2006 was another tremendous year for Dow.

Sales reached a new high of $49.1 billion, with net income of $3.7 billion. Our earnings were $3.82 per share, versus $4.62 per share in 2005. Excluding certain items, earnings for 2006 were $4.25 per share, only slightly below last year’s record of $4.37 per share.

We reduced debt by $1.2 billion, lowering the Company’s debt to capital ratio to 34 percent, compared with 39 percent at year-end 2005. We raised our dividend by 12 percent. And we repurchased more than 18 million shares as part of a buy-back program, which, when complete, will be followed immediately by a new program, authorized in October, for the repurchase of up to $2 billion of Dow stock.

A strong financial performance, by any measure, was made all the more noteworthy when set against the challenges we faced during 2006. For example, Dow’s hydrocarbon and energy costs climbed again, up $2 billion to nearly $22 billion. Customers in a number of key industry sectors reported extremely tough market conditions. Demand proved unpredictable, with ebbs and flows across many businesses and geographic regions. And 2006 lacked both the price momentum experienced in early 2005 and the benefits of tight U.S. Gulf Coast supply conditions at the end of that year.

Given that backdrop, our financial performance in 2006 speaks volumes for Dow’s strategic direction. The global geographic diversity that we have created protected us against the fluctuations of regional demand, with strong underlying growth in Asia Pacific, Latin America and Europe more than offsetting softness in North America. Plus, the diversity of end-use markets that we serve enabled us to deliver strong results, despite downturn in some significant industry sectors, most notably housing and automotive in North America.

Our focus on emerging geographies again bore fruit (see sidebar on right).

Equity earnings from joint ventures added $959 million to our pretax income, just a shade below the $964 million in 2005 and the third consecutive year of more than $900 million.

And continued financial discipline kept costs low. Capital spending was within our $1.8 billion target for the year, while selling, administrative and research and development expenses increased just slightly as a percent of sales— up from 5.7 percent to 5.8 percent—despite significant investments in building markets, expanding product offerings and establishing brands.

Looking ahead, our focus on financial discipline will continue as we invest for long-term growth, delivering innovative products and services to our customers and greater value to our shareholders. The global economy remains strong, we anticipate continued healthy demand for our products and we believe that 2007 will be another very good year for Dow.

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