Retain.

Dow has achieved a new level of fitness—a solid foundation of efficiency and accountability on which to build long-term success. Now, our focus is on staying fit…on retaining the discipline, responsibility and pragmatism of our recent past as we accelerate our strategic growth agenda through the years ahead.

The process of getting fit was tough.

But the difficulty of the journey spurred a cultural change that is now institutionalized throughout Dow. It strengthened a mind-set that recognizes the importance of staying fit—helping to ensure we are ready for whatever lies ahead and are well positioned to capitalize on opportunities that will generate long-term value for our shareholders.

Toward that goal, 2006 was a year of solid progress. We advanced several initiatives that will lower our feedstock and energy costs, principally through joint ventures that will provide Dow access to advantaged hydrocarbons.

We were steadfast in our efforts to enhance productivity, using Six Sigma methodology to improve our performance across all areas of our Company, including manufacturing, research and development, supply chain, purchasing and technical support. And we were disciplined in our commitment to maintain the competitiveness of our global operations, strengthening our assets using Most Effective Technology analysis and announcing plans to shut down a number of assets worldwide as a result of detailed reviews of their long-term sustainability.

But productivity and efficiency are just a part of the mix. Staying fit also means sustaining the commitment of the Company to the very highest standards of social, ethical and environmental performance—recognizing that trust, confidence and respect across all stakeholder audiences are as fundamental to our success as the cost of feedstocks and technical efficiency. Here too, 2006 was a year of significant progress.

We advanced our corporate governance practices and compliance programs to help drive exemplary standards of integrity and ethical behavior across our entire organization. We took significant steps forward on employee health, workplace safety, energy efficiency and environmental stewardship. And we made further progress with our corporate citizenship agenda—working hard to deliver on the expectations of our communities and society at large, while responding respectfully to their specific issues and concerns.

Promoting Energy Efficiency
As a major consumer of fossil fuels, Dow is taking a global leadership role in seeking sustainable solutions to the energy challenge—from short-term fixes, such as raising public awareness of the need for energy efficiency, to long-term goals focused on creating diverse sources of renewable and alternative energy that are clean and affordable. In 2006, we pressed forward on many fronts. For example, we announced a 2015 Sustainability Goal to reduce energy intensity by 25 percent from 2004 levels. We developed innovative natural oil polyols to replace hydrocarbons in certain formulations. We supported public awareness campaigns to promote energy efficiency at home and on the road, enabling everyone to make a difference. And we added a number of new energy-efficient products to our lineup.

Delivering Six Sigma Value
Since 1999, Six Sigma tools and methodology have played a key role in driving Dow’s businesses and functions to a new level of performance, strengthening our bottom line as we improve product quality; process efficiency; environment, health and safety performance; and customer loyalty. In 2006, for example, a Six Sigma project at our Texas City, Texas, plant optimized the catalyst and carbon monoxide levels in the reactors, improving profitability and adding $3 million annually to the results of our Basics portfolio. On the Performance side, among the projects that collectively delivered a record Six Sigma contribution in 2006 was one that solved a key problem for a major computer manufacturer in Asia Pacific. The project yielded a new strategic customer for Dow and has delivered more than $2 million in value to the Company to date. These are just two of the many successes that continue to deliver superior results and new business to Dow.

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