How accurate are selection methods. How is accuracy measured Essay - 1

How accurate are selection methods. How is accuracy measured - Essay Example There are five determinants of accurate recruitment and selection process. They are reliability, validity, legality, generalization and utility. Recruitment involves a pool of candidates being attracted for vacant jobs while selection involves choosing the right candidate from a pool of candidates. It might either be external where recruitment is done or internal, which requires promotion. Employee selection is part of the staffing process of an organization, which also include human resource planning, recruitment and retention activities. In conducting human resource planning, an organization project its likely demand for personnel who posses particular knowledge, skills and abilities (KSAs). Job analysis compares the present level of staffing to anticipated availability of the required personnel in the internal or external labor markets. Organizations carry out the recruitment processes when there is staff turnover or organizational expansion. This enables the organization to fill vacancies as required. Vacancies that are created by natural wastages should be filled as soon as possible. Natural waste is the process that oc curs when employees leave their jobs in order to retire or move to other jobs and not because their employer has made to them leave. When the organization, expands, vacancies are created and needs to be filled by the right personnel who will perform their duties towards achievement of organizational goals. When the organization wants to change direction from its initial business or when partners running organization decides to pull away from one another, the new organization will require new employees who have right abilities and knowledge, especially if most employees remains in one organization leaving the new with a few. When the organization conducts succession planning, vacancies are created. Succession planning is a process whereby internal personnel are identified and developed to fill key or critical organizational

The Burkean Parlor Essay Example for Free

The Burkean Parlor Essay In an ideal world, a Burkean Parlor writing center, whether the collaborative type or in its own pure or hybrid form should be capable of seamlessly merging with the control kind and even harmlessly synthesized with the Storehouse and Garret models. In contrast with the pure Storehouse and Garret models, or the individual and the exterior genre, a Burkean Parlor is dreamed to be an open-ended knowledge center where there is individuality of the genius as there are collaborative knowledge processes. It can also be the interior type blending perfectly well with its own anti-thesis – the Storehouse exterior concept. This is the new hybrid Burkean Parlor writing center – a composite of the Storehouse and the Garret models metamorphosing both as a collaborative and control knowledge center. The knowledge and writing center as envisioned here recognizes and anticipates the varying needs and psyche of the scholar. The current pragmatic and philosophical needs of the writers everywhere demand the most motivating atmosphere that will encourage a spontaneous, prolific and imaginative flow of creativity. This flow of knowledge, although extremely fluid as it is rigid, demands a new form of writing center. Call it a hybrid Burkean Parlor or a new form of intellectual hub where every genius can be his own individual or in collaboration as well as in caution as a control button; where knowledge can be both sourced internally and externally. This neo-Burkean Parlor can be ideally called the Hub. Andrea Lunsford would be glad to join it as she must admit that in the scheme of linearity, her Burkean model could be slowly being rendered redundant and restrictive the way it did with the Storehouse and Garret models. It is as open as any knowledge center and can be as private as a virtual online writing domain. The Hub recognizes the various forces within the universe that creates or brings knowledge constructs to those who become congruent with the forces that make writers write well and thinkers think well. The Hub in any university is the brain as well as the heart of the intellectual interfacing with the school community or anyone who happens to exude the radio frequency of the Hub. It is the former student lounge as well as the internet cafe without the walls that divide the knowledge of the elite or the masa, the common man. It is equipped with the latest communication gadgets and circuitry that shames the traditional classroom: in fact, the Hub is the reason to come to school (Glasser. 1990). Its emptiness is a reason to move out of the school to find another Hub elsewhere. In the Hub, one can commune with oneself and bring out the most intriguing electronic autobiography for every one to read and develop a sense of belonging. As most schools turn to exclusivity, the Hub recognizes no special talents – it is an inclusive school; only for those with a clean heart to write and the need to discover knowledge without the academic compulsion to do so. Freedom is the pervasive atmosphere, but discipline is sharp and vigilance foremost. Here, order is non-existent but the Hub is not chaotic. The Hub graduates students as many times as the students want, as well as it elevates writers to the next level of knowledge and writing. The Hub would look like heaven on earth. Each one talks the same language despite the highly diverse backgrounds with each move and gesture of the writer giving a message of peace and quiet to allow knowledge and scholarly work to evolve in pure immaculate fashion – plagiarism free. The place is a real hub – teachers freely imparting knowledge and learners interfacing with other learners to collaborate and accumulate knowledge from within and without. It is freedom without the control and there is control without the pressure. New learners develop as they are inspired by the oneness in the Hub. While there are many voices, there is only one song sung in the Hub – creative writing? The Hub would hire only people who believe in the richness of culture, the phenomenon of collaboration, the variedness of the sources of knowledge whether the internal Garret type or the Storehouse kind. Here, the manager is the chief motivator, the philosopher of the writing center and the only person therein who can write the best about the smallest thing on earth and lead the reader to strongly believe that it is the biggest thing on earth. Lunsford would have loved the place to tickle her into creating the new Burkean Parlor once more. Inside the Hub, the students would be taught on stabilizing ethics even in the most trying times; on critical thinking without the excesses of rhetorics; writing skills that can move the heart to tears and chuckles no end; and, an on sustaining an imaginative mind to create a peaceful written or online virtual world where the ideal is just a pen stroke away. The lessons here are endless and borderless. Everyone is welcome to be one among them. It is a university within a university. No encroachment here; only an existence arising out of another’s existence: a university creating another university: a university that has not lost its soul. (Lewis, 2006) The Hub will make sure that students are guided into maturity and wisdom without the painful experiences of everyday life. For them, life is both pain and pleasure and one cannot exist without the other. Acceptance here is academic, hence pain is predictable but bearable, but it becomes truly excruciating as he beings to write. Here, the students are given a tour of life itself, and the crossroads available to each. Everything is there: the experiences, all of them, at the push of a button. The student is given the rare experiences of his lifetime: in physical as well as virtual realities. Inside the Hub, there is no difference between virtual pain and physical pain. Both are felt. The writers and knowledge worker in the Hub learns to be surprised at his own writing skill – able to grapple with the exact word and the best adjective fit for the scenario. Indeed, the Hub is a writers’ paradise where awareness (Clark, 2002) is knowledge itself It would not be difficult to relate to the students because the Hub creates the mood for the writer. Anyone can come at any phase of the activity within without feeling like a stranger and still come out with all the stories that abound. List of References Lewis, H. R. Excellence without a soul: How a great university forgot education. NEW York, Perseus Books, 2006. Glasser, W. , The quality school: Managing students without coercion. New York, Harper and Row Publishers. 1990. Clark, R.. Global awareness: thinking systematically about the world. New York. Rowman and Littlefield Publishers, Inc. , 2002. Glasser, W. The quality school: Managing students without coercion, New York: Harper Row Publishers, Inc. 1990. Villa, R. , Thosuand, J.. Creating an inclusive school, Alexandria, Virginia, Association for Supervision and Curriculum Development, 1995.

Effect of Government Debt on Incentives for Money Creation

Effect of Government Debt on Incentives for Money Creation Abdullahi Ahmad Why might the level of government debt affect the government incentive regarding to money creation. Government debt (also known as public debt and national debt) is the debt owed by a central government. Government debt is one method of financing government operations, but it is not the only method. Governments can also create money to monetize their debts, thereby removing the need to pay interest. But this practice simply reduces government interest costs rather than truly cancelling government debt, and can result in hyperinflation if used unsparingly. Public debt is one result of government financing expenditures. It is different from private debt, which consists of the obligations of individuals, businesses, and nongovernmental organizations. Public debt comes about as a result of taxing and borrowing by the federal government. The U.S. government has large capital outlays for such purposes as building or improving schools, hospitals, and highways. In order to pay for these projects, the government must finance part of their expenditures. When a government borrows money it als o avoids the excessive tax burden that such payments would involve in a single tax period. Public borrowing is generally believed to have an inflationary effect on the economy and for that reason is often resorted to in recessionary periods to stimulate investment, employment, and consumption. The debt owed by national governments is usually referred to as the national debt and is thus distinguished from the public debt of state and local governing bodies. In the United States, bonds issued by states and local governments are known as municipals. In the past, paper money was frequently regarded as a portion of the public debt, but in more recent years money has been regarded as a distinct type of obligation, in part because it is usually no longer payable in gold, silver, or other specific items of intrinsic value. Public debt, which is also sometimes referred to as government debt, is all of the money owed at any given time by any branch of the government. It encompasses debt owed by the federal government, the state government, and even the municipal and local government. It is, in effect, an extension of personal debt, since individuals make up the revenue stream of the government. Public debt accrues over time when the government spends more money than it collects in taxation. As a government engages in more deficit spending, the amount of debt increases. Many different types of debt make up public debt. A great deal of it is external debt, which is money that is owed by the government to foreign lenders, either in the form of international organizations, other governments, or groups like sovereign wealth funds, which invest in government bonds. Government debt is also made up of internal debt, where citizens and groups within the country lend the government money to continue operating. In some ways, this is a lot like lending to oneself, since ultimately the responsibility for it falls back on the very people lending money. Government incentive simply means something that motivates an individual to perform an action. The study of incentive structures is central to the study of all economic activities (both in terms of individual decision-making and in terms of cooperation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Ultimately, incentives aim to provide value for money and contribute to organizational success. incentive is not peculiar to economics alone, it is a general term used in many spheres of life. However, in economics, it is a very important word. In fact you can never study economics successfully without understanding what incentives are. One American economist says that economics in its entirety is a study of people’s response to incentives. Whether that statement is accurate or not is subject to one’s point of view, but what comes out clearly is the fact that incentives are truly central to the study of economics. In economics one can say that an incentive is a benefit, reward, or cost that motivates an economic action. Human beings do things deliberately and purposefully, and, naturally, people expect to benefit from their own decisions and actions. Before someone decides to produce something and sell it to people, they should have taken time to think and decide that doing this will help them earn something. Likewise, before a consumer buys anything, they know (or at least they think) that they are going to benefit from the product. In strict sense, it is more than just the usual concepts or trade and economics, it is about human nature. No one does something for no reason. Not when they have to spend time and resources in doing so. Incentives can be grouped into four main categories, or types. T hese types of incentives apply both to economics and to other spheres of life. These are as follows, Financial incentives: Perhaps in the modern times, financial incentives are more dominant. Before you get to business, you know that it is always about profit. Employment is all about salary and remuneration. It is true that sometimes people do voluntary jobs for some reasons other than financial ones. But ultimately, the main reason why human beings do business or work at all in modern days is money. It is this type of incentive that informs the idea of product promotions, where people are told that if they buy a certain product; they stand a chance of winning a certain amount of money. Moral incentives: Moral incentives motivate people to do things on the basis of right and wrong. People are encouraged to do certain action because morally, it is the right thing to do. Aspects of morality today are quite diverse, varying broadly from one society to the next, and it is practically impossible to define morals of society in general. Moral incentives therefore generally appeal to an individual’s own conscience. Natural incentives: â€Å"What will happen if I do this?† We often ask ourselves. Humans are naturally curious creatures, and we do many things for no reason other than to find out what the consequences are. Coercive incentives: Moral incentives motivate people to do things on the basis of right and wrong. People are encouraged to do certain action because morally, it is the right thing to do. Aspects of morality today are quite diverse, varying broadly from one society to the next, and it is practically impossible to define morals of society in general. Moral incentives therefore generally appeal to an individual’s own conscience. In economics, money creation is the process by which the of a country is increased. A central bank may introduce new money into the economy (termed expansionary monetary policy) by purchasing financial assets or lending money to financial institutions. Commercial bank lending then multiplies this base money through fractional reserve banking, which expands the total of broad money (cash plus demand deposits). Also money creation is The process in which banks increase the amount of funds in checkable deposits by using reserves to make loans. Money creation is an important process in the economy because it means that the government does not have total control over the money supply. In view of the above definition there is a high link between debt and money creation. Therefore, the monetary authority of a nation which is usually the Central Bank helps to effectively creates money by implementing policy through its Open Market Operation. To create money, the Central Bank simply buys government securities such as Treasury Bills, Treasury Certificates and Treasury Bonds from participating banking institutions. All these Treasury securities are bought in the Open Market. These treasury certificates are exchange for money which the commercial bank will have in their possession to give as loans to members of the public and it tends to increase bank credit. Thus, stimulating money creation. However, money creation could be restricted as government debt increases which could either be as a result of necessity or deliberate, if government as a result of necessity want to borrow money it usually does these through the treasury department under the Central Bank. There for the Treasury Department of a nation, in order to raise cash, will print up a stack of Treasury bonds, which are the means by which the government borrows money, these government debt tends to mop up the supply of money in private banks as central bank do not deal directly with members of the public and thus reducing the ability of commercial bank to lend money. The supply of money could also be restricted by government deliberately by selling treasury certificate at an attractive interest thus limiting the commercial bank ability to give loans and thus create money. It should be interesting to know that the money created by the government is also created through debt because as it is the money used in buying treasury certificates was a result of monetizing of debt because the money created out of thin air by the Central Bank on behalf of government is a promise to pay without attracting interest. Hence debt is use to pay debt. In this case debt without obligation is used to pay debt with obligation. Invariably money could be created through debt and as well restricted through debt; it all depends on which form of debt government is using. If government uses debt with obligations, that is when government sells treasury certificates to raise cash and thus restrict the ability of commercial bank to create money. If however, government uses debt without obligation, that is when the government print money to buy treasury securities and as such enable the commercial bank to increase their lending power. This brings more money to the economy because the commercial bank will be able to give out more loans from the money received from the sale of treasury securities. So now we know that there are two kinds of money out there. The first is bank credit, which is money that is loaned into existence, as we saw here. Bank credit is a type of money that comes with an equal and offsetting amount of debt associated with it. Debt upon which interest must be paid. The first is that all cash or money of a nation are backed by debt. At the local bank level, all new money is loaned into existence. At the Federal Reserve level, money is simply manufactured out of thin air and then exchanged for interest-paying government debt. In both cases, the money is backed by debt. Debt that pays interest. From this Key Concept, we can formulate a truly profound statement, which is that at a minimum, each year enough new money must be loaned into existence to cover the interest payments on all of the past outstanding debt. If we flip this slightly, we can say that each year all the outstanding debt must compound by at least the rate of the interest on that debt. Each and every year it must grow by some percentage. Because our debt-based money system is growing by some percentage continually, it is an exponential system by its very design. A corollary of this is that the amount of debt in the system will always exceed the amount of money. By understanding its design, though, one will be better equipped to understand that the potential range of future outcomes for our economy are not limitless, but rather bounded by the rules of the system. All of which leads us to the fact that perpetual expansion is a requirement of modern banking. In fact we can make a rule: Each year, new credit (loans) must be made that at least equal the amount of all the outstanding interest payments that year. Without a continuous expansion of the money supply, past debts would not be able to be serviced, and defaults would ripple through, and possibly destroy, the entire system. Defaults are the Achilles heel of a debt-based money system, which we saw in our local banking example in the previous chapter. Because of this, all the institutional and political forces in our society are geared towards avoiding this outcome. In view of the above money, government debt will help stimulate money creation if only there is more debt without obligation by government as against government debt with obligation. Conclusively, debt is money.

MARCIA GRIFFITHS: REGGAE QUEEN? :: Essays Papers

MARCIA GRIFFITHS: REGGAE QUEEN? BEGINNING YEARS These two quotes are critical in answering the question of whether or not Marcia Griffiths is the true Reggae Queen. After looking at her success as a female artist, the answer to this question becomes obvious. Women have been oppressed across the globe for centuries, which make Griffiths success as a female Reggae artist that much more outstanding. Looking at her achievements throughout her life starting at a young age to thirty-seven years in the music business, the audience will understand why she is the true Reggae Queen. Linneth Marcia Griffiths was born and raised in Kingston. Music had always been apart of her upbringing from her father’s influence as a singer. Her talent was recognized very early by producers Clement Coxsone Dodd and Byron Lee, â€Å"who were said to be competing for her father’s signature on a recording contract even before she was ten. Coxsone won the compitition and his legendary Studio One and its downbeat rhythms became her musical college.† (Tafari, pg. 1) Marcia reached the big stage for the first time at the Carib Theater in Cross Roads, Kingston at the age of twelve. At the age of sixteen she achieved her first Jamaican # 1 with the Rock Steady hit â€Å"Feel Like Jumping.† After that, she opened shows in Jamaica for Carla Thomas, Betty Wright and Ben E. King among others. Since those vintage days, music has been her life and she has risen to the top of Rock Steady and Reggae Charts in Jamaica. While growing up she listened to and admired singers like Aretha Franklin, Carla Thomas and Deon Warkick. There were not many female artists in Jamaica, but one that she admired was the late â€Å"Hortense Ellis† who was a local singer. At a young age Marcia established a name for herself before teaming up with Rita Marley and Judy Mowatt. Over the years Marcia has built up a long list of solo hits, but the re-make by Marcia and Bob Andy of the Nina Simone hit â€Å"Young, Gifted and Black† in the 1970’s put her into a household name throughout the Caribbean and Europe. (Tafari, pg. 2) The record’s popularity rose the charts in the UK and soon became popular across Europe.

Avg Antivirus

AVG  Ã¢â‚¬â€œ that’s short for  Anti Virus Guard  Ã¢â‚¬â€œ is a PC security package that provides comprehensive protection against the latest threats on the internet today. It is supported and trusted by millions of users across the globe. The authors of AVG provide free antivirus and antispyware protection for home users because for them, it’s a win-win situation   Ã¢â‚¬â€œ you get the protection you need, and they get to know about any viruses you encounter which helps keep the protection comprehensive. Please feel welcome to take a look at our other articles too, the latest are published in the column to the left- along with the most popular essay writers wanted.How to install AVG Antivirus Step 1. Download AVG You can download AVG FREE by  clicking here. When prompted, click the Run button. Notes: * Downloading AVG could take several minutes even with a broadband connection, so be patient and make yourself a cup of tea while you wait. * You are in no way o bligated to pay GRISOFT / AVG anything, so you won’t need to enter any credit card details or even personal details. But there are other versions of AVG, so if you like it you might consider supporting the company’s efforts by purchasing their commercial product. Step 2. Start the InstallationNow that AVG has downloaded, the installation wizard will start. Your PC might ask you if you’re sure you want to run the file, if it does you’ll need to click Run to confirm. Notes: * You’ll have a short wait while AVG extracts. Step 3. The Installation Phase – â€Å"Welcome to the AVG Free Setup Program† First screen:  You’ve just entered the Wizard, so click Next. Second screen:  For the Acceptance Notice, click Accept. Third screen:  It’s a license agreement, read it if you want to, otherwise just click Accept. Fourth screen:  It’s a waiting game! Let the installer do its job and wait patiently.Fifth screen:  St andard or custom installation? Choose Standard, and click Next. Sixth screen:  Activate your AVG Free License. If the user name isn’t your own name, change it. Click next. Seventh screen:  AVG Security Toolbar You may want to install the toolbar if you visit websites that are questionable, or if others use the PC and you are unable to monitor their usage. The Toolbar will alert you when it thinks a website is a potential threat, the downside is it makes your browser a bit slower. If you don’t want to install it, untick the box. Click Next. Eighth screen:  Setup SummaryNothing of interest here. Just click Finish. Nineth screen:  Don’t worry about this one, leave it to do its job and go make yourself another cuppa! (No picture for this one! ) Tenth screen:  SUCCESS! Installation is complete! Click OK. — NOTE: You may have to restart at this point, so be prepared to do so. — Step 4. AVG First Run Wizard First screen:  The First Run Wizard helps set up AVG to suit your needs. Click Next. Second screen:  Schedule regular scans and updates Adjust the time to a time that is more convenient. Your computer will need to be switched on to perform a scan.It’s also worth noting that you can optionally disable this scan if your computer is generally slow to perform – you can run scans manually whenever you feel the need. Click Next. Third screen:  Help us to identify new online threats AVG offer this service free of charge to you and millions of other users, you can help them improve the service by reporting information about potentially malicious websites. If you don’t mind AVG knowing which websites you visit, then enabling this feature shouldn’t be a problem. Otherwise, you may want to leave it disabled.Click Next. Fourth screen:  Update AVG protection Click Next on this screen, and AVG will perform an update. Fifth screen:  AVG Update Whilst it is updating, go make yourself another cup of tea! Once completed, you can click Next. Sixth screen:  Register AVG Anti-Virus Free. Optionally you can register your copy of AVG – but there is no obligation, so if you want to you can just click Next. Seventh screen:  AVG protection configuration is complete You’re done, your AVG security software is now fully installed and protecting your computer from the evils of the internet.

Comfort and Gods Glory Essay

In the decision to discuss two topics included within this reflection paper I have been led to discuss two doctrines that are close to all Christians. The comfort of God and the glory of God are the two doctrines that I have focused on over the last several weeks. The comfort of God has touched me at times over the course of my life however, never as much as it has over the last year. I wish to praise the glory of God as directed within the bible to show how God has worked in my life. The Comfort of God  Theological Definition The comfort of God can be best represent and defined by 2 Corinthians 1:3-5 which states: â€Å"Blessed be the God and Father of our Lord Jesus Christ, the Father of mercies and God of all comfort, who comforts us in all our affliction, so that we may be able to comfort those who are in any affliction, with the comfort with which we ourselves are comforted by God. For as we share abundantly in Christ’s sufferings, so through Christ we share abundantly in comfort too†. (NIV) However, Webster’s dictionary defines comfort as â€Å"to give strength and hope to† and â€Å"to ease the grief or trouble of† (Webster’s, 2013) Biblical Foundation  The Bible provides many references to God’s comfort as stated in Psalms 18:2 â€Å"The LORD is my rock, and my fortress, and my deliverer; my God, my strength, in whom I will trust; my buckler, and the horn of my salvation, and my high tower†. (NIV) Even though the word comfort isn’t contained in the passage just knowing that God is your strength and rock is enough. Psalms 138:7 states â€Å"though I walk in the middle of trouble, you will revive me: you shall stretch forth your hand against the wrath of my enemies, and your right hand shall save me†. (NIV) Practical Application  Over the course of my career as a law enforcement officer, I have found myself seeking comfort in some way or another. I have involved myself with discussions with fellow officers and have sought guidance from counselors and other professional sources. However, I have found no sense of comfort that compares to the bible and the comfort that religion brings me. I have learned over the course of my career that God is in control. He has a plan for all of us and comforts us when we stray from that path. When I speak of Gods comfort I think of a video that I watched on YouTube recently. The video was a speech given by Admiral Lee of the United State Coast Guard. Admiral Lee talks about the red tape that prevents him and all military personal from comforting soldiers on the battlefield. He states that he is unable at times to give guidance to those struggling for hope. I’m not a type of person who wants to force my faith and beliefs on a person. But much like Admiral Lee I have had the opportunity to be there when someone is reaching out. To give them comfort with Gods preachings and to give them a bible so they can find hope and comfort within its pages. I have for years during my tenure as a police officer carried a bible in my police vehicle. I also carry small pocket bibles purchased at my own expense. I throughout the years have never had anyone refuse one of my bibles. However, I have arrested people who have already got one of them. The Glory of God Theological Definition The glory of God is the beauty of his spirit. It is not his physical beauty however; it is his beauty that emanates from his character. God’s glory is His splendor, his majesty. The glory of God is his character and his divine nature; it is the very essence of his presence. Biblical Foundation The glory of God is referenced early in the bible Exodus 24: 15-17 states â€Å"Then Moses went up into the mountain, and a cloud covered the mountain. Now the glory of the Lord rested on Mt. Sinai, and the cloud covered it six days. And on the seventh day he called to Moses out of the midst of the cloud. The sight of the glory of the Lord was like a consuming fire on top of the mountain in the eyes of the children of Israel†. (NIV) The glory of god is used figuratively for God himself. Moses said to God himself in Exodus 33: 18-22 â€Å"Please show me your glory. Then he said, I will make all my goodness pass before you, and I will proclaim the name of the Lord before you . . . You cannot see my face; for no man shall see me and live. And the Lord said, here is a place by me, and you shall stand on the rock. So shall it be, while my glory passes by, that I will put you in the cleft of the rock, and will cover you with my hand while I pass by†. (NIV) Practical Applicati on How do we practically apply Gods glory to our everyday life? God calls us to glorify him in all we do. I do not proclaim to live a life without sin, as most Christians would agree. I don’t just do kind things to others with hopes of cancelling out the sins that I have done. However, I try to reach out into the community in the way in which I believe God wants me to. My career is a hard one and it takes a hard person to be a police officer. I have been accused of many things by people whom are upset and don’t understand. It’s easy to stand on the side of the road and observe a group of police officer at a tragic vehicle accident and get the wrong impression. I have seen officers who begin to joke around and are smiling. Now I agree the place and time for a joke is not at a car accident where someone has lost his or her life. However, it is a coping method that a lot of officers use to deal with a high stress situations. Are they living up to the glory of God? Probably not, however, they are performing their jobs to the best of their ability. The bible tells us we are not to commit murder, so how do I explain to my children that I had to take a life in the performance of my duties? How do I express to them that I am here to glorify God when I have broken one of the commandments? I don’t know the answer, but I do know that I try to live my life in a manner that allows me to glorify Him. I don’t believe that just worshiping God in church and singing hymns is enough. I believe that we need to try to preach to those who haven’t heard the Gospel and we need to live our lives praising him and living in his example. Conclusion I have progressed in my Christian studies and have focused on the things that I can do to both glorify God and to provide the comfort of God to others. You never know when the moments will be presented to you to affect the life of another, but I’m prepared. I can tell story after story to describe how I have attempted to accomplish these things, but I don’t want to place emphasis on them. God knows the good things I have done in my career and he knows the bad things. I will continue to study his word and build my house in heaven as to speak. Good deeds will not secure your place in heaven. The only way to God is through Jesus Christ. I have allowed Christ to fill my heart and I can build my home in heaven by the good deeds to which I do here. I can learn by Admiral Lee’s advice and example. I don’t have to stand and shout to someone in need. I only need to hand them the tool they need to find hope and Gods glory. I only need to whisper to them â€Å"read this†.

Global Chemical Industry

www. moodys. com Rating Methodology Table of Contents: Summary About the Rated Universe About This Rating Methodology The Key Rating Factors Assumptions and Limitations and Rating Considerations That are not Covered in the Grid Conclusion: Summary of the GridIndicated Rating Outcomes Appendix A: Global Chemcial Industry Methodology Factor Grid Appendix B: Methodology GridIndicated Ratings Appendix C: Observations and Outliers for Grid Mapping Appendix D: Chemical Industry Overview Appendix E: Key Rating Issues over the Intermediate Term 1 3 5 8Corporate Finance December 2009 Moody’s Global Global Chemical Industry Summary This rating methodology explains Moody’s approach to assessing credit risk for global chemical companies. This document replaces a previous publication from February 2006. The grid for the rating methodology is substantially unchanged from the 2006 publication, with minor updates to provide greater clarity regarding application of the grid. We also hav e provided a clearer explanation of how ratings in the chemical industry are derived.This publication is intended to provide a reference tool that can be used when evaluating credit profiles within the global chemical industry, helping issuers, investors, and other interested market participants understand how key qualitative and quantitative risk characteristics are likely to affect rating outcomes. This methodology does not include an exhaustive treatment of all factors that are reflected in Moody’s ratings but should enable the reader to understand the qualitative considerations and financial ratios that are most important for ratings in this sector.This report includes a detailed rating grid and illustrative mapping of each rated company in a representative sample of companies against the factors in the grid. The purpose of the rating grid is to provide a reference tool that can be used to approximate credit profiles within the chemical industry sector. The grid provides summarized guidance for the factors that are generally most important in assigning ratings to chemical companies. The grid is a summary that does not include every rating consideration, and our illustrative mapping uses historical results while our ratings methodology also considers forward-looking expectations.As a result, the grid-indicated rating is not expected to match the actual rating of each company. 17 18 19 20 21 26 27 Analyst Contacts: New York 1. 212. 553. 1653 William Reed Vice President -Senior Credit Officer John Rogers Senior Vice President James Wilkins Vice President -Senior Analyst Steven Wood Senior Vice President Tokyo 81. 35408. 4100 Noriko Kosaka Vice President -Senior Analyst Analyst Contacts continued on last page Rating Methodology Moody’s Global Corporate Finance Global Chemical IndustryThe grid contains five key factors that are important in our assessments for ratings in the global chemical sector: 1. Business Profile 2. Size & Stability 3. Cost P osition 4. Leverage / Financial Policies 5. Financial Strength Each of these factors also encompasses a number of sub-factors or metrics, which we explain in detail. Since an issuer’s scoring on a particular grid factor often will not match its overall rating, in the Appendix we include a brief discussion of â€Å"outliers† – companies whose grid-indicated rating for a specific factor differs significantly from the actual rating.This rating methodology is not intended to be an exhaustive discussion of all factors that Moody’s analysts consider in ratings in this sector. We note that our analysis for ratings in this sector covers factors that are common across all industries (such as ownership, management, liquidity, legal structure in the corporate organization, and corporate governance) as well as factors that can be meaningful on a company specific basis. Our ratings consider qualitative considerations and factors that do not lend themselves to a transp arent presentation in a grid format.The grid represents a compromise between greater complexity, which would result in grid-indicated ratings that map more closely to actual ratings, and simplicity, which enhances a transparent presentation of the factors that are most important for ratings in this sector most of the time. Because this methodology applies globally, it is necessarily general in some respects and is not intended to be an exhaustive and country-specific discussion of all factors that Moody’s analysts consider in every rating.Moody’s rating approach considers country-specific differences and at the same time allows for qualitative evaluation of these factors as well as other factors that cannot be easily presented in grid format. Highlights of this report include: ? ? ? An overview of our rated universe. A description of the key factors that drive rating quality. Comments on the rating methodology’s assumptions and limitations, including a discussio n on other rating considerations that are not included in the grid.The Appendices show the rating grid criteria on one page (Appendix A), tables that illustrate the application of the methodology grid to 20 representative rated chemical companies (Appendix B) with explanatory comments on some of the more significant differences between the grid-implied rating and our actual rating (Appendix C), a brief industry overview (Appendix D), and a discussion of key rating issues for the chemical sector over the intermediate term (Appendix E). 2 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate FinanceGlobal Chemical Industry About the Rated Universe Moody's rates 107 companies globally in the chemicals and allied industries. In the aggregate, these issuers have approximately $230 billion of rated debt. Our definition of the chemical industry includes a variety of related industrie s, such as: ? ? ? ? ? ? ? ? ? ? ? ? Commodity organic and inorganic chemicals ? Specialty chemicals ? Plastics, resins and elastomers ? Fertilizers, agricultural chemicals and seeds ? Industrial gases ? Architectural and industrial coatings ? Flavors and fragrances ? Other food ingredients ? Pharmaceutical intermediates ?Organometallics ? Specialty materials produced from refinery by-products ? Specialty materials that are used in composites ? These companies develop and produce a wide variety of products including basic chemicals, specialty materials, and industrial gases. Products range from true commodities to highly customized products used in technically demanding applications. The rated universe is spread throughout the world with the highest concentrations in the Americas (68), Europe (24) and Middle East/Asia (15). Companies range in size from as large as $40 billion in revenues to as small as $100 million.Some may be multinational with numerous manufacturing locations aroun d the globe, while others may operate a single facility with domestic customers only. The highly volatile nature of the industry as well as fairly high levels of business risk make it increasingly difficult for all but a select few companies who are extremely large and diversified to achieve and maintain a Aa rating. Ratings of A3 or above are generally limited to larger companies or to smaller specialty companies that exhibit uncommon stability in financial performance and relatively low business risk.The Corporate Family Rating (CFR) or senior unsecured ratings of the covered issuers range from Aa2 to Caa2 with a concentration in the Baa, Ba and B rating categories. The median rating for chemical companies is Ba1. The vast majority of companies – 81 out of 107, approximately 76%, are in the Baa (27), Ba (26), and B (28) range because of the cyclical nature of the industry and our view of the industry’s moderate to high business risk. 3 December 2009 ? Rating Methodol ogy ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate FinanceGlobal Chemical Industry Exhibit 1: Global Chemical Rating Distribution 2009 and 2006 Chemical Industry Ratings Distribution 25 Number of Issuers 20 15 10 5 0 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 Ratings 2009 – 107 com panies 2006 – 111 com panies B1 B2 B3 Caa1 Caa2 Caa3 Over the last ten years, in Europe and in the US, a growing number of speculative grade names have been added to the rated universe. This is attributable in part to incumbents' recent strategic efforts to focus on their core businesses by selling non-core assets as well as to a growing interest from private equity sponsors.For the purpose of this methodology we have identified 20 representative issuers out of the companies that we rate globally. These issuers represent both investment grade and speculative grade issuers. The criteria used to select the 20 focu sed on the larger, in terms of revenues, well-known issuers. For this reason the proportion of investment grade to non-investment grade issuers represented is higher than it is in the rated universe. 4 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate FinanceGlobal Chemical Industry Exhibit 2 Global Chemical Rating Methodology Representative Sample Company Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Shin-Etsu Chemical Company Ltd BASF (SE) E. I. du Pont de Nemours and Company Kaneka Corporation Teijin Limited Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan Inc. Rating Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 Outlook Stable Stable Negative Stable Negative Stable Negative Stable Stable Stable Stable Negative Stable Positive Stable Stable Stable Stable Positive NegativeApprox Debt millions $189 $21,347 $7,545 $293 $ 2,143 $20,215 $5,233 $3,082 $2,716 $1,441 $1,971 $23,073 $4,456 $3,390 $3,156 $1,217 $1,904 $4,681 $423 $3,451 LG Chem, Ltd. Eastman Chemical Company Yara International ASA The Dow Chemical Company Braskem SA Celanese Corporation Nalco Company ISP Chemco LLC NOVA Chemicals Company Huntsman Corporation PolyOne Corp Hexion Specialty Chemicals Inc. About This Rating Methodology This report explains the rating methodology for chemical companies in six sections, which are summarized as follows: 1.Identification of Key Rating Factors The grid in this rating methodology focuses on five key rating factors. These five broad factors are further broken down into eleven sub-factors that are equally weighted. 5 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry Factor Weighting Sub-Factor Weighting Rating Factor Relevant Sub-factor Operational Diversity Product Diversity Geographic Diversity Factor 1: Business Profile 9. 09%Commodity/Specialty Market Shares Raw Material Access Government Impact Revenues 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% Factor 2: Size & Stability 27. 27% Divisions of Equal Size Stability of EBITDA Factor 3: Cost Position 18. 18% EBITDA Margin (5 yr Avg. ) ROA – EBIT / Avg. Assets (5 yr Avg. ) Factor 4: Leverage / Financial Policies 18. 18% Current Debt / Capital* Debt / EBITDA (5 yr Avg. )* EBITDA/ Interest Expense Factor 5: Financial Strength 27. 27% Retained Cash Flow/Debt (5 yr Avg. )* Free Cash Flow (FCF) /Debt (5 yr Avg. * *Where appropriate net adjusted debt may be used (see discussion of Cash Balances and Net Debt Considerations) 2. Measurement of the Key Rating Factors We explain below how the sub-factors for each factor are calculated. We also explain the rationale for using specific rating metrics, and the ways in which we apply them during the rating process. Mu ch of the information used in assessing performance for the sub-factors is found in or calculated using the company’s financial statements; others are derived from observations or stimates by Moody’s analysts. Moody’s ratings are forward-looking and incorporate our expectations of future financial and operating performance. We use both historical and projected financial results in the methodology and the rating process. Historical results help us to understand patterns and trends for a company’s performance as well as for peer comparison. While the rating process includes both historical and anticipated results, this document makes use of historical data only to illustrate the application of the rating methodology.Specifically, unless otherwise stated, the mapping examples in this report use reported financials for the last three audited fiscal years. All of the quantitative credit metrics incorporate Moody’s standard adjustments to income statemen t, cash flow statement and balance sheet amounts for, among others, off-balance sheet accounts, receivable securitization programs, under-funded pension obligations, and recurring operating leases. Note: For definitions of Moody's most common ratio terms please see Moody’s Basic Definitions for Credit Statistics, User’s Guide which can be found at www. oodys. com in the Research and Ratings directory, in the Special Reports subdirectory (07 June 2007, document #78480/SP4467). 3. Mapping Factors to the Rating Categories After identifying the measurements for each factor, the potential outcomes for each of the 11 sub-factors are mapped to a broad Moody’s rating category. (Aaa, Aa, A, Baa, Ba, B, Caa, Ca). 6 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry 4.Mapping Issuers to the Grid and Discussion of Grid Outliers In t his section (Appendix C) we provide tables showing how each company maps to grid-indicated ratings for each rating sub-factor and factor. The weighted average of the sub-factor ratings produces a grid-indicated rating for each factor. We highlight companies whose grid-indicated performance on a specific sub-factor is two or more broad rating categories higher or lower than its actual rating and discuss general reasons for such positive outliers and negative outliers for a particular factor or sub-factor. . Assumptions and Limitations and Rating Considerations That are not Included in the Grid This section discusses limitations in the use of the grid to map against actual ratings, additional factors that are not included in the grid that can be important in determining ratings, and limitations and key assumptions that pertain to the overall rating methodology. 6. Determining the Overall Grid-Indicated Rating To determine the overall rating, we convert each of the 11 factor ratings in to a numeric value based upon the scale below.Aaa 6 Aa 5 A 4 Baa 3 Ba 2 B 1 Caa 0 Ca -1 The numerical score for each factor is weighted equally with the results then summed, and divided by 11, to produce a total factor score. The total factor score is then mapped back to an alphanumeric rating based on the ranges in the table below. Grid-Indicated Rating Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca Total Factor Score X ? 5. 50 5. 17 ? X ; 5. 50 4. 83 ? X ; 5. 17 4. 50 ? X ; 4. 83 4. 17 ? X ; 4. 50 3. 83 ? X ; 4. 17 3. 0 ? X ; 3. 83 3. 17 ? X ; 3. 50 2. 83 ? X ; 3. 17 2. 50 ? X ; 2. 83 2. 17 ? X ; 2. 50 1. 83 ? X ; 2. 17 1. 50 ? X ; 1. 83 1. 17 ? X ; 1. 5 0. 83 ? X ; 1. 17 0. 50 ? X ; 0. 83 0. 33 ? X ; 0. 50 0. 17 ? X ; 0. 33 0. 0 ? X ; 0. 17 x ; 0. 0 7 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry For e xample, an issuer with a composite weighted factor score of 1. 5 would have a Ba2 grid-indicated rating. We used a similar procedure to derive the grid-indicating ratings in the tables embedded in the discussion of each of the five broad rating factors. The Key Rating Factors Moody’s analysis of chemical companies focuses on five broad factors: ? ? ? ? ? Business Profile Size & Stability Cost Position Leverage / Financial Policies Financial Strength Factor 1: Business Profile (9. 09% weight) Why It Matters Business Profile is an important indicator of credit quality.The chemical team at Moody's looks at seven factors and aggregates them into a single score which is then mapped to a specific rating. The first three factors focus on diversity. Diversity, whether it be operational, product, or geographic, is a key component of business position that, can help mitigate the volatility in financial performance characteristic of the chemical sector. 1. Operational Diversity Single s ite locations, as an indicator of operational diversity, can expose a company to the prospect of unanticipated down times.We note that this factor is extremely important. Where a company operates a single site, the risk of that single site failing is deemed to have such a catastrophic impact on the business model that even the prospect of site insurance or business interruption insurance will not provide sufficient mitigation against the potential effects of a fundamental failure of the site. 2. Diverse Product Lines Diverse product lines can help stem volatility in cash flows to the extent that different products can have varied pricing dynamics. 3. Geographic DiversityGeographic diversity can also be beneficial as a company with multiple plant sites can still be negatively affected by both economic and weather related events. 4. Commodity Versus Value Added Products In the chemical sector commodity players are typically more volatile in terms of cash flow generation whereas the va lue added producers often produce more stable cash flows. At times, today's value added producers can become more commodity-like in their cash flow generating capabilities, so we will carefully assess where a product or group of products may be in its life cycle. 5.Market Share or Unique Competitive Advantage Large market share suggests a sustainable business position with the proven ability to weather the volatile market conditions in the chemical cycle. In some instances companies with large market shares will adjust their production volumes to help balance the supply and demand dynamics in the markets served as a means to stabilize product pricing. Market share that is protected by patent and unique licensing restrictions can also be a strong, positive contributor to stable cash flows and performance. 8 December 2009 ? Rating Methodology ?Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Che mical Industry 6. Exposure to Volatile Raw Materials Raw material exposures greater than 33% in terms of cost of goods sold, for example, can often result in dramatic swings in cash flow. This is especially true in times of supply/demand imbalances, which can create shortages in raw materials and exaggerate raw material price movements. Companies with the ability and foresight to locate their production facilities in areas of the world where they can benefit from long term fixed riced raw materials have a distinct advantage over companies that are subject to the vagaries of the raw material spot markets. 7. Impact of Government Regulation The final factor we assess is the positive or negative impact of government regulation. This factor addresses the positive or negative role that government regulation or policy may have on an individual company or sector of the chemical industry. For many companies, the impact of government regulation may be neutral. For some sectors, such as the e thanol sector in the U. S. the very existence of the sector is a function of government legislated policy. In still other instances, the government has sought to ban the use of certain products – such as MTBE – in some markets. This factor is also extremely important and we will, as explained below, overweight it when assessing companies for whom government regulations/mandates are, essentially, the sole driver for the business model. How We Measure it for the Grid The 7 Business Profile criteria are merged into an assessment score, as follows: Business Profile Assessment Score This score is made up of seven criteria.To each we assign a discrete numerical value. The values across the criteria range from (-2) to 2 with many coming in at 0 or 1. Moody's analysts may use a modifier of 0. 5 across the seven criteria to refine the score relative to other companies in the industry. These values are totaled into a score which is then mapped to a rating category in the followi ng manner: Aaa Aa A Baa Ba B Caa Ca = = = = = = = = > 6. 0 > 4. 5 to < 6. 0 > 3. 5 to < 4. 5 > 2. 5 to < 3. 5 > 1. 5 to < 2. 5 > 0. 5 to < 1. 5 > – 0. 5 to < 0. 5 < – 0. 5 ?Operational diversity – We count the number of discrete operating plants that have a globally competitive scale. A (-2) is assigned for 1 or 2 plants, a 0 is assigned for 2 – 8 plants and a 1 is assigned if there are greater than 8 large manufacturing locations. This is one of three factors with a negative score given the importance we assign to operational diversity. A sole site simply leaves the company with too many eggs in one basket. Product diversity – We assign a 0 if a majority of cash flow is generated from 1-2 key product lines and a 1 if a company relies on 3 or more product lines or product categories.Geographic diversity – We assign a 0 if a majority of the production assets are primarily in a single geographic region and assign a 1 if production assets are i n multiple regions Commodity versus value added products – We assign a 0 if a majority of sales are primarily commodity products and assign a 1 if we view products as adding distinct unique additional value. Quantitative factors such as stability of EBITDA and EBITDA margins are used later as another component in the measurement of this important factor. ? ? ? 9 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical IndustryRating Methodology Moody’s Global Corporate Finance Global Chemical Industry ? Market share – We assign a 0 if a market share is inconsequential relative to the next three largest competitors and assign a 1 if a sector or company has large share or few real competitors. We would assign a 2 if the company has a unique competitive advantage (patents, know-how, etc. ) that could reduce competition significantly. Market share assessments are driven by the definition of the markets served. Definitions should be wide enough to represent legitimate alternative products.Raw material access – We assign a (-1) or (-2) if we estimate exposure to volatile raw material costs at greater than 33% of costs of goods sold. We assign a 0 if exposure to volatile raw materials costs is from 10% to 33% of costs of good sold. We assign a 1 if the exposure to raw materials is less than 10% and a 2 if the company has a material, demonstrable, long-lived feedstock advantage. Given the importance of raw material inputs to ultimate cash flows this metric is vitally important. It is one of three metrics with a possible negative value. Given the importance of this metric, the value can go as high as 2.Impact of governmental regulations or policies – For companies subject to significant government regulations or sensitive to changes in government policies, we assign a score reflecting the positive or negative impact of these regulations/policies on the companies' long term financial perform ance. Most of the companies in this industry will score a 0. Ethanol producers in the US would be assigned a (-1) because of their reliance on government regulation to create demand for the product. Companies that would be positively affected over the long term by government regulations could be assigned a 1. ? The importance of the business profile score is highlighted by the fact that, in certain cases, it can outweigh all other factors in the methodology, materially lowering ratings. The two most prominent examples are: operations limited to a single site and a business model whose success is highly or solely dependent on government actions or policies. Factor 1: Business Profile (9. 09%) Weight a) Business Position Assessment 9. 09% Aaa ? 6. 0 Aa 4. 5 – 6. 0 A 3. 5 – 4. 5 Baa 2. 5 – 3. 5 Ba 1. 5 – 2. 5 B 0. 5 – 1. 5 Caa – 0. 5 – 0. 5 Ca ; – 0. 5A chart that illustrates grid mapping results for Factor 1 and a discussion of o utliers for companies in the sample is included in Appendix C. Factor 2: Size & Stability (27. 27% weight) Why It Matters This factor includes discrete quantitative measures that attempt to measure size, diversity and the stability of a business model. Large revenues combined with large divisions as well as a long history of stable performance suggest sustainable business positions that have been and will be able to demonstrably weather the vagaries of capital and economic cycles. SizeSize can suggest the ability to benefit from much needed economies of scale both in production and access to raw materials on a preferred basis. In addition, size suggests the ability to service large customers globally — an important attribute as many customers step up efforts to reduce the number of their suppliers. Size also tends to favor the companies that sovereigns, government related entities, and other large companies choose as their joint venture partners or technology suppliers of che micals that add important value added properties to customer’s products. Number of DivisionsThe presence of multiple large divisions typically signals a balanced diversified product portfolio and, by extension, more stable cash flows. Companies with high product concentration may exhibit more volatile cash flows and may be more vulnerable to one time events that can be damaging to credit quality. Multiple divisions also provide for discrete assets that can be sold as necessary to provide alternate liquidity. Larger companies 10 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate FinanceGlobal Chemical Industry with many divisions can, for example, sell weaker performing or non-core segments, with the sale proceeds providing funding for debt reduction or growth in other segments. Stability of Business Model (Stability of EBITDA) Given the diversity of this industry, we attempt to gauge the likely level of volatility in earnings and cash flow. Companies with elevated levels of volatility in earnings and cash flow will require better liquidity and more robust financial metrics, on average, to compensate for uncertainty over the magnitude and duration of potential downturns.We analyze the volatility of EBITDA over a long period of time (7-10 years, when the data is available) to get an estimation of the expected volatility of the company relative to its peers in the industry. While there are many problems associated with the use of EBITDA as a measure of either profitability or cash flow, EBITDA is typically less affected by extraordinary items, fluctuations in working capital, and capital spending on new capacity than other measures of cash flow. It also allows us to remove the potential impact from differences in capital intensity across the industry.To the extent that a company's EBITDA may contain unusual items, or items that we judge to be one- time, the reported data may be adjusted to improve the quality of the analysis and hence get a better view of the true volatility of the company relative to its peers in the industry. When companies have completed a transformational acquisition or divestiture, or if seven years of data is otherwise unavailable, we estimate this metric based on a comparison to other rated companies and attempt to adjust for differences in product or geographic mix, as well as the impact of feedstock advantages or disadvantages.A transforming transaction is typically defined as the acquisition or divestiture of assets that comprise more that 1/3 of the pre-transaction EBITDA. While we measure the past 7-10 years of data, we would emphasize that our ratings are a forward view informed by historical volatility. To the extent we believe that future performance might deviate from historical patterns, we will modify this factor. How We Measure it for the Grid Size Measured by Revenues We use the most recen t annual revenues or latest 12 month reported revenues.The current year's revenues obviously can be either understated or overstated subject to where the company is in the commodity price cycle. While the commodity price cycle may be different for various companies, this metric measures all companies, by and large, at the same point in the economic cycle. For companies whose revenues are on the border between two ratings categories, the analyst would consider the point in the commodity price cycle at which the measurement is taken and the estimate of future revenues. Divisions with Revenues of Equal Relative SizeThis factor can be captured from financial statements. We use the segment information found in the most recent quarterly report on a latest four quarter basis. We are attempting again to capture both diversity as well as scale. The analyst may adjust segment revenues manually to adjust for non-ordinary items or non-public segment information provided by management. For compa nies whose divisional revenues are volatile and subject to cycles, the analyst would again consider the point in the pricing cycle at which the measurement is taken.Our focus is to measure diversity of revenue streams. For a company with $1 billion in revenues – if all revenues come from a sole division/product it would map to a B. If there were four discrete divisions with $250 million in revenues each (essentially equal in size) it would map to a Baa. For a company with $10 billion in revenues with four discrete divisions/products, if two divisions had $3 billion in revenues each and 2 divisions had $2 billion in revenues each – it would still be judged to be relatively diverse and equate to a Baa. 1 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry Stability of EBITDA This factor is measured by the normalized standard error of the company's EBITDA as determined by a least squares regression on seven to ten years of data. We utilize standard error rather than standard deviation as it is much better at differentiating between commodity and specialty chemical companies.Standard deviation is a static measure that cannot clearly differentiate between a stable company growing over time and a commodity company whose volatility is induced by changes in its cash margins. Standard error is a statistical measure of the difference between the company's actual performance versus a theoretical line drawn through the data (hence normal growth in EBITDA over 7-10 years should not have a negative impact on this metric). The normalized standard error is obtained by dividing the standard error obtained from a linear regression by the average EBITDA over the period analyzed.This allows us to compare the standard error of large companies to much smaller companies This measurement is designed to capture two types of stabil ity: For smaller companies – The stability of business or businesses relative to other companies in the industry. The absolute size of a company is not considered. For larger companies – A very large or diverse commodity company may exhibit more stability based on the number of businesses in its portfolio, especially if the earnings of their individual businesses are not correlated (i. e. , all businesses don't go into a downturn or upturn at the same time).In statistical terms, if the covariance of the company’s businesses is low, the company's performance should be more stable although it may be an inherently cyclical commodity chemical business. Companies with a normalized standardized error above 40% (which maps to the Caa category) are most common for companies with very low or negative EBITDA at the bottom of a downturn. Factor 2: Size & Stability (27. 27%) Weight a) Revenue (Billions of US$) b) # of Divisions of Equal Size c) Stability of EBITDA 9. 09% 9. 09% 9. 09% Aaa ? $50 8 ; 2% Aa $20 – $50 6 to 7 2% – 6% A $10 – $20 5 6% – 12%Baa $5 – $10 4 12% – 20% Ba $1 – $5 2 or 3 20% – 30% B $. 2 – $1 1 or 2 30% – 40% Caa $. 1 – $. 2 1 40% – 60% Ca ; $. 1 0. 5 ? 60. 0% A chart that illustrates grid mapping results for Factor 2 and a discussion of outliers for companies in the sample is included in Appendix C. Factor 3: Cost Position (18. 18% weight) Why It Matters Relative cost position is a critical success factor for a chemical company because, in a downturn, (either cyclical or economic) prices often decline to the point where only companies with first and second quartile cash costs generate meaningful cash flow.Operating cost positions are a function of criteria that include size, access to low cost raw material inputs, location of assets, labor rates, and capital invested. Further, with low levels of financial leverage, low cost producers are typicall y better positioned to outperform competitors. Low cost producers, with low leverage, are better able to survive in a downturn and are also better positioned to grow when opportunities arise. A company's cash costs and its position on the industry cost curve, as well as the overall shape of the industry cost curve, are all valuable information.However, true cash cost curve data, while useful, is often proprietary or may be the property of various consultants and difficult to verify. 12 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry Comparisons across the wide variety of commodity and specialty chemical companies make it difficult to rely on relative or absolute costs for ranking companies. We use two measures in addition to information provided by companies to assess cost positions: ? ?EBITDA Margin Return on Average Assets How We Measur e it for the Grid EBITDA Margin This factor is used in part to gauge the quality of the pricing power a company has and is likely to achieve. It is measured using EBITDA, which includes recurring â€Å"other† income and excludes non-recurring â€Å"other† income and one time charges. This factor, along with several others, is an important measure of a company's profitability in multiple economic scenarios. We use the past three years' actual results along with our expectation for the next two years, and to consider the average as well as the high and low points.For illustrative purposes the measurement used in the company examples herein is based on an average of the past three years' EBITDA margin. The choice of EBITDA, versus EBIT, is driven in part by the many and varied depreciation polices used globally and the need for comparability between regions. Nonetheless, we recognize the weaknesses of EBITDA, discussed below, and analysts within regions will also evaluate EBIT margins as well. Another reason for the use of EBITDA is the aterial difference in capital intensity within sub-sectors of the chemical industry. The capital intensity of a large commodity company can be very different from a smaller specialty player. The use of EBITDA – as opposed to EBIT – has a disadvantage in that EBITDA fails to address the capital intensity of the chemical industry effectively. Clearly an important indicator of a company's ability to generate operating profit should be assessed after the costs of plant maintenance and capacity expansion, as represented by its annual depreciation charges.Experience indicates that while a chemical company's capital spending often swings with major projects, it will generally need to spend its depreciation over time as it maintains and develops new facilities. We attempt to capture the effect of this capital intensity in our use of free cash flow metrics in the financial strength rating factor discussion. Retu rn on Average Assets This is a strong measure of a company's ability to generate a consistent and meaningful return from its asset base. This metric specifically takes into account the capital intensive nature of the industry.This is also a five-year average measurement using the past three years of actual results along with our expectation for the next two years. We use total assets, less cash and short term investments rather than tangible assets to provide a more meaningful measure for the universe of speculative grade companies. Factor 3: Cost Position (18. 18%) Weight a) EBITDA Margin b) ROA – EBIT / Assets 9. 09% 9. 09% Aaa ? 30% ? 25% Aa 20% – 30% 15% – 25% A 15% – 20% 10% – 15% Baa 10% – 15% 7% – 10% Ba 8% – 10% 4% – 7% B 4% – 8% 2% – 4% Caa 1% – 4% 0. 5% – 2% Ca < 1% < 0. 5%A chart that illustrates grid mapping results for Factor 3 and a discussion of outliers for companies in the sam ple is included in Appendix C. 13 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry Factor 4: Leverage / Financial Policies (18. 18% weight) Why It Matters Management's willingness to enhance shareholder value via debt financed acquisitions and/or share repurchases, is likely to increase credit risk. The chemical industry is particularly vulnerable given its volatile nature.We learn about financial policies through a discussion with management that includes hypothetical scenarios. Such meetings often examine management's willingness to stretch its balance sheet and/or financial flexibility. The hypothetical situations often relate to acquisitions or share repurchase appetites. Concerning acquisitions, discussions often focus on size and on the combination of debt and/or equity that will be used to fund a growth initiative. Another key conce rn is management's approach to managing financial flexibility through a range of cycles.Specifically we look for an approach that emphasizes preparedness for lean times such that strong cash flows, when available, are used to reduce debt. Measurement of leverage and financial policies is based on two different estimates of leverage: current debt to capitalization, and debt to EBITDA. We believe that the amount of leverage with which management operates is a choice and a direct result of a company's financial strategy. Issuers, particularly those in the investment grade and high Ba rating categories, often actively manage to these ratios.Certainly these ratios, especially debt to EBITDA, are used by providers of capital in the form of specific covenant tests. Debt to capital is a simple way to compare the capital structure of companies operating within an industry, and managements often claim to manage to it. This metric is also a way to assess management's willingness to grow via de bt financed acquisitions. The debt to EBITDA ratio is a measure that balances the debt to capitalization ratio with a measurement of a company's ability to generate EBITDA both in times of peak pricing and in times of stress.We believe these two metrics provide insight into the company's financial policies, including its tolerance for debt and the ability of the company to ride out the highs and low of a cycle. How We Measure it for the Grid Debt to Capital This factor can be easily captured from financial statements using the most recent annual or quarterly debt and equity balances (incorporating our standard adjustments). There are certainly situations where this metric becomes less useful — particularly in the case of LBOs or spinouts wherein book equity is low or nonexistent. In these instances this metric could be given reduced weight.In the event that a company's book equity is extremely low and the stock is publicly traded, the analyst may use the market capital of the company in place of book equity in this ratio. While market capital has its own weaknesses and can be very volatile, this approach can be of some value. Debt to EBITDA For this measure we use a five-year average of the annual debt and EBITDA balances as shown on the financial statements. We look back three years and use estimates to make assumptions for two years going forward. Factor 4: Leverage / Financial Policies (18. 18%) * Weight a) Current Debt / Capital b) Debt / EBITDA 9. 09% 9. 09% Aaa lt; 15% < . 5x Aa 15% – 25% . 5x – 1. 5x A 25% – 35% 1. 5x – 2. 25x Baa 35% – 50% 2. 25x – 3x Ba 50% – 70% 3x – 4x B 70% – 80% 4x – 6x Caa 80% – 95% 6x – 8x Ca ? 95% ? 8x * Where appropriate net adjusted debt may be used (see discussion of Cash Balances and Net Debt Considerations) 14 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodo logy Moody’s Global Corporate Finance Global Chemical Industry A chart that illustrates grid mapping results for Factor 4 and a discussion of outliers for companies in the sample is included in Appendix C. Factor 5: Financial Strength (27. 7% weight) Why It Matters The three key indicators of financial strength are 1) Interest Coverage, 2) Retained Cash Flow to Debt, and 3) Free Cash Flow to Debt. All of these metrics are averaged over five-year periods to address the volatile nature of the industry. Interest coverage: Interest coverage can be particularly meaningful for speculative grade companies. This is especially true if the interest rate environment is in a period of change — such as the migration from lower rates to higher rates — and an issuer is facing the need to refinance debt that is nearing maturity. It is a less important metric for higher-rated companies.The remaining two metrics are useful across the rating spectrum and relate to the amount of ca sh flow available to cover varied scenarios of both operating needs and financing needs. ? ? Operating needs include major items such as working capital and capital spending. Financing needs refers to the impact of dividends and the â€Å"free† cash then available to service debt. As discussed above, the use of EBITDA (as opposed to EBIT) in the interest coverage ratio is important for companies in the chemical industry and the decision to use it is a function of the need to make the ratio more comparable globally.Retained Cash Flow and Free Cash Flow: The cash flow metrics we use measure two different levels of cash flow: retained cash flow and free cash flow and their ratio to total adjusted debt. Retained cash flow is a broader measure of financial flexibility than free cash flow as it excludes the potential ‘noise' created by changes in working capital and unusual capital spending programs. This is a helpful measure given the volatility and the variation in capital intensity within the chemical sector.As with other factors in which debt is involved we can look at these cash flow metrics in two ways — as a percentage of both debt and of net debt (net of cash balances). We use net debt for companies at which it is either a stated, long-lived policy to hold material cash balances or for which there may be unique scenarios such as recent asset sales whereby cash may be earmarked for use in debt reduction efforts. In some specific instances we may use a net debt denominator for the free cash flow metric as well. A more detailed discussion of our views on cash balances appears below.Free cash flow is, in many instances, one of the most important and reliable measures of financial strength and flexibility. This metric reflects a company's primary source of liquidity as it directly speaks to management's ability to service its debt burden after considering both its operating and financial commitments to shareholders. In this metric we often ide ntify where capital spending programs may be extraordinarily large and/or risky. At times, programs can have a direct impact on ratings because of the size of expenditure that may be involved as well as the risks of executing the program on time and on budget.If, for example, a large amount of capital is spent on new greenfield capacity and we believe that such capacity is being added at a time when product prices are low (i. e. , there is a lack of an adequate return on capital) the ratings may be negatively affected. There is also the risk that anticipated operating cash cost benefits upon project completion are different than expected. 15 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry How We Measure it for the GridInterest coverage This metric is a straightforward look at EBITDA (adjusted for non-recurring other income and one-time ch arges) to gross interest expense (including capitalized interest). This is a five-year measure. Cash Flow to Debt ? Retained Cash Flow to Debt – Defined as funds from operations (FFO) minus dividends, as a percentage of total debt. This is a five-year measure. Free Cash Flow to Debt – Defined as cash flow from operations (by its nature operating cash flow is determined after taking into account working capital) minus capital spending and dividends, as a percentage of total debt.This is a five-year measure. ? Cash Balances and Net Debt Considerations Typically, analysts approach the use of cash balances and the use of cash in â€Å"net debt† calculations in a conservative fashion. As a general rule we would not typically consider cash on the balance sheet as a true offset to adjusted total debt in for the purpose of ratio analysis. Reasons that we would not look at cash on the balance sheet as fungible for the debt include concern that: ? the cash is easily used for other purposes and debt reduction is only counted hen debt is permanently reduced in some instances cash is actually needed to fund the day-to-day operations of the issuer the cash is â€Å"stranded' overseas and subject to material taxes such that the true cash balance is materially lower than represented in the financial statements there may be other claims on the cash for restructuring efforts or legacy liabilities. ? ? ? There are, however, examples where our analysis for chemical companies incorporates cash balances as providing a measure of offset to adjusted total debt balances. Exceptions to the above analytical approach, for which we give credit for cash balances include: ? he specific refunding of near term debt maturities wherein management borrows in advance to prefund a near term maturity. cash is held temporarily for legal, tax or other purposes and the company has publicly stated its intention to reduce debt once the temporary period has ended. ? Other instances, typically only for large companies, include situations in which management has a history of maintaining material levels of cash on the balance sheet, it has publicly stated its intention not to pursue largedebt financed acquisitions or share repurchases, and cash is accessible without meaningful loss to taxes.In Europe and Latin America, we also generally observe that companies are more willing to maintain higher cash balances that may sometimes be linked to tax considerations or more broadly reflect a more conservative style of financial policies. Considering only gross debt may not reflect the real financial strength of these companies and we may prefer in this case to focus on net debt. In these cases, however, we capture the expectation that these cash balances can be liquidated at least at book value and without tax costs.Factor 5: Financial Strength (27. 27%) * Weight a) EBITDA / Interest Expense b) Retained Cash Flow / Debt c) Free Cash Flow / Debt 9. 09% 9. 09% 9. 09% Aaa ? 20x ? 65% ? 40% Aa 15x – 20x 45% – 65% 25% – 40% A 10x – 15x 30% – 45% 15% – 25% Baa 5x – 10x 20% – 30% 8% – 15% Ba 2x – 5x 10% – 20% 4% – 8% B 1x – 2x 5% – 10% . 5% – 4% Caa 0. 5x – 1x 1% – 5% 0% – . 5% Ca ; 0. 5x ; 1% ; 0% * Where appropriate net adjusted debt may be used (see discussion Cash Balances and Net Debt Considerations) 16 December 2009 ? Rating Methodology ?Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry A chart that illustrates grid mapping results for Factor 5 and a discussion of outliers for companies in the sample is included in Appendix C. Assumptions, Limitations and Rating Considerations not Covered in the Grid The rating methodology grid incorporates a trade-off between simplicity that enhances transparency and greater complexity that would enable the grid to map more closely to actual ratings.The five rating factors in the grid do not constitute an exhaustive treatment of all of the considerations that are important for ratings of global chemical companies. In choosing metrics for this rating methodology grid, we did not include certain important factors that are common to all companies in any industry, such as the quality and experience of management, assessments of corporate governance and the quality of financial reporting and information disclosure.The assessment of these factors can be highly subjective and ranking them by rating category in a grid would, in some cases, suggest too much precision in the relative ranking of particular issuers against all other issuers that are rated in various industry sectors. Ratings may include additional factors that are difficult to quantify or that only have a meaningful effect in differentiating credit quality in some cases. Such factors include regulatory and l itigation risk as well as changes in end use demand such that today’s specialty chemical becomes tomorrow’s commodity.While these are important considerations, it is not possible to precisely express these in the rating methodology grid without making the grid excessively complex and less transparent. Ratings may also reflect circumstances in which the weighting of a particular factor or qualitative issue will be different from the weighting or outcome suggested by the grid. For example, the importance of the business profile score is highlighted by the fact that, in certain cases, it can outweigh all other factors in the methodology materially, lowering ratings significantly. The three most prominent examples are: ? ? operations limited to a single site, and a business model whose success is highly dependent on government actions or policies. a company with significant litigation related to either environmental or product liability issues. This variation in weighting as a rating consideration can also apply to factors that we chose not to attempt to represent in the grid. For example, liquidity is a rating consideration that can sometimes be critical to ratings and under other circumstances may not have a substantial impact in discriminating between two issuers with a similar credit profile.Ratings can be heavily affected by extremely weak liquidity that magnifies default risk. However, two identical companies might be rated the same if their only differentiating feature is that one has a good liquidity position while the other has an extremely good liquidity position. This illustrates some of the limitations for using grid-indicated ratings to predict rating outcomes. Another consideration is the increase in pension underfunding that occurred at the end of 2008 as a result of large declines in the global equity markets.Increased pension fund liability is unlikely to be the sole driver of ratings downgrades where issuers have adequate liquidity, sufficient resources to alleviate their funding deficiency over time and financial metric contraction is modest for their rating category and the metric contraction is expected to only temporarily deviate. In evaluating the impact of an issuer’s pension liability on ratings, the analyst will consider the magnitude of the shortfall, the ability of the company to reduce the shortfall over time using internal sources and committed external sources of capital, and the plans for doing so.Issuers with higher ratings are likely to avoid a downgrade solely resulting from the increased pension liability if there is a clearly articulated plan for reducing the liability and we believe there are resources available to meet the plan without putting the core business and financial profile at risk. Issuers with speculative grade ratings and those at the lower end of investment grade rating levels are at greater risk of ratings transition because of higher potential exposure to liquidity is sues and weaker perceived capability of eradicating the funding liability without weakening the company’s financial or business position. 7 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody’s Global Corporate Finance Global Chemical Industry In addition, our ratings incorporate expectations for future performance, while the financial information that is used to illustrate the mapping in the grid is historical in practice we look at a combination of prior years and future years; usually three years of history and two years looking forward. In some cases, our expectations for future performance may be informed by confidential information that we cannot publish.In other cases, we estimate future results based upon past performance, industry trends, demand and price outlook, competitor actions and other factors. In either case, predicting the future is subject to the risk of substantial i naccuracy. Assumptions that can cause our forward looking expectations to be incorrect include unanticipated changes in any of the following: the macroeconomic environment and general financial market conditions, industry competition, new technology, regulatory actions, and changes in environmental regulation. Conclusion: Summary of the Grid-Indicated Rating OutcomesThe methodology grid-indicated ratings based on last twelve month financial data as of the quarter end closest to September, 30, 2009 map to current assigned ratings as follows (see Appendix B for the details): ? ? 8 companies map to their assigned rating 10 companies have a grid-indicated rating that is one or two alpha-numeric notches from the assigned rating 2 companies have a grid-indicated rating that is three notches from their assigned rating ? Overall, the framework indicates that there are an even number of companies whose grid-indicated rating is below their actual rating (6) than above their actual rating (6). This can be attributed to a variety of factors including: (a) willingness to look through periods of stronger or weaker activity where appropriate; (b) grid metrics do not capture our expectation of lower raw material costs and their benefit to margins and (c) liquidity concerns such as generating cash from working capital in a downturn are not fully captured by the grid. 18 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody's Global Corporate Finance Global Chemical IndustryAppendix A: Global Chemical Industry Methodology Factor Grid Weight Factor 1: Business Profile a) Business Position Assessment Factor 2: Size & Stability a) Revenue (Billions of US$) b) # of Divisions of Equal Size c) Stability of EBITDA Factor 3: Cost Position a) EBITDA Margin b) ROA – EBIT / Assets Factor 4: Leverage / Financial Policies * a) Current Debt / Capital b) Debt / EBITDA Factor 5: Financial Strength * a) EBIT DA / Interest Expense b) Retained Cash Flow / Debt c) Free Cash Flow / Debt 9. 09% 9. 09% 27. 28% 9. 09% 9. 09% 9. 09% 18. 19% 9. 09% 9. 09% 18. 9% 9. 09% 9. 09% 27. 28% 9. 09% 9. 09% 9. 09% ? 20. 0x ? 65. 0% ? 40. 0% 15. 0x – 20. 0x 45. 0% – 65. 0% 25. 0% – 40. 0% 10. 0x – 15. 0x 30. 0% – 45. 0% 15. 0% – 25. 0% 5. 0x – 10. 0x 20. 0% – 30. 0% 8. 0% – 15. 0% 2. 0x – 5. 0x 10. 0% – 20. 0% 4. 0% – 8. 0% 1. 0x – 2. 0x 5. 0% – 10. 0% 0. 5% – 4. 0% 0. 5 – 1. 0x 1. 0% – 5. 0% 0. 0 – 0. 5% < 0. 5x < 1. 0% < 0. 0% < 15. 0% < 0. 50x 15. 0% – 25. 0% 0. 50x – 1. 50x 25. 0% – 35. 0% 1. 50x – 2. 25x 35. 0% – 50. 0% 2. 25x – 3. 00x 50. 0% – 70. 0% 3. 00x – 4. 00x 70. 0% – 80. 0% 4. 00x – 6. 00x 80. 0% – 95. % 6. 00 – 8. 00x ? 95. 0% ? 8. 00x ? 30. 0% ? 25. 0% 20. 0% – 30. 0% 15. 0% â €“ 25. 0% 15. 0% – 20. 0% 10. 0% – 15. 0% 10. 0% – 15. 0% 7. 0% – 10. 0% 8. 0% – 10. 0% 4. 0% – 7. 0% 4. 0% – 8. 0% 2. 0% – 4. 0% 1. 0% – 4. 0% 0. 5% – 2. 0% < 1. 0% < 0. 5% ? $50. 0 8 > 2. 0% $20. 0 – $50. 0 6 to 7 2. 0% – 6. 0% $10. 0 – $20. 0 5 6. 0% – 12. 0% $5. 0 – $10. 0 4 12. 0% – 20. 0% $1. 0 – $5. 0 2 or 3 20. 0% – 30. 0% $0. 2 – 1. 0 1 or 2 30. 0% – 40. 0% $0. 1 – $0. 2 1 40. 0% – 60. 0% < $0. 1 0. 5 ? 60. 0% ? 6. 0 4. 5 – 6. 0 3. 5 – 4. 5 2. 5 – 3. 5 1. 5 – 2. 5 0. – 1. 5 0. 5 – 0. 5 < – 0. 5 Aaa Aa A Baa Ba B Caa Ca * Where appropriate net adjusted debt may be used (see discussion Cash Balances and Net Debt Considerations) 19 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating Methodology Moody's Global Corporate Finance Global Chemical Industry Appendix B: Methodology Grid-Implied Ratings Overall Grid Implied Rating Issuer Moody's Rating Business Profile Size & Stability # of Divisions of Equal Size Baa Aa Aa Aa Aa A A B A Baa Ba Aa Ba B Ba B Caa Ba B Ba Cost PositionLeverage / Financial Policies EBITDA/ Interest Expense (3 Yr) Avg Aaa A A Aaa A Ba Baa Aaa A Baa A A B Ba B Ba B Ba B Ca Financial Strength Retained Cash Flow/ Debt (3 Yr Avg) Aaa A Baa A Ba Ba Ba Aaa A Baa Baa Baa B Ba B Ca Ba Ba Ba Caa Free Cash Flow/ Debt (3 Yr Avg) Ca Baa Ba Ca Ca Ba Ba Aa B B Ba Ba Ca Ba Ba Ca Ba Ca Ba Ca Business Position Assessment Shin-Etsu Chemical Company Ltd BASF (SE) E. I. du Pont de Nemours and Company Revenue (Billions of US$) A Aaa Aa Ba Baa Aa Aa Baa A Baa A Aaa Baa Baa Ba Ba Baa A Ba Baa Stability of EBITDA Baa A Baa Ba Baa A Aa Ca Baa Ba Ba Baa Ba Ba A Baa Ca Ba Ba BaEBITDA Margin % (3 Year Avg) Aaa A A Baa Baa A Baa Aaa Baa A Baa Baa A Aa A A Baa Ba B Ba ROA – EBIT / Assets (3 Yr Avg) A A A Ba Ba Ba Ba Aaa A A A A Baa A Baa A Baa Ba Ba Ba Current Debt/Capital Aaa Baa Ba A Ba Baa Baa Baa Baa Ba Ba Ba B Caa Caa Caa Ba B Caa Ca Debt/ EBITDA (3 Yr Avg) Aaa Aa Baa A Ba Ba Ba Aa A Baa Baa Baa Ba Ba B B B B B Ca Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 A1 A1 A3 Baa1 Baa3 Baa1 Baa1 A2 Baa1 Baa2 Baa2 A3 Ba3 Ba1 Ba1 Ba3 B1 Ba3 B1 B2 Aa Aa Aa A Aa Aa A A Ba A Baa Aa B Baa A Baa Ca Baa B Baa Kaneka Corporation Teijin Limited Bayer AG Akzo Nobel N.V. Potash Corporation of Saskatchewan LG Chem, Ltd. Eastman Chemical Company Yara International ASA Dow Chemical Company (The) Braskem SA Celanese Corporation Nalco Company ISP Chemco LLC NOVA Chemicals Corporation Huntsman Corporation PolyOne Corporation Hexion Specialty Chemicals Inc. Positive Outlier Negative Outlier For illustrative purposes most financial metrics used the last three full fiscal years of reported data FYs 2006, 2007 and 2008 20 December 2009 ? Rating Methodology ? M oody’s Global Corporate Finance – Global Chemical Industry Rating MethodologyMoody's Global Corporate Finance Global Chemical Industry Appendix C: Observations and Outliers for Grid Mapping Factor 1 – Business Profile The majority of positive outliers for business profile are associated with companies whose financial strength, financial policy measures or liquidity are weakly positioned, providing offsets that are more consistent with the overall ratings. Factor 1: Business Profile Issuer Shin-Etsu Chemical Company Ltd BASF (SE) E. I. du Pont de Nemours and Company Kaneka Corporation Teijin Limited Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan Inc.LG Chem, Ltd. Eastman Chemical Company Yara International ASA Dow Chemical Company (The) Braskem SA Celanese Corporation Nalco Company ISP Chemco LLC NOVA Chemicals Corporation Huntsman Corporation PolyOne Corporation Hexion Specialty Chemicals Inc. Positive Outlier Rating Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Ba a1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 Business Position Assessment Aa Aa Aa A Aa Aa A A Ba A Baa Aa B Baa A Baa Ca Baa B Baa Negative Outlier 21 December 2009 ? Rating Methodology ? Moody’s Global Corporate Finance – Global Chemical Industry Rating MethodologyMoody's Global Corporate Finance Global Chemical Industry Factor 2 – Size & Stability Here the majority of positive outliers for revenue are associated with companies whose financial strength, financial policy measures or liquidity are relatively weakly positioned, providing offsets that are more consistent with the overall ratings. The negative outliers are largely related to the stability of EBITDA metric and reflect the volatility of cash flows in certain companies and sectors due to unprecedented high raw material prices and the significant global economic downturn in 2008.Factor 2: Size & Stability Revenue (Billions of US$) A Aaa Aa Ba Baa Aa Aa Baa A Baa A Aaa Baa Baa Ba Ba Baa A Ba Baa Issuer Shin-Etsu Chemical Company Ltd BASF (SE) E. I. du Pont de Nemours and Company Rating Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 # of Divisions of Equal Size Baa Aa Aa Aa Aa A A B A Baa Ba Aa Ba B Ba B Caa Ba B Ba Stability of EBITDA Baa A Baa Ba Baa A Aa Ca Baa Ba Ba Baa Ba Ba A Baa Ca Ba Ba Ba Kaneka Corporation Teijin Limited Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan Inc. LG Chem, Ltd.Eastman Chemical Company Yara International ASA Dow Chemical Company (The) Braskem SA Celanese Corporation Nalco Company ISP Chemco LLC NOVA Chemicals Corporation Huntsman Corporation PolyOne Corporation Hexion Specialty Chemicals Inc. Positive Outlier Negative Outlier 22 December 2009 ? Rating