D - EXTRAORDINARY ITEMS

During the first quarter of 2002, the company sold its 45 percent minority interest in Amersham Biosciences to Amersham plc for $1,000. The investment basis as of March 2002 was $227. The sale resulted in a gain of $649 (net of taxes of $124). The gain on the sale has been classified as an extraordinary item in the accompanying consolidated statements of earnings in accordance with Accounting Principles Board Opinion No. 16 “Business Combinations” because the sale of this investment took place within the two-year period following the merger of Pharmacia & Upjohn and former Monsanto, which was accounted for under the pooling of interests accounting method. The sale of this investment was not contemplated at the time of the pooling.

On June 28, 2001, the company retired certain debt obligations relating to one of the employee stock ownership plans. The principal amount of the debt was $65. Certain costs related to the transaction, including a premium to retire the debt and other direct costs, were $4 (net of taxes of $2) and have been classified as an extraordinary item on the company’s consolidated statements of earnings.

Through a private transaction entered into on June 29, 2001, the company retired debt related to adjustable conversion-rate equity securities in the principal amount of $700. Premium on the debt and other direct costs of $8 (net of taxes of $5) were accrued as an extraordinary item.

E - DISCONTINUED OPERATIONS

Monsanto

On November 28, 2001, the board of directors approved a formal plan to distribute to Pharmacia shareholders the remaining outstanding shares held of Monsanto, in a tax-free spin-off transaction.

On July 18, 2002, the Pharmacia board of directors approved the completion of the spin-off of Monsanto through the distribution of shares of Monsanto common stock to Pharmacia common shareholders of record on July 29, 2002. In order to effect the distribution, the Pharmacia board of directors declared a special dividend on the company’s common stock comprised of 220 million shares of Monsanto common stock currently held which, at July 29, 2002, represented approximately 84% of Monsanto’s outstanding stock. Each Pharmacia shareholder will be entitled to receive .170593 shares of Monsanto common stock for each share of Pharmacia stock owned on the record date. The shares will be distributed at the close of business on August 13, 2002.

On August 9, 2002, Monsanto entered into third-party agreements to issue $600 of debt due August 15, 2012. The transaction is scheduled to close on August 14, 2002, and proceeds will be used to reduce Monsanto’s commercial paper borrowings. Pharmacia has not underwritten or guaranteed this debt, however, as of August 13, 2002 Monsanto has $150 of short-term debt outstanding with Pharmacia which may remain outstanding as such until November 15, 2002.

Pharmacia has guaranteed approximately $360 of bank debt and $60 of environmental guarantees to state governments on behalf of Monsanto and will continue to guarantee these obligations after the spin-off, but not later than December 2004. The company is currently working to have these guarantees assigned to Monsanto or replaced by letters of credit at which time Pharmacia would be released from further liability. Pharmacia will not extend further bank guarantees or loans to Monsanto or to third parties on behalf of Monsanto.

On August 13, 2002, the distribution date, Pharmacia must compare the recorded amount of Monsanto shares on its books to the value based on Monsanto’s closing stock price on the New York Stock Exchange that day. The difference between the recorded amount and the market value, if lower, would be considered an impairment loss to Pharmacia. This amount would be included in the company’s consolidated statements of earnings as a loss from discontinued operations during the third quarter of 2002. Based on the August 9, 2002 closing price of Monsanto common shares, an impairment loss would approximate $1,100.

The results of operations, financial position and cash flows of Monsanto have been reclassified in the consolidated financial statements as discontinued operations. Income from discontinued operations has been reduced for amounts allocable to the minority interest. The company estimates that net income will be realized from Monsanto operations during the disposal period, net of seasonal net operating losses during the third quarter of 2002 and transaction costs. Seasonal losses provided for at June 30, 2002 increased by approximately $100 due to a change in Monsanto’s forecasted operating results and the acceleration in the timing of the spin-off. During the second quarter and first half of 2002, the accumulated income of Monsanto exceeded anticipated seasonal net losses and transaction costs and therefore, amounts above this estimate have been recognized in discontinued operations as realized. The net gain realized for the second quarter and year-to-date period ended June 30, 2002 was $25 and $89, net of taxes of $12 and $41, respectively.