MONSANTO CO /NEW/, S-1/A, 2000-09-26

MONSANTO CO /NEW/
S-1/A, 2000-09-26
AGRICULTURAL CHEMICALS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 2000
REGISTRATION NO. 333-36956
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
MONSANTO COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <S> <C>
DELAWARE 2879 43-1878297
(PRIMARY STANDARD
INDUSTRIAL
(STATE OR OTHER JURISDICTION CLASSIFICATION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
800 NORTH LINDBERGH BOULEVARD
ST. LOUIS, MISSOURI 63167
(314) 694-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
R. WILLIAM IDE III, ESQ.
MONSANTO COMPANY
800 NORTH LINDBERGH BOULEVARD
ST. LOUIS, MISSOURI 63167
(314) 694-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
<TABLE>
<S> <C> <C> <C>
RICHARD T. COLLIER, ESQ. ERIC S. ROBINSON, ESQ. MATTHEW G. HURD, ESQ. JOHN W. WHITE, ESQ.
DON W. SCHMITZ, ESQ. WACHTELL, LIPTON, ROSEN & KATZ SULLIVAN & CROMWELL CRAVATH, SWAINE & MOORE
PHARMACIA CORPORATION 51 WEST 52ND STREET 125 BROAD STREET WORLDWIDE PLAZA
100 ROUTE 206 NORTH NEW YORK, NY 10019 NEW YORK, NY 10004-2498 825 EIGHTH AVENUE
PEAPACK, NJ 07977 (212) 403-1000 (212) 558-4000 NEW YORK, NY 10019
(908) 901-8000 (212) 474-1000
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER UNIT PRICE(2) FEE(3)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $0.01 par 40,250,000 $24.00 $966,000,000 $255,024
value................. shares
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) Includes an aggregate of 5,250,000 shares which the underwriters have the
option to purchase from the Registrant solely to cover over-allotments.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(3) This amount has previously been paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION. DATED SEPTEMBER 26, 2000.

35,000,000 Shares

[MONSANTO LOGO](TM)

Common Stock

-----------

This is an initial public offering of shares of common stock of Monsanto
Company. All of the shares of common stock are being sold by Monsanto.

Prior to this offering, there has been no public market for the common stock.
It currently is estimated that the initial public offering price per share will
be between $21.00 and $24.00. Monsanto has filed an application to list the
common stock on the New York Stock Exchange under the symbol "MON."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.

-----------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

-----------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price.................................. $ $
Underwriting discount.......................................... $ $
Proceeds, before expenses, to Monsanto......................... $ $
</TABLE>

To the extent that the underwriters sell more than 35,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
5,250,000 shares from Monsanto at the initial public offering price less the
underwriting discount.

-----------

The underwriters expect to deliver the shares in New York, New York on ,
2000.

GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY

J.P. MORGAN & CO. MORGAN STANLEY DEAN WITTER

BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO.

-----------

Prospectus dated , 2000.
<PAGE>

[INSIDE FRONT COVER PAGE]

[Graphic of DNA sequences] [Graphic of barrels of crops]
[Graphic of tractor on field]

Monsanto is a leading global provider of technology-based solutions and
agricultural products that improve farm productivity and food quality.

[Graphic of Monsanto logo]
<PAGE>

PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS DOCUMENT.
THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY, ESPECIALLY THE RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED
UNDER "RISK FACTORS."

IN THIS PROSPECTUS, THE TERMS "WE," "US," "OUR" AND "MONSANTO" REFER TO
BOTH THE ISSUER IN THIS OFFERING AND OUR PREDECESSOR, THE AGRICULTURAL PRODUCTS
BUSINESS OF THE FORMER MONSANTO COMPANY (WE REFER TO THE FORMER MONSANTO
COMPANY AS "OLD MONSANTO"). IN CONNECTION WITH THE MERGER OF OLD MONSANTO AND
PHARMACIA & UPJOHN, INC., OLD MONSANTO CHANGED ITS NAME FROM "MONSANTO COMPANY"
TO "PHARMACIA CORPORATION." THE TERM "PHARMACIA" REFERS TO PHARMACIA
CORPORATION FOLLOWING THE MERGER.

MONSANTO, OUR LOGO AND OTHER TRADEMARKS, TRADE NAMES AND SERVICE MARKS OF
MONSANTO MENTIONED IN THIS DOCUMENT, INCLUDING ROUNDUP(R), ROUNDUP READY(R),
ROUNDUP ULTRA(R), ROUNDUP DRY(R), POSILAC(R), LASSO(R), HARNESS(R), MACHETE(R),
MAVERICK(R), LATITUDE(R), DEKALB(R), HYBRITECH(R), HOLDEN'S(R), YIELDGARD(R),
MAISGARD(R), BOLLGARD(R), NEWLEAF(R), ASGROW(R), HARTZ(R), AVADEX(R) AND
ENVIRO-CHEM(R) ARE THE PROPERTY OF, OR ARE LICENSED BY, MONSANTO, PHARMACIA OR
A SUBSIDIARY OF MONSANTO OR PHARMACIA.

OUR COMPANY

We are a leading global provider, based on sales, of technology-based
solutions and agricultural products for growers and downstream customers, such
as grain processors and consumers, in the agricultural markets. The combination
of our herbicides, seeds and related genetic trait products provides growers
with integrated solutions to more efficiently and cost effectively produce
crops at higher yields, while controlling weeds, insects and diseases. Our base
business, led by Roundup and coupled with the latest tools in biotechnology,
genomics and molecular breeding, gives us a unique set of assets and
capabilities.

Our family of Roundup herbicides provides a strong foundation for our
overall business. Over the past three decades, we have grown our Roundup
herbicide into the world's best-selling herbicide. While Roundup competes with
numerous other herbicides sold by a variety of companies, its sales in 1999
were more than five times those of the next largest selling herbicide. Our
sales volumes of Roundup and other glyphosate-based herbicides have grown at an
average annual growth rate of approximately 20% over the last 10 years. In this
same period, these products maintained an average sales growth rate of
approximately 11%, even as we reduced prices significantly and our patents
expired in countries outside the United States. Roundup's success is based on
its ability to provide growers with improved economic and environmental
benefits, as well as our low-cost manufacturing position and formulations
expertise.

With respect to the crops on which we have chosen to focus, we hold leading
positions by acreage in seeds, seed traits and genetic technologies that
protect crops from insects and that provide effective weed control options. Our
global seed infrastructure enables us to coordinate our agricultural chemicals
and seeds and traits research to introduce new products more rapidly and
efficiently to our customers. In 1999, we held the No. 1 or No. 2 seed market
share position in key markets for corn and soybeans, as well as the No. 1
position in the European wheat market. Acreage planted with our seed traits
grew from approximately 3 million in 1996 to approximately 86 million in 1999,
accounting for over 70% of the worldwide acres planted with herbicide-tolerant
and insect-resistant traits. We estimate that our acreage of biotechnology
traits in the United States for 2000 increased by approximately 5%. Our trait
products are available through an extensive network of seed companies which
have licensed our technologies. We also have one of the largest efforts in the
amount spent on conventional plant breeding for the crops on which we have
chosen to focus.

3
<PAGE>

Over the last several years, we have made a major change in our research
and development to focus on gene-based capabilities. Our integrated efforts in
this area are threefold. First, our genomics research and development helps us
understand the structure and function of genes as well as how those genes are
activated. Second, our molecular breeding effort combines our genomics
capabilities and conventional breeding expertise to significantly speed up
commercialization of new seeds with desired attributes, without genetically
modifying plants. Finally, our biotechnology research and development focuses
on genetically enhancing crops via incorporation of tailored genes to add
specific benefits. We have integrated our products and technologies to provide
customers with unique solutions. As a result, we believe we are well positioned
to maintain our leadership positions and to take advantage of industry
developments.

STRATEGY

Our goal is to create and deliver integrated agricultural solutions that
substantially increase the volume and quality of global food production while
reducing economic costs and environmental effects. We aim to achieve this by
integrating our traditional agricultural products with advanced technological
tools, including genomics, biotechnology and molecular breeding. Our strategy
is built around the following focus areas:

. CONTINUING TO DEVELOP INTEGRATED SOLUTIONS FOR GROWERS. We are
continuing to integrate our agricultural chemicals with our seed and
technology products to offer agricultural solutions to growers that meet
their production needs.

. MAXIMIZING THE GROWTH OF THE ROUNDUP BUSINESS. We aim to increase our
sales and income from Roundup by:

. ENCOURAGING EXPANDED ADOPTION OF CONSERVATION TILLAGE TECHNIQUES BY
GROWERS WORLDWIDE. We estimate that conservation tillage is
currently practiced on only approximately 200 million of the
estimated approximately 740 million acres in developed countries on
which this farming technique could potentially be practiced. Roundup
is the herbicide of choice in most conservation tillage markets
today, and we will work to expand our position in this key area.

. INCREASING SALES OF ROUNDUP READY CROPS, WHICH TOLERATE ROUNDUP
HERBICIDE FOR EFFECTIVE WEED CONTROL. We expect additional weed
control opportunities for Roundup with the introduction of Roundup
Ready crops into new markets and with the development of new
products with the Roundup Ready technology.

. INTRODUCING ADDITIONAL PROPRIETARY FORMULATIONS OF ROUNDUP.

. SELECTIVELY REDUCING PRICES TO ENCOURAGE INCREASED USAGE OF
ROUNDUP. We have implemented a pricing strategy for Roundup in which
we have selectively reduced prices to encourage increased use.
Historically, our net sales of Roundup have increased as the growth
in volumes has more than offset our price reductions.

. MAINTAINING OUR POSITION AS A LOW-COST, HIGH-QUALITY PRODUCER OF
GLYPHOSATE, THE ACTIVE INGREDIENT IN ROUNDUP.

. BUILDING ON OUR RELATIONSHIPS WITH OUR DISTRIBUTION PARTNERS. Our
business is supported by a network of wholesalers, distributors and
retailers that offer an array of

4
<PAGE>

Monsanto products. We expect to continue to focus on and strengthen
these relationships.

. ACCELERATING THE DEVELOPMENT AND COMMERCIALIZATION OF NEW PRODUCTS. We
expect to remain a leader in the development and introduction of new
technologies for food and agricultural production by:

. REDUCING THE TIME AND COST OF DISCOVERING NEW PRODUCTS.

. EXPANDING OUR TECHNOLOGICAL EXPERTISE VIA STRATEGIC
RELATIONSHIPS.

. USING OUR GLOBAL SEED INFRASTRUCTURE AND DIVERSE GERMPLASM TO
ACCELERATE THE COMMERCIALIZATION OF NEW PRODUCTS TO OUR BROAD
CUSTOMER BASE.

. HELPING TO BROADEN PUBLIC UNDERSTANDING AND ACCEPTANCE OF NEW
TECHNOLOGIES AND PRODUCTS. We continue to address concerns of consumers,
public interest groups and government regulators regarding the
agricultural and food products developed through biotechnology. We hope
to broaden public understanding and acceptance of biotechnology through
a number of initiatives we have launched that educate the public on the
safety and benefits of plant biotechnology.

RISK FACTORS

The principal risks we face in implementing our strategy are:

. failing to maintain or secure consumer confidence in, or to maintain
or receive governmental approvals for, our products developed through
biotechnology;

. increasing generic and branded competition for Roundup, on which our
business is substantially dependent, following the expiration of our
U.S. patent protection in September 2000; and

. the other risks described in "Risk Factors."

5
<PAGE>

OUR RELATIONSHIP WITH PHARMACIA CORPORATION

On December 19, 1999, old Monsanto entered into a merger agreement with
Pharmacia & Upjohn, pursuant to which a wholly owned subsidiary of old Monsanto
merged with and into Pharmacia & Upjohn, with Pharmacia & Upjohn surviving as a
wholly owned subsidiary of old Monsanto. In connection with the merger, old
Monsanto changed its name from "Monsanto Company" to "Pharmacia Corporation."
The merger became effective on March 31, 2000. We were incorporated in Delaware
on February 9, 2000 as a wholly owned subsidiary of old Monsanto under the name
"Monsanto Ag Company." On March 31, 2000, we changed our name to "Monsanto
Company."

Until the completion of this offering, we will continue as a wholly owned
subsidiary of Pharmacia. After the completion of this offering, Pharmacia will
own approximately 86.3% of our outstanding common stock, or 84.5% if the
underwriters exercise their over-allotment option in full. Pharmacia has
informed us that it has no present plans to dispose of its interest in our
common stock.

Prior to this offering, we entered into agreements with Pharmacia related
to the transfer of our business operations from Pharmacia. These agreements
provided for, among other things, the transfer from Pharmacia to us of assets
and the assumption by us of liabilities relating to our business, which have
been substantially completed. For more information regarding the assets and
liabilities transferred to us, see "Arrangements Between Monsanto and
Pharmacia," "Merger and Reorganization Transactions Occurring Prior to This
Offering," "Pro Forma Condensed Combined Financial Statements" and our combined
financial statements and the notes to these statements that are included
elsewhere in this document.

The agreements between us and Pharmacia also govern our various interim and
ongoing relationships. See "Risk Factors--Risks Related to Our Relationship
with Pharmacia" and "Arrangements Between Monsanto and Pharmacia."

6
<PAGE>

THE OFFERING

Common stock offered........ 35,000,000 shares

Common stock to be
outstanding immediately
after this offering........ 255,000,000 shares

Common stock to be held by
Pharmacia immediately
after this offering....... 220,000,000 shares

Dividend policy............. Our board of directors intends to declare
quarterly dividends on our common stock. We
expect that the quarterly dividend rate will be
$0.12 per share (an annual rate of $0.48 per
share). We expect that a prorated fourth quarter
dividend will be declared in January 2001 and
paid on February 1, 2001. See "Dividend Policy."

Use of proceeds............. We expect to use the estimated $744.2 million of
net proceeds from this offering to pay off a
substantial portion of the commercial paper
obligations issued by Pharmacia that are to be
assumed by Monsanto. If the overallotment option
is exercised, we expect to use the estimated
$111.6 million of additional net proceeds to
reduce further such commercial paper obligations.
See "Use of Proceeds."

New York Stock Exchange
symbol..................... MON

Unless we specifically state otherwise, the information in this document
does not take into account the possible issuance of up to 5,250,000 additional
shares of our common stock, which the underwriters have the option to purchase
from us solely to cover over-allotments. If the underwriters exercise this
option in full, there will be 260,250,000 shares of our common stock
outstanding following this offering. See "Underwriting."

We expect to grant options to employees and directors as of the date of
this offering to purchase an aggregate of approximately 24.1 million shares of
our common stock at an exercise price equal to the initial public offering
price. See "Management--Incentive Plans--Monsanto 2000 Management Incentive
Plan" and "--Monsanto Broad-Based Stock Option Plan."

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

We were incorporated in Delaware on February 9, 2000 as a wholly owned
subsidiary of old Monsanto under the name "Monsanto Ag Company." On March 31,
2000, we changed our name to "Monsanto Company." Our principal executive
offices are located at 800 North Lindbergh Boulevard, St. Louis, Missouri
63167, and our telephone number is (314) 694-1000. Our website is
WWW.MONSANTO.COM. The information and content contained on our website are not
part of this document.

7
<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary historical and pro forma financial data should be read
together with "Pro Forma Condensed Combined Financial Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our historical combined financial statements and the notes to
those combined financial statements included elsewhere in this prospectus. The
combined operating results data, cash flow measures and other selected data set
forth below for the six months ended June 30, 2000 and 1999 and the combined
financial position data as of June 30, 2000 are derived from our unaudited
combined financial statements included elsewhere in this document. The combined
operating results data, cash flow measures and other selected data set forth
below for the years ended December 31, 1999, 1998, and 1997 are derived from
our audited combined financial statements included elsewhere in this document.
The combined operating results data, cash flow measures and other selected data
for the years ended December 31, 1996 and 1995 are derived from our unaudited
combined financial statements that are not included in this document. In the
opinion of management, these unaudited financial data have been prepared on a
basis consistent with the audited financial statements included in this
document and include all adjustments, which are only normal, recurring
adjustments, necessary for a fair statement of the operating results and
financial position for the unaudited periods.

The historical financial information may not be indicative of our future
performance and does not necessarily reflect what our financial position and
results of operations would have been had we operated as a separate, stand-
alone entity during the periods presented. Financial information for the first
six months of 2000 should not be annualized. We have historically generated the
majority of our sales during the first half of the year, primarily due to the
timing of the planting and growing season. As a result, in each of the last two
years all of our operating income was generated in the first half of the year
and we incurred operating losses in the second half of the year. See Note 17 of
Notes to Combined Financial Statements. Consistent with this, cash used in
operations has historically been higher during the first half of the year,
which has resulted in higher borrowings than at year end.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- ---------------------------------------------
2000 1999 1999 1998 1997 1996 1995(4)
------ ------ ------ ------------- ------ ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net Sales............... $3,290 $3,136 $5,248 $ 4,448 $3,673 $2,928 $2,429
Income from
Operations(1).......... 635 746 610 55 13 506 512
Income (Loss) Before
Income Taxes........... 479 581 263 (60) 1 531 544
Net Income (Loss)....... 269 369 150 (125) 31 319 365
CASH FLOW MEASURES:
Net Cash Provided by
(Used in) Operations... $ (822) $ (513) $ 120 $ (528) $ 248 $ (518) N/A
Net Cash (Used in)
Investing Activities... (424) (290) (415) (4,544) (1,878) (223) N/A
Net Cash Provided by
Financing Activities... 1,261 837 284 5,073 1,581 825 N/A
OTHER SELECTED DATA:
Capital Expenditures.... $ 325 $ 263 $ 632 $ 432 $ 298 $ 216 98
Depreciation and
Amortization........... 275 251 547 368 245 148 142
EBIT(2)................. 607 717 506 34 21 530 517
EBIT (excluding unusual
items)(2)(3)........... 764 717 607 638 654 610 N/A
EBITDA(2)............... 882 968 1,053 402 266 678 N/A
EBITDA (excluding
unusual items)(2)(3)... 1,039 968 1,154 1,006 899 758 N/A
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------
PRO
ACTUAL FORMA(5)
------- --------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION:
Total Assets................................................. $12,351 $12,399
Working Capital.............................................. 1,917 2,043
Short- and Long-Term Debt of Parent Attributable to Monsanto
Company Agricultural Business............................... 5,557 2,690
Equity....................................................... 4,943 7,446
</TABLE>

8
<PAGE>

(1) Income from operations for the six months ended June 30, 2000 included $157
million in costs associated with our plan to focus on key projects,
resulting in the termination of certain research and development programs
and the reversal of restructuring reserves; for 1999 included $50 million
for accelerated business integration costs and the reversal of
restructuring reserves established in 1998; for 1998 included $583 million
for restructuring charges and the write-off of acquired in-process research
and development; for 1997 included $633 million for the write-off of
acquired in-process research and development; for 1996 included
restructuring and other unusual charges of $95 million; and for 1995
included net restructuring expenses and other unusual items of $17 million.

(2) EBIT is defined as earnings before interest and taxes. EBITDA is defined as
earnings before interest, taxes, depreciation and amortization. EBITDA
eliminates the effect of depreciation of tangible assets and amortization
of intangible assets, most of which were acquired in seed company
acquisitions accounted for under the purchase method of accounting. The
presentation of EBIT (excluding unusual items) and EBITDA (excluding
unusual items) is intended to supplement investors' understanding of our
operating performance. It is not intended to replace net income, cash
flows, financial position or comprehensive income, and it is not a measure
of financial performance as determined in accordance with accounting
principles generally accepted in the United States. EBITDA (excluding
unusual items) may not be comparable to other companies' EBITDA performance
measures because those companies may not exclude unusual items.

(3) Unusual items for the six months ended June 30, 2000 included $157 million
in costs associated with our plan to focus on key projects, resulting in
the termination of certain research and development programs and the
reversal of restructuring reserves; for 1999 included $101 million for
accelerated business integration costs, failed merger costs, restructuring
reversals and a gain on the sale of a business; for 1998 included $604
million for restructuring costs, the write-off of acquired in process
research and development and charges to cancel DEKALB Genetics Corporation
stock options; for 1997 included $633 million for the write-off of acquired
in-process research and development; for 1996 included $80 million for
restructuring and other unusual charges which were partially offset by
minority interest associated with certain asset impairments; and for 1995
included net restructuring expenses and other unusual items of $17 million.

(4) The cash flow measures for 1995 are not available because it is not
practicable to prepare.

(5) The pro forma financial position data presented above are derived from our
unaudited pro forma condensed combined financial statements included
elsewhere in this document. They are presented for illustrative purposes
only and illustrate the estimated effects of the separation of our
businesses from those of Pharmacia, this offering and related transactions
described in the notes to our unaudited pro forma condensed combined
financial statements as if these transactions had occurred on June 30,
2000.

9
<PAGE>

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND THE OTHER INFORMATION
CONTAINED IN THIS DOCUMENT, INCLUDING THE FINANCIAL STATEMENTS AND RELATED
NOTES, BEFORE INVESTING IN OUR COMMON STOCK. THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU COULD LOSE ALL OR PART
OF YOUR INVESTMENT. IF ANY OF THE EVENTS DESCRIBED BELOW WERE TO OCCUR, OUR
BUSINESS, PROSPECTS, FINANCIAL CONDITION, RESULTS OF OPERATIONS OR CASH FLOW
COULD BE MATERIALLY ADVERSELY AFFECTED.

RISKS RELATED TO OUR BUSINESS

NEGATIVE PUBLICITY CONCERNING, OPPOSITION TO, AND LEGAL DEVELOPMENTS AFFECTING,
PRODUCTS DEVELOPED THROUGH BIOTECHNOLOGY COULD HAVE A NEGATIVE IMPACT ON OUR
SALES, PROFITS OR STOCK PRICE

The commercial success of our products developed through biotechnology may
be adversely affected by claims that genetically modified plant products are
unsafe for consumption, pose risks of damage to the environment and create
legal, social and ethical dilemmas. The development and sales of our products
have been, and may in the future be, delayed or impaired because of adverse
public perception or regulatory concerns about the safety of our products and
the potential effects of these products on other plants, animals, human health
and the environment. For instance:

. some countries, primarily in the European Union, have instituted a de
facto moratorium on the planting of some genetically modified seeds or
on the import of grain produced from these seeds;

. some countries, including Japan, and the European Union have imposed
labeling requirements on genetically modified agricultural and food
products, which may affect the acceptance of these products;

. court decisions in Brazil have delayed planting of Roundup Ready
soybeans in that country;

. two university studies have found that a competitor's Bt corn, which
contains traits resistant to certain insects, is harmful to the Monarch
butterfly, a non-target species, and these findings could lead to
further restrictions on the planting of Bt corn generally;

. Kraft Foods recently announced a voluntary nationwide recall of taco
shells after tests indicated the presence in certain samples of
genetically modified corn approved for animal feed use but not for
human food. While all Monsanto biotechnology products currently being
sold have been approved for feed and food use, this broader industry
issue could negatively affect the regulatory process, food company use
and public acceptance of biotechnology products;

. partly in response to criticism by opponents of biotechnology, the
Clinton Administration has recently announced steps to strengthen
science-based governmental regulation of agricultural biotechnology
products and consumers' access to information about the products of
agricultural biotechnology;

. companies in food-related industries, such as the Archer Daniels
Midland Company, have paid premiums for non-genetically modified crops,
and other companies, such as Gerber Products Company, have announced
that they will not use genetically modified crops; and

. advocacy groups have engaged in publicity campaigns and filed lawsuits
in various countries against companies, including ours, seeking to halt
biotechnology approval activities or influence public opinion against
products developed through biotechnology.

Failure to maintain or secure consumer confidence in, or to maintain or receive
governmental approvals for, our products could have a significant negative
impact on our sales, profits or stock price.

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OUR HEAVY DEPENDENCE ON SALES OF OUR ROUNDUP HERBICIDES COULD ADVERSELY AFFECT
OUR BUSINESS AND PLACE US AT A COMPETITIVE DISADVANTAGE

Our business is substantially dependent upon the sale of our family of
Roundup and other glyphosate-based herbicides, which in 1999 accounted for
approximately 73% of our Agricultural Productivity segment sales and
approximately 50% of our total sales. Further, our agricultural chemicals
business is less diversified with respect to product offerings than the
agricultural chemicals businesses of our principal competitors, which may give
these competitors an advantage in meeting customer needs. Should an event occur
that adversely affects nonselective herbicides in general, or Roundup in
particular, our business would be adversely affected and our competitors that
offer a broader array of products may have a competitive advantage.

INCREASED GENERIC AND BRANDED COMPETITION FOR ROUNDUP HERBICIDES FOLLOWING THE
EXPIRATION OF OUR U.S. PATENT PROTECTION IN SEPTEMBER 2000 COULD NEGATIVELY
AFFECT OUR SALES AND PROFITS

Our sales and profits could be adversely affected because our patent
protecting glyphosate, the active ingredient in Roundup, expired in the United
States on September 20, 2000. Sales of the family of Roundup herbicides
protected by this patent in the United States, excluding our Roundup lawn and
garden products, represented approximately 20% of our total company sales in
1999. Following the expiration of our patent, these herbicides are likely to
face increasing competition from lower-priced generic and branded glyphosate
products.

Our sales and profits may decline as we reduce our prices on Roundup
herbicides. We reduced our prices on Roundup products in the United States by
16% to 22% in September 1998 for the following growing season and expect to
reduce such prices further. There is no assurance that any increase in volumes
will offset price reductions. If they do not, our profits will decline.

OUR PRODUCT DEVELOPMENT EFFORTS DEPEND ON NEW TECHNOLOGIES THAT MAY NOT BE
SUCCESSFUL, WHICH COULD HAVE A NEGATIVE IMPACT ON OUR GROWTH

Our failure to develop successful new or improved products, which require
substantial time and resources to develop, could adversely affect our sales,
business growth and stock price. We invested $409 million, $536 million and
$695 million in research and development in 1997, 1998 and 1999, respectively.
Our substantial investments may not result in significant increased revenues,
particularly over the next several years. To date, companies have developed and
commercialized relatively few genetically enhanced agricultural products.
Commercialization requires years of development and involves risks of failure
inherent in the development of products based on innovative technologies. These
risks include the possibility that:

. these technologies or any or all of the products based on these
technologies will be ineffective, or otherwise will fail to receive
necessary regulatory clearances;

. the products will be difficult to produce on a large scale or will be
uneconomical to market;

. proprietary rights of third parties will prevent us or our
collaborators from marketing products; and

. third parties will market superior or equivalent products or will reach
the market with their products first.

THE VALUE OF OUR INTELLECTUAL PROPERTY COULD DIMINISH DUE TO TECHNOLOGICAL
DEVELOPMENTS OR CHALLENGES BY COMPETITORS, MAKING OUR PRODUCTS LESS COMPETITIVE

The increasing importance of technology development and intellectual
property protection in the agricultural industry increases the risk that
technological advances by others could render our products less competitive.

Our intellectual property rights are material to the operation of our
business. We rely on a combination of patents, copyrights, trademarks and trade
secrets, confidentiality provisions, Plant

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Variety Protection Act registrations and licensing arrangements to establish
and protect our intellectual property. However, our business could be
negatively affected by any of the following:

. our pending patent, Plant Variety Protection and trademark registration
applications may not be allowed or may be challenged successfully by
our competitors;

. our products may rely on the technology of others and, therefore,
require us to obtain intellectual property licenses from other parties
in order for us to sell our products;

. we may be unable to obtain such intellectual property licenses that are
necessary or useful to our business on favorable terms, or at all; or

. litigation involving our intellectual property rights may have adverse
results.

Claims of intellectual property infringement may require us to enter into
costly royalty or license agreements, subject us to substantial damage claims
or cause us to stop using such technology absent a license agreement. See
"Business--Legal Proceedings" for a summary of our material pending litigation.

THIRD PARTIES MAY INFRINGE ON OUR INTELLECTUAL PROPERTY RIGHTS, AND WE MAY
EXPEND SIGNIFICANT RESOURCES ENFORCING OUR RIGHTS OR BE COMPETITIVELY
DISADVANTAGED

If we fail to protect our intellectual property rights from infringement by
third parties, our competitive position could suffer, which could harm our
profits. We spend significant resources to monitor and deter unauthorized use
of our intellectual property rights. We may not be able to detect or prevent
infringement or may lose our competitive position in the market before we do
so. See "Business--Legal Proceedings" for a summary of material suits we have
filed against our competitors alleging patent infringement.

THE SCOPE OF PATENT PROTECTION FOR OUR BIOTECHNOLOGY AND GENOMICS INTELLECTUAL
PROPERTY IS UNCERTAIN, AND CHANGES IN PATENT LAW COULD DIMINISH THE VALUE OF
OUR INTELLECTUAL PROPERTY

Patent positions in biotechnology and genomics generally are uncertain and
involve complex legal and factual questions that will determine which company
has the right to develop a particular product. Our competitors may be able to
commercialize our biotechnology or genomics discoveries. Very little case law
now exists regarding the enforceable breadth of claims in biotechnology and
genomics patents. There has been, and continues to be, intense debate on the
scope and appropriateness of patent protection for both partial gene sequences
and full-length genes. The biotechnology and genomics patent situation outside
the United States is even more uncertain and currently is undergoing review and
revision in many countries. Changes in either the patent laws or in
interpretations of patent laws in the United States and other countries may
diminish the value of our intellectual property.

FAILURE TO OBTAIN REGULATORY APPROVALS COULD DELAY OR PREVENT SALES OF OUR
PRODUCTS

The field-testing, production and marketing of our products are subject to
extensive regulations and numerous governmental approvals, which vary widely
among jurisdictions where our products are sold and substantially increase our
costs and the time it takes to bring our products to market. Regulatory
authorities can block the sale or import of our products or order a recall of
products already on the market, which could adversely affect our business. For
example, we failed to obtain approval to market our bovine growth hormone in
the European Union. As a result, our bovine growth hormone has not yet been
sold in the European Union and will not be sold unless approval is obtained.
Regulatory authorities also can impose conditions that delay production and
sale of our products, or that make the sale of our products technically or
commercially unfeasible. For instance, legal, regulatory and political hurdles
have delayed approval of the planting or importing of our Roundup Ready corn in
the European Union and our Roundup Ready soybeans in Brazil.

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REGULATION OF AGRICULTURAL BIOTECHNOLOGY IS RAPIDLY EVOLVING AND NEW, MORE
BURDENSOME REGULATORY REQUIREMENTS MAY ADVERSELY AFFECT OUR BUSINESS

Biotechnology in seed is relatively new and the biotechnology seed industry
is emerging, so the regulation of biotechnology seed quality is rapidly
evolving. As a result, regulatory authorities may impose new requirements that
increase our costs or adversely affect our business. The proliferation of
BACILLUS THURINGIENSIS (Bt) products, which contain traits resistant to certain
insects, in multiple crops could result in significant regulatory restrictions
on the total acres planted with such crops in order to prevent the development
of insect resistance. For example, the U.S. Environmental Protection Agency
(EPA) imposed limitations on the planting of Bt corn, including minimum acreage
requirements for non-genetically modified corn. Separately, the U.S. Department
of Agriculture (USDA) has proposed a rule defining the term "organic" that
excludes genetically modified crops. The scope and content of these regulations
are subject to varying degrees of controversy, public interest and political
circumstances, and, as a result, regulations have changed and may change
substantially in the future. For example, the EPA has required us and other Bt
producers to conduct additional monitoring of the effects of Bt-related
products on non-target species. The U.S. Food and Drug Administration (FDA) has
announced that it will strengthen its review of foods produced from
agricultural biotechnology to include a mandatory procedure for notification of
the FDA at least 120 days prior to marketing a product, to make supporting
scientific information available to the public, and to include guidelines for
voluntary labeling of non-biotech food. In addition, the establishment of new
organizations at the national and international levels responsible for
monitoring or studying the safety and environmental effects of genetically
modified crops and foods could lead to the adoption of more burdensome
regulations.

CONCERNS ABOUT SEED QUALITY, INCLUDING THE POSSIBLE PRESENCE OF UNINTENDED
BIOTECHNOLOGY MATERIAL, MAY RESULT IN CLAIMS AGAINST US OR NEW REGULATORY
REQUIREMENTS

The detection of unintended biotechnology material in pre-commercial seed,
commercial seed varieties or the crops and products produced can result in
unmarketability of crops grown, potential liability for us as seed producers or
technology providers, or governmental regulatory compliance actions such as
crop destruction or product recalls. For instance, the presence of Roundup
tolerance in conventional canola seed in the European Union resulted in
government-mandated destruction of growing crops in some countries, and more
recently, the reported presence of a competitor's Bt gene not approved for food
use in taco shells in the United States has resulted in government scrutiny and
a voluntary nationwide product recall. Concerns about seed quality related to
biotechnology could also lead to additional regulations on our business, such
as regulations related to testing procedures, mandatory governmental reviews of
biotechnology advances, or the integrity of the food supply chain from the farm
to the finished product. Efforts to establish practical science-based
regulation and appropriate testing programs and detection methods are affected
by the conflicts over public acceptance.

WE FACE AGGRESSIVE COMPETITION IN ALL AREAS OF OUR BUSINESS, AND IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED

The agricultural industry is highly competitive, rapidly changing and
undergoing consolidation, and we may not be able to compete effectively. Our
principal competitors are major international agrochemical and agricultural
biotechnology corporations, including companies that are part of much larger
pharmaceutical or chemical companies, with substantially greater resources than
we have for research and development, production or marketing. In addition, we
face competition from biotechnology and genomics companies, from academic
research institutions, and from seed and food companies with conventional
biotechnology research and development programs. We are unable to predict what
effect consolidations in the industry may have on price, selling strategies,
intellectual property or our competitive position.

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As new products enter the market, our products may become obsolete or our
competitors' products may be more effective, or more effectively marketed and
sold, than our products. Changes in technology and customer preferences may
result in short product life cycles. To remain competitive, we will need to
develop new products and enhance our existing products in a timely manner. We
anticipate that we may have to adjust prices on many of our products to stay
competitive and our profit margins may fall. In addition, new competitors may
emerge, and entire product lines may be threatened by new technologies or
market trends that reduce the value of these product lines. Our failure to
maintain our competitive position could have a material adverse effect on our
business and results of operations.

OUR BUSINESS IS HIGHLY SEASONAL AND WE HAVE HISTORICALLY INCURRED LOSSES IN OUR
THIRD AND FOURTH QUARTERS

The sale of agricultural chemicals and seeds is dependent upon the planting
and growing season, which varies from year to year, resulting in both highly
seasonal patterns and substantial fluctuations in our quarterly sales and
profitability. For example, in 1999, approximately 60% of our sales were
recorded in the first half of the year, which corresponds to the period that
farmers in the northern hemisphere purchase most of their seeds and chemicals
for the planting season. We had net income of approximately $369 million in the
first half of 1999 compared to a net loss of approximately $219 million in the
second half of 1999. The net loss for the second half of 1999 included $81
million of unusual items. See Note 17 of Notes to our Combined Financial
Statements included elsewhere in this document. The third quarter falls after
the end of the northern hemisphere agricultural season and before the beginning
of the main selling season in the southern hemisphere. As a result,
historically, we have our lowest quarterly net sales levels in the third
quarter and we have historically had net losses. We expect a similar level of
sales and a loss in the third quarter of 2000.

UNEXPECTED FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS MAY CAUSE OUR STOCK
PRICE TO DECLINE

A large proportion of our costs, including our selling, general and
administrative expenses, research and development costs, and production costs,
do not vary directly in relation to sales. Thus, declines in revenue, even if
small, could disproportionately affect our quarterly operating results, could
cause such results to differ materially from expectations and could cause our
stock price to decline.

WE REQUIRE A SUBSTANTIAL AMOUNT OF SHORT-TERM FINANCING TO FUND OUR WORKING
CAPITAL; ANY DOWNGRADE IN OUR CREDIT RATING COULD NEGATIVELY AFFECT OUR
PROFITABILITY AND SALES

Like many other agricultural companies, we regularly extend credit to our
customers to enable them to acquire agricultural chemicals and seeds at the
beginning of the growing season. Our credit practices, combined with the
seasonality of our sales, make us dependent on our ability to obtain
substantial short-term financing to fund our cash flow requirements. Our need
for short-term financing typically peaks in the second quarter, varying with
the timing of the planting season for a particular year. For example, our
short- and long-term debt increased from $4.4 billion on December 31, 1999 to
$5.6 billion on June 30, 2000.

We expect to continue to access the commercial paper market to meet our
seasonal financing needs in the future. Because our customer base depends upon
our ability to extend credit that we finance with short-term borrowing,
downgrades in our credit rating or other limitations on our ability to access
short-term financing would increase our interest costs and adversely affect our
sales to customers and our profitability.

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THE MAJORITY OF OUR DEBT CONSISTS OF VARIABLE-RATE, SHORT-TERM OBLIGATIONS,
WHICH CREATES INTEREST RATE AND REFINANCING RISKS

As of the closing of this offering, the majority of our debt will consist
of variable-rate, short-term obligations that we will assume from Pharmacia on
or before the closing of this offering, which will expose us to interest rate
and refinancing risks. Changes in interest rates could adversely affect our
results of operations, particularly in the second and third quarters, when our
short-term debt levels are highest. We may over time refinance all or part of
our commercial paper with medium- and/or long-term debt with fixed interest
rates, subject to market conditions. We expect any such refinancing would be at
higher interest rates than that for short-term commercial paper. There is no
assurance that we will be able to refinance our debt when it matures.

WE EXPECT TO INCUR SUBSTANTIAL CHARGES THAT WILL NEGATIVELY AFFECT OUR REPORTED
NET INCOME (LOSS)

We expect to record pretax charges of between $275 million and $325 million
over the twelve- to eighteen-month period beginning July 1, 2000, of which
approximately $130 million to $150 million is expected to be taken in the third
and fourth quarters of 2000, which will negatively affect our reported net
income (loss) over this period. These charges, as well as $157 million of net
pretax charges we recorded in the first six months of 2000, are primarily
associated with our plan to stringently focus our research and development
programs on the four key crops of corn, soybeans, wheat and cotton and our plan
to streamline our operations. Our plan includes charges to eliminate certain
non-core programs, such as laureate oil and wheat quality programs, and
facility shut-down, asset impairment and employee termination costs. While we
anticipate these actions totaling $425 million to $475 million pretax will
yield future annual cash savings, the timing of the charges as well as the
timing and the amounts of any savings realized may vary from our estimates.

OUR BUSINESS IS SUBJECT TO WEATHER CONDITIONS, COMMODITY PRICES AND OTHER
FACTORS BEYOND OUR CONTROL, WHICH MAY NEGATIVELY AFFECT SALES OF OUR PRODUCTS

Factors beyond our control may adversely affect the volumes and prices of
the agricultural chemicals and seeds we sell. Our business is sensitive to
weather conditions, including extremes such as drought, and to natural
disasters, each of which affect commodity prices, product performance, seed
yields and decisions by growers regarding purchases of seeds, traits and
chemicals. Commodity prices, government agricultural programs and consumer
preferences also affect growers' decisions about the types and amounts of crops
to plant. All of these factors may negatively influence sales of our products
and affect our pricing opportunities, selling strategies and collection
practices. If we fail to forecast accurately and manage inventory effectively,
there could be an unexpected shortfall or surplus of our products, which could
have a material adverse effect on our business.

WE MAY NOT PREVAIL IN ONGOING LITIGATION AND MAY BE REQUIRED TO PAY SUBSTANTIAL
DAMAGES

We are involved in several major lawsuits regarding contract disputes,
intellectual property issues, biotechnology, antitrust allegations and other
matters. An adverse outcome in any of these lawsuits could have a material
adverse effect on our cash flow and results of operations. Litigation is costly
and time-consuming, and diverts our management and key personnel from our
business operations. Material pending litigation includes:

. a $65 million April 1999 jury verdict, which we are appealing, in favor
of Aventis CropScience S.A. (formerly Rhone Poulenc Agrochimie S.A.)
for compensatory and punitive damages in connection with our Roundup
Ready corn;

. October 1998 lawsuits by Pioneer Hi-Bred International, Inc. claiming
misappropriation of trade secrets related to corn breeding, patent law
violations and other matters;

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. December 1999 and February 2000 class action lawsuits made on behalf of
purchasers of some of our genetically modified crops containing our
patented technology and growers of non-genetically modified crops;

. a January 2000 lawsuit by Delta and Pine Land Company seeking
unspecified compensatory damages for lost stock market value of not
less than $1 billion, as well as punitive damages, arising from the
failure of our proposed merger with Delta and Pine Land; and

. two March 2000 lawsuits by E.I. DuPont de Nemours and Company seeking
damages and equitable relief for alleged federal antitrust and state
law violations in connection with glyphosate-related and glyphosate-
tolerant soybean business matters.

We have generally not established reserves for the foregoing matters. These
and other pending litigation matters are discussed under "Business--Legal
Proceedings."

OUR PRODUCTS MAY LOSE THEIR EFFECTIVENESS, WHICH WOULD RENDER THEM LESS
ATTRACTIVE TO OUR CUSTOMERS AND COULD RESULT IN CLAIMS FOR LOSSES FROM OUR
CUSTOMERS

It is possible that weeds could develop resistance to Roundup or our other
herbicides. It is also possible that pests could develop a resistance to one or
more of the pest protections in our plant products. In either case, our
products would become less attractive to our customers and our profits might
decline. In addition, we may be held liable if any product we develop, or any
product that is made with the use or incorporation of any of our technologies,
causes injury or damages, which may adversely affect our business or profits.

WE DERIVE A SUBSTANTIAL PORTION OF OUR REVENUES FROM FOREIGN MARKETS, WHICH
SUBJECTS US TO ADDITIONAL BUSINESS RISKS

Changes in exchange rates between the U.S. dollar and other currencies will
result in increases or decreases in our costs and earnings, and also may affect
the book value of our assets outside the United States and the amount of our
shareholders' equity. We record our transactions and prepare our financial
statements in U.S. dollars, but a significant portion of our earnings and
expenditures are in other currencies. Operations outside the United States
provided approximately 45% of our 1999 net sales. To the extent we sell our
products in U.S. dollars in foreign markets, currency fluctuations may result
in our products becoming too expensive for foreign customers. Our international
operations could also be adversely affected by changes in political and
economic conditions, trade protection measures and changes in regulatory
requirements that restrict sales of our products or increase our costs.

IF WE LOSE KEY MANAGEMENT OR OTHER PERSONNEL, OUR BUSINESS MAY BE ADVERSELY
AFFECTED

We depend on the experience and expertise of our senior executive officers
and other personnel. We do not have employment agreements with most of our key
personnel. Competition among biotechnology and genomics companies for qualified
employees is intense, and the loss of qualified employees or an inability to
attract, retain and motivate additional highly-skilled employees required for
our activities could hinder our ability to conduct research activities
successfully and develop marketable products.

OUR CURRENT AND FORMER OPERATIONS EXPOSE US TO RISKS OF ENVIRONMENTAL
LIABILITIES

Increasingly stringent environmental regulations restrict the amount and
types of pollutants that can be released from our operations into the
environment. Compliance with these and any future regulations could require
significant capital investments in pollution control equipment or changes in
the way we make our products. In addition, because we use hazardous and other
regulated materials

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in our product development programs and manufacturing processes, we are subject
to risks of accidental contamination, personal injury claims and civil and
criminal fines, any of which could be material to our cash flow or earnings.
For example,

. we have remediated, and currently are remediating, some of our
operating plant sites, as well as certain properties that we have sold;

. we are funding, along with other potentially responsible parties, the
cleanup of approximately 10 Superfund sites where we (or our
predecessors) and others disposed of wastes in the past;

. we have agreed to indemnify Pharmacia for any liability associated with
contamination from past operations at all properties to be transferred
from Pharmacia to us and at certain sites used in old Monsanto's former
businesses; and

. we are responsible for the environmental liabilities that Solutia Inc.,
old Monsanto's former chemicals businesses, assumed from old Monsanto
on September 1, 1997, in the event that Solutia Inc. is unable to
satisfy its legal obligations with respect to these liabilities.
Solutia has publicly disclosed that, as of December 31, 1999, it had
accrued liabilities of $88 million for plants no longer in operation
and third-party sites for which it assumed responsibility from old
Monsanto, $81 million for solid and hazardous waste remediation and for
post-closure costs at Solutia's operating locations, and $32 million
related to Superfund sites. Solutia estimated that its future expenses
with respect to these matters could be as much as an additional $20 to
$30 million based upon uncertainties related to evolving government
regulations, the method and extent of remediation, and future changes
in technology.

These and other environmental matters are described in more detail under
"Business--Environmental Matters."

WE MAY NO LONGER HAVE ACCESS TO PHARMACIA FINANCIAL SUPPORT

In the past, we operated our business as an unincorporated division of old
Monsanto and our business was able to rely on the financial support of our
parent company. Upon the closing of this offering, we will be assuming from
Pharmacia commercial paper issued by Pharmacia. We have no other financing
arrangements with Pharmacia and, following this offering, we may no longer have
access to Pharmacia's financial or other resources.

RISKS RELATED TO OUR RELATIONSHIP WITH PHARMACIA

OUR AGREEMENTS WITH PHARMACIA MAY BE LESS FAVORABLE TO US THAN IF THEY HAD BEEN
NEGOTIATED AT ARM'S-LENGTH

Our agreements with Pharmacia will be finalized while we are a wholly owned
subsidiary of Pharmacia. Each of these agreements may be less favorable to us
than if it had been negotiated at arm's-length.

OUR RELATIONSHIP WITH PHARMACIA MAY IMPAIR OUR ABILITY TO PURSUE NEW BUSINESS
OPPORTUNITIES SUCCESSFULLY

Our ability to take advantage of specific business opportunities is subject
to procedures in our certificate of incorporation relating to allocation of
business opportunities between Pharmacia and us. Our certificate of
incorporation provides that, unless otherwise provided in a written agreement
between us and Pharmacia, Pharmacia will have no duty to refrain from engaging
in the same or similar activities or lines of business as our company engages
in or proposes to engage in at the time of this offering. Furthermore, subject
to applicable law, Pharmacia has no duty to communicate or offer to us any
corporate opportunities that come to its attention. As a result, it may be more

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difficult for us to pursue successfully new business opportunities available to
both Pharmacia and us, which could limit our potential sources of revenue and
growth. In addition, we have established procedures in our certificate of
incorporation that govern should one of our directors or officers who is also a
director or officer of Pharmacia acquire knowledge of a corporate opportunity
for both us and Pharmacia. See "Arrangements Between Monsanto and Pharmacia--
Allocation of Corporate Opportunities" for a description of allocation of
business opportunities between the companies.

WE MAY HAVE BUSINESS CONFLICTS WITH PHARMACIA WITH RESPECT TO OUR PAST AND
ONGOING RELATIONSHIPS THAT COULD HARM OUR PROFITABILITY

Conflicts of interest may arise between Pharmacia and us relating to our
past and ongoing relationships. For example, we and Pharmacia may dispute the
nature and magnitude of tax, employee benefit, indemnification and other
obligations arising from the separation of our businesses from those of
Pharmacia, which could result in our making payments to Pharmacia related to
the separation in excess of what we expect. Conflicts may arise over the
ownership and use of our or Pharmacia's intellectual property, subjecting us to
the risk of losing valuable patents and licenses and the risk of having to
provide Pharmacia with licenses to our intellectual property, which could
adversely affect our revenues and profits. In addition, disputes may occur over
the nature, quality and pricing of services that we and Pharmacia provide to
each other, potentially leading to services payments higher than we anticipate.

We may not be able to resolve any potential conflicts, and, even if we do,
the resolution may be less favorable than if we were dealing with an
unaffiliated party. See "Arrangements Between Monsanto and Pharmacia--
Separation Agreement--Arbitration and Dispute Resolution." The agreements we
have entered into with Pharmacia may be amended upon agreement between
Pharmacia and us.

BECAUSE OF THEIR OWNERSHIP OF PHARMACIA COMMON STOCK AND POSITIONS WITH
PHARMACIA, OUR DIRECTORS AND EXECUTIVE OFFICERS MAY HAVE CONFLICTS OF INTEREST
THAT COULD NEGATIVELY IMPACT OUR STOCK PRICE AND INCREASE OUR EXPOSURE TO
LITIGATION

Ownership of Pharmacia common stock by our directors and officers after the
separation of our businesses from those of Pharmacia and the presence of
Pharmacia officers and directors on our board of directors could create, or
appear to create, potential conflicts of interest when directors and officers
are faced with decisions that could have different implications for Pharmacia
and us. Investors may perceive these conflicts of interest as a burden on our
operations, negatively affecting our stock price. These conflicts of interests
could also lead to increased litigation based on stockholder claims that our
directors or officers have breached their fiduciary duties. For information
regarding directors' and officers' ownership of Pharmacia common stock, see
"Management--Stock Ownership of Directors and Executive Officers." A majority
of our directors following this offering will be directors or officers of
Pharmacia.

CONTROL BY PHARMACIA WILL LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF
MATTERS REQUIRING STOCKHOLDER APPROVAL AND COULD DISCOURAGE POTENTIAL
ACQUISITIONS OF OUR COMPANY BY THIRD PARTIES

As long as Pharmacia owns a majority of our outstanding common stock,
Pharmacia will continue to be able to elect our entire board of directors and
take stockholder action with respect to any matters without the vote of any
other stockholder. Such matters could include:

. the composition of our board of directors and, through it, decisions
with respect to our business direction and policies, including the
appointment and removal of officers;

. any determinations with respect to mergers or other business
combinations;

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. our acquisition or disposition of assets;

. our capital structure;

. changes to the agreements relating to the separation of our businesses
from those of Pharmacia;

. payment of dividends on our common stock;

. determinations with respect to our tax returns; and

. other aspects of our business direction and policies.

In addition, while Pharmacia owns a majority of our common stock, a
supermajority approval by at least 80% of our directors is required with
respect to specified matters with significant financial or strategic
consequences. See "Management--Board Structure and Compensation--Governance
Provisions."

Pharmacia's voting control and board influence may have the effect of
discouraging many types of transactions involving a change of control,
including transactions in which you as a holder of our common stock might
otherwise receive a premium for your shares over the then-current market price.
Furthermore, Pharmacia is not prohibited from selling a controlling interest in
us to a third party.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

THE PRICE OF OUR COMMON STOCK MAY BE SUBJECT TO WIDE FLUCTUATIONS AND MAY TRADE
BELOW THE INITIAL PUBLIC OFFERING PRICE

Before this offering, there has not been a public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock could be
subject to significant fluctuations after this offering. Among the factors that
could affect our stock price are the preceding risk factors, as well as reports
in the press or investment community regarding acceptance of biotechnology, and
strategic moves by us or our competitors, such as acquisitions or
restructurings.

Stock markets in general, and the markets for biotechnology and genomics
stocks in particular, have experienced extreme volatility that has often been
unrelated to the operating performance of a particular company. These broad
market fluctuations may adversely affect the trading price of our common stock.
In particular, we cannot assure you that you will be able to resell your shares
at or above the initial public offering price, which was determined by
negotiations between the representatives of the underwriters and us. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price.

PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT
AN ACQUISITION OF OUR COMPANY THAT STOCKHOLDERS MAY CONSIDER FAVORABLE, WHICH
COULD DECREASE THE VALUE OF YOUR SHARES

Our certificate of incorporation and bylaws and Delaware law contain
provisions that become effective if we are no longer controlled by Pharmacia
that could make it harder for a third party to acquire us without the consent
of our board of directors. These provisions include a classified board of
directors and limitations on actions by our stockholders by written consent. In
addition, our board of directors has the right to issue preferred stock without
stockholder approval, which could be used to dilute the stock ownership of a
potential hostile acquiror. These provisions apply even if the offer may be
considered beneficial by some stockholders.

19
<PAGE>

OUR SHARE PRICE MAY DECLINE BECAUSE OF THE ABILITY OF PHARMACIA AND OTHERS TO
SELL SHARES OF OUR COMMON STOCK

Sales of substantial amounts of our common stock after this offering, or
the possibility of such sales, could adversely affect the market price of our
common stock and impede our ability to raise capital through the issuance of
equity securities. See "Shares Eligible for Future Sale" for a discussion of
possible future sales of our common stock.

After this offering, Pharmacia will own 86.3% of our outstanding common
stock, assuming the underwriters' overallotment option is not exercised in full
(84.5% if the underwriters' overallotment option is exercised in full).
Pharmacia has advised us that its current intention is to continue to hold all
of our common stock it beneficially owns. However, Pharmacia has no contractual
obligation to retain its shares of our common stock, except for the 180-day
period after the date of this document during which it has agreed not to sell
any of its shares without the consent of the representatives of the
underwriters, as described under "Underwriting." Subject to applicable federal
and state securities laws, after the expiration of this 180-day waiting period
(or before, with such consent), Pharmacia may sell any and all of the shares of
our common stock that it beneficially owns or distribute any or all of these
shares of our common stock to its stockholders. In addition, after the
expiration of this 180-day waiting period, we could sell additional shares of
our common stock, subject to Pharmacia's preemptive rights described under
"Arrangements Between Monsanto and Pharmacia--Corporate Agreement." Sales or
distributions by Pharmacia or us of our common stock in the public market or to
Pharmacia's stockholders, or the perception that such sales or distributions
could occur, could adversely affect prevailing market prices for the shares of
our common stock.

In connection with this offering, we intend to file a registration
statement on Form S-8 to register approximately 25.2 million shares of our
common stock that are or will be reserved for issuance under our stock
incentive plans.

20
<PAGE>

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

You should not rely on forward-looking statements in this prospectus. These
statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, levels of activity, performance or
achievements to be materially different from any results, levels of activity,
performance or achievements expressed or implied by any forward-looking
statement. These factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"could," "expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts" or "potential," or the negative of these terms or other comparable
terminology. Although we believe that the expectations reflected in forward-
looking statements are reasonable, we cannot guarantee future results, levels
of activity, performance or achievements. We assume no obligation to update any
of the forward-looking statements after the date of this prospectus.

21
<PAGE>

MERGER AND REORGANIZATION TRANSACTIONS OCCURRING PRIOR TO THIS OFFERING

THE MERGER

OUR FORMATION

Old Monsanto and Pharmacia & Upjohn stated their intention in the merger
agreement that, as promptly as practicable following the merger, the combined
company would reorganize the agribusiness unit under the Monsanto name as a
direct or indirect subsidiary and sell up to 19.9% of that subsidiary by means
of an initial public offering of its common stock to be listed on the New York
Stock Exchange.

Until the completion of this offering, we will continue as a wholly owned
subsidiary of Pharmacia. We and Pharmacia entered into agreements providing for
the separation of our businesses from those of Pharmacia as of September 1,
2000, including a separation agreement. These agreements generally provide for,
among other things:

. the transfer from Pharmacia to us of assets and the assumption by us of
liabilities primarily relating to our business;

. the transfer and licensing to us of intellectual property relating to
our business; and

. various interim and ongoing relationships between the parties, including
support services that we and Pharmacia will provide to each other.

These agreements were made in the context of a parent-subsidiary
relationship. The terms of these agreements may be more or less favorable than
those we could have negotiated with unaffiliated third parties. For more
information regarding the separation arrangements, see "Arrangements Between
Monsanto and Pharmacia."

OUR CAPITALIZATION

The debt on our historical Statement of Combined Financial Position
represents the amount of debt incurred by old Monsanto that was specifically
attributable to us, primarily for seed company acquisitions. Pharmacia will
retain substantially all of the debt that was attributable to us, and these
debt obligations will not be assumed by us, except for approximately $500
million of obligations relating to variable-rate, medium-term notes,
approximately $50 million of debt owed by our subsidiaries and approximately
$40 million of debt associated with our employee stock ownership plan. In
addition, upon the closing of this offering, we will assume from Pharmacia an
amount of commercial paper equal to the sum of approximately $1.8 billion plus
the net proceeds we receive from this offering assuming no exercise of the
overallotment option. The proceeds of this offering will be used to repay a
portion of the commercial paper assumed from Pharmacia. We also expect to repay
a portion of the commercial paper assumed from Pharmacia by the end of this
year with a portion of the cash flows from our business. The factors considered
in determining our initial capitalization include the amount of debt incurred
by old Monsanto that was specifically attributable to us, our expected
financing requirements for working capital and capital expenditures, as well as
our desired credit ratings.

22
<PAGE>

BENEFITS OF THE REORGANIZATION

We believe that we will realize benefits from the separation of our
businesses from those of Pharmacia, including the following:

. GREATER STRATEGIC FOCUS. As a result of having our own board of
directors and separate management team, we expect to have a sharper
focus on our business and strategic opportunities.

. INCENTIVES FOR EMPLOYEES MORE CLOSELY TIED TO OUR BUSINESS. We expect
the motivation of our employees and the focus of our management will be
strengthened by incentive compensation programs tied to the market
performance of our common stock. The separation will enable us to offer
our employees compensation directly linked to the performance of our
business, which we expect to enhance our ability to attract and retain
qualified personnel.

. MORE FOCUSED INVESTOR BASE. As a separate company, we will provide an
opportunity to invest in a business focused on agriculture and
biotechnology. Our company will be followed by analysts who focus on
this sector. We expect that this will allow for a more efficient equity
valuation of our business than if it were to be valued as a part of a
larger pharmaceuticals company.

23
<PAGE>

USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately
$744.2 million, after deducting estimated underwriting discounts and
commissions, assuming an initial public offering price at the midpoint of the
range on the cover page of this prospectus. If the underwriters exercise their
over-allotment option in full, we estimate that our net proceeds will be
approximately $855.8 million. We plan to use the net proceeds from this
offering to repay a portion of the commercial paper that we will assume from
Pharmacia contemporaneously with the closing of this offering. The maturity and
interest rate of the commercial paper to be repaid with the proceeds of this
offering will not be known until after the date of this document.

DIVIDEND POLICY

Our board of directors intends to declare quarterly dividends on our common
stock. We expect that the quarterly dividend rate will be $0.12 per share (an
annual rate of $0.48 per share). We expect that a prorated fourth quarter
dividend will be declared in January 2001 and paid on February 1, 2001. The
declaration and payment of dividends by us is subject to the discretion of our
board of directors. Our board of directors will take into account such matters
as:

. general economic and business conditions;

. our strategic plans;

. our financial results and condition;

. contractual, legal and regulatory restrictions on our ability to pay
dividends; and

. such other factors as our board of directors may consider to be
relevant.

24
<PAGE>

CAPITALIZATION

Set forth below as of June 30, 2000 is our unaudited actual capitalization
and pro forma capitalization that gives effect to the pro forma adjustments
described in "Pro Forma Condensed Combined Financial Statements." Historically,
due to the seasonality of our business, cash provided by operations has not
been sufficient in the first half of the year to fund our working capital
requirements, resulting in an increase in borrowings relative to our year end
debt levels. You should read the information below together with "Selected
Financial Data," "Pro Forma Condensed Combined Financial Statements" and the
notes to the pro forma financial statements, our historical combined financial
statements and the notes to those statements, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 2000
--------------------
ACTUAL PRO FORMA(1)
------- ------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt of parent attributable to Monsanto
Company Agricultural Business........................... $ 1,912 $ 1,698
Long-term debt of parent attributable to Monsanto Company
Agricultural Business .................................. 3,645 992
Equity................................................... 4,943 7,446
------- -------
Total Capitalization................................... $10,500 $10,136
======= =======
</TABLE>
--------
(1) Reflects pro forma adjustments giving effect to the separation of our
businesses from those of Pharmacia, this offering and related transactions
as if these transactions had occurred on June 30, 2000 as described in the
"Pro Forma Condensed Combined Financial Statements" and the notes to those
statements.

25
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On December 19, 1999, old Monsanto and Pharmacia & Upjohn entered into a
definitive merger agreement to combine in a merger of equals transaction, with
the combined entity following the merger being renamed "Pharmacia Corporation."
In connection with the merger agreement, the parties announced a plan to create
a wholly owned subsidiary, to be named "Monsanto Company," and to offer up to
19.9% of Monsanto in an initial public offering. Upon completion of Monsanto's
initial public offering, Pharmacia will own over 80.1% of Monsanto's
outstanding common stock. Monsanto is comprised of the former Agricultural
Products segment of old Monsanto and certain smaller research and business
operations. These operations are referred to in these pro forma condensed
combined financial statements as Monsanto Company Agricultural Business
("Monsanto Ag"), a division of Pharmacia Corporation and the predecessor to
Monsanto Company.

We prepared the following pro forma condensed combined financial statements
of Monsanto Ag as of and for the six months ended June 30, 2000 and for the
year ended December 31, 1999 to illustrate the estimated effects of the
separation of our businesses from those of Pharmacia, this offering and related
transactions described in the notes to pro forma condensed combined financial
statements as if they had occurred as of the beginning of each period presented
for purposes of the Pro Forma Condensed Combined Statement of Income, and on
June 30, 2000, for purposes of the Pro Forma Condensed Combined Statement of
Financial Position. The pro forma adjustments are based on currently available
information and upon estimates and assumptions that management believes provide
a reasonable basis for presenting the significant effects directly attributable
to the separation of Monsanto Ag from Pharmacia, this offering and related
transactions.

The pro forma condensed combined financial statements should be read
together with the historical combined financial statements and the notes to
those statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere in this prospectus.

The pro forma condensed combined financial statements are presented for
illustrative purposes only. The Pro Forma Condensed Combined Statement of
Income is not necessarily indicative of the results of operations that Monsanto
Ag would have attained had the separation of the businesses, this offering and
the related transactions been completed as of the beginning of each period
presented, nor is it indicative of future operating results. Financial
information for the first six months of 2000 should not be annualized. We have
historically generated the majority of our sales during the first half of the
year, primarily due to the timing of the planting and growing season. As a
result, in each of the last two years all of our operating income was generated
in the first half of the year and we incurred operating losses in the second
half of the year. See Note 17 of Notes to Combined Financial Statements.
Consistent with this, cash used in operations has historically been higher
during the first half of the year, which has resulted in higher borrowings than
at year end.

26
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Monsanto Company:

We have examined the pro forma adjustments reflecting the transactions
described in the Notes to Pro Forma Condensed Combined Statements of Income and
the application of those adjustments to the historical amounts in the
accompanying pro forma condensed combined statement of income of the Monsanto
Company Agricultural Business ("Monsanto Ag") for the year ended December 31,
1999. The 1999 historical condensed combined statement of income is derived
from the 1999 historical combined financial statements of Monsanto Ag, which
were audited by us, appearing elsewhere herein. Such pro forma adjustments are
based upon management's assumptions described in the Notes to Pro Forma
Condensed Combined Statements of Income. Our examination was made in accordance
with standards established by the American Institute of Certified Public
Accountants and, accordingly, included such procedures as we considered
necessary in the circumstances.

The objective of this pro forma financial information is to show what the
significant effects on the historical information might have been had the
transactions described in the Notes to Pro Forma Condensed Combined Statements
of Income occurred at an earlier date. However, the pro forma condensed
combined statement of income is not necessarily indicative of the results of
operations that would have been attained had the transactions described in the
Notes to Pro Forma Condensed Combined Statements of Income actually occurred
earlier.

In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the transactions
described in the Notes to Pro Forma Condensed Combined Statements of Income,
the related pro forma adjustments give appropriate effect to those assumptions
and the pro forma column reflects the proper application of those adjustments
to the historical combined statement of income amounts in the pro forma
condensed combined statement of income for the year ended December 31, 1999.

/s/ Deloitte & Touche LLP

St. Louis, Missouri
September 19, 2000

27
<PAGE>

REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Monsanto Company:

We have reviewed the related pro forma adjustments reflecting the
transactions described in the Notes to Pro Forma Condensed Combined Statements
of Income and Notes to Pro Forma Condensed Combined Statement of Financial
Position (collectively, the "Pro Forma Notes") and the application of those
adjustments to the historical amounts in the accompanying pro forma condensed
combined statement of financial position of the Monsanto Agricultural Business
("Monsanto Ag") as of June 30, 2000, and the related pro forma condensed
combined statement of income for the six months then ended. The June 30, 2000
historical condensed combined financial statements are derived from the
unaudited June 30, 2000 historical combined financial statements of Monsanto
Ag, which were reviewed by us, appearing elsewhere herein. Such pro forma
adjustments are based on management's assumptions as described in the Pro Forma
Notes. Our review was made in accordance with standards established by the
American Institute of Certified Public Accountants.

A review is substantially less in scope than an examination, the objective
of which is the expression of an opinion on management's assumptions, the pro
forma adjustments and the application of those adjustments to the historical
combined financial information. Accordingly, we do not express such an opinion
on the pro forma adjustments or the application of such adjustments to the
historical condensed combined statement of financial position of Monsanto Ag as
of June 30, 2000, and the historical condensed combined statement of income for
the six months then ended.

The objective of this pro forma financial information is to show what the
significant effects on the historical information might have been had the
transactions described in the Pro Forma Notes occurred at an earlier date.
However, the pro forma condensed combined financial statements are not
necessarily indicative of the results of operations or related effects on
financial position that would have been attained had the transactions described
in the Pro Forma Notes actually occurred earlier.

Based on our review, however, nothing came to our attention that caused us
to believe that management's assumptions do not provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
transactions described in the Pro Forma Notes, that the related pro forma
adjustments do not give appropriate effect to those assumptions, or that the
pro forma columns do not reflect the proper application of those adjustments to
the historical financial statement amounts in the pro forma condensed combined
statement of financial position as of June 30, 2000, and the related pro forma
statement of income for the six months then ended.

/s/ Deloitte & Touche LLP

St. Louis, Missouri
September 19, 2000

28
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED) YEAR ENDED DECEMBER 31, 1999
------------------------------------ ------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ------------------------ HISTORICAL ------------------------
MONSANTO AG ADJUSTMENTS AS ADJUSTED MONSANTO AG ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES............... $3,290 -- $3,290 $5,248 -- $5,248
Cost of goods sold...... 1,486 -- 1,486 2,556 -- 2,556
------ ---- ------ ------ ---- ------
GROSS PROFIT............ 1,804 -- 1,804 2,692 -- 2,692
Operating Expenses...... 1,169 -- 1,169 2,082 -- 2,082
------ ---- ------ ------ ---- ------
INCOME FROM OPERATIONS.. 635 -- 635 610 -- 610
Interest expense--net... (128) 89 (a) (39) (243) 183 (a) (60)
Other expense--net...... (28) -- (28) (104) -- (104)
------ ---- ------ ------ ---- ------
INCOME BEFORE INCOME
TAXES.................. 479 89 568 263 183 446
Income tax provision.... (210) (34)(a) (244) (113) (70)(a) (183)
------ ---- ------ ------ ---- ------
NET INCOME ............. $ 269 $ 55 $ 324 $ 150 $113 $ 263
====== ==== ====== ====== ==== ======
BASIC AND DILUTED NET
INCOME PER SHARE OF
COMMON STOCK........... $ 1.27 $ 1.03
====== ======
SHARES OF COMMON STOCK
OUTSTANDING
(IN MILLIONS).......... 255 (b) 255 (b)
====== ======
</TABLE>
--------
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

(a) To reflect the reduction of interest expense and the associated increase in
income tax expense resulting from the reduction in short- and long-term
borrowings as described in notes (b) and (f) of Notes to Pro Forma
Condensed Combined Statement of Financial Position. The related increase in
income tax expense has been calculated assuming a combined federal and
state income tax rate of 38%.

(b) The number of shares of common stock outstanding was computed using the
number of shares we expect to have issued and outstanding immediately
following this offering. Stock options expected to be issued upon
completion of this offering have not been included as common stock
equivalents because they will be granted with exercise prices equal to the
per share price of this offering and, accordingly, will not be dilutive.

The number of shares of common stock outstanding was computed as follows:

<TABLE>
<S> <C>
Common stock to be held by Pharmacia immediately after
this offering........................................ 220,000,000 shares
Common stock included in the offering................. 35,000,000 shares
------------------
Common stock to be outstanding immediately after the
offering............................................. 255,000,000 shares
==================
</TABLE>

29
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000 (UNAUDITED)
-------------------------------------
PRO FORMA
HISTORICAL -------------------------
MONSANTO AG ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............... $ 41 $ 744 (a) $ 41
(744)(b)
Trade receivables--net.................. 3,485 -- 3,485
Deferred tax assets..................... 152 (13)(c) 139
Inventories............................. 1,222 -- 1,222
Miscellaneous receivables and other
current assets......................... 321 -- 321
------- ------ -------
TOTAL CURRENT ASSETS.................. 5,221 (13) 5,208
------- ------ -------
Property, plant and equipment--net...... 2,585 (47)(d) 2,538
Goodwill--net........................... 2,918 -- 2,918
Other intangible assets--net............ 859 -- 859
Other assets............................ 768 94 (c) 876
34 (d)
(20)(e)
------- ------ -------
TOTAL ASSETS.......................... $12,351 $ 48 $12,399
======= ====== =======
LIABILITIES AND EQUITY
Short-term debt of Parent attributable
to Monsanto Ag......................... $ 1,912 $ (214)(f) $ 1,698
Accounts payable........................ 332 79 (d) 411
Accrued compensation and benefits....... 141 29 (d) 170
Restructuring reserves.................. 41 -- 41
Miscellaneous short-term accruals....... 878 (33)(d) 845
------- ------ -------
TOTAL CURRENT LIABILITIES............. 3,304 (139) 3,165
------- ------ -------
Long-term debt of Parent attributable to
Monsanto Ag............................ 3,645 (744)(b) 992
(1,949)(f)
40 (g)
Other liabilities....................... 459 (15)(c) 796
27 (d)
111 (h)
214 (i)
Equity.................................. 4,943 2,503 (j) 7,446
------- ------ -------
TOTAL LIABILITIES AND EQUITY.......... $12,351 $ 48 $12,399
======= ====== =======
</TABLE>

The accompanying notes are an integral part of these pro forma financial
statements.

30
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION

(a) Represents the receipt by Monsanto Ag of approximately $744 million in
estimated net proceeds from this offering.

(b) To reflect the use of estimated net proceeds from this offering to reduce
debt.

(d) To record the transfer of certain corporate assets and liabilities of
Pharmacia, which had been related to the joint operations of Pharmacia's
agricultural and pharmaceutical businesses but which, pursuant to the
separation agreement, will be contributed to or assumed by Monsanto Ag.
These assets and liabilities principally consist of aircraft, certain
information technology assets, accounts payable, accrued compensation and
benefits, environmental liabilities, and other miscellaneous corporate
assets and liabilities. Adjustments also include the transfer from Monsanto
Ag to Pharmacia of current taxes payable that Pharmacia will pay and
certain research and development facilities.

(e) To transfer deferred financing costs related to debt attributable to
Monsanto Ag that will be retained by Pharmacia pursuant to the separation
agreement.

(f) To reflect the reduction of short- and long-term debt attributable to
Monsanto Ag resulting from the separation agreement.

(g) To transfer debt related to Monsanto Ag Employee Stock Ownership Plan
(ESOP) to Monsanto Ag from Pharmacia.

(h) To record the estimated accrued net pension liabilities associated with
certain pension plans sponsored by old Monsanto and attributable to
employees of Monsanto Ag and certain former employees terminating
employment with old Monsanto prior to 1995. Such net liabilities will be
assumed by Monsanto Ag pursuant to the employee benefits allocation
agreement. The net liabilities relate to certain ex-U.S. funded pension
plans which Monsanto Ag will sponsor, as well as certain unfunded U.S.
pension plans that Pharmacia will sponsor, but that will operate in a
manner analogous to multiple-employer plans. Monsanto Ag is expected to
retain costs related to its active employees and certain former employees
terminating employment with old Monsanto prior to 1995. Prospectively,
Monsanto Ag's pension plans will have the same basic features as the old
Monsanto plans in which Monsanto Ag has participated; accordingly, future
pension costs for Monsanto Ag are likely to be comparable to the historical
amounts.

(i) To record the estimated accrued liabilities relating to employee
postretirement benefit plans sponsored by old Monsanto and attributable to
employees of Monsanto Ag and certain former employees terminating
employment with old Monsanto prior to 1995. Such liabilities will be
assumed by Monsanto Ag pursuant to the employee benefits allocation
agreement. The liabilities relating to the postretirement benefit plans
have been allocated to Monsanto Ag based upon the estimated percentage of
the accumulated postretirement benefit obligations related to such
employees in proportion to the accumulated postretirement benefit
obligation of old Monsanto. The liabilities relate to plans that Monsanto
will sponsor. Monsanto Ag is expected to retain costs related to its active
employees and certain former employees terminating employment with old
Monsanto prior to 1995. Prospectively, Monsanto Ag's postretirement benefit
plans will have the same basic features as the old Monsanto plans in which
Monsanto Ag has participated; accordingly, future postretirement benefit
costs for Monsanto Ag are likely to be comparable to the historical
amounts.

31
<PAGE>

(j) To reflect the effect on equity related to the pro forma adjustments
referred to in notes (a), (c), (d), (e), (f), (g), (h) and (i) as follows
(in millions):

<TABLE>
<S> <C>
Proceeds from this offering................................... $ 744
Debt attributable to Monsanto Ag retained by Pharmacia........ 2,163
------
Subtotal.................................................... 2,907
Deferred taxes relating to the pro forma adjustments.......... 96
Transfer of certain corporate assets and liabilities.......... (115)
Transfer of deferred financing costs.......................... (20)
Transfer of debt related to Monsanto Ag ESOP.................. (40)
Transfer of assets and liabilities relating to pension plans.. (111)
Transfer of liabilities relating to postretirement benefit
plans........................................................ (214)
------
Net increase in equity...................................... $2,503
======
</TABLE>

32
<PAGE>

SELECTED FINANCIAL DATA

The following selected historical financial data should be read together
with "Pro Forma Condensed Combined Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our historical combined financial statements and the notes to those statements
included elsewhere in this document. The combined operating results data, cash
flow measures and other selected data set forth below for the six months ended
June 30, 2000 and 1999 and the combined financial position data as of June 30,
2000 are derived from our unaudited combined financial statements included
elsewhere in this document. The combined operating results data, cash flow
measures and other selected data set forth below for the years ended
December 31, 1999, 1998, and 1997 and the combined financial position data as
of December 31, 1999 and 1998 are derived from our audited combined financial
statements included elsewhere in this document. The combined operating results
data, cash flow measures and other selected data for the years ended December
31, 1996 and 1995 and the combined financial position information as of
December 31, 1997, 1996 and 1995 are derived from our unaudited combined
financial statements that are not included in this document. In the opinion of
management, this unaudited financial data has been prepared on a basis
consistent with the audited financial statements included in this document and
include all adjustments, which are only normal recurring adjustments, necessary
for a fair statement of the operating results and financial position for the
unaudited periods.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------------------------
2000 1999 1999 1998 1997 1996 1995(4)
------ ------ ------ ------- ------- ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net Sales............... $3,290 $3,136 $5,248 $ 4,448 $ 3,673 $2,928 $2,429
Gross Profit............ 1,804 1,753 2,692 2,299 1,944 1,591 1,284
Selling, general and
administrative
expenses............... 688 603 1,237 1,135 869 722 550
Research and development
expenses............... 291 338 695 536 409 210 200
Acquired in-process
research and
development............ -- -- -- 402 633 -- --
Amortization and
adjustments of
goodwill............... 149 66 128 77 20 10 8
Restructuring and other
unusual items.......... 41 -- 22 94 -- 143 14
Income from
Operations(1).......... 635 746 610 55 13 506 512
Income (Loss) Before
Income Taxes........... 479 581 263 (60) 1 531 544
Net Income (Loss)....... 269 369 150 (125) 31 319 365

CASH FLOW MEASURES:
Net Cash Provided by
(Used In) Operations... $ (822) $ (513) $ 120 $ (528) $ 248 $ (518) N/A
Net Cash (Used In)
Investing Activities... (424) (290) (415) (4,544) (1,878) (223) N/A
Net Cash Provided by
Financing Activities... 1,261 837 284 5,073 1,581 825 N/A

OTHER SELECTED DATA:
Capital Expenditures.... $ 325 $ 263 $ 632 $ 432 $ 298 $ 216 $ 98
Depreciation and
Amortization........... 275 251 547 368 245 148 142
EBIT(2)................. 607 717 506 34 21 530 517
EBIT (excluding unusual
items)(2)(3)........... 764 717 607 638 654 610 N/A
EBITDA(2)............... 882 968 1,053 402 266 678 N/A
EBITDA (excluding
unusual items)(2)(3)... 1,039 968 1,154 1,006 899 758 N/A
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------------------------
2000 1999 1998 1997 1996 1995
-------------- ------- ------- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Total Assets.............. $12,351 $11,101 $10,891 $5,123 $3,650 $2,851
Working Capital........... 1,917 2,323 1,879 1,000 719 416
Short- and Long-Term Debt
of Parent Attributable to
Monsanto Ag.............. 5,557 4,367 4,710 1,390 -- --
Equity.................... 4,943 4,645 4,125 2,386 2,193 1,109
</TABLE>
--------
(1) Income from operations for the six months ended June 30, 2000 included $157
million in costs associated with our plan to focus on key projects,
resulting in the termination of certain research and development in
programs and the reversal of restructuring reserves; for the year ended
1999 included $50 million for accelerated business integration costs and
the reversal of restructuring reserves established in 1998; for the year
ended 1998 included $583 million for restructuring charges and the write-
off of acquired in-process research and development; for the year ended
1997 included $633 million for the write-off of acquired in-process
research and development; for 1996 included restructuring and other unusual
charges of $95 million; and for 1995 included net restructuring expenses
and other unusual items of $17 million.

(2) EBIT is defined as earnings before interest and taxes. EBITDA is defined as
earnings before interest, taxes, depreciation and amortization. EBITDA
eliminates the effect of depreciation of tangible assets and amortization
of intangible assets, most of which were acquired in seed company
acquisitions accounted for under the purchase method of accounting. The
presentation of EBITDA (excluding unusual items) is intended to supplement
investors' understanding of our operating performance. It is not intended
to replace net income, cash flows, financial position or comprehensive
income, and it is not a measure of financial performance as determined in
accordance with accounting principles generally accepted in the United
States. EBITDA (excluding unusual items) may not be comparable to other
companies' EBITDA performance measures because those companies may not
exclude unusual items.

(3) Unusual items for the six months ended June 30, 2000 included $157 million
in costs associated with our plan to focus on key projects, resulting in
the termination of certain research and development in programs and the
reversal of restructuring; for 1999 included $101 million for accelerated
business integration costs, failed merger costs, restructuring reversals
and a gain on the sale of a business; for 1998 included $604 million for
restructuring costs, the write-off of acquired in-process research and
development and charges to cancel DEKALB Genetics Corporation stock
options; for 1997 included $633 million for the write-off of acquired in-
process research and development; for 1996 included $80 million for
restructuring and other unusual charges which were partially offset by
minority interest associated with certain asset impairments; and for 1995
included net restructuring expenses and other unusual items of $17 million.

(4) The cash flow measures for 1995 are not available because it is not
practicable to prepare.

34
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

BACKGROUND

Our combined financial statements have been prepared on a carve-out basis
using old Monsanto's historical accounting records because, prior to the
separation of our businesses from those of Pharmacia, the agricultural
businesses that will be transferred to us on the separation date was a division
of old Monsanto. Old Monsanto provided general and administrative services for
our businesses, including finance, legal, treasury, information systems, public
affairs, regulatory and human resource services. The costs of these services
have been allocated to us and included in our combined financial statements
based upon the relative levels of use of these services. All of the allocations
and estimates in the combined financial statements are based on assumptions and
estimates that management believes to be reasonable under the circumstances.
These allocations and estimates, however, are not necessarily indicative of the
costs and expenses that would have resulted if we had operated as a separate
entity. For information relating to our relationship with Pharmacia and
services that Pharmacia will provide to us following the separation, see
"Arrangements Between Monsanto and Pharmacia." For more information regarding
these and other allocations made in connection with the preparation of our
combined financial statements, see Note 1 to the combined financial statements
and the other notes to those statements.

The results of operations and changes in financial position included in our
combined financial statements, which are discussed below, reflect the
historical results of operations and cash flows of the businesses that were
part of old Monsanto during each respective period and that are being
transferred to us; however, they do not reflect any significant changes that
will occur in our operations or funding as a result of the separation of our
businesses from those of Pharmacia. This discussion and analysis should be read
together with the selected financial data and the combined financial statements
and accompanying notes to those statements included in this prospectus.
Financial information for the first six months of 2000 should not be
annualized. We have historically generated the majority of our sales during the
first half of the year, primarily due to the timing of the planting and growing
season. As a result, in each of the last two years all of our operating income
was generated in the first half of the year and we incurred operating losses in
the second half of the year. See Note 17 of Notes to Combined Financial
Statements. Consistent with this, cash used in operations has historically been
higher during the first half of the year, which has resulted in higher
borrowings than at year end. The third quarter falls after the end of the
northern hemisphere agricultural season and before the beginning of the main
selling season in the southern hemisphere. As a result, historically, we have
our lowest quarterly net sales levels in the third quarter and we have
historically had net losses. We expect a similar level of sales and a loss in
the third quarter of 2000.

We manage our business in two segments: Agricultural Productivity, and
Seeds and Genomics. The Agricultural Productivity segment consists of our crop
protection products, animal agriculture and environmental technologies
businesses. The Seeds and Genomics segment is comprised of our global seeds and
related traits business and our genetic technology platforms.

In the first half of 2000, we recorded a net pretax charge of $157 million
to operating expenses, primarily associated with our plan to focus on key
research and development projects, resulting in the elimination of certain
programs. Additional charges are expected to be incurred as we plan to continue
to stringently focus our research and development programs and streamline our
operations. Total pretax charges from this plan are expected to be
approximately $425 million to $475 million, including $157 million of net
charges incurred in the first half of 2000. The remaining restructuring charges
we expect to incur relate primarily to facility closures and employee
severance. We expect to incur approximately $130 million to $150 million of
these costs during the second half of 2000, with the remainder being incurred
during 2001, when plans are finalized and approved and the appropriate
communications with employees occur. We expect to implement these actions by
the end of 2001 and we anticipate they will yield annual cash savings of
approximately $100 million thereafter.

35
<PAGE>

In 1997, we began to implement a strategy to create a global seed
infrastructure to provide the breeding and distribution capabilities for our
seed traits. To build this capability, we acquired a number of seed companies
in 1997 and 1998, including the Asgrow Agronomics business, Holden's Foundation
Seeds Inc., Corn States Hybrid Service, Inc., Sementes Agroceres S.A., Plant
Breeding International Cambridge, certain international seed operations of
Cargill, Incorporated and DEKALB Genetics. The amortization of goodwill and
increased interest expense related to these acquisitions significantly reduced
net income in 1998 and 1999. In addition, a number of unusual items, including
in-process research and development expense related to the acquisitions,
significantly lowered net income in each of the three years from 1997 to 1999.

USE OF EBITDA (EXCLUDING UNUSUAL ITEMS)

The primary operating performance measure for our two segments is earnings
before interest and taxes (EBIT). EBIT was $607 million for the six months
ended June 30, 2000, $717 million for the six months ended June 30, 1999, $506
million in 1999, $34 million in 1998 and $21 million in 1997. However, in
recent years unusual items significantly affected our results. Moreover, our
recent seed company acquisitions have resulted in a substantial increase in
amortization expense associated with goodwill and other intangible assets.
Accordingly, management believes that earnings before interest, taxes,
depreciation, amortization and unusual items (EBITDA (excluding unusual items))
is an appropriate measure for evaluating the operating performance of our
business. EBITDA (excluding unusual items) eliminates, among other things, the
effect of depreciation of tangible assets and amortization of intangible
assets, most of which resulted from the seed company acquisitions accounted for
under the purchase method of accounting. In particular, it also eliminates the
effect of the items described under "--Events Affecting Comparability." The
presentation of EBITDA (excluding unusual items) is intended to supplement
investors' understanding of our operating performance. EBITDA (excluding
unusual items) may not be comparable to other companies' EBITDA performance
measures. It is not intended to replace net income, cash flows, financial
position or comprehensive income, as determined in accordance with accounting
principles generally accepted in the United States.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
------------- ---------------------
2000 1999 1999 1998 1997
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales...................................... $3,290 $3,136 $5,248 $4,448 $3,673
====== ====== ====== ====== ======
Net income (loss).............................. $ 269 $ 369 $ 150 $ (125) $ 31
Add: Interest expense--(net)................... 128 136 243 94 20
Income tax provision (benefit)............... 210 212 113 65 (30)
------ ------ ------ ------ ------
EBIT(1).................................... 607 717 506 34 21
Add: Unusual items............................. 157 -- 101 604 633
------ ------ ------ ------ ------
EBIT (excluding unusual items)............. 764 717 607 638 654
Add: Depreciation.............................. 127 112 238 205 184
Amortization of goodwill and other intangible
assets...................................... 148 139 309 163 61
------ ------ ------ ------ ------
EBITDA (excluding unusual items)(2)........ $1,039 $ 968 $1,154 $1,006 $ 899
====== ====== ====== ====== ======
</TABLE>
--------
(1) Earnings before interest and taxes.
(2) Earnings before interest, taxes, depreciation and amortization and unusual
items. See "--Use of EBITDA (excluding unusual items)."

FOR THE SIX MONTHS ENDED JUNE 30, 2000

Net sales increased 5% to $3.3 billion for the six month period ended June
30, 2000, compared to $3.1 billion for the same time period in 1999. This
increase was due to an 8% increase in

36
<PAGE>

glyphosate product sales and, to a lesser degree, to increased sales of Roundup
lawn and garden products and in our selective chemistries business, as well as
an increase in technology fee revenues. Offsetting these gains was a 7% decline
in our seeds business revenue, most of which was due to the divestiture of the
Stoneville Pedigreed Seed business in December 1999.

Cost of goods sold increased 7% to $1.5 billion for the six month period
ended June 30, 2000 from $1.4 billion for the same period in 1999. The primary
reason for this increase was a 19% increase in glyphosate sales volumes. Start-
up expenses associated with our new Posilac manufacturing facility in Augusta,
Georgia also contributed to increased cost of goods sold.

Gross margin declined one percentage point to 55% of net sales for the
first six months of 2000 from 56% of net sales for the first six months of
1999. This decline was the result of a slight decline in gross margin in the
Agricultural Productivity segment, primarily in glyphosate products, partially
offset by a modest gain in our Seeds and Genomics segment, resulting from
increased technology fees. The decline in the gross margin of glyphosate
products was due to an overall decline in the net selling price of our
glyphosate family of products as a result of our continued strategy to
selectively reduce glyphosate prices to encourage increased usage. This decline
was partially offset by reduced production costs.

Selling, general and administrative expenses increased 14%, to $688 million
for the six month period ended June 30, 2000 compared to $603 million for the
six month period ended June 30, 1999. Approximately $20 million of this
increase was attributable to increased spending on biotech acceptance and
education programs in 2000. Our higher overall selling, general and
administrative expenses were also a result of increased agency fees payable to
The Scotts Company in our Roundup lawn and garden business due to the 48%
increase in sales of these products during the first six months of 2000. See
"Our Agreement with The Scotts Company" for further details.

Research and development expense decreased 14% to $291 million for the six
month period ended June 30, 2000 compared to $338 million for the six month
period ended June 30, 1999 due to a decision to increase the focus of our
research programs on our four core crops of corn, soybean, cotton and wheat and
to reduce our spending on our nutrition and non-core programs and crops.

In the six months ended June 30, 2000, we wrote down $84 million of
goodwill associated with the decision to terminate the nutrition programs at
Calgene. Excluding this write-down, amortization and adjustments of goodwill
were relatively flat in the six months ended June 30, 2000 compared to the same
period in 1999.

Other expense-net declined $1 million to $28 million for the six month
period ended June 30, 2000, compared to $29 million for the six month period
ended June 30, 1999 due primarily to a tax imposed on foreign currency
transaction gains in Brazil in the first half of 1999, partially offset by
increased equity losses from affiliates (primarily Renessen) in the first half
of 2000.

Income tax expense for the first half of 2000 was relatively flat compared
to the first half of 1999, although pre-tax income, including unusual items,
declined approximately $100 million. The increase in the effective tax rate to
44% for the six months ended June 30, 2000 from 36% for the six months ended
June 30, 1999 was primarily the result of the non-deductibility of the $84
million write-down of goodwill in the second quarter of 2000.

Net income declined 27% to $269 million for the six months ended June 30,
2000 compared to $369 million for the six months ended June 30, 1999 primarily
due to the after-tax impact of $123 million of unusual items recorded in the
first half of 2000. These unusual items are discussed in detail below.
Excluding unusual items, net income for the six month period would have been
$392

37
<PAGE>

million, a 6% increase over net income of $369 million for the period ended
June 30, 1999. There were no unusual items recorded in the first six months of
1999.

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Net sales increased 18% in 1999 to $5.2 billion from $4.4 billion in the
prior year, primarily reflecting the inclusion of a full year of sales from
seed companies acquired late in 1998. Excluding the 1998 seed company
acquisitions and the divestiture of the tomato business, net sales increased
3%. The increase in net sales reflected increased sales of the family of
Roundup herbicides and increased trait fee revenues, partially offset by
decreases in revenues in our environmental technologies business and our
Roundup lawn and garden business. Net sales increased 21% in 1998 to $4.4
billion from $3.7 billion in 1997, led by a significant increase in Roundup and
other glyphosate product sales, and the inclusion of a full year of seed sales
from seed companies acquired in 1997 and increased trait fee revenues.
Excluding seed company acquisitions in 1997 and 1998, net sales increased 17%.

Cost of goods sold for 1999 increased 19% to $2.6 billion from $2.1 billion
in the prior year, primarily reflecting the inclusion of a full year of the
results of seed companies acquired in 1998. Gross margin for 1999 declined one
percentage point to 51% compared with 52% of net sales in 1998. This decline
was the result of a slight decline in gross margin in our Agricultural
Productivity segment, primarily in glyphosate products, partially offset by a
modest gain in gross margin in our Seeds and Genomics segment, where an
increase in seed trait revenues and improved seed gross margin drove up the
gross margin. Cost of goods sold for 1998 increased 24% to $2.1 billion from
$1.7 billion in 1997, primarily reflecting increased glyphosate volumes. Gross
margin for 1998 declined one percentage point to 52%, compared with 53% of net
sales in 1997. This decline was the result of the same factors that caused the
change from 1998 to 1999.

Selling, general and administrative expenses increased 42% to $1.2 billion
from $869 million over the three-year period from 1997 to 1999 as a result of
the inclusion of a full year of operating expenses of the acquired seed
companies and increased general and administrative services provided to our
business, mainly in the area of information technology, regulatory and biotech
acceptance programs. In addition, our 1999 results were negatively affected by
an increase in bad debt expense to $70 million, as compared to $45 million in
1998 and $30 million in 1997. This increase in bad debt expense was primarily
the result of weak economic conditions in Brazil, Eastern Europe and the
Commonwealth of Independent States. In response to these events, we shifted the
business in parts of Central Europe and the Commonwealth of Independent States
primarily to a cash basis and increased our focus on collections in Brazil.
Research and development expenses increased 70%, to $695 million in 1999, from
$409 million in 1997, again due to the inclusion of a full year of the
operating expenses of the acquired seed companies, and due to increased
spending on genomics research and biotechnology. Amortization and adjustments
of intangible assets increased five fold during the same period due to higher
goodwill amortization from seed company acquisitions.

Other expenses increased $83 million to $104 million in 1999 compared to
$21 million in 1998, primarily as a result of costs associated with the failed
merger with Delta and Pine Land of $85 million combined with litigation costs.
Other income decreased $29 million in 1998 compared to 1997 primarily due to
the inclusion in 1998 of a $20 million charge related to the cancellation of
employee stock options in connection with the DEKALB Genetics acquisition.

Net interest expense increased from $20 million in 1997 to $94 million in
1998 and $243 million in 1999 as our long-term debt increased significantly to
$4.3 billion at December 31, 1999 from $1.0 billion at December 31, 1997 in
connection with the seed company acquisitions. While our 1998 results included
interest on the higher debt level for a short period of time, 1999 earnings
reflected a full year of interest on approximately $4.3 billion of long-term
acquisition related debt.

38
<PAGE>

Income tax expense for 1999 of $113 million increased from income tax
expense for 1998 of $65 million, primarily from the increase in pretax income
and due to the non-deductibility of a portion of goodwill. Income tax expense
for 1998 of $65 million increased from an income tax benefit for 1997 of $30
million, primarily due to the fact that a portion of in-process research and
development write-offs in 1998 were nondeductible for tax purposes. The income
tax benefit of $30 million on $1 million of pretax income in 1997 was primarily
the result of the U.S. tax benefit on export sales. (See Note 8 to our combined
financial statements.)

Net income in 1999 was $150 million and included a full year of operating
results, amortization and interest expense related to the seed companies
purchased late in 1998. Our net loss in 1998 was $125 million, compared with
net income of $31 million in 1997, reflecting higher interest and amortization
expenses in 1998.

UNUSUAL ITEMS (BEFORE TAX)

For the six months ended June 30, 2000 and in each of the past three years,
our results have included unusual items that significantly affected net income.
In addition to the discussion below, further details regarding the specific
impact to the Statement of Combined Income (Loss) can be found under "--Events
Affecting Comparability." The pretax income (expense) components of the unusual
items were as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- -------------------
2000 1999 1999 1998 1997
----- ---- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Restructuring charges..................... $ (45) $-- $ -- $(143) $ --
In-process research and development write-
offs..................................... -- -- -- (402) (633)
Accelerated integration costs............. -- -- (53) -- --
Failed merger costs....................... -- -- (85) -- --
Gain on the sale of Stoneville Pedigreed
Seed Company............................. -- -- 35 -- --
Reversal of restructuring reserves........ 4 -- 11 -- --
Write-off of obsolete inventory........... (32) -- -- -- --
Write-off of goodwill..................... (84) -- (8) (39) --
Other..................................... -- -- (1) (20) --
----- ---- ----- ----- -----
Total unusual items..................... $(157) -- $(101) $(604) $(633)
===== ==== ===== ===== =====
</TABLE>

FOR THE SIX MONTHS ENDED JUNE 30, 2000

In the first half of 2000, we recorded a net pretax charge of $157 million
to operating expenses, primarily associated with our plan to focus on key
research and development projects, resulting in the elimination of certain
programs. The plan encompassed a decision to more stringently focus on our four
key crops of corn, soybeans, wheat and cotton and included the elimination of
certain food and biotech research programs, including laureate oil and wheat
quality programs. Additionally, we decided to streamline and realign our
commercial and administrative operations in Western Europe and the Commonwealth
of Independent States. Of the $157 million of charges, $84 million was for the
write-off of goodwill associated with the nutrition programs acquired from
Calgene and $32 million was included in cost of goods sold for the write-off of
obsolete inventory also associated with the nutrition program. The
restructuring charges of $45 million included $31 million of involuntary
employee separation costs for 375 employees worldwide, including positions in
both administration and research and development. The remaining $14 million of
restructuring charges consisted of equipment write-offs of $11 million and $3
million of various license and germplasm write-offs

39
<PAGE>

associated with the eliminated research programs. In addition, in the first
half of 2000, we reversed restructuring liabilities of $4 million related to
the 1998 restructuring plan, largely as a result of lower actual severance
expenses than originally estimated. Our 1998 restructuring plan is
substantially complete.

Cash payments to complete the 2000 plan will be funded from operations and
are not expected to significantly impact our liquidity. Additional charges are
expected to be incurred as we plan to continue to stringently focus our
research and development programs and streamline our operations. Total pretax
charges from this plan are expected to be approximately $425 million to $475
million, including $157 million of net charges incurred in the first half of
2000. The remaining restructuring charges we expect to incur relate primarily
to facility closures and employee severance. We expect to incur approximately
$130 million to $150 million of these costs during the second half of 2000,
with the remainder being incurred during 2001, when plans are finalized and
approved and the appropriate communications with employees occur. We expect to
implement these actions by the end of 2001 and we anticipate they will yield
annual cash savings of approximately $100 million thereafter.

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

In 1999, we recorded a net pretax charge of $101 million that included $61
million of costs associated with the accelerated integration of our
agricultural chemical and seed operations and $85 million related to a failed
merger with Delta and Pine Land. These costs were partially offset by a pretax
gain of $35 million on the divestiture of Stoneville Pedigreed Seed Company and
an $11 million reversal of restructuring liabilities established in 1998.

In 1998, we recorded pretax restructuring charges of $182 million as part
of our overall strategy to cut costs and to integrate our acquired seed
businesses via the closure of certain facilities, reductions in work force, and
sale of our tomato business, the operations of which were no longer consistent
with our strategic objectives. We also recorded a pretax charge of $20 million
related to the cancellation of employee stock options in connection with the
DEKALB Genetics acquisition. In addition, we recognized $402 million of in-
process research and development write-offs primarily arising from our
purchases of DEKALB Genetics, Plant Breeding International and the
international seed operations of Cargill. We incurred a $633 million in-process
research and development write-off in 1997 related to our acquisitions of
Asgrow, Holden's, Corn States, Agroceres and the remaining minority interest in
Calgene, Inc., which conducts biotechnology research in cotton and produce.

Amortization and adjustments of goodwill and other intangible assets
increased five-fold during the period from 1997 to 1999 due to higher goodwill
amortization from seed company acquisitions. In 1999, an adjustment to goodwill
and other intangible assets of $8 million resulted from a charge related to the
termination of several research programs, compared with a $39 million charge in
1998 related to a decision to exit the tomato business. There were no
adjustments of goodwill and other intangible assets in 1997.

AGRICULTURAL PRODUCTIVITY SEGMENT

Our Agricultural Productivity segment consists of our crop protection
products (glyphosate herbicides and selective chemistries) and our animal
agriculture, Roundup lawn and garden, and environmental technologies
businesses.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------- --------------------
2000 1999 1999 1998 1997
-------- -------- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES
Glyphosate products, excluding Roundup
lawn and garden products.............. $1,521 $1,405 $2,482 $2,289 $1,979
All other.............................. 773 695 1,104 1,211 1,131
-------- -------- ------ ------ ------
Total net sales.................... $ 2,294 $ 2,100 $3,586 $3,500 $3,110
======== ======== ====== ====== ======
</TABLE>

40
<PAGE>

AGRICULTURAL PRODUCTIVITY NET SALES

FOR THE SIX MONTHS ENDED JUNE 30, 2000

Net sales for our Agricultural Productivity segment increased 9% to $2.3
billion for the six month period ended June 30, 2000, as compared to $2.1
billion for the six month period ended June 30, 1999. This increase was
primarily due to a 19% increase in glyphosate product volumes, excluding
Roundup lawn and garden products, and to a lesser degree resulting from
increased sales of Roundup lawn and garden products and selective chemistries.
Glyphosate product sales increased primarily in the United States due to
incremental Roundup Ready acres and the continued adoption of conservation
tillage. Roundup lawn and garden sales increased 48% in 2000 primarily due to
improvements over reduced 1999 sales levels that reflected a change in the
distribution method for these products. Sales of selective chemistries
increased 10% during the six months ended June 30, 2000 compared to the same
period of the prior year primarily due to increased acetochlor product sales in
the United States. Sales in our environmental technologies business, Enviro-
Chem, declined 14% during the six months ended June 30, 2000 compared to the
same period of the prior year, due to continued depression in the fertilizer
and metal commodity markets. This sales decline partially offset sales gains in
the rest of our Agricultural Productivity segment.

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Net sales of our Agricultural Productivity segment increased 2% in 1999 to
$3.6 billion compared to $3.5 billion in 1998 as lower prices for our family of
Roundup herbicides, excluding Roundup lawn and garden products, were more than
offset by higher sales volumes of these products. Sales were also affected by a
decline in other Agricultural Productivity product revenues due to decreases in
selective chemistry sales and Roundup lawn and garden product sales, and due to
a decline in our environmental technologies business offset in part by higher
sales of our animal agriculture products, primarily Posilac. Net sales in 1998
increased 13% to $3.5 billion from $3.1 billion in 1997, mainly due to higher
sales volumes of our Roundup herbicides, including Roundup lawn and garden
products, and increased sales of animal agriculture products and selective
chemistry products. Sales for our environmental technologies business in 1998
decreased compared to 1997, partially offsetting some of the aforementioned
gains.

Net sales of glyphosate products (excluding Roundup lawn and garden
products) grew 8% to $2.5 billion in 1999 compared to $2.3 billion in 1998 and
16% in 1998 compared to $2.0 billion in the prior year. During both 1999 and
1998, volumes from glyphosate products, excluding Roundup lawn and garden
products, grew at a rate slightly above the past decade's 20% average annual
volume growth rate, principally due to strong volume growth in the United
States, Argentina, Brazil, Australia and Canada. Higher sales volumes in the
United States in 1999 were largely offset by lower selling prices announced in
late 1998. We also reduced selling prices of Roundup over this three-year
period in most markets outside the United States in response to generic
competition in those regions. Outside the United States, the effect of lower
selling prices was more than offset by increased sales volumes. Sales volume
growth during the period resulted from increased adoption of conservation
tillage, use of Roundup in new applications and increased use of Roundup over
the top of Roundup Ready crops.

Our business results are affected by changes in foreign economies and
foreign currency exchange rates, as well as by climatic conditions around the
world. Our sales growth was adversely impacted by weak economic conditions in
certain world areas, which lessened the demand for herbicides, especially in
Eastern Europe and the Commonwealth of Independent States in 1999 and in
Southeast Asia in 1998. Drought conditions in key areas of Brazil during the
1999 planting season decreased demand for herbicides and limited sales volume
growth of Roundup in 1999. Although we have operations in virtually every
region of the world, our Agricultural Productivity business is

41
<PAGE>

principally conducted in the United States, Argentina, Brazil, Canada,
Australia, France and Japan. Accordingly, changes in economic conditions,
foreign exchange rates and climatic conditions in those parts of the world
generally have a more significant impact on our operations than similar changes
in other places.

Net sales of our other Agricultural Productivity products declined 9% to
$1.1 billion in 1999 from $1.2 billion in 1998. The primary driver of this
decline was a drop in net sales in our Roundup lawn and garden business and in
our environmental technologies business, Enviro-Chem, and, to a lesser extent,
a decrease in our selective chemistries sales, partially offset by increased
net sales in our animal agriculture business. Net sales of our Roundup lawn and
garden products were negatively affected in 1999 by a change in our
distribution method. In connection with the change in distribution,
distribution channel inventories declined during the year. As a result of a
downward trend in metal and fertilizer prices that began in 1997, Enviro-Chem
net sales declined by approximately 37% and 15% in 1999 and 1998, respectively.
Our worldwide selective chemistries sales declined 5% in 1999 from 1998,
reflecting the downturn in the agricultural economy in the United States as
well as the continued poor economic environment in the Commonwealth of
Independent States. Net sales in our animal agriculture business grew due to a
14% increase in Posilac sales volume from 1998 to 1999.

Net sales of Agricultural Productivity products other than glyphosate
increased 7% to $1.2 billion in 1998 from $1.1 billion in 1997 due to increased
net sales in the Roundup lawn and garden, animal agriculture and selective
chemistries businesses. Partially offsetting these gains was a decline in the
environmental technologies business, due to the decline in metal and fertilizer
prices, as previously mentioned. Animal agriculture sales gains were due to a
24% increase in Posilac volumes and selective chemistries sales increases
caused by increased volumes in Western Europe and Latin America.

AGRICULTURAL PRODUCTIVITY EBIT AND EBITDA (EXCLUDING UNUSUAL ITEMS)

<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
--------- --------------------
2000 1999 1999 1998 1997
---- ---- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EBIT(1)........................................ $803 $706 $ 897 $ 869 $ 888
Add: Unusual items............................. 9 -- 27 45 --
---- ---- ------ ------ ------
EBIT (excluding unusual items)............... 812 706 924 914 888
Add: Depreciation.............................. 97 78 178 169 160
Amortization of goodwill and other intangible
assets...................................... 2 3 7 6 7
---- ---- ------ ------ ------
EBITDA (excluding unusual items)(2)............ $911 $787 $1,109 $1,089 $1,055
==== ==== ====== ====== ======
</TABLE>
--------
(1) Earnings before interest and taxes.
(2) Earnings before interest, taxes, depreciation, amortization and unusual
items. See "--Use of EBITDA (excluding unusual items)."

FOR THE SIX MONTHS ENDED JUNE 30, 2000

EBIT (excluding unusual items) for the Agricultural Productivity segment
increased 15%, to $812 million for the six month period ended June 30, 2000
compared to $706 million for the six month period ended June 30, 1999.

Gross profit for the Agricultural Productivity segment increased 7% for the
six month period ended June 30, 2000, as compared to the period ended June 30,
1999, driven by the increased

42
<PAGE>

sales of Roundup, Roundup lawn and garden products, and selective chemistries.
However, the gross margin of glyphosate products declined one percentage point
due to an overall decline in the net selling price of our glyphosate family of
products as a result of our continued strategy to selectively reduce glyphosate
prices to encourage increased uses.

Operating expenses for the Agricultural Productivity segment remained
relatively flat for the first six months of 2000 compared with the first six
months of 1999, despite the increase in net sales for the segment. Other
expense declined $21 million for the six months ended June 30, 2000 compared to
the same period last year. This drop in expense in 2000 was due primarily to a
tax imposed on foreign currency transaction gains in Brazil in the first half
of 1999, and to a lesser extent due to losses from an unconsolidated equity
investment included in other expense for the six months ended June 30, 1999,
but which was consolidated beginning in the second quarter of 2000 because we
acquired a controlling ownership interest.

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

EBIT (excluding unusual items) for our Agricultural Productivity segment
increased 1% in 1999 to $924 million compared to $914 million in 1998 and
increased 3% in 1998 from $888 million in 1997. Cost of goods sold for our
Agricultural Productivity segment increased 23% during the period 1997 to 1999,
while sales volumes for our family of Roundup herbicides and Posilac increased
by 56% and 41%, respectively, over the period.

Agricultural Productivity segment gross profit improved slightly in 1999 on
higher overall volume and lower unit cost in our family of Roundup herbicides.
Gross margin declined one percentage point in this segment due to decreased
glyphosate prices. The increase in gross profit, coupled with a slight decline
in operating expenses led to an overall increase in EBIT in 1999 for the
Agricultural Productivity segment.

In 1998, Agricultural Productivity segment gross profit grew 7% on higher
overall product volumes and improved unit costs in our Roundup family. Gross
margin declined two percentage points in this segment due to decreased
glyphosate prices. An overall increase in operating expenses offset gross
profit gains, resulting in a 2% decline in EBIT for the Agricultural
Productivity segment. The increase in 1998 operating expenses was due largely
to increases in general and administrative services provided to our business,
including information technology, regulatory and public affairs services. Other
(expense) income-net was relatively unchanged from 1997 to 1998.

SEEDS AND GENOMICS SEGMENT

Our Seeds and Genomics segment consists of our global seeds and related
traits business and our genomics technology platforms.

SEEDS AND GENOMICS NET SALES

FOR THE SIX MONTHS ENDED JUNE 30, 2000

Net sales for the Seeds and Genomics segment declined 4% to $996 million
for the six months ended June 30, 2000 from $1,036 million for the six months
ended June 30, 1999. Seed net sales declined 7% primarily due to the sale in
late 1999 of the Stoneville Pedigreed Seed business, which had sales of $29
million in the first six months of 1999. This decrease was partially offset by
an 8% increase in technology fees.

43
<PAGE>

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

The financial results of our Seeds and Genomics segment were significantly
affected by the seed company acquisitions made in 1997 and 1998. We acquired
Asgrow, Holden's, Corn States and Agroceres in 1997 for a total cost of $1.3
billion. In 1998, we acquired DEKALB Genetics, Plant Breeding International and
certain international seed operations of Cargill for a total cost of $4.1
billion. These acquisitions were part of our strategy to build a global seed
infrastructure to provide breeding and distribution capabilities for our seed
traits.

Net sales of the Seeds and Genomics segment were $1.7 billion in 1999,
compared with $0.9 billion in 1998 and $0.6 billion in 1997. The $0.8 billion
increase in 1999 primarily reflected the inclusion of our 1998 seed company
acquisitions for a full year, and to a lesser extent an increase in trait fee
revenues. The growth in 1998 was largely driven by increased demand for our
seeds and seed traits developed through biotechnology and, to a lesser degree,
due to the inclusion of a full year of operations for the 1997 seed company
acquisitions. Seed and technology trait fee revenues, particularly for products
containing Roundup Ready technology, increased strongly during the period. The
number of acres planted with Roundup Ready soybeans increased 227% in 1998 and
46% in 1999, the product's third and fourth years in the marketplace,
respectively. Revenues from technology fees, both in connection with our seed
sales and from licensing our technology to other seed companies, increased 45%
in 1999 and 160% in 1998 as the number of acres planted with crops possessing
biotechnology traits increased. Roundup Ready soybeans, Roundup Ready cotton
and YieldGard insect-resistant corn showed the most significant increases.

SEEDS AND GENOMICS EBIT AND EBITDA (EXCLUDING UNUSUAL ITEMS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
-----------
2000 1999 1999 1998 1997
----- ---- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EBIT(1)...................................... $(196) $ 11 $(391) $(835) $(867)
Add: Unusual items........................... 148 -- 74 559 633
----- ---- ----- ----- -----
EBIT (excluding unusual items)............. (48) 11 (317) (276) (234)
Add: Depreciation............................ 30 34 60 36 24
Amortization of goodwill and other
intangible assets....................... 146 136 302 157 54
----- ---- ----- ----- -----
EBITDA (excluding unusual items)(2).......... $ 128 $181 $ 45 $ (83) $(156)
===== ==== ===== ===== =====
</TABLE>
--------
(1) Earnings before interest and taxes
(2) Earnings before interest, taxes, depreciation, amortization and unusual
items. See "--Use of EBITDA (excluding unusual items)."

FOR THE SIX MONTHS ENDED JUNE 30, 2000

EBIT, excluding unusual items, was a loss of $48 million for the six month
period ended June 30, 2000 versus earnings of $11 million for the six month
period ended June 30, 1999. This decline was attributable to flat total gross
profit and increased selling, general and administrative expense and non-
operating expense.

Seeds and Genomics gross profit excluding unusual items increased 2% in the
first six months of 2000 as a lower gross profit on seed sales was offset by
higher gross profit from increased

44
<PAGE>

technology fees. The overall gross margin, excluding unusual items in 2000,
increased 2 percentage points due to proportionally higher margin technology
fees. Cost of goods sold for the Seeds and Genomics segment, excluding unusual
items, decreased 7%, for the period ended June 30, 2000 compared to the same
period ended June 30, 1999. This decline was due to reduced seed sales,
primarily conventional soybean seed units, in the United States, and, to a
lesser degree, as a result of the sale of Stoneville in late 1999.

Selling, general and administrative expense increased in total for the six
months ended June 30, 2000 compared to the same period last year due primarily
to increased spending on biotech acceptance and educational programs.
Additionally, amortization of other intangibles increased $10 million compared
with the six month period ended June 30, 1999 due to increases in genomics-
related intangible assets. Savings realized in research and development due to
the focusing of programs on our core crops and reduction of our nutrition
program helped to mitigate our increased operating expenses. Non-operating
expense increased $19 million due primarily to a $7 million increase in equity
affiliate losses from Renessen.

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

EBIT for the Seeds and Genomics segment in 1999 was a loss of $391 million,
compared with a loss of $835 million in 1998 and a loss of $867 million in
1997. Seeds and Genomics segment cost of goods sold as a percentage of sales
improved from 59% to 51% from 1997 to 1999 due to trait revenue growth and
synergies from seed business integration. Operating expenses, excluding unusual
items and amortization, increased primarily due to the inclusion of a full year
of operating expenses in 1999 from the seed companies acquired in 1998 and
1997. Additionally, we continued to expand our investment in genomics and
biotechnology.

In 1998 and 1997, EBIT was significantly negatively affected by costs
related to our seed company acquisitions and restructuring actions. In 1998,
unusual items included in-process research and development write-off expense of
$402 million and restructuring expense and other unusual charges of $157
million, which included $20 million related to the cancellation of DEKALB
Genetics stock options in connection with the DEKALB Genetics acquisition. The
$633 million unusual charge in 1997 was the result of in-process research and
development write-off expense for seed companies acquired in that year. EBIT in
1999 and 1998 was also negatively affected by intangible asset amortization of
$302 million and $157 million, respectively. The increase in intangible asset
amortization was due primarily to increased goodwill from the seed company
acquisitions.

OUR AGREEMENT WITH THE SCOTTS COMPANY

During 1998, we entered into an agency and marketing agreement with Scotts
with respect to our Roundup lawn and garden business. Under the agreement,
beginning in the fourth quarter of 1998, Scotts was obligated to pay us a
$20 million fixed fee each year to defray costs associated with the Roundup
lawn and garden business. Scotts' payment of a portion of this fee owed in each
of the first three years of the agreement is deferred and required to be paid
at later dates, together with interest. Monsanto Ag is accruing the $20 million
fixed fee per year owed by Scotts ratably over the periods during which it is
being earned as a reduction of selling, general and administrative expenses. We
are also accruing interest on the amounts owed by Scotts and including such
amounts in interest income. The total amount owed by Scotts, including accrued
interest, was $35 million as of June 30, 2000. Scotts is required to begin
paying these deferred amounts at $5 million per year in monthly installments
beginning October 1, 2002.

45
<PAGE>

EVENTS AFFECTING COMPARABILITY

2000 EVENTS

In the first six months ended June 30, 2000, Monsanto recorded a net pretax
charge of $157 million ($123 million after tax) to operations, primarily
associated with our plan to more stringently focus on key programs within
research and development, net of a reversal of restructuring reserves. The plan
encompassed a decision to focus on our four key crops of corn, soybeans, wheat
and cotton and included the elimination of food and biotech research programs,
including laureate oil and wheat quality programs. The plan also includes the
realignment of our commercial and administrative operations in Western Europe
and the Commonwealth of Independent States.

The charge of $161 million was comprised of asset impairments of $129
million, workforce reduction costs of $31 million and other exit costs of $1
million. This charge was partially offset by the reversal of $4 million of the
1998 restructuring liability, largely as a result of lower actual severance
expense than originally estimated. The net charge was recorded in the Combined
Statement of Income in the following categories:

<TABLE>
<CAPTION>
UNUSUAL RESTRUCTURING
CHARGES REVERSALS TOTAL
------- ------------- -----
(MILLIONS)
<S> <C> <C> <C>
Cost of goods sold................................ $ (32) $-- $ (32)
Amortization and adjustment of goodwill........... (84) -- (84)
Restructuring and other unusual items............. (45) 4 (41)
----- ---- -----
Income (loss) before income taxes................. (161) 4 (157)
Income tax benefit (provision).................... 35 (1) 34
----- ---- -----
Net Income (Loss)............................... $(126) $ 3 $(123)
===== ==== =====
</TABLE>

The asset impairments consisted of $32 million for laureate oil
inventories, $86 million for intangible assets, and $11 million for equipment
write-offs. The workforce reduction charge reflected involuntary employee
separation costs for 375 employees worldwide and included charges of
$18 million for positions in administration, and $13 million for positions in
research and development. The affected employees are entitled to receive
severance benefits pursuant to established severance policies or by
governmentally mandated labor regulations. As of June 30, 2000, none of the
planned employee terminations were completed. We expect the employee reductions
to be completed by June 2001. The other exit costs included expenses associated
with contract terminations and equipment dismantling. As of June 30, 2000, none
of these costs had been paid. Payments to complete the remaining restructuring
actions will be funded from operations and are not expected to significantly
impact Monsanto's liquidity. The actions taken to focus on key programs in
research and development and to streamline our commercial and administrative
operations in Western Europe and the Commonwealth of Independent States, namely
workforce reductions, are expected to result in annual pretax cash savings of
$49 million.

During the first half of 2000 costs charged against prior established
reserves were $17 million primarily related to workforce reductions. Our prior
restructuring plans are substantially complete.

Additional charges are expected to be incurred as we plan to continue to
stringently focus our research and development programs and streamline our
operations. Total pretax charges from this plan are expected to be
approximately $425 million to $475 million, including $157 million of net
charges incurred in the first half of 2000. We expect to implement these
actions by the end of 2001 and we anticipate they will yield annual cash
savings of approximately $100 million thereafter.

46
<PAGE>

1999, 1998 AND 1997 EVENTS

In 1999, we recorded a net pretax charge of $101 million ($81 million after
tax) resulting from the failed merger with Delta and Pine Land and costs
associated with the accelerated integration of agricultural chemical and seed
operations which were partially offset by the reversal of restructuring
liabilities established in 1998 and the gain on the sale of Stoneville.

The 1999 net unusual items were recorded in the statement of combined
income (loss) in the following categories:

<TABLE>
<CAPTION>
UNUSUAL RESTRUCTURING
CHARGES REVERSALS TOTAL
------- ------------- -----
(IN MILLIONS)
<S> <C> <C> <C>
Cost of goods sold................................ $ (20) $-- $ (20)
Amortization and adjustments of goodwill.......... (8) -- (8)
Restructuring and other unusual items............. (33) 11 (22)
Other (expense) income--net....................... (51) -- (51)
----- ---- -----
Income (loss) before income taxes................. (112) 11 (101)
Income tax benefit (provision).................... 24 (4) 20
----- ---- -----
Net Income (Loss)............................... $ (88) $ 7 $ (81)
===== ==== =====
</TABLE>

During 1999, we recorded in "Other (expense) income--net" a one-time pretax
charge of $85 million equal to the amount of a termination fee and other
expenses associated with a failed merger with Delta and Pine Land. We also
recorded a pretax charge of $61 million principally associated with our
continued focus on improving operating efficiency through accelerated
integration of our agricultural and seed operations. The charge of $61 million
was comprised of facility shutdown charges of $39 million, workforce reduction
costs of $12 million and asset impairments of $10 million, and was recorded in
the statement of combined income (loss) as cost of goods sold of $20 million,
amortization of goodwill of $8 million and restructuring expense of $33
million. The affected employees are entitled to receive severance benefits
pursuant to established severance policies or by governmentally mandated labor
regulations.

The facility shutdown charges included $14 million for contractual research
and other commitments, $9 million for intangible assets, $8 million for
inventories, $6 million for leasehold termination costs and $2 million for
property, plant and equipment write-offs. During 1999, these actions resulted
in cash payments of $2 million for contractual obligations and asset write-offs
of $19 million. Commitments of $18 million resulting from these actions were
reclassified to other liabilities.

As part of the decision to accelerate the integration of our chemical and
seed operations, we recognized a workforce reduction charge of $12 million,
consisting of involuntary employee separation costs for 305 employees worldwide
and included charges for positions in administration of $8 million and research
and development of $4 million. As of December 31, 1999, 125 of the planned
employee eliminations had been completed; approximately 55 of these employees
received cash severance payments totaling $2 million in the aggregate during
1999, and 70 employees elected deferred payments totaling $4 million, which
were paid in January 2000. At December 31, 1999, these deferred payments were
classified in the Statement of Combined Financial Position as other
liabilities. The remaining balance for employee severance relating to 180
positions was $6 million at December 31, 1999. These employee reductions were
completed by June 2000.

Cash payments to complete the remaining accelerated integration actions
will be funded from operations and are not expected to significantly impact our
liquidity. The accelerated integration actions are expected to result in annual
pretax cash savings of $24 million.

Offsetting the restructuring and unusual charges in 1999 was a pretax gain
of $11 million from the reversal of restructuring reserves established in 1998.
These restructuring reversals were principally required as a result of actual
severance and facility shutdown costs that were lower than

47
<PAGE>

originally estimated. In addition, we recognized a pretax gain of $35 million
on the sale of Stoneville and miscellaneous other expense of $1 million which
was recorded in "Other (expense) income--net."

1998 AND 1997 EVENTS

In 1998, we recorded in-process research and development, net restructuring
and other unusual items of $604 million ($504 million after tax), which were
recorded in the statement of combined income (loss) in the following
categories:

<TABLE>
<CAPTION>
WORK FORCE FACILITY ASSET
REDUCTIONS CLOSURES IMPAIRMENTS OTHER TOTAL
---------- -------- ----------- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cost of goods sold........... $-- $ (5) $(43) $ -- $ (48)
Acquired in-process research
and development............. -- -- -- (402) (402)
Amortization and
adjustments of goodwill..... -- (1) (38) -- (39)
Restructuring and other
unusual items............... (63) (31) -- -- (94)
Other (expense) income--net.. -- -- (1) (20) (21)
---- ---- ---- ----- -----
(Loss) before income taxes... (63) (37) (82) (422) (604)
Income tax benefit........... 21 12 17 50 100
---- ---- ---- ----- -----
Net (loss)................. $(42) $(25) $(65) $(372) $(504)
==== ==== ==== ===== =====
</TABLE>

In December 1998, the old Monsanto board of directors approved a plan to
reduce costs and to integrate our acquired seed businesses. The plan included
the closure of certain facilities, reductions in the current workforce and the
sale of our tomato business. The plan provided for the elimination of
approximately 710 jobs, primarily in manufacturing and administrative
functions, by the end of 1999, at a total cost of $69 million. This amount
included workforce reduction costs of $6 million related to 60 positions
originally accrued as part of a restructuring plan approved in 1996. Those
workforce reductions had been delayed principally as a result of a failed
merger with American Home Products Corporation; old Monsanto remained committed
to accomplishing these workforce reductions and transferred the remaining
accrual to the 1998 plan. The employees affected by the 1998 restructuring plan
were entitled to receive severance benefits pursuant to established severance
policies or by governmentally mandated labor regulations.

The plan also included pretax amounts for asset impairments, primarily for
property, plant and equipment, intangible assets and inventories, totaling $82
million. These asset impairments were recorded because of the decision to sell
the tomato business. As a result, the net assets of this business were
reclassified as assets held for sale and carried at their net realizable value
at December 31, 1998 based on estimated sale proceeds of approximately $33
million. This business was sold during the second quarter of 1999. It produced
net income of $11 million in 1998 and a net loss of $5 million in 1997. The
aftertax effect of suspending depreciation on assets held for sale was not
material in 1999, 1998 or 1997.

The December 1998 restructuring amounts also included pretax charges of $37
million for the shutdown or rationalization of certain production and
administrative facilities. Rationalization entails the consolidation, shutdown
or movement of facilities to achieve more efficient operations. Approximately
40 facilities, located primarily in the United States, Europe and Latin
America, were affected by these actions. Charges for these shutdowns included
$17 million for property, plant and equipment, $1 million for intangible
assets, and $4 million for inventories. Leasehold termination costs of $8
million and various facility closure costs of $7 million, principally for
facilities shutdown costs and equipment dismantling, are also included in the
shutdown charges. The closure or rationalization of these facilities was
completed by December 31, 1999.

48
<PAGE>

Through December 31, 1999, cash payments of $39 million were made to
eliminate approximately 460 positions. Employee severance payments of $8
million in connection with the elimination of 125 positions were deferred and
paid in January 2000. Eighty positions contemplated in the plan were eliminated
through attrition. As of December 31, 1999, the remaining reserve balance for
employee severance related to approximately 45 positions was $10 million. We
expect these employee reductions to be completed by June 2000. In addition, $9
million in facility shutdown payments were incurred in connection with the 1998
restructuring plan.

Cash payments to complete the 1998 plan will be funded from operations and
are not expected to significantly impact our liquidity. The restructuring
actions are expected to result in annual pretax savings of $60 million.

In 1998, we also recorded pretax charges of $422 million related to the
acquisition of Plant Breeding International, DEKALB Genetics and certain
international seed operations of Cargill, of which $402 million related to the
write-off of acquired in-process R&D and $20 million related to the
cancellation of DEKALB Genetics stock options in connection with the DEKALB
Genetics acquisition. Management believed that the technological feasibility of
the acquired in-process R&D had not been established and that the research had
no alternative future uses. Accordingly, the amounts allocated to in-process
research and development were required to be expensed immediately under
generally accepted accounting principles.

In-process research and development charges for the seed companies acquired
in 1997 and 1998 covered numerous seed breeding projects, no single one of
which was significant, as is typical in the seed industry. These projects
consisted of conventional breeding programs for corn, wheat and other hybrids;
conventional breeding for soybean varieties; and the development of crops
modified through biotechnology. The in-process research and development
projects were valued by a discounted cash flow method with risk-adjusted
discount rates, generally from 12% to 20%, which took into account the stage of
development of each in-process research and development category. Successful
commercialization of products developed through these projects is expected to
occur five to nine years after program initiation. Although there are risks
associated with the ultimate completion and commercialization of these research
projects (see "Risk Factors"), the failure of any one project would not
materially affect the total value of the research programs. The in-process
projects were at various stages of completion at the dates of acquisition. In
1999, we had expenses of $82 million for biotechnology-related activities and
$47 million for conventional breeding activities related to completing these
in-process research and development projects. During the next eight years,
management expects to spend approximately $275 million on biotechnology-related
activities and approximately $175 million on conventional breeding activities
to complete these in-process research and development projects, as follows:

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
EXPECTED SPENDING
(IN MILLIONS)

<TABLE>
<CAPTION>
ACQUIRED IN-PROCESS
RESEARCH AND DEVELOPMENT 2000 2001 2002 2003 2004 THEREAFTER TOTAL
------------------------ ---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1998 Acquisition-related
Conventional Seed Programs......... $ 45 $ 40 $35 $30 $20 $ 5 $175
1998 Acquisition-related
Biotechnology Programs............. 40 35 25 20 15 15 150
1997 Acquisition-related
Biotechnology Programs............. 40 30 20 10 10 15 125
---- ---- --- --- --- --- ----
Total Expected IPR&D Spending....... $125 $105 $80 $60 $45 $35 $450
==== ==== === === === === ====
</TABLE>

49
<PAGE>

We intend to fund these costs, consisting primarily of salary and benefit
expenses for research and development employees, with cash generated from
existing businesses. Revenues from the in-process research and development
projects related to the 1998 acquisitions began in 1999. Revenues from the in-
process research and development projects related to the 1997 acquisitions
began in 1998.

During 1997, we acquired several seed companies that specialize in various
stages of seed production. These acquisitions included Asgrow, Holden's, Corn
States and Agroceres. We also acquired the remaining interest in Calgene. The
company recorded pretax charges of $633 million ($404 million aftertax) for the
write-off of acquired in-process research and development related to these
acquisitions. In-process research and development charges for the 1997 seed
company acquisitions cover numerous seed breeding projects, no single one of
which was significant, as is typical in the seed breeding industry. These
projects consist of conventional breeding programs for corn, wheat and other
hybrids; conventional breeding for soybean varieties; and the development of
transgenic crops.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

FOR THE SIX MONTHS ENDED JUNE 30, 2000

Our working capital as of June 30, 2000 decreased to $1.9 billion from $2.3
billion at year-end 1999, primarily because of increases in accounts receivable
and inventories, partially offset by a decrease in accounts payable. Short-term
debt increased $1.8 billion primarily to fund seasonal working capital
requirements and to reflect the reclassification of approximately $633 million
of maturing long-term debt to short-term. Trade receivables increased
approximately $1.5 billion and inventories decreased $218 million largely
because of higher sales levels in the first half of 2000. Accounts payable and
miscellaneous short-term accruals decreased $424 million primarily because of
payments made to seed growers in the first half of 2000. Our operations used
cash of $822 million in the first half of 2000 compared to a use of cash of
$513 million in the first six months of 1999 primarily reflecting the increase
in trade receivables and reduction in accounts payable, partially offset by a
1999 currency devaluation in Brazil.

Investing activities in the first six months of 2000 used $424 million of
cash primarily related to property, plant and equipment purchases. Capital
expenditures in the first half of 2000 largely were used for capacity expansion
and improvements of manufacturing facilities in the United States and Latin
America. Acquisition and investing activities of $99 million were related to
equity investments in plant biotechnology and the purchase of an additional
ownership interest in an equity affiliate.

FOR THE YEAR ENDED DECEMBER 31, 1999

Our working capital increased $0.4 billion to $2.3 billion at year-end
1999, compared with $1.9 billion at the end of 1998, primarily because of an
increase in trade receivables and decreases in short-term debt. Trade
receivables at the end of 1999 increased $379 million, or 23%, compared with
the prior year end largely because of higher sales levels. Our operations
provided cash of $120 million in 1999 compared to a use of cash of $528 million
in 1998 primarily reflecting improved management of working capital and
increased net income, partially offset by the effect of a currency devaluation
in Brazil. To the extent our cash provided by operations was not sufficient to
fund our cash needs at certain times during the year, old Monsanto contributed
cash from other operations or used borrowings to finance these requirements,
including the seed company acquisitions. Such borrowings were specifically
attributed to us. See Note 9 to our combined financial statements.

Improved working capital management, proceeds from divestitures, and funds
from old Monsanto were used to reduce debt by $343 million in 1999 (short-term
debt was reduced by $233 million and long-term debt was reduced by $110
million).

50
<PAGE>

In the three years presented, property, plant, and equipment purchases
largely were related to capacity expansions and improvements of manufacturing
facilities in the United States, Latin America and Western Europe. Agricultural
Productivity segment capital expenditures of approximately $450 million in 1999
primarily were used to expand our manufacturing facilities to meet increasing
sales volumes for our family of Roundup herbicides and for Posilac. Seeds and
Genomics segment capital expenditures of $184 million primarily were related to
modernization and upgrade of recently acquired seed production facilities. As a
result of these investments, net property, plant and equipment at the end of
1999 was approximately $370 million higher than at year end 1998.

Acquisitions and investments of $108 million in 1999 primarily included
joint ventures and equity investments in plant biotechnology. Major investments
in 1998 of $4.1 billion included the acquisitions of DEKALB Genetics, Plant
Breeding International and certain international seed operations of Cargill.
Major investments in 1997 of $1.6 billion included the acquisitions of
Holden's, Corn States, the remaining interest in Calgene, Asgrow and Agroceres.
See Note 4 to our combined financial statements for further details. Major
sources of cash in 1999 were investment and property disposal proceeds which
included a net refund of approximately $290 million, representing a portion of
the original Cargill purchase price.

DEBT CAPITALIZATION AND AVAILABLE FINANCING SOURCES

We expect to finance our operations through the issuance of commercial
paper for seasonal working capital needs. Our working capital needs are the
highest in the first and second quarters, as we extend credit to our customers
to enable them to acquire agricultural chemicals and seeds on terms that permit
payment following the sales of their crops after harvest. These credit
practices, combined with the seasonality of our sales, make us dependent upon
our ability to obtain substantial short-term financing to fund our cash flow
requirements. We believe that we have sufficient financial flexibility to
finance these requirements and to access the global capital markets on terms
and in amounts satisfactory to us, although there can be no assurance that this
will be the case.

We also expect to assume certain liabilities related to our employees' and
retirees' participation in unfunded pension and postretirement benefit plans
sponsored by Pharmacia. Prospectively, our separate pension and postretirement
benefit plans are expected to have the same basic features as the old Monsanto
plans now sponsored by Pharmacia; accordingly, our future pension and
postretirement costs are likely to be comparable to historical amounts. See
Notes (h) and (i) to our Pro Forma Condensed Combined Statement of Financial
Position.

In addition, we expect financing obtained through this offering and other
short-term sources to be sufficient to satisfy our working capital, capital
expenditures, research and development, and debt

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<PAGE>

service requirements during the next 12 to 18 months. We expect cash flows from
operations and access to capital markets to satisfy our financing needs beyond
that period.

On August 8, 2000, we entered into two credit facilities: a $1 billion,
364-day facility, and a $500 million, five-year facility. These agreements will
support and back up our issuance of commercial paper. We expect interest on any
amounts borrowed under these agreements to be at money market rates. Covenants
under these facilities will restrict our maximum borrowings. However, we expect
to be able to satisfy our currently anticipated borrowing requirements under
the terms of these facilities.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires all derivatives be
recognized as assets or liabilities on the balance sheet and measured at fair
value. Monsanto Ag expects to adopt SFAS No. 133 as of January 1, 2001, and is
currently assessing the impact of adoption on its financial position and
results of operations.

In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," which provides guidance related to revenue recognition.
Implementation of this guidance is required no later than the fourth quarter of
this year. Monsanto Ag is currently in the process of analyzing the
implications of the document on previously reported revenues. Prior to the
March 31, 2000 merger, old Monsanto had effected an accounting change with
respect to SAB No. 101 in response to a specific dialogue with the Securities
and Exchange Commission related to the sale of certain agency rights. The
financial statements of Monsanto Ag have been retroactively adjusted to
recognize the $32 million of proceeds from the sale over 20 years.

SAB 101 allows companies to report any changes in revenue recognition
related to adoption of its provisions as an accounting change at the time of
implementation. Companies must adopt SAB 101 no later than the fourth quarter
of 2000, effective as of January 1, 2000. Monsanto Ag is currently determining
the impact this statement will have on its financial position and results of
operations.

OUTLOOK

Our family of Roundup herbicides continues to face competition from generic
producers in certain markets outside the United States. Patents protecting
Roundup expired in various countries in 1991. As our patent protection on
Roundup has expired in countries outside the United States, we have
implemented, and expect to continue to follow, a pricing strategy in which we
have selectively reduced prices to encourage new usage. Compound per se
patent protection for the active ingredient in Roundup herbicide expired in the
United States on September 20, 2000. Consistent with our global pricing
strategy, we reduced our prices on the family of Roundup products in the United
States by 16% to 22% in September 1998 in anticipation of patent expiration.
The effect of the volume growth in 1999 more than offset the effect of the
price decrease in the United States. As other agricultural chemical suppliers
have access to glyphosate in the U.S., their pricing policies may cause
downward pressure on prices. In the post-patent environment, we expect to
continue our pricing strategy of selectively reducing selling prices to
encourage new uses and to increase our sales volumes.

Management expects technological advances in manufacturing processes and
formulations, as well as rapidly expanding production capacity, to continue to
improve our glyphosate manufacturing cost structure and to help maintain our
leadership position. We aim to increase our sales and income from Roundup by
encouraging expanded adoption of conservation tillage techniques by growers
worldwide; increasing sales of Roundup Ready crops, which tolerate Roundup
herbicide for effective

52
<PAGE>

weed control; introducing additional proprietary formulations of Roundup;
selectively reducing prices to encourage new uses for Roundup; maintaining our
position as a low-cost, high-quality glyphosate producer; and building on our
relationships with our distribution partners.

The U.S. patent expiration and the continuation of our pricing strategy in
the U.S. will likely result in a near term modest reduction in our gross
margin, consistent with the last three years. We expect that increased
glyphosate sales volumes and growth in our other business lines will enable us
to grow our total gross profit in the future above 1999 levels. While there can
be no assurance that any increases in volumes will offset price reductions,
this generally has been our experience in glyphosate post-patent environments
outside of the United States.

We continue to address concerns of consumers, public interest groups and
government regulators regarding the agricultural and food products developed
through biotechnology. We are investing significant amounts in 2000 to address
these concerns, including participating in an integrated, industry-wide
initiative involving major companies with an interest in agricultural
biotechnology. This initiative includes using consumer media to provide
consumers with improved information sources on biotechnology. For more
information on biotechnology, see "Risk Factors" and "Business--Acceptance of
Plant Biotechnology."

In April 1999, a jury verdict was returned against DEKALB (which became a
wholly-owned subsidiary of old Monsanto during December 1998), in a lawsuit
filed in U.S. District Court in North Carolina. The lawsuit was brought by
Aventis CropSciences S.A. (formerly Rhone Poulenc Agrochimie S.A.), claiming
that a 1994 license agreement was induced by fraud stemming from DEKALB's
nondisclosure of relevant information and that DEKALB did not have the right to
license, make or sell products using Aventis' technology for glyphosate
resistance under this agreement. The jury awarded $15 million in actual damages
for unjust enrichment and $50 million in punitive damages. DEKALB has appealed
this verdict and believes it has meritorious grounds to overturn the verdict
and intends to vigorously pursue all available means to have the verdict
overturned. No provision has been made in our combined financial statements
with respect to the award for punitive damages. Management expects intellectual
property disputes with several parties regarding biotechnology products will
continue to occur as the agricultural biotechnology industry evolves. See "Risk
Factors" and "Business--Legal Proceedings" for further discussion.

RISK MANAGEMENT

We continually evaluate risk retention and insurance levels for product
liability, property damage, and other potential areas of risk. We devote
significant efforts to maintaining and improving safety and internal control
programs, which reduce our exposure to certain risks. Management decides the
amount of insurance coverage to purchase from unaffiliated companies and the
appropriate amount of risk to retain based on the cost and availability of
insurance and the likelihood of a loss. Since 1986, our liability insurance has
been a "claims made" policy form. Management believes that the current levels
of risk retention are consistent with those of comparable companies in the
industries in which we operate. There can be no assurance that we will not
incur losses beyond the limits of, or outside the coverage of, our insurance.
We do not expect our liquidity, financial position and profitability to be
affected materially by the levels of risk retention that we accept.

EURO CONVERSION

On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their national currencies and the
euro. During the transition period, from January 1, 1999, until June 30, 2002,
both the national currencies and the euro will be legal currencies. Beginning
July 1, 2002, the euro will be the sole legal tender for transactions in these
countries.

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<PAGE>

In September 1997, we formed a cross-functional team and engaged a
consultant to address issues associated with the euro conversion. As of January
1, 1999, we began to engage in euro-denominated transactions and were legally
compliant. We expect to have all affected information systems fully converted
by April 2002. We do not expect the euro conversion to have a material effect
on our competitive position, business operations, financial position or results
of operations.

MARKET RISK MANAGEMENT

We are exposed to market risk, including changes in commodity prices,
currency exchange rates and interest rates. To manage the volatility relating
to market risks, we entered into various derivative transactions and
participated in old Monsanto's currency risk management programs. We do not
hold or issue derivative financial instruments for trading purposes.

After the separation of our business from those of Pharmacia, we plan to
continue to manage our own commodity price exposure as we have in the past. We
also plan to establish a foreign currency risk management program under which
we intend to manage currency risk in a manner substantially the same as under
old Monsanto's currency risk management programs in which we participated in
the past. The objective of this program will be to protect us from adverse
fluctuations in foreign currency exchange rates versus our functional
currencies. Currency forward contracts will be used to hedge recorded
transactional exposures (primarily for receivables and payables denominated in
currencies other than Ex-U.S. entities' functional currencies). Currency option
contracts and forward contracts will be used to manage currency exposures
related to forecasted cash flow transactions (for example, forecasted export
sales revenue denominated in a currency other than an entity's functional
currency).

The tables below provide information about derivative instruments and other
financial instruments that are sensitive to changes in commodity prices and
interest rates. The financial instruments are grouped by market risk exposure
category. Instrument denominations are indicated in parentheses. For
instruments denominated in currencies other than the U.S. dollar, the
information is presented in U.S. dollar equivalents.

COMMODITY PRICE RISK-SENSITIVE INSTRUMENTS

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<PAGE>

The following significant commodity price risk-sensitive instruments, all
of which are expected to mature in 2000 and 2001, were specifically
attributable to us as of June 30, 2000 and December 31, 1999:

<TABLE>
<S> <C>
JUNE 30, 2000
PURCHASED CORN FUTURES CONTRACTS:
Contract volumes (million bushels).................................... 13.7
Weighted average price (per bushel)................................... $ 2.33
Contract amount (in millions)......................................... $32
Contract fair value as of June 30, 2000 (in millions)................. $28
PURCHASED SOYBEAN FUTURES CONTRACTS:
Contract volumes (million bushels).................................... 12.5
Weighted average price (per bushel)................................... $ 5.28
Contract amount (in millions)......................................... $66
Contract fair value as of June 30, 2000 (in millions)................. $60
SOLD LEAN HOGS FUTURES CONTRACTS:
Contract volumes (million pounds)..................................... 9.7
Weighted average price (per pound).................................... $ 0.57
Contract amount (in millions)......................................... $ (6)
Contract fair value as of June 30, 2000 (in millions)................. $ (6)
DECEMBER 31, 1999
PURCHASED CORN FUTURES CONTRACTS:
Contract volumes (million bushels).................................... 13.6
Weighted average price (per bushel)................................... $ 2.05
Contract amount (in millions)......................................... $28
Contract fair value as of December 31, 1999 (in millions)............. $28
PURCHASED SOYBEAN FUTURES CONTRACTS:
Contract volumes (million bushels).................................... 15.9
Weighted average price (per bushel)................................... $ 4.89
Contract amount (in millions)......................................... $78
Contract fair value as of December 31, 1999 (in millions)............. $75
SOLD LEAN HOGS FUTURES CONTRACTS:
Contract volumes (million pounds)..................................... 16.0
Weighted average price (per pound).................................... $ 0.54
Contract amount (in millions)......................................... $ (9)
Contract fair value as of December 31, 1999 (in millions)............. $ (9)
</TABLE>
--------------------------------------------------------------------------------
Contract amounts are used to calculate the contractual payments and quantity of
the commodity to be exchanged.

CURRENCY EXCHANGE RATE RISK-SENSITIVE INSTRUMENTS

Until the separation of our businesses from those of Pharmacia our foreign
currency risk was managed by Pharmacia jointly with foreign currency risks of
other Pharmacia businesses, and it is not practicable to determine foreign
currency risks specifically attributable to us. Pharmacia's policy was to
purchase currency option contracts to manage currency exposure for anticipated
transactions (for example, expected export sales in the following year
denominated in foreign currencies), and to use currency option and forward
contracts to manage other currency exposures (primarily for receivables and
payables denominated in currencies other than a specific Monsanto entity's
functional currencies). This hedging activity was intended to protect old
Monsanto from adverse fluctuations in foreign currencies compared with the
entities' functional currencies. Following the separation of our businesses
from those of Pharmacia, we plan to continue to manage our currency risk,
either through our own risk management programs or through those maintained by
Pharmacia.

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<PAGE>

CERTAIN INTEREST RATE RISK-SENSITIVE INSTRUMENTS

The following significant interest rate risk-sensitive instruments were
legal obligations of Pharmacia as of June 30, 2000 and old Monsanto as of
December 31, 1999. See "Merger and Reorganization Transactions Occurring Prior
to This Offering."

Even though these instruments represent debt that was specifically
attributable to us, most of these obligations will not be assumed by us and
will remain obligations of Pharmacia. See "Merger and Reorganization
Transactions Occurring Prior to This Offering--Our Capitalization."

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000 EXPECTED MATURITY DATE
FAIR
VALUE AS
OF JUNE
2000 2001 2002 2003 2004 THEREAFTER TOTAL 30, 2000
------ ---- ---- ---- ---- ---------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT:
Fixed rate
Principal amount..... -- $500 -- $700 -- $1,993 $3,193 $3,073
Average interest
rate................ -- 5.4% -- 6.0% -- 6.2% 6.2% --
Variable rate
Principal amount..... -- $ 31 $56 $365 -- -- $ 452 $ 476
Average interest
rate(2)............. -- 5.6% 5.6% 5.5% -- -- 5.5% --
SHORT-TERM DEBT:
Variable rate
Principal amount..... $1,849 $ 27 -- -- -- -- $1,876 $1,878
Average interest
rate(2)............. 6.7% 5.6% -- -- -- -- 6.7% --

<CAPTION>
AS OF DECEMBER 31, 1999 EXPECTED MATURITY DATE
FAIR
VALUE AS
OF
DECEMBER
2000 2001 2002 2003 2004 THEREAFTER TOTAL 31, 1999
------ ---- ---- ---- ---- ---------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT:
Fixed rate
Principal amount..... -- $500 -- $700 -- $1,993 $3,193 $2,839
Average interest
rate................ -- 5.4% -- 6.0% -- 6.2% 6.2% --
Variable rate
Principal amount(1).. -- $664 $56 $365 -- -- $1,085 $1,112
Average interest
rate(2)............. -- 5.9% 5.2% 5.2% -- -- 5.6% --
SHORT-TERM DEBT:
Variable rate
Principal amount..... $69 -- -- -- -- -- $ 69 $ 72
Average interest
rate(2)............. 7.5% -- -- -- -- -- 7.5% --
</TABLE>
--------
(1) Includes commercial paper that is assumed to be renewed through 2001 when
Pharmacia's $1.0 billion credit facility expires.
(2) Average variable rates are as of June 30, 2000 and December 31, 1999.
Actual rates may be higher or lower.

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<PAGE>

BUSINESS

INTRODUCTION

We are a leading global provider, based on sales, of technology-based
solutions and agricultural products for growers and downstream customers in the
agricultural markets. The combination of our herbicides, seeds and related
genetic trait products provides growers with integrated solutions to more
efficiently and cost effectively produce crops at higher yields, while
controlling weeds, insects and diseases. Our base business, led by Roundup and
coupled with the latest tools in biotechnology, genomics and molecular
breeding, gives us a unique set of assets and capabilities. Our integrated
product offerings seek to improve farm productivity and food quality developed
through our broad technology platform. Our product innovations have transformed
farming practices and create value for growers and other agricultural customers
around the world.

The foundation of our business is the family of Roundup herbicides, which
provides growers with effective weed control at a competitive price. Over the
past three decades, we have grown our Roundup herbicide business, the core of
our Agricultural Productivity segment, into one of the most recognized global
agriculture brands. Roundup is the world's best-selling herbicide, with sales
in 1999 more than five times those of the next largest selling herbicide. Our
sales volumes of Roundup and other glyphosate-based products have grown at an
average annual rate of approximately 20% over the last 10 years. In this same
period, these products maintained an average annual sales growth rate of
approximately 11%, even as we reduced prices significantly. In 1999, our sales
of glyphosate exceeded the sales of the next eight leading herbicides combined.
Recently, much of the growth in the use of Roundup has come from the adoption
of conservation tillage, a farming practice that reduces soil erosion and
moisture evaporation while increasing farm efficiency by replacing plowing with
the judicious use of herbicides to control weeds. We seek to continue to expand
sales volumes of Roundup primarily through competitive pricing, expanded
adoption of conservation tillage, development of new, proprietary formulations,
introduction of crops developed through biotechnology that are tolerant of
Roundup and other glyphosate-based herbicides, and maintaining our position as
a low-cost, high-quality glyphosate producer. In addition to Roundup, our
Agricultural Productivity segment includes our selective chemistries and animal
agriculture businesses.

Through our Seeds and Genomics segment, we offer seeds, traits and genetic
technologies. Our research efforts in our Seeds and Genomics segment focus on
developing capabilities that add value for growers, processors and consumers
through biotechnology and advanced gene-based breeding techniques. In 1999, we
held the No. 1 or No. 2 seed market share position in key markets for corn and
soybeans, as well as the No. 1 position in the European wheat market. We have
introduced more new biotechnology traits than any of our competitors, including
traits for herbicide-resistance and traits that protect crops from insects,
viruses and diseases. As a result, in 1999, seeds with Monsanto traits
accounted for over 70% of the acres planted with herbicide-tolerant or insect-
resistant traits. We use our seed assets, including a broad, high-quality
collection of genetic material, referred to as germplasm, and our global
production and distribution infrastructure to accelerate product development
and expand our market access.

Looking ahead, the agricultural industry faces the challenge of meeting the
growing demand for food, while facing limitations on the availability of
productive farm land due to global urbanization, changes in farming practices
driven by environmental concerns and a limited supply of farm labor in
developed countries. Technological innovations are an important tool in helping
to address these challenges. To meet growers' needs for new technologies, we
have made significant investments in research and development to create a
leading, integrated plant genetics system, with platforms in biotechnology,
plant genomics and molecular breeding. Integration of these platforms creates a
highly efficient, world-class system for producing improved plants of high
commercial value.

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<PAGE>

INDUSTRY OVERVIEW

The crop input industry includes machinery, fertilizers, chemical crop
protection products, and seeds and associated traits. Throughout most of the
twentieth century, growers have benefited from the development of improved
inputs and farming practices as well as the introduction of new farmlands,
which enabled food production to keep pace with the growing demand for food.
More recently, however, the rate at which growers have been able to further
improve crop productivity has declined as improved farming practices have
become more fully implemented around the world, as land in developed countries
available for conversion to farming has declined, and as concerns about the
environmental impact of farming have increased. At the same time, the global
demand for food has continued to increase with population growth and increasing
wealth.

New technologies that provide growers with additional options to increase
productivity began to emerge in the 1990s. Key among these technologies have
been biotechnology innovations that are beginning to allow growers to take
greater advantage of the genetic potential of crops. Nonselective herbicides,
which control all vegetation, are being combined with enhanced, herbicide-
tolerant seeds to replace traditional selective herbicides, while insect-
resistant seeds can reduce the use of chemical insecticides. Grower acceptance
of these gene-based technologies is transforming the traditional agricultural
inputs industry by further linking the seed and chemical crop protection
industries. In addition, increased research is resulting in the development of
powerful genomics-based capabilities that are likely to increase the power of
biotechnology and breeding and accelerate the development of novel crop and
animal-based products that create value for growers, processors, food companies
and consumers.

CROP PROTECTION CHEMICALS

Crop protection products, including herbicides, insecticides and
fungicides, are used to protect the yield and increase the quality of crops by
controlling weeds, insects and diseases. Sales of these products grew
significantly in the 1960s, 1970s and 1980s with the introduction of new, more
effective chemistries and an increasing demand for food. In recent years, the
growth in agricultural chemical sales has slowed because fewer innovative
chemical products have come to market, seeds enhanced through biotechnology
have reduced the need for chemical treatments, and the number of production
acres has declined in developed countries. Global sales of crop protection
products in 1999 are shown below.

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<PAGE>

AGRICULTURAL CHEMICAL SALES

GLOBAL SALES OF AGRICULTURAL CHEMICALS BY REGION - 1999

Total = $28.1 billion

[PIE CHART]

United States and Canada 30.4%
Western Europe 23.5%
Latin America (including Mexico) 16.1%
Asia/Eastern Europe/Rest of World 30.0%

GLOBAL SALES OF AGRICULTURAL CHEMICALS BY CATEGORY - 1999

Total = $28.1 billion

[PIE CHART]

Herbicides 50.8%
Insecticides 25.1%
Fungicides 20.4%
Other 3.7%

Source: Phillips McDougall

Worldwide sales of herbicides, which are used to control weeds, were
approximately $14.3 billion in 1999. There are two types of herbicides:

. selective herbicides, which represented 74.2% of 1999 global herbicide
sales, control only certain weeds and do not harm crops for which they
are designed; and

. nonselective herbicides, which represented 25.8% of 1999 global
herbicide sales, control a broad spectrum of vegetation including
crops, unless the crops have been specifically designed to tolerate the
herbicide.

The global herbicide market share of nonselective herbicides has grown from
approximately 14.3% in 1991 to approximately 25.8% in 1999 while the market
share of selective herbicides has correspondingly declined. Glyphosate, a
chemical that we discovered and patented and continue to market under the
trademark Roundup, is now the largest selling single product in the global crop
protection market.

Global sales of insecticides, used to control insects that feed on crops,
were approximately $7 billion in 1999. Fungicides, used to prevent and treat
crop diseases, accounted for approximately $6 billion in global sales in 1999.

CROP SEEDS AND TRAITS

Seeds constitute a major component of the global agricultural input
industry. The global commercial seed trade market was worth over $23 billion in
1999. While the rate of yield increases from hybrids has slowed in the last two
decades, the application of biotechnology and genomics to seed development is
dramatically increasing innovation in the seed industry. Biotechnology enables
gene-by-gene analysis and enhancement of crops and is augmenting traditional
breeding by enabling faster, targeted development of performance-enhancing
traits. Traits are generally categorized as "input" or "output" traits,
depending on whether they create value at the input stage of production or
after harvesting.

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<PAGE>

Key input traits to improve agronomic qualities include:

. HERBICIDE TOLERANCE. Herbicide-tolerant crops enable growers to spray
their fields with nonselective herbicides that control weeds while
leaving the crop unharmed.

. INSECT RESISTANCE. Biotechnology traits that confer resistance to
certain insects minimize applications of chemical insecticides. An
example of this is the insertion of a gene of a common soil
microorganism, Bt, which has created crops resistant to certain
insects.

. DISEASE RESISTANCE. Virus-resistant crops enable growers to protect
their plants from damaging viral diseases for which there are often no
effective agricultural chemical solutions.

Traits that produce herbicide-tolerant or insect-resistant crops first became
commercially available in the mid-1990s and now can be purchased in a number of
crops, including corn, canola, soybean and cotton. Also, traits that produce
virus-resistant crops are now available for potato. In addition to these
commercially available traits, scientists are working on developing traits to
increase the amount of grain produced on a given acre of land by increasing
plants' abilities to withstand adverse conditions and by selecting for high-
growth characteristics.

Output traits have begun to be introduced into the market. These traits
currently are designed to create higher-quality animal feed and in the future
are expected to include human nutritional benefits.

Growers have rapidly adopted the first generation of seed traits with acres
planted. The number of global planted acres of herbicide-tolerant and insect-
resistant crops grew from less than 5 million acres in 1995 to approximately
120 million acres in 1999. Despite this rapid growth, the total number of acres
covered currently represents only a small fraction of the approximately 3
billion acres of crops cultivated worldwide. We believe additional growth will
come from further adoption of currently available traits and the development of
new input and output traits.

We expect that plant genomics, which is the study of the genetic structure
of plants, will substantially accelerate the development of traits. Genomics
tools allow the identification and characterization of thousands of genes in
parallel as well as the tracking of genes throughout the breeding process. This
capability substantially increases the power of biotechnology tools and the
traditional breeding process. As a result, researchers can more rapidly
identify genes that may enhance the performance of crops in the field or
improve the nutritional content of harvested crops. The application of plant
genomics to biotechnology and plant breeding should allow faster introduction
of desired attributes into crops that, in turn, we expect will result in more
rapid commercialization. We believe that future applications of plant genetic
technology may extend beyond traditional agricultural applications.
Increasingly, technological capabilities, such as genomics and biotechnology,
are expected to be important for success in the industry.

STRATEGY

The growth in world population combined with a general increase in global
prosperity are creating an increasing demand for food. Our goal is to create
and deliver integrated agricultural solutions that substantially increase the
volume and quality of global food production while reducing economic costs and
environmental effects. We expect to achieve this by integrating our traditional
agricultural products with advanced technological tools, including genomics,
biotechnology and molecular breeding. Our strategy is built around the
following focus areas:

. CONTINUE TO DEVELOP INTEGRATED SOLUTIONS FOR GROWERS. We are continuing
to integrate our agricultural chemicals with our seed and technology
products to offer agricultural solutions to growers that meet their
production needs. The integration of our seed assets with our seed and
chemical field operations began in 1999. As this initiative progresses,
we will continue to look for opportunities to more effectively and
efficiently develop and deliver value-added

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innovations to our customers. For example, we expect that the combining
of diverse input and output traits into the best seed varieties will
offer significant additional value to growers. These and other integrated
solutions have the potential to significantly alter crop production
systems. We are well positioned to take advantage of this opportunity,
given our global seed infrastructure, current portfolio of seed trait
products and integrated genetic technology system.

. MAXIMIZE THE GROWTH OF THE ROUNDUP BUSINESS. We aim to increase our
sales and income from Roundup by:

. ENCOURAGING EXPANDED ADOPTION OF CONSERVATION TILLAGE TECHNIQUES BY
GROWERS WORLDWIDE. We will continue to promote the adoption of
conservation tillage through selective price reductions as well as
through education of farmers on the environmental and cost benefits of
converting to conservation tillage.

. INCREASING PLANTINGS OF ROUNDUP READY CROPS, WHICH TOLERATE ROUNDUP
HERBICIDE FOR EFFECTIVE WEED CONTROL. We expect additional weed
control opportunities for Roundup with the introduction of Roundup
Ready crops into new markets and with the development of new products
with Roundup Ready technology.

. INTRODUCING ADDITIONAL PROPRIETARY FORMULATIONS OF ROUNDUP. We expect
to continue to develop new, improved proprietary formulations that
provide growers added benefits.

. SELECTIVELY REDUCING PRICES TO ENCOURAGE NEW USES FOR ROUNDUP AND TO
INCREASE VOLUMES. We have implemented a pricing strategy for Roundup
in which we have selectively reduced prices to encourage increased
use. Historically, the growth in volumes has more than offset price
decreases.

. MAINTAINING OUR POSITION AS A LOW-COST, HIGH-QUALITY GLYPHOSATE
PRODUCER.

. BUILDING ON OUR RELATIONSHIPS WITH OUR DISTRIBUTION PARTNERS.

. ACCELERATE THE DEVELOPMENT AND COMMERCIALIZATION OF NEW PRODUCTS. We
expect to remain a leader in the development and introduction of new
technologies for food and agricultural production by:

. REDUCING THE TIME AND COST OF DISCOVERING NEW PRODUCTS.

. USING GENOMICS CAPABILITIES TO SPEED INVENTION AND DEVELOPMENT OF NEW
TECHNOLOGIES. We expect our genomics capabilities to reduce the time
and cost of discovering new products by accelerating the
identification of genes for crop improvement and by expanding the
available pool of genes for new product development. We also are
applying genomics techniques to the commercialization of improved
plant varieties through a process known as molecular breeding.

. EXPANDING OUR TECHNOLOGICAL EXPERTISE VIA STRATEGIC RELATIONSHIPS. We
have established numerous strategic relationships that expand the
scope of our research and provide access to new technologies and
markets.

. USING OUR GLOBAL SEED INFRASTRUCTURE TO ACCELERATE THE
COMMERCIALIZATION OF NEW PRODUCTS. Our seed assets provide a rich
source of diverse germplasm and accelerate the introduction of our
seed traits developed through genomics and biotechnology.

. HELP TO BROADEN PUBLIC UNDERSTANDING AND ACCEPTANCE OF NEW TECHNOLOGIES
AND PRODUCTS. We have a number of initiatives to educate consumers on
the safety and benefits of plant biotechnology. We are investing
significant amounts in 2000 to address these concerns, including
participating in an integrated, industry-wide initiative involving
major companies with an interest in agricultural biotechnology. This
initiative includes using

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consumer media to provide consumers with improved information sources on
biotechnology. We also continue to support a rigorous review process for
new products by regulatory bodies worldwide.

PRODUCTS

Financial information about our Agricultural Productivity segment and our
Seeds and Genomics segment can be found under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Agricultural
Productivity Segment," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seeds and Genomics Segment" and Note 15
to our historical combined financial statements included elsewhere in this
prospectus.

AGRICULTURAL PRODUCTIVITY

Our Agricultural Productivity segment consists of our crop protection
products, animal agriculture and environmental technologies businesses. In
1999, this segment accounted for approximately 68% of our net sales.

CROP PROTECTION PRODUCTS

Our crop protection business focuses on the herbicide market and includes
our family of Roundup herbicides, the leading worldwide agricultural herbicide
brand in terms of sales; glyphosate sold to other major herbicide
manufacturers; and selective chemistries used primarily for weed control in
corn, wheat and rice. Our global herbicides business is the largest in the
world, with 1999 market share of approximately 19%.

Roundup

Roundup, which is sold in more than 80 countries, is the world's best-
selling herbicide, with net sales in 1999 more than five times greater than
those of the next largest selling herbicide. We discovered glyphosate in 1970,
and began marketing it under the Roundup brand in 1976. Today, Roundup
herbicides are sold for agricultural, industrial and residential weed control.

We have developed a broad family of Roundup herbicides to meet grower
needs, including formulations that:

. more effectively control difficult-to-kill weeds;

. are absorbed more rapidly to minimize losses due to rain; and

. allow faster visual indication of weed control.

We continue to invest to grow this business. We are using our strong
capabilities in the area of formulation technology and our understanding of
the interactions between seed genetics, chemicals, biotechnology traits and
growing conditions to develop proprietary Roundup herbicides and more powerful
glyphosate-based solutions. In addition, we are implementing proprietary
improvements to our glyphosate production processes to reduce marginal costs
and increase capacity.

Specifically, we seek to expand the use of Roundup through the following
initiatives:

. EXPAND ADOPTION OF CONSERVATION TILLAGE. Roundup is the herbicide of
choice in the U.S. conservation tillage market and is used widely in
other major conservation tillage markets. Conservation tillage is a
farming practice that replaces plowing with the judicious use of
herbicides to control weeds, which reduces soil erosion, moisture
evaporation and labor, energy and equipment costs for growers. As a
nonselective herbicide, Roundup is an excellent fit for conservation
tillage since it effectively controls a variety of weeds and can be
applied before a crop emerges without any residual effect.

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Price reductions for Roundup have reduced the costs of conservation
tillage for growers, thus contributing to the growth of this practice
globally. As the adoption of conservation tillage has expanded, and
growers have substituted the use of nonselective herbicides for plowing,
sales of Roundup have increased. While we estimate that global acreage
under conservation tillage grew from approximately 90 million acres in
1995 to approximately 200 million acres in 1999, we believe this
represents only approximately 27% of the estimated crop acres in
developed countries on which conservation tillage could potentially be
practiced. Developing countries contain approximately 750 million
additional acres, many of which we believe are suitable for conservation
tillage.

We intend to promote the expansion of conservation tillage globally
through a combination of selective price reductions for Roundup and
continued education of growers about the economic and environmental
benefits of conservation tillage.

. INCREASE SALES OF ROUNDUP READY CROPS. Roundup and other glyphosate
herbicides can be applied over the top of our Roundup Ready crops,
controlling weeds without injury to the crop. This integration of
agricultural chemicals and enhanced seeds offers growers a cost-
effective solution for weed control. To date, we have introduced
Roundup Ready soybeans, corn, canola and cotton. In 1999, approximately
65 million acres were planted with Roundup Ready crops. We expect to
continue to introduce new Roundup Ready crop technology, including
Roundup Ready sugar beets, Roundup Ready wheat and second-generation
Roundup Ready corn, each subject to completion of field trials and
receipt of regulatory and other governmental approvals.

We have significantly increased our herbicide sales in key geographic
areas by offering an integrated weed control system using Roundup Ready
technology. As a result, over 50% of U.S. and over 80% of Argentine
post-emergent soybean weed control now allows use of nonselective
products like Roundup rather than selective herbicides. We believe more
herbicide-tolerant crops will be developed and approved for planting in
various countries, and additional business will shift from selective to
nonselective herbicides.

. PURSUE OUR PRICING STRATEGY. Price decreases in Roundup historically
have been followed by substantial expansion in the use of Roundup. As
Roundup has become more economical, growers have used Roundup in new
applications, have treated more acres with Roundup in existing
applications and have used higher amounts of Roundup per treated acre.
This historical growth in volumes has more than offset our decline in
prices, causing sales to grow and reinforcing our pricing strategy for
the brand. For example, we believe that the 1999 global average price
decline in Roundup of approximately 11% was a key factor in an
approximately 20% increase in global volumes in that year. We expect to
continue to implement this pricing strategy globally to increase sales
volumes for Roundup.

. DEVELOP PROPRIETARY FORMULATIONS. We expect to continue to enhance our
family of Roundup herbicides and to maintain premium pricing for our
proprietary brands relative to generic competition, even though our
patent for Roundup has expired in the United States. We have competed
with generic glyphosate products for many years outside the United
States and retained a substantial share of global sales, suggesting
that growers are loyal to our branded Roundup herbicides. According to
one recent journal article, Roundup is one of the most recognized
agricultural chemical names. In addition, growers have demonstrated a
willingness to purchase our premium brands, such as Roundup Ultra. We
also have developed products like Roundup Dry, which offers more
convenience to growers by reducing packaging disposal and increasing
ease of product handling.

Between 1992 and 1999, we expanded our glyphosate production capacity more
than four-fold and reduced our per-gallon cost of manufacturing glyphosate by
more than 35%. We plan to continue to expand our capacity for producing
glyphosate to meet expected volume growth. We also expect to

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continue to develop and implement proprietary manufacturing process
enhancements to reduce our unit costs. In addition, we have entered into
agreements with eight other major agrochemical manufacturers to supply them
with glyphosate. We believe that these manufacturers' interest in establishing
these purchasing relationships with us evidences the cost advantage of our
production process.

Our glyphosate patent in the United States expired on September 20, 2000.
Although we have not had glyphosate patent protection outside the United States
for several years, our global sales volumes of Roundup and our other glyphosate
herbicides have consistently increased, with more than 70% of our glyphosate
sales volume in 1999 coming from outside the United States. In 1999, sales of
our glyphosate exceeded the sales of the next eight leading herbicides
combined.

The Roundup lawn and garden business sells Roundup that is formulated and
sized for homeowner use. On October 1, 1998, we entered into an agency and
marketing agreement with The Scotts Company with respect to the Roundup lawn
and garden business. Pursuant to this agency and marketing agreement, Scotts
has global responsibility for marketing, sales, product distribution and
finance for our Roundup lawn and garden products. The Roundup lawn and garden
business holds the market-leading position in the United States, Canada, France
and Australia in the non-selective category.

Selective Chemistries

Our selective chemistries business primarily serves growers in the corn,
rice and wheat markets. Our Lasso, Harness and related brands of herbicides
collectively hold the No. 2 acetanilide position in total area treated for pre-
emergent control of grassy weeds in the United States. We also sell Machete, a
herbicide for the control of grasses in rice production, primarily in Asian
markets, and Avadex, an herbicide for control of wild oats, a significant weed
problem in North American wheat production. These products have established
strong market positions based on performance, competitive pricing and field
support.

We recently have launched two new products for wheat in certain markets:
Maverick, a post-emergent herbicide for control of several key weeds; and
Latitude, a fungicide for management of "take all" disease in wheat, which,
until Latitude's introduction, could not be effectively controlled. We expect
the use of these products to grow significantly once regulatory approval is
received in other markets in the next two years. In addition, selective
chemistries play an important role in rounding out the portfolio of products we
offer to growers.

ANIMAL AGRICULTURE

We produce the largest selling U.S. brand of recombinant bovine growth
hormone, which increases milk production in dairy cows. We market this product
under the brand name Posilac in the United States, and license the product for
sale outside the United States. Nearly one-third of the over nine million dairy
cows in the United States are in herds supplemented with Posilac. These cows
have shown an average increase in milk production of roughly nine pounds per
day, or approximately 15%.

Our animal agriculture business focuses on improving animal productivity in
the dairy and swine industries. We use our expertise in biotechnology and
genomics to develop innovative products that improve the productivity of dairy
cattle and swine. We also are the second-largest swine genetics company in the
United States in terms of market share, operating under the DEKALB Choice
Genetics brand name. DEKALB Choice Genetics offers several improved swine
genetic lines that increase swine producer productivity measures, such as
fertility and pigs per litter. We expect to use our expertise in biotechnology
and genomics to continue to develop innovative products in animal agriculture,
and expand our market share.

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We have a highly efficient sales and marketing model for Posilac, unique in
the industry, pursuant to which we sell and ship our products directly to
customers. We believe this model allows us to provide superior customer service
at a lower cost.

ENVIRO-CHEM

Enviro-Chem is a full-service engineering and construction company that
specializes in engineering, procurement and construction of sulfuric acid,
nitric acid and urea plants using proprietary process technology. It also sells
a portfolio of unique products and systems to solve industrial air pollution
problems. Enviro-Chem serves clients in fertilizer, chemical, metallurgical,
refinery, power generation and other process industries.

SEEDS AND GENOMICS

Our Seeds and Genomics segment represented approximately 32% of our 1999
net sales. This segment is comprised of our global seeds and related traits
business and our genetic technology platforms.

SEEDS AND RELATED TRAITS

Our global seeds and associated traits business is based on our ability to
deliver valuable, technology-based products to growers of major crops around
the world. We primarily focus on serving the markets for corn, soybeans, cotton
and wheat. In 1999, we held the No. 1 or No. 2 seed market share position in
key markets for corn and soybeans as well as the No. 1 position in the European
wheat market.

We are a leading provider by acres planted of biotechnology seed traits,
which are characteristics expressed in plants, such as herbicide tolerance or
insect resistance. We are developing such traits using biotechnology and
genomics tools and seed breeding. We currently make our traits available
through our seed products or by licensing the traits to other seed companies
for sale in their seeds. Fees from these licenses represent a significant
portion of our net sales from traits.

Growers have embraced our seed traits, paying fees or premiums above
conventional seed prices for traits, and market penetration has been rapid. For
example, Roundup Ready soybeans, introduced in 1996, represented over 50% of
the approximately 70 million acre U.S. soybean market and over 80% of the
approximately 18.5 million acre Argentine soybean market in 1999. In aggregate,
the acreage of our Roundup Ready, YieldGard and Bollgard products has grown
from approximately 3 million acres in 1996 to approximately 86 million in 1999.
We estimate that our acreage of biotechnology traits in the United States for
2000 increased by approximately 5%.

GROWTH OF MONSANTO WORLDWIDE BIOTECH TRAIT ACREAGE

million acres
[BAR CHART]

1996 1997 1998 1999
---- ---- ---- ----
3 17 58 86

MONSANTO TRAIT ACREAGE BY REGION - 1999
million acres

Total = 86.1 million acres

[PIE CHART]

North America 68.7
South America 16.9
Rest of World 0.5

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Because seeds are the delivery vehicle for traits, we have built a global
seed infrastructure to provide the backbone for our breeding, production and
distribution activities. We built this infrastructure by acquiring and
consolidating a number of seed company operations around the world
and integrating the sales and service functions of this global seeds enterprise
with our agricultural productivity operations. This infrastructure enables us
to coordinate our agricultural productivity and seeds and traits research to
introduce new products to our customers rapidly and efficiently.

CORN. Globally, corn is one of the largest crops by seed value and
represents our major crop focus. Our major corn seed brands are DEKALB Genetics
and Asgrow, which together hold the No. 2 position in the U.S. market,
accounting for approximately 13% retail market share in 1999. Through Corn
States, we license our germplasm and traits to nearly 200 seed corn companies
that sell to growers representing an additional 35% of the corn acres in the
United States. Our brands also hold the No. 1 position in the three major Latin
American hybrid corn markets (Brazil, Argentina and Mexico), accounting for
more than 45% of 1999 sales in those markets. In addition, we have a
significant position in corn in Asia.

We have introduced corn input trait products directed toward meeting grower
needs by improving crop performance and reducing input costs. Our first input
traits include Roundup Ready corn and YieldGard insect-resistant corn. Roundup
Ready corn provides superior weed control by protecting corn against over-the-
top applications of our Roundup herbicide and other glyphosate herbicides.
YieldGard provides resistance to European corn borers, which historically have
cost U.S. growers an estimated $1 billion annually in crop yield losses and
pest control expenditures. In 1999, we commercialized YieldGard corn in
Argentina under the registered name MaisGard, and currently plan, subject to
regulatory approval, to commercialize corn with both YieldGard and Roundup
Ready traits throughout Latin America.

SOYBEANS. Soybeans represent our second largest crop focus. To date, our
primary market for soybean seeds and Roundup Ready soybeans has been in North
America. We sell our soybeans under the Asgrow, DEKALB Genetics and Hartz seed
brands in the United States, and the First Line Seeds brand in Canada.
Combined, our brands hold the No. 1 seed share position in the U.S. soybean
market, accounting for approximately 25% of 1999 market sales. We also license
the traits for Roundup Ready soybeans to both large and smaller seed companies
in the United States. Outside North America, Roundup Ready soybeans are sold in
Argentina and we have filed for regulatory approval in Brazil. In Brazil, we
are the second largest supplier of seed germplasm.

COTTON. Our third major crop focus is cotton. We have licensed the traits
for our Roundup Ready cotton, our Bollgard insect-resistant cotton and
combinations of these traits to Delta and Pine Land, a leading breeder,
producer and marketer of cotton seeds. Currently, we are involved in a lawsuit
brought by Delta and Pine Land, which seeks unspecified compensatory and
punitive damages arising from the failure of our two companies to merge. On
December 20, 1999, old Monsanto announced that it had withdrawn its filing for
U.S. antitrust clearance of the proposed merger in light of the Department of
Justice's unwillingness to approve the transaction on commercially reasonable
terms. Regardless of litigation between the two companies, we expect that Delta
and Pine Land will continue to have the same economic incentive to market our
cotton products and, accordingly, that the litigation should not adversely
affect our marketing relationship with Delta and Pine Land. We also license
these traits to Stoneville, a company that we sold in December 1999, and other
smaller cotton seed companies. Bollgard insect-resistant cotton protects
against several of the most economically damaging insects, including the cotton
bollworm. U.S. cotton growers have widely adopted both the Roundup Ready and
Bollgard traits. In addition, our Bt cotton has been adopted elsewhere,
including Australia and China.

WHEAT. Wheat represents our fourth major crop focus. We hold the No. 1 seed
share position in the European wheat market. Currently, our wheat crop activity
is located primarily in Western

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Europe and consists of the breeding and licensing activities of our Plant
Breeding International conventional seed in the United Kingdom, France and
Germany, and the sale of our Hybritech brand hybrid wheat seeds, primarily in
France. We are developing Roundup Ready wheat and other traits for the wheat
market in the United States and Canada.

OTHER CROPS. We hold leading market positions in several other crops,
including sunflower, sorghum and canola seed, in major markets around the
world. In addition, we sell Roundup Ready canola in both the United States and
Canada.

GENETIC TECHNOLOGY SYSTEM

Our integrated genetic technology system is targeted at developing a deep
understanding of the genetic makeup of plants and other organisms, and using
that knowledge to improve crop production. We believe that our expertise in
improving crops provides us with unique competitive tools.

We believe we are now in a position to build upon our earlier agrochemical
and biotechnology successes to accelerate our advances in improving food
production. We have created a genomics capability that substantially expands
the power of biotechnology to identify and improve genetic material and that
provides a significant increase in the ability of breeding technologies to
incorporate enhanced traits into crops. Integration of our breeding,
biotechnology and genomics capabilities through highly developed management
systems promises to provide us with the ability to produce improved plants of
high commercial value in the future.

TECHNOLOGY

Our integrated technologies for understanding and improving plant genetics
provide us with a significant ability to invent and develop improved crops. We
base our technology strategy on the convergence of three major platforms:
biotechnology, genomics and molecular breeding.

Integration of these platforms creates what we believe to be the world's
strongest system for producing improved plants of high commercial value. We
believe this integrated technology platform has transformed and will continue
to transform the agricultural industry, resulting in market expansion and
increased market share for our products.

BIOTECHNOLOGY

Genes are the fundamental genetic instructions determining what an organism
is, how it behaves and how it responds to its environment. Biotechnology refers
to capabilities that began to emerge in the 1970s to isolate, understand and
modify genes. We committed early to applying this technology toward the study
and improvement of plants. Our specific biotechnology accomplishments include:

. identifying one of the first genes that would confer a commercially
useful trait in a plant;

. inventing the capability to efficiently insert new genes into plants,
commonly called plant transformation; and

. creating one of the first stable genetically transformed plants.

We continue to pursue the cutting-edge application of biotechnology to
plants. We employ more than 400 scientists at our principal research facilities
in St. Louis, Missouri and at our wholly owned subsidiaries, Calgene,
Agracetus, Inc., DEKALB Genetics and Plant Breeding International (now part of
Monsanto PLC). Currently, we have substantial expertise and capacity in
critical areas of plant biotechnology, including:

. PLANT TRANSFORMATION. We possess advanced capabilities to introduce
valuable genes into major crops. We are able to conduct over 20,000
independent plant transformations annually.

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. GENE EXPRESSION. We possess an advanced capability to regulate when and
in what plant tissues specific genes are turned on or off. This enables
us to direct genetic improvement to specific parts of the plant.

. METABOLIC ENGINEERING. We have a proven capability to regulate the basic
functions and characteristics of plants through genetic improvements.

. GENE STACKING. We have proven experience in combining genes to achieve
multiple traits or in achieving single complex traits requiring multiple
genes.

. FIELD TESTING. We have substantial capacity to test plants under both
greenhouse and field conditions. We have obtained more than twice as
many field trial approvals from the U.S. Department of Agriculture as
our nearest competitor, which we believe is an indication that our
research and development capabilities are broad and deep relative to
those of our competitors.

. REGULATORY MANAGEMENT. We have obtained regulatory approval for more
agricultural biotechnology products than any of our competitors.

GENOMICS

Genomics enhances the results we can achieve through our breeding and
biotechnology platforms by allowing us to analyze thousands of genes
simultaneously. This genomics approach, which is more efficient than the
biotechnology approach of identifying useful genes one by one, represents the
culmination of converging advances in biology, chemistry, robotics and
computing. As a result, it is now possible to decipher the entire genome of a
plant. By understanding all the genes in an organism, we can apply
biotechnology to an even greater range of products than was previously
possible. Examples of potential resulting products include drought-tolerant
corn and high-protein soybeans.

In order to increase our ability to understand the biological processes of
commercial organisms, we made a strategic commitment to become a world leader
in developing and applying genomics technologies to the discovery and
development of products based on the genetic improvement of crop plants. The
three components of our genomics strategy are to:

. build an internal and external network of collaborative centers of
excellence in genomics;

. integrate genomics with biotechnology, molecular breeding and our
germplasm assets; and

. create commercial value by applying genomics technologies to crop
plants, microbes and animal breeding.

This platform creates an unprecedented potential to improve crops to meet
the needs of our growing world population. Agricultural genomics could
potentially create products improving food and feed safety, crop productivity
and animal agriculture, non-arable land utilization, quality of consumer food
products and pharmaceutical manufacturing.

The integration of genomics and breeding reduces the uncertainty inherent
in traditional breeding. We believe that this capability will enable us to
enhance the performance of our seed products and reduce product cycle times. In
1999, we identified thousands of new DNA markers and analyzed over 5 million
genotypes.

We invested $695 million in research and development in 1999, $536 million
in 1998 and $409 million in 1997. We have created one of the largest and most
effective genomics programs in the world, involving approximately 500 of our
employees and the dedicated efforts of 200 additional scientists through our
partnerships. Internal operations include:

. CEREON GENOMICS LLC (CAMBRIDGE, MASSACHUSETTS). Cereon is our wholly
owned subsidiary. Through an agreement with Millennium Pharmaceuticals,
Inc., we and Cereon

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have been granted an exclusive license to all of Millennium's technology
related to genomic processes and genomic products, such as DNA sequences,
for use in the areas of plant agriculture and dairy cattle. In return,
any improvements to these genomic processes and products made by Cereon
are licensed to Millennium for use in the area of pharmaceuticals.

. MONSANTO RESEARCH (ST. LOUIS, MISSOURI). In St. Louis, our genomics
capabilities are focused on the commercial application of genomics
technology and are closely integrated with our biotechnology program.

. DEKALB GENETICS (MYSTIC, CONNECTICUT). DEKALB Genetics focuses on the
analysis of gene function for the improvement of corn.

. MONSANTO RESEARCH (ANKENY, IOWA). In Ankeny, we have built a state-of-
the-art plant molecular breeding facility, with a world-class capacity
to analyze genetic characterizations on crop samples.

. MONSANTO RESEARCH (BANGALORE, INDIA). In Bangalore, our genomics
capabilities are focused on bioinformatics, the application of computer
hardware and software to biological information.

Our external network includes:

. MILLENNIUM PHARMACEUTICALS. Millennium Pharmaceuticals is a leader in
human genomics and Cereon's collaborative partner in genomics research
and development. Millennium Pharmaceuticals has granted us an exclusive,
perpetual license to its extensive genomics technologies for use in the
areas of plant agriculture and dairy cattle.

. MENDEL BIOTECHNOLOGY. Mendel Biotechnology is a company focused on the
analysis of gene function, established by world-leading academic
scientists. In exchange for funding, Mendel provides us with licenses to
classes of proprietary genes for the development of commercial traits in
our core crops. These licenses are in force for the life of the patents
which are filed during the term of the collaboration.

. PARADIGM GENETICS. Paradigm Genetics is a company focused on the
analysis of gene function, established by world-leading plant
scientists. In exchange for funding, Paradigm provides us with perpetual
licenses to functional characterizations of our proprietary genes.

. INCYTE PHARMACEUTICALS INC. Incyte Pharmaceuticals is an established
genomics company. In exchange for funding, Incyte has provided us with
licenses that expire in October 2000 to all of its corn and soybean
genomics databases for use in our research, and a perpetual, non-
exclusive license to commercialize products developed using database
information. We are seeking to renew these licenses and gain access to
other Incyte databases.

. UNIVERSITY RELATIONSHIPS. Hundreds of agreements with universities
provide us, in exchange for funding, with access to emerging genomics
technologies and capabilities developed by top university scientists.
Most of these agreements provide us with licenses or options to license
developed technologies. Many of these licenses are exclusive. The
licenses are generally in force for the life of the relevant patents.

We intend to use these genomics capabilities to discover genes that will
create new traits in crops, such as:

. resistance to insects and disease;

. resistance to environmental stresses, such as drought, heat and cold;

. higher crop yields;

. increased content of oil, protein and other nutrients; and

. modified nutritional composition of oils.

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GERMPLASM AND MOLECULAR BREEDING. Our seed companies have thousands of seed
varieties, called germplasm, for our crops. The diversity of our germplasm
enables our breeders to be effective at selecting commercial varieties with
traits of value to farmers.

Plant breeders create new varieties by pollinating one plant with another.
Historically, plant breeding has been done without any direct knowledge of the
genes that underlie desired characteristics, such as grain yield. Today, we are
applying our genomics technology to make the plant-breeding process faster,
more cost effective and with more predictable outcomes. In 1999, at our world-
leading breeding center in Ankeny, Iowa, we analyzed more than 2.5 million
genetic characterizations on crop samples.

This novel, technology-driven breeding process allows us to use varieties
of crops that have not traditionally been part of the plant breeding process.
Many untapped varieties may contain better versions of genes for yield, disease
resistance, drought tolerance or other traits. Genomics allows plant breeders
to integrate these genes into commercial crop varieties efficiently. Our
breeders are currently using this approach in corn, soybeans and cotton. This
new ability to improve crops is complementary to the biotechnology approach to
crop improvement.

These technology-driven breeding and gene discovery efforts are dependent
on the strength of our ongoing plant breeding operation. In conjunction with
the establishment of our genomics platform, we have created one of the world's
largest plant breeding platforms, encompassing more than 1,000 people located
at over 150 breeding stations in over 15 countries. At these stations, our
breeders manage over 3.5 million test plots per year, continually investigating
plant yield and other characteristics in our core crops.

COMPREHENSIVE GENE-TO-SEED CAPABILITIES. Our leading technology position
has resulted in the planting of seeds with Monsanto traits on more than 70% of
the acres planted with herbicide-tolerant and insect-resistant traits in 1999.
We have integrated our strong position in biotechnology with germplasm,
genomics and molecular breeding to create a more efficient "gene-to-seed"
capability for the discovery, development and commercialization of industry-
transforming products for agriculture. We have a team of over 200
bioinformaticians, biostatisticians and computer scientists, as well as
proprietary knowledge management systems that enable increasingly rapid
discovery and development of improved crops.

As a result of our comprehensive gene-to-seed capabilities, we have a
promising pipeline of new products. Two examples of products that we are
planning to introduce, subject to completion of field trials and receipt of
regulatory and other governmental approval, include corn rootworm-resistant
corn and second-generation Bollgard insect-resistant cotton.

We have designed our corn rootworm-resistant corn to offer protection
against the corn rootworm and related insects. Losses from corn rootworm are
significant and currently available insecticides have limited effectiveness in
controlling this underground pest. Second-generation Bollgard insect-resistant
cotton contains a combination of insect-resistant traits to help growers
improve their insect-resistance management programs.

ACCEPTANCE OF PLANT BIOTECHNOLOGY

The safety of food and the health of consumers is our first priority,
regardless of whether the product is a traditional pesticide or a biotechnology
trait. Recently, advocacy groups have challenged the safety of foods produced
from biotechnology crops, and have raised concerns about their potential effect
on consumers and the environment. See "Risk Factors--Risks Related to Our
Business." However, biotechnology has enjoyed and continues to enjoy
substantial support from members of the scientific community, based on the
testing and safety of these products.

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In 1999, we received more than 25 separate regulatory approvals (food, feed
or environmental) in eight different countries (Argentina, Bulgaria, Canada,
China, Japan, Romania, Russia and the United States) for production and/or
import of our plant biotech products. Additionally, the major U.S. grain
handlers (ConAgra, Inc., Cargill and Archer Daniels Midland) have committed to
accepting biotech grain for the 2000 growing season. While a few food companies
have chosen to remove genetically modified ingredients from their products, the
Grocery Manufacturers of America continues to support biotechnology as "a safe
way to produce healthier food in greater quantities, as well as to ensure a
cleaner environment."

We believe there is a low awareness of biotechnology issues among the
general public in the United States, but that most consumers support the
benefits associated with plant biotechnology, including reduction of
insecticide use, higher yielding crops and the promise of more nutritious
foods. Our market research indicates that the most consistent food safety
concern across several countries (Brazil, Canada, France, Germany, Japan, the
United Kingdom and the United States) is the presence of pesticides and
agricultural chemicals in food. In addition, based upon our studies, more
consumers are most concerned about nutritional content of food, healthfulness
of food and artificial ingredients in food than they are about biotech foods.

We have undertaken several initiatives to provide consumers information
about the safety of these products, and support essential testing, safety
procedures and regulatory review systems for biotech crops. Independent market
research indicates that the more consumers know about biotechnology, the more
likely they are to support it. Therefore, we and other major companies with an
interest in agricultural biotechnology have plans to spend up to $50 million
over the next few years in an integrated, industry-wide initiative to provide
consumers with information regarding the safety of plant biotechnology. This
initiative will use consumer media (television, newspapers, magazines, consumer
hotlines and other materials) to provide consumers with sources of more
information about biotechnology, such as websites.

We are committed to maintaining an open dialogue with all those interested
in plant biotechnology. In addition, we expect that as we continue to develop
biotechnology products with direct benefits to consumers, such as foods with
improved nutrition, taste or texture, consumer acceptance of biotechnology will
broaden.

STRATEGIC ALLIANCES

We use strategic partnerships and alliances to augment our access to
innovative and enabling technologies, to expand the use of our technology
platforms into new arenas and to improve the market access of our products.

Our technology partnerships generally provide preferred access to leading
edge, pre-commercial technological developments. For example, in 1997, we
established an innovative and fully-integrated genomic agricultural company,
Cereon, in conjunction with Millennium Pharmaceuticals. Through this five-year
alliance, Millennium Pharmaceuticals has granted us an exclusive license to use
its genomics technologies in the field of plant agriculture. We have developed
additional alliances with other leading genomics institutions, including Mendel
Biotechnology, Incyte Pharmaceuticals and Paradigm Genetics, to further extend
and deepen our access to technology.

In September 1998, we entered into an agreement to form the Renessen LLC
joint venture with Cargill to develop and market enhanced crops for the grain
processing and animal feed industries. Renessen began operations in January
1999 and has no specified term. We and Cargill each have a 50% interest in
Renessen. Renessen is managed by a governance board on which we and Cargill
have equal representation. With respect to Renessen, we and Cargill (1) have
committed to make equal contributions to fund Renessen's approved business
plan, (2) have granted Renessen a world-

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wide, fully paid-up, non-exclusive, non-royalty-bearing right and license to
our and Cargill's respective patents and intellectual property relevant to
Renessen's activities in the grain processing and animal feed industries, (3)
receive rights to use intellectual property developed by Renessen in other
specified areas and (4) receive preferential rights to provide specified
services to Renessen. This joint venture combines our seed assets and
technology capabilities with Cargill's global grain processing, marketing and
risk management infrastructure. Renessen's products under development include
seeds designed to enhance processing efficiency and corn, soybean and wheat
products designed to deliver better nutrition in animal feed. Other alliances,
such as with Savia, S.A. de C.V., a leading global vegetable seeds company,
provide additional avenues for commercialization of Roundup Ready products and
other technology platforms. Pursuant to our non-exclusive, ten-year agreement
with Savia, we provide Savia with access to our discoveries for use in fruits
and vegetables in return for royalties.

We will continue to use this network of relationships to enhance our
ability to offer outstanding integrated solutions to our customers, thereby
strengthening our leadership position within the agricultural industry.

SALES AND MARKETING

We have a worldwide distribution and sales and marketing organization that
reaches growers throughout the world. We have consolidated the sales forces of
our crop protection and seeds and traits operations, creating a sales and
service force that is one of the industry leaders in size and capability. In
North America, we sell our crop protection products and seeds and license our
traits to growers through more than 13,000 retail and dealer locations. In
addition, we license a broad package of our trait products to more than 300
seed companies that do business in the United States and certain international
markets. For instance, we have granted a license for our Roundup Ready cotton,
our Bollgard insect-resistant cotton and combinations of these traits to Delta
and Pine Land, which allows Delta and Pine Land to market these products to
growers. These growers, in turn, enter into licensing agreements through which
they pay a fee for use of our products. This fee is then divided between us and
Delta and Pine Land. In other parts of the world, we sell our crop protection
products and seeds and license our traits products through a combination of
distributors and retailers, as well as directly to growers. We sell and ship
our animal agriculture products directly to dairy growers.

We market our Roundup products for residential use through Scotts, a
leading provider of lawn and garden products. Scotts receives a commission for
its services as our agent based on a varying percentage of the earnings before
interest and taxes related to the Roundup lawn and garden business. Scotts is
also responsible for contributing annually towards the expenses of the Roundup
lawn and garden business.

We support our products in all global markets with a sales and product
development organization that educates growers about our newest products,
innovative farming practices and the integration of new products with existing
ones. We also use marketing programs to promote our products. These include
advertising, public relations, sales promotion, event marketing and direct
marketing programs. For these purposes, we maintain a proprietary database of
crop protection products and seeds and traits customers in North America and
several other key markets.

CUSTOMERS

We sell to a variety of customers in the agricultural industry, including
individual growers, seed companies, independent retailers and agricultural
cooperatives, as well as to other major agricultural chemical producers. While
no single customer represents more than 10% of our consolidated revenues, our
three largest U.S. agricultural distributors represented, in aggregate,
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17% of our net sales in 1999. We seek to build strong partnerships with our
customers, and we have signed multiyear contracts and supply agreements with
many of our larger customers. Consistent with industry practice, we regularly
extend credit to our customers to enable them to acquire agricultural chemicals
and seeds at the beginning of the growing season.

INTELLECTUAL PROPERTY

We seek patent and other intellectual property protection for most of our
important discoveries and improvements that are likely to be incorporated into
our products or that give us a competitive advantage. We rely on a broad
portfolio of patents in the United States and many foreign countries to obtain
intellectual property protection for our products and processes. We have
patented many of the tools and processes by which our seeds containing biotech
traits are created.

Patents protecting Roundup herbicide have expired in most countries, and
key patent protection for the active ingredient in Roundup herbicide expired in
the United States on September 20, 2000. We have several patents on our
glyphosate formulations and manufacturing processes, some of which will not
expire until 2015 and beyond. Our insect-resistant plant products, including
our NewLeaf potato, YieldGard corn and Bollgard cotton, are protected by
patents that extend at least until 2013. Our herbicide-tolerant plant products,
including Roundup Ready cotton, corn, canola and soybeans, are protected by
patents that extend at least until 2014. Our Posilac bovine growth hormone is
protected by a United States patent that expires in 2008 and by patents in
other countries, most of which expire in 2005. Other patents protect various
aspects of bovine growth hormone manufacturing in the United States and expire
as early as January 2003 and as late as March 2012, with corresponding patents
in other countries of varying terms.

We also obtain licenses from other parties relating to certain products and
processes as necessary. For example, we have obtained perpetual licenses to
chemicals for our Harness herbicide and to manufacturing technology for our
bovine growth hormone, and have licensed gene transformation technology for our
Roundup Ready soybean and corn products until patent expiration in 2007. In
addition, we file trademark applications for our branded products to preserve
our products' identity and enhance customer loyalty. Most, but not all, of our
branded products are covered by either issued or pending trademarks.

MATERIALS

We are both a producer and significant purchaser of a variety of basic and
intermediate raw materials. Our major raw materials are typically purchased
through long-term contracts of 10 years or longer. We are not dependent on any
one supplier for a significant amount of any raw materials, but certain
important raw materials are obtained from a few major suppliers. Additional
capacity exists for all major raw materials either from different suppliers or
from alternate manufacturing locations.

We purchase all of our North American supply of elemental phosphorus, a key
raw material for the production of Roundup herbicide, from P4 Production, LLC,
a joint venture formerly 40% owned by Solutia and operated by Solutia under an
operating agreement with P4 Production. Effective March 31, 2000, we acquired
nearly all of Solutia's 40% ownership interest in P4 Production and took over
operation of the facilities. We now own a 99% interest in P4 Production and
have a right to purchase the remaining 1% from Solutia at any time, subject to
regulatory requirements. Solutia has the right to sell its 1% interest to us at
any time subject to regulatory requirements. Alternate sources of elemental
phosphorus are available from other sources based in the United States, the
Netherlands and China.

We also produce directly, or contract with third parties for the production
of, hybrid corn seed, soybean seed and wheat seed in growing locations
throughout the world. Cotton seed is produced

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through international joint ventures with Delta and Pine Land. The availability
and cost of seed is primarily dependent upon seed yields, weather conditions,
grower contract terms, commodity prices and global supply and demand. We
attempt to minimize the risks related to weather by producing seed at multiple
growing locations, where practical.

In general, where we have limited sources of raw materials, we have
developed contingency plans to minimize the effect of any interruption or
reduction in supply. These would include supplier inventories, dedicated excess
manufacturing capacity, substitute materials and approved alternate sources of
supply. While temporary shortages of raw materials may occasionally occur,
these items are generally sufficiently available to cover current and projected
requirements. Global sourcing strategies for key materials help ensure that new
capacity is installed by our suppliers in time to meet our growing requirements
at competitive prices. However, to some extent availability and price are
subject to unscheduled plant interruptions caused by shortages of energy and
petrochemical supplies.

COMPETITION

The global markets for our agricultural products are highly competitive. We
expect competition to intensify as the result of continuing industry
consolidation, patent expiration for Roundup in the United States and increased
expenditures on the development and commercialization of biotechnology traits.

Competitive success in crop protection products is dependent upon price,
product performance, the quality of solutions offered to growers, and the
quality of service to distributors and growers. Our major competitors in the
agricultural productivity market are Novartis AG and AstraZeneca PLC (which
plan to combine their agribusinesses as a new company, to be called Syngenta),
Aventis, BASF AG (which this year acquired American Cyanamid, another
competitor), DuPont, and Dow Agrosciences which, with us, represent over 70% of
worldwide agrochemical sales in 1999. Significant competition for Roundup also
has come from glyphosate producers in China, that sell to both local and export
markets. The experience in China demonstrates that new glyphosate facilities
can be developed at relatively modest cost. Manual control of weeds by growers
is a primary alternative to herbicides in many developing countries. Control of
weeds by plowing competes with conservation tillage in developed countries. In
developed countries, the number of acres that are farmed organically, although
small in magnitude, has grown rapidly in the last few years.

The industry has seen substantial growth in the use of nonselective
herbicides, particularly of Roundup and other glyphosate products, at the
expense of selective herbicides, which control only certain types of weeds. A
key reason behind this shift has been the development of crops tolerant of
Roundup, which allow the spraying of glyphosate-based products after planting.
As a result, these products are increasingly displacing the selective
herbicides traditionally applied over these crops. Other companies (including
Aventis, American Cyanamid, DuPont and Novartis) have developed or are
developing crops tolerant of their herbicides.

We are the primary supplier of glyphosate to most of our largest
competitors. Competition in the U.S. glyphosate market will increase, given
that our patent expired on September 20, 2000. As other agricultural chemical
suppliers have access to glyphosate in the U.S., their pricing policies may
cause downward pressure on prices. However, although our main glyphosate
products outside the U.S. have been without patent protection for more than
five years, we have retained leadership in most major countries in terms of
volume sold.

Our largest competitors in the seeds business are Pioneer, a subsidiary of
DuPont, and Novartis. Although the seed industry has consolidated in recent
years, hundreds of small seed companies compete with us in local and regional
markets. Product performance (in particular, crop yield), customer service,
intellectual property and price are important determinants of market

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success. In addition, strong distributor and grower relationships have been
important in the United States and other countries.

Our traits compete directly with traits developed by other companies as
well as with agricultural chemicals. Currently, Aventis, BASF AG/American
Cyanamid, Dow, Novartis and DuPont are significant competitors in trait
development, and other agrichemical marketers produce chemical products that
compete with some of our Roundup and Roundup Ready systems. Academic
researchers and smaller biotech companies are other likely sources of new
traits. The primary factors underlying the competitive success of traits are
public acceptance, performance, timeliness of introduction, value and
environmental friendliness.

Competition for the discovery of new agricultural traits based on
biotechnology and/or genomics is likely to come not only from firms already in
the business but from academic researchers, biotech boutiques and the numerous
firms that are investigating gene function with principal focus on human
applications.

SEASONALITY

Historically, we have recorded our highest levels of sales and income in
the first half of the year, consistent with the purchasing and growing patterns
of growers in North America, our largest market. We historically have had net
losses during the second half of the year. In recent years, sales in the third
and fourth quarters have increased compared to the corresponding periods in
prior years because of significant growth in South America driven by the
adoption of conservation tillage. However, this trend has not altered our
prevailing sales and income pattern worldwide. Sales and income may shift
somewhat between quarters depending on variations in when a grower chooses to
plant crops, which in turn is dictated by the grower's desire to achieve ideal
growing conditions.

EMPLOYEES

As of September 1, 2000, we had approximately 14,700 employees worldwide.
Roughly half our employees are based in the United States. Other employees are
located in over 60 countries around the world, with concentrations in Brazil
and Belgium. In the United States, no employees are represented by unions.
Outside the United States, various local agreements apply. We believe we have a
satisfactory relationship with our employees.

FACILITIES AND PROPERTIES

Our general offices are located in St. Louis County, Missouri. We also
lease additional research facilities in St. Louis County. We and our
subsidiaries own or lease manufacturing facilities, laboratories, agricultural
facilities, office space, warehouses and other land parcels in North America,
South America, Europe, Asia, Australia and Africa. In addition to the
facilities in St. Louis County, Missouri, our principal properties include
chemicals manufacturing facilities at the following locations: Alvin, Texas;
Antwerp, Belgium; Augusta, Georgia; Fayetteville, North Carolina; Luling,
Louisiana; Muscatine, Iowa; Rock Springs, Wyoming; Sao Jose dos Campos, Brazil;
Soda Springs, Idaho; and Zarate, Argentina. Another significant chemicals
manufacturing facility is under construction in Camacari, Brazil. Our principal
properties are suitable and adequate for their use. Utilization of these
facilities may vary with seasonal, economic and other business conditions, but
none of the principal properties is substantially idle. The facilities
generally have sufficient capacity for existing needs and expected near-term
growth, and expansion projects are undertaken as necessary to meet future
needs. Most of these properties are owned in fee. However, we lease the land
underlying facilities that we own in Alvin, Texas. In addition, we lease the
manufacturing facility at Augusta, Georgia, with an option to buy, pursuant to
an industrial revenue bond financing. In certain instances, we have granted
leases on portions of plant sites not required for current operations.

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GOVERNMENT REGULATION

We are subject to extensive laws and regulations governing pesticides, new
plant varieties and food and feed safety in the countries in which we
manufacture or sell our products. In virtually all countries, we must obtain
regulatory approvals prior to marketing our products.

Prior to marketing any product derived using agricultural biotechnology,
numerous field tests and commercial applications are conducted under EPA and
USDA supervision. Additionally, we study and summarize the properties and
safety of the food products from biotechnology as compared to conventional food
products, and consult with the FDA. This consultation process is used to
establish the safety and equivalence of the foods and feeds derived from
biotechnology to that of non-biotechnology foods and feeds. Under the new
Agricultural Risk Protection Act of 2000, which updates the Plant Pest Act, the
previous authority for USDA regulation on agricultural biotechnology, the USDA
regulates all potential plant pests. Products derived using modern
biotechnology are regulated and supervised until the USDA determines that they
pose no risk as a plant pest. Once that determination has been made, and the
registration and consultation processes at the EPA and the FDA, respectively,
if applicable, have been completed, product commercialization may commence.

Current FDA policy is to apply the same statutory safety standards to foods
from plant varieties developed through biotechnology as are applied to foods
developed through traditional plant breeding. FDA policy describes the process
for food and feed safety review of new plant varieties, including those derived
through the application of modern biotechnology. FDA policy does not require
that foods derived from biotechnology plants be labeled as such, unless those
foods have been modified in a way that results in relevant nutritional or
safety information, such as:

. foods that are not substantially equivalent in nutrition and composition
to foods produced from traditionally bred varieties;

. foods that have been modified to include an allergen or toxin; or

. basic varieties that have been changed.

Consumer and environmental opponents of the technology and at least two
sympathetic members of Congress have urged that labeling be required. In
addition, a Colorado ballot initiative will ask voters whether genetically
modified foods sold in the state should be labeled.

The FDA held three public hearings to discuss and receive comments on its
current policy on foods developed through biotechnology. Subsequently, the
Clinton Administration and the FDA announced that the FDA will require
notification of the FDA 120 days prior to the introduction of biotechnology
food products, that the scientific data submitted for review will be made
available to the public, and that the FDA will develop guidelines for voluntary
labeling of non-biotech foods. We have assessed the safety of all our
commercial agricultural biotechnology products, submitted those assessments to
the FDA, and voluntarily consulted with the FDA pursuant to its 1992 Policy on
New Plant Varieties. The Commissioner of the FDA has reaffirmed that its
current policy is effective, and that all foods from plants developed through
biotechnology presently in the market are safe.

In the European Union, the environmental safety of biotechnology products
is regulated by the 90/220 Council Directive, while foods and food ingredients,
including those derived from biotechnology, are regulated by the Novel Foods
and Food Ingredients Regulation (NFR). Under Directive 90/220, the European
Commission's Directorate-General of the Environment regulates environmental
releases of biotechnology products for research and development, as well as
placements of biotechnology products on the market. Under the NFR, there are
two procedures for regulating foods and food ingredients: (1) a simplified
notification procedure that applies to products that are substantially
equivalent to existing foods and food ingredients and (2) a full authorization

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procedure for products that are not substantially equivalent. During the
initial implementation of the NFR, the simplified notification procedure for
substantially equivalent products took approximately one year to complete.
Eleven products have been notified to date, including two Monsanto products:
oil from Roundup Ready canola and processed corn ingredients from YieldGard
corn. Six other Monsanto products are currently pending notification; several
of these products have been pending since 1997. To date, no products have been
approved under the full authorization procedure and, therefore, it is not
possible to estimate the amount of time required to complete this process. As
of July 2000, nine applications were pending at different stages of the full
authorization procedure. To qualify for the simplified notification procedure,
an appropriate European authority must issue an opinion that the food or food
ingredient is substantially equivalent to a traditional food or food
ingredient. We believe that all of our current and proposed commercial products
are subject to the simplified notification procedure under the NFR because
these products are the same in terms of nutrients, anti-nutrients and relative
physical properties as their conventional counterparts. It is unclear whether
the European Union will concur with our opinion that the simplified process
applies. Once a product is approved, it is cleared for marketing and
consumption in all European Union member states. Commercial cultivation of
biotechnology crops in the European Union requires further authorization
through registration as an official plant variety in the national catalogue of
each member state where planting will occur. There is no European Union-wide
legislation for variety registration, but rather, individual decisions are
taken at the national level.

The European regulatory process is extremely complex because of the
involvement of 15 countries. The European Commission is in the process of
revising Directive 90/220 and has not authorized an agricultural biotechnology
crop product for import since April 1998. The proposed revisions would
introduce a number of measures designed to improve public confidence, such as
labeling, monitoring, traceability and transparency. In June 1999, five
countries announced their intention to suspend all future authorizations until
new comprehensive European Community rules are in place for labeling and
traceability.

Our regulatory organization is comprised of over 300 scientists and
regulatory affairs experts located throughout the world to support our
agricultural chemical, biotechnology, seed, animal health and nutrition
products. We employ premier scientists in several disciplines, including
environmental sciences, product safety assessment, ecology, product
characterization and statistics, to ensure that the safety data supporting our
products meets the highest standard. We work closely with other scientists
during the new product discovery and development phases to assure that all
questions regarding food, feed and environmental safety are addressed early in
the commercialization process. Our success in obtaining regulatory approvals
for biotechnology-derived products has been clearly demonstrated. In the United
States, we have obtained from the USDA more of the approvals that are necessary
to permit the commercialization of our products since 1988 than all of our
competitors combined. In addition, nearly half of the biotechnology food
products that have completed the full process of discussion and consultation
with the FDA have been our products. Globally, our products have been the first
biotechnology products approved in numerous countries. We are actively involved
in international regulatory organizations that promote the need for harmonized
data requirements and the use of science-based, risk-based assessments in the
regulatory decision-making process.

ENVIRONMENTAL MATTERS

Our operations are subject to environmental laws and regulations in the
jurisdictions in which we operate. Some of these laws restrict the amount and
type of pollutants that can be released from our operations into the
environment. Other laws, such as the U.S. Superfund law, can impose liability
for the entire cost of cleanup upon any former or current site owners or
operators or parties who sent waste to these sites, without regard to fault or
the lawfulness of the original disposal activity. These laws and regulations
may be amended from time to time and become increasingly stringent. We are

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dedicated to long-term environmental protection and compliance programs that
reduce and monitor emissions of hazardous materials into the environment, as
well as to the remediation of identified existing environmental concerns. While
the costs of compliance with environmental laws and regulations cannot be
predicted with certainty, we do not expect such costs to have a material
adverse effect upon our capital expenditures, earnings or competitive position.

We are a potentially responsible party at several Superfund sites, where we
or our predecessors have disposed of wastes in the past. We have settled our
liability at a number of these sites, but may on occasion continue to receive
notices alleging potential liability under the Superfund law. Under the terms
of the separation agreement, we are responsible for remedial liabilities at
existing and former manufacturing locations and certain off-site disposal and
formulation facilities. We maintain approximately $6.5 million in environmental
reserves for remedial liabilities, which includes amounts for remediation at
several of our operating plants.

On March 7, 2000, the U.S. Department of Justice filed suit on behalf of
the EPA in U.S. District Court for the District of Wyoming against old
Monsanto, Solutia and P4 Production, seeking civil penalties for alleged
violations of Wyoming's environmental laws and regulations, and of an air
permit issued in 1994 by the Wyoming Department of Environmental Quality. The
permit had been issued for a coal coking facility in Rock Springs, Wyoming that
is currently owned by P4 Production. The United States sought civil penalties
of up to $25,000 per day (or $27,500 per day for violations occurring after
January 30, 1997) for the air violations, and immediate compliance with the air
permit. In light of the government's lawsuit, the companies have voluntarily
dismissed a declaratory judgment action that they had previously brought, and
have raised the same issues as an affirmative defense to this action, arguing
that it is precluded by the doctrine of res judicata because the companies have
already paid a $200,000 fine covering the same Clean Air Act violations
pursuant to a consent decree entered in the First Judicial District Court in
Laramie County, Wyoming on June 25, 1999. On April 12, 2000, the Department of
Justice revised its settlement demand, from $2.5 million to $1.9 million plus
injunctive relief to ensure P4 Production's compliance with the Clean Air Act.
On April 21, 2000, the companies filed a motion for dismissal or summary
judgment on the grounds of claim preclusion, including the doctrines of res
judicata and release. Pursuant to the separation agreement, we have assumed any
liabilities resulting from this matter.

In the early 1980s, old Monsanto was identified as a potentially
responsible party at three landfills in West Virginia including the Heizer
Creek landfill, the Poca Strip Mine landfill and the Manila Creek landfill. As
a result, Monsanto entered into Consent Orders with the EPA and implemented
remedial actions at each of those sites to address dioxin contamination, all of
which were completed in the mid-1980's. The EPA is currently investigating over
20 sites in the Kanawha river valley to determine potential sources of dioxin
discharges into the river. As a part of that process, the EPA is conducting
preliminary assessments at the 20-plus sites including the three sites
mentioned above and has notified Monsanto of its potential liability at the
Heizer Creek landfill. Depending on the outcome of the EPA's preliminary
assessments, Monsanto could receive notices of potential liability at the other
two sites, although we have not received any such notices at this point in
time.

On September 28, 1999, we entered into a consent order with the EPA whereby
we agreed to immediately investigate contamination at the Heizer Creek landfill
near Nitro, West Virginia and to propose a remedy based on our results. We used
the Heizer Creek landfill for approximately one year between 1958 and 1959 to
dispose of plant waste from our former Nitro, West Virginia manufacturing
location. In 1999, the EPA identified elevated levels of dioxin in one sample
taken at the former landfill. We recently completed the investigation and
submitted the results to EPA. We are in the process of evaluating remedial
action options and will submit a recommendation to EPA shortly. We cannot
accurately estimate the cost of remediation until EPA approves a remedy for the
site.

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LEGAL PROCEEDINGS

Pursuant to the separation agreement, at the time of the separation of our
businesses from those of Pharmacia, we will assume liabilities for legal
proceedings primarily related to the agriculture business. As a result,
although Pharmacia or old Monsanto may remain the named defendant in these
cases, we will manage the litigation and indemnify Pharmacia for costs,
expenses and judgments arising from this litigation. In addition, we also will
manage litigation primarily related to the agriculture business in which
Pharmacia or old Monsanto is the named plaintiff, and we will pay the fees and
costs of, and receive any benefits from, this litigation. The following
describes proceedings to which Pharmacia or we are a party and for which we
will assume any liabilities or receive any benefits.

PROCEEDINGS RELATED TO BIOTECHNOLOGY RIGHTS

On May 19, 1995, Mycogen Plant Sciences, Inc. filed suit against old
Monsanto in the U.S. District Court in California alleging infringement of its
patent involving synthetic Bt genes, and seeking unspecified damages and
injunctive relief. On November 10, 1999, the court granted summary judgment in
our favor and dismissed all of Mycogen's patent claims, finding Mycogen's
patent invalid on the basis of our prior invention. Previously, the court had
also held that products containing Bt genes made prior to January 1995 did not
infringe Mycogen's patent. Mycogen has filed an appeal with the Court of
Appeals for the Federal Circuit seeking to overturn the dismissal and oral
argument on the appeal is scheduled for October 3, 2000.

Old Monsanto is also a party in interference proceedings against Mycogen in
the U.S. Patent and Trademark Office to determine the first party to invent
certain inventions related to Bt technology, and has requested a stay of the
interference proceeding pending determination of Mycogen's appeal. Under U.S.
law, patents issue to the first to invent, not the first to file for a patent
on, a subject invention. If two or more parties seek patent protection on the
same invention, as is the case with our Bt technology, the U.S. Patent and
Trademark Office must hold interference proceedings to identify the party who
first invented the particular invention in dispute.

On March 19, 1996, old Monsanto filed suit in the U.S. District Court in
Delaware seeking $76 million in damages and injunctive relief against Mycogen
Plant Sciences, Inc., Agrigenetics, Inc. and Ciba-Geigy Corporation (now
Novartis Seeds, Inc.) for infringement of our patent relating to synthetic Bt
genes. Trial of this matter ended June 30, 1998, with a jury verdict that while
the patent was literally infringed by the defendants, the patent was not
enforceable due to a finding of prior invention by another party and was not
infringed due to the defense of the reverse doctrine of equivalents. On
September 8, 1999, the district court affirmed in part the jury's verdict on
the issue of prior invention but overturned the finding of non-infringement on
the reverse doctrine of equivalents. The matter is now on appeal to the Court
of Appeals for the Federal Circuit and oral argument on the appeal is scheduled
for October 3, 2000.

In June 1996, Mycogen Corporation, Mycogen Plant Sciences, Inc. and
Agrigenetics filed suit against old Monsanto in California State Superior Court
in San Diego alleging that we failed to license, under an option agreement,
technology relating to Bt corn and glyphosate-tolerant corn, cotton and canola.
On October 20, 1997, the court construed the agreement as a license to receive
genes rather than a license to receive germplasm. Jury trial of the damage
claim for lost future profits from the alleged delay in performance ended March
20, 1998, with a verdict against us awarding damages totaling $174.9 million.
On June 28, 2000, the California Court of Appeal for the Fourth Appellate
District issued its opinion reversing the jury verdict and related judgment of
the trial court, and directed that judgment should be entered in our favor.
Mycogen's subsequent motion for rehearing has been denied and, on August 7,
2000, Mycogen filed a petition with the California Supreme Court requesting
that further appeal to that court should be granted. We have opposed the
discretionary appeal sought by Mycogen.

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On October 22, 1996, Mycogen Corporation filed suit against old Monsanto,
DEKALB Genetics (subsequently acquired by us) and Delta and Pine Land in the
U.S. District Court in Delaware alleging infringement of two Bt-related
patents. The jury trial concluded on February 3, 1998, with a verdict in favor
of all defendants. Mycogen's patents were invalidated on the basis that we were
a prior inventor. On September 8, 1999, the district court issued a revised
order that upheld the jury verdict and ruled that Mycogen's patents were
invalid due to their prior invention and lack of enablement. On December 6,
1999, Mycogen filed an appeal in the Court of Appeals for the Federal Circuit
and oral argument on the appeal is scheduled for October 3, 2000.

On March 27, 1997, Pioneer filed an action against old Monsanto claiming
unspecified damages, which was transferred to the U.S. District Court for the
Eastern District of Missouri, alleging contractual breach by Monsanto and
license rights to certain DEKALB Genetics corn transformation patents that
DEKALB Genetics has asserted against Pioneer in litigation (see the Rockford
Litigation discussed below). The court denied and dismissed all of Pioneer's
license claims but retained jurisdiction to consider a counterclaim asserted by
Monsanto alleging that Pioneer had breached a 1993 license agreement for Bt
corn technology under which Pioneer now sells YieldGard insect-resistant corn.
Monsanto asserted the license should be terminated in view of Pioneer's
breaches. On July 28, 2000, the court found that Pioneer had breached the 1993
license agreement in several respects, including the stacking of the licensed
technology together with other traits. On August 24, 2000, a jury determined
that five independent contract breaches by Pioneer were material. Under the
terms of the 1993 license, if a material breach occurs, the non-breaching party
may request termination of the agreement. In addition to that remedy, which
will be addressed in the post-trial remedy phase of the case, Monsanto has
filed a request for bifurcated trial seeking monetary damages for pre-
termination sales by Pioneer and motions for further equitable relief
associated with Pioneer's misuse of technology as established through jury
trial. Monsanto and Pioneer have announced that the current YieldGard product
sold by Pioneer will remain available to farmers under a royalty bearing
license with Monsanto, final terms of which have not yet been set. Pioneer has
stated that it will appeal the jury verdict.

On November 20, 1997, Aventis filed suit in the U.S. District Court in
North Carolina against old Monsanto and DEKALB Genetics alleging that because
DEKALB Genetics failed to disclose a research report involving the testing of
plants to determine glyphosate tolerance, Aventis was induced by fraud to enter
into a 1994 license agreement relating to technology incorporated into a
specific type of herbicide-tolerant corn. Aventis also alleged that DEKALB
Genetics did not have a right to license, make or sell products using Aventis
technology for glyphosate resistance under the terms of the 1994 agreement. On
April 5, 1999, the trial court rejected Aventis's claim that the contract
language did not convey a license. Jury trial of the fraud claims ended April
22, 1999, with a verdict for Aventis and against DEKALB Genetics. The jury
awarded Aventis $15 million in actual damages and $50 million in punitive
damages. The trial was bifurcated to allow claims for patent infringement and
misappropriation of trade secrets to be tried before a different jury. Jury
trial on these claims ended June 3, 1999, with a verdict for Aventis and
against DEKALB Genetics. The district court had dismissed old Monsanto from
both phases of the trial prior to verdict on the legal basis that it was a bona
fide licensee of the corn technology. On or about February 8, 2000, the
district court affirmed both jury verdicts against DEKALB Genetics, and
enjoined DEKALB Genetics from future sales of the specific type of herbicide-
tolerant corn involved in the agreement (other than materials held in DEKALB's
inventory on June 2, 1999). Judgment was entered March 10, 2000. On March 8,
2000, Aventis filed with the Court of Appeals for the Federal Circuit its
notice to appeal certain district court rulings that denied claims for further
equitable relief against us. DEKALB Genetics has also filed an appeal of the
jury verdict with the U.S. Court of Appeals for the Federal Circuit, and
submitted its initial appellate brief on July 31, 2000. We, our licensees and
DEKALB Genetics (to the extent permitted under the district court's order and
an agreement with Aventis) continue to sell the specific type of herbicide-
tolerant corn pursuant to a royalty-bearing agreement

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with Aventis, entered prior to the June 3, 1999 jury verdict. In addition, we
and DEKALB Genetics have announced our intention, as of 2001, to replace this
specific type of herbicide-tolerant corn with new technology not associated
with Aventis's claims in this litigation. The district court held an advisory
jury trial which ended with a verdict in favor of Aventis on September 1, 2000,
regarding claims that certain employees of Aventis should be named as "co-
inventor" on two patents issued to DEKALB Genetics. No monetary relief was
sought. DEKALB Genetics continues to deny that Aventis employees should be
named as "co-inventor" on the two patents since those individuals made no
inventive contribution. The parties have not submitted proposed findings of
fact or conclusions of law on the verdict. DEKALB will appeal any final
decision or judgment.

On October 28, 1998, Pioneer filed two related lawsuits seeking injunctive
relief and unspecified damages against DEKALB Genetics and Asgrow, another of
our subsidiaries, in the U.S. District Court in Iowa alleging misappropriation
of Pioneer trade secrets related to corn breeding. On October 8, 1999, Pioneer
added us and the prior owners of DEKALB Genetics and Asgrow (Pfizer Inc. and
The Upjohn Company, respectively) as defendants in the litigation. In addition
to state law trade secret misappropriation claims, Pioneer alleges Lanham Act
and patent law violations. Pioneer also asserts that the defendants have
violated an unspecified contractual obligation not to conduct breeding using
Pioneer germplasm. On July 17, 1999, the court denied without prejudice the
defendants' motions to dismiss the initial trade secret claims. On January 4,
2000, the district court allowed Pioneer to amend its claims to assert that the
defendants infringed its patents. Pursuant to agreement of the parties dated
June 1, 2000, the parties entered into a partial settlement agreement that will
dismiss a portion of Pioneer's claims against old Monsanto, DEKALB Genetics and
Asgrow. The stipulation for dismissal of this claim has not yet been filed with
the court.

On November 30, 1999, old Monsanto filed suit against Pioneer in the U.S.
District Court for the Eastern District of Missouri to terminate a technology
license for glyphosate tolerant soybeans and canola granted by it to Pioneer,
on the ground that Pioneer had improperly assigned the license in connection
with its merger with DuPont. Old Monsanto alleges that the assignment resulted
in unauthorized sales, and therefore infringed old Monsanto's patents and
violated its trademark rights. On June 27, 2000, the court held that Pioneer
had assigned our intellectual property license in connection with the merger,
and denied Pioneer's motion to dismiss the complaint. A jury trial is set to
commence in March 2001.

On December 22, 1999, Mycogen Plant Sciences, Inc. filed a patent suit
seeking injunctive relief and unspecified damages against our subsidiary
Monsanto Australia Limited, and against DeltaPine Australia Limited, in the
Federal Court of Australia, Victoria District Registry. The suit alleges that
we have infringed two of Mycogen Plant Science's Australian patents associated
with Bt technology. These patents are Australian counterparts to patents and
inventions found invalid in other jurisdictions.

On March 27, 2000, DuPont filed a suit against old Monsanto in the U.S.
District Court for the District of South Carolina, seeking unspecified damages
and injunctive relief for alleged violations of federal antitrust acts and
state law in connection with glyphosate-related business matters. The complaint
asserts that a DuPont herbicide product has not been successfully introduced
into the marketplace due to alleged anticompetitive practices that have
enhanced our sales of Roundup herbicide and Roundup Ready cotton. Old Monsanto
entered into a glyphosate supply agreement with DuPont in December 1999. A jury
trial is scheduled to commence in October 2001.

On March 30, 2000, DuPont filed a suit against old Monsanto and Asgrow in
the U.S. District Court for Delaware, seeking damages and equitable relief
including the divestiture of Asgrow by Monsanto for alleged violations of
federal antitrust acts and state law in connection with glyphosate-tolerant
soybean business matters. The complaint asserts that Asgrow breached certain
contract obligations and that old Monsanto tortiously interfered with those
obligations, and as a consequence DuPont is asserting previously resolved
claims that Asgrow misappropriated intellectual property of

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DuPont. The complaint also alleges that Asgrow's actions improperly accelerated
old Monsanto's development of glyphosate-tolerant soybeans. Monsanto has filed
to dismiss the lawsuit based on statute of limitations and estoppel.

ENFORCEMENT OF DEKALB GENETICS' PATENTS

DEKALB Genetics, which we acquired in December 1998, has filed legal
actions to enforce its patents. On April 30, 1996, DEKALB Genetics filed patent
infringement actions in the U.S. District Court for the Northern District of
Illinois against Pioneer, Mycogen Corporation and two of Mycogen's
subsidiaries, and on August 27, 1996, against several Hoechst Schering AgrEvo
GmbH entities (these actions are referred to as the "Rockford Litigation"). The
suits relate to DEKALB Genetics' patents involving herbicide-resistant and/or
insect-resistant fertile, transgenic corn. In particular, the DEKALB Genetics
patents cover:

. fertile, transgenic corn plants expressing genes encoding Bt
insecticidal proteins;

. the microprojectile method for producing fertile, transgenic corn plants
covering a bar or pat gene, as well as the production and breeding of
progeny of such plants;

. methods of producing either herbicide-resistant or insect-resistant
transgenic corn; and

. transgenic corn plants containing a bar or pat gene (all lawsuits
related to this patent have been stayed pending resolution of an
interference proceeding at the U.S. Patent and Trademark Office).

In each case, DEKALB Genetics has asked the court to determine that
infringement has occurred, to enjoin further infringement and to award
unspecified compensatory and exemplary damages. By order dated June 30, 1999, a
special master construed the patent claims in a manner largely in accord with
the position of DEKALB Genetics. The judge has adopted the findings of the
special master and appointed a settlement mediator to conduct discussions among
the parties. Jury trials on certain of DEKALB Genetics' patent claims are set
to commence January 3, 2001 against Mycogen and February 12, 2001 against
Pioneer.

On July 2, 1999, DEKALB Genetics sued Pioneer in the U.S. District Court
for the Northern District of Illinois in a patent interference action to
declare that DEKALB Genetics was the first inventor of the microprojectile
method of producing fertile transgenic corn. The court has denied Pioneer's
motion to dismiss. On July 30, 1999, DEKALB Genetics moved to consolidate this
suit with the remainder of the Rockford Litigation for purposes of trial, but
the request has been provisionally denied.

On November 23, 1999, Pioneer sued old Monsanto, DEKALB Genetics and
Novartis Seeds, Inc. in the U.S. District Court for the Eastern District of
Iowa for alleged infringement of Pioneer's patent pertaining to the
microprojectile transformation of corn. This suit has been transferred at old
Monsanto's request to the U.S. District Court for the Northern District of
Illinois for consolidated treatment with the Rockford Litigation. On the same
date, DEKALB Genetics filed an interference action in the U.S. District Court
for the Northern District of Illinois seeking a declaration that DEKALB
Genetics was the first inventor of the microprojectile method of producing
fertile transgenic corn and the related suits have been assigned to that court
for disposition.

GROWER LAWSUITS

On November 8, 1999, a class action lawsuit claiming unspecified damages
was filed against old Monsanto in the U.S. District Court for the Northern
District of Mississippi by a single plaintiff purporting to represent a class
of purchasers of genetically modified soybeans that contain our patented
technology. The complaint asserted claims under the Racketeer Influenced and
Corrupt

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Organizations Act and various antitrust acts, and claims for breach of
contract. The plaintiffs seek an award of antitrust damages, treble damages,
compensatory damages and attorneys' fees. On June 21, 2000, the case was
transferred to the U.S. District Court for the Eastern District of Missouri. On
July 28, 2000, plaintiff filed a motion for leave to amend his complaint to
withdraw all antitrust and RICO claims and class action allegations.
Plaintiff's only remaining claim relates to performance of products that he
purchased.

On December 14, 1999, a class action lawsuit claiming unspecified damages
was filed against old Monsanto in the U.S. District Court for the District of
Columbia by six farmers purporting to represent a class composed of purchasers
of genetically modified soybean and corn seed and growers of non-genetically
modified soybean and corn seed. The complaint alleges that we violated various
antitrust laws and unspecified international laws through our patent license
agreements, breached an implied warranty of merchantability and violated
unspecified consumer fraud and deceptive business practices laws in connection
with the sale of genetically modified seed. The plaintiffs seek declaratory and
injunctive relief in addition to antitrust, treble, compensatory and punitive
damages and attorneys' fees. Old Monsanto filed a motion to dismiss this
lawsuit with prejudice, and on March 7, 2000, plaintiffs filed a motion to
voluntarily dismiss without prejudice. On May 21, 2000, this case was
transferred to the U.S. District Court for the Southern District of Illinois
and Monsanto has filed to transfer the litigation to the U.S. District Court
for the Eastern District of Missouri.

On February 14, 2000, a class action lawsuit claiming unspecified damages
was filed against old Monsanto in the U.S. District Court for the Southern
District of Illinois by five farmers purporting to represent various classes of
farmers. The complaint alleges claims virtually identical to those in the
Mississippi and District of Columbia cases. We have filed to dismiss and
transfer the litigation to the U.S. District Court for the Eastern District of
Missouri.

PROCEEDINGS RELATED TO DELTA AND PINE LAND COMPANY

On December 30, 1999, following old Monsanto's announcement that it had
withdrawn its filing for U.S. antitrust clearance of the proposed merger with
Delta and Pine Land in light of the Department of Justice's unwillingness to
approve the transaction on commercially reasonable terms, two alleged holders
of Delta and Pine Land common stock filed a derivative and class action lawsuit
against old Monsanto, Delta and Pine Land and members of the Delta and Pine
Land board of directors in the Delaware Court of Chancery. Plaintiffs allege
that Delta and Pine Land has been harmed by the termination of the effort to
complete the merger and that the individual defendants have a continuing duty
to seek a value-maximizing transaction for the stockholders, and requested
unspecified compensatory damages, costs, disbursements and fees. On January 18,
2000, Delta and Pine Land reinstituted a suit against old Monsanto in the
Circuit Court of the First Judicial District of Bolivar County, Mississippi,
seeking unspecified compensatory damages for lost stock market value of not
less than $1 billion, as well as punitive damages, resulting from our alleged
failure to exercise reasonable efforts to complete the merger. The parties have
agreed that following the dismissal of certain shareholder litigation initiated
against Delta and Pine Land and Monsanto in Delaware, all remaining litigation
between the companies will proceed in Mississippi.

OTHER LEGAL PROCEEDINGS

Since the 1984 termination of the class action litigation against various
manufacturers, including old Monsanto, of the herbicide Agent Orange used in
the Vietnam war, old Monsanto has successfully defended against various
lawsuits associated with the herbicide's use. A few matters remain pending,
including three separate actions, now consolidated, filed against old Monsanto
and The Dow Chemical Company in Seoul, Korea in October 1999. Approximately
13,760 Korean

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veterans of the Vietnam war allege they were exposed to, and suffered injuries
from, herbicides manufactured by the defendants. The complaints fail to assert
any specific causes of action, but seek damages of 300 million won
(approximately $250,000) per plaintiff. Pharmacia is also subject to ancillary
actions in Korea, including a request for provisional relief pending resolution
of the main lawsuit. On December 2, 1999, plaintiffs filed a class action
lawsuit against old Monsanto and five other herbicide manufacturers in the U.S.
District Court for the Eastern District of Pennsylvania. The plaintiffs purport
to represent a class of over 9,000 Korean and 1,000 U.S. service persons
allegedly exposed to the herbicide Agent Orange and other herbicides sprayed
from 1967 to 1970 in or near the demilitarized zone separating North Korea from
South Korea. The complaint does not assert any specific causes of action or
demand a specified amount in damages. The Judicial Panel on Multidistrict
Litigation has granted transfer of the case to the U.S. District Court for the
Eastern District of New York for coordinated pretrial proceedings as part of IN
RE "AGENT ORANGE" PRODUCT LIABILITY LITIGATION, which is the multidistrict
litigation proceeding established in 1977 to coordinate Agent Orange-related
litigation in the United States.

We are involved in other legal proceedings arising in the ordinary course
of our business. While the results of litigation cannot be predicted with
certainty, we do not believe that the resolution of the proceedings that we are
involved in, either individually or taken as a whole, will have a material
adverse effect on our financial position, profitability or liquidity.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is information concerning our directors and executive
officers. Unless otherwise indicated, each position was with Monsanto or its
predecessor. In addition, within three months following this offering, we
intend to add an additional director who is unaffiliated with Pharmacia. Ages
are as of September 21, 2000.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Frank V. AtLee III...... 60 Chairman of the Board and Director
Hendrik A. Verfaillie... 55 President, Chief Executive Officer and Director
Hakan Astrom............ 53 Director
Christopher J.
Coughlin............... 48 Director
Michael Kantor.......... 61 Director
C. Steven McMillan...... 54 Director
William U. Parfet....... 53 Director
John S. Reed............ 61 Director
Martin E. Blaylock...... 59 Vice President, Manufacturing
Carl Casale............. 39 Vice President, North America
Terrell K. Crews........ 44 Executive Vice President and Chief Financial Officer
Steven L. Engelberg..... 58 Senior Vice President, Government Affairs
Robert T. Fraley,
Ph.D. ................. 47 Executive Vice President and Chief Technology Officer
Hugh Grant.............. 42 Executive Vice President and Chief Operating Officer
Janet M. Holloway....... 46 Chief Information Officer
R. William Ide III...... 60 Senior Vice President, Secretary and General Counsel
Cheryl Morley........... 45 President of Animal Agricultural Group
John M. Murabito........ 41 Senior Vice President, Human Resources
</TABLE>

FRANK V. ATLEE III has served as chairman of our board of directors since
June 2000. Mr. AtLee has served as president of American Cyanamid Company and
chairman of Cyanamid International from 1993 until his retirement in January
1995. Mr. AtLee is a director of Takeda Italia Farmaceutici S.p.A.

HENDRIK A. VERFAILLIE has served as our President and Chief Executive
Officer and as one of our directors since February 2000. From 1997 to March
2000, Mr. Verfaillie served as President of old Monsanto. From 1999 to March
2000, Mr. Verfaillie also served as Chief Operating Officer of old Monsanto.
From 1995 to 1997, Mr. Verfaillie served as Executive Vice President and
Advisory Director of old Monsanto. Mr. Verfaillie has served in a variety of
management positions since he joined old Monsanto in 1976.

HAKAN ASTROM has served as one of our directors since June 2000. Since
March 2000, Mr. Astrom has served as Senior Vice President, Corporate Strategy
and Investor Relations of Pharmacia. From 1995 to March 2000, Mr. Astrom was
Senior Vice President, Corporate Strategy and Investor Relations of Pharmacia &
Upjohn. Since January 1999, Mr. Astrom has served as Chairman and Managing
Director of Pharmacia & Upjohn AB. Since 1995, Mr. Astrom has been responsible
for Corporate Strategy and Investor Relations of Pharmacia & Upjohn AB.

CHRISTOPHER J. COUGHLIN has served as one of our directors since March
2000. Since March 2000, Mr. Coughlin has served as Executive Vice President and
Chief Financial Officer of Pharmacia. From 1998 to March 2000, Mr. Coughlin
served as Executive Vice President and Chief Financial Officer of Pharmacia &
Upjohn. From 1997 to 1998, Mr. Coughlin served as the President of Nabisco

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International. From 1996 to 1998, Mr. Coughlin was the Executive Vice President
of Nabisco Holdings Corp. and of Nabisco Inc. and from 1996 to 1997, he also
served as Chief Financial Officer of these companies. From 1995 to 1996, Mr.
Coughlin worked as a consultant.

MICHAEL KANTOR has served as one of our directors since June
2000. Since 1997, Mr. Kantor has been a partner at the law firm Mayer, Brown &
Platt. From 1996 to 1997, Mr. Kantor served as the U.S. Secretary of Commerce.
Prior to becoming Secretary of Commerce, from 1993 to 1996, Mr. Kantor served
as the U.S. Trade Representative. In 1992, Mr. Kantor was the national chairman
for the Clinton/Gore presidential campaign. From 1975 to 1992, Mr. Kantor was a
partner at the law firm Manatt, Phelps, Phillips and Kantor. Mr. Kantor is a
director of Pharmacia.

C. STEVEN MCMILLAN has served as one of our directors since June 2000.
Effective July 1, 2000, Mr. McMillan became President and Chief Executive
Officer of Sara Lee Corporation. In March 1997, Mr. McMillan became President
of Sara Lee and, in December 1997, became its Chief Operating Officer. From
1993 to 1997, Mr. McMillan was an Executive Vice President of Sara Lee. Mr.
McMillan is a director of Pharmacia, Sara Lee and Dynergy Inc.

WILLIAM U. PARFET has served as one of our directors since June 2000. Since
1995, Mr. Parfet has been Co-Chairman of MPI Research, LLC. From 1993 to 1996,
Mr. Parfet served as President and Chief Executive Officer of Richard Allan
Medical Industries. Mr. Parfet is a director of Pharmacia, CMS Energy
Corporation, the Financial Accounting Foundation, Stryker Corporation and
Sybron International.

JOHN S. REED has served as one of our directors since June 2000. From 1998
to April 2000, Mr. Reed was the Chairman and Co-Chief Executive Officer of
Citigroup Inc. From 1984 to 1998, Mr. Reed served as Chairman and Chief
Executive Officer of Citicorp and Citibank, N.A. Mr. Reed is a director of
Pharmacia and Philip Morris Companies, Inc. Mr. Reed also is a member of The
Business Council.

MARTIN E. BLAYLOCK has served as our Vice President, Manufacturing since
February 2000 and held the same position at old Monsanto since 1995. Mr.
Blaylock joined old Monsanto in 1962.

CARL CASALE has served as Vice President, North America since August 2000.
From July 2000 to August 2000, Mr. Casale served as our North American Business
Lead. From July 1998 to March 2000, Mr. Casale was Managing Director, U.S. Ag
for old Monsanto. From October 1996 to July 1998, Mr. Casale served as
Director, Marketing for Ceregen, a business unit of old Monsanto. From October
1995 to July 1996, Mr. Casale also held the position of Director, Channel
Strategy of old Monsanto. From 1994 to 1995, Mr. Casale served as Western
Region Sales Director of old Monsanto. Mr. Casale joined old Monsanto in 1984
as a sales representative for the Agricultural Group in Walla Walla,
Washington.

TERRELL K. CREWS has served as Executive Vice President since August 2000
and as our Chief Financial Officer since February 2000. From July 1999 to March
2000, Mr. Crews was Chief Financial Officer of the Agricultural Sector of old
Monsanto. From December 1998 to July 1999, Mr. Crews served as Global Finance
Lead for the Global Seed Group of old Monsanto. From June 1997 to December
1998, Mr. Crews served as the General Auditor and, prior to that, was the
Finance Lead for the Asia Pacific region of old Monsanto. Mr. Crews served in a
variety of other accounting and finance positions since he joined old Monsanto
in 1977.

STEVEN L. ENGELBERG has served as Senior Vice President, Government Affairs
since August 2000. From June 2000 to August 2000, Mr. Engelberg served as our
Global Government and Public Affairs Lead and a member of the Life Sciences
Business Team. From January 1996 to March 2000,

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Mr. Engelberg served as Senior Vice President of old Monsanto. From January
1994 to January 1996, Mr. Engelberg served as Corporate Vice President,
Worldwide Government Affairs of old Monsanto.

ROBERT T. FRALEY, PH.D., has served as Executive Vice President since
August 2000 and as our Chief Technology Officer since February 2000. From 1997
to March, 2000, Dr. Fraley served as Co-President of the Agricultural Sector of
old Monsanto. From 1995 to 1997, Dr. Fraley served as President of Ceregen, a
business unit of old Monsanto. Dr. Fraley has served in a variety of research
positions since he joined old Monsanto in 1980. Dr. Fraley is a board member of
Renessen, a joint venture between Cargill and our company, which develops and
produces products for the food industry.

HUGH GRANT has served as Executive Vice President since August 2000 and as
our Chief Operating Officer since February 2000, and from March to June 2000,
served as one of our directors. From 1998 to March 2000, Mr. Grant served as
Co-President, Agricultural Sector of old Monsanto. From 1995 to 1998, Mr. Grant
served as General Manager of the Agricultural Sector for Southeast Asia,
Australia, New Zealand and South Korea. From 1996 to 1998, Mr. Grant also
served as Managing Director for all our business units in Southeast Asia.

JANET M. HOLLOWAY has served as Chief Information Officer for Monsanto and
its predecessor since 1999. From 1997 to 1999, Ms. Holloway was Co-Lead, IT of
the Agricultural Sector of old Monsanto. From 1995 to 1997, Ms. Holloway served
as Director, IT of old Monsanto's Crop Protection business. Ms. Holloway has
held a variety of positions since she joined old Monsanto in 1984.

R. WILLIAM IDE III has served as Senior Vice President since August 2000,
as our General Counsel since June 2000 and as our Secretary since February
2000. From February 2000 to June 2000, Mr. Ide served as Vice President. From
1996 to March 2000, Mr. Ide served as Senior Vice President, General Counsel
and Secretary of old Monsanto. From 1993 to 1996, Mr. Ide was a partner at the
law firm Long, Aldridge & Norman. From 1993 to 1994, Mr. Ide served as the
President of the American Bar Association.

CHERYL MORLEY has served as President of the Animal Agricultural Group of
Monsanto and its predecessor since 1997. From 1995 to 1997, Ms. Morley was
responsible for leading the strategic planning and commercial development
efforts of the Animal Agriculture Group of old Monsanto. Ms. Morley joined old
Monsanto in 1983. She is a director of the Animal Health Institute.

JOHN M. MURABITO has served as Senior Vice President, Human Resources since
August 2000. From June 2000 to August 2000, Mr. Murabito served as Vice
President, Human Resources. From March 2000 to June 2000, Mr. Murabito served
as our Global Human Resources Leader. From 1998 to March 2000, Mr. Murabito
served as the Human Resources Team Leader for the Agricultural and Nutrition
Sectors of old Monsanto. From 1997 to 1998, Mr. Murabito served as Human
Resources Operations Team Leader of old Monsanto. From 1995 to 1997, Mr.
Murabito was Group Vice President, Human Resources for Frito-Lay Companies
Eastern U.S. Division.

BOARD STRUCTURE AND COMPENSATION

COMPENSATION

In addition to receiving at the time of the offering a grant of options to
purchase 10,000 shares of our common stock under the 2000 Plan (discussed
below), each of our directors who is not an employee of Pharmacia or us will
receive an annual retainer pursuant to the Director Plan (discussed below)
having a value of $110,000, with an additional $10,000 paid to each committee
chair and an additional $40,000 paid to the chairman of our board of directors.
Half of this compensation will be payable in deferred stock, and the remainder
will be payable in the form of non-qualified stock options, restricted common
stock, deferred common stock, current cash and/or deferred cash, at the
election of each director.

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We have entered into a consulting agreement with Frank V. AtLee covering
the period beginning on June 22, 2000 through the annual meeting of our
shareholders occurring in 2003. Under this agreement, Mr. AtLee has agreed to
provide us with consulting services as requested by our board or our chief
executive officer, including advice regarding policies, long-term strategies
and general business and industry issues.

Under this agreement, Mr. AtLee will earn a consulting fee of $400,000 per
year, less the amount of his retainer fees that he receives as a member of the
Board. We will pay this fee to him at the termination of the consulting term,
with interest at the Moody's Baa Bond Index Rate, or under any deferred
compensation plan that may be provided to our directors, except as noted below.
We will also reimburse Mr. AtLee for expenses he incurs in providing his
consulting services.

If the consulting term is terminated before our 2003 annual meeting as a
result of his death or permanent disability, or by us other than as a result of
his breach of the agreement, we will pay Mr. AtLee the fee he would have earned
through the date of our 2003 annual meeting in a lump-sum payment.

GOVERNANCE PROVISIONS

On certain matters with significant financial or strategic consequences, a
supermajority approval by at least 80% of our directors is required. These
matters include:

. transactions, capital expenditures, additional debt or other non-
ordinary course financial commitments, including litigation
settlements, valued at $100 million or more, other than matters already
approved as part of our annual operating or capital budgets;

. any issuance or repurchase of equity securities or other equity
interests, except pursuant to employee stock options or stock
appreciation rights or under compensation plans approved by our board
of directors, unless the aggregate amount of equity interests issued or
repurchased since this offering without supermajority approval would
not exceed one percent of our common stock outstanding on the date of
such proposed issuance or repurchase;

. approval of our annual operating and capital budgets and annual
strategic plan;

. selection, compensation and removal of our Chief Executive Officer;

. any change in the size of our board of directors; and

. any certificate of incorporation or bylaw amendments.

After such time that Pharmacia owns less than 50% of our common stock, no
supermajority approval will be required for the items listed above.

COMMITTEES

Our board of directors has the following six committees: (1) executive, (2)
audit and finance, (3) people, (4) pricing, (5) public policy and (6) science &
technology. The membership and function of each committee are described below.
Our entire board of directors acts on nominations for directors, and therefore
we do not have a nominating committee.

EXECUTIVE COMMITTEE. Messrs. AtLee, Coughlin and Verfaillie are members of
our executive committee. Our executive committee has the powers of our board of
directors in directing the management of our business and affairs in the
intervals between meetings of our board of directors (except for certain
matters otherwise delegated by our board of directors, or which by statute, our
certificate of incorporation or our bylaws are reserved for our entire board of
directors). Actions of the executive committee are reported at the next regular
meeting of our board of directors.

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AUDIT AND FINANCE COMMITTEE. Messrs. McMillan, Parfet and Reed are members
of our audit and finance committee. Our audit and finance committee assists our
board of directors in fulfilling its responsibilities to oversee our
accounting, auditing and financial reporting practices, internal control
policies and procedures and corporate compliance policies. The audit and
finance committee recommends to our board of directors the selection of our
independent auditors; reviews our annual financial statements and discusses
them with our auditors and our internal financial staff prior to their
submission to our board of directors; reviews the independence of the
independent accountants conducting the audit; reviews the services provided by
the independent accountants; reviews the scope of our internal audit program;
discusses with our management and the auditors our accounting system and
related systems of internal control; reviews our compliance programs; and
consults, as it deems necessary, with the independent accountants, internal
auditors and our internal financial staff. The audit and finance committee
recommends the annual operating and capital budgets, long-range plans and
financing plans to our board of directors.

PEOPLE COMMITTEE. Mr. McMillan is a member of our people committee and we
expect to name to our people committee the additional director to be added to
our board after this offering. Our people committee recommends to our board of
directors the establishment and modification of our management incentive plans
and corporate governance practices. Our people committee administers and
interprets our management incentive plans and approves the establishment,
modification, and termination of other compensation and benefit plans and
agreements. Our people committee reviews plans for executive succession,
determines the salaries of all our executive officers and monitors our
performance as it affects employees, including issues such as diversity and
morale.

PRICING COMMITTEE. Messrs. AtLee, Coughlin, McMillan, Reed and Verfaillie
are members of our pricing committee. Our pricing committee will authorize the
issuance and sale of our common stock in this offering. The pricing committee
will determine the initial public offering price, the number of shares of our
common stock to be offered and sold in this offering and underwriters'
discounts and commissions. The pricing committee may take all such other
actions in connection with this offering as the board of directors could take.

PUBLIC POLICY COMMITTEE. Messrs. Astrom, Kantor and Reed are members of our
public policy committee. Our public policy committee reviews and monitors our
performance as it affects communities, customers and the environment. Our
public policy committee also identifies and investigates emerging issues that
will affect our impact on society, including public acceptance of
biotechnology.

SCIENCE AND TECHNOLOGY COMMITTEE. Messrs. Coughlin and Kantor are members
of our science and technology committee. Our science and technology committee
reviews and monitors our science and technology initiatives in areas such as
information technology, technological programs, research and agricultural
biotechnology. Our science and technology committee also identifies and
investigates significant emerging science and technology issues.

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STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the options to purchase Monsanto common
stock, the Pharmacia common stock and the options to purchase Pharmacia common
stock held by our directors and certain of our executive officers as of the
date of this offering. The options to purchase Monsanto common stock will be
granted as of the date of this offering at an exercise price equal to the
initial public offering price. The information relating to Pharmacia common
stock and options to acquire Pharmacia common stock is as of September 15,
2000.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
SHARES OF SHARES OF PHARMACIA
MONSANTO COMMON PHARMACIA COMMON
STOCK UNDERLYING COMMON STOCK STOCK
OPTIONS TO BENEFICIALLY UNDERLYING
NAME BE GRANTED(1) OWNED(2) OPTIONS
---- -------------------- ------------ ----------
NUMBER PERCENTAGE
--------- ----------
<S> <C> <C> <C> <C>
Frank V. AtLee III........... 10,000 * 1,198 --
Hendrik A. Verfaillie (3).... 1,066,670 * 232,002 1,057,032(4)
Hakan Astrom................. -- * 12,353 385,180(5)
Christopher J. Coughlin...... -- * 35,547 565,300(6)
Michael Kantor............... 10,000 * 3,000 21,818(4)
C. Steven McMillan........... 10,000 * 6,000 --
William U. Parfet............ 10,000 * 831,115(7) 10,170(4)
John S. Reed................. 10,000 * 91,947 29,630(4)
Steven L. Engelberg (3)...... 124,450 * 44,641 621,267(4)
Robert T. Fraley, Ph.D. (3).. 391,120 * 54,121 337,662(4)
Hugh Grant (3)............... 480,000 * 1,761 222,596(4)
R. William Ide III (3)....... -- * 51,714 282,208(4)
All directors and executive
officers as a group......... 3,001,160 1.2% 1,660,244 4,176,270(8)
</TABLE>
--------
* Represents holdings of less than one percent.
(1) Options will vest during 2002 and 2003.
(2) Excludes options to acquire Pharmacia common stock, all of which are listed
separately in the last column.
(3) Such officers participated in the old Monsanto premium stock option
purchase program in 1999. Under this program, the officers were granted an
opportunity to purchase premium stock options from old Monsanto at $7.77
per option with cash or through base salary or bonus reduction over a four-
year period. Participating officers also received an additional premium
stock option grant in 1999. Both stock option grants have a $75 exercise
price per share of Pharmacia Common Stock. The total number of premium
priced options under contract (including the additional grant) are: Mr.
Verfaillie, 139,768; Mr. Engelberg, 46,564; Dr. Fraley, 51,151; Mr. Grant,
49,874; and Mr. Ide, 44,003.
(4) All these options currently are exercisable.
(5) 322,180 of these options are currently exercisable. The balance becomes
exercisable in three equal annual tranches commencing June 1, 2001.
(6) 440,300 of these options are currently exercisable. The balance becomes
exercisable in three equal annual tranches commencing June 1, 2001.
(7) Includes 821,948 shares held by various trusts of which Mr. Parfet acts as
trustee. Mr. Parfet disclaims beneficial ownership of such shares.
(8) All of these options are currently exercisable, except as described in
notes (5) and (6).

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Kantor is a partner at the law firm of Mayer, Brown & Platt, which
provided services to Pharmacia in 1999 and has been retained to provide
services to Pharmacia, including the agricultural business, in 2000.

Until his retirement in April 2000, Mr. Reed served as Chairman and Co-
Chief Executive Officer of Citigroup Inc., the parent company of Salomon Smith
Barney Inc., an investment banking firm which provided services to Pharmacia in
1999 and is providing services to Pharmacia in 2000, including in connection
with this initial public offering.

We have entered into a consulting agreement with Mr. AtLee that is
described above under "Board Structure and Compensation--Compensation."

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COMPENSATION

Our compensation plan is designed to motivate employees to deliver
outstanding business results by aligning their interests with those of our
stockholders. Our people committee is charged with approving the overall
compensation plan for all employees, setting pay for executive officers,
administering our incentive plans, and making awards to executive officers
under our incentive plans. Compensation is variable and based on contributions
and delivered results. Only when long-term stockholder value is created will
total compensation be at or near the top of the market.

Employee compensation for both executives and non-executives will consist
of three basic components: (1) base pay, (2) performance rewards and (3)
benefits. Base pay is set to reflect the external market value of the
experiences and qualifications that an individual brings to his or her role as
well as the responsibilities of the individual. Base pay is targeted at the
median of the market, which includes representative companies from general
industry, as well as the agriculture and biotech industries. Performance
rewards may include both an annual incentive bonus and long-term incentives in
the form of stock options or other awards. Benefits will be delivered through a
flexible menu of competitive benefits with the current plan design expected to
remain in place through December 2001.

INCENTIVE PLANS

MONSANTO 2000 MANAGEMENT INCENTIVE PLAN

The material features of the Monsanto 2000 Management Incentive Plan,
referred to as the "2000 Plan," are outlined below.

AUTHORIZED SHARES. The total number of shares that may be delivered
pursuant to awards under the 2000 Plan and the Director Plan (discussed below)
may not exceed the number that equals 8.85% of the outstanding shares
immediately after the initial public offering of the shares assuming no
exercise of the underwriters' over-allotment option (subject to adjustment in
the event of a stock split, merger, consolidation, sale of assets, liquidation,
spinoff, distribution of stock or assets or other change in capitalization).

ADMINISTRATION. The 2000 Plan will be administered by our people committee,
or another committee of our board of directors, which will be composed of two
or more non-employee directors. The people committee may delegate the
administration of the plan, except as it relates to those officers subject to
the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934 or the limits on deductibility imposed by Section 162(m) of the Internal
Revenue Code. Determinations of our people committee or its delegate concerning
any matter arising in connection with the 2000 Plan are final, binding and
conclusive on all interested parties.

PERSONS ELIGIBLE FOR GRANTS. Our people committee may grant awards under
the 2000 Plan to any of our directors and employees and to employees of
Pharmacia or any affiliates of either company. In any three-year period, the
total number of shares for which awards may be made to any one participant
under the 2000 Plan cannot exceed 15% of the total number of shares for which
awards may be made under the 2000 Plan.

COMPANY OPTIONS. Our people committee has broad authority to establish the
terms and conditions of the options granted under the 2000 Plan, including the
ability to specify the employees and directors who will be granted options and
whether or not they will be incentive stock options eligible for special tax
treatment. Under the 2000 Plan, the exercise price of any option must be no
less than the fair market value, as defined in the 2000 Plan, of our common
stock on the grant date.

The 2000 Plan permits our people committee to include various terms in the
options in order to enhance the linkage between stockholder and management
interests. These include permitting

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participants to deliver shares of our common stock in payment of the exercise
price, offering participants the opportunity to elect to receive a grant of
options instead of a salary increase or bonus, offering participants the
opportunity to purchase options, and making the exercise or vesting of options
contingent upon the satisfaction of performance criteria. The 2000 Plan also
permits the granting of dividend equivalent units in connection with option
grants.

The 2000 Plan provides that the term of any option granted may not exceed
10 years and that each option may be exercised for such period as may be
specified by our people committee in the grant of the option.

Options granted under the 2000 Plan are not transferable except by will,
the laws of descent and distribution, or upon the holder's death pursuant to a
beneficiary designation. All options may be exercised during the holder's
lifetime only by the holder or the holder's guardian or legal representative.

In connection with this offering, we expect to grant options to our
executive officers and directors to purchase a total of approximately 1.2% of
our shares of our common stock, including grants of options to each of our non-
employee directors to purchase 10,000 shares of our common stock, effective as
of the date of this offering at an exercise price equal to the initial public
offering price.

AMENDMENT OR TERMINATION. Our people committee may amend or terminate the
2000 Plan at any time, provided that no grants previously made under the plan
are adversely affected without the consent of the affected participants, except
as a result of changes in law or other developments. Amendments to change the
number of shares authorized for use under the 2000 Plan must be approved by our
board of directors.

STOCK APPRECIATION RIGHTS. The 2000 Plan authorizes the grant of stock
appreciation rights. It is expected that stock appreciation rights will be
granted primarily in lieu of options to employees who are foreign nationals or
are employed by us outside the United States, and who are precluded from
receiving stock options by virtue of local law, tax policy or custom or other
reasons as determined by our people committee.

RESTRICTED AND UNRESTRICTED SHARES. The 2000 Plan authorizes the grant of
restricted or unrestricted shares. Our people committee may set the terms and
conditions of restricted stock awards, including restrictions against sale,
transfer or other disposition, and may make the lapse of such restrictions
contingent on the achievement of performance goals. Our people committee also
may grant an award of dividend equivalent units in connection with a restricted
stock award.

NON-U.S. PARTICIPANTS. To accommodate differences in local law, tax policy
or custom, awards granted to employees who are not U.S. nationals or who are
employed outside the United States may be subject to special terms, conditions
and documentation as provided by our people committee. Our people committee may
also grant substitutes for awards to non-U.S. employees.

REGISTRATION AND COMPLIANCE WITH APPLICABLE LAW. If our people committee
determines under U.S. federal, state or local or foreign law or practice, that
government approval or the registration, qualification, or listing of shares of
our common stock is desirable in connection with the granting of awards or
their exercise, or the purchase or receipt of shares pursuant to awards, no
shares pursuant to an affected award may be purchased or received before our
people committee is satisfied that the desired actions have been completed. Our
people committee will not be required to issue any shares of our common stock
pursuant to an award before it has received all required information and
determined that such issuance is in compliance with all applicable laws and
securities exchange rules.

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CHANGE OF CONTROL. The 2000 Plan provides that, unless our people committee
determines otherwise at the time of grant, all awards will vest, and any
restrictions and other conditions applicable to awards will lapse, if we
undergo a change of control immediately following which Pharmacia does not own
more than 50% of our common stock. Similarly, unless our people committee
determines otherwise at the time of grant, such vesting will occur if a change
of control of Pharmacia occurs immediately following which it still owns more
than 50% of our common stock, and one of the following occurs within one year
thereafter:

. the award holder's employment is terminated without cause or by the
award holder for good reason,

. the employment of a majority of the members of our leadership team is
terminated without cause or for good reason,

. our headquarters is relocated by more than 35 miles, or a decision to
effect such a relocation is publicly announced, or

. a decision is announced that Pharmacia will dispose of its majority
ownership of our stock or otherwise take steps that will result in a
change of control of our company and such steps have not been approved
by a majority of our leadership team.

Such accelerated vesting could result in a participant's being considered
to receive "excess parachute payments" (as defined in Section 280G of the
Internal Revenue Code), which payments are subject to a 20% excise tax imposed
on the participant. If so, the participant would generally be entitled to be
made whole for such excise tax under our excess parachute tax indemnity plan,
and we would not be able to deduct the excess parachute payments or any such
indemnity payments.

MONSANTO BROAD-BASED STOCK OPTION PLAN

The material features of the Monsanto Broad-Based Stock Option Plan,
referred to as the "Monsanto Broad-Based Plan," are outlined below.

AUTHORIZED SHARES. The total number of shares that may be delivered
pursuant to options under the Monsanto Broad-Based Plan may not exceed the
number that equals 1.05% of the outstanding shares immediately after the
initial public offering of the shares assuming no exercise of the underwriters'
over-allotment option (subject to adjustment in the event of a stock split,
merger, consolidation, sale of assets, liquidation, spinoff, distribution of
stock or assets or other change in capitalization).

ADMINISTRATION. The Monsanto Broad-Based Plan will be administered by our
people committee, or another committee of our board of directors, which will be
composed of two or more non-employee directors. Our people committee may
delegate the administration of the plan. Determinations of our people committee
or its delegate concerning any matter arising in connection with the Monsanto
Broad-Based Plan are final, binding, and conclusive on all interested parties.

PERSONS ELIGIBLE FOR GRANT. Our people committee may grant options under
the Monsanto Broad-Based Plan to any of our employees and any employees of
Pharmacia or any affiliate of either company, other than officers subject to
the reporting requirements of Section 16(a) of the Securities Exchange Act or
to the limits on deductibility imposed by Section 162(m) of the Internal
Revenue Code.

COMPANY OPTIONS. Our people committee has broad authority to establish the
terms and conditions of the options granted under the Monsanto Broad-Based
Plan, including the ability to specify the employees who will be granted
options. Under the Monsanto Broad-Based Plan, the exercise price of any option
must be no less than the fair market value, as defined in the Monsanto Broad-
Based Plan, of our common stock on the grant date. The term of options granted
under the

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Monsanto Broad-Based Plan may not exceed 10 years, and each option may be
exercised for such period as may be specified by the people committee in the
grant of the option.

Options granted under the Monsanto Broad-Based Plan are not transferable
except by will, the laws of descent and distribution or, upon the holder's
death pursuant to a written beneficiary designation. All options may be
exercised during the holder's lifetime only by the holder or the holder's
guardian or legal representative.

AMENDMENT OR TERMINATION. The Monsanto Broad-Based Plan may be amended or
terminated by our people committee at any time, provided that no options
previously granted are adversely affected without the consent of the affected
participant, except as a result of changes in law or other developments.
Amendments to change the number of shares authorized for use under the Monsanto
Broad-Based Plan must be approved by our board of directors.

NON-U.S. PARTICIPANTS. To accommodate differences in local law, tax policy
or custom, options granted to employees who are not U.S. nationals or who are
employed outside the United States may be subject to special terms, conditions,
and documentation as provided by our people committee. Our people committee may
also grant substitutes for options to non-U.S. employees.

REGISTRATION AND COMPLIANCE WITH APPLICABLE LAW. If our people committee
determines, under U.S. federal, state or local or foreign law or practice, that
government approval or the registration, qualification, or listing of shares is
desirable in connection with the granting of options or their exercise, no
affected option will be exercisable before our people committee is satisfied
that the desired actions have been completed. Our people committee will not be
required to issue any shares of our common stock pursuant to the exercise of an
option before it has received all required information and determined that such
issuance is in compliance with all applicable laws and securities exchange
rules.

CHANGE OF CONTROL. The Monsanto Broad-Based Plan provides that unless our
people committee determines otherwise at the grant, all options will become
exercisable in connection with a change of control of Monsanto or Pharmacia on
the same basis as described above for the 2000 Plan.

NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE COMPENSATION PLAN

The material features of the Monsanto Non-Employee Director Equity
Incentive Compensation Plan, referred to as the "Director Plan," are outlined
below.

PARTICIPATION. Any of our directors who are not also our employees or
employees of our affiliates will participate in the Director Plan.

AUTHORIZED SHARES. All options, deferred stock and restricted stock
provided for under the Director Plan will automatically be granted under the
2000 Plan, and will reduce the number of shares available for awards under the
2000 Plan (subject to adjustment in the event of a stock split, merger,
consolidation, sale of assets, liquidation, spinoff, distribution of stock or
assets or other change in corporate capitalization).

ADMINISTRATION, AMENDMENT AND TERMINATION. The Director Plan will be
administered by a committee consisting of our chief financial officer, our
general counsel, and our corporate vice president--human resources. The
committee administering the Director Plan has broad authority to interpret the
plan. Both the committee and the board of directors have the ability to amend
the Director Plan, and the board of directors may terminate the plan at any
time.

DEFERRED STOCK. Deferred stock means shares of our common stock that are
delivered at a specified time in the future. Under the Director Plan, half of
the annual retainer for each non-employee director will automatically be paid
in the form of deferred stock.

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ELECTIVE AMOUNT. The half of each director's annual retainer that is not
automatically paid in deferred stock may be received in the form of
nonqualified stock options, restricted common stock, deferred common stock,
current cash, and/or deferred cash, at the director's election.

OPTIONS. Under the Director Plan, the exercise price of any stock option
will be the fair market value, as defined in the Director Plan, of our common
stock on the grant date. The Director Plan also provides that the term of any
options granted will be 10 years. Options may be exercisable for a shorter
period as a result of a director's death or termination of service.

Options granted under the Director Plan are not transferable except by
will, the laws of descent and distribution, or upon the holder's death pursuant
to a beneficiary designation. All options may be exercised during the holder's
lifetime only by the holder or the holder's guardian or legal representative.

RESTRICTED STOCK. Restricted stock means shares of our common stock that
vest in accordance with specified terms after they are granted. Dividends and
other distributions with respect to restricted stock will be held in escrow to
be delivered with the restricted stock as it vests.

VESTING OF OPTIONS. Under the Director Plan, the options granted to a
director for the term to which the director was elected will vest in
installments on the last day of each plan year, but only if the director
remains a member of the board of directors on that day, based on the percentage
of the term that is included in the plan year. When a director's service
terminates before the last day of a plan year, a pro rata portion of the
director's options that otherwise would have vested on the last day of the plan
year will vest on the termination date, based on the percentage of the plan
year that elapsed before the termination date.

VESTING OF DEFERRED STOCK AND RESTRICTED STOCK. Under the Director Plan,
the deferred stock and any restricted stock granted to a director for the term
to which the director was elected will vest in installments on the last day of
each plan month, but only if the director remains a member of the board of
directors on that day, based on the percentage of the term that is included in
the plan month.

CASH. Under the Director Plan, any portion of a director's annual retainer
that is not paid in the form of deferred stock, options or restricted stock
will be paid in cash, either monthly during the term or on a deferred basis, as
elected by the director. Any deferred cash will be credited to a cash account
that will accrue interest at the average Moody's Baa Bond Index Rate, as in
effect from time to time.

PHANTOM SHARE AGREEMENTS

We have entered into phantom share agreements with Pharmacia and each of
Hendrik Verfaillie, Hugh Grant, Robert Fraley and one other executive, pursuant
to which each of these executives has agreed to the termination of his change-
of-control employment agreement with Pharmacia as of the closing of this
offering. Under the change-of-control employment agreements that were triggered
upon the merger of Pharmacia & Upjohn, Inc. with a wholly owned subsidiary of
old Monsanto on March 31, 2000, each of these executives would have been
entitled to substantial severance benefits from Pharmacia if his employment
were terminated by his employer without cause or by him for "good reason"
during the three years following the merger. A termination for "good reason"
would have included a termination by the executive as a result of adverse
changes in the terms and conditions of his employment or for any reason during
the 30-day period beginning on the first anniversary of the merger. In
connection with this offering, we have replaced these change-of-control
employment agreements with the phantom share agreements to provide these key
executives of our company with a more powerful incentive to remain with us for
the long term and to

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build the value of our stock after the offering. The phantom share agreements
were designed to achieve these goals by providing incentive pay tied to the
performance of our common stock, generally conditioned upon the executives'
remaining employed by us or our affiliates through October 1, 2002.

Each of the new phantom share agreements becomes effective upon the close
of the offering, at which time the executive's current change-of-control
employment agreement will be superseded.

At the time of the offering, we will credit to a phantom share account for
the executive a number of phantom shares of our common stock equal to the cash
severance and value of benefits continuation he would have received as a result
of the termination of his employment under his change-of-control employment
agreement, divided by the offering price. The relevant amounts for the named
executive officers are as follows: Mr. Verfaillie, $7,231,000; Mr. Grant,
$3,441,000; and Mr. Fraley, $3,533,000. The phantom share account will also be
credited periodically with deemed dividends, which will be treated as
reinvested in additional phantom shares, and will be adjusted as appropriate
for stock splits, mergers, and other corporate transactions affecting our
common stock.

The phantom share account will generally vest on October 1, 2002, generally
subject to:

. Achievement of the performance goal specified in the phantom share
agreements that we have positive net income for 2001; and

. The executive remaining employed by us or our affiliates through October
1, 2002.

The phantom share account will also vest if:

. The executive's employment is terminated before December 31, 2001,
without cause, for good reason, or because of death or disability,
whether or not the performance goal has been met.

. The executive's employment is terminated on or after December 31, 2001
without cause, for good reason, or because of death or disability and
the performance goal has been met.

In addition, the phantom shares will vest upon a change of control of our
company or following a change of control of Pharmacia under the same
circumstances as those described above for the vesting of awards under the 2000
Plan.

Payment of the value of the phantom shares held in the account will be made
to the executive within 30 days after the last to occur of:

. Vesting of the account;

. The date our people committee certifies achievement of the performance
goal if such certification is a condition to vesting; and

. Date of shareholder approval.

We plan to seek shareholder approval of the material terms and conditions
of the phantom share agreements (including the performance goal) at the 2001
annual meeting of our shareholders, for purposes of exempting the phantom
shares from the deduction limitation of Section 162(m) of the Internal Revenue
Code. If shareholder approval is not obtained, no payments would be made,
unless there were a change of control before the 2001 annual meeting.
Pharmacia, by signing the phantom share agreements, has approved their material
terms and conditions and agreed to vote its shares in favor of the phantom
share agreements at the 2001 annual meeting.

CHANGE-OF-CONTROL EMPLOYMENT AGREEMENTS

We have entered into change-of-control employment agreements with 21 key
executives. These agreements have terms that initially end on June 30, 2001 and
are automatically extended one year

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at a time, unless we give the executive a notice that no extension will occur.
If a change of control of Monsanto occurs during the term of an agreement, or
if a change of control of Pharmacia occurs during the term at a time when
Pharmacia owns more than 50 percent of our common stock, then the agreement
becomes operative for a fixed three-year period.

The agreements provide generally that the executive's terms and conditions
of employment, including position, location, compensation and benefits, will
not be adversely changed during the three-year period after such a change of
control. If, during this three-year period, we terminate the executive's
employment other than for cause, death or disability, or the executive
terminates for good reason, or if we terminate the executive's employment
without cause in connection with or in anticipation of a change of control, the
executive is generally entitled to receive:

. a specified multiple of the executive's annual base salary plus an
annual bonus amount and an amount to reflect our employer matching
contributions under various savings plans,

. accrued but unpaid compensation,

. continued welfare benefits for a specified number of years,

. a lump sum payment having an actuarial present value equal to the
additional pension benefits the executive would have received if he or
she had continued to be employed by us for a specified number of years,

. if the executive has reached age 50 at the conclusion of a specified
number of years following employment termination, receipt of lifetime
retiree medical benefits, and

. outplacement benefits.

The specified multiple and the specified number of years is three for our named
executive officers, and two for all other executives. In addition, the
executive is generally entitled to receive a payment in an amount sufficient to
make him or her whole for any federal excise tax on excess parachute payments.

Messrs. Blaylock, Engelberg and Ide are parties to change-of-control
employment agreements with Pharmacia, which provide similar benefits to those
described above. These agreements became effective on March 31, 2000, when the
merger involving old Monsanto and Pharmacia & Upjohn took place. Accordingly,
if any of these executives experiences a termination of employment without
cause or for good reason on or before March 31, 2003, he will be entitled to
severance benefits similar to those described above. In addition, he would
receive the same severance benefits if he chooses to terminate his employment
for any reason during April of 2001. We estimate that the cash severance
benefits payable under these agreements would be approximately $2,400,000 for
Mr. Blaylock, $3,100,000 for Mr. Engelberg and $4,500,000 for Mr. Ide.
Pharmacia has retained all severance liabilities under these agreements. If Mr.
Blaylock's new change-of-control agreement (as discussed above) becomes
operative before March 31, 2003, it would replace his former change-of-control
employment agreement.

EXCESS PARACHUTE TAX INDEMNITY PLAN

We have adopted the Excess Parachute Tax Indemnity Plan, which provides
that if any of our non-employee directors or any of our employees who is not a
party to a change of control employment agreement described above is subject to
the federal tax on excess parachute payments received in connection with a
change of control, we generally will pay him or her an amount to

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make him or her whole for the tax, and will pay any legal fees he or she may
incur to enforce his or her rights under the plan or in connection with any
Internal Revenue Service audit related to the excise tax.

PENSION PLANS

The named executive officers (as well as other of our employees) are
eligible for retirement benefits payable under Pharmacia's tax-qualified and
non-qualified defined benefit pension plans, which were formerly old Monsanto's
plans. We intend to establish our own cash balance pension plan and non-
qualified plans, to provide benefits to our employees beginning at a future
date to be determined by Pharmacia. Our pension plans will have the same basic
features as the Pharmacia pension plans.

Effective January 1, 1997, the old Monsanto defined benefit pension plan
was amended. The old Monsanto non-qualified pension plan that provides benefits
to executives that cannot be provided under the old Monsanto qualified plan
because of limitations under federal tax law was similarly amended. The amended
old Monsanto defined benefit pension plans each consists of two accounts: a
"prior plan account" and a "cash balance account."

The opening balance of the prior plan account was the lump sum value of the
executive's December 31, 1996 monthly retirement benefit earned at old Monsanto
prior to January 1, 1997 under the old defined benefit pension plan described
below, calculated using the assumption that the monthly benefit would be
payable at age 55 with no reduction for early payment. The formula used to
calculate the opening balance for employment with old Monsanto was the greater
of 1.4% (1.2% for employees hired by old Monsanto on or after April 1, 1986) of
average final compensation multiplied by years of service, without reduction
for Social Security or other offset amounts, or 1.5% of average final
compensation multiplied by years of service, less a 50% Social Security offset.
Average final compensation for purposes of determining the opening balance was
the greater of (1) average compensation received during the 36 months of
employment prior to 1997 or (2) average compensation received during the
highest three of the five calendar years of employment prior to 1997.

For each year of the executive's continued employment with old Monsanto,
Pharmacia or our company, the executive's prior plan account will be increased
by 4% to recognize that prior plan benefits would have grown as a result of pay
increases.

For each year that the executive is employed by old Monsanto, Pharmacia or
our company after 1996, 3% of annual compensation in excess of the Social
Security wage base and a percentage (based on age) of annual compensation
(salary and annual bonus) will be credited to the cash balance account. The
applicable percentages and age ranges are: 3% before age 30, 4% for ages 30 to
39, 5% for ages 40 to 44, 6% for ages 45 to 49, and 7% for age 50 and over. In
addition, the cash balance account of executives who earned benefits under old
Monsanto's old defined benefit pension plan will be credited each year (for up
to 10 years based on prior years of service with old Monsanto or Pharmacia),
during which the executive is employed after 1996, with an amount equal to a
percentage (based on age) of annual compensation. The applicable percentages
and age ranges are: 2% before age 30, 3% for ages 30 to 39, 4% for ages 40 to
44, 5% for ages 45 to 49, and 6% for age 50 and over.

In addition to the retirement benefits for Mr. Verfaillie and Mr. Grant
based on their years of service as our employee in the United States, Mr.
Verfaillie and Mr. Grant are also eligible for regular retirement benefits
based on their respective years of service as our employee outside the United
States. In addition, Mr. Verfaillie and Mr. Grant participate in Pharmacia's
regular, non-qualified pension plan designed to protect retirement benefits for
employees serving in more than one country.

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However, their total retirement benefits from the combined plans, when
considering their total service, are expected to be generally comparable to the
benefits described in this section.

Mr. Ide has an individual supplemental retirement arrangement with
Pharmacia under which Mr. Ide is entitled to a supplemental retirement benefit,
subject to certain conditions, which is designed to produce a total retirement
benefit from Pharmacia at age 65 comparable to that which a Pharmacia employee
with 30 years of service would receive (taking into account the value of any
pension benefits earned as an active employee of Pharmacia and of Monsanto and
pension benefits received from prior employers). We will assume all liabilities
under this agreement.

Mr. Engelberg also has an individual supplemental retirement arrangement
with Pharmacia under which Mr. Engelberg is entitled to a supplemental
retirement benefit, subject to certain conditions, which is designed to produce
an annual retirement benefit from Pharmacia at age 65 equal to 45% of his
average total earnings, reduced by the amount of any benefit received under
Pharmacia pension and parity pension plans and by an additional amount. We will
assume all liabilities under this agreement.

The estimated annual benefits payable as a single life annuity beginning at
age 65 (assuming that each executive officer remains employed by us until age
65 and receives 4% annual compensation increases) are as follows: Mr.
Verfaillie, $785,296; Dr. Fraley, $708,969; Mr. Grant, $583,785; Mr. Ide,
$353,505; and Mr. Engelberg, $309,093.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by applicable Delaware law, we have included in our
certificate of incorporation a provision to generally eliminate the personal
liability of our directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors. However, this provision does not eliminate
or limit liability of a director for a director's breach of the duty of
loyalty, for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, for any transaction from which a
director derived an improper personal benefit and for certain other actions. In
addition, our bylaws provide that we are required to indemnify our officers and
directors under a number of circumstances, including those circumstances in
which indemnification would otherwise be discretionary, and we are required to
advance expenses to our officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. At present, we are
not aware of any pending or threatened litigation or proceeding involving a
director, officer, employee or agent of ours in which indemnification would be
required or permitted. We believe that these indemnification provisions are
necessary to attract and retain qualified individuals as directors and
officers.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling us under
the foregoing provisions, we have been informed that, in the opinion of the
SEC, this indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.

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ARRANGEMENTS BETWEEN MONSANTO AND PHARMACIA

WE HAVE PROVIDED BELOW A SUMMARY DESCRIPTION OF THE MATERIAL TERMS OF THE
SEPARATION AGREEMENT AND THE KEY RELATED AGREEMENTS BETWEEN MONSANTO AND
PHARMACIA. YOU SHOULD READ THE FULL TEXT OF THESE AGREEMENTS, WHICH ARE FILED
WITH THE SEC AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS
IS A PART.

SEPARATION AGREEMENT

The separation agreement contains the key provisions relating to the
separation of our businesses from those of Pharmacia and this offering. The
separation agreement identifies the assets transferred to us by Pharmacia and
the liabilities assumed by us from Pharmacia. The separation agreement also
describes when and how these transfers and assumptions occurred. In addition,
we have entered into additional agreements with Pharmacia governing various
interim and ongoing relationships between Pharmacia and us following the
separation date. These other agreements include:

. a corporate agreement;

. a tax sharing agreement;

. an intellectual property transfer agreement;

. an employee benefits and compensation allocation agreement; and

. a services agreement.

ASSET TRANSFER

Effective on September 1, 2000, which we refer to as the separation date,
Pharmacia transferred the following assets to us, except as provided in one of
the ancillary agreements:

. all assets reflected on our balance sheet as of June 30, 2000 or the
accounting records supporting our balance sheet, as adjusted by the pro
forma adjustments set forth in this document and all assets acquired by
Pharmacia between June 30, 2000 and the separation date that would have
been included on our balance sheet as of June 30, 2000 had they been
owned on June 30, 2000;

. all other assets primarily related to our business or the former
agriculture or chemical businesses of old Monsanto;

. the corporate offices in St. Louis, Missouri (Creve Coeur campus) and
other real property primarily used by our business;

. the subsidiaries, partnerships, joint ventures and other equity
interests primarily related to our business;

. all computers, desks, furniture, equipment and other assets used
primarily by Pharmacia employees who will become our employees due to
the separation;

. any contingent gains that are primarily related to our business or the
former agriculture or chemical businesses of old Monsanto, or otherwise
specifically allocated to us;

. 57% of unknown contingent gains arising as of or prior to the
separation date that are not primarily related to our business, the
former agriculture or chemical businesses of old Monsanto, Pharmacia's
business or former Pharmacia businesses, which we expect would
generally consist of unknown corporate-level gains not primarily
related to any of these businesses; and

. other assets agreed upon by us and Pharmacia.

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ASSUMPTION OF LIABILITIES

Effective on the separation date, we assumed the following liabilities from
Pharmacia, except as provided in one of the ancillary agreements:

. all liabilities reflected on our balance sheet as of June 30, 2000 or
the accounting records supporting our balance sheet, as adjusted by the
pro forma adjustments set forth in this document and all liabilities of
Pharmacia incurred or arising between June 30, 2000 and the separation
date that would have been included on our balance sheet as of June 30,
2000 had they arisen or been incurred on or prior to June 30, 2000;

. all other liabilities primarily related or arising primarily from (1)
any asset that is transferred to us pursuant to the separation, (2) our
business, (3) the former agriculture or chemical businesses of old
Monsanto or (4) the disposition of any of these former agriculture or
chemical businesses;

. liabilities for worker's compensation or third party claims incurred
prior to the separation date at a site transferred to us pursuant to the
separation;

. all liabilities for environmental remediation or other environmental
responsibilities related to our business and the former agriculture or
chemical businesses of old Monsanto, and all real property transferred
to us as part of our assets;

. all liabilities for products of our business or the former agriculture
or chemical businesses of old Monsanto sold to third parties;

. all liabilities relating to medium-term bank notes issued by Monsanto
do Brasil Ltda. and non-intercompany debt for which our subsidiaries
organized or operating outside the United States are the obligors;

. all of our liabilities relating to a $1 billion, 364-day credit
agreement and a $500 million, five-year credit agreement;

. all liabilities of old Monsanto that were assumed by Solutia or any of
its subsidiaries on September 1, 1997 in connection with its spinoff
from old Monsanto, to the extent that Solutia fails to pay, perform or
discharge these liabilities;

. any contingent liabilities that are primarily related to our business
or the former agriculture or chemical businesses of old Monsanto, or
otherwise specifically allocated to us;

. 57% of unknown contingent liabilities arising as of or prior to the
separation date that are not primarily related to our business, the
former agriculture or chemical businesses of old Monsanto, Pharmacia's
business or former Pharmacia businesses, which we expect would
generally consist of unknown corporate-level liabilities not primarily
related to any of these businesses; and

. other liabilities agreed upon by us and Pharmacia.

SHARED CONTINGENT GAINS AND LIABILITIES

The separation agreement provides for the division of "shared" contingent
gains and liabilities, which are those contingent gains and liabilities arising
as of or prior to the separation date that are not primarily related to our
business, the former agriculture or chemical businesses of old Monsanto,
Pharmacia's business or former Pharmacia businesses.

Shared contingent gains and liabilities are allocated as follows:

. any benefit that may be received from any shared contingent gain will
be allocated 43% to Pharmacia and 57% to us. Pharmacia has the
authority to prosecute, settle or waive any shared contingent gain;

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. any responsibility for any shared contingent liability, except for
environmental remediation, will be allocated 43% to Pharmacia and 57%
to us, adjusted for insurance proceeds and other offsetting amounts
received by either company. Pharmacia will assume the defense of, and
may seek to settle or compromise, any third party claim that is a
shared contingent liability, and any costs and expenses incurred will
be included in the total amount of the shared contingent liability;

. any shared contingent liability for environmental remediation or other
environmental responsibility will be borne by each company in
proportion to its respective contribution to the site giving rise to
the shared contingent liability; and

. we and Pharmacia will form a committee for the purpose of resolving
issues regarding shared contingent gains and liabilities.

FINANCING ARRANGEMENTS

We and Pharmacia will arrange a commercial paper facility prior to the
closing of this offering, under which Pharmacia will issue assumable commercial
paper in the amount equal to the sum of approximately $1.8 billion plus the net
proceeds we receive from this offering assuming no exercise of the
overallotment option. The proceeds of such commercial paper obligations will be
used by Pharmacia to repay Pharmacia indebtedness, a substantial portion of
which was incurred in connection with our acquisitions of seed companies, and
for Pharmacia's general corporate purposes. The separation agreement provides
that all liabilities under the commercial paper facility will be assumed by us
on the closing of this offering. We also assumed from Pharmacia on the
separation date the obligations relating to variable-rate, medium-term bank
notes in the aggregate principal amount of approximately $500 million, which
mature in 2003 and had an average interest rate of 5.5% as of June 30, 2000. In
addition, on the separation date, we indirectly assumed approximately $50
million of debt owed by our subsidiaries.

THE EX-U.S. PLAN AND DELAYED TRANSFERS

The transfer of international assets and the assumption of international
liabilities will be accomplished through agreements between international
subsidiaries. The separation agreement acknowledges that circumstances in some
jurisdictions outside of the United States may require the timing of part of
the international separation to be delayed past the separation date.

INDEMNIFICATION

In general, under the separation agreement, we will indemnify Pharmacia and
its representatives and affiliates from all liabilities that we assume under
the separation agreement, including, as of the closing of this offering, the
indebtedness under the assumable commercial paper facility, and any and all
losses by Pharmacia or its representatives or affiliates arising out of or due
to our failure to pay, perform or discharge in due course these liabilities. In
general, Pharmacia will indemnify us and our representatives and affiliates
from all liabilities that Pharmacia retains under the separation agreement and
any and all losses by us or our representatives or affiliates arising out of or
due to Pharmacia's failure to pay, perform or discharge in due course these
liabilities. All indemnification amounts would be reduced by any insurance
proceeds and other offsetting amounts recovered by the indemnitee.

ACCESS TO INFORMATION

Under the separation agreement, the following terms govern access to
information:

. prior to or as promptly as practicable after the separation date,
Pharmacia will deliver to us all corporate books and records related to
our business;

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. from and after the separation date, subject to applicable
confidentiality provisions or restrictions, we and Pharmacia will each
give the other reasonable access and the ability to duplicate
information developed or obtained prior to the separation date within
each company's possession relating to the other's businesses, or for
audit, accounting, claims, intellectual property protection, litigation
and tax purposes, as well as for purposes of fulfilling disclosure and
reporting obligations;

. after the separation date, we and Pharmacia will each use reasonable
efforts to provide assistance to the other for litigation and to make
available to the other employees for the purpose of consultation, or
directors, officers, other employees and agents as witnesses, in legal,
administrative or other proceedings;

. the company providing information, consultant or witness services under
the separation agreement will be entitled to reimbursement from the
other for reasonable expenses;

. we and Pharmacia will each retain all proprietary information in its
possession relating to the other's business for a period of time and if
the information is to be destroyed, the destroying company will give
the other company the opportunity to receive the information at the
other company's expense;

. we and Pharmacia will each agree not to disclose or otherwise waive any
privilege relating to it or to the other without consent, unless the
privilege relates solely to its own business, assets or liabilities;
and

. from and after the separation date, we and Pharmacia will agree to hold
in strict confidence all information concerning or belonging to the
other obtained prior to the separation date or furnished pursuant to
the separation agreement, subject to applicable law.

ARBITRATION AND DISPUTE RESOLUTION

Under the separation agreement, if disputes arise between Pharmacia and us,
the following will occur:

. the parties will first attempt to resolve the dispute by direct
discussions and negotiation, including, if either party elects, among
senior executives;

. if the parties cannot resolve their dispute within 30 days after notice
calling for negotiation among senior executives, the parties will
attempt to settle the dispute through mediation;

. if the dispute is not resolved within 60 days after initiation of
mediation, either party may demand that the dispute be resolved by
binding arbitration; and

. the parties will bear their own expenses and attorneys' fees in
resolving the dispute and will share equally the costs and expenses of
any mediation or arbitration.

NO REPRESENTATIONS AND WARRANTIES

Pursuant to the separation agreement, we understand and agree that
Pharmacia did not represent or warrant to us as to the assets to be transferred
to us, the liabilities to be assumed by us, our business, the former
agriculture or chemical businesses of old Monsanto, our balance sheet or as to
any consents or approvals required in connection with the consummation of the
transactions contemplated by the separation agreement. We took all assets "as
is, where is" and bear the economic and legal risk relating to conveyance of,
and title to, the assets.

INSURANCE

Under the terms of the separation agreement, our assets will include any
and all rights of an insured party, including rights of indemnity and the right
to be defended by or at the expense of the insurer and to receive insurance
proceeds with respect to all of our insured claims under insurance

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policies held by either us or Pharmacia. Each company is responsible for its
own deductibles, self-insured retentions, retrospective premiums, claims
handling and other charges owed under the insurance policies.

NON-COMPETITION PROVISIONS

For a two-year period following the separation date, we will be obligated
to refrain from commercializing, by selling or transferring for sale or use by
the end user, products in the businesses retained by Pharmacia. For a two-year
period following the separation date, Pharmacia will be obligated to refrain
from commercializing products in the businesses transferred to us.

EXPENSES

Pharmacia will pay all reasonable and customary out-of-pocket costs and
expenses directly related to the preparation, execution and delivery of the
separation agreement and other agreements related to the separation, and the
consummation of the separation and this offering. These costs and expenses will
consist of fees and expenses of external advisors (including independent public
accountants, consultants and attorneys), expenses directly related to this
offering (other than underwriting discounts and commissions), transfer and
other costs, registration and filing fees, printing and mailing costs, and any
other costs, fees or charges imposed by a governmental entity.

OTHER AGREEMENTS

If there is a conflict or inconsistency between the provisions of the
separation agreement and the provisions of any other agreement related to the
separation, the provisions of the separation agreement will control over the
inconsistent provisions of the other agreement as to matters within the scope
of the separation agreement.

CORPORATE AGREEMENT

The corporate agreement provides Pharmacia Corporation with continuing
shareholder rights with respect to us following this offering, including
preemptive rights, registration rights and rights associated with Pharmacia's
auditing obligations.

PREEMPTIVE RIGHTS

Under the terms of the corporate agreement, Pharmacia has a continuing
preemptive right to purchase common stock from us in order to allow Pharmacia
to own at least 80.1% of our outstanding equity and voting power on a fully
diluted basis. The exercise price for these shares would be at prevailing
market prices measured by the volume-weighted average for the 20 consecutive
trading days prior to notice of exercise or, in the case of a public offering
of our common stock for cash, a price per share equal to the initial public
offering price less underwriters' discounts and commissions. The preemptive
right would terminate in the event Pharmacia sells or disposes of its shares to
reduce its ownership interest of our outstanding equity and voting power to
less than 80.1% on a fully diluted basis.

REGISTRATION RIGHTS

Under the corporate agreement, Pharmacia has the right to require us to
register for offer and sale all or a portion of our common stock held by
Pharmacia, so long as the common stock Pharmacia requires us to register in
each case represents at least 5% of the aggregate shares of common stock then
issued and outstanding. Pharmacia's registration rights terminate on the first
date on which Pharmacia ceases to hold at least 5% of our outstanding shares on
a fully diluted basis.

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PIGGY-BACK REGISTRATION RIGHTS

If we at any time intend to file on our behalf or on behalf of any of our
security holders a registration statement in connection with a public offering
of any of our securities on a form and in a manner that would permit the
registration for offer and sale of common stock held by Pharmacia, Pharmacia
has the right to include its shares of our common stock in such offering.

UNREGISTERED OFFERINGS

Under the terms of the corporate agreement, Pharmacia has the right to
require us to prepare an offering memorandum in connection with the offer and
sale in an unregistered offering of all or a portion of our common stock, but
not less than 5% of our outstanding shares in any one offering, held by
Pharmacia. Pharmacia's rights and limitations with respect to such unregistered
offerings are comparable to those rights and limitations applicable to
Pharmacia in registered offerings. In addition, we have agreed to grant
customary registration rights to third parties who purchase our stock from
Pharmacia in such an unregistered offering.

REGISTRATION EXPENSES

We are responsible for the registration expenses in connection with the
performance of our obligations under the corporate agreement. Pharmacia is
responsible for all of the fees and expenses of counsel to Pharmacia, any
applicable underwriting discounts or commissions, and any transfer taxes.

INDEMNIFICATION

Pursuant to the corporate agreement, we will indemnify Pharmacia against
any liabilities that may result from untrue statements or omissions in the
registration statement. Pharmacia will indemnify us against liabilities that
arise out of untrue statements or omissions in the registration statement based
on written information furnished by Pharmacia.

AUDITING PRACTICES

So long as Pharmacia is required or permitted to consolidate our results of
operations and financial position in Pharmacia's financial statements, the
companies agree to the following terms relating to auditing practices:

. we will not select a different independent accounting firm than
Deloitte & Touche LLP to serve as our independent certified public
accountants without Pharmacia's prior written consent;

. we will use reasonable best efforts to enable our auditors to (1)
complete their audit such that they will date their opinion on our
audited annual financial statements on the same date that Pharmacia's
auditors date their opinion on Pharmacia's audited annual financial
statements, and (2) complete their quarterly review procedures on our
quarterly financial statements on the same date that Pharmacia's
auditors complete their quarterly review procedures on Pharmacia's
quarterly financial statements;

. we will provide to Pharmacia on a timely basis all information that
Pharmacia reasonably requires to meet its schedule for the preparation,
printing, filing and public dissemination of its annual and quarterly
financial statements;

. we will authorize our auditors to make available to Pharmacia's
auditors both (1) the personnel who performed or will perform the
annual audits and quarterly reviews of our financial statements, and
(2) work papers related to the annual audits and quarterly reviews of
our financial statements;

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. we will provide Pharmacia's internal auditors with access to our books
and records; and

. we will give Pharmacia notice of any proposed significant changes in
accounting estimates or principles from those in effect on the
separation date.

NO DISCRIMINATION

Under the terms of the corporate agreement, we agree that, for so long as
Pharmacia owns at least 50% of our outstanding common stock, we will not,
without the prior written consent of Pharmacia, take any action which has the
effect of restricting or limiting the ability of Pharmacia freely to sell,
transfer, assign, pledge or otherwise dispose of shares of our common stock or
would restrict or limit the rights of any transferee of Pharmacia as a holder
of our common stock. In addition, we agree that we will not, without the prior
written consent of Pharmacia, limit the legal rights of, or deny any benefit
to, Pharmacia as our stockholder in a manner not applicable to our stockholders
generally.

ACCOUNTING TREATMENT

Pursuant to the corporate agreement, we agree to refrain from taking any
actions that could adversely affect Pharmacia's ability to account for the
recent merger transaction involving old Monsanto and Pharmacia & Upjohn as a
pooling of interests.

TAX SHARING AGREEMENT

Following this offering, Monsanto and some of its subsidiaries will be
included in Pharmacia's consolidated group for U.S. federal income tax purposes
(the "Pharmacia Federal Group") as well as in consolidated, combined, unitary
or other similar consolidated returns that include Pharmacia and its
subsidiaries for state and local income tax purposes (a "Pharmacia State
Group"). As of the separation date, we and Pharmacia entered into a tax sharing
agreement.

Pursuant to the tax sharing agreement, with respect to tax returns for any
taxable period in which we and any of our subsidiaries (collectively, the
"Monsanto Group") are included in the Pharmacia Federal Group or any Pharmacia
State Group, we generally will be obligated to pay to Pharmacia the amount of
taxes (including estimated taxes) that would be due and payable by us
determined, subject to adjustment by Pharmacia, as if the Monsanto Group filed
its own tax returns that did not include Pharmacia or other members of the
Pharmacia Federal Group or the Pharmacia State Group, as the case may be. If,
for any taxable period in which the Monsanto Group is included in the Pharmacia
Federal Group or any Pharmacia State Group, the Monsanto Group has a net
operating loss or tax credit that reduces the taxes of the Pharmacia Federal
Group or any Pharmacia State Group, as the case may be, below the amount that
would have been payable if the Monsanto Group had not incurred such loss or tax
credit, Pharmacia must pay to us the amount of the reduction in taxes
attributable to the loss or tax credit. We will be responsible for any taxes
with respect to tax returns that include only the Monsanto Group.

Pharmacia will be responsible for the preparation and filing of all tax
returns for any taxable period in which the Monsanto Group is included in the
Pharmacia Federal Group or any Pharmacia State Group. Pharmacia may elect at
its discretion to include the Monsanto Group in any Pharmacia State Group when
inclusion is not required by law. We will be responsible for the preparation
and filing of all tax returns that include only the Monsanto Group.

Pharmacia generally will have sole responsibility for, and control over,
all audits with respect to any tax return for the Pharmacia Federal Group and
any Pharmacia State Group and we generally will have sole responsibility for,
and control over, all audits with respect to all tax returns that include only
the Monsanto Group.

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With respect to tax periods beginning on or after the separation date, in
the event of any adjustments to the tax returns of the Pharmacia Federal Group,
any Pharmacia State Group or the Monsanto Group, the liability of Pharmacia or
us, as the case may be, under the tax sharing agreement will be redetermined by
giving effect to such adjustment, and Pharmacia or we, as the case may be, will
be obligated to pay to the other party any differences between the original
liability and the redetermined liability.

With respect to tax periods beginning before the separation date, we are
responsible for tax liabilities attributable to DEKALB Genetics Corporation and
its subsidiaries. We will also be responsible for the tax liability arising
from transactions pursuant to which the Monsanto Group's pharmaceutical assets
in foreign jurisdictions are separated from the Monsanto Group's agricultural
assets in foreign jurisdictions ("Separation Transactions"). This liability
will be reduced by the present value of any tax asset created as a result of
such transactions. Except for the DEKALB tax liabilities, taxes attributable to
Separation Transactions and property and sales and use taxes attributable to
our assets or businesses, Pharmacia will be responsible for and will indemnify
and hold us harmless from all taxes incurred by any member of the Monsanto
Group prior to the separation date.

Pharmacia and we will provide each other all information and other
assistance reasonably requested by the other party in connection with the
preparation and filing of any tax return pursuant to the tax sharing agreement.
Disputes arising between Pharmacia and us relating to matters covered by the
tax sharing agreement are subject to resolution through third-party dispute
resolution provisions.

We will be included in the Pharmacia Federal Group for all taxable periods
during which Pharmacia beneficially owns at least 80% of the total voting power
and value of our outstanding common stock. Each member of a consolidated group
for U.S. federal income tax purposes is jointly and severally liable for the
U.S. federal income tax liability of each other member of the consolidated
group. As such, although the tax sharing agreement provides for the sharing of
liabilities between Pharmacia and us, during the period in which we are
included in the Pharmacia Federal Group, we could be liable for any U.S.
federal income tax liability that is incurred, but not discharged, by any other
member of the Pharmacia Federal Group.

EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION AGREEMENT

The employee benefits and compensation allocation agreement sets forth the
agreement between Pharmacia and us as to the allocation of employees and their
compensation and benefits following the separation date.

In general, employees who work exclusively in the businesses being
transferred to us were transferred to us and our subsidiaries as of the
separation date, and employees who work exclusively in the businesses being
retained by Pharmacia remained with Pharmacia and its other subsidiaries.
Outside the United States, employees who work as staff employees supporting all
of the businesses generally were allocated to the primary businesses in each
country, unless factors dictated otherwise. In the United States, staff
employees working in St. Louis, Missouri generally were allocated to us and
staff employees working in Chicago, Illinois generally were assigned to
Pharmacia, unless certain factors dictated otherwise. In some cases, staff
employees of Pharmacia working in St. Louis will provide services to both
Pharmacia and us under the services agreement. In some cases, the staff
employees assigned to one company will provide support services to the other
company under the services agreement. See "Services Agreement." For example, in
the United States, the staff employees transferred to us may continue to
provide services to Pharmacia. Former employees of old Monsanto who had been
employed in the United States were generally allocated to us if they retired
before 1995. Former employees of old Monsanto who had been employed outside the

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United States were generally assigned to us if they either had been working
primarily in the agricultural business at the time they retired or were members
of the corporate staff in countries where the agricultural business was the
primary business of old Monsanto unless local law or other factors dictate
otherwise.

We assumed responsibility for all obligations under any individual
employment letters or similar agreements between Pharmacia and employees who
transferred to us other than the severance liabilities under change-of-control
employment agreements between Pharmacia and each of Messrs. Blaylock, Engelberg
and Ide and one other executive. See "Management--Change-of-Control Employment
Agreements."

It is expected that some of the staff employees will be terminated
following this offering. The employee benefits and compensation allocation
agreement provides that the severance benefits for such employees who are
terminated within two years after our offering will be borne by Pharmacia.

In the United States, employees and former employees allocated to us will
continue to participate in the old Monsanto Company Pension Plan, the related
ERISA Parity Pension Plan and the old Monsanto Company Supplemental Retirement
Plan, each of which will continue to be sponsored by Pharmacia for a period of
time following our offering, and we will bear the costs of their participation.
The period of this continued participation will last until such time as we are
able to establish our own qualified pension plan with benefits similar to those
provided under the old Monsanto Company Pension Plan, and obtain a
determination letter from the Internal Revenue Service that the qualified
pension plan meets the requirements for tax qualification, or such later date
as Pharmacia may determine. When the continued participation of our employees
in the old Monsanto Company Pension Plan does cease, our new pension plans will
assume liability for the pension benefits of our employees and the former
employees allocated to us, as described above, and assets to fund the
liabilities under the qualified pension plan on an accrued-benefits-obligation
basis will be transferred from the trust for the old Monsanto Company Pension
Plan to the trust for our qualified pension plan. If, at the time of the plan
split, the assets of the Monsanto Company Pension Plan have a value at least
equal to its total accrued benefit obligations, then our plan will receive
assets having a value at least equal to the accrued benefit obligation for the
liabilities it assumes. If the Monsanto Company Pension Plan has surplus assets
in excess of its total accrued benefit obligation, Pharmacia will determine
whether to transfer any portion of the surplus to our plan. If Pharmacia
determines to transfer a portion of surplus assets to our plan, the amount of
surplus transferred will equal either:

. our proportionate share of the surplus, based upon the percentage of
the total accrued benefit obligations of the Monsanto Company Pension
Plan that our plan assumes, or

. the lesser of our proportionate share of the surplus or the amount of
the projected benefit obligation for the liabilities our plan assumes,

as determined by Pharmacia. If, at the time of the plan split, the assets of
the Monsanto Company Pension Plan have a value less than its total accrued
benefit obligations, then our plan will receive a proportionate share of those
assets, based upon the percentage of the total accrued benefit obligations of
the Monsanto Company Pension Plan that our plan assumes. Before this split
takes place, we will bear the costs of providing benefits to our employees and
former employees allocated to us under the old Monsanto Company Pension Plan.

We will establish a qualified savings and investment plan, which will be a
qualified defined contribution plan similar to the old Monsanto Company Savings
and Investment Plan, and a related nonqualified plan, which will be similar to
the old Monsanto Company ERISA Parity Savings and Investment Plan, to provide
benefits to our employees on January 1, 2001, or as soon as is

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administratively feasible after that date. The accounts of our employees under
the old Monsanto Company Savings and Investment Plan will be transferred to our
new plan. In connection therewith, a portion of the employee stock ownership
plan component of the old Monsanto Company Savings and Investment Plan also
will be transferred to our plan. Our qualified savings and investment plan will
assume a percentage of the debt obligations of the old Monsanto Company Savings
and Investment Plan, and receive the same percentage of the employer securities
financed by that debt, based upon the relative eligible pay of our employees
participating in the plan as compared to the Pharmacia employees participating
in the plan.

Pension plans maintained outside the United States in which both our
employees and those of Pharmacia participate will generally be divided between
the two companies. If such plans are funded, the assets will generally be split
in proportion to the relative projected benefit obligations of the two separate
plans, except to the extent otherwise required by law.

Effective as soon after the separation date as is administratively
feasible, we will assume sponsorship of all of old Monsanto's U.S. medical,
life, disability and other welfare benefit plans, and Pharmacia will be a
participating employer in those plans. Outside of the United States, the
company that is going to assume sponsorship of the benefit plans in which both
Pharmacia and our employees will participate will generally be designated as
the host company. Pharmacia will bear the cost of the continued participation
in the plans assumed by us by Pharmacia employees and by former employees
allocated to Pharmacia, and we will bear the costs of the continued
participation plans by our employees and by former employees allocated to us in
plans assumed by Pharmacia. There may be some deviations from these general
rules where appropriate because of local law or other local considerations.

Cost-sharing for the benefits provided to one company's employees by plans
sponsored by the other company generally will be based upon actual cost of
providing the benefits to each company's employees and former employees. In
addition, the employee benefits and compensation allocation agreement provides
that we and Pharmacia will share any costs or liabilities involving the old
Monsanto employee benefit plans and relating to compliance issues arising
before this offering or, after this offering, if such issues involve the plans
in which we and Pharmacia both participate.

INTELLECTUAL PROPERTY TRANSFER AGREEMENT

The intellectual property transfer agreement, referred to as the "IPTA," is
a master agreement encompassing several agreements which allocates between
Pharmacia and Monsanto rights relating to patents, patent applications,
invention disclosures, unpatented technology (such as know-how), technology
agreements, trademarks, copyrights and other forms of intellectual property.
The IPTA generally provides that both parties agree not to disclose
confidential information of the other party. Further, each party agrees not to
use the information except when such use has been agreed to by the other party.

PATENT RIGHTS

Under the terms of the IPTA, Pharmacia assigned to us ownership of patents,
patent applications and invention disclosures directed to technology related
exclusively to the businesses transferred to us. If the technology is used by
both Pharmacia and us, but primarily by Pharmacia, such patents, patent
applications and invention disclosures were retained by Pharmacia and licensed
to us for use in our business field. If the technology is used by both
Pharmacia and us, but primarily by us, such patents, patent applications and
invention disclosures were assigned to us and a license provided to Pharmacia
for use in Pharmacia's business field.

The IPTA provides that both parties will assist each other in (1) the
filing of patent applications, (2) the prosecution of the patent applications
and (3) any patent litigation. Expenses for such

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<PAGE>

assistance will be borne by the party requesting assistance. Further, the IPTA
specifies that for a period of three years both parties will be obligated to
correct any bona fide error made in allocating the rights between the parties.

We believe that all material patent rights necessary to conduct our
business will be either assigned or licensed to us by Pharmacia under the IPTA.

UNPATENTED TECHNOLOGY

Unpatented technology that relates exclusively to our business as of the
separation date was assigned to us. Unpatented technology used by both
Pharmacia and us, but primarily by Pharmacia, was retained by Pharmacia and
licensed royalty-free to us. Unpatented technology used by Pharmacia and us,
but primarily by us, was assigned to us and licensed royalty-free to Pharmacia.

TECHNOLOGY AGREEMENTS

Pharmacia has entered into numerous agreements with third parties relating
to patents, patent applications and/or technology. To the extent such
agreements can be identified as relating exclusively to us, and to the extent
assignment is allowed to be made, Pharmacia assigned to us such agreements
relating exclusively to our business. If the subject technology is used by both
Pharmacia and us, but primarily by us, such agreements were assigned to us and
a license provided to Pharmacia for use in Pharmacia's business field. In any
case and to the extent that the agreement is used by both businesses, we and
Pharmacia will continue to permit the agreement to be used by both businesses
to the extent the agreement allows. Royalty payments under these technology
agreements will be allocated between us and Pharmacia on a prorated basis,
based on the use of the technology.

TRADEMARKS

Pharmacia assigned to us at the separation date trademarks used exclusively
by us. Pharmacia also assigned to us all marks relating to the Monsanto name,
as well as the block M and the Food, Health and Hope logo. We will provide a
license to Pharmacia, limited to six months, for Pharmacia to utilize
trademarks, including the Monsanto name, the block M and the Food, Health and
Hope logo. After six months, Pharmacia will no longer have the right to use
those trademarks.

COPYRIGHTS

Pharmacia assigned to us all copyrights that are primarily used in our
business as of the separation date.

FIRST RIGHT TO NEGOTIATE

Also, for two years after the separation date, we and Pharmacia will each
be obligated to offer the other a first right to negotiate a license for
technology developed after the separation date that has a use in the other's
business field. The term for initiating such negotiation will expire three
years from the separation date. Such negotiation will be conducted in good
faith and will reflect commercially reasonable license terms. Further, the
financial terms of such license will be no less favorable than financial terms
granted to any third party for the subject technology in a similar field
of use.

SERVICES AGREEMENT

The services agreement governs the provision by Pharmacia to us and by us
to Pharmacia of support services, such as financial management, accounting,
tax, payroll, legal, investor relations,

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human resources administration, financial transaction support, information
technology, data processing, procurement, real estate management and other
general administrative functions. The terms of these services are generally
until December 31, 2001, subject to exceptions. We anticipate that we will
negotiate a new agreement with Pharmacia for the continued provision of some of
these services for some period after December 31, 2001, but we cannot guarantee
that we will be able to do so.

ALLOCATION OF CORPORATE OPPORTUNITIES

Our certificate of incorporation provides that, unless otherwise provided
in a written agreement between us and Pharmacia, Pharmacia will have no duty to
refrain from engaging in the same or similar activities or lines of business as
our company engages in or proposes to engage in at the time of this offering,
and, to the fullest extent permitted by law, neither Pharmacia nor any officer
or director of Pharmacia (except as provided below) will be liable to us or our
stockholders for breach of any fiduciary duty by reason of any such activities
of Pharmacia. In the event that Pharmacia acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both Pharmacia
and us, Pharmacia will, to the fullest extent permitted by law, have no duty to
communicate or offer such corporate opportunity to us and will, to the fullest
extent permitted by law, not be liable to us or our stockholders for breach of
any fiduciary duty as a stockholder of our company by reason of the fact that
Pharmacia pursues or acquires such corporate opportunity for itself, directs
such corporate opportunity to another person, or does not communicate
information regarding such corporate opportunity to us.

In the event that one of our directors or officers who is also a director
or officer of Pharmacia acquires knowledge of a potential transaction or matter
which may be a corporate opportunity for both us and Pharmacia, such director
or officer will, to the fullest extent permitted by law, have fully satisfied
the fiduciary duty of such director or officer to us and our stockholders with
respect to such corporate opportunity if such director or officer acts in a
manner consistent with the following policy:

. a corporate opportunity offered to any person who is an officer of our
company, and who is also a director but not an officer of Pharmacia,
will belong to us;

. a corporate opportunity offered to any person who is a director but
not an officer of our company, and who is also a director or officer
of Pharmacia, will belong to us if such opportunity is expressly
offered to such person in his or her capacity as a director of our
company, and otherwise will belong to Pharmacia; and

. a corporate opportunity offered to any person who is an officer of
both our company and Pharmacia will belong to us if such opportunity
is expressly offered to such person in his or her capacity as an
officer of our company, and otherwise will belong to Pharmacia.

These corporate opportunities provisions will expire once Pharmacia owns
less than 20% of our common stock and once no person who is a director or
officer of our company is also a director or officer of Pharmacia.

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<PAGE>

PRINCIPAL STOCKHOLDER

Prior to this offering, all of the outstanding shares of our common stock
will be owned by Pharmacia. After this offering, Pharmacia will own
approximately 86.3% of our outstanding common stock, or approximately 84.5% if
the underwriters exercise their over-allotment option in full. Except for
Pharmacia, we are not aware of any person or group that will beneficially own
more than 5% of our outstanding shares of common stock following this offering.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

We are authorized to issue 1,500,000,000 shares of our common stock, $.01
par value, and 20,000,000 shares of undesignated preferred stock, $.01 par
value. The following description of our capital stock is subject to and
qualified in its entirety by our certificate of incorporation and bylaws, which
are included as exhibits to the registration statement of which this prospectus
forms a part, and by the provisions of applicable Delaware law.

COMMON STOCK

Prior to this offering, there were 220,000,000 shares of our common stock
outstanding, all of which were held of record by Pharmacia.

The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by our stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of our common
stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by our board of directors out of funds legally
available for that purpose. See "Dividend Policy." In the event of our
liquidation, dissolution or winding up, the holders of our common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of our preferred stock, if any, then
outstanding. The holders of our common stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to our common stock.

PREFERRED STOCK

Our board of directors has the authority, without action by the
stockholders, to designate and issue our preferred stock in one or more series
and to designate the rights, preferences and privileges of each series, which
may be greater than the rights of our common stock. It is not possible to state
the actual effect of the issuance of any shares of our preferred stock upon the
rights of holders of our common stock until the board of directors determines
the specific rights of the holders of our preferred stock. However, the effects
might include, among other things:

. restricting dividends on our common stock;

. diluting the voting power of our common stock;

. impairing the liquidation rights of our common stock; or

. delaying or preventing a change of control of us without further action
by our stockholders.

At the closing of this offering, no shares of our preferred stock will be
outstanding, and we have no present plans to issue any shares of our preferred
stock.

ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
DELAWARE LAW

Some provisions of Delaware law and our certificate of incorporation and
bylaws could make the following more difficult, although they have little
significance while we are controlled by Pharmacia:

. acquisition of us by means of a tender offer;

. acquisition of us by means of a proxy contest or otherwise; or

. removal of our incumbent officers and directors.

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These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions also are
designed to encourage persons seeking to acquire control of us to first
negotiate with our board of directors. We believe that the benefits of
increased protection give us the potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure us
and outweigh the disadvantages of discouraging such proposals because
negotiation of such proposals could result in an improvement of their terms.

ELECTION AND REMOVAL OF DIRECTORS

Our certificate of incorporation provides that directors may be removed
only by the vote of holders of at least 70% of our outstanding shares of common
stock and, once Pharmacia owns less than 50% of our common stock, directors may
be removed only for cause. After such time that Pharmacia owns less than 50% of
our common stock, our board of directors will be divided into three classes.
The directors in each class will serve for a three-year term, one class being
elected each year by our stockholders. This system of electing and removing
directors may discourage a third party from making a tender offer or otherwise
attempting to obtain control of us if Pharmacia no longer controls us because
it generally makes it more difficult for stockholders to replace a majority of
the directors.

ELIMINATION OF STOCKHOLDER ACTION BY WRITTEN CONSENT

Our certificate of incorporation eliminates the right of stockholders other
than Pharmacia to act by written consent without a meeting. Pharmacia will lose
this right once it owns less than 50% of our common stock.

AMENDMENT OF CERTIFICATE OF INCORPORATION PROVISIONS

The amendment of any of the above provisions in our certificate of
incorporation would require approval by holders of at least 70% of our
outstanding common stock.

STOCKHOLDER MEETINGS

Under our bylaws, only our board of directors and, until Pharmacia owns
less than 50% of our common stock, Pharmacia, may call special meetings of our
stockholders.

REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS

Our bylaws establish advance notice procedures with respect to stockholder
proposals and nomination of candidates for election as directors, other than
nominations made by or at the direction of our board of directors or a
committee of our board of directors.

AMENDMENTS TO OUR BYLAWS

Our bylaws may only be amended by our board of directors or by the vote of
holders of at least 70% of the outstanding shares.

DELAWARE ANTI-TAKEOVER LAW

Our certificate of incorporation provides that Section 203 of the Delaware
General Corporation Law, an anti-takeover law, does not apply to us until
Pharmacia owns less than 15% of our outstanding common stock.

In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date the person became an interested
stockholder, unless the "business combination" or the transaction in which the
person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale, or
other transaction resulting in a

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financial benefit to the interested stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns or
within three years prior to the determination of interested stockholder status,
did own, 15% or more of a corporation's voting stock. Section 203 is not
applicable to business combinations with Pharmacia. The existence of this
provision after Pharmacia no longer owns at least 15% of our outstanding shares
may have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.

NO CUMULATIVE VOTING

Our certificate of incorporation and bylaws do not provide for cumulative
voting in the election of directors.

UNDESIGNATED PREFERRED STOCK

The authorization of undesignated preferred stock makes it possible for our
board of directors to issue our preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
us. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes of control of our management.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is anticipated to be
ChaseMellon Shareholder Services LLC.

NEW YORK STOCK EXCHANGE LISTING

We have filed an application to list our common stock on the New York Stock
Exchange under the symbol "MON."

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SHARES ELIGIBLE FOR FUTURE SALE

All of the 35,000,000 shares of our common stock sold in this offering will
be freely tradable without restriction under the Securities Act, except for any
shares that may be acquired by an affiliate of us, as that term is defined in
Rule 144 under the Securities Act. Persons who may be deemed to be affiliates
generally include individuals or entities that control, are controlled by, or
are under common control with, us and may include our directors or officers as
well as our significant stockholders, if any. Persons who are affiliates will
be permitted to sell the shares of our common stock that are issued in this
offering only through registration under the Securities Act, or under an
exemption from registration, such as the one provided by Rule 144.

The shares of our common stock held by Pharmacia are deemed restricted
securities (as defined in Rule 144) and may not be sold other than through
registration under the Securities Act or under an exemption from registration.
We have granted registration rights to Pharmacia. See "Arrangements Between
Monsanto and Pharmacia--Corporate Agreement--Registration Rights." Pharmacia,
our directors and executive officers and we have agreed not to offer or sell
any shares of our common stock, subject to exceptions, for a period of 180 days
after the date of this prospectus, without the prior written consent of
Goldman, Sachs & Co. on behalf of the underwriters. See "Underwriting."

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UNDERWRITING

We and the underwriters named below have entered into an underwriting
agreement with respect to the shares of our common stock being offered. Subject
to certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co.,
Salomon Smith Barney Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co.
Incorporated, Bear, Stearns & Co. Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated are the representatives of the underwriters.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ----------
<S> <C>
Goldman, Sachs & Co. ................................................
Salomon Smith Barney Inc. ...........................................
J.P. Morgan Securities Inc. .........................................
Morgan Stanley & Co. Incorporated....................................
Bear, Stearns & Co. Inc..............................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated...................
----------
Total.............................................................. 35,000,000
==========
</TABLE>

Under the terms and conditions of the underwriting agreement, the
underwriters agree to purchase all of our shares being offered pursuant to this
offering, if any shares are purchased. If the underwriters sell more shares
than the total number set forth in the table above, the underwriters have an
option to buy up to an additional 5,250,000 shares from us to cover such sales.
They may exercise that option for 30 days. If any shares are purchased pursuant
to this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase 5,250,000 additional shares.

<TABLE>
<CAPTION>
Paid by Monsanto
-----------------------
Full
No Exercise Exercise
----------- -----------
<S> <C> <C>
Per Share............................................... $ $
Total................................................... $ $
</TABLE>

Shares sold by the underwriters to the public initially will be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial offering price, the representatives may change the offering price and
the other selling terms.

The Company currently anticipates that it will undertake a directed share
program pursuant to which it will direct the underwriters to reserve up to
1,750,000 shares of common stock for sale at the initial public offering price
to our employees, officers and directors, and officers and directors of
Pharmacia through a directed share program. The number of shares of common
stock available for sale to the general public in the public offering will be
reduced to the extent these persons purchase any reserved shares. Any shares
not so purchased will be offered by the underwriters to the general public on
the same basis as the other shares offered hereby.

We, our executive officers and directors and Pharmacia have agreed with the
underwriters not to dispose of or hedge any of their shares of our common stock
or securities convertible into or exchangeable for shares of our common stock
during the 180-day period following the date of this prospectus, except with
the prior written consent of Goldman, Sachs & Co. on behalf of the
underwriters. See "Shares Eligible for Future Sale" for a discussion of certain
transfer restrictions.

Prior to this offering, there has been no public market for the shares of
our common stock. The initial public offering price will be negotiated between
us and the representatives. Among the factors to be considered in determining
the initial public offering price of the shares, in addition to prevailing

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market conditions, will be our historical performance, estimates of our
business potential and earnings prospects, an assessment of our management and
consideration of the above factors in relation to market valuation of companies
in related businesses.

We have filed an application for the common stock to be listed on the New
York Stock Exchange under the symbol "MON." In order to meet one of the
requirements for listing our common stock on the NYSE, the underwriters have
undertaken to sell lots of 100 or more shares of common stock to a minimum of
2,000 beneficial holders.

In connection with the offering, the underwriters may purchase and sell
shares of our common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from us in the offering. The underwriters
may close out any covered short position by either exercising their option to
purchase additional shares or purchasing shares in the open market. "Naked"
short sales are any sales in excess of such option. The underwriters must close
out any naked short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the common stock in the
open market after pricing that could adversely affect investors who purchase in
the offering. Stabilizing transactions consist of various bids for or purchases
of common stock made by the underwriters in the open market prior to the
completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.

Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of our
common stock, and together with the imposition of the penalty bid, may
stabilize, maintain or otherwise affect the market price of our common stock.
As a result, the price of our common stock may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters at any time. These transactions
may be effected on the NYSE, in the over-the-counter market or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of our common stock offered.

We estimate that the total offering expenses, excluding underwriting
discounts and commissions, will be approximately $8,500,000 which will be paid
by Pharmacia.

We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act.

From time to time, some of the underwriters and their affiliates have
provided, and in the case of Monsanto and Pharmacia may continue to provide,
investment banking services to old Monsanto, Monsanto and Pharmacia, including
in connection with the merger of old Monsanto and Pharmacia & Upjohn, for which
they have received customary compensation. Citibank, N.A. and Salomon Smith
Barney Inc., affiliates of Citigroup, Inc., serve as administrative agent and
arranger/book manager, respectively, for both our $1 billion, 364-day credit
facility and our $500 million, five-year credit facility. In addition, we are
currently negotiating with Citibank, N.A. and Salomon Smith Barney Inc. for a
$1 billion, 120-day standby credit facility. These credit facilities will be
used to support and back up our issuance of commercial paper. Citibank, N.A.
and Salomon Smith Barney Inc. will receive compensation for these services.

Michael Kantor, a director of Monsanto and Pharmacia, is a partner at the
law firm Mayer, Brown & Platt. Mayer, Brown & Platt is currently retained by
Morgan Stanley & Co. Incorporated.

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John S. Reed, a director of Monsanto and Pharmacia, resigned as Chairman
and Co-Chief Executive Officer of Citigroup Inc. effective as of April 18,
2000. Salomon Smith Barney Inc., one of the underwriters, is a member of
Citigroup.

LEGAL MATTERS

Wachtell, Lipton, Rosen & Katz, New York, New York will pass upon the
validity of our common stock being sold in this offering and other legal
matters for us. Cravath, Swaine & Moore, New York, New York will pass upon a
number of legal matters relating to this offering for the underwriters. Each of
these firms has in the past represented and continues to represent one or more
of the underwriters, and Wachtell, Lipton, Rosen & Katz has in the past
represented old Monsanto, on a regular basis and in a variety of matters other
than this offering.

EXPERTS

The combined financial statements of the Monsanto Company Agricultural
Business as of December 31, 1999 and 1998, and for each of the three years in
the period ended December 31, 1999, included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.

The statement of financial position of Monsanto Company as of February 9,
2000 included in this prospectus has been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and has been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

With respect to the unaudited interim financial information of the Monsanto
Company Agricultural Business as of June 30, 2000 and for the six month periods
ended June 30, 2000 and 1999, and the pro forma condensed combined statement of
financial position of Monsanto Ag as of June 30, 2000 and the related pro forma
condensed combined statement of income for the six months then ended, which are
included herein, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for reviews of such information.
However, as stated in their reports included in this Registration Statement on
Form S-1 included herein, they did not audit and they do not express an opinion
on that interim financial information and pro forma financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act of 1933 for their reports on the unaudited interim
financial information and pro forma financial information because those reports
are not "reports" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.

The pro forma condensed combined statement of income of the Monsanto
Company Agricultural Business for the year ended December 31, 1999 included in
this prospectus has been examined by Deloitte & Touche LLP, independent public
accountants, as stated in their report appearing herein, and has been so
included in reliance upon such firm given upon their authority as experts in
giving such reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to our common stock offered in this prospectus.
This prospectus does not contain all of the

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<PAGE>

information set forth in the registration statement and the exhibits and
schedules to that registration statement. For further information with respect
to us and our common stock, we refer you to this registration statement and its
exhibits and schedules. With respect to statements contained in this prospectus
as to the contents of any contract or other document reference is made to the
copy of that contract or document filed as an exhibit to the registration
statement, each of these statements being qualified in all respects by that
reference. You may read and copy the registration statement, including exhibits
to the registration statement, at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our filings with the SEC are
also available to the public through the SEC's Internet site at
HTTP://WWW.SEC.GOV.

Upon completion of this offering, we will be subject to the informational
requirements of the Securities Exchange Act and, in accordance with those
requirements, will file reports, proxy and information statements with the SEC.
You may inspect and copy these reports, proxy and information statements and
other information at the addresses set forth above.

We intend to furnish to our stockholders our annual reports containing
combined financial statements audited by our independent auditors and quarterly
reports containing unaudited consolidated financial statements for each of the
first three quarters of each fiscal year.

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MONSANTO COMPANY AGRICULTURAL BUSINESS

Unaudited Interim Combined Financial Statements:
Independent Accountants' Report.......................................... F-2
Statement of Combined Income for the six months ended June 30, 2000 and
1999.................................................................... F-3
Statement of Combined Financial Position as of June 30, 2000 and December
31, 1999................................................................ F-4
Statement of Combined Cash Flows for the six months ended June 30, 2000
and 1999................................................................ F-5
Notes to Unaudited Interim Combined Financial Statements................. F-6

Audited Combined Financial Statements:
Independent Auditors' Report............................................. F-10
Statement of Combined Income (Loss) for the years ended December 31,
1999, 1998, and 1997.................................................... F-11
Statement of Combined Financial Position as of December 31, 1999 and
1998.................................................................... F-12
Statement of Combined Cash Flows for the years ended December 31, 1999,
1998, and 1997.......................................................... F-13
Statement of Combined Equity for the years ended December 31, 1999, 1998,
and 1997................................................................ F-14
Statement of Combined Comprehensive Income (Loss) for the years ended
December 31, 1999, 1998, and 1997....................................... F-14
Notes to Combined Financial Statements................................... F-15

MONSANTO COMPANY
Independent Auditors' Report............................................. F-40
Statement of Financial Position as of June 30, 2000 and
February 9, 2000 ....................................................... F-41
Notes to Statement of Financial Position................................. F-42
</TABLE>

F-1
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of
Monsanto Company:

We have reviewed the accompanying statement of combined financial position
of the Monsanto Company Agricultural Business ("Monsanto Ag") as of June 30,
2000, and the related combined statements of income and cash flows for the six-
month periods ended June 30, 2000 and 1999. These financial statements are the
responsibility of Monsanto Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our review, we are not aware of any material modifications that
should be made to such combined financial statements for them to be in
conformity with accounting principles generally accepted in the United States
of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the statement of combined financial
position of Monsanto Ag as of December 31, 1999, and the related statements of
combined income, cash flows, equity, and comprehensive loss for the year then
ended; and in our report dated March 22, 2000, except as to Notes 14 and 19 as
to which the date is August 7, 2000, we expressed an unqualified opinion on
those combined financial statements. In our opinion, the information set forth
in the accompanying statement of combined financial position as of December 31,
1999 is fairly stated, in all material respects, in relation to the statement
of combined financial position from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

St. Louis, Missouri
August 14, 2000

F-2
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

STATEMENT OF COMBINED INCOME
(IN MILLIONS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
--------------
2000 1999
------ ------
<S> <C> <C>
NET SALES....................................................... $3,290 $3,136
Cost of goods sold.............................................. 1,486 1,383
------ ------
GROSS PROFIT.................................................... 1,804 1,753
------ ------
OPERATING EXPENSES:
Selling, general and administrative expenses.................. 688 603
Research and development expenses............................. 291 338
Amortization and adjustments of goodwill...................... 149 66
Restructuring and other unusual items......................... 41 --
------ ------
Total operating expenses........................................ 1,169 1,007
INCOME FROM OPERATIONS.......................................... 635 746
Interest expense (net of interest income of $15 and $10
in 2000 and 1999, respectively)................................ (128) (136)
Other expense--net.............................................. (28) (29)
------ ------
INCOME BEFORE INCOME TAXES...................................... 479 581
Income tax provision............................................ (210) (212)
------ ------
NET INCOME...................................................... $ 269 $ 369
====== ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS
STATEMENT OF COMBINED FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents........................... $ 41 $ 26
Trade receivables (net of allowances of $163 in 2000
and $151 in 1999).................................. 3,485 2,028
Miscellaneous receivables........................... 216 350
Deferred tax asset.................................. 152 130
Inventories......................................... 1,222 1,440
Other current assets................................ 105 53
------- -------
TOTAL CURRENT ASSETS............................... 5,221 4,027
------- -------
Property, Plant and Equipment:
Land................................................ 73 82
Buildings........................................... 795 708
Machinery and equipment............................. 2,448 2,187
Computer software................................... 167 155
Construction in progress............................ 799 726
------- -------
Total property, plant and equipment.................. 4,282 3,858
Less accumulated depreciation........................ 1,697 1,639
------- -------
Net Property, Plant and Equipment.................... 2,585 2,219
------- -------
Goodwill (net of accumulated amortization of $233 in
2000 and $183 in 1999).............................. 2,918 3,081
Other Intangible Assets (net of accumulated
amortization of $450 in 2000 and $362 in 1999)...... 859 935
Other Assets......................................... 768 839
------- -------
TOTAL ASSETS....................................... $12,351 $11,101
======= =======
LIABILITIES AND EQUITY
----------------------
Current Liabilities:
Short-term debt of Parent Attributable to Monsanto
Ag................................................. $ 1,912 $ 89
Accounts payable.................................... 332 466
Accrued compensation and benefits................... 141 147
Restructuring reserves.............................. 37 26
Accrued marketing programs.......................... 452 256
Miscellaneous short-term accruals................... 430 720
------- -------
TOTAL CURRENT LIABILITIES.......................... 3,304 1,704
------- -------
Long-Term Debt of Parent Attributable to Monsanto
Ag.................................................. 3,645 4,278
Other Liabilities.................................... 459 474
Commitments and Contingencies (Note 4)
Equity:
Accumulated other comprehensive loss................ (324) (281)
Parent company's net investment..................... 5,267 4,926
------- -------
TOTAL EQUITY....................................... 4,943 4,645
------- -------
TOTAL LIABILITIES AND EQUITY....................... $12,351 $11,101
======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

STATEMENT OF COMBINED CASH FLOWS
(IN MILLIONS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
----------------
2000 1999
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Income before income taxes.................................. $ 479 $ 581
Adjustments to reconcile to Cash Provided by (Used in)
Operations:
Items that did not use (provide) cash:
Depreciation and amortization............................. 275 251
Restructuring and other unusual items..................... 157 --
Working capital changes that provided (used) cash:
Trade receivables......................................... (1,457) (1,164)
Inventories............................................... 186 229
Accounts payable and accrued liabilities.................. (450) (204)
Other..................................................... 46 --
Brazil currency devaluation................................ -- (223)
Other items................................................ (58) (6)
------- -------
NET CASH (USED IN) OPERATIONS............................... (822) (536)
------- -------
INVESTING ACTIVITIES:
Property, plant and equipment purchases..................... (325) (263)
Acquisitions and investments................................ (99) (58)
Investment and property disposal proceeds................... -- 31
------- -------
NET CASH (USED IN) INVESTING ACTIVITIES..................... (424) (290)
------- -------
FINANCING ACTIVITIES:
Net change in short-term financing.......................... 1,823 589
Long-term debt proceeds..................................... -- 306
Long-term debt reductions................................... (633) --
Net transactions with parent................................ 71 (58)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 1,261 837
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 15 11
CASH AND CASH EQUIVALENTS:
Beginning of year.......................................... 26 37
------- -------
End of period.............................................. $ 41 $ 48
======= =======
</TABLE>

The effect of exchange rate changes on cash and cash equivalents was not
material.

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO UNAUDITED INTERIM COMBINED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

BASIS OF PRESENTATION

These financial statements should be read in conjunction with the Basis of
Presentation and Significant Accounting Policies as set forth in Notes 1 and 2,
respectively, to the Combined Financial Statements of Monsanto Company
Agricultural Business ("Monsanto Ag") as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, included
elsewhere in this document.

The accompanying unaudited interim combined financial statements reflect
all adjustments which in the opinion of management are necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods reported. Such adjustments are of a normal, recurring nature.
Financial information for the first six months of 2000 should not be
annualized. Monsanto Ag has historically generated the majority of its sales
during the first half of the year, primarily because of the concentration of
sales due to the timing of the planting and growing season. As a result, during
1999 and 1998 all of Monsanto Ag's operating income was generated in the first
half of the year and operating losses were incurred in the second half of the
year. See Note 17 of Notes to Combined Financial Statements. Consistent with
this, cash used in operations has historically been higher during the first
half of the year which has resulted in higher borrowings than at year end.

On February 9, 2000, a newly formed, wholly owned subsidiary of Pharmacia
Corporation ("Pharmacia") was incorporated in Delaware as the successor to
Monsanto Ag. The new subsidiary was renamed Monsanto Company effective March
31, 2000. This "new" Monsanto Company was established for the purpose of
receiving the assets and liabilities of Monsanto Ag that are expected to be
contributed to it.

NOTE 2: NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to
be recognized as assets or liabilities on the balance sheet and measured at
fair value. Changes in the fair value of derivatives should be recognized in
either Net Income or Other Comprehensive Income, depending on the designated
purpose of the derivative. This statement will be effective for Monsanto Ag on
January 1, 2001. Monsanto Ag is currently determining the impact this statement
will have on its financial position and results of operations.

In December 1999, the Staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
Recognition in Financial Statements," which provides guidance related to
revenue recognition. SAB 101 allows companies to report any changes in revenue
recognition related to adoption of its provisions as an accounting change at
the time of implementation. Companies must adopt SAB 101 no later than the
fourth quarter of 2000, effective as of January 1, 2000. Monsanto Ag is
currently determining the impact this statement will have on its financial
position and results of operations. Prior to the March 31, 2000 merger, old
Monsanto had effected an accounting change with respect to SAB No. 101 in
response to a specific dialogue with the SEC related to the sale of certain
agency rights. The financial statements of Monsanto Ag have been retroactively
adjusted to record the $32 million proceeds from the sale over 20 years.

F-6
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO UNAUDITED INTERIM COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3: INVENTORY

Components of inventories were:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
(IN MILLIONS)
<S> <C> <C>
Finished goods....................................... $ 603 $ 705
Goods in process..................................... 319 412
Raw materials and supplies........................... 335 346
------ ------
Inventories, at FIFO cost............................ 1,257 1,463
Excess of FIFO over LIFO cost........................ (35) (23)
------ ------
Total................................................ $1,222 $1,440
====== ======
</TABLE>

NOTE 4: COMMITMENTS AND CONTINGENCIES

Pharmacia is a party to a number of lawsuits and claims relating to
Monsanto Ag, for which Monsanto Company will assume responsibility effective on
the separation date and which Pharmacia and Monsanto Ag are vigorously
defending. Such matters arise out of the normal course of business and relate
to a variety of issues. Certain of the lawsuits and claims seek damages in very
large amounts. Although the results of litigation cannot be predicted with
certainty, it is Pharmacia and Monsanto Ag managements' belief that the final
outcome of such litigation will not have a material adverse effect on Monsanto
Ag's financial position, profitability or liquidity.

In April 1999, a jury verdict was returned against DEKALB (which became a
wholly owned subsidiary of old Monsanto during December 1998), in a lawsuit
filed in U.S. District Court in North Carolina. The lawsuit was brought by
Aventis CropScience S.A. (formerly Rhone Poulenc Agrochimie S.A.) ("Aventis"),
claiming that a 1994 license agreement was induced by fraud stemming from
DEKALB's nondisclosure of relevant information and that DEKALB did not have the
right to license, make or sell products using Aventis's technology for
glyphosate resistance under this agreement. The jury awarded Aventis $15
million in actual damages for unjust enrichment and $50 million in punitive
damages. DEKALB has appealed this verdict, believes it has meritorious grounds
to overturn the verdict and intends to vigorously pursue all available means to
have the verdict overturned. No provision has been made in Monsanto Ag's
combined financial statements with respect to the award for punitive damages.

NOTE 5: COMPREHENSIVE INCOME

Comprehensive Income was $226 million and $118 million for the six months
ended June 30, 2000 and 1999, respectively.

NOTE 6: SEGMENT AND GEOGRAPHIC DATA

Monsanto Ag manages its business in two segments: Agricultural
Productivity, and Seeds and Genomics. The Agricultural Productivity segment
consists of the crop protection products, animal agriculture and environmental
technologies business lines. The Seeds and Genomics segment is comprised of the
global seeds and related traits businesses and genetic technology platforms.
Sales between segments were not significant.

F-7
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO UNAUDITED INTERIM COMBINED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
SEEDS
AGRICULTURAL AND
PRODUCTIVITY GENOMICS TOTAL
------------ -------- -------
(IN MILLIONS)
<S> <C> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30
Sales
2000...................................... $2,294 $ 996 $ 3,290
1999...................................... 2,100 1,036 3,136

Earnings (loss) before interest and taxes
2000...................................... $ 803 $ (196) $ 607
1999...................................... 706 11 717

AS OF JUNE 30
Total Assets
2000...................................... $6,480 $5,871 $12,351
</TABLE>

NOTE 7: RESTRUCTURING AND UNUSUAL ITEMS

In the first half of 2000, Monsanto Ag recorded a net pretax charge of $157
million to operating expenses primarily associated with its plan to focus on
key projects, including the elimination of certain research and development
programs. Additionally, Monsanto Ag decided to realign its commercial and
administrative operations in Western Europe and the Commonwealth of Independent
States. The plan encompassed a decision to more stringently focus on the four
key crops of corn, soybeans, wheat and cotton and included the elimination of
food and biotech research programs, including laureate oil and wheat quality
programs. In conjunction with the elimination of these projects, inventories
and intangible assets (including goodwill, product rights and licensed
technologies) were written off.

In total, the net charge of $157 million was comprised of asset impairments
of $129 million, workforce reduction costs of $31 million and other exit costs
of $1 million, net of prior restructuring reserve reversals of $4 million. The
costs were recorded in the Statement of Income (Loss) as cost of goods sold of
$32 million, amortization of goodwill of $84 million and restructuring expense
of $41 million. The asset impairments consisted of $32 million for laureate oil
inventories, $86 million for intangible assets, and $11 million for equipment
write-offs.

The workforce reduction charge reflected involuntary employee separation
costs for 375 employees worldwide and included charges of $18 million for
positions in administration, and $13 million for positions in research and
development. The affected employees are entitled to receive severance benefits
pursuant to established severance policies or by governmentally mandated labor
regulations. As of June 30, 2000, none of the planned employee terminations
were completed. The other exit costs included expenses associated with contract
terminations and equipment dismantling. As of June 30, 2000, none of these
costs had been paid. The company expects the employee reductions, asset
dispositions and other exit activities to be completed by June 2001. Payments
to complete the remaining restructuring actions will be funded from operations
and are not expected to significantly impact Monsanto's liquidity.

F-8
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO UNAUDITED INTERIM COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The costs were recorded in the Combined Statement of Income in the
following categories:

Activities related to restructuring and other actions for the six months
ended June 30, 2000 were as follows:

<TABLE>
<CAPTION>
WORKFORCE FACILITY ASSET
RESTRUCTURING & UNUSUAL ITEMS: REDUCTIONS CLOSURES IMPAIRMENTS TOTAL
------------------------------ ---------- -------- ----------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
January 1, 2000 Reserve Balance......... $ 24 $ 2 $-- $ 26

Costs charged against reserves.......... (15) (2) -- (17)

Reversal of reserves related to pre-1998
plans.................................. (4) -- -- (4)

Addition for 2000 actions............... 31 1 129 161

Reclassification of reserves to other
balance sheet accounts: -- --
Inventories........................... -- -- (32) (32)
Property.............................. -- -- (11) (11)
Goodwill.............................. -- -- (84) (84)
Other intangible assets............... -- -- (2) (2)
---- --- ---- ----

June 30, 2000 Reserve Balance........... $ 36 $ 1 $-- $ 37
==== === ==== ====
</TABLE>

F-9
<PAGE>

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
MONSANTO COMPANY:

We have audited the accompanying statement of combined financial position
of the Monsanto Company Agricultural Business ("Monsanto Ag") as of December
31, 1999 and 1998, and the related statements of combined income (loss), cash
flows, equity and comprehensive income (loss) for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of Monsanto Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of Monsanto Ag as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States of America.

/S/ DELOITTE & TOUCHE LLP

St. Louis, Missouri
March 22, 2000, except as to Notes 14 and 19
as to which the date is August 7, 2000

F-10
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

STATEMENT OF COMBINED INCOME (LOSS)
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
NET SALES............................................. $5,248 $4,448 $3,673
Cost of goods sold.................................... 2,556 2,149 1,729
------ ------ ------
GROSS PROFIT.......................................... 2,692 2,299 1,944
------ ------ ------
OPERATING EXPENSES:
Selling, general and administrative expenses........ 1,237 1,135 869
Research and development expenses................... 695 536 409
Acquired in-process research and development........ -- 402 633
Amortization and adjustments of goodwill............ 128 77 20
Restructuring and other unusual items............... 22 94 --
------ ------ ------
Total operating expenses.............................. 2,082 2,244 1,931
INCOME FROM OPERATIONS................................ 610 55 13
Interest expense (net of interest income of $26, $27
and $28 in 1999, 1998 and 1997, respectively)........ (243) (94) (20)
Other (expense) income--net........................... (104) (21) 8
------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES..................... 263 (60) 1
Income tax (provision) benefit........................ (113) (65) 30
------ ------ ------
NET INCOME (LOSS)..................................... $ 150 $ (125) $ 31
====== ====== ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-11
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

STATEMENT OF COMBINED FINANCIAL POSITION
(IN MILLIONS)

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents.............................. $ 26 $ 37
Trade receivables (net of allowances of $151 in 1999
and $83 in 1998)...................................... 2,028 1,649
Miscellaneous receivables.............................. 350 390
Deferred tax assets.................................... 130 212
Inventories............................................ 1,440 1,400
Other current assets................................... 53 60
--------- ---------
TOTAL CURRENT ASSETS.................................. 4,027 3,748
--------- ---------
Property, Plant and Equipment:
Land................................................... 82 86
Buildings.............................................. 708 573
Machinery and equipment................................ 2,187 2,083
Computer software...................................... 155 94
Construction in progress............................... 726 479
--------- ---------
Total property, plant and equipment..................... 3,858 3,315
Less accumulated depreciation........................... 1,639 1,466
--------- ---------
Net Property, Plant and Equipment....................... 2,219 1,849
--------- ---------
Goodwill (net of accumulated amortization of $183 in
1999 and $64 in 1998).................................. 3,081 3,586
Other Intangible Assets (net of accumulated amortization
of $362 in 1999 and $194 in 1998)...................... 935 976
Other Assets............................................ 839 732
--------- ---------
TOTAL ASSETS.......................................... $ 11,101 $ 10,891
========= =========
LIABILITIES AND EQUITY
----------------------
Current Liabilities:
Short-term debt of Parent Attributable to Monsanto Ag.. $ 89 $ 322
Accounts payable....................................... 466 572
Accrued compensation and benefits...................... 147 121
Restructuring reserves................................. 26 84
Accrued marketing programs............................. 256 200
Miscellaneous short-term accruals...................... 720 570
--------- ---------
TOTAL CURRENT LIABILITIES............................. 1,704 1,869
--------- ---------
Long-Term Debt of Parent Attributable to Monsanto Ag.... 4,278 4,388
Other Liabilities....................................... 474 509
Commitments and Contingencies (see Note 14)
Equity:
Accumulated other comprehensive loss................... (281) (24)
Parent company's net investment........................ 4,926 4,149
--------- ---------
TOTAL EQUITY.......................................... 4,645 4,125
--------- ---------
TOTAL LIABILITIES AND EQUITY.......................... $ 11,101 $ 10,891
========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-12
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

STATEMENT OF COMBINED CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1999 1998 1997
----- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income (loss) before income taxes.................... $ 263 $ (60) $ 1
Adjustments to reconcile to Cash Provided by (Used
in) Operations:
Items that did not use (provide) cash:
Depreciation and amortization...................... 547 368 245
Acquired in-process research and development
expense........................................... -- 402 633
Restructuring and other unusual items.............. 50 202 --
Working capital changes that provided (used) cash:
Trade receivables.................................. (370) (578) (75)
Inventories........................................ (35) (139) (42)
Accounts payable and accrued liabilities........... (108) (779) (339)
Other.............................................. (29) 27 (164)
Brazil currency devaluation......................... (223) -- --
Other items......................................... 25 29 (11)
----- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATIONS............ 120 (528) 248
----- ------- -------
INVESTING ACTIVITIES:
Property, plant and equipment purchases.............. (632) (432) (298)
Acquisitions and investments......................... (108) (4,112) (1,598)
Investment and property disposal proceeds............ 325 -- 18
----- ------- -------
NET CASH (USED IN) INVESTING ACTIVITIES.............. (415) (4,544) (1,878)
----- ------- -------
FINANCING ACTIVITIES:
Net change in short-term financing................... (233) (69) 390
Long-term debt proceeds.............................. -- 3,276 1,000
Long-term debt reductions............................ (110) -- --
Net transactions with parent......................... 627 1,866 191
----- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 284 5,073 1,581
----- ------- -------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS......................................... (11) 1 (49)
CASH AND CASH EQUIVALENTS:
Beginning of year................................... 37 36 85
----- ------- -------
End of year......................................... $ 26 $ 37 $ 36
===== ======= =======
</TABLE>

The effect of exchange rate changes on cash and cash equivalents was not
material.

The accompanying notes are an integral part of these financial statements.

F-13
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

STATEMENT OF COMBINED EQUITY
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
ACCUMULATED CURRENCY ADJUSTMENT:
Balance at January 1,.............................. $ (43) $ (35) $ 7
Translation adjustment............................. (250) (8) (42)
------- ------- -------
BALANCE AT DECEMBER 31,............................ (293) (43) (35)
------- ------- -------
UNREALIZED NET GAINS ON INVESTMENTS:
Balance at January 1,.............................. 19 13 16
Unrealized gains (losses) on investments........... (7) 6 (3)
------- ------- -------
BALANCE AT DECEMBER 31,............................ 12 19 13
------- ------- -------
Total accumulated other comprehensive income
(loss)............................................ (281) (24) (22)
------- ------- -------
PARENT COMPANY'S NET INVESTMENT:
Balance at January 1,.............................. 4,149 2,408 2,186
Net income (loss).................................. 150 (125) 31
Net transactions with parent....................... 627 1,866 191
------- ------- -------
BALANCE AT DECEMBER 31,............................ 4,926 4,149 2,408
------- ------- -------
TOTAL EQUITY--
BALANCE AT DECEMBER 31,............................ $ 4,645 $4,125 $ 2,386
======= ======= =======

STATEMENT OF COMBINED COMPREHENSIVE INCOME (LOSS)
(IN MILLIONS)

<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
NET INCOME (LOSS).................................. $ 150 $ (125) $ 31
------- ------- -------
Other Comprehensive (Loss) Income:
Foreign currency translation adjustments......... (250) (8) (42)
Unrealized net holding (losses) gains
before tax...................................... (11) 10 (5)
Related income tax (provision) benefit........... 4 (4) 2
------- ------- -------
Total other comprehensive (loss)................... (257) (2) (45)
------- ------- -------
TOTAL COMPREHENSIVE (LOSS)......................... $ (107) $ (127) $ (14)
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-14
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1: BACKGROUND AND BASIS OF PRESENTATION

On December 19, 1999, Monsanto Company and Pharmacia & Upjohn, Inc.
announced that they had entered into a definitive agreement to combine in a
merger of equals transaction, with the combined entity following the merger
being renamed "Pharmacia Corporation." Monsanto Company prior to the merger is
hereinafter referred to as "old Monsanto," and Pharmacia Corporation subsequent
to the merger is hereinafter referred to as "Pharmacia." On December 19, 1999,
old Monsanto and Pharmacia & Upjohn, Inc. announced a plan to create a wholly
owned subsidiary, to be named Monsanto Company, and to offer up to 19.9% of
Monsanto Company in an initial public offering. On February 9, 2000 a newly
formed, wholly owned subsidiary of Pharmacia Corporation was incorporated in
Delaware as the successor to Monsanto Ag. This "new" Monsanto Company was
established for the purpose of receiving the assets and liabilities of Monsanto
Ag that are expected to be contributed to it. Upon completion of Monsanto
Company's initial public offering, Pharmacia will own at least 80.1% of
Monsanto Company's outstanding common stock. Monsanto Company will be comprised
of the former Agricultural Products Segment of Pharmacia and certain smaller
research and business operations. These operations are referred to herein as
Monsanto Company Agricultural Business ("Monsanto Ag"), a division of Pharmacia
Corporation and the predecessor to Monsanto Company. Monsanto Ag manages its
business in two segments: Agricultural Productivity, and Seeds and Genomics.
The Agricultural Productivity segment consists of the crop protection products,
animal agriculture and environmental technologies business lines. The Seeds and
Genomics segment is comprised of the global seeds and related traits business
and genetic technology platforms.

Monsanto Company and Pharmacia will enter into a separation agreement and
other agreements that will provide for, among other things, the assets to be
contributed to and the liabilities to be assumed by Monsanto Company. The
accompanying combined financial statements have been prepared on a basis which
reflects the historical assets, liabilities, operating results and cash flows
of Monsanto Ag and have been prepared using old Monsanto's historical bases in
such assets and liabilities, as well as old Monsanto's historical results of
operations.

Old Monsanto provided certain general and administrative services to
Monsanto Ag, including finance, legal, treasury, information systems, public
affairs, regulatory and human resources. Although it is not practicable to
determine what the cost of these services would have been had Monsanto Ag
operated on a stand-alone basis, these costs have been included in the combined
financial statements and were allocated to Monsanto Ag based on methodologies
that management believes to be reasonable. Costs associated with finance,
information systems, and human resources were allocated based on the number of
people in those functions assigned to support Monsanto Ag while public affairs,
legal, and regulatory costs were driven by work effort and projects specific to
the business. Treasury costs were allocated based on Monsanto Ag's sales as a
percentage of total old Monsanto sales. The allocation methodologies followed
in preparing the combined financial statements do not necessarily reflect what
the results of operations, cash flow, or financial position would have been had
Monsanto Ag been a separate stand-alone public entity. Following the completion
of the initial public offering, Monsanto Company will be responsible for these
general and administrative services using its own resources or purchased
services (including those initially purchased from Pharmacia pursuant to the
transition services agreement) and it will be responsible for the costs and
expenses associated with the management of a public entity.

As described in Notes 10, 11, 12 and 13, Monsanto Ag employees and retirees
participate in various pension, health care, savings and other benefit plans.
The costs related to those plans and

F-15
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

attributable to Monsanto Ag are included in Monsanto Ag's combined financial
statements generally based upon the percentage of Monsanto Ag's payroll costs
to total old Monsanto payroll costs. In connection with the separation of
Monsanto Company's businesses from Pharmacia, an employee benefit allocation
agreement will be established to set forth benefit provisions following the
separation.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

BASIS OF COMBINATION

The combined financial statements are presented on the basis of accounting
principles generally accepted in the United States of America. All significant
intercompany accounts and transactions have been eliminated. Other agricultural
companies in which Pharmacia has a significant ownership interest (generally
greater than 20%), and which are to be contributed to Monsanto Company, are
included in "Other Assets" in the Statement of Combined Financial Position.
Monsanto Ag's share of these companies' net earnings or losses is included in
"Other (expense) income--net" in Monsanto Ag's Statement of Combined Income
(Loss).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and that affect revenues and expenses during the
period reported. Estimates are adjusted to reflect actual experience when
necessary. Significant estimates and assumptions are used to account for
restructuring reserves, environmental reserves, self-insurance reserves,
employee benefit plans, asset impairments, in-process research and development,
the allocation of corporate costs, business acquisitions and contingencies.
Actual results may differ from these estimates and assumptions.

REVENUE RECOGNITION

Revenues are recognized when title to finished goods inventories is
transferred and goods are delivered to customers. Where the right of return
exists, sales revenues are reduced at the time of sale to reflect expected
returns which are estimated based on historical experience. License revenues
and revenues from the sale of product rights are recognized when the rights
have been contractually conferred to the licensee or purchaser. Additional
conditions for recognition of revenue are that the collection of sales proceeds
is reasonably assured and that there are no further performance obligations
under the sale or license agreement. Interest income from providing customers
extended financing terms is included in revenues as earned, generally based
upon the passage of time, with appropriate reductions for amounts whose
collection is considered doubtful.

INCOME TAXES

Monsanto Ag's operating results historically have been included in the
consolidated federal and state income tax returns filed by old Monsanto and its
subsidiaries in various U.S. and ex-U.S. jurisdictions. Following completion of
both the merger and the initial public offering described in Note 1, Monsanto
Ag will continue to be included in the Pharmacia consolidated group for all
taxable periods during which Pharmacia beneficially owns at least 80% of the
total voting power and value of Monsanto Company's common stock. The tax
provisions reflected in Monsanto Ag's Statement of Combined Income (Loss) have
been computed as if Monsanto Ag were a separate company. Deferred tax assets
and liabilities are recognized for the expected tax consequences of temporary
differences between the tax bases of assets and liabilities and their reported
amounts.

F-16
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

EARNINGS PER SHARE

Historical earnings per share have not been presented as Monsanto Ag was
wholly owned by Pharmacia, not a separate, legal entity and did not have
capital shares.

MARKETING AND ADVERTISING COSTS

Marketing and advertising costs are expensed as incurred. Marketing program
liabilities are accrued based upon specific performance criteria achieved by
distributors, dealers and/or farmers, such as purchase volumes, promptness of
payment and/or market share increases. The associated cost of marketing
programs is recognized as a reduction of gross sales in the Statement of
Combined Income (Loss).

CASH AND CASH EQUIVALENTS

All highly liquid investments with a maturity of three months or less at
the date of purchase are considered to be cash equivalents.

SHORT-TERM INVESTMENTS

Investments in debt securities are classified in the Statement of Combined
Financial Position as either short-term (with maturities of greater than three
months but less than one year) or long-term (with maturities beyond one year).
Monsanto Ag also has investments in equity securities, all of which are
considered to be available for sale and are classified as other non-current
assets.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The recorded amounts of cash, trade receivables, investments in securities,
miscellaneous receivables, third-party guarantees, commodity futures contracts,
accounts payable, and short-term debt approximate their fair values. Fair
values are estimated by the use of quoted market prices, estimates obtained
from brokers, and other appropriate valuation techniques based on information
available at year-end. The fair value estimates do not necessarily reflect the
values that could be realized in the current market.

INVENTORY VALUATION

Inventories are stated at the lower of cost or market. Actual cost is used
to value raw materials and supplies. Standard cost, which approximates actual
cost, is used to value finished goods and goods in process. Standard cost
includes direct labor and raw materials, and manufacturing overhead based on
practical capacity. The cost of certain inventories (approximately 51% as of
December 31, 1999) is determined by using the last-in, first-out (LIFO) method,
which generally reflects the effects of inflation or deflation on cost of goods
sold sooner than other inventory cost methods do. The cost of other inventories
generally is determined by the first-in, first-out (FIFO) method. Inventories
at FIFO approximate current cost.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, the excess of cost over the fair value of net assets acquired, is
being amortized using the straight-line method over various periods not
exceeding 40 years. Monsanto Ag periodically reviews goodwill to evaluate
whether changes have occurred that would suggest that goodwill may be impaired
based on the estimated undiscounted cash flows of the assets acquired over the

F-17
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

remaining amortization period. If this review indicates that the remaining
estimated useful life of goodwill requires revision or that the goodwill is not
recoverable, the carrying amount of the goodwill is reduced by the estimated
shortfall of cash flows on a discounted basis. Trademarks that are included in
other intangible assets are assessed for impairment whenever events indicate a
possible loss. Such assessment involves a review of undiscounted cash flows
over the remaining useful life of the trademark. If this review indicates that
the remaining estimated useful life of the trademark requires revision, the
carrying amount of the trademark is reduced by the estimated shortfall of cash
flows on a discounted basis. Patents obtained in a business acquisition are
recorded at the present value of estimated future cash flows resulting from
patent ownership. The cost of patents is amortized over their remaining legal
lives and the cost of other intangible assets (principally seed germplasm and
product rights) is amortized over their estimated useful lives.

PROPERTY, PLANT & EQUIPMENT

Property, plant and equipment is recorded at cost. Additions and
improvements are capitalized and include all material, labor, and engineering
costs to design, install or improve the asset. Interest costs are also
capitalized on significant construction projects. These costs are carried in
Construction in progress until the asset is ready for its intended use, at
which time the costs are transferred to Land, Buildings or Machinery and
equipment. Routine repairs and maintenance are expensed as incurred. The cost
of plant and equipment is depreciated over weighted-average periods of 18 years
for buildings and 10 years for machinery and equipment using the straight-line
method for financial reporting purposes. Long-lived assets are reviewed for
impairment whenever conditions indicate a possible loss. Such impairment tests
are based on a comparison of undiscounted cash flows to the recorded value of
the asset. If an impairment is indicated, the asset value is written down to
its fair market value or using discounted cash flows, if fair market value is
not readily determinable.

ENVIRONMENTAL REMEDIATION LIABILITIES

Monsanto Ag follows Statement of Position 96-1, "Environmental Remediation
Liabilities," which provides guidance for recognizing, measuring and disclosing
environmental remediation liabilities. Monsanto Ag accrues for these costs in
the period in which responsibility is established and when costs are probable
and reasonably estimable based on current law and existing technology. Post-
closure and remediation costs for hazardous and other waste facilities at
operating locations are accrued over the estimated life of the facility as part
of its anticipated closure cost.

FOREIGN CURRENCY

The financial statements for most of Monsanto Ag's ex-U.S. operations are
translated into U.S. dollars at current exchange rates, the year end rate for
assets and liabilities and the average rate for the period for revenues,
expenses, gains and losses. Unrealized currency adjustments in the Statement of
Combined Financial Position are accumulated in equity as a component of
Accumulated Other Comprehensive Loss. The financial statements of ex-U.S.
operations in highly inflationary economies are translated at either current or
historical exchange rates, as appropriate. These currency adjustments are
included in net income.

Currencies in which Monsanto Ag has significant exposures are the euro
(which, as of January 1, 1999, replaced the Belgian franc, German mark, Italian
lira, and eight other European currencies), Brazilian real, Argentine peso, and
the U.K. pound sterling. Other currency exposures include the Japanese yen and
the Canadian dollar. Currency restrictions are not expected to have a
significant effect on Monsanto Ag's cash flow, liquidity, or capital resources.

F-18
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Monsanto Ag designated Ecuador, Turkey, Russia, Romania, and Venezuela as
hyperinflationary countries as of January 1, 1999. Monsanto Ag designated the
Brazilian economy as non-hyperinflationary as of January 1, 1998, and
established the Brazilian real as a functional currency.

DERIVATIVE FINANCIAL INSTRUMENTS

Monsanto Ag uses derivative financial instruments to limit its exposure
arising from changes in commodity prices and participates in a foreign currency
risk management program sponsored by Pharmacia. Monsanto Ag does not use
derivative financial instruments for trading purposes, nor does it engage in
commodity or interest rate speculation. Monsanto Ag monitors its underlying
market risk exposures on an ongoing basis and believes that it can modify or
adapt its hedging strategies as needed. Gains and losses on contracts that are
designated and effective as hedges are deferred and are included in the
recorded value of the transaction being hedged. Gains and losses on contracts
that are not designated as and effective as hedges are included in net income
immediately.

RECLASSIFICATIONS

Certain balances have been reclassified to conform with the June 30, 2000
financial statement presentation.

NOTE 3: NEW ACCOUNTING STANDARDS

In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," which provides guidance related to revenue recognition. SAB 101
allows companies to report any changes in revenue recognition related to
adoption of its provisions as an accounting change at the time of
implementation. Companies must adopt SAB 101 no later than the fourth quarter
of 2000, effective as of January 1, 2000. Monsanto Ag is currently determining
the impact this statement will have on its financial position and results of
operations. Prior to the March 31, 2000 merger, old Monsanto had effected an
accounting change with respect to SAB No. 101 in response to a specific
dialogue with the Securities and Exchange Commission related to the sale of
certain agency rights. The financial statements of Monsanto Ag have been
retroactively adjusted to recognize the $32 million of proceeds from the sale
over 20 years.

NOTE 4: PRINCIPAL ACQUISITIONS, MERGERS AND DIVESTITURES

On December 29, 1999, Monsanto Ag completed the sale of Stoneville
Pedigreed Seed Company. Proceeds were $92 million, resulting in a pre-tax gain
of $35 million.

F-19
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

On December 20, 1999, old Monsanto withdrew its filing for U.S. antitrust
clearance of its proposed merger with Delta and Pine Land Company in light of
the U.S. Department of Justice's unwillingness to approve the transaction on
commercially reasonable terms. On January 3, 2000, Monsanto Ag paid Delta and
Pine Land $80 million in cash, equal to the amount of a termination fee set
forth in the merger agreement, plus reimbursement of $1 million in expenses. In
addition, Monsanto Ag incurred $4 million of other expenses in 1999 related to
the failed merger with Delta and Pine Land, resulting in a total charge of $85
million.

On October 20, 1999, Monsanto Ag and Cargill, Incorporated ("Cargill")
announced that they had reached an agreement that resolves outstanding issues
related to Monsanto Ag's purchase of certain international seed operations of
Cargill as discussed below. Under terms of the agreement, Cargill made a cash
payment of $335 million, including $28 million for reimbursement of expenses
incurred, to Monsanto Ag for the lost use of certain germplasm and for damages
caused by the delay in integrating the acquired seed operations and for legal
expenses. Additionally, Monsanto Ag and Pioneer Hi-Bred International, Inc.
("Pioneer") announced a resolution of the litigation between them stemming from
Monsanto Ag's purchase of these Cargill international seed operations. Under
terms of this agreement, Monsanto Ag was required to destroy genetic material
derived from Pioneer's seed lines and pay damages to Pioneer of $42 million. As
a result, the purchase price for certain international seed operations of
Cargill was reduced by $307 million and a liability of $42 million was
recorded. Monsanto Ag also recorded $28 million in the 1999 Statement of
Combined Income (Loss) as a reduction of incremental costs incurred.

In 1998, Monsanto Ag made strategic acquisitions of several seed companies.
In July 1998, Monsanto Ag acquired Plant Breeding International Cambridge
Limited ("Plant Breeding International") for approximately $525 million. In
October 1998, Monsanto Ag announced the acquisition of certain international
seed operations of Cargill in Asia, Africa, Central and South America, and
Europe, excluding certain operations in the United Kingdom, for approximately
$1.4 billion. In December 1998, Monsanto Ag completed its acquisition of DEKALB
Genetics Corporation ("DEKALB") for approximately $2.3 billion. Monsanto Ag
accounted for these acquisitions as purchases. Monsanto Ag's final purchase
price allocations for the principal acquisitions made during 1998 were to
goodwill, $2,686 million; germplasm and core technology, $505 million;
trademarks, $222 million; in-process research and development, $402 million;
exit costs and employee termination liabilities, ($64) million; inventories and
other individually insignificant tangible assets and liabilities, $212 million.
The final purchase price allocations were based on final valuation studies. The
following pretax charges were recorded in 1998 for the write-off of acquired
in-process research and development (R&D) related to these acquisitions:
approximately $60 million for Plant Breeding International, approximately $150
million for DEKALB and approximately $190 million for certain Cargill
international seed operations. Management believed that the technological
feasibility of the acquired in-process R&D had not been established and that it
had no alternative future uses. Accordingly, the amounts allocated to in-
process R&D were required to be expensed immediately under accounting
principles generally accepted in the United States.

At the time of and in connection with the 1998 seed company acquisitions,
Monsanto Ag established a plan to integrate the acquired businesses. Monsanto
Ag is in the process of closing or rationalizing (consolidating, shutting down
or moving facilities to achieve more efficient operations) certain assets or
facilities and eliminating approximately 1,400 jobs, primarily in manufacturing
and administrative functions, as part of this integration plan. Approximately
300 of these positions related to Monsanto Ag's existing seed operations and
were therefore included in the December 1998 restructuring plan discussed in
Note 5. The costs related to 1,000 positions and the other actions

F-20
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

were originally estimated to be $78 million, and were recognized as liabilities
in 1998. As of December 31, 1999, over 900 positions had been eliminated at a
cost of approximately $50 million. The remaining 200 positions (including an
estimated 100 additional positions identified in 1999) are expected to be
eliminated by the third quarter of 2000 at a cost of $14 million, which will
complete the original plan. In addition, the original liability established in
1998 was reduced during 1999 by $14 million as a result of lower actual
severance costs resulting in an adjustment to the final purchase price
allocations to goodwill.

In 1997, Monsanto Ag also acquired several other seed companies. In
February 1997, Monsanto Ag completed its acquisition of the Asgrow Agronomics
seed business for approximately $250 million. Monsanto Ag completed its
acquisition of the remaining shares of Calgene Inc. that it did not already own
for approximately $270 million during May 1997. In September 1997, Monsanto Ag
completed the acquisitions of Holden's Foundation Seeds Inc. and Corn States
Hybrid Services Inc. for approximately $1.0 billion, and in December 1997,
Monsanto Ag acquired controlling interest in Sementes Agroceres S.A., a
Brazilian seed company, for approximately $160 million. Monsanto Ag recorded
the following pretax charges in 1997 for the write-off of acquired in-process
research and development related to these acquisitions: approximately $102
million for Asgrow, approximately $21 million for Calgene, approximately $435
million for Holden's and Corn States and approximately $75 million for
Agroceres.

The in-process R&D charges for the 1998 and 1997 seed company acquisitions
cover numerous seed breeding projects, no single one of which was significant,
as is typical in the seed industry. These projects consist of conventional
breeding programs for corn, wheat and other hybrids; conventional breeding for
soybean varieties; and the development of transgenic crops. Successful
commercialization of products developed through these projects is expected to
occur five to nine years after program initiation. The in-process R&D projects
were valued using a discounted cash flow method with risk-adjusted discount
rates generally ranging from 12 percent to 20 percent, which took into account
the stage of completion and the appropriate development cycle of each in-
process R&D category. The in-process projects were at various stages of
completion at the dates of acquisition. Revenues from the in-process R&D
projects related to the 1997 acquisitions began in 1998, and revenues from the
in-process R&D projects related to the 1998 acquisitions began in 1999. On
average, a new seed technology is in the research process or developmental
stage for approximately eight years before it is launched in a commercial
product. Additionally, based on historical experience, Monsanto Ag assumed that
approximately one eighth of the products in the in-process pipeline would be
released or launched each year for the next eight years. From this information,
a weighted-average percent complete was computed. The present value of future
cash flows was then multiplied by the estimated percentage complete as of the
valuation date to determine the value of the acquired in-process R&D.

F-21
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The following unaudited pro forma condensed combined financial information
combines the consolidated results of operations of Monsanto with those of Plant
Breeding International, DEKALB, and certain Cargill operations as if these
acquisitions had occurred at the beginning of each period presented:

<TABLE>
<CAPTION>
1998 1997
------ ------
(IN MILLIONS)
<S> <C> <C>
Sales......................................................... $5,146 $4,367
Income (loss) from operations................................. 181 (217)
</TABLE>

The pro forma results give effect to certain purchase accounting
adjustments, including additional amortization expense from goodwill and other
identified intangible assets, and increased interest expense and additional
shares outstanding related to debt and common stock issued to finance the
acquisitions. Pro forma income from operations for 1998 excludes unusual
aftertax charges of $371 million, primarily for the write-offs of in-process
R&D related to these acquisitions of $351 million, and $20 million for the
cancellation of stock options in exchange for cash related to the DEKALB
acquisition. These charges were excluded because of their nonrecurring nature.

This pro forma financial information is presented for comparative purposes
only. It is not necessarily indicative of the operating results that actually
would have occurred had the acquisitions occurred on the earliest day of the
periods presented. In addition, these results are not intended to be a
projection of future results. Pro forma income from operations for 1998
includes aftertax restructuring and special charges of $239 million. Pro forma
loss from operations for 1997 includes aftertax unusual charges of $404 million
related to in-process R&D.

NOTE 5: RESTRUCTURING AND UNUSUAL ITEMS

In 1999, Monsanto Ag recorded a net pretax charge associated with
restructuring and other unusual items of $101 million ($81 million aftertax)
resulting from the failed merger between Monsanto Ag and Delta and Pine Land,
combined with costs associated with the accelerated integration of agricultural
chemical and seed operations. These charges were net of the reversal of
restructuring liabilities established in 1998 and the gain on the sale of
Stoneville Pedigreed Seed Company. The 1999 net unusual items were recorded in
the Statement of Combined Income (Loss) in the following categories:

<TABLE>
<CAPTION>
UNUSUAL RESTRUCTURING
ITEMS REVERSALS TOTAL
------- ------------- -----
(IN MILLIONS)
<S> <C> <C> <C>
Cost of goods sold.............................. $ (20) $ -- $(20)
Amortization and adjustments of goodwill........ (8) -- (8)
Restructuring and other unusual items........... (33) 11 (22)
Other (expense) income--net..................... (51) -- (51)
----- ----- ----
Income (loss) before income taxes............... (112) 11 (101)
Income tax provision (benefit).................. 24 (4) 20
----- ----- ----
NET INCOME (LOSS) .............................. $(88) $ 7 $(81)
===== ===== ====
</TABLE>

During 1999, Monsanto Ag recorded in "Other (expense) income--net" a one-
time pretax charge of $85 million equal to the amount of a termination fee and
other expenses associated with the failed merger between Monsanto Ag and Delta
and Pine Land. Monsanto Ag also recorded a

F-22
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

pretax charge of $61 million principally associated with the continued focus on
improving operating efficiency through accelerated integration of its
agricultural and seed operations ("the accelerated integration plan"). The
charge of $61 million was comprised of facility shutdown charges of $39
million, workforce reduction costs of $12 million, and asset impairments of $10
million, and was recorded in the Statement of Combined Income (Loss) as cost of
goods sold of $20 million, amortization of intangible assets of $8 million and
restructuring expense of $33 million. The affected employees are entitled to
receive severance benefits pursuant to established severance policies or by
governmentally mandated labor regulations.

The facility shutdown charges included $14 million for contractual research
and other commitments, $9 million for intangible assets, $8 million for
inventories, $6 million for leasehold termination costs, and $2 million for
property, plant and equipment write-offs. During 1999, these actions resulted
in cash payments of $2 million for contractual obligations and asset write-offs
of $19 million. Commitments of $18 million resulting from these actions were
reclassified to other liabilities.

The workforce reduction charge reflected involuntary employee separation
costs for 305 employees worldwide and included charges for positions in
administration of $8 million and research and development of $4 million. As of
December 31, 1999, 125 of the planned employee eliminations were completed;
approximately 55 of these employees received cash severance payments totaling
$2 million during 1999, and 70 employees elected deferred payments of $4
million which were paid in January 2000. At December 31, 1999, these deferred
payments were classified in the Statement of Combined Financial Position as
other liabilities. The remaining balance for employee severance related to 180
positions was $6 million at December 31, 1999. These employee reductions were
completed by June 2000.

Offsetting the restructuring and unusual items in 1999 was a pretax gain of
$11 million from the reversal of restructuring reserves established in 1998.
These restructuring reversals were principally required as a result of lower
actual severance and facility shutdown costs than were originally estimated. In
addition, Monsanto Ag recognized a pretax gain of $35 million for the sale of
Stoneville Pedigreed Seed Company and miscellaneous other expense of $1 million
which was recorded in "Other (expense) income--net".

In 1998, Monsanto Ag recorded in-process research and development charges,
net restructuring and other unusual items of $604 million ($504 million
aftertax). The 1998 net restructuring and unusual items were recorded in the
Statement of Combined Income (Loss) in the following categories:

<TABLE>
<CAPTION>
WORK FORCE FACILITY ASSET
REDUCTIONS CLOSURES IMPAIRMENTS OTHER TOTAL
---------- -------- ----------- ------ -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cost of goods sold.......... $-- $ (5) $(43) $ -- $ (48)
Acquired in-process research
and development............ -- -- -- (402) (402)
Amortization and
adjustments of goodwill.... -- (1) (38) -- (39)
Restructuring and other
unusual items.............. (63) (31) -- -- (94)
Other (expense) income--
net........................ -- -- (1) (20) (21)
---- ---- ---- ------ -----
(Loss) before income taxes.. (63) (37) (82) (422) (604)
Income tax benefit.......... 21 12 17 50 100
---- ---- ---- ------ -----
Net (loss)................ $(42) $(25) $(65) $(372) $(504)
==== ==== ==== ====== =====
</TABLE>

F-23
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

In December 1998, the old Monsanto's board of directors approved a plan to
reduce costs and to integrate its acquired seed businesses. The plan included
the closure of certain facilities, reductions in the current workforce and the
sale from its tomato business. The plan provided for the elimination of
approximately 710 jobs, primarily in manufacturing and administrative
functions, by the end of 1999, at a total cost of $69 million. This amount
included workforce reduction costs of $6 million related to 60 positions
originally accrued as part of a restructuring plan approved in 1996. Those
workforce reductions had been delayed principally as a result of a failed
merger of old Monsanto with American Home Products Corporation; old Monsanto
remained committed to accomplishing these workforce reductions and transferred
the remaining accrual to the 1998 plan. The employees affected by the 1998
restructuring plan were entitled to receive severance benefits pursuant to
established severance policies or by governmentally mandated labor regulations.

The plan also included pretax amounts for asset impairments, primarily for
property, plant and equipment, intangible assets and inventories, totaling $82
million. These asset impairments were recorded because of the decision to sell
the tomato business. As a result, the net assets of this business were
classified as assets held for sale and were carried at their net realizable
value at December 31, 1998 based on estimated sale proceeds of approximately
$33 million. This business was sold during the second quarter of 1999. It
produced net income of $11 million in 1998 and a net loss of $5 million in
1997. The aftertax effect of suspending depreciation on assets held for sale
was not material in 1999, 1998 or 1997.

The December 1998 restructuring amounts also included pretax charges of $37
million for the shutdown or rationalization of certain production and
administrative facilities. Rationalization entails the consolidation, shutdown
or movement of facilities to achieve more efficient operations. Approximately
40 facilities, located primarily in the United States, Europe and Latin
America, were impacted by these actions. Charges for these shutdowns included
$17 million for property, plant and equipment, $1 million for intangible
assets, and $4 million for inventories. Leasehold termination costs of $8
million and various facility closure costs of $7 million, principally for
facilities shutdown costs and equipment dismantling are also included in the
shutdown charges. The closure or rationalization of these facilities was
completed by December 31, 1999. In addition, $9 million in facility shutdown
payments were incurred in connection with the 1998 restructuring plan.

Through December 31, 1999, cash payments of $39 million were made to
eliminate approximately 460 positions. Employee severance payments of $8
million in connection with the elimination of 125 positions were deferred and
paid in January 2000. Monsanto Ag also recorded pretax charges of $422 million
relating to its 1998 seed company acquisitions, of which $402 million related
to the write-off of in-process research and development and $20 million related
to the cancellation of DEKALB stock options associated with that acquisition.
For further discussion of these charges, see Note 4.

As of December 31, 1999, the remaining reserve balance for employee
severance related to approximately 45 positions was $10 million. Monsanto Ag
expects these employee reductions to be completed by June 2000. An additional
80 positions originally contemplated in the plan were eliminated through
attrition. Cash payments to complete the 1998 plan will be funded from
operations and are not expected to significantly impact Monsanto Ag's
liquidity.

F-24
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Activity related to the 1999 accelerated integration plan, and the 1998 and
1996 restructuring plans and certain unusual items were as follows:

<TABLE>
<CAPTION>
WORK FORCE FACILITY ASSET
REDUCTIONS CLOSURES IMPAIRMENTS TOTAL
RESTRUCTURING & UNUSUAL ITEMS: ---------- -------- ----------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
January 1, 1997 Reserve Balance......... $ 41 $ 1 $ -- $ 42
Costs charged against reserves.......... (23) (1) -- (24)
---- ----- ----- ----
December 31, 1997 Reserve Balance....... $ 18 $ -- $ -- $ 18
---- ----- ----- ----
Costs charged against reserves.......... (12) -- -- (12)
1998 Restructuring & Unusual Items(1)... 63 37 82 182
Reclassification of reserves to other
balance sheet accounts:
Inventories............................ -- (4) -- (4)
Property............................... -- (17) (44) (61)
Intangible Assets...................... -- (1) (38) (39)
---- ----- ----- ----
December 31, 1998 Reserve Balance....... $ 69 $ 15 $ -- $ 84
---- ----- ----- ----
Addition for accelerated integration
costs.................................. 12 39 10 61
Costs charged against reserves:
1998 Plan.............................. (39) (9) -- (48)
Accelerated integration plan........... (2) (2) -- (4)
Reversal of reserves related to 1998
Plan................................... (12) 1 -- (11)
Reclassification of reserves to other
balance sheet accounts:
1998 Plan--Other Assets................ -- (5) -- (5)
Accelerated integration plan:
Inventories........................... -- (8) -- (8)
Property.............................. -- (2) (10) (12)
Intangible assets..................... -- (9) -- (9)
Other liabilities..................... (4) (18) -- (22)
---- ----- ----- ----
December 31, 1999 Reserve Balance....... $ 24 $ 2 $ -- $ 26
==== ===== ===== ====
</TABLE>
--------
(1) Restructuring reserves recorded in 1998 did not include the charges for
the cancellation of the DEKALB stock options and the write-off of acquired
in-process research and development.

As part of restructuring actions approved prior to 1998, Monsanto Ag
reorganized its worldwide operations, closed a Canadian production facility and
made final payments to complete contractual commitments as part of a United
States production facility shutdown. These actions eliminated approximately 130
positions and were completed by December 31, 1998.

NOTE 6: INVENTORIES

Components of inventories were:

<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Finished goods............................................... $ 705 $ 867
Goods in process............................................. 412 252
Raw materials and supplies................................... 346 316
------ ------
Inventories, at FIFO cost.................................... 1,463 1,435
Excess of FIFO over LIFO cost................................ (23) (35)
------ ------
TOTAL........................................................ $1,440 $1,400
====== ======
</TABLE>

F-25
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Commodity futures and options contracts are used to hedge the price
volatility of certain commodities, primarily soybeans and corn. This hedging
activity is intended to manage the price paid to production growers for corn
and soybean seeds. Gains and losses on contracts that are designated and
effective as hedges are deferred in inventory and are included in cost of goods
sold when the underlying seed products are sold. As of December 31, 1999,
futures contracts to purchase $106 million of corn and soybeans were
specifically attributable to Monsanto Ag. The excess of FIFO over LIFO cost
decreased $12 million due to reduced inventory levels and lower average cost of
inventory which favorably affected 1999 net income by $7 million.

NOTE 7: INVESTMENTS

As of December 31, Monsanto Ag had investments in securities as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN
MILLIONS)
<S> <C> <C>

Aggregate fair value............................................... $54 $66
Gross unrealized holding:
Gains............................................................ 22 31
Losses........................................................... 2 --
</TABLE>

NOTE 8: INCOME TAXES

The components of income (loss) before income taxes were:

<TABLE>
<CAPTION>
1999 1998 1997
---- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
United States............................................. $198 $ 44 $(171)
Outside United States..................................... 65 (104) 172
---- ----- -----
TOTAL..................................................... $263 $ (60) $ 1
==== ===== =====
</TABLE>

The components of income tax provision (benefit) were:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Current:
U.S. federal............................................. $ 14 $154 $ 92
U.S. state............................................... 4 16 9
Outside United States.................................... 53 60 78
---- ---- ----
71 230 179
---- ---- ----
Deferred:
U.S. federal............................................. 74 (68) (167)
U.S. state............................................... 7 (7) (17)
Outside United States.................................... (39) (90) (25)
---- ---- ----
42 (165) (209)
---- ---- ----
TOTAL...................................................... $113 $ 65 $(30)
==== ==== ====
</TABLE>

F-26
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Factors causing Monsanto Ag's income taxes to differ from the U.S. federal
statutory rate were:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
U.S. federal statutory rate............................... $ 92 $(21) $--
U.S. export earnings...................................... (20) (24) (22)
U.S. R&D tax credit....................................... (6) (5) --
Higher (lower) ex-U.S. rates.............................. (8) 8 (9)
Nondeductible goodwill.................................... 46 24 4
Acquired in-process R&D................................... -- 71 7
Equity loss (income)...................................... -- 9 (2)
State income taxes........................................ 7 6 (5)
Other..................................................... 2 (3) (3)
---- ---- ----
INCOME TAXES.............................................. $113 $ 65 $(30)
==== ==== ====
</TABLE>

Deferred income tax balances were related to:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN
MILLIONS)
<S> <C> <C>
Employee fringe benefits......................................... $ 13 $ 75
Restructuring reserves........................................... 10 29
Inventory........................................................ 14 3
Net operating loss and tax credit carryforwards.................. 305 133
Intangibles...................................................... 157 179
Other............................................................ 106 135
Valuation allowance.............................................. (62) --
---- ----
TOTAL DEFERRED TAX ASSETS........................................ $543 $554
==== ====
Property......................................................... $203 $163
Other............................................................ 12 21
---- ----
TOTAL DEFERRED TAX LIABILITIES................................... $215 $184
==== ====
NET DEFERRED TAX ASSETS.......................................... $328 $370
==== ====
</TABLE>

A $62 million valuation allowance was established in connection with
operations in 1999 in Brazil. Monsanto Ag's management concluded that it was
more likely than not that Monsanto Ag would not be able to realize a portion
of deferred tax assets in Brazil. This valuation allowance had no effect on
the 1999 effective tax rate because it was recorded in the parent company's
net investment due to the fact that the losses related primarily to the effect
of Brazil's currency devaluation on an intercompany loan not expected to be
repaid in the foreseeable future. As of December 31, 1999, old Monsanto had
available approximately $287 million in net operating loss carryforwards in
the United States which were specifically attributable to Monsanto Ag. These
expire from 2017 through 2019. As of December 31, 1999, old Monsanto also had
available approximately $453 million in net operating loss carryforwards
outside the United States specifically attributable to Monsanto Ag, the
majority of which do not expire.

Income taxes and remittance taxes have not been recorded on the
undistributed earnings of foreign operations of Monsanto Ag, either because
any taxes on dividends would be offset substantially by foreign tax credits or
because Monsanto Ag intends to reinvest those earnings indefinitely. It is not
practical to estimate the income tax liability that might be incurred if such
earnings were remitted to the United States.

F-27
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The purpose of the above information is to show Monsanto Ag's current and
deferred tax amounts as if it had been a separate company for the years 1999,
1998 and 1997. Monsanto Ag did not make any cash payments for taxes in these
years since Monsanto Ag's operating results were included in the Pharmacia
consolidated federal and state tax returns for those years (see Note 2).

NOTE 9: DEBT AND OTHER CREDIT ARRANGEMENTS

The historical financial statements include the portion of old Monsanto's
total debt specifically attributable to Monsanto Ag. The amounts included in
Monsanto Ag's financial statements reflect borrowings of approximately $5.4
billion which were used to finance various seed business acquisitions during
1997 and 1998 (see Note 4). Each of the acquisitions was originally financed by
borrowings of old Monsanto. Since the time the debt was incurred, approximately
$991 million has been repaid by old Monsanto, primarily through the use of net
proceeds received from the issuance of common stock in the fourth quarter of
1998 ($944 million).

Short-term debt specifically attributable to Monsanto Ag at December 31
was:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN
MILLIONS)
<S> <C> <C>
Notes payable to banks......................................... $ 21 $276
Bank overdrafts................................................ 20 1
Current portion of long-term debt.............................. 48 45
---- ----
Total........................................................ $ 89 $322
==== ====
Weighted average interest rates of notes payable as of December
31:
Banks (1).................................................... 12.8% 8.3%
</TABLE>
--------
(1) Includes the effect of notes in certain countries which have interest rates
which are higher than those in the United States.

Aggregate short-term loan facilities specifically attributable to Monsanto
Ag as described above were $22 million at December 31, 1999, under which loans
totaling $21 million were outstanding as of that date. Interest on these loans
is related to various bank rates. A $1.0 billion credit facility, expiring in
2001, allowed old Monsanto to request that lenders increase their commitments
up to an aggregate of $1.6 billion, and was also specifically attributable to
Monsanto Ag. In August 1999, old Monsanto entered into a $1.5 billion, 364-day
credit facility. There were no borrowings by old Monsanto or Monsanto Ag under
these credit facilities as of December 31, 1999. These facilities are used to
support the issuance of commercial paper. Covenants under these credit
facilities restrict maximum borrowings.

F-28
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Long-term debt (exclusive of current maturities) specifically attributable
to Monsanto Ag at December 31 was:

<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Commercial paper.............................................. $ 605 $ 668
5 3/8% notes due 2001......................................... 500 499
5.95% junior subordinated deferrable debentures due 2003...... 700 700
Variable-rate medium-term notes due 2003...................... 480 528
5.75% notes due 2005.......................................... 599 598
5 7/8% notes due 2008......................................... 199 199
6.5% debentures due 2018...................................... 498 498
6.6% debentures due 2028...................................... 697 698
------ ------
TOTAL......................................................... $4,278 $4,388
====== ======
</TABLE>

Maturities and sinking-fund requirements on long-term debt specifically
attributable to Monsanto Ag as described above, excluding commercial paper, are
$48 million in 2000, $558 million in 2001, $56 million in 2002, $1,065 million
in 2003, and zero in 2004. The weighted-average maturity of long-term debt as
of December 31, 1999, was approximately 10 years. Commercial paper balances of
$605 million and $668 million as of December 31, 1999 and 1998, respectively,
were classified as long-term debt because old Monsanto had the ability and
intent to renew these obligations beyond 2000.

The estimated fair value of long-term debt specifically attributable to
Monsanto Ag at December 31 was:

<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Long-term debt............................... $4,278 $3,951 $4,388 $4,590
</TABLE>

All interest expense on debt specifically attributable to Monsanto Ag is
included in the Statement of Combined Income (Loss). However, no cash payments
for interest were made by Monsanto Ag during 1999, 1998 or 1997 due to the fact
that all interest payments during these years were made by old Monsanto.

Interest expense for Monsanto Ag was:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
INTEREST EXPENSE:
Total interest cost........................................ $291 $130 $57
Less capitalized interest.................................. (23) (9) (9)
---- ---- ---
Net interest expense....................................... $268 $121 $48
==== ==== ===
</TABLE>

F-29
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10: POSTRETIREMENT BENEFITS--PENSIONS

Monsanto Ag's employees participate in certain of Pharmacia's
noncontributory pension plans. No detailed information regarding the funded
status of the plans and components of net periodic pension cost, as it relates
solely to Monsanto Ag, is available. Accordingly, the corresponding net pension
asset or liability has not been included in Monsanto Ag's Statement of Combined
Financial Position. Total pension cost related to Monsanto Ag employees in
1999, 1998 and 1997 and included in the Combined Statement of Income (Loss) was
$49 million, $48 million and $29 million, respectively. The information that
follows relates to the old Monsanto pension plans in which Monsanto Ag
employees participate. The components of pension cost for these plans were:

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost for benefits earned during the year........ $ 65 $ 58 $ 61
Interest cost on benefit obligation..................... 171 170 148
Assumed return on plan assets........................... (200) (156) (167)
Amortization of unrecognized net loss................... 49 22 13
----- ----- -----
TOTAL................................................... $ 85 $ 94 $ 55
===== ===== =====
</TABLE>

Pension benefits are based on an employee's years of service and/or
compensation level. Pension plans were funded in accordance with old Monsanto's
long-range projections of the plans' financial conditions. These projections
took into account benefits earned and expected to be earned, anticipated
returns on pension plan assets, and income tax and other regulations.

Pension costs were determined through the use of the preceding year-end
rate assumptions. The following assumptions, calculated on a weighted average
basis, were used as of December 31 for the principal plans in which Monsanto Ag
employees participate:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Discount rate............................................ 7.75% 6.75% 7.00%
Assumed long-term rate of return on plan assets.......... 9.50% 9.50% 9.50%
Annual rates of salary increase (for plans that base
benefits on final compensation level)................... 4.50% 4.00% 4.00%
</TABLE>

F-30
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The funded status of old Monsanto's pension plans, in which Monsanto Ag
employees participate at year-end, was:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year...................... $2,655 $2,483
Service cost................................................. 65 58
Interest cost................................................ 171 170
Plan Participants' Contributions............................. 1 1
Amendments................................................... 6 10
Actuarial (gain)/loss........................................ (143) 146
Acquisitions/divestitures.................................... -- 9
Settlements.................................................. 15 --
Benefits paid................................................ (248) (222)
------ ------
Benefit obligation at end of year............................ 2,522 2,655
------ ------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year............... 2,146 2,029
Actual return on plan assets................................. 411 310
Employer contribution........................................ 24 17
Plan Participants' Contributions............................. 3 3
Acquisitions/divestitures.................................... -- 9
Settlements.................................................. (4) --
Fair value of benefits paid.................................. (248) (222)
------ ------
Plan assets at end of year................................... 2,332 2,146
------ ------
Unfunded status.............................................. 190 509
Unrecognized initial net gain................................ 9 15
Unrecognized prior service cost.............................. (82) (94)
Unrecognized subsequent gain (loss).......................... 371 (22)
------ ------
Accrued net pension liability................................ $ 488 $ 408
====== ======
</TABLE>
The projected benefit obligation, the accumulated benefit obligation (ABO)
and fair value of plan assets for pension plans with ABOs in excess of plan
assets for old Monsanto were $319 million, $315 million and zero, respectively,
as of December 31, 1999; and $2.1 billion, and $2.0 billion, and $2.0 billion,
respectively, as of December 31, 1998. Plan assets consist principally of
common stocks and U.S. government and corporate obligations.

NOTE 11: POSTRETIREMENT BENEFITS--HEALTHCARE AND OTHER

Monsanto Ag employees participate in certain of Pharmacia's benefit
programs which provide certain health care and life insurance benefits for
retired employees. No detailed information regarding the components of the
total cost and obligations, as it relates solely to Monsanto Ag, is available.
Postretirement benefit costs related to Monsanto Ag employees in 1999, 1998 and
1997 were $23 million, $22 million and $20 million, respectively. The
information that follows related to old Monsanto's benefit programs in which
Monsanto Ag employees participate. Substantially all regular, full-time U.S.
employees and certain employees in other countries may become eligible for
these benefits if they reach retirement age while employed by old Monsanto or
Monsanto Ag. These post-retirement benefits are unfunded and are generally
based on the employees' years of service and/or compensation level. The costs
of postretirement benefits are accrued by the date the employees become
eligible for the benefits.

F-31
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

As of December 31, the components of the cost of old Monsanto's
postretirement benefits in which Monsanto Ag employees participate, principally
health care and life insurance, were:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost for benefits earned during the year............ $16 $13 $10
Interest cost on benefit obligation......................... 27 27 27
Amortization of unrecognized net (gain) loss................ 15 (1) (3)
--- --- ---
Total..................................................... $58 $39 $34
=== === ===
</TABLE>

Postretirement costs were determined by using the preceding year-end rate
assumptions. The following assumptions, calculated on a weighted average basis,
were used as of December 31 for the principal plans:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.75% 6.75% 7.00%
Initial trend rate for health care costs................... 5.25% 5.75% 7.00%
Ultimate trend rate for health care costs.................. 5.25% 4.75% 5.00%
</TABLE>

A one percent increase in the assumed trend rate for health care costs
would have increased the cost of 1999 postretirement health care benefits for
these plans by $1 million and the accumulated postretirement benefit obligation
by $9 million as of December 31, 1999. A one percent decrease in the assumed
trend rate for health care costs would have decreased the cost of 1999
postretirement health care benefits for these plans sponsored by old Monsanto
by $1 million and the accumulated postretirement benefit obligation by $11
million as of December 31, 1999.

As of December 31, the status of old Monsanto's postretirement health care
and life insurance benefit plans and of its employee disability benefit plans
in which Monsanto Ag employees participate was:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN
MILLIONS)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.......................... $403 $383
Service cost..................................................... 16 13
Interest cost.................................................... 27 27
Actuarial (gain)/loss............................................ (10) 6
Benefits paid.................................................... (16) (26)
---- ----
Benefit obligation at end of year................................ 420 403
---- ----
Unfunded status.................................................. 420 403
Unrecognized prior service cost.................................. 6 10
Unrecognized subsequent (loss)................................... (3) (31)
---- ----
Accrued postretirement liability................................. $423 $382
==== ====
</TABLE>

NOTE 12: EMPLOYEE SAVINGS PLANS

The information that follows relates to old Monsanto's Employee Stock
Ownership Plan (the "ESOP"), in which Monsanto Ag employees participate. The
ESOP held 14.7 million shares of old Monsanto's common stock as of December 31,
1999. At its inception, the ESOP acquired shares by using proceeds from the
issuance of long-term notes and debentures guaranteed by old Monsanto, and a
loan from old Monsanto. Dividends on the common stock owned by the ESOP are
used to

F-32
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

repay the ESOP borrowings, which were $100 million as of December 31, 1999. A
portion of the ESOP shares is allocated each year to employee savings accounts
as matching contributions. In 1999, 1,302,590 shares were allocated to
participants under the plan. An additional 634,548 shares were released in 1999
awaiting allocation to participants, leaving 7.3 million unallocated shares as
of December 31, 1999. Compensation expense is equal to the cost of the shares
allocated to participants, less cash dividends paid on the shares held by the
ESOP. Compensation expense related to Monsanto Ag employees and included in the
Combined Statement of Income (Loss) in 1999, 1998 and 1997 was $11 million, $5
million and $3 million, respectively. The following information relates to the
old Monsanto ESOP plan in which the Monsanto Ag employees participate for the
year ended December 31.

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Total ESOP expense............................................ $31 $21 $18
Interest portion of total ESOP expense........................ 9 10 12
Cash contribution............................................. 37 14 6
Dividends paid on ESOP shares held............................ 2 2 8
</TABLE>

NOTE 13: STOCK OPTION PLANS

The following information, except pro forma net income (loss), relates to
the old Monsanto stock option plans in which eligible Monsanto Ag employees
participate. Old Monsanto granted stock options to Monsanto Ag employees under
two fixed plans. Under the Monsanto Management Incentive Plan of 1996, key
officers and management employees may be granted stock-based awards, including
stock options, of up to 87.6 million shares of common stock. Under this plan,
the exercise price of each option equals not less than the market price of the
stock on the date of grant. An option's maximum term is 10 years. Options are
granted at the discretion of the people committee of the Board of Directors or
its delegate. Options generally vest upon the achievement of business
performance targets or the ninth anniversary of the option grant date,
whichever comes first. Certain options granted to senior management vest upon
the attainment of pre-established prices within specified time periods. Under
the Monsanto Shared Success Stock Option Plan, most regular full-time and
regular part-time employees of old Monsanto were granted options on 330 shares
in 1997 and 500 shares in 1998, and most new regular full-time and regular
part-time employees were granted options on 300 shares in 1999. The maximum
number of shares for which stock options may be granted under this plan is 27.3
million. The exercise price of each option is determined by the Committee and
generally equals the market price of the stock on the date of grant. An
option's maximum term is 10 years.

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation,"
Monsanto Ag has elected to follow the guidance of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," for measurement and
recognition of stock-based transactions with employees. Accordingly, no
compensation cost has been recognized in relation to the old Monsanto option
plans in which Monsanto Ag employees participate. Had the determination of
compensation cost for these plans been based on the fair value at the grant
dates for awards under these plans for employees of Monsanto Ag, consistent
with the method of SFAS No. 123, Monsanto Ag's net income (loss) would have
been adjusted to the pro forma amounts indicated below for the year ended
December 31:

<TABLE>
<CAPTION>
1999 1998 1997
---- ----- ----
(IN MILLIONS)
<S> <C> <C> <C>
Net income (loss):
As reported............................................... $150 $(125) $31
Pro forma................................................. 113 (164) 16
</TABLE>

F-33
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The pro forma compensation expense may not be representative of
compensation expense that will be incurred on a pro forma basis in future
years.

In computing the pro forma compensation expense, the fair value of each
option grant is estimated on the date of grant by using the Black-Scholes
option-pricing model. The weighted-average fair values of options granted to
employees of Monsanto Ag during 1999, 1998, and 1997 were $13.99, $16.94 and
$9.57, respectively. The following weighted-average assumptions were used for
grants:

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Expected dividend yield.............................. 0.34% 0.25% 0.29%
Expected volatility.................................. 39.5% 30.0% 27.0%
Risk-free interest rates............................. 4.4% 5.6% 6.4%
Expected option lives (years)........................ 4.1 4.0 4.3
</TABLE>

NOTE 14: COMMITMENTS AND CONTINGENCIES

Commitments, principally in connection with uncompleted additions to
property, were approximately $11 million as of December 31, 1999. Old Monsanto
was contingently liable as a guarantor for bank loans and for miscellaneous
receivables directly attributable to Monsanto Ag totaling approximately $56
million as of December 31, 1999, and $81 million as of December 31, 1998.
Future minimum payments under noncancelable operating leases, unconditional
inventory purchases, and R&D alliances are $76 million for 2000, $48 million
for 2001, $45 million for 2002, $16 million for 2003, $14 million for 2004 and
$35 million thereafter. Rent expense was $72 million, $54 million and $62
million for the years ended December 31, 1999, 1998 and 1997, respectively. The
more significant concentrations in Monsanto Ag's trade receivables at year-end
were:

<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
U.S. agricultural product distributors........................ $ 709 $ 514
Customers in Latin American Southern Cone Countries........... 807 565
European agricultural product distributors.................... 328 305
Customers in Canada........................................... 86 59
Customers in the former Soviet Union.......................... 74 97
Customers in Southeast Asia................................... 56 41
</TABLE>

Management of Monsanto Ag does not anticipate losses on its trade
receivables in excess of established allowances.

The patent protecting glyphosate, the active ingredient in Roundup, expires
in the United States on September 20, 2000. Sales of the family of Roundup
herbicides protected by this patent in the United States, excluding our Roundup
lawn and garden products, represented approximately 20% of total company sales
in 1999.

Monsanto Ag's Statement of Combined Financial Position includes accrued
liabilities of $7 million as of December 31, 1999 and 1998, for the remediation
of identified waste disposal sites. Monsanto Ag's future remediation expenses
for waste disposal sites are affected by a number of uncertainties. These
uncertainties include, but are not limited to, the method and extent of

F-34
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

remediation, the percentage of material attributable to Monsanto Ag at the
sites relative to that attributable to other parties, and the financial
capabilities of the other potentially responsible parties. Monsanto Ag does not
expect the resolution of such uncertainties to have a material adverse effect
on its financial position, profitability or liquidity.

On March 20, 1998, a jury verdict was returned against old Monsanto in a
lawsuit filed in the California Superior Court. The lawsuit was brought by
Mycogen Corp., Agrigenetics Inc. and Mycogen Plant Sciences Inc. claiming that
old Monsanto delayed providing access to certain gene technology under a 1989
agreement with Lubrizol Genetics Inc., a company which Mycogen Corp.
subsequently purchased. The jury awarded $174.9 million in future damages. This
jury award was overturned on appeal by the California Court of Appeals for the
Fourth Judicial District. Mycogen Corp.'s subsequent motion for rehearing has
been denied and, on August 7, 2000, Mycogen Corp. filed a petition with the
California Supreme Court requesting that further appeal to that court should be
granted. Monsanto Ag will oppose the discretionary appeal sought by Mycogen
Corp. No provision had been made in Monsanto Ag's combined financial statements
with respect to this verdict.

F-35
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 15: SEGMENT AND GEOGRAPHIC DATA

Monsanto Ag manages its business in two segments: Agricultural
Productivity, and Seeds and Genomics. The Agricultural Productivity segment
consists of the crop protection products, animal agriculture and environmental
technologies businesses. The Seeds and Genomics segment is comprised of global
seeds and related traits businesses and genetic technology platforms. Sales
between segments were not significant.

<TABLE>
<CAPTION>
AGRICULTURAL SEEDS AND
PRODUCTIVITY GENOMICS TOTAL
------------ --------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Net Sales
1999........................................ $3,586 $1,662 $ 5,248
1998........................................ 3,500 948 4,448
1997........................................ 3,110 563 3,673
Earnings (Loss) before interest and taxes (1)
1999........................................ $ 897 $ (391) $ 506
1998........................................ 869 (835) 34
1997........................................ 888 (867) 21
Depreciation and amortization expense
1999........................................ $ 185 $ 362 $ 547
1998........................................ 175 193 368
1997........................................ 167 78 245
Total Assets
1999........................................ $5,340 $5,761 $11,101
1998........................................ 4,508 6,383 10,891
Capital Expenditures
1999........................................ $ 448 $ 184 $ 632
1998........................................ 344 88 432
</TABLE>

(1) A reconciliation of earnings before interest and taxes to net income
(loss) for each year follows.

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- ----
(IN MILLIONS)
<S> <C> <C> <C>
Earnings before interest and taxes....................... $ 506 $ 34 $21
Interest expense--net.................................... (243) (94) (20)
Income tax (provision) benefit........................... (113) (65) 30
----- ----- ---
Net Income (Loss)........................................ $ 150 $(125) $31
===== ===== ===
</TABLE>

Although inflation is relatively low in most of Monsanto Ag's major
markets, it continues to affect operating results. To mitigate the effect of
inflation, Monsanto Ag has implemented measures to control costs, to improve
productivity, to manage new fixed and working capital, and to raise selling
prices when government regulations and competitive conditions permit. In
addition, the current costs of replacing certain assets are estimated to be
greater than the historical costs presented in the financial statements.
Accordingly, the depreciation expense reported in the Statement of Combined
Income (Loss) would be greater if it were stated on a current-cost basis.

F-36
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Net sales and long-lived assets are attributed to geographic areas based
upon the location of each of Monsanto Ag's legal entities. For example, a sale
from the United States to a customer in Latin America is reported as a U.S.
export sale.

<TABLE>
<CAPTION>
U.S. EX-U.S. TOTAL
------ ------- ------
(IN MILLIONS)
<S> <C> <C> <C>
Net Sales
1999................................................. $2,895 $2,353 $5,248
1998................................................. 2,515 1,933 4,448
1997................................................. 1,988 1,685 3,673
Long-Lived Assets
1999................................................. $5,062 $1,593 $6,655
1998................................................. 5,043 1,763 6,806
</TABLE>

NOTE 16: OTHER (EXPENSE) INCOME--NET

The significant components of Other (Expense) Income--net were:

<TABLE>
<CAPTION>
1999 1998 1997
----- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Equity affiliate (expense) income......................... $ (18) $(31) $ 6
Gain (loss) on sale of businesses and assets.............. 37 (1) 24
Failed merger costs....................................... (85) -- --
Foreign currency losses................................... (25) (15) (33)
Royalty income............................................ 11 12 4
Other miscellaneous (expense) income...................... (24) 14 7
----- ---- ----
Other (expense) income.................................... $(104) $(21) $ 8
===== ==== ====
</TABLE>

Equity affiliate (expense) income includes investments in a number of
affiliates that are accounted for using the equity method. The most significant
of these in 1999 was equity expense of $14.6 million from Renessen LLC, a 50/50
joint venture between Monsanto Ag and Cargill Incorporated. Equity affiliate
expense in 1998 included $20 million related to the cancellation of DEKALB
Genetics Corp. stock options associated with the acquisition of the remaining
60% interest in DEKALB that Monsanto Ag did not previously own. Equity
affiliate income in 1997 included $7 million from the 40% interest in DEKALB
that Monsanto Ag owned at that time.

F-37
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 17: QUARTERLY DATA

<TABLE>
<CAPTION>
QUARTERLY DATA (UNAUDITED)
---------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net Sales
1999.............................. $1,483 $1,653 $ 983 $1,129 $5,248
1998.............................. 1,172 1,490 916 870 4,448
Gross Profit
1999.............................. $ 784 $ 969 $ 426 $ 513 $2,692
1998.............................. 662 845 465 327 2,299
Income (Loss) from Operations
1999.............................. $ 289 $ 458 $(141) $ 4 $ 610
1998.............................. 284 429 (129) (529) 55
Net Income (Loss)
1999.............................. $ 126 $ 243 $(127) $ (92) $ 150
1998.............................. 193 288 (174) (432) (125)
</TABLE>

Historically, Monsanto Ag has generated the majority of its sales during
the first half of the year, primarily due to the timing of the planting and
growing season. As a result, in each of the last two years all of its operating
income was generated in the first half of the year and it incurred operating
losses in the second half of the year.

Net Income for the third quarter of 1999 included a net aftertax charge of
$44 million primarily related to the accelerated integration of agricultural
and seed operations. The fourth quarter of 1999 includes an aftertax charge of
$53 million for a termination fee and other expenses associated with the failed
merger with Delta and Pine Land. Also included in the fourth quarter of 1999
was an aftertax gain of $7 million principally resulting from the reversal of
restructuring liabilities established in 1998. These restructuring liability
reversals were required as a result of lower actual severance and facility
shutdown costs incurred than were originally estimated. In addition, the fourth
quarter included an aftertax gain of $7 million for the sale of the Stoneville
Pedigreed Seed Company.

Net Income for the third quarter of 1998 included an aftertax charge of
$188 million for the write-off of in-process research and development for the
acquisition of Plant Breeding International. Net Income for the fourth quarter
of 1998 included an after-tax charge of $316 million for restructuring, write-
off of in-process R&D and cancellation of DEKALB stock options. The write-off
of in-process R&D in the fourth quarter of 1998 was for the acquisition of
DEKALB and certain international seed operations of Cargill, net of a revision
of the amount of in-process R&D written off in the third quarter related to the
acquisition of Plant Breeding International made in accordance with the SEC's
clarified guidance at that time on in-process R&D.

NOTE 18: MARKETING AND ADVERTISING COSTS

Marketing and advertising expenses were:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Marketing and Advertising expenses......................... $96 $71 $48
</TABLE>

F-38
<PAGE>

MONSANTO COMPANY AGRICULTURAL BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19: SUBSEQUENT EVENTS

On February 9, 2000, a newly formed, wholly-owned subsidiary of Pharmacia
Corporation was incorporated in Delaware as the successor to Monsanto Ag. The
new subsidiary was re-named Monsanto Company effective March 31, 2000. This
"new" Monsanto Company was established for the purpose of receiving the assets
and liabilities of Monsanto Ag that are expected to be contributed to it.
Additionally, the merger transaction discussed in Note 1 between old Monsanto
Company and Pharmacia & Upjohn, Inc. became effective on March 31, 2000.

F-39
<PAGE>

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND SHAREOWNER OF MONSANTO COMPANY:

We have audited the accompanying statement of financial position of Monsanto
Company (formerly Monsanto Ag Company) as of February 9, 2000. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such statement of financial position presents fairly, in all
material respects, the financial position of Monsanto Company at February 9,
2000, in conformity with accounting principles generally accepted in the United
States of America.

/s/ Deloitte & Touche LLP

St. Louis, Missouri
September 1, 2000

F-40
<PAGE>

MONSANTO COMPANY

STATEMENT OF FINANCIAL POSITION

<TABLE>
<CAPTION>
JUNE 30, FEBRUARY 9,
2000 2000
----------- -----------
(UNAUDITED) (DATE OF
INCEPTION)
<S> <C> <C>
SHAREOWNER'S EQUITY
Capital Stock (issued and outstanding: 1,000 shares,
par value $1.00)..................................... $1,000 $1,000
Receivable from Pharmacia Corporation................. (1,000) (1,000)
------ ------
Total............................................... $ -- $ --
====== ======
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-41
<PAGE>

NOTES TO STATEMENT OF FINANCIAL POSITION

1. ORGANIZATION AND PURPOSE--Monsanto Company (the "Company"), formerly
Monsanto Ag Company, was incorporated in Delaware on February 9, 2000 as a
wholly owned subsidiary of Pharmacia Corporation for the purpose of
receiving the assets and liabilities of Pharmacia Corporation's Agricultural
Business that are expected to be contributed to it. The Company has
undertaken no operations since its formation; accordingly no statements of
income, cash flows, comprehensive income or changes in shareowner's equity
are presented.

2. SHAREOWNER'S EQUITY--The Company is authorized to issue 1,000 shares of
$1.00 par value capital stock. The Company has issued 1,000 shares to
Pharmacia Corporation; and has recorded a receivable from Pharmacia
Corporation of $1,000 related to this purchase. Under the Company's bylaws,
while Pharmacia owns a majority of the Company's common stock, a
supermajority approval by at least 80% of the directors is required with
respect to specified matters with significant financial or strategic
consequences. The Company has approved the Monsanto 2000 Management
Incentive Plan, pursuant to which the people committee of the Board of
Directors or its delegate may grant awards of non-qualified and incentive
stock options, stock appreciation rights, restricted stock and unrestricted
stock to any of our directors and employees and to employees of Pharmacia or
any affiliates of either company. The total number of shares that may be
delivered pursuant to awards under the Plan may not exceed the number that
equals 8.85% of the common shares outstanding immediately after the initial
public offering. The term of stock options granted under the Plan may not
exceed ten years and each option granted may be exercised for a period as
specified by the people committee. Under the Plan, the exercise price of any
option must be no less than the fair market value, as defined in the Plan,
of the common stock on the grant date. The terms of the other stock-based
awards will be set by the people committee or its delegate.

3. SUBSEQUENT EVENTS--On March 31, 2000, a wholly owned subsidiary of Monsanto
Company merged into Pharmacia & Upjohn, Inc. and the former Monsanto Company
changed its name to Pharmacia Corporation. On September 1, 2000, the assets
and liabilities of Pharmacia Corporation's Agricultural Business were
transferred to the Company in accordance with the terms of agreements
between the Company and Pharmacia Corporation. The material terms of these
agreements include asset transfers and liability assumptions, corporate tax
sharing, intellectual property transfer, employee benefits and compensation
allocation, and services arrangements.

F-42
<PAGE>

[INSIDE BACK COVER PAGE]

[Graphic of child eating corn]

MONSANTO PRODUCTS CREATE VALUE FOR
GROWERS, PROCESSORS AND CONSUMERS AROUND THE WORLD.

KEY MONSANTO PRODUCTS

[Graphic of bag of Roundup Ultra]

ROUNDUP HERBICIDE

[Graphic of cotton]

BOLLGARD INSECT-PROTECTED COTTON

[Graphic of bags of Roundup Ready products]

ROUNDUP READY CANOLA
ROUNDUP READY CORN
ROUNDUP READY COTTON
ROUNDUP READY SOYBEANS

[Graphic of bag of YieldGard corn]

YIELDGARD INSECT-PROTECTED CORN
<PAGE>

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

No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
Cautionary Note Regarding Forward-Looking Information.................... 21
Merger and Reorganization Transactions Occurring Prior to This Offering.. 22
Use of Proceeds.......................................................... 24
Dividend Policy.......................................................... 24
Capitalization........................................................... 25
Pro Forma Condensed Combined Financial Statements........................ 26
Selected Financial Data.................................................. 33
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 35
Business................................................................. 57
Management............................................................... 85
Arrangements Between Monsanto and Pharmacia.............................. 100
Principal Stockholder.................................................... 112
Description of Capital Stock............................................. 113
Shares Eligible for Future Sale.......................................... 116
Underwriting............................................................. 117
Legal Matters............................................................ 119
Experts.................................................................. 119
Where You Can Find More Information...................................... 119
Index to Financial Statements............................................ F-1
</TABLE>

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

Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.

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

35,000,000 Shares

MONSANTO COMPANY

Common Stock

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

[MONSANTO LOGO]

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

GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.

Representatives of the Underwriters

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
common stock being registered, all of which will be paid by Pharmacia
Corporation:

<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC registration fee.......................................... $ 265,650
NASD filing fee............................................... $ 30,500
New York Stock Exchange listing fee........................... $ 500,000
Printing expenses............................................. $ 850,000
Legal fees and expenses....................................... $5,000,000
Accounting fees and expenses.................................. $1,600,000
Blue sky fees and expenses.................................... $ 5,000
Transfer agent and registrar fees and expenses................ $ 3,600
Miscellaneous................................................. $ 245,250
----------
Total....................................................... $8,500,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.

A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such

II-1
<PAGE>

action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper.

As permitted by the DGCL, the Registrant has included in its certificate of
incorporation a provision to eliminate the personal liability of its directors
for monetary damages for breach of their fiduciary duties as directors, subject
to certain exceptions. In addition, the Registrant's certificate of
incorporation and bylaws provide that the Registrant is required to indemnify
its officers and directors under certain circumstances, including those
circumstances in which indemnification would otherwise be discretionary, and
the Registrant is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified.

The Underwriting Agreement is expected to provide that the Underwriters are
obligated, under certain circumstances, to indemnify directors, officers and
controlling persons of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement to be filed as Exhibit 1.1 hereto.

Either the Registrant and/or Pharmacia Corporation maintain directors and
officers liability insurance for the benefit of the Registrant's directors and
officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On February 9, 2000, the Registrant issued 1,000 shares of common stock,
par value $1.00 per share, to old Monsanto Company for a subscription
receivable for $1,000. There were no underwriters, brokers or finders employed
in connection with this transaction. The sale of these securities were deemed
to be exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act as a transaction by an issuer not involving a public
offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.1 --Form of Underwriting Agreement.**
2.1 --Separation Agreement.*
3.1 --Registrant's Amended and Restated Certificate of Incorporation.*
3.2 --Registrant's Amended and Restated Bylaws.*
4.1 --Form of Specimen Certificate for Registrant's Common Stock.*
5.1 --Opinion of Wachtell, Lipton, Rosen & Katz.*
10.1 --Monsanto 2000 Management Incentive Plan.
10.2 --Non-Employee Director Equity Incentive Compensation Plan.*
10.3 --Form of Phantom Share Agreement.*
10.4 --Form of Change-of-Control Employment Security Agreement.*
10.5 --Frank V. AtLee III Employment Agreement.*
10.6 --Tax Sharing Agreement.*
10.7 --Employee Benefits and Compensation Allocation Agreement.*
10.8 --Intellectual Property Transfer Agreement.*
10.9 --Services Agreement.*
10.10 --Corporate Agreement.*
10.11 --364-Day Credit Agreement.*
10.12 --Five Year Credit Agreement.*
15.1 --Letter re Unaudited Interim Financial Information.
21.1 --Subsidiaries of the Registrant.*
23.1 --Consent of Independent Auditors.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
23.2 --Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1).*
23.3 --Consent of Phillips McDougall.*
24.1 --Powers of Attorney.*
27.1 --Financial Data Schedule.*
</TABLE>
--------
*Previously filed.
**To be filed by amendment.

(b)Financial Statement Schedules

INDEX TO SCHEDULES

MONSANTO FINANCIAL STATEMENT SCHEDULES
FOR THE THREE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
AND SIX MONTHS ENDED JUNE 30, 2000

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of
1933 shall be deemed to be part of this Registration Statement as of the
time it was declared effective.

(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

(3) To provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Monsanto Company has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the county of St.
Louis, state of Missouri, on September 26, 2000.

MONSANTO COMPANY

By:

/s/ Hendrik A. Verfaillie
----------------------------------
NAME: HENDRIK A. VERFAILLIE
TITLE:PRESIDENT AND CHIEF
EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
* Chairman of the Board and September 26, 2000
___________________________________________ Director
FRANK V. ATLEE III

/S/ HENDRIK A. VERFAILLIE President, Chief Executive September 26, 2000
___________________________________________ Officer and Director
HENDRIK A. VERFAILLIE (Principal Executive
Officer)

* Director September 26, 2000
___________________________________________
HAKAN ASTROM
* Director September 26, 2000
___________________________________________
CHRISTOPHER J. COUGHLIN

* Director September 26, 2000
___________________________________________
MICHAEL KANTOR

* Director September 26, 2000
___________________________________________
C. STEVEN MCMILLAN

* Director September 26, 2000
___________________________________________
WILLIAM U. PARFET
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
* Director September 26, 2000
___________________________________________
JOHN S. REED

* Executive Vice President September 26, 2000
___________________________________________ and Chief Financial
TERRELL K. CREWS Officer (Principal
Financial Officer)

* Vice President and September 26, 2000
___________________________________________ Controller (Principal
CURT TOMLIN Accounting Officer)
</TABLE>
--------
* Michael D. Bryan, by signing his name hereto, does sign this document on
behalf of the above noted individuals, pursuant to powers of attorney duly
executed by such individuals which have been filed as an exhibit to this
Registration Statement.

/s/ MICHAEL D. BRYAN
-----------------------------
MICHAEL D. BRYAN
ATTORNEY-IN-FACT

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.**
2.1 -- Separation Agreement.*
3.1 -- Registrant's Amended and Restated Certificate of Incorporation.*
3.2 -- Registrant's Amended and Restated Bylaws.*
4.1 -- Form of Specimen Certificate for Registrant's Common Stock.*
5.1 -- Opinion of Wachtell, Lipton, Rosen & Katz.*
10.1 -- Monsanto 2000 Management Incentive Plan.
10.2 -- Non-Employee Director Equity Incentive Compensation Plan.*
10.3 -- Form of Phantom Share Agreement.*
10.4 -- Form of Change-of-Control Employment Security Agreement.*
10.5 -- Frank V. AtLee III Employment Agreement.*
10.6 -- Tax Sharing Agreement.*
10.7 -- Employee Benefits and Compensation Allocation Agreement.*
10.8 -- Intellectual Property Transfer Agreement.*
10.9 -- Services Agreement.*
10.10 -- Corporate Agreement.*
10.11 -- 364-Day Credit Agreement.*
10.12 -- Five Year Credit Agreement.*
15.1 -- Letter re Unaudited Interim Financial Information.
21.1 -- Subsidiaries of the Registrant.*
23.1 -- Consent of Independent Auditors.
23.2 -- Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1).*
23.3 -- Consent of Phillips McDougall.*
24.1 -- Powers of Attorney.*
27.1 -- Financial Data Schedule.*
</TABLE>
--------
* Previously filed.
** To be filed by amendment.

II-6