MIRA INFORM REPORT

Report Date :

25.08.2011

IDENTIFICATION DETAILS

Name :	THE DOW CHEMICAL COMPANY

Registered Office :	Corporation Trust Center 1209 Orange Street, Wilmington, De 19801

Country :	United States

Financials (as on) :	31.12.2010

Year of Establishment :	1897

Legal Form :	Corporation for Profit

Line of Business :	Thermoplastic Materials

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 3,000,000.

Status :	Satisfactory

Payment Behaviour :	No Complaints

Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – March 31^st, 2011

Country Name

Previous Rating

(31.12.2010)

Current Rating

(31.03.2011)

United States

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

GEOPOLITICS - UNITED STATES

POLITICAL DATA

ECONOMIC DATA

Form of Government: Federal

Economic Risk: Nil

Currency: USD

Branch Situation: Stable

IDENTIFICATION
Comments on data supplied:	The complete operation and legal address are listed below.
Legal Name:	THE DOW CHEMICAL COMPANY

Legal Address	CORPORATION TRUST CENTER 1209 ORANGE STREET, WILMINGTON, DE 19801, USA (Registered Agent Address)
Operative Address	2030 DOW CENTER, MIDLAND, MI 48674, USA
Mailing Address	4520 Ashman Street, PO Box 1206, Midland, MI 48642, USA
Telephone:	(800) 258 - 2436 / (989) 636 – 1000	ID :	0414128
Fax:	(989) 832 - 1465	Legal Form:	Corporation for Profit
Email:	info@dow.com	Registered in:	Delaware
Website:	http://www.dow.com	Date Created:	1897
Manager:	Mr. Andrew N. Liveris CEO	Date Incorporated:	June 11, 1947
Staff:	51,028	Stock:	1,140,566,930 shares
		Value:	USD 2.50 per share
Activity:	Thermoplastic Materials.

BANKS
Name of the Bank	FIFTH THIRD BANK
Location	38 FOUNTAIN SQUARE PLAZA MD 109 CINCINNATI OH 45263- 0001


BUSINESS
HISTORY
	The company was created in 1897.
PRINCIPAL ACTIVITY
	The company engages in the manufacture and sale of chemicals, plastic materials, agricultural, and other products and services worldwide.
Products/Services description:
	The company’s Electronic and Specialty Materials segment offers materials for chemical mechanical planarization pads and slurries, chemical processing and intermediates, electronic displays, food and pharmaceutical processing and ingredients, PCB materials, semiconductor packaging, connectors and industrial finishing, and water purification. It’s Coatings and Infrastructure segment provides sticking and bonding solutions; insulation, housewrap, sealant, adhesive products and systems, and construction chemicals; and other coating materials. The Health and Agricultural Sciences segment provides agricultural and plant biotechnology products, pest management solutions, and healthy oils. The company’s Performance Systems segment provides plastics, adhesives, glass bonding systems, emissions control technology, films, fluids, structural enhancement, and acoustical management solutions. This segment also offers elastomers, specialty films, plastic additive products, polymers, additives, and specialty oil technology-based solutions, as well as skin and microcellular polyurethane foams and systems, and epoxy solutions and systems. Its Performance Products segment provides amines, emulsion polymers, epoxy resins, oxygenated solvents, polyurethane, and specialty monomer products. The company’s Basic Plastics segment offers polyethylene, polypropylene, equipolymers, and polystyrene resins. Its Basic Chemicals segment provides ethylene dichloride, vinyl chloride monomer, caustic soda, and ethylene oxide. The Hydrocarbons and Energy segment procures fuels, natural gas liquids, and crude oil-based raw materials, as well as supplies monomers, power, and steam.
Sales are:
	Wholesale
Clients:
	Professionals of the industry.
Operations area:
	National, International
The company imports from Worldwide, depending on the demand
The company export to Worldwide, depending on the demand
Trade References:
	The Accounts Payable Representative did not contact us back after we left him a voicemail. Therefore, we could not get the names of the suppliers for us to check trade references.
The subject employs 51,028 employee(s)
PAYMENTS
	made on a 60 days basis - monitored over the last 12 months
Comments on location:
	The company is incorporated in Delaware for tax purposes. However, it is headquartered in Michigan.

Shareholders - Manager - Related Companies
Listed at the stock exchange:
	YES
Capital:
	Breakdown % of Shares Held by All Insider and 5% Owners: 0% % of Shares Held by Institutional & Mutual Fund Owners: 71% % of Float Held by Institutional & Mutual Fund Owners: 71% Number of Institutions Holding Shares: 732
Shareholders Parent Company(ies):
	Major Direct Holders Holder Shares Reported LIVERIS ANDREW N FREIWALD GREGORY M GAMBRELL MICHAEL R KALIL CHARLES J KEPLER DAVID E
Management:
	Mr. Andrew N. Liveris Exec. Chairman, Chief Exec. Officer Mr. William H. Weideman Chief Financial Officer and Exec Mr. Charles J. Kalil Exec. VP of Law & Gov. Affairs Mr. Heinz Haller Chief Commercial Officer
Related Companies:
	The company has international presencenc. A list of its subsidiaries is attached to the document.

Financials - COMMERCIAL TRENDS AND FORECAST

The subject is a public company traded at the stock exchange. Please find enclosed the financial statements.

Legal Fillings

There are several UCC** files listed with the Secretary of State of Delaware:

Filing Number: 2010135160-3

Filing Date: 10-08-2010

Secured Party: HI TECH MOLD & ENGINEERING, INC

Filing Number: 2010 3511247

Filing Date: 10-08-2010

Secured Party: HI TECH MOLD & ENGINEERING, INC

Filing Number: 2010 3301730

Filing Date: 09-22-2010

Secured Party: J.R. AUTOMATION TECHNOLOGIES, LLC

Filing Number: 2010 2895773

Filing Date: 08-18-2010

Secured Party: AIR LIQUIDE INDUSTRIAL US LP

Filing Number: 2010 2314874

Filing Date: 07-01-2010

Secured Party: IBM CREDIT LLC

There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its business. It is the opinion of management, after consultation with counsel, that the ultimate resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

THE COMPANY IS NOT LISTED ON THE OFAC LIST.*

The last annual report was filed on Feb 19, 2010.

For information:

* The Specially Designated Nationals (SDN) List is a publication of OFAC which lists individuals and organizations with whom United States citizens and permanent residents are prohibited from doing business.

** The Uniform Commercial Code (UCC) is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.

The UCC deals primarily with transactions involving personal property (movable property), not real property (immovable property).

It allows a creditor to notify other creditors about a debtor’s assets used as collateral for a secured transaction by filing a public notice (financing statement) with a particular filing office.

The Uniform Commercial Code Bureau files and maintains on financial obligations (including IRS liens) incurred by individuals (in business as a sole proprietor), business entities and corporations.

Rating

Local credit bureau gave a good credit rate.

The company is in Good Standing. This means that all local and federal taxes were paid on due date.

Final Opinion

Dow Chemical Company is a large company with 51,028 employees.

The company was founded in 1897 and is based in Midland, Michigan.

Dow Chemical has more than 113 years operations.

This company is a manufacturer and supplier of chemicals.

The Company delivered $4.1 billion of cash from operating activities, nearly double that of 2009, and surpassed its goal to divest $2 billion in non-strategic assets in 2010. Dow ended the year with $7.0 billion of cash and cash equivalents. Throughout the year the Company had sufficient liquidity and financial flexibility to meet all of its financial obligations.

A credit line can be granted.

SUMMARY
FINANCIAL SUMMARY		DEBT COLLECTIONS AND PAYMENTS
Profitability	CORRECT	Public Records	NO
Indebtedness	CONTROLLED	Payments	REGULAR
Cash	NORMAL

ADVISED CREDIT

USD 3,000,000.

Financials

Income Statement

Annual

All numbers in thousands

Period Ending		Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Total Revenue		53,674,000	44,875,000	57,514,000
Cost of Revenue		45,780,000	39,148,000	52,019,000

Gross Profit		7,894,000	5,727,000	5,495,000

	Operating Expenses
	Research Development	1,660,000	1,492,000	1,310,000
	Selling General and Administrative	2,484,000	1,596,000	1,969,000
	Non Recurring	169,000	869,000	1,117,000
	Others	509,000	399,000	92,000

	Total Operating Expenses	4,822,000	4,356,000	4,488,000


Operating Income or Loss		3,072,000	1,371,000	1,007,000

	Income from Continuing Operations
	Total Other Income/Expenses Net	91,000	39,000	175,000
	Earnings Before Interest And Taxes	4,275,000	2,040,000	1,969,000
	Interest Expense	1,473,000	1,571,000	648,000
	Income Before Tax	2,802,000	469,000	1,321,000
	Income Tax Expense	481,000	(97,000)	667,000
	Minority Interest	(11,000)	(28,000)	(75,000)

	Net Income From Continuing Ops	2,321,000	566,000	579,000

	Non-recurring Events
	Discontinued Operations	-	110,000	-
	Extraordinary Items	-	-	-
	Effect Of Accounting Changes	-	-	-
	Other Items	-	-	-


Net Income		2,310,000	648,000	579,000
Preferred Stock And Other Adjustments		(340,000)	(312,000)	-

Net Income Applicable To Common Shares		1,970,000	336,000	579,000

Currency in USD.

Income Statement

Quarterly

All numbers in thousands

Period Ending		Jun 30, 2011	Mar 31, 2011	Dec 31, 2010	Sep 30, 2010
Total Revenue		16,046,000	14,733,000	13,771,000	12,868,000
Cost of Revenue		13,551,000	12,117,000	11,818,000	10,841,000

Gross Profit		2,495,000	2,616,000	1,953,000	2,027,000

	Operating Expenses
	Research Development	411,000	400,000	443,000	403,000
	Selling General and Administrative	695,000	700,000	702,000	472,000
	Non Recurring	-	31,000	42,000	35,000
	Others	125,000	123,000	132,000	124,000

	Total Operating Expenses	-	1,254,000	1,319,000	1,034,000


Operating Income or Loss		1,264,000	1,362,000	634,000	993,000

	Income from Continuing Operations
	Total Other Income/Expenses Net	90,000	(442,000)	67,000	(171,000)
	Earnings Before Interest And Taxes	1,645,000	1,218,000	1,014,000	1,073,000
	Interest Expense	328,000	377,000	368,000	362,000
	Income Before Tax	1,317,000	841,000	646,000	711,000
	Income Tax Expense	240,000	120,000	133,000	114,000
	Minority Interest	(10,000)	(11,000)	(2,000)	-

	Net Income From Continuing Ops	1,358,000	1,008,000	513,000	58,000

	Non-recurring Events
	Discontinued Operations	-	-	-	-
	Extraordinary Items	-	-	-	-
	Effect Of Accounting Changes	-	-	-	-
	Other Items	-	-	-	-


Net Income		1,067,000	710,000	511,000	597,000
Preferred Stock And Other Adjustments		(85,000)	(85,000)	(85,000)	(85,000)

Net Income Applicable To Common Shares		982,000	625,000	426,000	512,000

Currency in USD.

Balance Sheet

Annual

All numbers in thousands

Period Ending		Dec 31, 2010	Dec 31, 2009	Dec 31, 2008

Assets
Current Assets
	Cash And Cash Equivalents	7,039,000	2,846,000	2,800,000
	Short Term Investments	-	-	-
	Net Receivables	9,655,000	9,849,000	7,224,000
	Inventory	7,087,000	6,847,000	6,036,000
	Other Current Assets	-	-	-

Total Current Assets		23,781,000	19,542,000	16,060,000
Long Term Investments		6,603,000	6,325,000	6,383,000
Property Plant and Equipment		17,668,000	18,141,000	14,294,000
Goodwill		12,967,000	13,213,000	3,394,000
Intangible Assets		5,530,000	5,966,000	829,000
Accumulated Amortization		-	-	-
Other Assets		-	-	-
Deferred Long Term Asset Charges		3,039,000	2,831,000	4,514,000

Total Assets		69,588,000	66,018,000	45,474,000

Liabilities
Current Liabilities
	Accounts Payable	10,674,000	9,884,000	11,654,000
	Short/Current Long Term Debt	3,222,000	3,221,000	1,454,000
	Other Current Liabilities	-	-	-

Total Current Liabilities		13,896,000	13,105,000	13,108,000
Long Term Debt		20,605,000	19,152,000	8,042,000
Other Liabilities		11,150,000	11,270,000	9,498,000
Deferred Long Term Liability Charges		1,295,000	1,367,000	746,000
Minority Interest		803,000	569,000	569,000
Negative Goodwill		-	-	-

Total Liabilities		47,749,000	45,463,000	31,963,000

Stockholders' Equity
Misc Stocks Options Warrants		-	-	-
Redeemable Preferred Stock		-	-	-
Preferred Stock		4,000,000	4,000,000	-
Common Stock		2,931,000	2,906,000	2,453,000
Retained Earnings		17,736,000	16,704,000	17,013,000
Treasury Stock		(239,000)	(557,000)	(2,438,000)
Capital Surplus		2,286,000	1,913,000	872,000
Other Stockholder Equity		(4,875,000)	(4,411,000)	(4,389,000)

Total Stockholder Equity		21,839,000	20,555,000	13,511,000

Net Tangible Assets		3,342,000	1,376,000	9,288,000

Currency in USD.

Balance Sheet

Quarterly

All numbers in thousands

Period Ending		Jun 30, 2011	Mar 31, 2011	Dec 31, 2010	Sep 30, 2010

Assets
Current Assets
	Cash And Cash Equivalents	2,223,000	3,562,000	7,039,000	3,223,000
	Short Term Investments	-	-	-	4,000
	Net Receivables	11,324,000	10,910,000	9,655,000	10,159,000
	Inventory	8,739,000	8,132,000	7,087,000	7,283,000
	Other Current Assets	413,000	379,000	-	-

Total Current Assets		22,699,000	22,983,000	23,781,000	20,669,000
Long Term Investments		6,507,000	6,324,000	6,603,000	6,489,000
Property Plant and Equipment		18,049,000	17,785,000	17,668,000	17,416,000
Goodwill		13,079,000	13,048,000	12,967,000	13,000,000
Intangible Assets		5,389,000	5,453,000	5,530,000	5,625,000
Accumulated Amortization		-	-	-	-
Other Assets		-	-	-	-
Deferred Long Term Asset Charges		2,724,000	2,849,000	3,039,000	2,802,000

Total Assets		68,447,000	68,442,000	69,588,000	66,001,000

Liabilities
Current Liabilities
	Accounts Payable	10,852,000	10,668,000	10,674,000	10,058,000
	Short/Current Long Term Debt	1,577,000	2,316,000	3,222,000	3,101,000
	Other Current Liabilities	-	-	-	-

Total Current Liabilities		12,429,000	12,984,000	13,896,000	13,159,000
Long Term Debt		18,511,000	19,078,000	20,605,000	18,030,000
Other Liabilities		11,230,000	11,259,000	11,150,000	10,907,000
Deferred Long Term Liability Charges		1,238,000	1,284,000	1,295,000	1,301,000
Minority Interest		854,000	816,000	803,000	698,000
Negative Goodwill		-	-	-	-

Total Liabilities		44,262,000	45,421,000	47,749,000	44,095,000

Stockholders' Equity
Misc Stocks Options Warrants		-	-	-	-
Redeemable Preferred Stock		-	-	-	-
Preferred Stock		4,000,000	4,000,000	4,000,000	4,000,000
Common Stock		2,953,000	2,939,000	2,931,000	2,919,000
Retained Earnings		18,877,000	18,187,000	17,736,000	17,478,000
Treasury Stock		-	-	(239,000)	(313,000)
Capital Surplus		2,450,000	2,243,000	2,286,000	2,116,000
Other Stockholder Equity		(4,095,000)	(4,348,000)	(4,875,000)	(4,294,000)

Total Stockholder Equity		24,185,000	23,021,000	21,839,000	21,906,000

Net Tangible Assets		5,717,000	4,520,000	3,342,000	3,281,000

Currency in USD.

Subsidiaries of The Dow Chemical Company

At December 31, 2010


	Location*	% Ownership
This list includes companies for which the effective ownership by The Dow Chemical Company is 50 percent or more.
The Dow Chemical Company	Delaware
Arabian Chemical Company (Latex) Ltd. (1)	Saudi Arabia		50
Arabian Chemical Company (Polystyrene) Limited (1)	Saudi Arabia		50
Battleground Water Company (73)	Texas		9
Buildscape, LLC	Delaware		100
CanStates Holdings Inc.	Oklahoma		100
ANGUS Chemical Company	Delaware		100
CD Polymers Inc.	Delaware		100
Centen Ag Inc.	Delaware		100
Dow AgroSciences LLC (9)	Delaware		39
DowBrands Inc. (14)	Delaware		8
Mycogen Corporation (13)	California		12
Chemars III LLC	Delaware		100
Chemtech II L.P. (8)	Delaware		22
DC Partnership Management Inc.	Delaware		100
DowBrands L.P. (6)	Delaware		42
DCOMCO, Inc.	Delaware		100
Denmerco Inc.	Delaware		100
Dexco Polymers Operating Company LLC (1)	Texas		50
Dexco Polymers LP (1) (18)	Texas		1
Diamond Capital Management Inc.	Delaware		100
DML Holding Inc. (30)	Delaware		89
Rohm and Haas Canada Investments Inc./Placements Rohm et Haas Canada Inc. (56)	Canada		1
Dofinco, Inc.	Delaware		100
Dow Business Services LLC	Delaware		100
Dow Capital International LLC	Delaware		100
Dow Chemical (Australia) Limited	Australia		100
Dow Australia Superannuation Fund A Pty Limited	Australia		100
Dow Chemical (China) Investment Company Limited	China		100
Dow Chemical (China) Company Limited	China		100
Dow Chemical (Guangzhou) Company Limited	China		100
Dow Chemical (Shanghai) Company Limited	China		100
Dow Chemical (Zhangjiagang) Company Limited	China		100
Guangdong Zhongshan Amerchol Specialty Chemicals Co., Ltd.	China		90
Zhejiang Pacific Chemical Corporation	China		100
Dow Chemical China Holdings Pte. Ltd.	Singapore		100
Dow Chemical Delaware Corp.	Delaware		100
Chemtech II L.P. (8)	Delaware		73
Chemtech Portfolio Inc. (11)	Texas		33
Chemtech Portfolio II Inc.	Michigan		100
Dow Chemical International Ltd.	Delaware		100
Dow Chemical Thailand Ltd.	Thailand		100
Dow International Holdings Company (22)	Delaware		1
Dow International Holdings S.A. (77)	Switzerland		1
Pacific Plastics (Thailand) Limited (41)	Thailand		51
Petroquimica-Dow S.A. (Petrodow)	Chile		100
Dow Chemical Korea Limited (34)	Korea		86
Dow Chemical (NZ) Limited	New Zealand		100
Dow Chemical Pacific Limited	Hong Kong		100
Dow Chemical Pacific (Singapore) Private Limited	Singapore		100
Dow Chemical (Malaysia) Sdn. Bhd.	Malaysia		100
Dow Chemical International Pvt. Ltd. (26)	India		99
Dow Chemical Vietnam LLC	Vietnam		100
PT Dow Indonesia (65)	Indonesia		99
Dow Chemical (Singapore) Private Limited	Singapore		100
Dow Chemical International Pvt. Ltd. (26)	India		1
PT Dow Indonesia (65)	Indonesia		1

Standard & Poor’s

United States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks, Rising Debt Burden; Outlook Negative

Publication date: 05-Aug-2011 20:13:14 EST

· We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

· We have also removed both the short- and long-term ratings from CreditWatch negative.

· The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

· More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

· Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

· The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

TORONTO (Standard & Poor's) Aug. 5, 2011--Standard & Poor's Ratings Services said today that it lowered its long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA'. Standard & Poor's also said that the outlook on the long-term rating is negative. At the same time, Standard & Poor's affirmed its 'A-1+' short-term rating on the U.S. In addition, Standard & Poor's removed both ratings from CreditWatch, where they were placed on July 14, 2011, with negative implications.

The transfer and convertibility (T&C) assessment of the U.S.--our assessment of the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for

debt service--remains 'AAA'.

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria (see "Sovereign Government Rating Methodology and Assumptions ," June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government's other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.

We have taken the ratings off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has removed any perceived immediate threat of payment default posed by delays to raising the government's debt ceiling. In addition, we believe that the act provides sufficient clarity to allow us to evaluate the likely course of U.S. fiscal policy for the next few years.

The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements,

the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a 'AAA' rating and with 'AAA' rated sovereign peers (see Sovereign Government Rating Methodology and Assumptions," June 30, 2011, especially Paragraphs 36-41). In our view, the difficulty in framing a consensus on fiscal policy weakens the government's ability to manage public finances and diverts attention from the debate over how to achieve more balanced and dynamic economic growth in an era of fiscal stringency and private-sector deleveraging (ibid). A new political consensus might (or might not) emerge after the 2012 elections, but we believe that by then, the government debt burden will likely be higher, the needed medium-term fiscal adjustment potentially greater, and the inflection point on the U.S. population's demographics and other age-related spending drivers closer at hand (see "Global Aging 2011: In The U.S., Going Gray Will Likely Cost Even More Green, Now," June 21, 2011).

Standard & Poor's takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.'s finances on a sustainable footing.

The act calls for as much as $2.4 trillion of reductions in expenditure growth over the 10 years through 2021. These cuts will be implemented in two steps: the $917 billion agreed to initially, followed by an additional $1.5 trillion that the newly formed Congressional Joint Select Committee on Deficit Reduction is supposed to recommend by November 2011. The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.

The act further provides that if Congress does not enact the committee's recommendations, cuts of $1.2 trillion will be implemented over the same time period. The reductions would mainly affect outlays for civilian discretionary spending, defense, and Medicare. We understand that this fall-back mechanism is designed to encourage Congress to embrace a more balanced mix of expenditure savings, as the committee might recommend.

We note that in a letter to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated total budgetary savings under the act to be at least $2.1 trillion over the next 10 years relative to its baseline assumptions. In updating our own fiscal projections, with certain modifications outlined below, we have relied on the CBO's latest "Alternate Fiscal Scenario" of June 2011, updated to include the CBO assumptions contained in its Aug. 1 letter to Congress. In general, the CBO's "Alternate Fiscal Scenario" assumes a continuation of recent Congressional action overriding existing law.

We view the act's measures as a step toward fiscal consolidation. However, this is within the framework of a legislative mechanism that leaves open the details of what is finally agreed to until the end of 2011, and Congress and the Administration could modify any agreement in the future. Even assuming that at least $2.1 trillion of the spending reductions the act envisages are implemented, we maintain our view that the U.S. net general government debt burden (all levels of government combined, excluding liquid financial assets) will likely continue to grow. Under our revised base case fiscal scenario--which we consider to be consistent with a 'AA+' long-term rating and a negative outlook--we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign indebtedness is high in relation to those of peer credits and, as noted, would continue to rise under the act's revised policy settings.

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

Our revised upside scenario--which, other things being equal, we view as consistent with the outlook on the 'AA+' long-term rating being revised to stable--retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.

Our revised downside scenario--which, other things being equal, we view as being consistent with a possible further downgrade to a 'AA' long-term rating--features less-favorable macroeconomic assumptions, as outlined below and also assumes that the second round of spending cuts (at least $1.2 trillion) that the act calls for does not occur. This scenario also assumes somewhat higher nominal interest rates for U.S. Treasuries. We still believe that the role of the U.S. dollar as the key reserve currency confers a government funding advantage, one that could change only slowly over time, and that Fed policy might lean toward continued loose monetary policy at a time of fiscal tightening. Nonetheless, it is possible that interest rates could rise if investors re-price relative risks. As a result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in 10-year bond yields relative to the base and upside cases from 2013 onwards. In this scenario, we project the net public debt burden would rise from 74% of GDP in 2011 to 90% in 2015 and to 101% by 2021.

Our revised scenarios also take into account the significant negative revisions to historical GDP data that the Bureau of Economic Analysis announced on July 29. From our perspective, the effect of these revisions underscores two related points when evaluating the likely debt trajectory of the U.S. government. First, the revisions show that the recent recession was deeper than previously assumed, so the GDP this year is lower than previously thought in both nominal and real terms. Consequently, the debt burden is slightly higher. Second, the revised data highlight the sub-par path of the current economic recovery when compared with rebounds following previous post-war recessions. We believe the sluggish pace of the current economic recovery could be consistent with the experiences of countries that have had financial crises in which the slow process of debt deleveraging in the private sector leads to a persistent drag on demand. As a result, our downside case scenario assumes relatively modest real trend GDP growth of 2.5% and inflation of near 1.5% annually going forward.

When comparing the U.S. to sovereigns with 'AAA' long-term ratings that we view as relevant peers--Canada, France, Germany, and the U.K.--we also observe, based on our base case scenarios for each, that the trajectory of the U.S.'s net public debt is diverging from the others. Including the U.S., we estimate that these five sovereigns will have net general government debt to GDP ratios this year ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%. By 2015, we project that their net public debt to GDP ratios will range between 30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at 79%. However, in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015.

Standard & Poor's transfer T&C assessment of the U.S. remains 'AAA'. Our T&C assessment reflects our view of the likelihood of the sovereign restricting other public and private issuers' access to foreign exchange needed to meet debt service. Although in our view the credit standing of the U.S. government has deteriorated modestly, we see little indication that official interference of this kind is entering onto the policy agenda of either Congress or the Administration. Consequently, we continue to view this risk as being highly remote.

The outlook on the long-term rating is negative. As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand, as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction--independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners--lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government's debt dynamics, the long-term rating could stabilize at 'AA+'.

On Monday, we will issue separate releases concerning affected ratings in the funds, government-related entities, financial institutions, insurance, public finance, and structured finance sectors.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.45.77
UK Pound	1	Rs.75.57
Euro	1	Rs.65.97

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.

MIRA INFORM REPORT

GEOPOLITICS - UNITED STATES

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