THE Dow CHEMICALCOMPANY

MIDLAND,MICHIGAN

FINANCIAL REPORT - FOR YEAR ENDED MAY 31,1937

‘THE DOW CHEMICAL COMPANY
Directora
E. 0. BARSTOW W. H. DOW J. S. CRIDER L. I. DOAN G. E. COLLINGS C. J. STROSACKER E. W. BENNETT J. T. PARDEE W. R. VEAZEY

Officers
Chairman of the Board President and General Manager Vice President Vice President Vice President, Sec’y and Treasurer Assistant Treasurer Assistant General Manager Auditor and Assistant Secretary Assistant Secretary J. T. PARDEE W. H. DOW 0 G. E. COLLINGS J. T. PARDEE E. W. BENNETT J. S. CRIDER I A. P. BEUTEL 0 L. A. CHICHESTER 0 0 F. H. BROWN

Registrars
The New York Trust Company 100 Broadway New York City The National City Bank of Cleveland Cleveland, Ohio

Transfer Agents
Guaranty Trust Company of New York 140 Broadway New York City

The Cleveland Trust Company Cleveland, Ohio

ACCOUNTANTS’
The Dow Chemical Company:

CERTIFICATE

We hove mode on examination of the consolidated balance sheet of The Dow Chemical Company and its subsidiary componies OS of May 31, 1937, and of the related statements of consolidated income and earned surplus for the year ended that dote. In connection therewith, we mode Q review of the QCcounting methods and examined or tested accounting records of the companies and other supporting evidence in a manner and to the extent which we considered appropriate in view of We did not verify the systems of internal accounting control. the quantities and condition of the inventories which were certified to us by officials of the companies.
In our opinion, based upon such examination, the accompanying consolidated balance sheet and related statements of consolidated income and earned surplus fairly present, in accordance with accepted principles of accounting consistently followed by the companies, their financial condition at May 3 1, 1937, and the results of their operations for the year ended that dote. HASKINS Detroit, July 3, 1937. & SELLS.

THE DOW CHEMICAL

COMPANY

(Incorporated in Michigan)

AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET, MAY 31, 1937

ASSETS
CURRENT ASSETS: Cash ---------------------------------mm United States Government securities---at cost (face value, $800,000.00; market value, $857,125.00) Notes and accounts receivable (customers, $2,488,005.74; associated company, $5 1,066.73; employees, $9,629.57; and sundry, $58,067.92) less reserve for doubtful accounts, ---------------------e-em-v $148,375.63 Inventories of finished goods, work in process, and materials and supplies-t cost _--------_-$ 3,339,515.10 847,8 12.50

2,458,394.33 6,278,534.00 $12,924,255.93 35,473.08 18,908.g 1

Total current assets __--- _--__ -_----_--___ -- ____---CLAIMS AGAINST BANKS IN LIQUIDATION (less reserve for loss, $35,000.00) ___--------_-------------------------------RECEIVABLE FROM INDIVIDUALS ON SALES OF HOUSES AND LOTS INVESTMENTS: Preferred and common capital stocks of on associated company (at cost, which is less than the Company’s book equity in the stocks as indicated $ 557,800.OO by the balance sheet of the associated company) Miscellaneous securities (at cost, less reserve for 79,623.35 ----------------------loss, $27,500.00) Total investments -----------_---------------------FIXED ASSETS: Real estate, plants, and equipment (less reserves ---------for depreciation, $12,686,034.39) Patents (less reserves for amortization,$l6,891.12)

637,423.35

$21,788,638.25 59,396.24 21,848,034.49

Total fixed assets ____ --_--_--____ -_- ______________ DEFERRED CHARGES-UNEXPIRED INSURANCE PREMIUMS, UNAMORTIZED NOTE AND DEBENTURE DISCOUNT AND EXPENSE, AND MISCELLANEOUS __________________ - ________________ TOTAL --------------------------------------

218,841.78

$35,682,937.54

THE DOW CHEMICAL AND SUBSIDIARY

COMPANY

( Incorporated in Michigan)

COMPANIES

CONSOLIDATED BALANCE SHEET, MAY 31, 1937

LIABILITIES
CURRENT LIABILITIES: Accounts payable- trade and miscellaneous ____ Employees’ compensation awards --___----____ Serial notes, 2% %, series due January 1, 1938 __ Federal income taxes _____ -_--__-___-______ Other taxes accrued-including local property taxes, Federal capital stock tax, and social securi ty toxes ---------------------------Accrued interest payable ____-_______--______ $ 1,681,360.40 81,194.13 720,OOO.OO 910,151.77

300,5 16.58 15,000.00 $ 3,708,222.88 720,OOO.OO 5,000,000.00 2 15,932.63 904,4 19.29 2,969,200.00 12,685,OOO.OO

Total current liabilities -----------------------------SERIAL NOTES, 2%% (exclusive of $720,000.00 included in current liabilities) -SERIES DUE JANUARY 1, 1939 ------__---_--_--__ FIFTEEN YEAR 3% DEBENTURES, DUE DECEMBER 1, 1951, (subject to redemption through sinking fund commencing June 1, 1941) ____ RESERVE FOR FIRE AND ACCIDENT INSURANCE AND DAMAGE CLAIMS _____-_______----_______________________------MINORITY INTEREST IN CAPITAL STOCK AND SURPLUS OR DEFICIT OF SUBSIDIARY COMPANIES ______________________ PREFERRED CAPITAL STOCK 5% CUMULATIVE (authorized, 60,000 shores of $100.00 par value each; outstanding, 29,692 shares) COMMON CAPITAL STOCK (authorized, 2,000,OOO shores without par value; outstanding, 945,000 shares) -------------------------SURPLUS: Capital surplus arising from acquisition of subsidiary companies ------------------------$ 26,420.OO ---------------------------9,453,742.74 Earned surplus Total surplus --------------------------------------

9,480,162.74

TOTAL

--------------------------------------

$35,682,937.54

NOTE:

Accrued dividends on the Class A preferred capital stock held by a minority interest of the Cliffs Dow Chemical Company, a subsidiary company consolidated herein, which had not been declared by the Board of Directors of that company or provided for in this balance sheet, amounted to $35,724.00 at May 31, 1937.

THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME FOR THE YEAR ENDED MAY 31,1937
SALES (net of returns, allowances, and freight) _____________ - ____ COST OF SALES (exclusive of provision for depreciation) _-----_---GROSS PROFIT -------------------------------------------SELLING AND ADMINISTRATIVE EXPENSES --$25,578,911.12 16,18 1,082.27

$ 9,397,828.85
--___---____-__1,477,120.65

PROFIT FROM OPERATIONS BEFORE PROVIDING FOR DEPRECIATION -----------------------------------------------------------------------------PROVISION FOR DEPRECIATION PROFIT FROM OPERATIONS ---------------1-----------------

$ 7,920,708.20
1,839,783.36

$ 6,080,924.84
$360,197.00 253,344.05 613,541.05

OTHER INCOME: Dividends from on associated compony ____-___-__ Cash discounts on purchases, interest earned, royalties, and miscellaneous ______________ - _____ GROSS INCOME -------------------------------------------

$ 6,694,465.89
$936,047.55 158,575.53 252,865.33 311,851 .OO 139‘878.54

INCOME CHARGES: Research and experimental expenses _____ - _______ Interest and amortization of discount on serial notes and debentures --------------------------Cosh discounts allowed - ________________-_---Purchase of annuities for employees __-_-___---Provision for uncollectible accounts and miscellaneous ____-__---__________----------------

1,799,2 17.95 $ 4,895,247.94 893‘439.07

NET INCOME BEFORE PROVIDING FOR FEDERAL INCOME TAXES __ PROVISION FOR FEDERAL INCOME TAXES (including $171,835.23 surtax on undistributed profits) ----------------------------NET INCOME BEFORE ADJUSTMENT FOR MINORITY INTERESTS IN --------------------------------SUBSIDIARY COMPANIES MINORITY INTERESTS’ SHARE OF PROFITS AND LOSSES OF SUBSIDIARY COMPANIES (net loss) ---------------------------NET INCOME FOR THE YEAR --------------------------------

$ 4,00 1,808.87 87,304.39 $ 4,089,113.26

THf DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED EARNED SURPLUS FOR THE YEAR ENDED MAY 31,1937
EARNED SURPLUS AT BEGINNING OF THE YEAR: Applicable to the company: Closing surplus OS shown in lost annual r’eport to stockholders (not consolidated) _______Adjustment of provision for depreciation and additional assessment of Federal income tax applicable to a prior year (allocated to the year affected in the preparation of Q Registration Statement filed with the Securities and Exchange Commission during the year) ____ Total (as adjusted) ~~~~~~~~~~__~~ Equity in net adjusted surplus at the beginning of the year of subsidiary companies not previously consol ida ted ---------------------------NET INCOME FOR THE YEAR -------------------------------Total ----------------------------------------

$ 8,24 1,045.98

48,36 1.56

$ 8,289,407.54

122,856.94

$ 8,4 12,264.48 4,089,113.26 $12,50 1,377.74

SURPLUS CHARGES: Dividends paid in cash: Common capital stock _____ - _____ - ________ Preferred capitol stock _________ --__- _____ Total ----------------------------Premium on retirement of 308 shores of 7% preferred copi tal stock ______ ~~~~~~~~~~~___~_

$ 2,882,250.00 163,845.OO $ 3,046.095.00 1,540.oo 3,047,635.00

EARNED SURPLUS AT END OF THE YEAR ______________________

$ 9,453,742.74