be paid on the January 31st after Retirement, and/or as soon as administratively feasible in the year of the payment of the Performance Award for the Performance Award deferral.

Notwithstanding any of the foregoing, Deferred Account distributions must begin no later than the April 1st after the calendar year in which the Participant reaches age 70 ½.

Section 7.02         Changing Form of Benefit. Participants may elect an alternative form of payout as available under Section 7.01 by written election filed with the Administrator; provided, however, that the Participant files the election in the

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prior tax year and at least six (6) months prior to the first day of the month in which payments are to commence.  Distribution change elections for payments commencing in January must be made no later than June 30 of the prior calendar year.

If the Participant files the election in the year that the benefit payments are to commence or in the prior year but less than six (6) months prior to the date of benefit commencement, the Participant will have his or her Deferral Account reduced by ten percent (10%) at the Valuation Date immediately prior to commencement of payments, and, for future deferrals only, all Participation Agreements previously filed by such Participant shall be null and void after such election is filed (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been completed), and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such election is made.

Section 7.03         Matching Contribution.  Each Participant who elects to make deferrals of Eligible Compensation to the Plan will be credited with a Matching Contribution utilizing the same formula authorized under the Savings Plan for employer matching contributions.  For purposes of calculating the match under this Plan, The Dow Chemical Company will assume each Participant is contributing the maximum allowable amount to the Savings Plan and receiving a match thereon.  This assumed match from the Savings Plan will be offset from the Matching Contribution calculated under provisions of the Elective Deferral Plan.  Notwithstanding the foregoing, the sum of the Matching Contribution under the Plan plus the assumed employer matching contributions under the Savings Plan may not exceed fifteen thousand dollars ($15,000) in each Plan Year.  The amount of the Matching Contribution may be based on a formula that takes into account a Participant’s overall compensation and may be subject to maximum or minimum limitations.  The Matching Contribution shall be credited to the Deferral Account as soon as administratively feasible within the first 60 days of the following plan year.  The Matching Contribution shall be invested among the same Hypothetical Investment Benchmarks as defined in 6.02 in the same proportion as the elections made by the Participant governing the Base Salary deferrals of the Participant.  The Matching Contribution shall be distributed to the Participant according to the election made by the Participant governing his or her Base Salary deferrals and will vest one hundred percent (100%) on the date credited to the Participant’s account.

If a Participant is employed by a Company, other than The Dow Chemical Company, an amount equal to all Matching Contributions credited to Participants of such Company shall be paid or transferred in full by such Company to The Dow Chemical Company as of the date such Matching Contribution is credited to a Participant’s Deferred Account.  The Dow Chemical Company shall hold such amounts as part of the general assets of The Dow Chemical Company.

Section 7.04         Retirement.  Subject to Section 7.01 and Section 7.11 hereof, if a Participant has elected to have the balance of his or her Deferral Account distributed upon Retirement or after a Specific Future Year, the account balance of the Participant (determined as of the most recent Valuation Date preceding the end of the Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participation Agreement. Notwithstanding any of the foregoing, Deferred Account distributions must begin no later than the April 1st after the calendar year in which the Participant reaches age 70 ½.

Section 7.05         Distributions after Specific Future Year.  Subject to Section 7.01 and Section 7.11 hereof, if a Participant has elected to defer Eligible Compensation under the Plan until a stated future year, the account balance of the Participant (determined as of the most recent Valuation Date preceding such Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participation Agreement. Notwithstanding any of the foregoing, Deferred Account distributions must begin no later than the April 1st after the calendar year in which the Participant reaches age 70 ½.

Section 7.06         Pre-Retirement Survivor Benefit.  If a Participant dies prior to Retirement and prior to receiving full payment of his or her Deferral Account(s), The Dow Chemical Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant’s Beneficiary or Beneficiaries (as the case may be) according to the form elected by the Participant as a part of the Participation Agreement.  If a Participant was employed at a Company other than The Dow Chemical Company, such Company shall pay the remaining balance of such deceased Participant’s Deferral Account in accordance with the preceding sentence, and The Dow Chemical Company shall reimburse the Company for such payment.  In the event that installment payments are elected, The Dow Chemical Company shall continue to credit interest on the unpaid balance of the Deferral Account subject to Section 6.02(a) hereof, based on the Participant’s investment elections.  Participant’s Beneficiary may request acceleration of timing and form of payment by filing a written designation with the Administrator within 60 days of the death of the Participant, provided that such change shall not be effective until the January 31st after the calendar year of the Participant’s death.

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Section 7.07         Post-Retirement Survivor Benefit.  If a Participant dies after Retirement and prior to receiving full payment of his or her Deferral Account(s), The Dow Chemical Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant’s Beneficiary or Beneficiaries (as the case may be) according to the form elected by the Participant as a part of the Participation Agreement.  If a Participant was employed at a Company other than The Dow Chemical Company, such Company shall pay the remaining balance of such deceased Participant’s Deferral Account in accordance with the preceding sentence, and The Dow Chemical Company shall reimburse such Company for such payments.  In the event that installment payments are elected, The Dow Chemical Company shall continue to credit interest on the unpaid balance of the Deferral Account subject to Section 6.02(a) hereof, based on the Participant’s investment elections. Participant’s Beneficiary may request acceleration of timing and form of payment by filing a written designation with the Administrator within 60 days of the death of the Participant, provided that such change shall not be effective until the January 31st after the calendar year of the Participant’s death.

Section 7.08         Disability.  If a Participant suffers a Disability, the Participant’s Deferred Amount shall cease, and The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay the benefit described in section 7.01. Participant may request acceleration of timing and form of payment by filing a written designation with the Administrator within 60 days of the determination of Disability of the Participant, provided that such change shall not be effective until the January 31st after the calendar year of the Participant’s Disability.

Section 7.09         Termination of Employment.  In the event of Termination of Employment which takes place prior to eligibility for Retirement, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay the benefits described in section 7.01 in a single lump sum payment as soon as practicable after the Termination of Employment.

Section 7.10         Merger, Joint Venture or Sale of Business Exception.  Notwithstanding any of the foregoing, if the Termination of Employment occurs as a direct result of a merger, joint venture or sale of a subsidiary, division, business or other unit of any Company, or as a result of transfer of the Participant to a non-participating subsidiary or joint venture, as determined by the Administrator, the Administrator may, in its sole discretion,

(i) elect to waive the lump sum distribution of benefits for an entire class of affected employees transferring to the joint venture.  In cases where this election is made by the Administrator, the Participant’s Base Salary Deferrals shall cease and the Participant’s Deferral Account shall remain deferred, in accordance with the distribution elected in the Participation Agreement, until the Participant’s termination of employment from the joint venture, provided however, the Participant is employed by the joint venture until at least age 50; in cases where the Participant is not 50 years old at the time of termination of employment from the entity, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay to the Participant a lump sum termination benefit equal to the balance of the Deferral Account as of the Valuation Date.  If any Company terminates its ownership interest in the joint venture, the Participant’s Deferral Account shall remain deferred, in accordance with the distribution elected in the Participation Agreement, until the Participant’s termination of employment from the remaining joint venture partners, provided however, the Participant is employed by the remaining joint venture partners until at least age 50; in cases where the Participant is not 50 years old at the time of termination of employment from the remaining joint venture partners, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay to the Participant a lump sum termination benefit equal to the balance of the Deferral Account as of the Valuation Date.

(ii) elect to waive the lump sum distribution of benefits for an entire class of affected employees of a sale.  In cases where this election is made by the Administrator, the Participant’s Base Salary Deferrals shall cease and the Participant’s Deferral Account shall remain in effect until such time as the benefits are distributed to Participants in accordance with the distribution elected in the Participation Agreement, provided however, the Participant is employed by the purchaser until at least age 50; in cases where the Participant is not 50 years old at the time of termination of employment from the purchaser, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay to the Participant a lump sum termination benefit equal to the balance of the Deferral Account as of the Valuation Date.

(iii) elect to permit the Performance Deferral for an entire class of affected employees transferring to the joint venture.  In cases where this election is made by the Administrator, the award will be credited to the Participant’s Deferral Account and

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the Participant’s Deferral Account shall remain in effect until such time as benefits are distributed to Participants as provided under Section 7.10 (i).

(iv) elect to permit the Performance Deferral for an entire class of affected employees of a sale.  In cases where this election is made by the Administrator, the award will be credited to the Participant’s Deferral Account and the Participant’s Deferral Account shall remain in effect until such time as the benefits are distributed to Participants as provided under Section 7.10 (ii).

Participants who retire or terminate after merger, joint venture or sale of a subsidiary, division, business or other unit of any Company, or as a result of transfer of the Participant to a non-participating subsidiary or joint venture assume the personal responsibility to notify The Dow Chemical Company of their status change.  Failure to promptly notify The Dow Chemical Company may result in the loss of earnings beyond the status change date.

Section 7.11         Small Benefit Election.  Notwithstanding any of the foregoing, in the event the sum of all benefits payable to the Participant or Beneficiary(ies) is less than or equal to ten thousand dollars ($10,000), the Administrator may, in its sole discretion, elect to pay such benefits in a single lump sum.  The Administrator may also, in its sole discretion, elect to change monthly payments so they are at least three hundred dollars ($300) by reducing the number of monthly installments.

Section 7.12         Hardship Withdrawals.   Notwithstanding the provisions of Section 7.01 and any Participation Agreement, a Participant’s on-going Deferred Amount shall cease and a Participant shall be entitled to early payment of all or part of the balance in his or her Deferral Account(s) in the event of an Unforeseeable Emergency, in accordance with this Section 7.12.  A distribution pursuant to this Section 7.12 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant’s assets to the extent such liquidation would not itself cause severe financial hardship, or (iii) by cessation of participation in the Plan.  An application for an early payment under this Section 7.12 shall be made to the Administrator in such form and in accordance with such procedures as the Administrator shall determine from time to time.  The determination of whether and in what amount and form a distribution will be permitted pursuant to this Section 7.12 shall be made by the Administrator.

Section 7.13         Voluntary Early Withdrawal.  Notwithstanding the provisions of Section 7.01 and any Participation Agreement, a Participant shall be entitled to elect to withdraw all or a portion of the balance in his or her Deferral Account(s) in accordance with this Section 7.13 by filing with the Administrator such forms, in accordance with such procedures, as the Administrator shall determine from time to time.  The amount of this withdrawal must be at least twenty five percent (25%) of the balance of the Deferral Account, or $10,000.00, whichever is less.  As soon as practicable after receipt of such form by the Administrator, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay an amount equal to ninety (90) percent of the amount elected for withdrawal (determined as of the most recent Valuation Date preceding the date such election is filed) to the electing Participant in a lump sum in cash, and the Participant shall forfeit the remaining ten (10) percent of the amount elected for withdrawal. For future deferrals only, all Participation Agreements previ­ously filed by a Participant who elects to make a withdrawal under this Section 7.13 shall be null and void after such election is filed (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been completed), and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such election is made.

Section 7.14         Change of Control.  An Eligible Employee may, when completing a Participation Agreement during the enrollment period, elect that, if a Change of Control occurs, the Participant (or after the Participant’s death the Participant’s Beneficiary) shall receive a lump sum payment of the balance of the Deferral Account within thirty (30) days after the Change of Control.  This election may be changed only during a 30-day period ending on November 30 of each calendar year and shall apply to the entire Deferral Account both before and after Retirement.  The Deferral Account balance shall be determined as of the most recent Valuation Date preceding the month in which Change of Control occurs. All Participation Agreements previ­ously filed by a Participant who receives a distribution under this Section 7.14 shall be null and void (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been completed), and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such distribution is made.

Section 7.15         Discretionary Company Contributions.   Any Company may at any time contribute a discretionary Company contribution.  The amount of the discretionary contribution may vary from payroll period to payroll period throughout the Plan Year, may be based on a formula which takes into account a Participant’s overall compensation, and

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otherwise may be subject to maximum or minimum limitations. The Discretionary Contribution shall be credited to the Deferral Account as soon as administratively feasible following the end of the payroll period.  The discretionary contribution shall be invested among the same Hypothetical Investment Benchmarks as defined in 6.02 in the same proportion as the elections made by the Participant governing the deferrals of the Participant.  The discretionary contribution shall be distributed to the Participant according to the election made by the Participant governing his or her deferrals.  The vesting schedule shall be at the sole discretion of the Plan Administrator.

If a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay or transfer to The Dow Chemical Company any amounts designated as discretionary Company contributions for all such Participants as of the date such discretionary Company contributions are credited to a Participant’s Deferral Account.  The Dow Chemical Company shall hold such amounts as part of the general assets of The Dow Chemical Company.

Section 7.16         Withholding of Taxes.  Notwithstanding any other provision of this Plan, any Company shall withhold from payments made hereunder any amounts required to be so withheld by any applicable law or regulation.

ARTICLE VIII

BENEFICIARY DESIGNATION

Section 8.01         Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person, persons or entity as his or her Beneficiary or Beneficiaries.  A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Administrator, on such form and in accordance with such procedures as the Administrator shall establish from time to time.

Section 8.02         No Beneficiary Designation.   If a Participant or Beneficiary fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant’s Beneficiary shall be deemed to be, in the following order:

(a)to the spouse of such person, if any;

(b)to the children of such person, if any;

(c)to the beneficiary of any Company Paid Life Insurance of such person, if any;

(d)to the beneficiary of the Executive Life Insurance of such person, if any;

(e)to the beneficiary of any Company-sponsored life insurance policy for which any Company pays all or part of the premium of such person, if any; or

(f)to the deceased person’s estate.

ARTICLE IX

AMENDMENT AND TERMINATION OF PLAN

Section 9.01         Amendment.  The Board may at any time amend this Plan in whole or in part, provided, however, that no amendment shall be effective to decrease the balance in any Deferral Account as accrued at the time of such amendment, nor shall any amendment otherwise have a retroactive effect.

Section 9.02         Company’s Right to Terminate.  The Board may at any time terminate the Plan with respect to future Participation Agreements.  The Board may also terminate the Plan in its entirety at any time for any reason, including without limitation if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of The Dow Chemical Company, and upon any such termination, The Dow Chemical Company shall pay to each Participant (or shall transfer to a Company other than The Dow Chemical Company for payment if the Participant is employed at a Company other than The Dow Chemical Company) the benefits such Participant is entitled to receive under the Plan as monthly installments over a three (3) year period commencing within ninety (90) days (determined as of the most recent Valuation Date preceding the termination date).  Any Company may cease participation in the Plan for any reason by notifying The Dow Chemical Company in writing at least 30 days prior to such Company’s cessation of participation.  Payments to Participants of any such Company will commence in accordance with the terms of the Plan.

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ARTICLE X

MISCELLANEOUS

Section 10.01       Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201, 301 and 401 of ERISA and therefore meant to be exempt from Parts 2, 3 and 4 of Title I of ERISA.  All payments pursuant to the Plan shall first be made from the general assets of The Dow Chemical Company, as the entity primarily liable for such payments, and no special or separate fund shall be established or other segregation of assets made to assure payment.  As described above, if a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay such Participant’s Deferral Account balance to such Participant according to the terms of the Plan, and The Dow Chemical Company shall reimburse such Company for the amount of the payment.  In the event The Dow Chemical Company is insolvent or is otherwise unable to make any required payment or reimbursement to a Participant or a Company, the Company (other than The Dow Chemical Company) that employed such Participant shall be secondarily liable for such payments from the general assets of such Company.  No Participant or other person shall have under any circumstances any interest in any particular property or assets of The Dow Chemical Company or any other Company as a result of participating in the Plan.  Notwithstanding the foregoing, The Dow Chemical Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of The Dow Chemical Company’s creditors, to assist it in accumulating funds to pay its obligations.

Section 10.02       Nonassignability.  Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

Section 10.03       Validity and Severability.  The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.04       Governing Law.   The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Delaware, without reference to principles of conflict of law, except to the extent preempted by federal law.

Section 10.05       Employment Status.  This Plan does not constitute a contract of employment or impose on the Participant or any Company any obligation for the Participant to remain an employee of such Company or change the status of the Participant’s employment or the policies of such Company and its affiliates regarding termination of employment.

Section 10.06       Underlying Incentive Plans and Programs.  Nothing in this Plan shall prevent any Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which  Performance Awards are earned and which are deferred under this Plan.

Section 10.07       Severance. Payments from the Executive Severance Supplement equal to six months’ Base Salary will be credited to the Participant’s Deferral Account subject to the same earnings methods and distribution elections most recently elected by the Participant governing his or her Base Salary deferrals.  The Executive Severance Supplement for individuals who do not have an established Deferral Account will be deemed to be invested using the U.S. Treasury Note Hypothetical Investment Benchmark and a ten year payout distribution election.

Section 10.08         Successors of the Company.  The rights and obligations of The Dow Chemical Company shall inure to the benefit of, and shall be binding upon, the successors and assigns of The Dow Chemical Company.

Section 10.09         Waiver of Breach.  The waiver by The Dow Chemical Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

Section 10.10       Notice.  Any notice or filing required or permitted to be given to The Dow Chemical Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of The Dow

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Chemical Company, directed to the attention of the Administrator.  Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.

By:
	Julie Fasone Holder
	Its: Corporate Vice President
	Human Resources Department
	The Dow Chemical Company

APPENDIX A

The Dow Chemical Company Stock Index Fund

125% of Ten Year Treasury Notes

Vanguard Windsor II Admiral Shared (Effective January 1, 2007)

Vanguard 500 Index Fund

T. Rowe Price Mid-Cap Growth Fund

Fidelity Low-Priced Stock Fund

Fidelity Diversified International Trust (Effective September 1, 2006)

Vanguard Balanced Index Fund

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EX-10.(DD)

EXHIBIT 10(dd)

The Dow Chemical Company
Elective Deferral Plan
Effective for Deferrals after January 1, 2005

ARTICLE I

PURPOSE AND EFFECTIVE DATE

The purpose of The Dow Chemical Company Elective Deferral Plan (“Plan”) is to aid The Dow Chemical Company and its subsidiaries in retaining and attracting executive employees by providing them with tax deferred savings opportunities.  The Plan provides a select group of management and highly compensated employees, within the meaning of Sections 201(2), 301(a)3 and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) and therefore exempt from Parts 2, 3, and 4 of Title I of ERISA, of The Dow Chemical Company and certain subsidiaries with the opportunity to elect to defer receipt of specified portions of compensation, and to have these deferred amounts treated as if invested in specified Hypothetical Investment Benchmarks.  The Plan shall be effective for deferrals made hereunder on or after January 1, 2005, and is intended to comply with the provisions of Section 409A of the Internal Revenue Code. The benefits provided under the Plan shall be provided in consideration for services to be performed after the effective date of the Plan, but prior to the executive’s Separation from Service.

Amendments were made to the Plan on January 10, 2005 and March 11, 2005 to further comply with the provisions of Section 409A of the Internal Revenue Code, and a minor amendment was made to the Plan on January 23, 2006. On September 1, 2006, the Plan was amended to further comply with the provisions of Section 409A of the Internal Revenue Code and, effective September 1, 2006 and January 1, 2007, to change the Hypothetical Investment Benchmarks.

ARTICLE II

DEFINITIONS

For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the con­text clearly indicates otherwise:

Section 2.01         Administrator.  “Administrator” means the Retirement Board appointed under the Dow Employees’ Pension Plan.

Section 2.02         Base Salary.  “Base Salary” means the annual base rate of pay from the Company at which a Participant is employed (excluding Performance Awards, commissions, relocation expenses, and other non-regular forms of compensation) before deductions under (A) deferrals pursuant to Section 4.02 and (B) contributions made on his or her behalf to any qualified plan maintained by any Company or to any cafeteria plan under Section 125 of the Internal Revenue Code maintained by any Company.

Section 2.03         Base Salary Deferral.  “Base Salary Deferral” means the amount of a Participant’s Base Salary which the Participant elects to have withheld on a pre-tax basis from his Base Salary and credited to his or her Deferral Account pursuant to Section 4.02.

Section 2.04         Beneficiary.  “Beneficiary” means the person, persons or entity designated by the Participant to re­ceive any benefits payable under the Plan pursuant to Article VIII.

Section 2.05         Board.  “Board” means the Board of Di­rectors of The Dow Chemical Company.

Section 2.06         Change of Control.  For purposes of this Plan, a “Change of Control” shall be deemed to have occurred on: (a) the date that any one person, or more than one person acting as a group acquires, ownership of stock of The Dow Chemical Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of The Dow Chemical Company, (b) the date that a majority of the members of the Board of Directors of The Dow Chemical Company is replaced during any 12-month period by directors whose

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appointment or election is not endorsed by a majority of the directors before the date of the appointment or election, (c) the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of The Dow Chemical Company possessing 35% or more of the total voting power of the stock of such corporation, (d) the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from The Dow Chemical Company that has a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of The Dow Chemical Company immediately before such acquisition or acquisitions, provided that the following asset transfers shall not result in a Change of Control:  (i)  a transfer of assets to a stockholder of The Dow Chemical Company in exchange for or with respect to its stock, (ii)  a transfer to a corporation, 50% or more of the total value or voting power of which is owned, directly or indirectly, by The Dow Chemical Company, (iii) a transfer to a person, or more than one person acting as a group, that owns 50% or more of the stock of The Dow Chemical Company, or  (iv) a transfer to an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (iii).  This definition of “Change of Control” is intended to conform to the definition of a “change in ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation” as defined under Section 409A of the Internal Revenue Code of 1986, as amended, and any subsequent authority issued pursuant thereto, and no corporate event shall be considered a Change of Control unless it meets such requirements.

Section 2.07         Common Stock.  “Common Stock” means the common stock of The Dow Chemical Company.

Section 2.08         Company.  “Company” means The Dow Chemical Company, its successors, any subsidiary or affiliated organizations authorized by the Board or the Administrator to participate in the Plan and any organization into which or with which The Dow Chemical Company may merge or consolidate or to which all or substantially all of its assets may be transferred.

Section 2.09         Deferral Account.  “Deferral Account” means the notional account established for record keeping purposes for each Participant pursuant to Article VI.

Section 2.10         Deferral Period.  “Deferral Period” is defined in Section 4.02.

Section 2.11         Deferred Amount.   “Deferred Amount” is defined in Section 4.02.

Section 2.12         Designee.  “Designee” shall mean The Dow Chemical Company’s Global Compensation & Benefits Department to whom the Administrator has delegated the authority to take action under the Plan.

Section 2.13         Disability.  “Disability” means a Participant who is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or is (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company.  The Administrator, in its complete and sole discretion, shall determine a Participant’s Disability.  The Administrator may require that the Participant submit to an examination on an annual basis, at the expense of the Company at which such Participant was employed, by a competent physician or medical clinic selected by the Administrator to confirm Disability.  On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive.

Section 2.14         Eligible Compensation.  “Eligible Com­pensation” means any Base Salary, Performance Awards or Other Bonuses and any other monies deemed to be eligible compensation by The Dow Chemical Company.

Section 2.15         Eligible Employee.  “Eligible Employee” means an employee of any Company who:  (i) is a United States employee or an expatriate who is paid from one of The Dow Chemical Company’s U.S. entities, (ii) is a member of the functional specialist/functional leader or global leadership job families, (iii) has a job level of L2 or higher,  (iv) is eligible for participation in the Savings Plan, (v) is designated by the Administrator as eligible to participate in the Plan as of September 30 for deferral of Base Salary and Performance Awards, and (vi) qualifies as a member of the “select group of management or highly compensated employees” under ERISA.  For purposes of Section 7.15, Discretionary Company

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Contributions, only, “Eligible Employee” also means an employee who: (i) is a United States employee, (ii) has terminated employment with a foreign affiliate of the Company and has accepted employment with one of the Company’s U.S. entities, (iii) is eligible for a signing bonus from one of the Company’s U.S. entities, (iv) has a job level of AP5 or higher, (v) is eligible for participation in the Savings Plan and (vi) qualifies as a member of the “select group of management or highly compensated employees” under ERISA.

Section 2.16         ERISA.   “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Section 2.17         Fair Market Value.  “Fair Market Value” of a share of Common Stock means the closing price of The Dow Chemical Company’s Common Stock on the New York Stock Exchange on the most recent day on which the Common Stock was so traded that precedes the date the Fair Market Value is to be determined. The definition of Fair Market Value in this Section shall be exclusively used to determine the values of a Participant’s interest in The Dow Chemical Company Stock Index Fund (defined in Section 6.02(b)) for all relevant purposes under the Plan.

Section 2.18         Form of Payment.  “Form of Payment” means payment in one lump sum or in substantially equal monthly, quarterly or annual installments not to exceed 15 years.

Section 2.19         Hardship Withdrawal.  “Hardship Withdrawal” means the early payment of all or part of the balance in a Deferral Account(s) in the event of an Unforeseeable Emergency.

Section 2.20         Hypothetical Investment Benchmark.  “Hypothetical Investment Benchmark” shall mean the phantom investment benchmarks which are used to measure the return credited to a Participant’s Deferral Account.

Section 2.21         Key Employee.  Key employee means an employee of any Company within the meaning of Section 416(i) of the Internal Revenue Code, without regard to paragraph (5) thereof.  Unless otherwise determined by the Administrator, for purposes of the preceding, an employee of any Company who meets the following requirements is a Key Employee:  (i) the employee is a United States employee or an expatriate who is paid from one of The Dow Chemical Company’s U.S. entities, (ii) the employee is a member of the global leadership job family, (iii) the employee has a job level of V5 or higher, (iv) the employee is eligible for participating in the Savings Plan, (v) the employee is designated by the Administrator as eligible to participate in the Plan as of September 30 for deferral of Base Salary and Performance Awards, and (vi) the employee qualifies as a member of the “select group of management or highly compensated employees” under ERISA.

Section 2.22         Matching Contribution.  “Matching Contribution” means the amount of annual matching contribution that each Company will make to the Plan.

Section 2.23         Other Bonus.   “Other Bonus” means the amount awarded to a Participant for a Plan Year under any other incentive plan maintained by any Company that has been established and authorized as eligible for deferral.

Section 2.24         Other Deferral.  “Other Deferral” means the amount of a Participant’s Other Bonus which the Participant elects to have withheld on a pre-tax basis credited to his or her account pursuant to Section 4.02.

Section 2.25         Participant.  “Participant” means any individual who is eligible and makes an election to participate in this Plan by filing a Participation Agreement as provided in Article IV.

Section 2.26         Participation Agreement.  “Participation Agreement” means an agreement filed by a Participant in accordance with Article IV.

Section 2.27         Performance Awards.   “Performance Awards” means the amount paid in cash to the Participant by any Company in the form of annual incentive bonuses for a Plan Year.

Section 2.28         Performance Deferral.  “Performance Deferral” means the amount of a Participant’s Performance Award which the Participant elects to have withheld on a pre-tax basis from his or her Performance Award and credited to his or her account pursuant to Section 4.02.

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Section 2.29         Phantom Share Units.   “Phantom Share Units” means units of deemed investment in shares of The Dow Chemical Company Common Stock so determined under Section 6.02(b).

Section 2.30         Plan Year.  “Plan Year” means a twelve-month period beginning January 1 and ending the following December 31.

Section 2.31         Retirement.  “Retirement” means normal or early retirement of a Participant from the Companies after attaining age 65 or age 50 with at least ten years of service under the Dow Employees’ Pension Plan or any other defined benefit pension plan maintained by a Company under which a Participant is eligible to receive a benefit.

Section 2.32         Retirement Board.  “Retirement Board” means the general administrator of the Plan appointed under the Dow Employees’ Pension Plan.

Section 2.33         Savings Plan.       “Savings Plan” means The Dow Chemical Company Employees’ Savings Plan as it currently exists and as it may subsequently be amended.

Section 2.34         Section 16 Participant.  “Section 16 Participant” means an officer or director of The Dow Chemical Company required to report transactions in The Dow Chemical Company securities to the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934.

Section 2.35         Separation from Service.  “Separation from Service” means the cessation of a Participant’s services as an employee of the Companies, whether voluntary or involuntary, for any reason other than Retirement, or Disability or death, determined consistent with guidance issued by the Department of the Treasury regarding what constitutes a “separation from service” under Section 409A of the Internal Revenue Code.

Section 2.36         Unforeseeable Emergency.  “Unforeseeable Emergency” means severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152 of the Internal Revenue Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Administrator.  The amount of the distribution may not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

Section 2.37         Valuation Date.   “Valuation Date” means the last day of each calendar month or such other date as the Administrator in its sole discretion may determine.

ARTICLE III

ADMINISTRATION

Section 3.01         Administrator Duties. This Plan shall be administered by the Retirement Board. The Retirement Board shall consist of not less than three members who may, but need not, be employed by any Company.  Each person appointed to the Retirement Board shall signify acceptance of his or her position and may resign by delivery of a written notice to The Dow Chemical Company.  The Dow Chemical Company may remove any member at its pleasure by delivery of a written notice to the member.  In the event of any vacancy in membership, The Dow Chemical Company shall (or, if at least three members are then serving, may in its discretion) appoint a successor to fill the vacancy in office; provided, however, that the Retirement Board may exercise its full authority and discretion notwithstanding the existence of any vacancy. Members shall serve without compensation for their services.  The Retirement Board shall act by a majority of its members by vote at a meeting or by unanimous consent in writing.  If all members of the Retirement Board are not available, a quorum, consisting of three (3) members of the Retirement Board, may act by a majority of the quorum.  It may authorize one or more of its members to execute documents in its behalf.  Any person, upon written notification of the authorization, shall accept and rely upon that authorization until notified in writing that the Retirement Board has revoked the authorization. 

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The Retirement Board shall appoint a secretary (who may or may not be a Retirement Board member) to keep all minutes of its meetings and to receive and deliver all notices.  The secretary shall record and, where appropriate, communicate to all persons affected all delegations made by the Retirement Board of its responsibilities, any rules and procedures adopted by the Retirement Board and all other formal actions taken by the Retirement Board.  No member of the Retirement Board shall vote or act on any matter relating solely to him/herself. The Administrator may participate in a meeting of such committee by means of a conference telephone or similar communications equipment that enables all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting and waiver of notice of such meeting.

The Administrator shall be responsible for the administration of this Plan and shall have all powers necessary to administer this Plan, including discretionary authority to determine eligibility for benefits and to decide claims under the terms of this Plan, except to the extent that any such powers that are specially vested in any other person administering this Plan by the Administrator.  The Administrator may from time to time establish rules for the administration of this Plan, and it shall have the exclusive right to interpret this Plan and to decide any matters arising in connection with the administration and operation of this Plan.  All rules, interpretations and decisions of the Administrator shall be conclusive and binding on any Company, Participants and Beneficiaries.

The Administrator has delegated to The Dow Chemical Company’s Global Compensation & Benefits Department responsibility for performing certain admin­istrative and ministerial functions under this Plan.  The Designee shall be responsible for determining in the first instance issues related to eligibility, Hypothetical Investment Benchmarks, distribution of Deferred Amounts, determination of account balances, crediting of hypothetical earnings and debiting of hypothetical losses and of distributions, withdrawals, deferral elections and any other duties concerning the day-to-day operation of this Plan.  The Administrator shall have discretion to delegate such additional duties as it may determine.  The Designee may retain and supervise outside providers, third party administrators, record keepers and professionals (including in-house professionals) to perform any or all of the duties delegated to it hereunder.

Neither The Dow Chemical Company, any other Company, a member of the Board, a member of the Retirement Board nor any Designee shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or for anything done or omitted to be done in connection with this Plan.

The Dow Chemical Company shall, to the fullest extent permitted by law, indemnify each director, officer or employee of The Dow Chemical Company (including the heirs, executors, administrators and other personal representatives of such person), each member of the Retirement Board and any Designee against expenses (including attorneys’ fees), judgments, fines, amounts paid in settlement, actually and reasonably incurred by  such person in connection with any threatened, pending or actual suit, action or proceeding (whether civil, criminal, administrative or investigative in nature or otherwise) in which such person may be involved by reason of the fact that he or she is or was serving this Plan in any capacity at the request of The Dow Chemical Company, the Administrator  or Designee.

Any expense incurred by The Dow Chemical Company or the Administrator relative to the administration of this Plan shall be paid by The Dow Chemical Company and/or may be deducted from the Deferral Accounts of the Participants as determined by the Administrator or Designee.

Section 3.02         Claim Procedure.  If a Participant or Beneficiary (“claimant”) makes a written request alleging a right to receive payments under this Plan or alleging a right to receive an adjustment in benefits being paid under this Plan, such actions shall be treated as a claim for benefits.  Benefits under this Plan shall be payable only if the Designee or the Administrator, as the case may be, determines, in its sole discretion, that a claimant is entitled to them.

(a)           All initial claims for benefits under this Plan shall be sent to the Designee.  If the Designee determines that any individual who has claimed a right to receive benefits, or different benefits, under this Plan is not entitled to receive all or any part of the benefits claimed, the Designee shall inform the claimant in writing of such determination and the reasons therefor in terms calculated to be understood by the claimant.  The notice shall be sent within 90 days of receipt of the claim unless the Designee determines that additional time, not exceeding 90 additional days, is needed and so notifies the claimant in writing before the expiration of the initial 90 day period.  Any written notice of extension for review shall include the circumstances requiring extension and date by which a decision is expected to be rendered.  A written notice of denial of

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benefits shall (1) state specific reasons for the denial, (2) make specific reference to the pertinent Plan provisions on which the denial is based, (3) describe any additional material or information that is necessary to support the claimant’s claim and an explanation of why such material or information is necessary, and (4) include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records or other information relevant (as defined by Department of Labor Regulation Section 2560.503-1(m)) to the claim.  Such notice shall, in addition, inform the claimant of the procedure that the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim, including the right to bring a civil action under Section 502(a) of ERISA following exhaustion of review procedures set forth herein.

(b)           The claimant may within 60 days after notice of the denial submit, in writing, to the Administrator a notice that the claimant contests the denial of his or her claim and desires a further review by the Administrator.  During the review process, the claimant has the right to submit written comments, documents, records and other information relating to the claim for benefits, which the Administrator shall consider without regard to whether the items were considered upon the initial review.  The Administrator shall within 60 days thereafter review the claim and authorize the claimant to, upon request and free of charge, have reasonable access to, and copies of all documents, records or other information relevant (as defined by  Department of Labor Regulation Section 2560.503-1(m)) to the claim.  The Administrator will render a final decision on behalf of The Dow Chemical Company with specific reasons therefor in writing and will transmit it to the claimant within 60 days of the written request for review, unless the Administrator determines that additional time, not exceeding 60 days, is needed, and so notifies the claimant in writing before the expiration of the initial 60 day period.  Any written notice of extension for review shall include the circumstances requiring extension and date by which a decision is expected to be rendered.  A written notice of denial of benefits upon review shall (1) state specific reasons for the denial, (2) make specific reference to the pertinent Plan provisions on which the denial is based, and (3) include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records or other information relevant (as defined by Department of Labor Regulation Section 2560.503-1(m)) to the claim.  Such notice shall, in addition, inform the claimant of the right to bring a civil action under Section 502(a) of ERISA.  If such determination is adverse to the claimant, it shall be binding and conclusive unless the claimant notifies the Administrator within 90 days after the mailing or delivery to him or her by the Administrator of its determination that he or she intends to institute legal proceedings challenging the determination of the Administrator, and actually institutes such legal proceeding within 180 days after such mailing or delivery.

ARTICLE IV

PARTICIPATION

Section 4.01         Participation.  Participation in the Plan shall be limited to Eligible Employees who elect to participate in this Plan by filing a Participation Agreement with the Administrator.  A Participation Agreement must be filed on or prior to the November 30 (Eastern Standard Time) immediately preceding the Plan Year in which the Eligible Compensation to which the Participation Agreement relates is earned.  The Administrator shall have the discretion to establish special deadlines regarding the filing of Participation Agreements for Participants. Notwithstanding the foregoing, the Administrator, in its sole discretion, may permit a newly eligible Participant to submit a Participation Agreement within 30 days after that employee becomes eligible, and deferrals shall commence as soon as practical thereafter for Eligible Compensation earned after the Administrator receives a completed and timely submitted Participation Agreement.  An individual shall not be eligible to elect to participate in this Plan unless the individual is a Participant for the Plan Year for which the election is made.  In the event a Participant transfers to a subsidiary of any Company and such subsidiary does not participate in the Plan, the Participant’s Deferred Amount shall cease, and the Participant’s Deferral Account shall remain in effect until such time as the benefits are distributed as originally elected by the Participant in the Participation Agreement or in accordance with the terms and conditions of the Plan.

Section 4.02         Contents of Participation Agreement.  Subject to Article VII, each Participation Agreement shall set forth:  (i) the amount of Eligible Compensation for the Plan Year or performance period to which the Participation Agreement relates that is to be deferred under the Plan (the “Deferred Amount”), expressed as either a dollar amount or a percentage of the Base Salary and Performance Awards for such Plan Year or performance period; provided, that the minimum Deferred Amount for any Plan Year or performance period shall not be less than 5% (in 5% increments) of Base Salary and/or 5% (in 5% increments) of Performance Award/Other Bonus; (ii) the maximum Deferred Amount for any Plan

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Year or performance period shall not exceed 50% of Base Salary and 85% of Performance Award/Other Bonus; (iii) the period after which payment of the Deferred Amount is to be made or begin to be made (the “Deferral Period”), which shall be (A) a specific future year, not greater than the year the Participant reaches age 70 ½ or (B) the period ending upon Separation from Service of the Participant; and (iv) the form in which payments are to be made, which may be a lump sum or in substantially equal monthly, quarterly or annual installments not to exceed 15 years.  Participation Agreements are to be completed in a format specified by the Administrator.

Section 4.03         Modification or Revocation of Election by Participant. A Participant may not change the amount of his or her Deferred Amount during a Plan Year.  A Participant’s Participation Agreement may not be made, modified or revoked retroactively, except for the 2004 Performance Award can be revoked.  For deferrals to occur from Performance Awards, the Participant must be actively employed or an eligible Retiree.

ARTICLE V

DEFERRED COMPENSATION

Section 5.01         Elective Deferred Compensa­tion.  Except for Section 16 Participants, the Deferred Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited to the Participant’s Deferral Account as and when such Deferred Amount would otherwise have been paid to the Participant.  For Section 16 Participants who elect to direct their Deferred Amount to the Hypothetical Investment Benchmark of The Dow Chemical Company Stock Index Fund only, the Deferred Amount of that Participant with respect to each Plan Year of participation shall be credited to the Participant’s Deferral Account in the Hypothetical Investment Benchmark of 125% of Ten Year Treasury Notes as and when such Deferred Amount would otherwise have been paid to the Participant; on a quarterly basis (on the last business day of the months of March, June, September and December), such Deferred Amount shall be reallocated to the Hypothetical Investment Benchmark of The Dow Chemical Company Stock Index Fund.  If a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay or transfer the Deferred Amounts for all such Company’s Participants to The Dow Chemical Company as and when the Deferred Amounts are withheld from a Participant’s Base Salary, Performance Award or Other Bonus.  Such forwarded Deferred Amounts will be held as part of the general assets of The Dow Chemical Company.  The earnings based on a Participant’s investment selection among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the Administrator from time to time, shall be borne by The Dow Chemical Company.  To the extent that any Company is required to withhold any taxes or other amounts from the Deferred Amount pursuant to any state, Federal or local law, such amounts shall be taken out of other compensation eligible to be paid to the Participant that is not deferred under this Plan.

Section 5.02         Vesting of Deferral Account.  Except as provided in Sections 7.05 and 7.15, a Participant shall be 100% vested in his or her Deferral Account as of each Valuation Date.

ARTICLE VI

MAINTENANCE AND INVESTMENT OF ACCOUNTS

Section 6.01         Maintenance of Accounts.  Separate Deferral Accounts shall be maintained for each Participant.  More than one Deferral Account may be maintained for a Participant as necessary to reflect (a) various Hypothetical Investment Benchmarks and/or (b) separate Participation Agreements specifying different Deferral Periods and/or forms of payment.  A Participant’s Deferral Account(s) shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan, and shall not constitute or be treated as a trust fund of any kind.  The Administrator shall determine the balance of each Deferral Account, as of each Valuation Date, by adjusting the balance of such Deferral Account as of the immediately preceding Valuation Date to reflect changes in the value of the deemed investments thereof, credits and debits pursuant to Section 6.02 and Section 7.05 and distributions pursuant to Article VII with respect to such Deferral Account since the preceding Valuation Date.

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Section 6.02         Hypothetical Investment Benchmarks.  (a)  Each Participant shall be entitled to direct the manner in which his or her Deferral Accounts will be deemed to be invested, selecting among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the Administrator from time to time, and in accordance with such rules, regulations and procedures as the Administrator may estab­lish from time to time.  Notwithstanding anything to the contrary herein, earnings and losses based on a Participant’s investment elections shall begin to accrue as of the date such Participant’s Deferred Amounts are credited to his or her Deferral Accounts.    Participants, except for Section 16 Participants, can reallocate among the Hypothetical Investment Benchmarks on a daily basis.  Section 16 Participants can reallocate among the Hypothetical Investment Benchmarks in accordance with such rules, regulations and procedures as the Administrator may establish from time to time.

(b) (i)   The Hypothetical Investment Benchmarks available for Deferral Accounts will include “The Dow Chemical Company Stock Index Fund.”  The Dow Chemical Company Stock Index Fund will consist of deemed investments in shares of The Dow Chemical Company Common Stock including reinvestment of dividends, stock splits and without brokerage fees.  Deferred Amounts that are deemed to be invested in The Dow Chemical Company Stock Index Fund shall be converted into Phantom Share Units based upon the Fair Market Value of the Common Stock as of the date(s) the Deferred Amounts are to be credited to a Deferral Account.  The portion of any Deferral Account that is invested in The Dow Chemical Company Stock Index Fund shall be credited, as of each dividend payment date, with additional Phantom Share Units of Common Stock with respect to cash dividends paid on the Common Stock with record dates during the period beginning on the day after the most recent preceding Valuation Date and end­ing on such Valuation Date.

(ii)   When a reallocation or a distribution of all or a portion of a Deferral Account that is invested in The Dow Chemical Company Stock Index Fund is to be made, the balance in such a Deferral Account shall be determined by multiplying the Fair Market Value of one share of Common Stock on the most recent Valuation Date preceding the date of such reallocation or distribution by the number of Phantom Share Units to be reallocated or distributed.  Upon a distribution, the amounts in The Dow Chemical Company Stock Index Fund shall be distributed in the form of cash having a value equal to the Fair Market Value of a comparable number of actual shares of Common Stock.

(iii)   In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, or other change in the corporate structure of The Dow Chemical Company affecting Common Stock, or a sale by The Dow Chemical Company of all or part of its assets, or any distribution to stockholders other than a normal cash dividend, then the Administrator may make appropriate adjustments to the number of deemed shares credited to any Deferral Account.  The determination of the Administrator as to such adjustments, if any, to be made shall be conclusive.

(iv)   Notwithstanding any other provision of this Plan,  the Administrator shall adopt such procedures as it may determine are necessary to ensure that with respect to any Participant who is actually or potentially subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the crediting of deemed shares to his or her Deferral Account is deemed to be an exempt purchase for purposes of such Section 16(b), including without limitation requiring that no shares of Common Stock or cash relating to such deemed shares may be distributed for six months after being credited to such Deferral Account.

Section 6.03         Statement of Accounts.  Each Participant shall be issued quarterly statements of his or her Deferral Account(s) in such form as the Administrator deems desirable, setting forth the balance to the credit of such Participant in his or her Deferral Account(s) as of the end of the most recently completed quarter.

ARTICLE VII

BENEFITS

Section 7.01         Time and Form of Payment.  Except as otherwise provided in this Article, at the end of the Deferral Period for each Deferral Account, The Dow Chemical Company shall pay to the Participant the balance of such Deferral Account at the time or times elected by the Participant in the applicable Participation Agreement.  If the Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay the balance of such Participant’s Deferral Account, pursuant to the terms of the Plan, and The Dow Chemical Company shall reimburse such Company for any such payments.

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(a)           If the Participant has elected to receive payments from a Deferral Account in a lump sum and payment is made upon Separation from Service after becoming Retirement eligible, The Dow Chemical Company (or any other Company as described above) shall pay the balance in such Deferral Account (determined as of the most recent Valuation Date preceding the end of the Deferral Period) in cash on the January 31st after the end of the Deferral Period, and/or as soon as administratively feasible in the year of the payment of the Performance Award for the Performance Award deferral.

(b)           If the Participant has elected to receive payments from a Deferral Account in installments and payment is made upon Separation from Service after becoming Retirement eligible, The Dow Chemical Company (or any other Company as described above) shall make cash only payments from such Deferral Account, each of which annual amount shall consist of an amount equal to (i) the balance of such Deferral Account as of the most recent annual Valuation Date preceding the first annual payment date times (ii) a fraction, the numerator of which is one and the denominator of which is the number of remaining installment years (includ­ing the installment being paid).  The first such installment shall be paid on the January 31st after the end of the Deferral Period and/or as soon as administratively feasible in the year of the payment of the Performance Award for the Performance Award deferral, and each subsequent installment shall be paid on or about the anniversary of such first payment or in quarterly or monthly intervals, if selected.  Each such installment shall be deemed to be made on a pro rata basis from each of the different deemed investments of the Deferral Account (if there is more than one such deemed investment).

(c)           If the Participant incurs a Separation from Service before becoming Retirement eligible, section 7.11 shall apply.

Notwithstanding any of the foregoing:  (i) for Key Employees, distributions may not be made before the date which is 6 months after the date of Separation from Service, and (ii) Deferral Account distributions must begin no later than the April 1st after the calendar year in which the Participant reaches age 70 ½.

Section 7.02         Changing Form of Benefit.  Participants may elect an alternative form of payout as available under Section 7.01 by written election filed with the Administrator; provided, however, that the Participant files the election  at least twelve  (12) months prior to the first day of the month in which payments are to commence.  If a Participant changes his/her form of payout from a lump sum to installments, the first installment date cannot occur earlier than five years after the date on which the lump sum was scheduled to be made.  A Participant cannot reduce the overall length of the installment period (e.g., from 15 years to 10 years) nor can a Participant increase the frequency of installment payments (e.g., from annual to quarterly or monthly payments).  A Participant cannot change his form of election from installments to a lump sum.

Section 7.03         Changing Form of Benefit to Delay Distribution.  Participants may elect to delay their form of payout as available under Section 7.01 as long as the first payment with respect to which such election is made must be deferred for a period of not less than 5 years from the date such payment otherwise would have been made.  If the distribution date is set at Retirement, then the delay must be a minimum of 5 years beyond the year the Participant could Retire as defined in Section 2.31.

Section 7.04         Changing Form of Benefit to Accelerate Distribution.  Acceleration of the distribution timing is only allowed for death, Disability, Unforeseeable Emergency or limited circumstances in accordance with governmental regulations.

Section 7.05         Matching Contribution.  Each Participant who elects to make deferrals of Eligible Compensation to the Plan will be credited with a Matching Contribution utilizing the same formula authorized under the Savings Plan for employer matching contributions.  For purposes of calculating the match under this Plan, The Dow Chemical Company will assume each Participant is contributing the maximum allowable amount to the Savings Plan and receiving a match thereon.  This assumed match from the Savings Plan will be offset from the Matching Contribution calculated under provisions of the Plan.  Notwithstanding the foregoing, the sum of the Matching Contribution under the Plan plus the assumed employer matching contributions under the Savings Plan may not exceed fifteen thousand dollars ($15,000) in each Plan Year.  The amount of the Matching Contribution may be based on a formula that takes into account a Participant’s overall compensation and may be subject to maximum or minimum limitations.  The Matching Contribution shall be credited to the Deferral Account as soon as administratively feasible within the first 60 days of the following Plan Year.  The Matching Contribution shall be invested among the same Hypothetical Investment Benchmarks as defined in 6.02 in the same proportion as the elections made by the Participant governing the Base Salary deferrals of the Participant.  The Matching Contribution shall be

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distributed to the Participant according to the election made by the Participant governing his or her Base Salary deferrals and will vest one hundred percent (100%) on the date credited to the Participant’s account.

If a Participant is employed by a Company, other than The Dow Chemical Company, an amount equal to all Matching Contributions credited to Participants of such Company shall be paid or transferred in full by such Company to The Dow Chemical Company as of the date such Matching Contribution is credited to a Participant’s Deferral Account.  The Dow Chemical Company shall hold such amounts as part of the general assets of The Dow Chemical Company.

Section 7.06         Retirement.  Subject to Section 7.01 and Section 7.12 hereof, if a Participant has elected to have the balance of his or her Deferral Account distributed upon Retirement, which is a Separation from Service but the Participant is Retirement eligible (or after a specific future year after Retirement), the account balance of the Participant (determined as of the most recent Valuation Date preceding the end of the Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participation Agreement. Notwithstanding any of the foregoing, Deferral Account distributions must begin no later than the April 1st after the calendar year in which the Participant reaches age 70 ½.

Section 7.07         Distributions after Specific Future Year.  Subject to Section 7.01 and Section 7.12 hereof, if a Participant has elected to defer Eligible Compensation under the Plan until a stated future year, the account balance of the Participant (determined as of the most recent Valuation Date preceding such Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participation Agreement. Notwithstanding any of the foregoing, Deferral Account distributions must begin no later than the April 1st after the calendar year in which the Participant reaches age 70 ½.

Section 7.08         Pre-Retirement Survivor Benefit.  If a Participant dies prior to Retirement and prior to receiving full payment of his or her Deferral Account(s), The Dow Chemical Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant’s Beneficiary or Beneficiaries (as the case may be) in a lump sum.  If a Participant was employed at a Company other than The Dow Chemical Company, such Company shall pay the remaining balance of such deceased Participant’s Deferral Account in accordance with the preceding sentence, and The Dow Chemical Company shall reimburse the Company for such payment.

Section 7.09         Post-Retirement Survivor Benefit.  If a Participant dies after Retirement and prior to receiving full payment of his or her Deferral Account(s), The Dow Chemical Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant’s Beneficiary or Beneficiaries (as the case may be) in a lump sum.  If a Participant was employed at a Company other than The Dow Chemical Company, such Company shall pay the remaining balance of such deceased Participant’s Deferral Account in accordance with the preceding sentence, and The Dow Chemical Company shall reimburse such Company for such payments.

Section 7.10         Disability.  If a Participant suffers a Disability, the Participant’s Deferred Amount shall cease, and The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay the benefit described in section 7.01 as a lump sum.

Section 7.11         Separation from Service.  In the event of Separation from Service which takes place prior to eligibility for Retirement, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay the benefits described in section 7.01 in a single lump sum payment as soon as practicable after the Separation from Service.

Section 7.12         Small Benefit Election.  Notwithstanding any of the foregoing, in the event the sum of all benefits payable to the Participant or Beneficiary(ies) is less than or equal to ten thousand dollars ($10,000), the Administrator shall pay such benefits in a single lump sum.  The Administrator shall also change monthly payments so they are at least three hundred dollars ($300) by reducing the number of monthly installments.

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Section 7.13         Hardship Withdrawals.   Notwithstanding the provisions of Section 7.01 and any Participation Agreement, a Participant’s on-going Deferred Amount shall cease and a Participant shall be entitled to early payment of all or part of the balance in his or her Deferral Account(s) in the event of an Unforeseeable Emergency, in accordance with this Section 7.13.  A distribution pursuant to this Section 7.13 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant’s assets to the extent such liquidation would not itself cause severe financial hardship, or (iii) by cessation of participation in the Plan.  An application for an early payment under this Section 7.13 shall be made to the Administrator in such form and in accordance with such procedures as the Administrator shall determine from time to time.  The determination of whether and in what amount and form a distribution will be permitted pursuant to this Section 7.13 shall be made by the Administrator.

Section 7.14         Change of Control.  An Eligible Employee may, when completing a Participation Agreement during the enrollment period, elect that, if a Change of Control occurs, the Participant (or after the Participant’s death the Participant’s Beneficiary) shall receive a lump sum payment of the balance of the Deferral Account within thirty (30) days after the Change of Control.  This election is irrevocable and shall apply to the Eligible Compensation deferred under such Participation Agreement.  The portion of the Deferral Account balance to be paid upon a Change in Control shall be determined as of the most recent Valuation Date preceding the month in which Change of Control occurs.  All Participation Agreements previously filed by a Participant who receives a distribution under this Section 7.14 shall be null and void to the extent such Participation Agreement provides for a distribution upon a Change in Control.  All other Participant Agreements shall continue in effect.  Nothing in this Section 7.14 shall be interpreted or construed to permit a lump sum payment of Deferred Amounts if an election under this Section 7.14 results in an acceleration of a distribution prohibited by Section 409A of the Internal Revenue Code or any regulations or guidance issued thereunder.

Section 7.15         Discretionary Company Contributions.   Any Company may at any time contribute a discretionary Company contribution.  This discretionary Company contribution may be for payments including, but not limited to, signing or retention bonuses.  The amount of the discretionary Company contribution may vary from payroll period to payroll period throughout the Plan Year, may be based on a formula which takes into account a Participant’s overall compensation, and otherwise may be subject to maximum or minimum limitations. The discretionary Company contribution shall be credited to the Deferral Account as soon as administratively feasible following the end of the payroll period.  The discretionary contribution shall be invested among the same Hypothetical Investment Benchmarks as defined in 6.02 in the same proportion as the elections made by the Participant governing the deferrals of the Participant.  The discretionary contribution shall be distributed to the Participant according to the election made by the Participant governing his or her deferrals for the Plan Year in which the discretionary Company contribution is made, or if none, the most recent valid Participation Agreement on file for the Participant.  The vesting schedule shall be determined by the Administrator at the time the discretionary Company contribution is made.

If a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay or transfer to The Dow Chemical Company any amounts designated as discretionary Company contributions for all such Participants as of the date such discretionary Company contributions are credited to a Participant’s Deferral Account.  The Dow Chemical Company shall hold such amounts as part of the general assets of The Dow Chemical Company.

Section 7.16         Withholding of Taxes.  Notwithstanding any other provision of this Plan, any Company shall withhold from payments made hereunder any amounts required to be so withheld by any applicable law or regulation.

ARTICLE VIII

BENEFICIARY DESIGNATION

Section 8.01         Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person, persons or entity as his or her Beneficiary or Beneficiaries.  A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Administrator, on such form and in accordance with such procedures as the Administrator shall establish from time to time.

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Section 8.02         No Beneficiary Designation.   If a Participant or Beneficiary fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant’s Beneficiary shall be deemed to be, in the following order:

(a)to the spouse of such person, if any;

(b)to the children of such person, if any;

(c)to the beneficiary of any Company Paid Life Insurance of such person, if any;

(d)to the beneficiary of the Executive Life Insurance of such person, if any;

(e)to the beneficiary of any Company-sponsored life insurance policy for which any Company pays all or part of the premium of such person, if any; or

(f)to the deceased person’s estate.

ARTICLE IX

AMENDMENT AND TERMINATION OF PLAN

Section 9.01         Amendment.  The Board may at any time amend this Plan in whole or in part, provided, however, that no amendment shall be effective to decrease the balance in any Deferral Account as accrued at the time of such amendment, nor shall any amendment otherwise have a retroactive effect.

Section 9.02         Company’s Right to Terminate.  The Board may at any time terminate the Plan with respect to future Participation Agreements.  The Board may also terminate the Plan in its entirety at any time for any reason, including without limitation if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of The Dow Chemical Company, and upon any such termination, The Dow Chemical Company shall pay to each Participant (or shall transfer to a Company other than The Dow Chemical Company for payment if the Participant is employed at a Company other than The Dow Chemical Company) the benefits such Participant is entitled to receive under the Plan as monthly installments over a three (3) year period commencing within ninety (90) days (determined as of the most recent Valuation Date preceding the termination date).  Any Company may cease participation in the Plan for any reason by notifying The Dow Chemical Company in writing at least 30 days prior to such Company’s cessation of participation.  Payments to Participants of any such Company will commence in accordance with the terms of the Plan.

ARTICLE X

MISCELLANEOUS

Section 10.01       Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201, 301 and 401 of ERISA and therefore meant to be exempt from Parts 2, 3 and 4 of Title I of ERISA.  All payments pursuant to the Plan shall first be made from the general assets of The Dow Chemical Company, as the entity primarily liable for such payments, and no special or separate fund shall be established or other segregation of assets made to assure payment.  As described above, if a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay such Participant’s Deferral Account balance to such Participant according to the terms of the Plan, and The Dow Chemical Company shall reimburse such Company for the amount of the payment.  In the event The Dow Chemical Company is insolvent or is otherwise unable to make any required payment or reimbursement to a Participant or a Company, the Company (other than The Dow Chemical Company) that employed such Participant shall be secondarily liable for such payments from the general assets of such Company.  No Participant or other person shall have under any circumstances any interest in any particular property or assets of The Dow Chemical Company or any other Company as a result of participating in the Plan.  Notwithstanding the foregoing, The Dow Chemical Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of The Dow Chemical Company’s creditors, to assist it in accumulating funds to pay its obligations.

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Section 10.02       Nonassignability.  Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

Section 10.03       Validity and Severability.  The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.04       Governing Law.   The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Delaware, without reference to principles of conflict of law, except to the extent preempted by federal law.

Section 10.05       Employment Status.  This Plan does not constitute a contract of employment or impose on the Participant or any Company any obligation for the Participant to remain an employee of such Company or change the status of the Participant’s employment or the policies of such Company and its affiliates regarding termination of employment.

Section 10.06       Underlying Incentive Plans and Programs.  Nothing in this Plan shall prevent any Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which Performance Awards are earned and which are deferred under this Plan.

Section 10.07       Severance. Payments from the Executive Severance Supplement equal to six months’ Base Salary will be credited to the Participant’s Deferral Account subject to the same earnings methods and distribution elections most recently elected by the Participant governing his or her Base Salary deferrals.  The Executive Severance Supplement for individuals who do not have an established Deferral Account will be deemed to be invested using the 125% of Ten Year Treasury Notes Hypothetical Investment Benchmark and a ten year payout distribution election.

Section 10.08       Successors of the Company.  The rights and obligations of The Dow Chemical Company shall inure to the benefit of, and shall be binding upon, the successors and assigns of The Dow Chemical Company.

Section 10.09       Waiver of Breach.  The waiver by The Dow Chemical Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

Section 10.10       Notice.  Any notice or filing required or permitted to be given to The Dow Chemical Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of The Dow Chemical Company, directed to the attention of the Administrator.  Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.

By:
	Julie Fasone Holder
Its:	Corporate Vice President
	Human Resources Department
	The Dow Chemical Company

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APPENDIX A

The Dow Chemical Company Stock Index Fund

125% of Ten Year Treasury Notes

Vanguard Windsor II Admiral Shared (Effective January 1, 2007)

Vanguard 500 Index Fund

T. Rowe Price Mid-Cap Growth Fund

Fidelity Low-Priced Stock Fund

Fidelity Diversified International Trust (Effective September 1, 2006)

Vanguard Balanced Index Fund

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EX-23

EXHIBIT 23

Analysis, Research & Planning Corporation’s Consent

The Dow Chemical Company:

Analysis, Research & Planning Corporation (“ARPC”) hereby consents to the use of ARPC’s name and the reference to ARPC’s reports dated January 9, 2003, January 26, 2004, January 26, 2005 and January 3, 2006 in this Quarterly Report on Form 10-Q of The Dow Chemical Company for the quarter ended September 30, 2006, and the incorporation by reference thereof in the following Registration Statements of The Dow Chemical Company:

Form S-3:
Nos.	33-37052
	33-52980
	333-101647
	333-106533
Form S-4:
No.	333-88443
Form S-8:
Nos.	2-64560
	33-21748
	33-51453
	33-52841
	33-58205
	33-61795
	333-27379
	333-27381
	333-40271
	333-43730
	333-49183
	333-67414
	333-88443
	333-91027
	333-103518
	333-103519
	333-105080
	333-115185
	333-122932
	333-129381

/s/ B. THOMAS FLORENCE

B. Thomas Florence

President

Analysis, Research & Planning Corporation

October 27, 2006

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EX-31.(A)

EXHIBIT 31(a)

The Dow Chemical Company and Subsidiaries

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Andrew N. Liveris, President and Chief Executive Officer of The Dow Chemical Company, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Dow Chemical Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2006

/s/ ANDREW N. LIVERIS

Andrew N. Liveris

President and Chief Executive Officer

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EX-31.(B)

EXHIBIT 31(b)

The Dow Chemical Company and Subsidiaries

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Geoffery E. Merszei, Executive Vice President and Chief Financial Officer of The Dow Chemical Company, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Dow Chemical Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2006

/s/ GEOFFERY E. MERSZEI

Geoffery E. Merszei

Executive Vice President and Chief Financial Officer

79

EX-32.(A)

EXHIBIT 32(a)

The Dow Chemical Company and Subsidiaries

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Andrew N. Liveris, President and Chief Executive Officer of The Dow Chemical Company (the “Company”), certify that:

1.the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2006 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ANDREW N. LIVERIS

Andrew N. Liveris

President and Chief Executive Officer

October 31, 2006

80

EX-32.(B)

EXHIBIT 32(b)

The Dow Chemical Company and Subsidiaries

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Geoffery E. Merszei, Executive Vice President and Chief Financial Officer of The Dow Chemical Company (the “Company”), certify that:

1.the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2006 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ GEOFFERY E. MERSZEI

Geoffery E. Merszei

Executive Vice President and Chief Financial Officer

October 31, 2006

81