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Monsanto,Annual Rept 1982
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Issue date:	12/31/1982
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' Contents To Our Shareowners 2 $ rategies for the Future 7 St Renew Our Core Businesses 7 increase Options for Growth 8 Emphasize Growth Around the World 11 Extend Leadership of Growth Businesses 12 Create Windows on Technology 14 Anticipate Society's Concerns 21 Performance in Major Markets 25 Financial Report 31 Financial Review 33 Financial Statements 47 Financial Summary 58 Directors and OfHcers 60 Cover Our AnnualReport coterilhistrates three highlights of 1982 (hft to right): Monsanto' neteanaleicanigdride s plant in It>nsacoki, Florickt; uvrhi-uide afxinsion ofRoundup lxrbicide uses(as on thisfarin in Kenya);andgrotting research intohunent seith research unimst-ties (like Washington Unitersity in Italics throughout the Annual Rtport St. Louis,picturedlxre). identify Monsantos tradenuirks. i

t 1 Operational Highlights (Dollars in millions, except per share) 1982 1981 1980 Net Sales $6,325 $6,948 $6,574 Net Income $ 352 $ 445 $ 149 Per Common Share: Net Income - $ 8.79 $11.50 $ 4.10 Dividends 3.95_ 3.75 3.55 _, Shareowners' Equity 85.97 84.37 77.63 Property, Plant and Equipment ., :e Additions $ 673, c $ 668 $ 781 Depreciation and Obsolescence $ 439 ~ ~~ q $ 263 $ 547 $ 256 $ 225 $ 208 Research and Development Yearend: Shareowners-Common'3 hares 75,943 79,029 82,441 Employees 52,199 57,391 61,836 Note: Net income for 1982 includds an extraordinary gain of $23 million, or 50.58 per share, from an exchange of debt for common shares. d / e 9 4 Monsanto at a Glance and iblymer Products - as well as Monsanto Company's purpose is to five operating divisions-Animal serve customers worldwide through and Plant Products, Elearonics, quality products, processes and ser. The Company sells more than 1,000 Engineered Products, Health Care, vices in harmony with society's goals. products in 100 countries. Among and Nutrition Chemicals. Ileadquartered in St. Louis, these products are chemicals, agri-Monsanto Oil Company, a wholly Monsanto is a multinational indus-cultural products, man-made fibers, owned subsidiary, engages in explo-electronics materials, industrial trial company of mere than 52,000 ration for and produaion of oil and people engaged primarily in the pr cess controls and other capital natural gas. Fisher Controls Interna-manufacture of chemicals. Founded eqmpment. tional, Inc., a majority-owned subsid-in 1901, it now has investments in Monsanto's organization includes idt, is a leading worldwide supplier 166 manufaauring plants, labor-four operating companies - of indus,ulal process control systems, atories and technical centers in Agricultural Produas, Fibers and instrumentation, control valves 20 nations. Intermediates, Industrial Chemicals,.' an.ti regulators. 4

2 Ovanrum]<J>n W Ikmigflimkallry l' resident fg Qgg $hggggygggg RidurdJ. Ahdwuy (kftI arul Vice Omrnum fxmis ikrnarulez. "~ ~ ~ ~ ~ " '* 7 Faced with a grinding recession throughout 1982, Monsanto per- ~- formed better than many of its major competitors while carrying out a far-reaching reorganization to meet the challenges of the decade ahead. 1982 was the first year that the U.S. farm economy negatively affected our agricultural products business which is by far the largest contribu-tor to corporate earnings. Even so, our Insso and Rotondtip herbi-cides outperformed 1981, but the m / -7)lJ k growth curve for Rotendiep fell E below expectations for this extraor-

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y f dinary crop chemical. (1 +i' h; Our steadfast commitment to asset r-of management and cost-reduction pro- ~ _,,"C 'd grams helped offset somewhat the f ~ effects of lower demand for our s \\,, D industrial products. lly shedding H non-productive assets, we signifi-t. % "~~ y ' h-1R1 cantly improved our break-even 4 7 point to about 60 percent of plant . - f. - V LT utilization. We retired additional \\ long-and short-term debt, winding up the year in a strong financial posi- ,e tion that provides a solid foundation for future growth. Reported net income for 1982 was $352 million or $8.79 per share. This reflects the lloard of Directors' approval in February 1983 of the planned sale of our European acrylic fibers business and the establish-ment of a 1982 loss provision of $18 million ($0A6 per share). Net income for 1981 was $415 million or $11.50 per share, including a gain of $68 million or $1.75 per share from the sale to Conoco of Monsanto's assets in a joint venture. A more meaningful comparison of net income from operations in the i

3 buttressed by first-class technology. If 51onsanto could aim at a doubling past two years would exclude the ofits earnings every 10 years, he earned a total of $2.1 billion alto-1982 extraordinary gain on our debt-said - in contrast to the preceding gether, against a goal of $1.8 billion equity exchange as well as the 1981 decade's annual growth rate o."only - exceeding our growth target by gain on the sale of the Conoco joint 3.2 percent - it would have a goal about 16 percent. venture assets. These nuxlifications which would be at once challenging, Over the decade, alonsanto has would put net income in 1981 realistic, and readily affordable made notable progress in other at $377 million and 1982 at within the resource limitations that areas as well. $329 million - a year-to-year prevailed. Sales and earningspers/xire hcnv decrease of 13 percent. After three or four years, when groten at annualcornpound rates As 1983 begins, we see several significant progress had been made of IIMPercent and 9.7 percent, encouraging economic signals. toward this aspiration, it became 'y1" jct [,iy n ininaldollanfiwn 7, g inflation and interest rates are lower. evident that inflation was invah-Consumer confidence is on the rise. dating the original goal, and some Shareorrner equity and return on it There is a measurable upturn in rethinking was in order. A logical hcn e improvedinarhed/r -fimn single-family housing starts, and conclusion emerged; the idea of $1.3 hi//lon and 9.7 percent in 1972

>illi n and la3fx>rcent U.S. auto prix!uction is predicted to increasing earnings at a rate which f

be up substantially. We anticipate would double in 10 years after infla-modest economic growth in 1983, tion - in other words, a doubling Divideruh over the decade totaled although less than normally follows a in real terms. That has been our $1.1 hi//lon, as the Bcxird incr eased recession. If our expectations are adjusted long-range goal. the dividend rate 10 times during the I D ###l " I d' realized, the economy's recent down-If Alonsanto had moved toward that ward pressure on earnings will be Our ha/ance sheet has been great /r Y"'I '." "E"I """" I "D?' * ' strengthened-debt to totalcapital behind us. ings would have advanced in real fw, jug fu,n /ouvirdfimn 31 per-llecause 1982 was a year in which dollar terms at a rate of approxi-cent to 22 percent. 51onsanto reached a milestone in matelv 7.2 percent a year. Ilut our both product portfolio analysis and profit $tbility over the past decade has Of course, the past decade was not reorganization, we feel it is appropri-been importantly influenced by an without its setbacks. Our calculated ate in this Annual Report to give our nflation plagued environment; two but high-risk expansion in polyester shareowners a perspective of two oil shocks of pervasive impact; and filament failed to live up to our decades - the past one and the one a Company policy of enlarging its hopes, and we eventually withdrew ahead - so this will be the theme of expenditures on research and devel-from that beleaguered segment of our letter. opment while at the same time with-the textile business. Our buildup of Tha Past Decade drawing from businesses where acrylonitrile facilities in Europe, in Alonsanto has been evolving at a prospects were no longer attractive. anticipation of expansion in pktstics rate that sees it quite a different llecause alonsanto's earnings during and fibers, proved to be unwar-organization today from the one the 1973-82 period were far from a ranted in light of subsequent mar- } which installedJohn W. Ilanley as steady progression, a point-to-point ket conditions. President and CEO in late 1972. comparison tends to blur the pic-Ilowever, these disappointments At that time, the new CEO told floard ture. A beuer comparison would be were more than offset by our gains members his objective was to build a to measure cumulative real earnings in total - success in agricultural company with strong finances, sound over the decade against our goal. products and in such traditional management, and solid businesses When we do so, we find that we businesses as rubber chemicals,

4 Saflex interlayer, Fisher's controls, Strong R&D Commitment and detergents and phosphates. To position Monsanto to share in Success, too, in putting in place a both old and new growth areas, we vigorous new management team, have substantially strengthened our installing modern planning proce-commitment to research and devel-dures, and raising managers' emphasize the upgraded steps. This opment all across the Corporation. awareness of the changing dimen. decision was formalized with the We have increased four-fold our agri-sions of socially responsible sale of our interest in the Conoc cultural programs in just the past corporate conduct. joint venture in 1981. five years; launched a five-year Keeping Ahead of Change Our strategic direction is to buy $235 million research venture in The progress made over the past these materials, and use benzene protein chemistry for new drug uses decade amply validates our strategy and other purchased petrochemicals with Washington University which of moving our pnxluct ponfolio ' in far more complicated products was recently singled out by President toward specialties and high-technol, with a higher component of value feagan as a nuxlel of private-sector ogv. Ilut the chemical industry is added by Monsanto and value initiative; formed partnerships with changing rapidh, and we are deter. received by our customers. some of Amenca,s and Europe's fore-most research mstitutions giving us mined to keep ahead of the changes. At the same time, we are investing to access to the finest scientific minds So we have been adjusting our strat-expand our non-petrochemical base of our time; started a new Nutrition egy over the past three years to - silicon wafers, phosphates, and Chemicals unit which has in the become even more competitive m the engineered pnxlucts portions of development stage Monsanto's first the bracing environment we antici-Monsanto including Fishers total recombinant DNA product, animal pate m the decade ahead. process-control systems and Itadia-growth hormone; and begun a multi-In explaining our new strategic tion Dynamics' emerging electron-million-dollar project for building directions, it is helpful to start with beam product line. and staffing a world-class life-sci-the basic raw materials of the chemi-We are simultaneously moving into ences laboratory complex in cal business - oil and natural gas. health care, the third leg of the in-suburban St. l.ouis County. These are upgraded first into what terrelated agricultural chemicals / Even as we probe new frontiers, we are called primary petrochemical nutrition chemicalwhealth care busi-I ve maintained a lively interest in mtermediates - the large-volume, nesses, all tied together through the the basic chemical businesses on commodity raw materials like ethyl-new biotechnology. This next major dich Monsamm fomded md ene, propylene, benzene and others. wave of chemistry has implications at from which it has drawn sustenance Then they are funher upgraded into least as far-reaching for our industry over the years. We have formed a first-stage paxiucts, the traditional as the advent of petrochemicals in corporate group to examine renewal monomers such as benzene into the 1930s. of our higher value-added chemicals styrene and on to polystyrene. lleceat advances in biotechnology - through technology and business Finally, come the specialty chemi-molecule manipulation like recom-acquisitions. We m. tend to invest cals - rubber chemicals, resins for binant DNA - give promise of prudently in basic chemicals and opening up dramatic new opportu-manage them for balanced income f [e d a d I nities for the chemical, medical drug growth around the world. The use of the way to herbicides like lasso and agricuhural industries. Indeed, innovative technology, like the and Roundup' it is not toa farfetched to imagine butane route to maleic anhydride, We made a judgment to withdraw whole new industries selling pnxt-will become an increasingly impor-from the production of the primaIT ucts that today cannot even be tant part of Monsanto's strategy for petrochemical intermediates, and to conceived, let alone made. the decade ahead.

5 To help achieve our new strategic Inoking to the future, we are deter-directions, we carried out in 1982 mined to build a Monsanto of the a wide-ranging reorganization to 1990s that is sufficiently productive streamline both staff and line. selves of this option, bringing about and profitable to be highly attractive Gect cf Reorganization a more appropriate balance between to investors, that enjoys and deserves The reorganization was intended to people and jobs, and eliminating the a reputation for excellence among its position selected high value-added need for massive layoffs. customers, that is a source of pride businesses for growth, strengthen Throughout the dist > cations of reor. to its employees, and that is known our chemicals, fibers and plastics ganization, our 52,000 employees in its plant and office communities businesses, reinforce our interna-proved themselves once again a bul. as a socially responsible corpo-rate citizen. tional posture, meet customer needs wark of strength, as they have during more effectively, and enhance the the entire evolution of the past dec-Our optimism is strongly related to contribution of technology to our ade. They are as able and dedicated a the fact that we have a management overall performance. As a result, we group of mea and women as can be team and a strategy in place that befit now have a structure which will per-found in any enterprise, fully com-the trust that shareowners have mani-mit us to sene our customers better, mitted to building a company whose fested by their investments. We are link raw materials and products products enhance the quality of life confident these factors can sustain more closely, and focus our around the world. the Company's success pattern into the next decade - and the resources more efficiently. Their dedication is matched by that in the reorganization, we grouped of the Board of Directors which ""*'CC"'"'Y I our businesses under three broad never lost sight of our longer-term headings: our major chemicals and goals as it guided Monsanto through fibers units; our biological sciences a difficult economic period. During units including agriculture and nutri-the year, the lloard lost the services tion; and our non-chemical growth of two valued members. Edmond S. John W. IIanley units such as electronics, oil and gas, llauer, Chairman of Fisher Controls Chairman of the lloard and Fisher Controls and engineered International and a.io-year veteran Chief Executive Officer products. Each of these units has of Monsanto, died unexpectedly. worldwide responsibility for the J. William Fisher, a former Chairman manufacture and sale of its pnxtucts of the company bearing his name, Q7 -a recognition of the fact that retired from the lloard upon reach-imponant segments of our future ing the age of 68. Both men had RichardJ. Mahoney growth will occur outside the United contributed substantively and effec. President and States where we plan to pursue an tively over the years to the lloard's Chief Operating Officer active investment program. deliberations, and we are deeply When we found that we had more appreciative of their extraordinarily people than would be required in productive service. M./,- /_ the restructured organization, we We are confident that the heartening offered an incentive program for progress of the past decade can be Dr. Louis Fernandez those voluntarily choosing early extended into the next. When eco-Vice Chairman of the lloard retirement. About 1,300 salaried nomic health returns to the world, workers-more than 61 percent of we believe that Monsanto is posi-those eligible - elected to avail them-tioned to take full advantage of it. March 7,1983

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7 Agronombts honest sugar hwts on Storwmtos g Q g agnacituralresatrchfann an Belgiurn b* 51onsanto's strategy is to expand in n ther case,51onsanto has been toward production of higher-value a m rket leader for most of the past proprietary and specialty products. We intend to become a company less With those realities before us, we 50 years in the building-bk)ck chemi-vulnerable to the cyclical fluctuations have set our course toward proprie-c 1, m leic anhydride. Today, we have of the economy, one less capital. tary and specialty products with a strengthened that position through a nmre efficient and economical new intensive but more research-inten-greater hionsanto-added value and sive-and a company with the technological component. To reach technology to manufacture maleic. llecause of the combination of our technological and business strengths that destination, we are simultane-to flourish in the markets of the next ously traveling several roads. We will m rket position and technology decade and beyond. continue, as elements of our strategy, advantage, alonsanto began construc-tion in 1981 f the world's largest to do the following: I.or several years now, we have maleic anhydride plant, boosting our closely examined all our businesses Rencu> our core chemical businesses. capacity in this chemical by about and candidly debated the proper Increase our optionsforgrorrth. 75 percent. course for our future. Certain things Einphas/regroreth aiuund the Another long-standing hionsanto became clear. First, raw materials, unr/d-busmess, od and gas, has been particularly petroleum-based ones' Extend the market leadership ofour positioned as a significant profit had become too large a component gnneth husinesses. contributor through a change in of too many of our products. Create trindores on nere technology strategy. The basic strategy for the Second, we faced structural - and Anticipate and respoiulto socicM oil and gas business during the past thre:ueniag - changes in the petro-decade was to run it primarily for g chemical intermediates business as feedstock security rather than for the major oil companies and oil-pro-Renew Core Businesses profit. Today, with a long-term turna-ducing nations moved into that hionsanto's traditional non-agricul-round in the feedstocks situation, we market by upgrading their petro-tural chemical businesses amount to have encouraged our managers to leum into primary intermediates-more than half of both total invest-participate fully in promising oil and Third, some of our most promising ment and sales. These businesses gas ventures without regard to feed-growth businesses were already will remain at the core of hionsanto stocks requirements. We reorganized pointing the way to our new corpo-for years to come, providing the that business, effectiveJuly 1,1982, rate strategy. The leadership of strength for success in the near to create Stonsanto Oil Company, a Fisher Controls international and of future and the basis for developing wholly owned subsidiary which is our premier herbicides businesses new businesses for the longer term. expected to become a stronger "" I"' SI"""I* depends on high-technology pro-Strengthening our traditional core prietary products. Silicon, hollow-businesses means reinvestment in Our other core businesses have also fiber separations, nutrition chemicals selected areas where we possess a been reorganized, bringing together and other businesses are at the fore-substantial technological or market the entire manufacturing process front of high technology and on the advantage. For instance, the Com-from raw material to finished prod-verge of commercial success. pany installed an improved catalyst uct, so they can be managed as Finally, we have the research and system at our acrylonitrile plant in strategic units. OnJanuary 1,1983, a development skills and resources to the United Kingdom. The resulting new operating company organization carry us into a future based on first-cost reductions have contributed to went into effect reflecting this stra-rate science and technology. this plant's improved performance. tegic shift. We dissolved Stonsanto

8 Monsanto' longtime hwimhtp in nudeic s anhnhide uns stn ngthened utth tlx start up of its nete iHuacola, Fhrida, plant, Ilx uvrid's largest. Chemical Intermediates Company, which produced intermediate bulk chemicals for other Monsanto manu-facturing units and supplied the merchant market. We then integrated each intermediates operation into the same manufacturing stream with f-the finished product, allowing us to supply and serve all our customers q txtter. a N Strengthening core businesses - . '?, indeed, all businesses - for an 7 improved return on investment means rigorous asset management, and that will be a continuing focus for the decade ahead. For the past three years, tighter management of the Company's $6 billion in assets has saved us well over $100 million annually. Asset management has also contributed to reducing the break-even point of many of our core busi- "We like to regard asset nesses to less than their 1982 operatina average of about 62 per-management as a way cent of capacitv. of l.fe. But we cannot i Cost reductions have also come save our way to pros-ihrough stringent energy con erva. tion mea 8"res. compared (o 1972, perity. To provide the the year before the OPEC oil Cash muscle to pursue e m bargo and skyrocketiny cost,, our new directions, we Mon anto achieved more than a 27 pawnnedaaion in is enay. must renew todav's use rate through the end of 1982. Core businesses." raat achievemcet tran,ia,e, ie,e a reduction of $175 million in pur-Francis J. Fitzgerald chased energv costs in 1982. Executive Vice President increase Options for Growth A second strategic course Monsanto follows is to increase its options for growth - not only through new businesses, but also through addi-tions to traditional businesses.

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11 Sq) tex saferygbus intsrkmrluu Iwt usalfur pttrs to nude automobile ghus slutterprvof it is note inanuirmly tutiin kominatalartbitw turalgkus, tu in tiv nete ikdbu Gdhria. The recently formed Corporate Emphasize Growth Development and Growth Commit. Around the World tee will explore options for growth atonsanto continues to place greater through acquisitions. Its immediate emphasis on planning for interna-task is to strengthen selected tradi-Alonsanto is also promoting expanded tional growth. Rxiay, roughly a third tional businesses for near-term higher-value uses for &iflex polyvinyl of 51onsantos sales are in markets growth and to augment development butyral filnt For decades we have outside the United States. Of those of growth businesses. Candidates for been a leader in supplying the inter-sales, more than half are supplied by acquisition must be developed busi-layer for laminated automobile safety non U.S. manufacturing operations. nesses with a market niche, a high-glass. In recent years, however, During the next decade, we expect technology component and the abil- &if7ev has become a leader in lami-three-quarters of the absolute growth ity to contribute in the near term to a nated architectural gLtss. Ilesides of world chemical markets to occur strong return on capital. shatter resistance and aesthetic quali-outside the United States. Growth opportunities through new ties, &iflex offers value in noise 3 ggg pn> duct development often result reduction and energy savings. ,g g from process innovation, as in the One of Stonsanto's most unusual-not be done through exports alone. case of A:rrim prepolymer and cata-as well as environmentally beneficial local and regional differences often lyst. This proprietary system permits - new product development efforts dictate h> cal technical support. The molding of nylon pans in what are is called the "Co-product l'tilization need to gain freer access to markets called reaction injection-molding Program." llegun in 1981, this pro-frequently makes h> cal manufactur. (Illst) machines. With these gram seeks to find beneficial uses ing desirable. Consequently, we have machines, a fabricator can eliminate and markets for manufacturing stepped up efforts to identify invest. Intermediate steps in the production wastes - that is, for co-pnxlucts ment opportunities in all world areas. of such parts as automotive compo-generated in the manufacture of Some early results of this emphasis nents. In the past, polyurethane was intended pnxtucts. Today more than the principal material used by RIS1 20 co-pnxtucts are in commercial-f, g 9 machines. Now,Nrrim pernuts the ization or in various stages of research center in Paulinia, lirazil, in use of ny.lon resins, opening up a commercial development. 1981. In 1982 we expanded our agri-range of new possibilities for fabrica-The most successful of these co-cultural research facilities in llelgium tors of plastic parts. pnxtucts has been dibasic acid and broke ground for a major agri-We also search for new uses for (DilA), a co-pnxtuct of the manufac-cultural research facility inJapan. We existing pnxlucts, based upon their ture of adipic acid. DilA has been also opened a technical center in unique qualities. For example, Aime-found to be more effective and more Japan to support the marketing of Cor polystyrene foam board laminate energy-efficient than conventional the Company's electronics materials has long been used as insulating technologies in " scrubbing" indus-in the largeJapanese market. material in home renovation, manu-trial Ilue gases. Its use greatly increases hn some instances, international factured housing and automotules. the removal of sultur dioxtde, one Recognized as the standard of of the major causes of " acid rain." expansion comes from k)c;uing a quality in the graphic arts industty, Ily finding a profitable market for facility in a country where h) cal Aime Cor board has recently gained this once-costly waste pnxluct, inanufacture is legally or customarily popularity as an ideal backing for 51onsanto is also helping coal-burn, re luired to protect patent rights. pictures and photographs. It is also ing electric utilities solve a serious 51onsanto depends heavily on pat-used for displays and exhibits. pollution problem. ents. For instance,80 percent of the

12 An autornoinefaxks(Mnelis trioltictifri>rn tiere Nyrton prqminner arulwtakt at our Bloorn. field Rxhnimi Centa sales of our agricultural products in cide, found m. creasing favor m. the 1982 were of patented pnxtucts. Our loss and Roundup herbicides. highly developed farmlands of North reliance on patents will increase as Enmgh innovative marketing and America and Europe, but it has also we implement our strategy of mov-full supp rt in people and resources, gained favor in developing agricul-ing toward specialty markets with we mntinue to extend their lead in tural areas. Alonsanto promotes proprietary products. herbicide markets. Roundup to supplement scarce rural llowever, rising economic national-labor in many developing countries lasso herbicide, a pre-emergent ism in lesser deseloped countries weed killer for corn and soybeans and to permit farmers to increase the (LDCs) has spawned a movement to has been one of our best-selling IEr. amount of land thev cultivate. revise the century-old international

b.. des for years and a leader in its We also achieve and strengthen lead-ici patent protection system to reduce market. About five years ago, how-ership by adding special qualities the benefits of patents to patent em,Imo bqan to lose market and value to our pnxtucts. The holders. Although their desire is to speed the transfer of advanced tech-sham in dw gnited States for the first change in our approach to silicon tinw. A c mbined marketing and illustrates this strategy.

nology to their countries, the LDC technical initiative resulted in a approach wauld, in fact, do just the in an earlier maiket of simpler and highly successful application lower-scale integrated circuits, one opposite. Without adequate patent nwthod, known adugam Bkrut, company's silicon wafer was much systems, innovators within a country that reduces application costs. As a like that of another. Today, however, have little incentive to invent, and msuh of t effon,lmo rm ined the market has changed. Electronics outsiders have little incentive to market share during 1981 and 1982 manufacturers have begun to make transfer technology into a nation in one of dm worst farm economies where it is not protected. very large scale integrated devices I" " Y that are much faster and contain as At the same time, a number of coun, tries have come to a greater Non-selective Roundup herbicide much as 256 times the capacity they understanding of the need for patent has also benefited from energetic once did. We have seized this oppor-protection to encourage domestic marketing. It made particularly tunity to develop markets for high-technology development as well as impressive gains in minimum-tillage performance wafers with characteris-technology transfer and investment agriculture which requires little tics tailored to each customer's by international companies. The Peo. plowing and disking, leaving crop device-performnce needs. Conse-stubble and residue on the field. quently, we are moving away from ple's l<epublic of China, Malavsla and Indonesia are currently reviewing This reduces topsoil erosion, con. commmlity pnx!uction of wafers draft legislation that would establish ms soll moisture, reduces the toward application-specific manufac-patent systems in their countries. amount of energy required, and pre-ture for a dozen or more semi-vents soil compaction which results conductor device markets. The Extend Leadership of Growth from the frequent passage of heavy emphasis now is on the value Cu:inesses machinery over fields. 51onsanto received by alonsanto's customers, Monsanto follows a strategy of sales efforts have built on this long-an emphasis we hope will maintain extending the market leadership of recognized need of farmers in order and strengthen our market position. our growth businesses through such to penetrate new markets and lead Monsanto also extends market lead-measures as innovative marketing, the Company to international sales ership through technologv. Such is emphasis on quality and value, and growth. Roundup is now registered the case with Fisher Controls Inter-technological superiority. In 73 countries for 500 uses. national, Inc., our majority-owned Monsanto's premier pnxhicts today Not only has Roundup, along with subsidiary which is a world market are its crop chemicals, particularly the newly intnxtuced Emnco herbi-leader in industrial process control.

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14 ushns arulcontmh nuule byiMw Contmh Intmustiorust arv swlin thu vil tmnirust in elx htkuut hLuuh. Central to Fisher's leadership strategy . _. m.M is building superior technology into o_ Fisher products. New Protur instru-mentation system for process control is a prime example. Pnnur is a microprocessor-based system flexi. ble enough to be applied to the entire range of industrial processes, l from the simplest to the most complex. j Of course, strengthening market i position usually involves a combina-

3 tion of strategic approaches. For instance, we add higher value to our nylon carpet fibers by backing up products made from them with a five-year warranty. We then advertise and promote these prtxtucts as her Dated carpets. As a result, carpet makers in January 1983 intro-duced the largest number of new grades and styles ever using our nThe thrust of our nbers. we conn, on this muitiraceted growth for the '80s will program to strengthen our position

'""P"'" be to drive our high-Create Windows on value-added product v..nnoi.., lines into expanding sincenxuysemergingiechnoingies markets and to back shape iomorrow's businesses. Monsanio uses severai means io them w.th. innovative gain windows on new tecnnoioyt i technology. We'll also We do this largely through in-hohe aunment selected """h""""*'"P"*"'"'""""' c through partnerships with universt-strong tradit.ional bus.t-iles and through veniure-capital nesses through invesunents n prondsing new high-iethnology businesses. aCnulsil.lons.,, Monsanto's commitment to develop-7 I"M "C" PI"PII"'I PI"d"' h"" E rla H. Harbison Jr. strengthened the role of technology Executivo Vice President as the driving force in Monsanto's strategy for growth. Research spend-ing has nearly doubled during the

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l l 17 A Kemun snudiholderpunur afpha Itounduplebiadein tmfishit past five years - from $136 million Q'~ h - %, f"'r N ~ & ~ gj'[L.-- _ _ j h.,_[ in 1978 to $256 million in 1982 and $301 million budgeted for 1983 This expansion of research adivity 0 e. ~ at Alonsanto has required additional 'P 8', E* facilities. In 1982 Afonsanto began g Egg, g p. EkN construction of a major research r, complex on a 210-acre site near ( ~ St. Inuis. When the first phase is completed in 1985, a three building facility will provide. space for about 6 { 800 profe.ssional and tet hnical people. N New facihties enable Alonsanto to T open wider us main wmdow on g. technology - internal research. The -) Company engages in a broad range } ot resean h, trom applied research .S. a los pn> cess improvements and exist-L f mg pn> duct refinements to long-range exploratory and basic research. nTomorroW'S success for 1radnional rescan h suengths such as the farmer

indeed, t hen ucal engmeenng sy stems. catal>.

for US ali iies in todaY's sis, poly mer science. agncohural < hennsiry. org.mic and inorganic research. Monsanto is mansinal thenusir3. und apphcati""" Committed to develop rescan h remam ba. sic to sionsantos growth and future piofnabihty The ing the agricultural recent reorg.mizanon has Imisiered technoio9yof the ihese areas bs combnune related future and to carrying resemh etiorts. suants in poh mer iesean h. so ihat we can bener sene it to every corner of the earth." our t ustomers. At the same time, we are pursuing two promising reseanh growth are.ts Nicholas L. Reding - new matenals and systems. such Executive V ce President as electronics matenals and separa-tions, and the hie science.s, including plant biology, animal nutntion, human heakh care, mokrular biol-ogy and luotechnology.

18 A Monwnto scientestptsr?fia ofwrirnental fun ine gmarth twnone. tthith can enluence milk eind mastprubscruon in cattle. It u afutalto be one <{tiv airliarpuluck t{rwomhuusnt inA tahnology lliotechnology research is advancing vigorously, and Monsanto scientists already have made fundamental dis. Science and Technology, St. Andrews University and the Nuffield Founda-coveries in plant genetic engineer-selected by an advison committee tion in the United lungdom, and ing. We expect these discoveries to appointed'by Monsanto and by Wash-ston University and Harvard contribute to the creation of more ington University. The projects are University in the United States. In productive crop plants by about collaborative, with close working addition to providing an opportunity 1990. Meanwhile, the Company is relationships among the institutions, to assess and acquire new technolo-building a powerful technical base sc entists. Patents arising from the M "3 I" ""'I 'l"E"3 "I "," * * "'CI I I F for potentially substantial markets in projects will be held by the univer-development, Advent Eurofund the next decade and beyond. s tv, though Monsanto will have enhances Monsanto's ability to appiv Monsanto's iirst commercial pnxluct exclusive h.censmg nghts. g ,g based on genetic engineering will The agreement is also considered a academic research. likely be bovine growth hormone model in protecting the academic As a result of these windows on tech-(bGil), which increases meat and freedom of university scientists. nol g many new opportunities in milk yields in cattle. Working with Faculty members participating in the field of heahh care have become Genei. ch, Inc., we first succeeded the collaborative research projects evident. Our research efforts in this in pnxiucing this hormone with are free to publish the results of area focus on proteins and peptides genetically altered microorganisms their research. associated with bhxxl factors, the in 1981. Recently, Monsanto and A third Monsanto window on new lxxly's immune system and the Cornell University scientists technology is venture-capital invest-growth of tissues and organs. From announced positive results from ini-ment in innovative young businesses. this research we foresee several tial testing of the biosynthetic bGH. In 1972 Monsanto and another indus-potential new therapies for impor-A second window through which trial company created a venture-tant and intractable human diseases. Monsanto obsenes and assesses capital firm, innoVen, to make invest-We anticipate that biotechnology will emerging technologv is research ments with three goals in mind: tirst, contribute significantly to these collaboration with universities, an to keep abreast of emerging technol-effons and therapies. area in which Monsanto is widelY ogies; second, to acquire new With these new opportunities before regarded as a pioneer. technologies for the parent compa-us, we recentiv created a Health L,are Among our partnerships with uni. nies; and third, to make a return on IM o wl d b M rmig versities is an innovative relationship investment. Mo mo's entn into major health-we established with Washington Uni-InnoVen has succeeded in all three care busmesses.'While managing versity in St. l.ouis during 1982. With objectives, and its success stimulated investments like that in Collagen Monsanto providing $215 million the creation in 1982 of Monsanto's Corporation, it w ill also develop over the next five years, the two most recent venture-capital enter-commercial strategies for regulaton-institutions will conduct collabora-prise - Advent Eurofund. This protems and peptides and related tive biomedical research in areas of $17 million fund invests in innova-products of potential significance in proteins and peptides which regulate tive high-technology businesses in human medicine. These pnxtucts cellular functions. Europe. Monsanto's partners in will emerge from our genetic engi. Our agreement with Washington Advent Eurofund are major research neenng research, from collaborative University is unique in several universities - Cambridge University, research with Washington University respects. Research projects are Oxford University, Imperial College of and from other external research.

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1 25 i 3'"'"T3"%';,"""'"T,;'"";'" "** Performance in Major Markets nurksnbms ofpkontgrvu th. 4 J Real Form haceme (Billions of 1972 Dollars) Difficult economic conditions both at h b== =d horns and abroad during 1982 affected Lyd%=rihin=pw=g4mi, f ' _5 d nearly all of the mapr markets in which I the Company did business. Even agricul-fMnR _ - -~ HNJ l =. .a ture, Monsanto's largest market and one i r! 'd ' ' 0F 71 traditionally thought to be immune to Cenetruction, Furniture anel Home Furnishing spending (Billions of 1972 Dollars) I cyclical pressure, was buffeted by high interest rates and declining growth. Housing and automobile production, two

important markets for Monsanto prod-j j ucts, fell to their lowest levels in decades.

w7e I I In the face of this, Monsanto fared rela-i tively well. The Company made good Pd" D"'** uipment spendine (sillions of 1972 Dollars) ! progress in implementing its long-term M t i 2.4 strategies for growth and refining its 19st 120.4 product portfolio toward meeting special 19eo i t 7.s j customer needs. Combining that witn ~ ~ ~ ~ - tm 120.s ! continued careful management of gy, ant was b o gate Phanneemais, soaps and wietries mtion (m7 = m) ~ l what the of fects of lowered demand for 19s2 33o.1 j industrial products. tSet 222.s l Monsanto's performance in each of its use

2. ' o l mapr markets is described in this sec.

im 20s.4 ! tiort Economic conditions for each 197s 192.7 ! market are summarized and depicted heeter Vehicle Production-North Ameries (mlions of Units) graphically on the right. ,9a2 s.2 1981 9.2 1980 9.4 1979

13. t i

1978 14.7 ( Basic Chemicals Production (1967 = 100) I 1982 157.7 19st tes.9 ~ 1980 187.5 it -193.o 197e 1st>s Censumer spending en Apparel (Billions of 1972 Dollars) 1982 84.1 1989 82.7 1980 78.o 1979 76.7 1978 73.6 Tetalinsiustrial Production (1967 = 100) 1982 128.6 1981 1

S itto 147 1979 152.5 1978

_144.1

a.< 26 Agriculture 7% Real farm income in 1982 fell to its lowest level since i A the 1930s, and farmers could not maintain their normal 'EQdd purchasing patterns. Nevertheless, agricultural product [~ ~\\ sales rose, although growth was slowed . u9 Lasso herbicide for corn and soybean crops continued cf 3 to increase its U.S. market share, partly due to the new Surface Blend technique which has gained wide accept-ance. New Bronco herbicide had an excellent reception in the no-till soybean market as farmers increasingly sought ways to conserve time, fuel costs and soil. Sales of Roundup herbicide continued to climb in mar-kets around the world, although not as rapidly as in recent years. In the United States, Roundup showed impressive gains in the reduced tillage and industrial markets. In Europe, preharvest applications of Roundup were successfully introduced. Far-Go herbicide for wheat had strong U.S. growth, but outside the U.S. Avadex BW and Machete herbicides had reduced sales in 1982. This was largely due to poor planting weather and deteriorating farm economies, rather than a strong U.S. dollar. The new Rodeo herbicide is the first approved by the U. S. Environmental Protection Agency for non-restricted use in controlling weeds which often choke ponds and navigable waterways. Rodeo will be marketed beginning in 1983. Monsanto is an important suppher of amino acid feed supplements and preservatives to the poultry and swine feed markets. MHA and Alimet feed supplements, methionine sources for animal feed, demonstrated strong sales gains dunng the year despite competitive pressures. Research is continuing on a growth hormone which shows promise of improving milk production efficiency in cattle. Construction and Horne Furnishings A depressed housing industry during 1982 affected sales in construction and related markets which account for 17 percent of Monsanto's total sales. New residential construction had its worst year since World War ll-caused by inflation and high interest rates. The sale of existing homes, which often creates demand for home furnishings, was half its recent high. Monsanto products are also found in non-residential construction which picked up only modestly in 1982. Laminated architectural glass made with Saflex plastic intertayer gained increasing acceptance in building windows, doors and skylights. It provides the properties of sound reduction and safety, as well as solar control which saves on air conditioning. Sales of Lustran ABS plastic used in pipe declined due to continuing stiff competition from polyvinyl chloride and depressed industry conditions. However, Lustran Ultra ABS plastic for appliances and consumer electronic items did well. Resins and plasticizers found in plywood, paints, insulation and wallpaper, continued to be well accepted in the marketplace. Santicizer plasticizers give flexibility to vinyl materials used in flooring and wall coverings. This product increased its market pene-tration during the year. Monsanto is a leading supplier of nylon fiber to makers of commercial and residential carpets. During 1982, new product introductions shifted the nylon fiber sales mix toward more branded, higher-value items. The warranty program for Wear-Dated carpet was well received by mill customers who introduced a record number of new Ultron nylon carpet styles and constructions. In home furnishings, Monsanto continued to see good growth for its Acrilan acrylic fibers in upholstery, draperies and wall coverings. While the penetration by acrylics in these markets suffered from the economic downtum, programs are in place with major %nbers shown #ndcate percentages of Mtnsanto su es. mills to increase their acceptance in such applications. r

? 27 Capital Equipment Capital spending dropped significantly during 1982. Major markets for Monsanto's subsidiary Fisher Controls Intemational, Inc., were particularfy hard hit. The semiconductor industry, which purchases Monsanto's silicon, also suffered. v Even in this environment, Fisher made strides in its sales of control valves and regulators. In 1982 Fisher introduced an innovative control valve with accessories designed for corrosive service applications. Meanwhile, develop-ment work accelerated on next-generation products. Building on its strength in field measurement instrumen-tation, Fisher Wroduced a temperature controller and vortex flowmeter product line using proprietary technology Provox computerized control room instrumentation, first sold in 1980, continued strong worldwide growth. Sales increased by more than 100 percent with over 200 control systems and 15,000 control loops sold to date. New enhancements help customers coordinate batch control for multi-stream, multi-product applications and provide special energy management capabilities. Monsarco continucd to improve both the quality and customer's device yield of its electrcnic-grade si' icon. Matenals for specialized customer applications contributed to the Company's leadership as a supplier to the semiconductor industry The silicon business has faced lower than anticipated demand during the past two years as the result of a poor economy Nevertheless, substantial long-term growth is foreseen with advances in mainframe and personal computers and telecommunications. Two Monsanto thrusts stressed energy efficiency Monsanto Enviro-Chem Systems, Inc., a leader in design and construction of sulfuric acid plants, developed programs to gerierate electricity from excess steam. Pn'sm separators have been sold in 10 countries. Their use in oil refineries is gaining increased acceptance. Pharmaceuticals U.S. demand for products in the pharmaceuticals and and Related Products related products area, two of our oldest markets, remined largely flat during 1982. Existing inventories, rather than new production, met increased demand for health care products. Monsanto is the world's largest supplier of analgesics, producing both aspirin and acetaminophen. With t production facilities in three countries, Monsanto main-tained its strorig pGsit;ca ;a ser ;ag tria worldwide aspirin market. Acetaminophen usage in the U.S. showed strong annual growth, and Monsanto's in-cremed capacity at our Luling, Louisiana, plant reached record production of this procuct during 1982. As the only U.S. manufacturer of L-Dopa, a prescription drug used in the treatment of Ps.rkinson's disease, Monsanto continues to be a major factor in this worldwide market. Although mature, detergent and toiletries markets continue to be important to Monsanto as new opportunities develop for future products. Volume of our traditional builders s and surfactants decreased during 1982, reflecting changing consumer spending pat-terns. However, Monsanto was able to hold its overall share of phosphorus and derivatives, such as STP, our largest volume detergent raw material. Other sales in these markets remained strong. / Monsanto is also a major supplier of packaging material to pharmaceutical and deter-gent markets which consume about 70 percent of our blownware plastic bottles. Although Monsanto is recognized as a leader in quality and service, blownware sales suffered due to overcapacity and price competition. A cross-licensing agreement with Yoshino Kogyosho Co., Ltd., in Japan permits Monsanto to exchange rights on tech-nology ano patents for production of plastic containers. As a result, Monsanto expects significant advances in this area.

28 Motor Vehicles In North America fewer automobiles were produced in 1982 than in any year since 1961. Widespread reces-sion and anxiety about unemployment caused American consumers to curtail motor vehicle purchases dramatically Domestic spending on U.S.-built automo-biles as a percent of gross national product was at its lowest level ever. As a result, sales were down for most Monsanto products serving this important industry, including rubber chemicals and plasticizers. Several Monsanto products turned in a relatively good performance in spite of lowered motor vehicle volumes. Shipments of Lustran ABS resin for automotive components held their own, including two new impact-resistant and color-fast grades of Lustran ABS. Sallex interlayer for laminated automotive windshields also maintained its share in a declining market. During the year, Monsanto commercialized Nyrim catalyst and prepolymer for nylon block copolymer reaction injection molding systems. Nyrim's long-term market potential is replacement of conventional materials like steel and fiberglass in automotive body panels. Two entirely new materials introduced in 1981 performed well in test applications. Santoprene elastomer, the first multi-purpose thermoplastic rubber, is already being specified in high-performance applicatons. Monsanto's unique thermoplastic resin, Cadon, has been rapidly adopted for interior applications. The use in automobiles of electronic devices, many of which contain Monsanto silicon, has grown dramatically Microprocessor control units that monitor and govern engine functions, such as fuel-air mixture for increased mileage, became almost universally accepted in 1982. Chemicals and Petroleum Refining The production of basic and industrial chemicals in the United States declined more than 15 percent during 1982 due to weak demand around the world, particu-larly in the United States and Europe. Petroleum refining did not fare as badly with only a 6 percent drop in production. Monsanto strengthened its oil and gas exploration activities by forming Monsanto Oil Company, a wholly owned subsidiary, to direct its worldwide hyrdocarbon operations. This enhanced its identity in the oil and gas industry and improved its flexibility in joint venture activity. Monsanto's yearend oil reserves totalled 38 million barrels and natural gas reserves totalled 607 billion cubic feet, up from 1981 levels by 12 percent and 1 per-cent respectively. With a drilling success ratio of 83 percent, Monsanto Oil Company increased oil production to nearly 4 mi!M barrels during the year. However, natural gas production declined due to reduced demand. Monsanto Oil Company now holds leases on more than one million net acres and has begun an exploratory drilling pro-gram on one of its several United Kingdom leases in the North Sea. Monsanto's process chemicals are used by manufacturers to make many industrial and consumer products. Monsanto has the world's leading technology for acetic acid. Ucensed in seven major industrialized countries, our methanol-based technology pro-vides approximately 35 percent of the world's capacity for this chemical. Monsanto continued to expand its worldwide maleic anhydride capacity as a new plant at Pensacola, Florida, neared completion. Thermino/ heat transfer fluids are used for indirect heating and cooling in chemical processing, on offshore drilling platforms, and in solar heating. Monsanto's major posi-tion in these markets continued to improve during the year. 1 wumbers shown uxhcate percentages of Monsanto sales. a

29 Apparel in 1982, the demand created by increased consumer spending on apparel was largely fdled from imports A and existing inventories, putting downward pressure on all apparel fibers. However, acrylics showed growing competitive strength over other fibers, with particularly strong performance in half hose and all activewear categories. Acrylic fiber products introduced over the past few years, including Pa-Oel, So-Lara and Fi-tana, enhanced Monsanto's position by offering strong branded programs in market segments which moved against the downward trend of the industry in 1982. Monsanto reached two important milestones during the year when the Company com-memorated the 20th anniversary of its warranty program for Wear-Dated products and the 10th anniversary of the introduction of SEF modacrylic fiber. Since 1962, when Monsanto first offered a warranty for qualified apparel products made with the Company's fiber, the Wear-Dated trademark has become a recognized symbol for quality and value. The warranty is the strongest of its kind in the textile industry. SEF modactylic fiber was developed to help Monsanto's customers meet the federal flammability standards for various apparel products. Its primary application in apparelis in children's sleepwear. In other apparel areas, Monsanto started to convert a majo. portion of its textile-denier nylon yam facilities to manufacture a product more suitable for use with the high-speed texturing equipment being installed by customers. When completed, this should provide Monsanto with an attractive low-cost nylon product for women's hosiery, men's half hose and activewear. Other Markets Monsanto sells a variet/ of other products to diverse markets ranging from ' cod to graphic arts to water treatment chemicals. These were affected by the 8-percent drop in industrial production which reflected the longest post-war recession in the United States. Monsanto's food ingredients include flavorings, acidu-lants and preservatives used in carbonated soft drinks, juices and wines. In the dairy industry, Monsanto's food ingredients preserve freshness and improve flavor. Monitor potassium sorbate food preservaSve, widely used by bakeries, increased penetration of this market while production costs were reduced. In the export market, the strong U.S. dollar had some negative effect on prices, but the outlook had improved by year's end. Fome-Cor board has gained wide acceptance in the graphic arts industry in addition to its traditional use as energy-saving sheathing in manufactured housing and head-liners for automobiles. Monsize, Mersize and Scripset paper sizing agents maintained their share in a weak market, while Santo-Res wetstrength resins increased sales during 1982. Monsanto is a leading supplier to this important industry Monsanto is also a major supplier of nylon fiber for various industrial applications and tires. Sales here were depressed due to conditions in end-use markets. Cerex spun-bounded nylon fabric, used in such applications as filtration and disposable garments, demonstrated strong potential for medical and non-industrial markets, even though sales were down somewhat in 1982.

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31 "G"nudding u one ofMomantos nat naisn yjg3ggjg}g gg c{fice Emildings at the sr tous hudquaners Contents Page Responsiiniities for Management Report 32 Financial Data Independent Auditors' Opinion on System ofInternal Accounting Control 32 Financial Review Review of the Results of Operations Consolidated Sales 33 Sales by Product Group 33_ Consolidated Net income 34 Analysis of Change in Earning 3 per Share 34 Quarterly Results 35 Operating Unit Segment Dats 36 International Area Basis Data _.38 Raw Materials and Energy 39 Research and Development 39 Foreign Currency 39 inflation-Adjusted Data 40 Selected Financia! Data 41 Review of Liquidity and Short-Term Liquiday and Capital Resources 42 Capital Resources Long-Term Liquidity and Capitei Resources 43 Comrnon Stock Data 44 Oil and Gas Activities Proved Reserves 45 Standardized Measure of Disccunted Future Net Cash Flows 46 Financial Statements Summary of Significant Accounting Policies 47 Independent Auditors' Opinion on Financial Statements 48 Statement of Consolidated income 49 Statement of Consolidated Financial Position 50 Statement of Changes in Consolidated Financial Position 52 Statement of Consolidated Shareowners' Equity 53 Notes to Financial Statements Principal Divestitures 54 Supplemental Income and Expense Data 54 Pension Plans 54 Income Taxes 55 Earnings per Share 55 inventories 55 Short-Term Dett and Bank Credit Arrangements 55 Long-Term Debt 56 Commitments and Contingencies 56 Capital Stock 56 Stock Option Plans 56 Segment Information 56 Financial Summary 58 Except where otherwise indicated by the context, the term "Monsanto" means Monsanto Company andits consolidated subtidiaries and the term " Company" means Monsanto Company alone. All dollar amounts are in millions, except those amounts shown on a per share basis.

r 32 Responsibilities for Financial Data Management Report The management of Monsanto Company is responsible for the fair presentation and consistency of all financial data included in this Annual Report. Where necessary, the data reflect management estimates. Management is also responsible for maintaining a system of intemal accounting control to provide reasonable assurance that assets are safeguarded against material loss from unauthonzed use or disposition and that authorized transactions are properly recorded to permit the preparation of accurate financial data. Cost-benefit judgments are an important consideration in this regard. Inherent limitations in any system include 1 the possibility of undetected errors or irregularities. Also, significant changes in circumstances could result in inadequate current procedures, or deterioration in compliance with those procedures. Management believes that the effectiveness of Monsanto's system is maintained by: (1) personnel selection and training; (2) division of responsibilities; (3) establishment and communication of policies; and (4) on-going internal review programs and audits. As ratified by shareowner vote at the 1982 Annual Meeting, Deloitte Haskins & Sells was appointed to examine, and express an opinion as to the fair presentation of, the consolidated financial statements. This opinion appears on page 48. At management's request, Deloitte Haskins & Sells also expressed an opinion, which appears below, on the internal accounting control system in the United States. Monsanto's Audit Committee, consisting of four non-employee directors, periodically meets with representatives of the Controllership Staff, the Internal Audit Staff and Deloitte Haskins & Sells to review internal controls, financial reporting and accounting practices. Both the independent and intemal auditors have complete access to meet with the Committee, with or without the presence of management, to discuss their examinations, the adequacy of intemal controls and the quality of financial reporting. John W. Hanley Francis A. Stroble Chairman of the Board and Senior Vice President and Chief Executive Officer Chief Fnancial Officer i February 25,1983 i independent Auditors' Opinion We have made a study and evaluation of the system of intemal accounting control of l on System of Internal Monsanto Company and its United States subsidiaries in effect during the year ended Accounting Control December 31,1982. These companies constitute approximately 81 percent of con-i solidated total assets at December 31,1982 and approximately 71 percent of 1982 l consolidated revenues. Our study and evaluation were conducted in accordance with standards established by the American Institute of Certified Public Accountants. The above report explains management's responsibility for maintaining a system of internal accounting control and the objectives and limitations of such a system. In our opinion, this system of intemal accounting control in effect during the year ended December 31,1982, taken as a whole, was sufficient to meet the objectives referred to above that pertain to the prevention or detection of errors or irregularities in amounts material in relation to the consolidated financial statements. & Y,4&v l Saint Louis, Missouri l February 25,1983 l

33 Review of the Results of Operations Consolidated Sales 1982 $6.325 6,948 lim 6.574 Sales for 1982 decreased 9 percent as compared to 1981. In 1981, sales were 6 percent higher than the prior year. Sales vokene for 1982 was down 11 percent versus 1981, with 1981 sales volume down 2 percent from the previous year. Higher selling prices contributed approximately 2 percent to 1982 sales in contrast with 1981 selling price increases of approximately 8 percent over the prior year. Worldwide recession Saies vene tne iasuwo years was adversely impacted by worldwide recessionary conditions, especially in those businesses dependent on the automotive and housing ,impacts sales industries. Polymer products, industrial chemicals and man-made fibers were particu-larly affected. Although agricultural sales in 1982 were negatively impacted by the farm economy's depressed financial condition, sales did increase albeit at a more modest rate than in the past. Divestitures of various businesses (see " Principal Divestitures" note to the financial statements) adversely impacted both 1982 md 1981 sales. The continuing strength of the United States dollar against many foreign currencies also negatively impacted domestic export sales. Sales by Product Group 1982 1981 1980 Agricultural and Nutritional Products Agncultural products $1,165 $1.099 $ 905 Nutntion chemicals 146 135 125 Total 1,311 1.234 1.030 Fibers and Intermediates Man-made fibers 880 1,014 1.041 Textile intermediates 377 418 330 Total 1,257 1.432 1.371 Industrial Chemicals Detergent and fine chemicals 552 609 608 Specialty chemicals 258 289 282 Total 810 898 890 Polymer Products Plastes 775 1.052 1.094 Resin products 742 813 807 Rubber chemcals and instruments 269 282 298 Total 1,786 2.147 2.199 Engineered Products and Other Businesses Engineered products and matenals 357 414 365 01 & gas 216 186 126 Total 573 600 491 Fisher Controls Valves, regulators & electronic process controls 588 637 593 Total consolidated $6,325 $6.948 $6.574 See " Restatement" discussion on page 37. i

34 Consolidated Not income Reported net income for 1982 was off 21 percent from 1981's results. Part of this decrease is attributable to unusual and extraordinary items year-to-year. However, the decline also reflects recessionary conditions, excess manufacturing capacity and depressed prices in the chemical industry worldwide. In 1981, net income was up significantly versus 1980, but unusual items in 1981 and 1980 also impact this comparison. Net income in 1982 benefited from a $23 million extraordinary gain on the exchange of outstanding debt for common shares. Lower equity income from affiliated companies, which also includes substantially all of the Mexican peso devaluation impact, adversely impacted 1982 results. Net income for 1981 included a $68 million gain from the sale of net assets related to a joint venture. In 1980, net income was significantly depressed by charges totaling $108 million related to various divestitures. See the " Principal Divestitures" note to the financial statements. Profitability sustained During the pasMew years, Monsanto has initiated comprehensive programs of asset management and cost reduction. These programs were significant contributors to diffiCUit economic minimizimo the,ee2 eet inceme eecl>ee e iewerino the evereli ereexeve, peier ef in v manufacturing facilities. Inventory levels were curtailed as part of these programs and Climate by cost resuked in aftenax income of $43 million and $21 million in 1982 and 1981, respectively, reduction and asset from nonrep'acement of io, cost inventories uneer tne tiFo (iast-in. first.out> inventory method. management Aftertax foreign currency losses in 1982 of $6 million were reported under a new pf0gfams accounting method. In 1981, reported foreign currency gains were $29 million, up substantially versus 1980. See the " Foreign Currency" discussion on page 39. The effective tax rate for 1982 was lower than in 1981 aue principally to the larger impact of investment tax credits. In 1981, the effective tax rate was higher than in 1980 as a result of lower investment tax credits and Domestic International Sales Corpora-tion (DISC) tax benefits. Earnings per share were $8.79 in 1982, versus $11.50 and $4.10 in 1981 and 1980, respectively in 1982 and 1981, eamings per share were impacted by additional shares issued in those years. Pro forma eamings per share for 1982 are disclosed in the "Eamings per Share" note to the financial statements. Analysis of Change in Earnings per Share -Increase (Decrease) 1982 vs.1981 1981 vs.1980 Selling prices $ 2.30 $10.31 Sales volume and mix (3.96) 2.87 Raw material prices 2.77 (3.47) Other manufactunng costs (1.22) (4.10) Divestitures (2.01) 4.72 Start-up costs (0.09) 0.62 Nonmanufacturin0 expenses (1.13) (1.14) Operating income (3.34) 9.81 Interest expense 0.31 0.22 Other income credits-net (0.36) (031) Effective tax rate 0.40 (1.55) Extraordinary item 0.58 Shares outstanding (0.30) (0.77) Change in eamings per share $(2.71) $ 7.40

35 Quarterly Results Aftertax Cost Foreign of Currency Earnings Net Goods Gains Net per Year Quarter Sales Sold (Losses) Income Share 1982: First $1,732 $1,264 $ 14 $147 $ 3.71 Second 1,623 1,240 (1) 87 2.17 Third 1,505 1,166 (8) 71 1.79 Fourth 1,465 1,142 (11) 47 1.12 Total $6,325 $4,812 $ (6) $352 $ 8.79 1981: First $1,900 $1,390 $ 10 $176 $ 4.81 Second 1,856 1,473 23 94 2.35 Third 1,634 1,190 (1) 123 3.09 Fourth 1.558 1,248 (3) 52 1.25 Total $6,948 $5.301 $ 29 $445 $11.50 Anricultural Income before the extr ordinary gain on the exchange of outstanding debt for U common shares was $24 million ($0.54 per share) for the fourth quarter of 1982. seasonality; cost ouarterty consoridated sales and income typically exhibit the seasonality of the agi-reduction programs. culturai business. Agricultural products' sales are heavily concentrated in the first half of the year, particularly in the first quarter, and have greater profitability than other lines nOncecurring items; of businesses. on a year-to-year basis, quarteriy consoiidated sales in 1982 trailed and recession imnact those of 1981. However, it is impodanno note thaMhe penodhpenod sales canpan-t' son reflects a combination of business divestiture impacts, year-to-year recessonary results fectors. ene the iefleence ef e streeothen>eo ue>1ee steres eeiler ee exne,1 seiee. All quarterly results in 1982, as compared to the corresponding prior year's quarter, reflect the impact of the adoption of a new accounting method for foreign currency translation (see " Foreign Currency" on page 39). Other nonrecurring and/or unusual items impacting 1982's results are as follows: 1982 First Second Third Fourth Impact on Eamings per Share Quarter Quarter Quarter Quarter Gain from nonreplacement of low cost inventory ters under LIFO method $0.06 $ 0.13 $0.13 $0.76 Mexican peso devaluaton 0.25 0.02 (0.18) (0.27) Gain or loss from facihties shutdown or sold (0.22) 0 03 (0.07) Earty retrement program cost (0.05) (0.21) Extraordinary gain on exchange of debt for common shares 0.58 Total $0.31 $(0.07) $(0.07) $ 0.79 Third quarter 1981 includes a $1.75 per share gain from the sale of the Company's net assets related to a joint venture. In 1981, aftertax gains from nonreplacement of low cost inventories under the LIFO method were $0.09, $0.12, $0.18 and $0.16 per share in the first through fourth quarters, respectively.

l 36 Ogating Unit Segment Data Operating Depreciation Net income Total and Capital 1982 Sales (Loss) Assets Obsolescence Expenditures Agricultural and Nutntonal Products $1,311 $426 $1,180 $ 71 $125 Rbers and Interrnediates 1,257 (25) 1,152 136 91 Industnal Cherrucals 810 100 779 56 163 Polyrner Products 1,786 23 1,138 76 73 Engineered Products and Other Busiresses 573 (27) 985 85 188 Rsher Controls 588 52 418 13 27 Ermnatons (5) Corporate expenses (43) 2 T:t:1 operating 6,325 501 5,652 439 667 incomo charges-ret 425 6 Nonoperating asets Tot:1 consolidated $6,325 $501 $6,077 $439 $673 1981 Agricultural and Nutntonal Products $1,234 $414 $1,011 5 55 $108 Rbers arid Intermedetes 1,432 36 1,300 96 118 indusmal Chemcals 898 140 670 68 105 Polymer Products 2,147 77 1,390 (25) 97 Engineered Products and Other Busnesses 600 5 853 54 210 Rsher Controls 637 68 435 13 24 Ehminatons (2) Corporate e. mnses (36) 2 T t:1cperating 6.948 702 5,659 263 662 9 income charges-net 410 6 Nonoperating assets T:t:1 consolidated $6,948 $693 $6,069 $263 $668 1980 Agncultural and Nutntonal Products $1,030 $355 $ 811 $ 43 $ 75 Fibers and intermediates 1,371 (270) 1,449 231 152 Industrial Chemicals 890 171 618 63 127 Polymer Products 2,199 (82) 1,601 157 218 Eng neered Products and Other Busiresses 491 5 634 41 180 Rsher Controls 33 72 413 10 23 Ehminations (2) Corporate expenses (39) 2 T tal operating 6,574 210 5,526 547 775 4 locome charges-ret 270 6 Nonoperating assets T:tal consolidated $6,574 $20G $5,796 $547 $781 The above data should be read in conjunction with the " Restatement" discussion which follows and the " Segment information" note to financial state-ments on page 56.

37 Restatement Effective January 1,1983, Monsanto's internal operating structure was reorganized to integrate raw materials with downstream products and to better serve related markets and technologies. Consistent with this new direction, certain product management responsibilities were realigned. The Company is using a market-based Internal ot'ecatinm t<e"e'er ar>ce a '>cv < < meterte's - v>"o 'et*ee" oe<et>"o "">te ^'i ene<et>"o "">t n tf financial data shown in this Annual Report have been restated to reflect the structure reorganized reorganization. Prior to the reorganization, certain chemicals such as acrylonitrile, ammonia, styrene monomer, nylon salt, phosphorus and phenol were used by several operating units as intermediate " building block" materials. One operating unit was responsible for the management of the manufacturing operations related to most of these materials. However, each operating unit that used the " building block" chemicals in the manu-facture of end products was considered to be the joint owner of the manufacturing facilities and shared the product manufacturing costs and investments based on its annual production commitment. Aaricultural business Agricultural and Nutritional Products Sales for 1982 were up 6 percent over 1981 levels due to the full year impact of prior period seiling price increases and 1982 s Strong but. Impacted vdume improvements, with 1982 operating income growing 3 percent. DespRe the poor U.S. farm income situation, sales of Lasso and Roundup herbicides improved by weak farm _ver 1981 ieveis, but Roundup saies growth in 1982 was less than experienced in prior economy years for this leading crop chemical. Nutrition chemicals' sales continued to grow in 1982. In 1981, agricu tura! and nutritional products' sales increased 20 percent from the prior year, with a 17 percent increase in operating income. Fibers and Intermediates in 1982, sales declined 12 percent from 1981 levels due to recession driven volume decreases and discontinuation of the polyester staple business. The 1982 operating loss, as compared to a 1981 profit, reflects significant reduction in man-made fibers industry demand, a $15 million obsolescence charge for Man-made fibers hard tne poiyester staple discontinuation and a $20 million loss on the planned sale of the hit bv recession crylic fibers business in Europe. These factors were mitigated somewhat in 1982 by 1 an $18 million reduction in the estimated costs related to prior years' shutdowns and a $20 million favorable impact from nonreplacement of lower cost LIFO inventories. Although impacted by the 1980 withdrawal from the polyester filament business, sales in 1981 were up 4 percent versus 1980. Operating results improved in 1981, favor-ably impacted by a $25 million gain due to nonreplacement of low cost LIFO inventories. In 1980, operating results included a $121 million write-off for the polyester filament discontinuation. Industrial chemical Industrial Chemicals Sales for 1982 decreased 10 percent from the prior year and related operating income was down 29 percent. Depressed activity in several markets markets depressed served by inese products accounts for tne year-to-year decrease. Operating income in 1982 includes a $27 million favorable impact from the nonreplacement of low cost LIFO inventories and an $11 million net gain as a result of the sale or shutdown of various production facilities. In 1981, sales were flat compared to 1980, and operating income was down 18 percent due to the recessionary conditions that were also evident in 1981. Weak automotive and Polymer Products Sales decreased 17 percent in 1982 versus 1981 due to declin-ing volumes as a result of recessionary conditions, particularly in the automotive and housing markets nousing markets. and a 1981 divestiture. Operating income also declined in 1982. The year-to-year decline was due to inclusion in 1981 of a $124 million gain from the d' vest-r impact polymer aure exciuding tnis nem, operating income improved in 1982 renecting benefas from products asset management and cost reduction programs and a $35 million favorable impact from nonreplacement of low cost LIFO inventories. Offsetting these favorable factors in 1982 were poor economic conditions and a $15 million charge for shutdowns of various production facilities. Sales in 1981 were down slightly versus 1980, although operating results improved substantially. This improvement was princ: pally due to a $124 million gain from a 1981 sa!e of not assets related to a joint venture, whereas 1980 was negatively impacted by a $66 million charge from a divestiture. Engineered Products and Other Businesses This operating unit segment includes fabricated products, electronic materials, chemical and environmental systems and oil and gas activities. Sales decreased over 4 percent in 1982 versus 1981 due principally to the Monsanto Enviro-Chem Systems, Inc. (Enviro-Chem)- a

38 subsidiary - reduced level of construction projects and lower fabricated products sales. These reductions were offset partially by increased Oil and Gas sales. Operat-ing results were down significantly in 1982 from 1981 levels mainly because of higher idle plant costs in the electronics' business, fewer Enviro-Chem construction projects, Other businesses also and bwer fabricated products business. In 1981, sales increased 22 percent over hurt bv the recession 1980, akhough operating income was flat due to start-up and idle plant costs in the electronics business, partially offset by better Oil and Gas and Enviro-Chem profitability. Denressed canital Fisher Controls Sales were down 8 percent in 1982 compared to 1981, and oper-ating income decreased 24 percent. Lower sales in 1982 were due to the depressed F F spending impacts ievei of wodewide capitai spending, particuiady in the oii and gas ineustry. and increased competition and economic instability in Mexico. These factors were offset Fisher semewhet b, h,ghe, se,,1ng,,,ces.,n,ee,. se,es,nc,eesee,,e,cen, eve, the,,,e, year, although operating income was down slightly. A combination of selling pnce and volume increases accounts for the 1981 sales improvement, but a strong U.S. dollar and a faltering European economy adversely affected that year's results. International Area Basis Data The wodd area segment data in the notes to the financial statements on pages 56-57 were prepared on an " entity basis"-i.e., sales and income as recorded in the finan-cial statements of the legal entity are assigned to the wodd area where the entity is located (e g., a salo from a Untd States' subsidiary to a customer in Brazil is reported as a United States transaction). This presentation is required by generally accepted accounting pnnciples. However, Monsanto views internal financial results on an " area basis" wherein sales and income are assigned to the wodd area where the customer is located (e g., a sale from a United States' subsidiary to a customer in Brazil is reported as a Latin American transaction). The table and discussion wtiich follow summarize Monsanto's " area basis" results of operations. Ex-U.S. sales and 'ataraatioaai saia= =ad operatias iacoma 1982 1981 1980 income denressed by Saes by exuS subscanes (entity Ws) $1,976 $2.218 $2,199 r U.S. export sales 864 1.042 1,027 global recession and interarea ebnamns (601) (698) (625) strong U.S. dollar iat' raat'oaai =a'a= (ar*= ba$'*) $2,239 $2,562 $2,601 Operati g income (loss)of ex-U.S ti subsidianes (entity basis) $ 80 $ 104 $ (7) U S export operating profit, net of allocated admnstratrve expenses 35 76 142 Equity in ex-U.S. affiriates' net income (loss) (11) 34 16 International operating income (area basis) $ 104 $ 214 $ 151 Euronean economies Europe-Africa Area sales for 1982 were $1,092 million, down 14 percent from 1981 levels because local manufacturing operations were depressed by general recession-r generally weak ary factors. Area operating income for 1982 was $48 million, a decrease of 25 percent from 1981. Included in 1982 results was a $20 million loss on the planned sale of the acrylic fibers business in Europe and a $4 million net charge due to the discontinua-tion or sale of other production facilities in the United Kingdom. The change in accounting principles for foreign currency translation (see " Foreign Currency" on page 39) favorably impacted the 1982 to 1981 income comparison. In 1981, area sales were down from the prior year reflecting the 1980 divestiture of the Company's Spanish subsidiary Area operating results in 1981 were much improved over 1980, as the 1980 resuns reflected a $66 million charge due to the divestiture. Canadian economv C8"* d' "" ^ **c' ^'* S 'es in 1982 were $597 million, down 14 percent J from 1981 levels. Some Latin Amencan economies were relatively strong but could not weak; Mexican peso offset tne impacts of the Mexican peso devaiuation and of the significant recession in Canada. Area operating income was $35 million in 1982, a 61 percent decrease from -impacts profits tne pnor year, redecting bwer resuas from Mexican operatbns including a $9 million loss from devaluation of the Mexican peso, decreased U.S. exports to the weak

39 Canadian and Brazilian economies, and an $8 millon wnte-off from the shutdown of a Canadian production facility. In 1981, area sales and operating income increased as compared to the prior year. U*S Asla-Pacific Area sales in 1982 were $550 million, an 8 percent decrease As exnorts sufferin r' compared to 1981 Area operating income in 1982 was $21 million, a 67 percent ia-Pac,if,ic decline from 1981. Tne decreased 1982 results were due principally to a lower level of U.S. exports. A stronger United States dolla versus other currencies adversely impacted the competitiveness of U.S. exports. In 1981, area sales and operating income improved over the prior period. Raw Materials and Energy $2.435 18 3.042 LI:Ie 2.990 Raw materials and energy include petrochemical feedstocks and energy used in production processes. Overall, these costs decreased significantly in 1982, after a relatively small increase in raw materia! and energy costs in 1981 over 1980. Raw material prices decreased approximately 5 percent in 1982, following increases of approximately 13 percent and 25 percent in 1981 and 1980, respectively. Raw material and Raw matsial contracts for key materials have been secured with terms and con-ditions which support the econcmic and security of supply requirements of Monsanto's energy costs decl,ine business units. in addition, tne Company coatinues to have available hydrocarbon resources from its Monsanto Oil Company subsic;ary, which resources can be used { in hydrocarbon sourcing programs, if required. Research and Development DI:P $256 193 225 L'I:In 208 Research and oevelopment costs continued at a high level in 1982, increasing to 4 percent of sales as compared to 3 percent in 1981 and 1980. In addition to these period costs, substantial new capital expenditure commitments were made in 1982 for expanded research facilities at a new St. Louis County, Missouri, location. This level of funding, in lignt of the worldwide recessionary conditions and necessary cost reduc-tion measures in 1982, testifies to Monsanto's continuing corrmtment to generate new products and processes. Research and Research in traditional areas of strength such as catalysis, polymer science, agricul- ,u,e, chem,s1.y cnemicai engineering systems, and appiication research is on-going. development funding The Company also has intensive and growing R&D programs in plant biology, animal nutrition, electronic matenals, biotechnology, molecular biology, and human health increased. 1982 in care. In 1982 Monsanto entered into a five-year, $24 million collaborative agreement with Washington University aimed at discovering new therapies for major human diseases. In January 1983, Monsanto announced the formation of the Health Care Division which will coordinate the Company's biomedical research and development programs. Foreign Currency 1982 1981 1980 Classification of Gains (Losses) (sFAs No 52) (sFAs No 8) (sFAs No 8) Income Statement: Pretax gains (losses) $ (15) $ (28) $ 12 income taxes (9) (57) 11 Aftertax gains (losses) $ (6) $ 29 $ 1 Per share $(0.15) $0.75 $0.03 Balance Sheet: Accumulated currency e@ustment net change $ (106)

40 As mentioned in the Summary of Significant Accounting Policies, Monsanto adopted New accounting Statement of Financial Accounting Standards No. 52 (SFAS No. 52), " Foreign method adopted for Currency Transiae, beginning in 1982. Accordingly, in 1982 most ex-U.S. assets and liabilities were translated at current exchange rates and most translation impacts were foreign currency renected in a new accumuiated currency adjustment account in shareowners equity. imnaCls in ddition to the reported impacts as reflected in the above table, income was r' adversely impacted in 1981 under SFAS No. 8 (the previously required translation procedures) by the use of historical currency rates to translate inventory and deprecia-tion expense. The Company significantly reduced its hedging actions (i.e., the use of forward exchange contracts) in 1982. Because of hedging actions by the Company under SFAS No. 8, it is not practical to restate prior years' foreign currency impacts on a basis comparable to 1982. Also, for the same reasons,1982 foreign currency impacts were not accumulated on a " pro forma" SFAS No. 8 basis. Mexican neso me 1982 reponed forecn wnency loss was principally due to the Mexican peso r' devaluations. The 1981 aftertax gain reflects the general strengthening of the United devaluation adversely States doiiar against severai correncies. imnacts nrofitability Be Company's ex-U.S. subsidiaries and affiliates generally use the local currency as the functional cur ency under SFAS No. 52 because of their relatively "self-contained" r r operations. Working and fixed capital needs for these entities are generally met through internal operations and local country borrowings, supplemented by additional equity capital or intercompany borrowings from the Company when appropriate or necessary. Monsanto has subsidiaries or affiliates in Argentina, Brazil and Mexico, for which the U.S. dollar was designated the functional currency because of the hyperin-flationary conditions in those countries. There are no currency restrictions that are expected to have a significant impact on the Company's tota! cash flow, liquidity or capital resources as a result of ex-U.S. operations. Monsanto's major functional currencies, in terms of currency exposure, are the United Kingdom pound sterling and Belgian franc. Other important currencies include the West German mark, French franc, Canadian dollar and Australian dollar. Significant currencies of Monsanto's equity affiliates are the Japanese yen and Mexican peso. Inflation-Adjusted Data Year ended December 31,1982 Current Cost Historical (in Average Cost 1982 Dollars) Net sales $6,325 $6.325 Cost of goods sold. excluding depreciation 4,416 4,499 Depreciation expense 396 567 Marketing. administrative and technological expense 1,012 1.012 Other expense and income-net Income taxes 172 172 Income before extraordinary item $ 329 $ 75 The " current cost" disclosures, which reflect adjustments based on estimates of the current cost to replace existing assets in kind, attempt to measure the impact of infla-tion on specific Monsanto assets. The following items are adjusted for inflation: inventories; property, plant and equipment; cost of goods sold; and depreciation expense. Income tax provisions are not adjusted for the inflation effects. All current cost data is stated in average 1982 dollars using the U.S. Consumer Price Index - All Urban Consumers calculation method. This method is otherwise known as the " translate-restate" method. in peu onnnam nistoricai cost eamings can overstate the abiiity of most manu-Cumulative effects of facturing companies to generate cash flow from operations sufficient to provide for , flation Continue to seeimees ene civieene orewth in e reel seese. Infletien effects mest firet se in e " financed" from historical cost earnings by increased expenditures to replace wom out

d. tort h. ton. cal results and obsoiete faciiities. wniie many of these faciiities wiii not be replaced in their is is current form as the computational methoc's of the current cost data suggest - tech-

41 Profit imnrovement nd gic I dv n s wNnwrp r ted as replacement occurs and some facilities will r' never be replaced - nevertheless, the data are useful in approximating certain infla-programs, asset ten effects. redenlovment and T m int ^i" Pr 'd bi'ity in an infiationary environment, Monsanto increases seiiing prices as cost and competitive conditions warrant and continually searches for ways r > technology advances to reduce wsts. Improved techndogy, increased productivity and successful energy conservation and asset management programs allow Monsanto to remain competitive lessen,inflat, ion impact from a seHing price standpoint, while mitigating some of the impact of rising costs. In addition, management is constantly reviewing Monsanto's businesses to determine those with long-term economics that will not justify continued investment. Monsanto has disposed of several such businesses in recent years. The 1982 increase in current cost of inventories and property, plant and equipment, stated in average 1982 dollars, was $144 million. At December 31,1982, the current cost of inventory and property, plant and equipment (net of accumulated depreciation) was $1,272 miHion and $4,230 million, respectively, stated in yearend 1982 donars. Inventories determined on a FIFO (first-in, first-out) basis were used to approximate inventories on a current cost basis. Cost of goods sold as determined on a LIFO basis (after adjustment for the impact of nonreplacement of low cost inventories) or similar techniques were used to approximate cost of goods sold on a current cost basis. The current cost of property, plant and equipment was generally estimated using appropri-ate construction and equipment indices. Accumulated depreciation for the current cost of existing facihties and related expenses were estimated using the same overall methods and rates as used in the historical cost financial statements. Selected Financial Data 1982 1981 1980 1979 1978 Historical cost, as reported (see notes): Net sales $6,325 $6.948 $6.574 $6,193 $5,019 Incorne before extraordinary item 329 445 149 331 303 Income before extraordinary item per share 8.21 11.50 4.10 9.11 8.29 Total assets 6,077 6.069 5,796 5,539 5,036 Long-term debt 1,003 1,110 1,371 1,203 1,224 Dvidends per common share 3.95 3.75 3.55 3.35 3.175 Current cost data, in average 1982 dollars: Income (loss) before extra-ordinary item 75 225 (36) 250 income (loss) before extra-ordinary item per share 1.87 5 81 (1.00) 6.87 Purchasing power gain on net monetary items 33 104 158 163 Increase in specific pnces of inventory and property over (under) increase caused soleY by generalinflation (73) (32) (327) 128 Aggregate foreign currency translation adystment, net of income taxes (176) Net assets 4,799 5.179 4,762 4.952 Other data,in averaga 1982 dollars: Net sa!es 6,325 7,374 7,702 8,235 7,426 Dvidends per common share 3.96 4 01 4 20 4.51 4.73 Market pnce of common stock at yearend $75.39 $72.02 $7680 $74.97 $67.00 Average consumer price index 289.1 272.4 246 8 217.4 195.4 Notes: In 1982, the requirements of Statement of Financial Accounting Standards No. 52," Foreign Currency Translation," were adopted. Beginning in 1980, interest costs related to construction-in-progress expenditures were capitahzed in accordance with Statement of Financial Accounting Stan-dards No. 34. " Capitalization of Interest Cost." In years prior to 1980, all interest costs were expensed as incurred. The etfect of the new accounting principle was to increase 1980 net income by $28 rnilhon, or 50.76 per share.

42 Review of Liquidity and Capital Resources Short-Term Liquidity and Capital Resources Funds Provided from Operations PI* $880 DI:1 806 L'I;D 668 Monsanto's 1982-1980 sources and uses of funds, defined as cash, time deposits, certificates of deposit and short-term secunties, are shown in the Statement of Changes in Consolidated Financial Position on page 52. Monsanto maintains M ns nto has substantially maintained its strong cash position at yearend 1982, with cash and cash equivalents decreasing slightly to $414 million as compared to the Strong Cash posit. ion 1981 level of $426 million. Funds provided from operations, before working capital changes, increased $74 million in 1982 versus 1981. A continued emphasis on man-While funding future aging tne Companys assets has resuned in good controi over woming capitai 9fowth onnortunities re@iremets, while capital expenditures in the last two years have been essentially r r-level. In addition, funds were provided by new common shares issued during 1981 ano used to liquidate outstanding debt. In 1981, significant proceeds were also received from the safe of the Company's net assets related to a joint venture. While cash is generated by operations throughout the year, significant receipts from agricultural products sales are concentrated in the first half. Tax and dividend payments are generally made quarterly, but most other significant sources and uses of funds occur throughout the year with the general level of operations. The current ratio, an indication of liquidity, continued to improve in 1982 to 2.6:1. The 1981 current ratio was 2.41 compared to 2.1:1 in 1980. Management believes a work-ing capital ratio of at least 2.0:1 is desirable. Working capital (current assets less j current liabilities) increased in 1982 to $1,503 million as compared to $1,486 million gggn yV {g' in 1981, as current liabihties declined more than current assets. Inventory reductions U position improves in 1982 reftect continued stringent controi of inventcry levels and the discontinuation of certain product lines. Yearend 1982 receivables were comparable with 1981. The Company has available various short-term bank facilities, which are further discussed in the "Short-Term Debt and Bank Credit Arrangements" note to the finan-cial statements. When necessary, short-term lines of credit and commercial paper are Short-term debt used to 6 nance woAing capital and provide " bridge" financing for capital require-ments until more attractive rates prevail in long-term debt markets. Short-term debt decreases decreased to $131 million in 1982 as compared to $175 million in 1981.

43 Long-Term Liquidity and Capital Resources Capitsi Expenditures yP $673 1981 668 781 Capital expenditures shown in the graph include $46 million, $44 million and $52 million of capitalized interest for 1982-1980, respectively At December 31,1982, Monsanto had purchase orders and contracts outstanding amounting to approximately $126 million in connection with uncompleted additions to property Expenditures for capital equipment are typically financed by a combination of cash provided from operations and long-term debt. In 1981, the Company issued 3,000,000 new common shares and used the proceeds to reduce debt that had been incurred to fund the capital expenditure program. Long-term debt was further reduced Mnl9 Canj{gl in 1982 through an exchange for 988,075 common shares. As a result of the common P P share issuances and the reduction of long-term debt, the long-term debt to capitaliza-resources provide tion ratio decreased to 22 percent in 1982 as compared to 25 and 33 percent in 1981 and 1980, respectively Over the long term, Monsanto believes that its appropriate future flexibiIity iong. term debt to capitalization ratio is approximately 33 percent. The interest cover-age ratio (times), excluding the 1982 extraordinary item and the effect of capitalized interest, was 4.6 in 1982, as compared to 5.5 in 1981. The Company has made extensive use of pollution control and industrial development bonds, including an additional $38 million in 1982, to finance qualified projects. Because of the tax status of these obliga'bns, the associated interest rates are very i favorable. The Company will continue to pursue this form of financing when available in the future. While industrial development bond obligations now comprise 25 percent of all Monsanto's outstanding long-term debt, the individual issues have not been substantial. Monsanto has 'n addition to the use of iong-term debt. Monsanto has occasionany used otner forms of financing, pnncipally lease arrangements and joint venture arrangements involving available van,ous take-or-pay contracts. These alternative forms of financing are used when the effective interest cost is attractive or the nature of the capital project requires their use. The long-term Company wiii consider using iease, joint venture and otner innovative financing EnanCinn alternatives rr ngements in the future, as appropriate, but the extent of ' heir use in Monsanto's U overall financial structure has not been significant in the past. Virtually all of the assets reflected in Monsanto's financial statements are free from lien and are not used to collateralize debt. Accordingly, these assets represent a source of additional debt capacity, although the Company has no present plans to pursue this 9 source of financing. Through the Monsanto Oil Company subsidiary, Monsanto is involved in oil and gas exploration activities and owns reserves with a significant current value that is not reflected in the accompanying financial statements. The Company's proved reserves represent a valuable asset that could be used to increase its total debt capacity in addstion, Monsanto Oil Company's undeveloped acreage, or some portion of it, could be used in future joint arrangements with outside parties to provide funding for explo-ration and development of the acreage.

44 Common Stock Data Dividends per Common Share Quarter 1982 1981 Rrst $0.95 $0.90 Second 1.00 0.95 Third 1.00 0.95 Fourth 1.00 0.95 Total year $3.95 $3.75 Common Stock Prices Quarter 1982 1981 High Low High Low Rrst $70% $60 $77% $67 Second 68 % 56 % 87W 69W Third 79 % 57 % 81 % 59 4 Fourth 89 72 72 % 60 % 1982 1981 e Shareowners' equity per common share $85.97 $84.37 Monsanto's common stock is traded principally on the New York Stock Exchange. The number of common shareowners of record as of February 22,1983, was 74,979 and the nigh and low common stxk price on that date was $84%$83%. During the past two years, the Company issued nearly 4,000,000 additional new common shares in two major transactions. In addition, Monsanto has convertible preferred stock, convertible debentures and convertible loan stock outstanding which result in periodic issuances of common stock upon conversion. Common shares are also regularly issued under employee stock option plans. There were 2,146,379 common shares reserved for convertible securities and stock option plans at Decem-ber 31,1982. A treasury stock acquisition program is in place to mitigate, when appropriate, the dilutive effect of the issuance of common shares under stock option and employee stock ownership plans and outstanding convertible securities. Also, the Company has an employee stock purchase program whose requirements are imme-diately funded with the purchase of treasury shares. Dividends increase for The Company has paid dividends on its common shares -without interruption or reduction - since 1928. The dividend is paid quarterly and has been increased in 10th consecutive year each of the past ten years. The dividend payout of 45 percent for 1982 is slightly higher than the average dividend payout over the last ten years because of the increased dividend rate and the somewhat lower level of eamings in 1982. The Company's dividend policies are not necessarily tied to a set payout percentage.

45 Oil and Gas Activities Proved Reserves (Oil Equivalent-Millions of Barrels) m ust 139 134 -el:9 133 in recent years, Monsanto has expanded its exploration efforts for hydrocarbon reserves. The Company's former Oil and Gas Division was established in 1982 as a separate wholly-owned subsidiary, Monsanto Oil Company, with activities principally located in the United States. Certain data regarding Monsanto Oil Company follow. Net Quantities of Proved Reserves Natural Developed and Undeveloped Reserves 0 11( 1 ) Gas (2) December 31,1979 24 614 Revisonsof previousestimates (24) Purchases of minerals-in-place 1 Extensons and ciscovenes 4 64 Producton (3) (36) December 31,1980 30 619 Revisons of prevous estimates (1) (26) Purchasesof minerals-in-place 2 1 Extensons and discoveres 6 45 Producton (3) (40) December 31,1981 34 599 OUantities of nroved a-i.i n. > ar-i - 1i-.1. = r Purchase.of minerais-in-place 1 reserves increase e 1en.io n..n ei.c ove,ie. e 4. Production (4) (38) December 31,1982 38 607 (1) Stated in millions of barrels. (2) Stated in billions of cubic feet (Bcf). In determining the estimated future cash inflow data which follow, actual 1982 yearend selling prices for oil and gas were used as prescribed by Statement of Financial Accounting Standards No. 69, " Disclosures about Oil and Gas Producing Activities." Similarly, future production and development costs were determined by using the actual 1982 yearend cost levels. A discount rate of 10 percent was used. The Company cautions that changes in the discount rate, future selling prices, or cost, production or reserve estimates made in developing the data could significantly affect the results. The capitalized costs of proved reserves, net of related accumulated depreciation, depletion and amortizaton, were $346 million as of December 31,1982.

t 46 Standardized Measure of Discounted Future Net Cash Flows 1982 1981 1980 Future cash infbws $3,491 $3.003 $2.945 Future productm and development costs 736 530 471 Future income tax expenses 1,190 1.064 1,102 Future net cash flows 1,565 1,409 1,372 Annual discount for estimated timing of cash flows 1,113 950 1,053 Discounted future Standsdimd mesm f dinounted future net cash flows $ 452 $ 459 $ 319 net cash flows from Proved reserves Change in Standardized Measure of remain signif.icant oi.countee,utu,e Nei Ca.h eio. 19 2

1ee, see0 Beginning of year

$459 $319 $202 Sales, net of productm costs (149) (126) (88) Net change in pnces and production costs 52 5 211 Extensions, discovenes and imprwed recovery less related costs 118 123 58 Purchases of rnnerais-in-place 10 39 3 l Devebpment costs 'rcurred 4 23 8 Revisms in previous quantites 16 (30) (16) Accretmof discount 46 32 20 Net change in income taxes 37 (65) (80) Other, pnncipally change in estimate of producton rate (141) 139 1 End of year $452 $459 $319 u

47 Financial Statements Summary of Significant Basis of Consolidation The consolidated financial statements include the Acccunting Policies Company and its majority-owned subsidiaries. Intercompany transactions have been eliminated in consolidation. Investments in affiliates in which Monsanto has an owner-ship interest between 20 and 50 percent are accbunted for by the equity rnethod. Foreign Currency Translation Effective January 1,1982, foreign currency trans-actions and financial statements are translated in accordance with Statement of Financial Accounting Standards No. 52 (SFAS No. 52). The functional currency of substantially all ex-U.S. subsidiaries is the local currency Intercompany advances to ex-U.S. subsidiaries are generally presumed to be of a long-term investment nature. The hyperinflationary countries in which Monsanto had significant operations in 1982 were Brazil, Mexico and Argentina. For 1980 and 1981, foreign currency transactions and financial statements were trans-lated in accordance with Statement of Financial Accounting Standards No. 8. It was not practical to restate these years under SFAS No. 52. Depreciation The straight-line method of computing depreciation is generally used, with approximate weighted average assigned lives of 23 years for buildings and 12 years for machinery and equipment. Income Taxes Investment tax credits are recorded as a reduction of income tax expense in the year they offset the Federal income tax liability income taxes have not been provided on undistnbuted eamings of ex-U.S. subsidi-aries since any taxes on dividends would be substantially offset by foreign tax credits. Income taxes have not been provided on a substartial portion of the undistributed eamings of domestic subsidiaries, including domesic intemational sales corporations (DISC's), because Monsanto intends to indefinitely reinvest those eamings. Inventory Valuation inventories are stated at the lower of cost or market. Actual cost is used for raw materials and supplies, and standard cost, which approximates actual cost, is used for finished goods and goods in process. Standard cost includes elements for direct labor, raw material and manufacturing overhead based on practi-ca! capacity The cost of substantially all domestic inventories is determined by the last-in, first-out (LIFO) method. The cost of other inventories is generally determined by the first-in, first-out (FIFO) method. Oil and Gas Activities Oil and gas exploration and production activities are accounted for using the successful efforts method.

48 independent Auditors' Opinion To the Shareowners of Monsanto Company: on Financial Statements We have examined the statement of consolidated financial position of Monsanto Company and Subsidiaries as of December 31,1982 and 1981 and the related state-ments of consolidated income, shareowners' equity and changes in financial position for each of the three years in the period ended December 31,1982. Our examinations were made in accordance with generally accepted auditing standards and, accord-ingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such consolidated financial statements present fairly the financial posi-tion of Monsanto Company and Subsidiaries at December 31,1982 and 1981, and the results of their operations and changes in their financial position for each of the three years in the period ended December 31,1982, in conformity with generally accepted accounting principles consistently applied during the period except for the change, with which we concur, in 1982 in the method of translating foreign currency trans-actions and financial statements as described in the Summary of Significant Accounting Policies. 484% M/6 i Saint Louis, Missouri February 25,1983 l l L-

49 Stat: ment of Consolidated Income Tg (Dollars in rndhans, except per share) 1982 1981 1980 Net S:les $6,325 $6,948 $6,574 Cost of goods sold 4,812 5,301 5,476 Marketing and administrative expenses 691 656 615 321 289 273 Technological expenses 5,824 6,246 6.364 501 702 210 Opersting income Other expense and income: 82 101 112 Interest expense Interest income 63 68 36 Other income - net 19 24 72 9 4 income Before income Taxes and Extraordinary Gain 501 693 206 income taxes 172 248 57 b income Before Extraordinary Gain 329 445 149 Extraordinary gain from exchange of debt for common shares 23 Net income $ 352 $ 445 $ 149 Ezrnings per Share: Before extraordinary gain S 8.21 $11.50 $ 4.10 After extraordinary gain 8.79 11.50 4.10 The above statement should be read vi coopnction wth page 47 and pages 54 through 57 of this report

50 Statement of Consolidated Financial Position (Donars in rnthons, except per share) At December 31 Assets 1982 1981 Current Assets: Cash 51 $ 82 Time deposit.s and certificates of deposit 92 127 Short-term securities, at cost which approximates market 271 217 Trade receivables, net of allowances of $38 in 1982 and $39 in 1981 1,076 1,073 Miscellaneous receivables and prepaid expenses 140 178 inventories 824 873 2,454 2,550 inv::tments and other Assets: Investments in affiliates 137 175 Other assets 173 160 310 335 Prcperty, Plant and Equipment, at Cost: Land 61 58 Buildings 675 666 Machinery and equipment 4,920 4,600 Mineral rights and oil and gas properties 625 475 Construction-in-progress 249 419 6,530 6.218 Less accumulated depreciation 3,217 3,034 3,313 3,184 ht:1 Assets $6,077 $6.069 The above statement should be read r1 conjuncDon wth page 47 and pages 54 through 57 cf this report.

51 Monsanto Company and subsidianes At December 31 Liabilities and Shareewners' Equity 1982 1981 Curr:nt Liabilities: Accounts payable $ 379 $ 492 Wages and commissions 102 107 income and other taxes 123 99 Miscellaneous accruals 216 191 Short-term debt 131 175 951 1,064 Long T2rm Debt 1,003 1,110 DefIrred Credits and Other Liabilities: Deferred income taxes 493 421 Other liabilities 31 30 524 451 Minority interests in Subsidiarles 109 114 Shir: owners' Equity: Preferred stock - authonzed.10,000,000 shares, no par vc'ue; issued and outstanding, 91,902 shares in 1982 and 99,151 shares in 1981 Common stock - authorized, 100,000,000 shares, par value $2, issued, as,966,159 shares in 1982 and 39,978,084 shares in 1981 82 80 Additional contributed capital 931 853 Accumulated currency adjustment (122) Reinvested earnings 2,621 2,423 3,512 3,356 Less treasury stock, at cost (common shares of 368,548 in 1982 and 509.800 in 1981) 22 26 3,490 3.330 Tot:1 Liabilities and Shareowners' Equity $6,077 $6,069

52 i Statement of Changes in Consolidated Financial Position TM (Donars vi n*rs) Sources (Usos) of Funds 1982 1981 1980 Operations: Income before extraordinary gain $ 329 $ 445 3 149 Charges not using (credits not providing) funds: Depreciation and obsolescence 439 263 547 Deferred income taxes 85 83 60 Other-net 27 15 (88) Funds provided from operations, before changes in working capital 880 806 668 invsstment and Other Tiransactions: Working cag: ital changes: Trade receivables (3) 33 (21) Inventories 49 (41) 78 Other current assets 38 51 (36) Accounts payable and accrued liabilities (69) (23) 9 Short-term debt (44) (64) 6 Property, plant and equipment additions (673) (668) (781) Net proceeds from safe of assets related to joint venture 219 Property disposals 31 33 8 Foreign currency adjustments (60) Other - not 10 51 (70) (721) (409) (807) Fin:ncial Tlransactions: Issuance of common stock 75 205 Long-term financing 38 32 266 Long-term debt reduction (149) (273) (60) Extraordinary gain from exchange of debt for common shares 23 Dividends (158) (145) (128) (171) (181) 78 Increase (Decrease)In Funds $ (12) $ 216 $ (61) Increase (Decrease)in Elements of Funds: Cash $ (31) $ 37 1 Time deposits and certificates of deposit (35) 23 10 Short term securities 54 156 (72) Increase (Decrease)in Funds S (12) $ 216 $ (61) The atee statement should be read ti conpocton wth page 47 and pages 54 through 57 of this report

53 C Stat: ment of Consolidated Shareowners' Equity Tm"*'"j (Dollars in rnihons, except per share) 1982 1981 1980 Prsfstred Stock: Balance, January 1 Conversion to common stock (7,249,23,988 and 35,042 shares in 1982-1980, respectively) BilInce, December 31 Ccmmon Stock: Balance, January 1 3 80 $ 74 $ 74 New shares issued (988.075 and 3.000,000 shares in 1982-1981, respectively) 2 6 BII:nce, December 31 $ 82 $ 80 $ 74 Additional Contributed Capital: Balance, January 1 $ 853 '$ - G52 $ 653 New shares issued 73 199 Other 5 2 (1) Bilince, December 31 $ 931 $ 853 $ 652 Accumulated Currency Adjustment: Initial adjustment for SFAS No 52 $ (16) Translation adjustments (111) Income taxes 9 Transferred to net income (4) B:ltnce, December 31 $ (122) R: Invested Earnings: Balance, January 1 $2,423 $2,123 $2,102 Deferred taxes adjustment for SFAS No. 52 4 Net income 352 445 149-Preferred dividends ($2.75 per share) Common dividends ($3.95, $3.75 and $3.55 per share for 1982-1980, respectively) (158) (145) (128) BIlznce, December 31 $2,621 $2,423 52,123 Common Stock in Treasury: Balance, January 1 $ (26) $ (41) $ (48) Shares purchased (171,940,21,641 and 83,243 shares in 1982-1980, respectively) (13) (1) (4) Conversion of convertible securities and issuances under employee stock plans (313,192, 320,276 and 221,724 shares in 1982-1980, respectively) 17 16 11 Biltnce, December 31 $ (22) $ (26) $ (41) The atxhe staternent should be read in conjuncton wth page 47 and pages 54 through 57 of this report.

r 2 5 3 i Notes to Finarselal Statements O Principal Divestitures in February 1983, the Company's SupplementalIncome and Expense Data Board of Directors approved the planned sale of the acrylic 1982 1981 1980 fibers business in Europe and the establishment of a 1982 loss Depreciation and obsolescence: provision of $18 million ($0.46 per share) net of related taxes. Depreciaton $396 $361 $327 The pretax loss of $20 million is reflected in obsolescence Obsolescence (includes gains and expense in cost of goods sold. An agreement in principle for I sses from dNestitures) 43 (98) 220 the sale has been reached with the buyer, a company that is a Total depreciation and obsolescence $439 $263 $547 joint venture partner with Monsanto in a nylon intermediates facility in the United Kingdom. The agreement also provides for Rent expenso S 78 $ 74 $ 71 Monsanto to purchase the buyer's interest in the nylon interme-Technological expenses: diates facility. The acrylic fibers business in Europe is a part of Research and development $256 $225 $208

the Fibers and Intermediates operating unit and had 1982 sales Engineering. commercial develop-

"of approximately $139 million. ment and patent 65 64 65 in August 1981, the Company cold its assets related to the taHechnological expenses $321 m $273 Monsanto/Conoco joint venture. The Company's gain on the Interest expense: Totalinterest costs incurred $128 $145 $164 sale was recorded as a reducts of obsolescence expense in cost of goods sold in 1981 of $124 million, or $68 million ($1.75 Less capitalized interest 46 44 52 .oer share) net of related tax effects. The facilities were a part of Net interest expense $ 82 $101 $112 the Polymer Products operating urut in the United States and Equity income: generated sales in 1981 of approximately $167 million. Equity in affiliates' ircome and losses $ (6) $ 22 $ 34 , Cost of goods sold for 1980 included a provision for losses of nIaN (5) 16 (17) $121 million, or $69 million ($1.90 per share) net of related tax Total equity income (loss) $(11) $ 38 $ 17 effects, from the Company's withdrawal from the polyester fila-ment business in the United States. Certain manufacturing Foreign currency gains and . facilities and other assets were sold and the remaining manu-losses (including equity in ates gains an sses) (28) $ 12 facturing 4cilities have been shut down and will be disposed of as soon as practical. This business was part of the Fibers and Pension Plans Most Monsanto employees are covered by InterrrFnintecooerating unit and had sales of approximately noncontributory pension plans. The related pension expense $134milie 1980. was $136 million, $127 million and $98 million in 1982-1980, ' t in 19PU, Monsanto decided to terminate its interest in Aiscondel, respectively, and includes charges applicable to current service ~ S.A., a roajority-owned Spanish subsidiary, and in 1981 sold its and amortization of unfunded prior service costs over periods intereM to the minonty shareholders. Cost of goods sold for generally ranging from 10 to 30 years. It is Monsanto's policy to 19M included a provision for losses on termination of $66 fund pewion costs accrued. Actuarial assumptions reflect an A Nn, d'$39 million ($1.07 per share) net of related tax effects, investment return of 7.5 percent and, when applicable, an over-This business was reported as part of the Polymer Products all average salary increase of 6.5 percent. i opMating ure. and had sales of approximately $126 million in Effective for 1981 Monsanto increased retirement benefits and 1960. reduced the eligibility requirements for early retirement and As of December 31,1982, the remaining accruals for the divesti-surviving spouses' automatic retirement benefits for its major tures O'scussed above and the 1979 withdrawal from nylon domestic plans. The net effect of these changes was to operationt. in Europe have been reduced to $49 million through increase 1981 expense by approximately $52 million. actud axpenditures for shutdown or withdrawal costs, disposal Estimated benefit and asset information at yearend for ~ of certah lacilities, and operating losses subsequent to the Monsanto's significant pension plans is presented belon Net recordng of the provisions. The rema.ining accruals are assets were measured at market value and accumulated bene-expected to be sufficient to absot future costs related to these fits were estimated from actuarial valuations made earlier in the actions. year. 1982 1981 Actuarial present value of accumulated plan benefits: Vested $1,366 $1.221 Nonvested 177 157 Total $1,543 $1.378 Net assets available for benefits $1,697 $1.358 m

55 income Taxes Earnings per Share Earnings per share were computed The components of income before income taxes were: using the weighted average number of cu m on and common 1982 1981 1980 equivalent shares outstanding each year (39,975,498,38,703,604 and 36,287,214 in 1982-1980, respectively). Common share US $425 $549 $212 equivalents included in the computation consist of common S-U~S' 78 144 (6) stock issuable upon exercise of outstanding stock options g $501 $693 m (159,858,200,801 and 24,611 in 1982-1980, respectively), and conversion of 6an stock of Monsanto p.l.c. (109,904,144,952 The components of income tax expense were: and 202,204 in 1982-1980, respectively). Earnings per share 1982 1981 1980 assuming full dilution were not significantly different from the Current: Federal 5 53 $ 91 $ (5) Had the common shares issued in October 1982 (see "Long-State 8 8 5 h-U S. 39 38 24 Term Debt" note) been issued as of January 1,1982, pro forma eamings per share for 1982 would have been $8.71. The pro 100 137 24 forma amount reflects the effect of decreased aftertax interest Deferred: Federal 72 103 19 expense through the reduction of long-term debt and the St ncreased number of shares outstanding. gUS Inventories inventories at December 31,1982 and 1981 72 111 33 would have been $447 million and $548 million, respectively, Total $172 $248 $ 57 higher than reported if the FIFO basis of inventory valuation (which approximates current cost) had been used for all inven-Investment tax credits for 1982-1980 were $53 million, $22 tories. Under the LIFO inventory method used, it is not practical million and $49 million, respectively to identify inventories by classification (i.e., finished goods, goods in process, raw materials and supplies). As a result The sources of timing differences in the recognition of revenue of liquidation of lower cost inventory,' tiers under the LIFO and expense for tax and financia' statement purposes and the method,1982 eamings were favorably impacted by approxi-tax effect of each were.' ma y m u s. 1982 1981 1980 AddMonal depreciation and obso-Short-Term Debt and Bank Credit Arrangements lescence for (book) tax purposes $ 49 $ 66 $ (8) 1982 1981 Intangible drilling and developrnent Wes payaN to banks $105 $139 costs 19 23 15 Current portion of long-term debt 26 36 Interest capitahzation 18 14 23 Total $131 $175 Other (14) 8 3 Total $ 72 5111 $ 33 The Company has available a $100 million domestic Revolving Credit / Term Loan Agreement and $100 mil lion of short-term lines f credit with twenty-one banks. The Agreement provides for Factors causing the effective tax rate to differ from the statutory revolving credit through 1986 with any borrowings outstanding rati were.' at the end of that penod convertible into a three-year term loan. 1982 1981 12 The interest rates on any borrowings under these domestic facil-Federal statutory rate 46 % 46 % 46% ities will generally be at or near prevailing prime rates. . Investment tax credit (10) (3) (24) The Company also has available $100 million under Eurocur-Benefits attnbutable to DISC camings (3) (3) (12) rency Revolving Credit Agreements subject to mandatory ax effected ex-U.S. subsidiaries, (3) 19 reductions beginning in 1985 and terminating in 1987. Interest Other (1) (1) rates under these agreements are at a margin above the London or Luxembourg interbank offer rates. Effective income tax rate 34 % 36 % 28 % No borrowings were made under the above credit facilities through February 25,1983. Undistributed eamings of subsidiaries, for which additional In addition, certain ex-U.S. subsidiaries have short-term loan taxes that may be required in the event of distribution have not facilities aggregating approximately $403 million, under which been provided. were.' loans totaling $76 million were outstanding at December 31, 1982 1981 12 1982. Interest on these loans is related to various ex-U.S. Ex-U.S. subsidianes $216 $186 $ 78 bank rates. U.S. subsidiaries, including DISC's 390 349 290 Total $606 $535 5368 Ex-U.S. net operating loss carryforwards at December 31,1982, ' for which no tax benefits have been recorded were approxi-mately $115 million, a substantial portion of which has an unlimited canyforward period.

o 56 Long 'llerm Debt Long-term debt (exclusive of current Commitments and Contingencies Cuiduients in maturities) repayable in U.S. dollars, except where indi-connection with uncompleted additions to property aggregated cated, was: approximately $126 million at December 31,1982. Monsanto 1982 1981 was contingently liable as guarantor of bank loans and for Monsanto Company, discounted customers' receivables totaling approximately 8hes due 1985 $ 100 $ 100 $72 million at December 31,1982, including $13 million related 4%% pimssuy notes due 1993 49 53 to guarantees of loans of affiliates. 9%% s4nlang fund debentures due 1997 67 90 Monsanto is a party to a number of lawsuits, which it is vigor-8K% siniong fund debentures due 2000 127 174 ously defending, arising in the normal course of business. 3%% income debentures due 2002 85 89 Certain of these actions seek damages in very large amounts. 4%% income debentures due 2008 50 50 While the results of litigation cannot be predicted with certainty, 8Y.% sinking fund debentures due 2008 169 199 management believes, based upon the advice of Company 4%%-11k% industrial development band counsel, that the final outcome of such litigation will not have a obligations due 1984/2021 247 211 material adverse effect on Monsanto's consolidated financial Capitalized lease obligations 10 13 position. Monsanto (Suisse) S.A. (Swiss subsidiary) Capital Stock The outstanding preferred stock is stated at are, has a mmdah Med oW5 peNe 6 debentures due 1986 24 27 Monsanto Europe, S.A. (Belgian subsidiary) and is convertible into 1.12 shares of the Company's common stock. Preferred stock may be redeemed solely at the Com-( ence) and has @an involuntary liquidation prefer panys oph a 3 ps share (the voluntary liquidation prefer-9 4g b loans due 1984/1988 (a) 25 56 Other, pnncipally ex-U S subsidiaries (b) 50 48 an apaHNb at k&G, M Total $1,003 $1.110 At December 31,1982, there were 296,738 comnun shares $ interest rates on certain of these bank loans are reduced by reserved for conversion of convertible securities and 1,849,641 a govemment subsidy of 4 percent, which is scheduled to expire in 1983. common shares for employee stock options. NN8Smh 4Ns NMtureIoNr$tb"e$n5t,ional Stock Option Plans At December 31,1982, there were n n. company's common stock at b per share, and $4 million at December 1,279,634 shares under options outstanding for the Company's 31,1982, of Monsanto p.t.c. (U.K. subsidiary) 5% loan stock convertible 1969 and 1974 Plans at prices ranging from $48.50 to $92.88. into the Company's common stock at a rate equivalent to $55 per share. Options for 829,989 shares were exercisable at December 31 Maturities and sinking fund requirements on long-term debt are 1982. During 1982,239,650 options were granted and 237,387 $26 million, $30 million, $153 miHion, $64 million and $27 million options, granted at prices ranging from $47.25 to $73.19 per for the five years ending December 31,1983 through 1987, share, were exercised. respectively Stock appreciation rights (SAR's) are authorized to be granted Covenants of certain loan agreements restrict maximum borrow-under the 1974 Plan, and may be granted retroactively for unex-ings and dividend payments. It is not anticipated that additional ercised options under the 1969 and 1974 Plans. At December future borrowings will be affected by these restrictions, and 31,1982, SAR's related to options for 303,028 shares were none of the Company's reinvested eamings were restricted as outstanding; of these,187,321 were exercisable. During 1982, to dividend payments at December 31,1982. SAR's related to options for 57,900 shares were granted and Monsanto has various parallel loan agreements, scheduled to 124,261 were exercised. cxpire from 1983 through 1986, with U.K. companies. Monsanto's Segment Information Certain operating unit segment data borrowings of $66 million and $85 million in British pounds ster-for 1982-1980 appear on page 36 and are integral parts of the ling and U.S. dollar loans of $69 million and $82 million as of accompanying financial statements. The principal product lines December 31,1982 and 1981, respectively, are reflected net in included in each operating unit are shown in the " Sales by the accompanying Statement of Consolidated Financial Position Product Group" data on page 33. The operating unit segment since both parties have the legal right of offset in case of information has been restated as described on page 37. default. Interest rates on the sterling loan are 2% percent to Unusual or nonrecurring charges or credits were included in the l 2% percent higher than the interest rates on the corresponding operating units and world areas as discussed in the " Principal dollar loans. Divestitures" note. The liquidation of lower cost inventory " tiers" Substantially all long-term debt of subsidiaries is guaranteed by under the LIFO method increased 1982 operating income by, the Company $20 million, $27 million and $35 million for Fibers and Intermedi-I a es, Wal hds aM @@h. mW@ On October 22,1982, the Company exchanged 988,075 shares l of its common stock for $100 million principal amount of various long-term debentures resulting in an extraordinary gain of $23 l million ($0.58 per share). i 1 1

57 Intercompany or inter-area receivables and profit derived assets principally include cash, time deposits and certificates from intercompany or inter-area sales are the principal items of deposit, short-term securities and investments. reflected in eliminations in amving at the consolidated totals. Total sales between operating units (made on a market basis) Inter-area sales, which are sales from one Monsanto location to were $311 million, $393 million and $381 million in 1982-1980, another Monsanto location in a different world area, were made respectively These sales were not significant for any operating on a market basis. Certain corporate expenses, primarily those units except Industrial Chemicals ($151 million, $162 million and related to the overall management of the Company, were not $147 million in 1982-1980, respectively). allocated to the operating units or world areas. Nonoperating Net sales by world area entities were: Outside Customer Inter-Area 1982 1981 1980 1982 1981 1980 United States $4,483 $4,874 $4,465 $ 467 $ 554 $ 535 Europe-Africa 1,079 1,247 1,378 108 115 59 Canada-Latin America 448 486 459 5 4 4 Asia-Pacific 315 341 272 21 25 27 6,325 6,948 6,574 601 698 625 Eliminations (601) (698) (625) Total consolidated $6,325 $6.948 $6.574 United States entities' export sales to outside customers were: 1982 1981 1980 Europs-Africa $ 32 $ 41 $ 69 Canada-Latin America 144 198 182 Asia-Pacific 221 249 241 Total $ 397 $ 488 $ 492 Operating income (loss) and total assets by world area entities were: Operating income (Loss) Total Assets 1982 1981 1980 1982 1981 1980 United States S 461 $ 650 $ 255 $4,711 $4,437 $4,256 Europe-Africa 39 38 (44) 790 1,049 1,026 Canada-Latin America 30 41 24 247 280 291 Asia-Pacific 11 25 13 172 227 176 541 754 248 5,920 5,993 5,749 Eliminations 8 (16) 1 (268) (334) (223) Corporate expenses (48) (36) (39) Total operating 501 702 210 5,652 5,659 5,526 Income charges-net 9 4 Nonoperating assets 425 410 270 Total consolidated S 501 $ 693 $ 206 $6,077 $6,069 $5.796 Following is a reconciliation of ex-U.S. operating income and total assets to the Company's equity in the net income (loss) and net assets of consolidated ex-U.S. subsidiaries: 1982 1981 1980 Operating income (loss) $ 80 $ 104 (7) Income charges (credits)-net 14 (38) 48 Income taxes 35 30 11 Net income (loss) of ' consolidated cx-U.S. subsidiaries S 31 $ 112 $ (66) Totaloperating assets $1,209 $1,556 $1,493 Totalliabilities, net of nonoperating assets 440 691 699 I Net cssets of consolidated cx-U.S. subsidiaries $ 769 $ 865 $ 794 2

58 Financial Summary (Dollars in rnillons, except per share) 1982(1)(2) 1981 Operating Results Net Sales $6,325 $6,948 l Operating income 501 702 Interest Expense 82 101 income Taxes 172 248 Net income 352 445 Percent of Net Sales 6% 6W Percent of Average Shareowners' Equity 10% 159 Earnings Per Share Primary $ 8.79 $11.50 Fully Diluted 8.74 11.43 Yearend Financial Position Total Assets $6,077 $6,069 Working Capital 1,503 1,486 Property, Plant & Equipment: Gross $6,530 $6.218 Net 3,313 3,184 Long-Term Debt $1,003 $1,110 Shareowners' Equity 3,490 3.330 Current Ratio 2.58 2.40 Percent of Debt to Total Capitalization 22 % 259 l i Other Data Per Common Share: Dividends $ 3.95 $ 3.75 4 I Shareowners' Equity 85.97 84.37 Property, Plant & Equipment Additions $ 673 $ 668 Depreciation and Obsolescence 439 263 Shareowners: Common 75,943 79,029 Preferred 709 775 Common Shares Outstanding (in millions) 41 40 Employees 52,199 57.391 (1) Net income for 1982 includes an extraordinary gain of $23 million, or 50.58 per primary share, from an exchange of debt for common shares. (2) In 1982, the requirements of Statement of Financial Accounting Standards No. 52, " Foreign Currency Translation," were adopted. l l

59 Monsanto company and Subsideries 1980(3) 1979 1978 1977 1976 1975 1974(4) 1973 1972 $6,574 $6,193 $5,019 $4,595 $4,270 $3,625 $3,498 $2,648 $2,225 210 487 632 610 668 547 550 406 216 112 123 103 86 80 56 43 39 37 57 150 274 248 251 230 251 173 81 149 331 303 276 366 306 323 238 122 2% 5% 6% 6% 9% 8% 9% 9% 6% 5% 12% 12% 12% 17 % 16% 20% 17% 10% $ 4.10 $ 9.11 $ 8.29 $ 7.46 $10.05 $ 8.63 $ 9.25 $ 6.90 $ 3.49 4.06 9.03 8.21 7.37 9.77 8.22 8.73 6.54 3.40 $5,796 $5,539 $5,036 $4,350 $3,959 $3,451 $2,938 $2,545 $2,237 1.226 1,323 1,296 1.080 1,106 1,150 968 855 677 $6,074 $5,529 $5,167 $4,745 $4,208 $3,620 $3,157 $2,852 $2,765 3,109 2.818 2.605 2,409 2.090 1,660 1.312 1,152 1,133 $1,371 $1,203 $1,224 $1,031 $ 915 $ 845 $ 587 $ 579 $ 576 2.808 2,782 2,579 2,401 2.253 1,977 1,755 1,484 1.294 2.07 2.16 2.46 2.64 2.92 3.39 2.88 3.06 3.17 33 % 30 % 32 % 30 % 29 % 30% 25 % 28 % 31 % $ 3.55 $ 3.35 $ 3.175 $ 3.025 $ 2.75 $ 2.55 $ 2.30 $ 1.90 $ 1.80 77.63 77.20 71.26 66.16 61.79 56.62 51.39 44.26 39.05 $ 781 $ 566 $ 480 $ 607 $ 647 $ 528 $ 313 $ 205 $ 168 547 413 288 296 226 173 172 170 194 82,441 85,608 86,775 85,021 84,647 91,725 98,542 98,964 104,369 871 952 1,156 1,404 1,956 2.836 3,709 3,855 3.939 36 36 36 36 36 35 34 33 33 61,836 63.926 62.851 61.519 61,903 59,242 60,926 58.277 57,891 (3) In 1980, interest costs related to construction-in-progress expenditures were capitalized in accordance with Statement of Financial Accounting Stan-dards No. 34. Prior to 1980, all interest costs were expensed as incurred. The offect of the new accounting principle was to increase 1980 net income by $28 million or 50.76 per pnmary share. (4) In 1974, the Company and certain of its domestic subsidiaries changed their method of inventory valuation for substantialty all United States invento-rles from the FIFO basis to the LIFO basis. The effect of this change was to decrease 1974 income by $78 million or $2.26 per primary share.

so Directors and Officers Board of Directors Committees of the Board John W. IIanley St. Louis Audit Chairman of the Board and Dr. Jean Mayer Chief Executive Officer Buck Mickel Dr. Donald C. Carroll Edward L Palmer Philadelphia Margaret Bush Wilson Dean of The Wharton School Corporate Social Responsibility University ofIbnnsyh'ania Edward L. Palmer Dr. Louis Fernandez C. Raymond Dahl New York Dr. Jean Mayer San Francisco Retired Chairman of the Admiral Stansfield Turner Retired Chairman of the Board Executive Committee Margaret Bush Wilson Crown Zellerbach Corporation Citicorp and Citibank, N.A. Executive Dr. Louis Fernandez Francis E. Reese Dr. Louis Fernandez St. Louis St. Louis John W. Ilanley Vice Chairman of the Board Senior Vice President RichardJ. Mahoney Richard I. Fricke Monte C.Throdahl Margaret Bush Wilson Montpelier, Vermont St. Louis Executive Compensation and President and Chief Executive Officer Senior Vice President Development National Life Insurance Company Admiral Stansfield Ibrner Richard I. Fricke Howard M. Love U.S. Navy, Retired floward M. l.ove l Pittsburgh Arlington, Virginia Buck Mickel l Chairman of the Board and Consultant and Lecturer Finance l Chief Executive Officer Margaret Bush Wilsen Dr. Donald C. Carroll l National Steel Corporation St. Louis C. Raymond Dahl l RichardJ. Mahoney Attorney John W. Ilanley St. Louis Wilson, Smith and McCullin RichardJ. Mahoney l President and Chief Operating Officer Edward L lblmer Dr. Jean Mayer Nominating l Medford, Massachusetts C. Raymond Dahl l President Advisory Directors floward M. Love 'Ibfts University Robert L. Berra lh!CK Mickel Buck Mickel FrancisJ. Fitzgerald Pension and Savings Funds Greenville, South Carolina Earle II. IlarbisonJr. Dr. Donald C. Carroll Chairman of the Board and President Nicholas L. Reding Dr. Louis Fernandez Daniel International Corporation Dr. Iloward A. Schneidennan Richard I. Fricke (a subsidiary of Fluor Corporation) Francis A.Stroble Admiral Stansfield Turner L

Officers Shareowner Inforenation Officers Chairman of the Board and Chief Executive Officer John W. Ilanley Pr esident and Chief Operating Officer RichardJ. Mahoney Vice Chairman of the Board Dr. Louis Fernandez Executive Vice Presidents FrancisJ. Fitzgerald Earle H. Ilarbison Jr. Nicholas L Reding Senior Vice Presidents ' Robert L Ilerra Francis E. Reese Dr. Iloward A. Schneiderman Monte C. Throdahl Annual Meeting Sent:r Vice President and The next Annual Meeting of the Chl f Financial Officer shareowners of Monsanto Company Francis A. Stroble will be held at 1:45 p.m., Friday, April Senior Vice President, 22,1983, at the Company's General Secretary and General Counsel Offices,800 N. Lindbergh 131vd., Richard W. Duesenberg St. Louis, Missouri. A formal notice Group Vice Pres' dents of the meeting, together with a proxy Robert E. Ilurke statement and form of proxy, is being liaroldJ. Corbett mailed to each shareowner. Thomas L Gossage ' Robert G. Ibtter 10 K Report, Corporate Data Vic: Precidents Book and Investor News Dr. Constantine E. Anagnostopoulos A copy of Monsanto Company's Form Alfred W Andrews 10-K Report filed with the Securities Leonard A. Cohn and Exchange Commission for 1982; Charles A. Faden a 1982 Corporate Data Book, which Dr. S. Allen lieininger contains additional information ' Martin J. Kallen relating to Monsanto; and Investor Dr. Joseph T Nolan News can be obtained by writing to: . Sam Pickard investor Relations Department Ernest S. RobsonJr. Monsanto Company ' Donald 11. Swan 800 N. Lindbergh llivd. Vice Prc:.ident and Treasurer St. Louis, Missouri 63167 ' Lawrence II. Skatoff - Vic2 Prc:Ident and Controller Transfer Agent and Registrar Michael E Mee The First National llank c,f Boston a

Monsanto Company - .800 North Lindbergh Boulevard St. louis, Missouri 63167 I l l l i t l I l k}}

ML20207R944

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