Fisher College of Business – Student Investment Management Materials Stock Analysis By Joshua Carter & Kyle Shaner

Fisher College of Business – Student Investment Management Presentation Overview  Sector Recap  Sell Recommendation  Buy Recommendation  Recommendation Summary  New SIM Portfolio

Fisher College of Business – Student Investment Management Sector Recap Current SIM Weight = 1.79% Current S&P Weight = 3.04% Continue to Underweight by 1.25%

Fisher College of Business – Student Investment Management Sector Recap – Current Holdings Unit Cost Total Cost Market Price Market Value Unrealized Gain/(Loss) Loss $117.06$468,225.60$52.11 $208,440($259,785.60)(55.5)% Posco ADR (PKX)  South Korean steel manufacturer  Hot-rolled steel  Cold-rolled steel  Stainless steel

Fisher College of Business – Student Investment Management Sector Recap – Current Holdings… POSCO Notable News EventsGeographic SegmentsRevenue Segments Feb 2009 – 6% annual production cut Feb 2009 – Iron Ore miners increase price 5% Jan 2009 – CEO steps down after poor performance Feb 2009 – Cuts stainless steel prices 10% Dec 2008 – Announces 1 st ever production cut at 10%

Fisher College of Business – Student Investment Management Sector Recap – Current Holdings… Posco vs. S&P Valuation HighLowMeanCurrent ∆ From Mean Opinion P/Forward E %Overvalued P/S %Overvalued P/B %Overvalued P/EBITDA %Fair Value P/CF %Overvalued P/E/G %Overvalued ROE %Overvalued Posco vs. Materials Valuation HighLowMeanCurrent ∆ From Mean Opinion P/Forward E %Overvalued P/S %Overvalued P/B %Overvalued P/EBITDA %Undervalued P/CF %Fair Value P/E/G %Overvalued ROE %Fair Value

Fisher College of Business – Student Investment Management Sell Recommendation Faces Many Economic ChallengesGlobal Slowdown  Steel prices have fallen dramatically  Slowdown in global & domestic demand  Ailing auto industry  Increase in raw materials prices South Korean Slowdown

Fisher College of Business – Student Investment Management Sell Recommendation… Comparables Analysis As of March 2, Data provided by Yahoo Finance

Fisher College of Business – Student Investment Management Sell Recommendation… DCF AnalysisDCF Sensitivity Analysis

Fisher College of Business – Student Investment Management Sell Recommendation… Absolute ValuationComparables AnalysisBlended Multiples Price Target – Abs. & Comp

Fisher College of Business – Student Investment Management Sell Recommendation… EPS vs. Volume & Steel Price – Sensitivity AnalysisTarget EPSPrice Target

Fisher College of Business – Student Investment Management Conclusion SELL US$ : Blended price target based on DCF EPS Sensitivity Analysis Comparable & Absolute Multiple Valuation

Fisher College of Business – Student Investment Management Buy Recommendation DOW Chemical  Engages in manufacture and sale of chemicals, plastic materials, agricultural, and other specialized products  2008 Revenues of $57,514 billion: 7.4% increase  Strong growth expected in agriculture segments Equity Trading Statistics Market Price % 52 Wk HiP / EMarket Cap09 EPS est.Beta $7.11(84.0%)11.52x$6.57 B$1.75/sh1.48

Fisher College of Business – Student Investment Management Buy Recommendation… Geographic SegmentsRevenue Segments Feb 2009 – Announces top executives won’t get cash bonuses March 2009 – S&P cuts two short-term ratings Jan 2009 – Rohm & Haas sues Dow Feb 2009 – Cuts dividend 64% to 15 cents a share Dec 2008 – Announces it will cut 11% of workforce

Fisher College of Business – Student Investment Management Buy Recommendation… Dow vs. S&P Valuation HighLowMeanCurrent ∆ From Mean Opinion P/Forward E %Overvalued P/S %Undervalued P/B %Undervalued P/EBITDA %Undervalued P/CF %Undervalued P/E/G %Fair Value ROE %Undervalued Dow vs. Materials Valuation HighLowMeanCurrent ∆ From Mean Opinion P/Forward E %Fair Value P/S %Undervalued P/B %Undervalued P/EBITDA %Undervalued P/CF %Undervalued P/E/G %Undervalued ROE %Undervalued

Fisher College of Business – Student Investment Management  Infrastructure spending plays to strengths  Consumer spending is key  Product and geographic diversification  Decline in oil prices Buy Recommendation… An Industry Bright SpotUS Economic OutlookEconomic Stimulus

Fisher College of Business – Student Investment Management Buy Recommendation… DOW Acquisition of Rohm & Haas ~$15 billion Deeper Reach in Developing Markets – Asia / Pacific 2007 – 2012E CAGR Financing Mix  $3 billion preferred equity investment from ROH Investors  Draw $10 billion from bank loan  Receive $4 billion from Berkshire and KIA  Divest $4 billion in ROH assets Strategic Rationale  Grow performance and specialty chemicals  Strengthens competitiveness of basic chemicals  $1.3 billion in synergies  30% of synergies come from purchasing of raw materials  $2.6 billion in additional value creation  $1.7 billion combined in R&D  Delivers more stable earnings with higher growth Dilution / Accretion -10%-5%0%5% EPS $ 0.52 $ 0.58 $ 0.61 $ 0.64 $ 0.67 Stock Price $ 8.61 $ 9.56 $ $ $ x EPS Dilution / Accretion

Fisher College of Business – Student Investment Management Buy Recommendation… Absolute Valuation (50% mean reversion) Dow Chemical Absolute Valuation HighLowMeanCurrent #Your Target Multiple *Your Target E, S, B, etc/Share Your Target Price (F x G) A.B.C.D.E.F.G.H. P/Forward E $5.40 P/S $27.03 P/B $20.47 P/EBITDA $11.47 P/CF $18.23 P/E/G $4.18 ROE $7.35 Average$13.45 Average Comparables Analysis Multiples Price Target – Blended Abs. & Comp 2009E EPSMultiplePrice $ x$10.07

Fisher College of Business – Student Investment Management Buy Recommendation… Discounted Cash Flow AnalysisDCF Sensitivity Analysis

Fisher College of Business – Student Investment Management Buy Recommendation… Price Target Summary US$ : Blended price target based on DCF Comparable & Absolute Multiple Valuation

Fisher College of Business – Student Investment Management New SIM Holdings SELL POSCO AND BUY DOW Conclusion: Continue to hold underweight Why not increase underweight? – Don’t want to miss an early economic rebound Why not reduce underweight? – Basic materials as a whole still out of favor SELL all of Posco holdings BUY 125 bps of DOW Chemical

Fisher College of Business – Student Investment Management Supplement Supplement: Key Economic Indicators

Fisher College of Business – Student Investment Management Supplement Supplement: Key Economic Indicators

Fisher College of Business – Student Investment Management Possible Dilution from Merger Supplement  Company project possible dilution of 5% Dilution / Accretion -10%-5%0%5% EPS $ 0.52 $ 0.58 $ 0.61 $ 0.64 $ 0.67 Stock Price $ 8.61 $ 9.56 $ $ $ x