Q. Can you provide some clarity to the whole situation regarding my Dow Chemical Co. shares? I have been confused by what's been going on. - BR, via the Internet.

A. The nation's largest chemical manufacturer became caught up in a legal soap opera over the large deal it cut in July to acquire Rohm & Haas Co., which became unattractive once the global economy stalled.

Complicating matters, Kuwait's government-run petrochemical company pulled out of a planned separate joint venture with Dow Chemical. That relationship was to have provided $9 billion to help pay for the Rohm & Haas acquisition.

After litigation was filed, Dow Chemical agreed to close on its acquisition of Rohm & Haas, which makes electronic components and paints. The deal will cost $16.3 billion, including transaction fees and delay penalties.

Under the new arrangement, two major shareholders of Rohm & Haas have agreed to invest as much as $3 billion in the combined company to help reduce Dow Chemical's debt financing.

This drama with major financial consequences, occurring in tandem with the downturn in the economy, has damaged the company's stock.

Dow Chemical shares are down 55 percent this year, following last year's 62 percent drop. The company last month announced it was cutting its quarterly dividend.

It had a net loss of $1.55 billion in its fourth quarter, including one-time items, on a 23 percent decline in sales. In January it announced that it would cut 5,000 full-time jobs, close 20 plants and sell several businesses. Rohm & Haas, on the other hand, was a better performer, with a $32 million profit from continuing operations for the same quarter.

Although Dow Chemical is in generally good financial health, the added burden of debt related to Rohm & Haas at a time when revenue is weak has made investors wary.

Analysts' ratings on Dow Chemical, according to Thomson Reuters, consist of two "buys", eight "holds", one "underperform" and one "sell".

The firm produces plastics, chemicals, agricultural products and other specialized products. A bright note is its agricultural sciences segment, which has turned in record sales for 10 successive quarters.

Despite the fourth-quarter loss, Dow Chemical posted a full-year net profit. Earnings are expected to decline 67 percent this year compared with the 27 percent decline forecast for the major diversified chemicals industry. Next year's predicted decline is 31 percent versus 23 percent for its peers. The five-year annualised return projection of seven percent compares to six percent industrywide.

Q. Please share your opinion of FMI Common Stock Fund. - CP, via the Internet.

A. It has outperformed most of its mid-cap peers by emphasizing a compact portfolio of carefully researched stocks in companies with strong franchises.

Sounds like a basic recipe, yet few funds have stuck with it during the past year of economic and market indigestion.

The $391 million FMI Common Stock Fund is down 29 percent over the past 12 months yet still ranks in the top four percent of mid-cap growth and income funds. Its three-year annualised decline of 11 percent puts it in the top eight percent of its peers.

"For most people this could be the first or second position in their portfolio, and I recommend it," said Andrew Gogerty, analyst with Morningstar Inc. in Chicago. "However, it does run a compact portfolio of about 40 stocks, so one or two misplaced bets could have a bigger negative impact than in a portfolio of 200 holdings."

The fund is run by a five-person investment policy committee headed by Ted Kellner, who has been with the fund since its 1981 inception, and Patrick English, who is responsible for day-to-day operations.

The team invests in small and midsize companies featuring durable business models with recurring revenue and strong returns. Its investment philosophy should not be expected to do as well as its peers in growth-led rallies.

FMI Common Stock takes a long-term approach, and turnover is low. Over the past year it sold two of its successes, Family Dollar Stores Inc. and Ruddick Corp., after it deemed them fully valued.

It used the proceeds to buy shares of asset manager Affiliated Managers Group Inc. and dental-supply firm Patterson Cos.

Nearly one-fourth of the portfolio is in business services, with industrial materials and consumer goods other major concentrations. Top holdings include Arrow Electronics Inc., Affiliated Managers Group, Old Republic International Corp., MPS Group Inc., Watsco Inc., Valspar Corp., Jack Henry & Associates Inc., PetSmart Inc. and Beacon Roofing Supply Inc.

The "no-load" (no sales charge) fund requires a $1,000 investment and has a 1.22 percent expense ratio.

Q. I am retired and own my home. My savings have taken a beating, and my son suggested a reverse mortgage. How do they work? - MI, via the Internet

A. Although many issuers of reverse mortgages have decided to pull back until the economy improves, one type being offered is the Home Equity Conversion Mortgage, insured by the Federal Housing Administration and available to homeowners over 62.

The lender makes a payment or payments to the borrowing homeowner, who keeps control of the house and doesn't have to pay the loan back as long as he or she lives there.

The homeowner still must pay property taxes, homeowner's insurance and make property repairs.

When the loan is over, the homeowner or heirs must repay the cash advances, plus interest.

"The housing crisis has generated more interest in reverse mortgages because people find themselves cash constrained or their investments aren't paying what they once were," said Peter Bell, president of the non-profit National Reverse Mortgage Lenders Association in Washington, D.C.

A rough rule of thumb is that the percentage of the value of the home available to you is roughly your age minus 10, said Mr. Bell, so that those 75 years old would have 65 percent of the home's value available to them. The government's economic stimulus plan has increased the maximum to $625,500, from $417,000, starting this year.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N. Central Ave., Suite 302, Phoenix, AZ 85004-1248, or by e-mail at andrewinv@aol.com

(C) 2009 TRIBUNE MEDIA SERVICES INC.