Impact on Dow Chemicals Reputation

Aside from direct financial liabilities, investors should recognize the international significance and historical resonance of the Bhopal chemical disaster, and therefore its powerful effect on corporate reputation. Since the purchase of Union Carbide in 2001, Dow has been subjected to escalating public scrutiny and demands for action refocused from Union Carbide to Dow Chemical as the new parent corporation. These include:

• In 2001 and 2002, survivors of the Bhopal disaster and their representatives met with the management of Dow regarding its completed acquisition of Union Carbide. The discussion ended inconclusively after Dow Chemical's CEO was replaced.

• In a letter to Dow management of March 11, 2002, the survivors wrote in follow-up to conversations with the management requesting that the company address the needs of survivors that remain substantially unmet, including cleanup of the site and groundwater, medical monitoring of survivors, further economic compensation and economic rehabilitation for those whose livelihoods are impaired by injury, and social support for widows and orphaned children.

• Survivors appeared at the 2003 Dow Chemical shareholder meeting, where CEO William Stavropoulos repeatedly stated that there was nothing the company could do to answer the survivors' pleas for help - that the company had neither liability nor responsibility for the prior disaster nor its continuing after effects.

• In December 2003, the 19th anniversary of the Bhopal disaster, protests erupted at Dow facilities worldwide. This included the first organized student protest of Dow Chemical since Vietnam on 25 American campuses. A total of 65 activities worldwide protested against Dow calling for "Justice for Bhopal."

• A large coalition of organizations met in Bhopal in January 2004 and announced an escalating campaign against Dow in the coming months, to culminate in December 2004 with the year's 20th anniversary of the Bhopal disaster.63

• On January 19, 2004, more than 500 people, including Bhopal survivors and representatives from Dow-impacted communities in Vietnam (Agent Orange) and Saginaw, Michigan, demonstrated outside the Dow Chemical India headquarters in Chembur, Mumbai. An eight-member delegation, including an Agent Orange victim and a former parliamentarian from Belgium, presented a memorandum to Dow Chief Ravi Muthukrishnan. Among

63International Campaign for Justice in Bhopal, Activists mount global challenge to Dow, Press Release, January 16, 2004.

other things, the memo urged Dow to present itself to the court in the ongoing criminal proceedings in Bhopal.

• Eighteen members of Congress sent a letter to Dow management on July 18, 2003, urging the company to provide medical rehabilitation and economic reparations for the victims of the tragedy, clean up contamination in and around the former factory site in Bhopal, provide alternative supplies of fresh water to the affected communities, and ensure that the Union Carbide Corporation appears before the Chief Judicial Magistrate's court in Bhopal where it faces criminal charges of culpable homicide. Similar declarations have also been proffered by 50+ parliamentarians in the United Kingdom.

• In April 2004, Rashida Bee and Champa Devi Shukla, two survivors of the gas disaster and leaders of ICJB, were honored with the Goldman Environmental Prize, known widely as the "Nobel Prize for the Environment". The award brought widespread international recognition of their campaign, and came with a $125,000 "no strings attached" cash award. Rashida and Champa self-lessly donated the entire sum to form the Bhopal Ki Chingari Trust, which will be used to provide jobs to woman gas victims, medical treatment of disabled children, and to fund an annual award to honor people fighting against polluting companies.

• In December 2004, the 20th Anniversary of the disaster, there was massive press coverage and NGO activity - over 400 events worldwide focused on Dow, Union Carbide and Bhopal. Amnesty International joined the International Campaign for Justice In Bhopal and released "Clouds of Injustice-Bhopal Disaster 20 years on" which, address the many issues with the Bhopal case through a human rights lens. So far, four campuses have organized "Divest from Dow" campaigns built on the company's role in Bhopal. On March 11, 2005 the University of California student assembly called on the University to divest and refuse donations from Dow Chemical. Dow is a major donor to the University of California, Berkeley, with cumulative donations totaling $4.3 million as of October 2003. The resolution is the third of its kind in the United States.

• On April 15, 2005 more than 1500 Amnesty International student members from 10 states throughout the Northeast descended on the Indian Consulate in New York to demand action from the Indian government on Bhopal. The Association for India's Development participated in solidarity actions and events at various Indian government offices in the United States that same day. These actions indicate that Dow's inability to resolve the Bhopal issues is threatening its license to operate.

In light of these developments, it is reasonable for investors analyzing the situation to determine that the Bhopal controversy will not go away on its own and indeed will always be a black mark on the company's record. Increased attention to Bhopal heightens the real potential that money managers who run portfolios that incorporate environmental and social analysis will screen out Dow stock. There is over $2.18

trillion under socially responsible investment management.64 The issue is gaining a higher profile as a result of continuing inaction by Union Carbide and Dow, and will likely affect investment decisions among this group of investors.

To learn more about these and other similar issues facing Dow Chemical, see "Dow Chemical: Risks for Investors" by Marc Brammer, Sr. Analyst, Innovest Strategic Value Advisors (available at www.innovestgroup.com).

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